10-Q 1 onvo-20230930.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

Form 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-35996

 

Organovo Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

27-1488943

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

 

11555 Sorrento Valley Rd, Suite 100,

San Diego, CA 92121

(858) 224-1000

(Address of principal executive offices and zip code)

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading symbol

Name of Each Exchange on which registered

Common Stock, $0.001 par value

ONVO

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of November 1, 2023, a total of 8,837,095 shares of the registrant’s Common Stock, $0.001 par value, were outstanding.

 

 

 


 

ORGANOVO HOLDINGS, INC.

INDEX

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

3

Condensed Consolidated Balance Sheets as of September 30, 2023 (Unaudited) and March 31, 2023

3

Unaudited Condensed Consolidated Statements of Operations and Other Comprehensive Loss for the Three and Six Months Ended September 30, 2023 and 2022

4

Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended September 30, 2023 and 2022

5

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2023 and 2022

6

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

25

Item 4.

Controls and Procedures

25

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

26

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

44

Item 3.

Defaults Upon Senior Securities

45

Item 4.

Mine Safety Disclosure

45

Item 5.

Other Information

45

Item 6.

Exhibits

46

 

 

 

2


 

PART I—FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

Organovo Holdings, Inc.

Condensed Consolidated Balance Sheets

(in thousands except for share and per share data)

 

 

 

September 30, 2023

 

 

March 31, 2023

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

7,617

 

 

$

15,301

 

Accounts receivable

 

 

55

 

 

 

152

 

Investment in equity securities

 

 

 

 

 

706

 

Prepaid expenses and other current assets

 

 

624

 

 

 

889

 

Total current assets

 

 

8,296

 

 

 

17,048

 

Fixed assets, net

 

 

808

 

 

 

902

 

Restricted cash

 

 

143

 

 

 

143

 

Operating lease right-of-use assets

 

 

1,505

 

 

 

1,705

 

Prepaid expenses and other assets, net

 

 

409

 

 

 

515

 

Total assets

 

$

11,161

 

 

$

20,313

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

Accounts payable

 

$

435

 

 

$

331

 

Accrued expenses

 

 

666

 

 

 

2,848

 

Operating lease liability, current portion

 

 

499

 

 

 

492

 

Total current liabilities

 

 

1,600

 

 

 

3,671

 

Operating lease liability, net of current portion

 

 

1,105

 

 

 

1,313

 

Total liabilities

 

 

2,705

 

 

 

4,984

 

Commitments and Contingencies (Note 7)

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

 

 

Common stock, $0.001 par value; 200,000,000 shares authorized, 8,719,453
   and
8,716,906 shares issued and outstanding at September 30, 2023 and
   March 31, 2023, respectively

 

 

9

 

 

 

9

 

Additional paid-in capital

 

 

341,467

 

 

 

340,317

 

Accumulated deficit

 

 

(333,020

)

 

 

(324,998

)

Accumulated other comprehensive income

 

 

1

 

 

 

2

 

Treasury stock, 46 shares at cost

 

 

(1

)

 

 

(1

)

Total stockholders’ equity

 

 

8,456

 

 

 

15,329

 

Total Liabilities and Stockholders’ Equity

 

$

11,161

 

 

$

20,313

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3


 

Organovo Holdings, Inc.

Unaudited Condensed Consolidated Statements of Operations and Other Comprehensive Loss

(in thousands except share and per share data)

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

Six Months Ended

 

 

Six Months Ended

 

 

 

September 30, 2023

 

 

September 30, 2022

 

 

September 30, 2023

 

 

September 30, 2022

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Royalty revenue

 

$

 

 

$

77

 

 

$

75

 

 

$

77

 

Total Revenues

 

 

 

 

 

77

 

 

 

75

 

 

 

77

 

Research and development expenses

 

 

1,335

 

 

 

1,231

 

 

 

3,001

 

 

 

2,251

 

Selling, general and administrative expenses

 

 

2,780

 

 

 

2,200

 

 

 

5,384

 

 

 

4,419

 

Total costs and expenses

 

 

4,115

 

 

 

3,431

 

 

 

8,385

 

 

 

6,670

 

Loss from Operations

 

 

(4,115

)

 

 

(3,354

)

 

 

(8,310

)

 

 

(6,593

)

Other Income (Expense)

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) gain on investment in equity securities

 

 

 

 

 

(70

)

 

 

12

 

 

 

(75

)

Interest income

 

 

121

 

 

 

103

 

 

 

278

 

 

 

134

 

Total Other Income

 

 

121

 

 

 

33

 

 

 

290

 

 

 

59

 

Income Tax Expense

 

 

 

 

 

 

 

 

(2

)

 

 

(2

)

Net Loss

 

$

(3,994

)

 

$

(3,321

)

 

$

(8,022

)

 

$

(6,536

)

Other Comprehensive Loss:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on available-for-sale debt securities

 

$

(1

)

 

$

 

 

$

(1

)

 

$

 

Comprehensive Loss

 

$

(3,995

)

 

$

(3,321

)

 

$

(8,023

)

 

$

(6,536

)

Net loss per common share—basic and diluted

 

$

(0.46

)

 

$

(0.38

)

 

$

(0.92

)

 

$

(0.75

)

Weighted average shares used in computing
   net loss per common share—basic and
   diluted

 

 

8,718,502

 

 

 

8,712,284

 

 

 

8,717,870

 

 

 

8,711,630

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4


 

Organovo Holdings, Inc.

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)

 

 

 

Three and Six Months Ended September 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

 

 

Treasury Stock

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional Paid-in Capital

 

 

Shares

 

 

Amount

 

 

Accumulated Deficit

 

 

Accumulated Other Comprehensive Income

 

 

Total

 

Balance at March 31, 2022

 

 

8,711

 

 

$

9

 

 

$

337,940

 

 

 

 

 

$

(1

)

 

$

(307,739

)

 

$

 

 

$

30,209

 

Issuance of common stock under employee and director stock option, RSU, and purchase plans

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

660

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

660

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,215

)

 

 

 

 

 

(3,215

)

Balance at June 30, 2022 (Unaudited)

 

 

8,712

 

 

$

9

 

 

$

338,600

 

 

 

 

 

$

(1

)

 

$

(310,954

)

 

$

 

 

$

27,654

 

Issuance of common stock under employee and director stock option, RSU, and purchase plans

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

673

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

673

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,321

)

 

 

 

 

 

(3,321

)

Balance at September 30, 2022 (Unaudited)

 

 

8,713

 

 

$

9

 

 

$

339,273

 

 

 

 

 

$

(1

)

 

$

(314,275

)

 

$

 

 

$

25,006

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three and Six Months Ended September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

 

 

Treasury Stock

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional Paid-in Capital

 

 

Shares

 

 

Amount

 

 

Accumulated Deficit

 

 

Accumulated Other Comprehensive Income

 

 

Total

 

Balance at March 31, 2023

 

 

8,717

 

 

$

9

 

 

$

340,317

 

 

 

 

 

$

(1

)

 

$

(324,998

)

 

$

2

 

 

$

15,329

 

Issuance of common stock under employee and director stock option, RSU, and purchase plans

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

475

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

475

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,028

)

 

 

 

 

 

(4,028

)

Balance at June 30, 2023 (Unaudited)

 

 

8,718

 

 

$

9

 

 

$

340,792

 

 

 

 

 

$

(1

)

 

$

(329,026

)

 

$

2

 

 

$

11,776

 

Issuance of common stock under employee and director stock option, RSU, and purchase plans

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

675

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

675

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,994

)

 

 

 

 

 

(3,994

)

Unrealized loss on available-for-sale debt securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

(1

)

Balance at September 30, 2023 (Unaudited)

 

 

8,719

 

 

$

9

 

 

$

341,467

 

 

 

 

 

$

(1

)

 

$

(333,020

)

 

$

1

 

 

$

8,456

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5


 

Organovo Holdings, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

Six Months Ended

 

 

Six Months Ended

 

 

 

September 30, 2023

 

 

September 30, 2022

 

Cash Flows From Operating Activities

 

 

 

 

 

 

Net loss

 

$

(8,022

)

 

$

(6,536

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

(Gain) loss on investment in equity securities

 

 

(12

)

 

 

75

 

Accretion on investments

 

 

(103

)

 

 

(62

)

Depreciation and amortization

 

 

138

 

 

 

104

 

Stock-based compensation

 

 

1,150

 

 

 

1,333

 

Increase (decrease) in cash resulting from changes in:

 

 

 

 

 

 

Accounts receivable

 

 

97

 

 

 

 

Prepaid expenses and other assets

 

 

371

 

 

 

443

 

Accounts payable

 

 

104

 

 

 

26

 

Accrued expenses

 

 

(2,182

)

 

 

(27

)

Operating lease right-of-use assets and liabilities, net

 

 

(1

)

 

 

13

 

Net cash used in operating activities

 

 

(8,460

)

 

 

(4,631

)

Cash Flows From Investing Activities

 

 

 

 

 

 

Purchases of fixed assets

 

 

(42

)

 

 

(193

)

Purchases of investments

 

 

(7,900

)

 

 

(9,893

)

Maturities of investments

 

 

8,000

 

 

 

 

Purchases of equity securities

 

 

 

 

 

(1,061

)

Sales of equity securities

 

 

 

 

 

368

 

Liquidation of equity securities

 

 

718

 

 

 

 

Net cash provided by (used in) investing activities

 

 

776

 

 

 

(10,779

)

Cash Flows From Financing Activities

 

 

 

 

 

 

Net cash provided by financing activities

 

 

 

 

 

 

Net decrease in cash, cash equivalents, and restricted cash

 

 

(7,684

)

 

 

(15,410

)

Cash, cash equivalents, and restricted cash at beginning of period

 

 

15,444

 

 

 

28,818

 

Cash, cash equivalents, and restricted cash at end of period

 

$

7,760

 

 

$

13,408

 

Reconciliation of cash, cash equivalents, and restricted cash to the condensed
   consolidated balance sheets

 

 

 

 

 

 

Cash and cash equivalents

 

$

7,617

 

 

$

13,265

 

Restricted cash

 

 

143

 

 

 

143

 

Total cash, cash equivalents, and restricted cash

 

$

7,760

 

 

$

13,408

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

 

Income taxes paid

 

$

2

 

 

$

2

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

6


 

Organovo Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

 

Note 1. Description of Business

Nature of Operations

Organovo Holdings, Inc. (“Organovo Holdings,” “Organovo,” and the “Company”) is a pharmaceutical and biotechnology company that focuses on clinical drug development of the farnesoid X receptor (“FXR”) agonist FXR314. FXR is a mediator of gastrointestinal and liver diseases. FXR agonism has been tested in a variety of preclinical models of inflammatory bowel disease ("IBD"). FXR314 is the lead compound in the Company's established FXR program containing two clinically tested compounds (including FXR314) and over 2,000 discovery or preclinical compounds. FXR314 is a drug with safety and tolerability after daily oral dosing in Phase 1 and Phase 2 trials. Further, FXR314 has FDA clinical trial authorization for a Phase 2 trial in ulcerative colitis ("UC").

The Company’s current clinical focus is in advancing FXR314 in IBD, including UC and Crohn’s disease (“CD”). The Company plans to start a Phase 2a clinical trial in UC in the calendar year 2024.

A second focus of the Company is building high fidelity, 3D tissues that recapitulate key aspects of human disease. The Company uses its proprietary technology to build functional 3D human tissues that mimic key aspects of native human tissue composition, architecture, function and disease. Management believes these attributes can enable critical complex, multicellular disease models that can be used to develop clinically effective drugs across multiple therapeutic areas.

As with the clinical development program, the Company is initially focusing on the intestine and has ongoing 3D tissue development efforts in human tissue models of UC and CD. The Company uses these models to identify new molecular targets responsible for driving these diseases and to explore the mechanism of action of known drugs including FXR314 and related molecules. The Company intends to initiate drug discovery programs around these new validated targets to identify drug candidates for partnering and/or internal clinical development.

The Company’s current understanding of intestinal tissue models and IBD disease models leads it to believe that it can create models that provide greater insight into the biology of these diseases than are generally currently available. The Company is creating high fidelity disease models, leveraging its prior work including the work found in its peer-reviewed publication on bioprinted intestinal tissues (Madden et al. Bioprinted 3D Primary Human Intestinal Tissues Model Aspects of Native Physiology and ADME/Tox Functions. iScience. 2018 Apr 27;2:156-167. doi: 10.1016/j.isci.2018.03.015.) Organovo’s advances include cell type-specific compartments, prevalent intercellular tight junctions, and the formation of microvascular structures.

Using these disease models, the Company intends to identify and validate novel therapeutic targets. After finding therapeutic drug targets, the Company intends to focus on developing novel small molecule, antibody, or other therapeutic drug candidates to treat the disease, and advance these novel drug candidates towards an Investigational New Drug (“IND”) filing and potential future clinical trials.

The Company expects to broaden its work into additional therapeutic areas over time and is currently exploring specific tissues for development. In the Company’s work to identify the areas of interest, it evaluates areas that might be better served with 3D disease models than currently available models as well as the potential commercial opportunity. In line with these plans, the Company is building upon both its external and in house scientific expertise, which will be essential to its drug development effort.

Except where specifically noted or the context otherwise requires, references to “Organovo Holdings”, “the Company”, and “Organovo” in these notes to the unaudited condensed consolidated financial statements refers to Organovo Holdings, Inc. and its wholly owned subsidiaries, Organovo, Inc., and Opal Merger Sub, Inc.

7


 

Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not necessarily include all information and notes required by GAAP for complete financial statements. The condensed consolidated balance sheet at March 31, 2023 is derived from the Company’s audited consolidated balance sheet at that date.

The unaudited condensed consolidated financial statements include the accounts of Organovo and its wholly owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, the unaudited financial information for the interim periods presented reflects all adjustments, which are only normal and recurring, necessary for a fair statement of the Company’s financial position, results of operations, stockholders’ equity and cash flows. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2023, as filed with the Securities and Exchange Commission (“SEC”). Operating results for any interim period are not necessarily indicative of the operating results for any other interim period or the Company’s full fiscal year ending March 31, 2024 (see “Note 1. Description of Business”).

 

Liquidity and Going Concern

The accompanying consolidated financial statements have been prepared on the basis that we are a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. As of September 30, 2023, the Company had cash and cash equivalents of approximately $7.6 million, restricted cash of approximately $0.1 million and an accumulated deficit of approximately $333.0 million. The restricted cash was pledged as collateral for a letter of credit that the Company is required to maintain as a security deposit under the terms of the lease agreement for its facilities. The Company also had negative cash flows from operations of approximately $8.5 million during the six months ended September 30, 2023.

Through September 30, 2023, the Company has financed its operations primarily through the sale of common stock through public and at-the-market (“ATM”) offerings, the private placement of equity securities, from revenue derived from the licensing of intellectual property, products and research service-based services, grants, and collaborative research agreements, and from the sale of convertible notes. During the six months ended September 30, 2023, the Company issued zero shares of its common stock through its ATM facility.

Based on the Company's current operating plan and available cash resources, it will need substantial additional funding to support future operating activities. The Company has concluded that the prevailing conditions and ongoing liquidity risks faced by it raise substantial doubt about its ability to continue as a going concern for at least one year following the date these financial statements are issued. The accompanying consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. As the Company continues its operations and is focusing its efforts on drug discovery and development, the Company will need to raise additional capital to implement this business plan. The Company cannot predict with certainty the exact amount or timing for any future capital raises. The Company will seek to raise additional capital through debt or equity financings, or through some other financing arrangement. However, the Company cannot be sure that additional financing will be available if and when needed, or that, if available, it can obtain financing on terms favorable to its stockholders. Any failure to obtain financing when required will have a material adverse effect on the Company’s business, operating results, and financial condition.

Use of Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. On an ongoing basis, management reviews these estimates and assumptions.

Investments

 

Investments consist of investments in debt securities and investments in equity securities.

Investments in debt securities consist of investments in U.S. Treasury bills. As of September 30, 2023, all investments that have original maturities of three months or less are classified as cash equivalents on the Condensed Consolidated Balance Sheets. Prior to

8


 

December 31, 2022, the Company classified certain investments as held-to-maturity. All investments previously classified as held-to-maturity matured prior to December 31, 2022. As of September 30, 2023 and March 31, 2023, all investments are classified as available-for-sale, as the sale of such investments may be required prior to maturity to implement management strategies. Available-for-sale debt securities are recorded at fair value. Any unrealized gains and losses are included in accumulated other comprehensive income as a component of stockholders' equity until realized. As U.S. Treasury bills have minimal risk, any declines in fair value are considered temporary.

Investments in equity securities consist of investments in the common stock of entities traded in active markets. The Company does not have the ability to exercise significant influence over any entities. Therefore, initial investments are recorded at cost, and are remeasured at fair value as of the balance sheet date. Any gains or losses resulting from the change in fair value are recorded in net income. The investments in equity securities are classified as current assets.

Fair value measurement

Financial assets and liabilities are measured at fair value, which is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The following is a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:

Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Net Loss Per Share

Basic and diluted net loss per share has been computed using the weighted-average number of shares of common stock outstanding during the period. The weighted-average number of shares used to compute diluted loss per share excludes any assumed exercise of stock options, shares reserved for purchase under the Company’s 2016 Employee Stock Purchase Plan (“ 2016 ESPP”), the assumed vesting of restricted stock units (“RSUs”), and shares subject to repurchase as the effect would be anti-dilutive. No dilutive effect was calculated for each of the six months ended September 30, 2023 and 2022 as the Company reported a net loss for each respective period and the effect would have been anti-dilutive.

Common stock equivalents excluded from computing diluted net loss per share due to their anti-dilutive effect were approximately 1.0 million at September 30, 2023 and 1.4 million at September 30, 2022.

Revenue recognition

The Company has generated revenues from payments received from licensing intellectual property.

The Company has entered into a license agreement with a company that includes the following: (i) non-refundable upfront fees and (ii) royalties based on specified percentages of net product sales, if any. At the initiation of the agreement, the Company has analyzed whether it results in a contract with a customer under Topic 606.

 

The Company has considered a variety of factors in determining the appropriate estimates and assumptions under these arrangements, such as whether the Company is a principal vs. agent, whether the elements are distinct performance obligations, whether there are determinable stand-alone prices, and whether any licenses are functional or symbolic. The Company has evaluated each performance obligation to determine if it can be satisfied and recognized as revenue at a point in time or over time. Typically, non-refundable upfront fees have been considered fixed, while sales-based royalty payments have been identified as variable consideration which must be evaluated to determine if it has been constrained and, therefore, excluded from the transaction price. Please refer to “Note 6: Collaborative Research, Development, and License Agreements” for further information.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies. Unless otherwise stated, the Company believes that the impact of the recently issued accounting

9


 

pronouncements that are not yet effective will not have a material impact on its consolidated financial position or results of operations upon adoption.

Note 3. Investments and Fair Value Measurement

 

Investments in debt securities

As of September 30, 2023, the Company held $3.0 million of investments in debt securities (which are included in the $7.6 million of cash and cash equivalents). For each of the three and six months ended September 30, 2023, there was $0.1 million of interest income related to the investments in debt securities. As the investments in debt securities consist of U.S. Treasury bills from active markets, the fair value is measured using level 1 inputs.

The following table summarizes the Company's investments in debt securities that are measured at fair value as of September 30, 2023 (in thousands):

 

 

 

Amortized costs basis

 

 

Gross unrealized gains

 

 

Gross unrealized losses

 

 

Fair value

 

As of March 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Investment in debt securities

 

$

4,943

 

 

$

2

 

 

$

 

 

$

4,945

 

As of September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Investment in debt securities

 

$

2,992

 

 

$

1

 

 

$

 

 

$

2,993

 

 

Investments in equity securities

For the six months ended September 30, 2023, there was $0.7 million of equity securities liquidated and less than a $0.1 million gain on the investment in equity securities. As of September 30, 2023, the fair value of investment in equity securities was zero, as a result of the liquidation of the shares by the underlying company during the six months ended September 30, 2023. As the investment in equity securities consists of common stock from active markets, the fair value is measured using level 1 inputs.

The following table presents the activity for investments in equity securities measured at fair value for the six months ended September 30, 2023 (in thousands):

 

 

 

Investment in Equity Securities
(in thousands)

 

Balance at March 31, 2023

 

$

706

 

Liquidation of equity securities

 

 

(718

)

Gain on investment in equity securities

 

 

12

 

Balance at September 30, 2023

 

$

 

 

Note 4. Accrued Expenses

Accrued expenses consisted of the following (in thousands):

 

 

 

September 30,
2023

 

 

March 31,
2023

 

Accrued compensation

 

$

283

 

 

$

609

 

Accrued legal and professional fees

 

 

49

 

 

 

193

 

Acquired in-process research and development

 

 

 

 

 

2,000

 

Other accrued expenses

 

 

334

 

 

 

46

 

 

 

$

666

 

 

$

2,848

 

 

Note 5. Stockholders’ Equity

Preferred Stock

The Company is authorized to issue 25,000,000 shares of preferred stock. There are no shares of preferred stock currently outstanding, and the Company has no current plans to issue shares of preferred stock.

10


 

Common Stock

In March 2021, the Company's Board of Directors ("Board") approved the 2021 Inducement Equity Incentive Plan ("Inducement Plan"). The Inducement Plan authorized the issuance of up to 750,000 shares of common stock for awards of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, RSUs, performance units, performance shares, and other stock or cash awards. The only persons eligible to receive grants under the Inducement Plan are individuals who satisfy the standards for inducement grants under Nasdaq guidance. The Company also committed to reducing the aggregate number of shares of its common stock issuable pursuant to the Inducement Plan from 750,000 shares to 51,000 shares (which includes 50,000 shares of its common stock issuable pursuant to an outstanding option to purchase common stock with an exercise price of $2.75 per share, leaving only 1,000 shares available for future issuance under the Inducement Plan) and the share reserve was reduced accordingly effective October 12, 2022. As of September 30, 2023, there were 1,000 shares available for future grant under the Inducement Plan.

On October 12, 2022, the Company's stockholders and the Board approved the 2022 Equity Incentive Plan ("2022 Plan"), and it became effective on that date. The 2022 Plan replaced the Amended and Restated 2012 Equity Incentive Plan ("2012 Plan") on the effective date. Upon the effective date, the Company ceased granting awards under the 2012 Plan and any shares remaining available for future issuance under the 2012 Plan were cancelled and are no longer available for future issuance. The 2012 Plan continues to govern awards previously granted under it. At the time the Board approved the 2022 Plan, an aggregate of 1,363,000 shares of the Company’s common stock was initially reserved for issuance under the 2022 Plan. The Company committed to reducing the 2022 Plan share reserve by the number of shares that were granted under the 2012 Plan and the Inducement Plan between July 25, 2022 and October 12, 2022. From July 25, 2022 to October 12, 2022, the Company issued 126,262 shares of its common stock under the 2012 Plan. As a result, the number of shares initially reserved for future issuance under the 2022 Plan was 1,236,738 shares of common stock. As of September 30, 2023, 1,672,574 shares were available for future grant under the 2022 Plan and 174,264 shares were subject to outstanding stock options.

The Company previously had an effective shelf registration statement on Form S-3 (File No. 333-222929), declared effective by the SEC on February 22, 2018 (the “2018 Shelf”), which registered $100.0 million of common stock, preferred stock, warrants and units, or any combination of the foregoing, that expired on