VivoSim Labs, INC.

Note 1. Description of Business and Summary of Significant Accounting Policies

Nature of Operations

VivoSim Labs, Inc., formerly known as Organovo Holdings, Inc. ("VivoSim" and the “Company”), is a pharmaceutical and biotechnology services company that is focused on providing testing of drugs and drug candidates in three-dimensional (“3D”) human tissue models of liver and intestine. The Company offers partners liver and intestinal toxicology insights using its new approach methodologies ("NAM") models. The Company anticipates accelerated adoption of human tissue models following the U.S. Food and Drug Administration (“FDA") announcement on April 10, 2025 to refine animal testing requirements in favor of these non-animal NAM methods. The Company will also offer bespoke services in the areas of investigational toxicology, mechanism of drug action elucidation, and other applications of these complex human tissue models.

Prior to March 2025, the Company was a clinical stage biotechnology company that was focused on developing FXR314 in inflammatory bowel disease ("IBD"), including ulcerative colitis ("UC"), based on demonstration of clinical promise in 3D human tissues as well as strong preclinical data. The Company's clinical focus was in advancing FXR314 in IBD, including UC and Crohn’s disease. The Company planned to start a Phase 2a clinical trial in UC in the calendar year 2025 and was also exploring the potential for combination therapies using FXR314 and approved mechanisms in preclinical animal studies and the Company's IBD disease models.

In March 2025, the Company sold its FXR programfor $10.0 million, with $9.0 million paid at closing and $1.0 million held in escrow for a period of 15 months, with future milestones of up to $50.0 million in the aggregate to be paid if the lead asset, FXR314, hits key development, regulatory and commercial milestones.

Effective April 24, 2025, the Company changed its corporate name to VivoSim Labs, Inc. by filing a Certificate of Amendment to its Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware. The Company changed its name to reflect its new business model, which includes the use of other longstanding assets of the Company, intestinal and liver tox models and expertise, and its IP portfolio for 3D bioprinting.

The Company is now offering liver toxicology predictive screening and research services as well as working on predicting and studying the intestinal side effect profiles of drugs that are therapeutic candidates of pharmaceutical and biotech companies at all stages of drug development. The Company's services offer the potential benefit of reducing the significant risk and cost of bringing therapeutics to market through the regulatory process. It is estimated that less than 10% of drug candidates entering clinical trials are approved, with a portion of the failures due to unexpected liver toxicity or intestinal intolerability. In addition, even approved drugs are occasionally withdrawn after liver toxicity is determined to be caused by the drug in a phenomenon called drug induced liver injury. The Company presented findings at the May 2025 Digestive Disease Week scientific conference showing that the liver toxicology platform had a best-in-class predictive power. VivoSim's liver predictive power was shown to be 87.5% for a set of challenging liver toxicity cases – inclusive of classic cases of “liver tox misses” drugs with unforeseen liver toxicity found in clinical trials or drugs that were withdrawn from the market after liver toxicity issues emerged later. The platform identified correctly that 87.5% of the known liver-toxic drugs could be seen as liver toxic using NAMkind™ liver. This is known as the sensitivity of the platform, which at 87.5% is a world’s best. Importantly, the specificity was 100%, meaning that none of the compounds tested that are not liver toxic were incorrectly identified as having liver toxicity issues by the platform.

The Company uses its proprietary technologies to build functional 3D human tissues that mimic key aspects of native human tissue composition, architecture, function, and disease. The Company believes these attributes can enable critical complex, multicellular disease models that can be used to study and develop clinically effective drugs across multiple therapeutic areas.

The Company has also used these human disease models to identify new molecular targets responsible for driving IBD and to explore the mechanism of action of known drugs including JAK inhibitors and related molecules. A portion of its internal research continues to focus on early stage internal drug discovery programs, validating targets, and testing potentially licensable or transactable external drug compounds to identify drug candidates for partnering and/or internal clinical development.

In February 2024, the Company formed its Mosaic Cell Sciences division (“Mosaic”) that was intended to serve as a key source of certain primary human cells that the Company utilizes in its research and development efforts. Mosaic provided the Company with qualified human cells for use in its clinical research and development programs. In addition to supplying the Company with primary human cells, Mosaic offered human cells for sale to life science customers, both directly and through distribution partners, which the Company expected to offset costs and over time become a profit center that offset overall research and development ("R&D") spending by the Company. The Company ended Mosaic's commercial sales operations in the third quarter of fiscal 2025, and any remaining saleable inventory was internally transferred to R&D at that time.

Liquidity and Going Concern

The accompanying Consolidated Financial Statements have been prepared on the basis that the Company is a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. As of March 31, 2025, the Company had cash and cash equivalents of approximately $11.3 million, restricted cash of approximately$0.1 million and an accumulated deficit of approximately$342.2 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 agreements for its facilities. The Company also had negative cash flows from operations of approximately $9.5 million during the year ended March 31, 2025. As of March 31, 2025, the Company had total current assets of approximately $12.1 million and current liabilities of approximately $3.7 million, resulting in working capital of $8.4 million.

Through March 31, 2025, 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-based services, grants, and collaborative research agreements, the sale of the Company’s FXR program, and from the sale of convertible notes. During the year ended March 31, 2025, the Company issued 493,372 shares of its common stock through its ATM facility, for net proceeds of approximately $4.9 million.

On March 25, 2025, the Company sold its FXR programfor $10.0 million, with $9.0 million paid at closing and $1.0 million held in escrow for a period of 15 months, with future milestones of up to $50.0 million to be paid if the lead asset, FXR314, hits key regulatory and commercial milestones.

Based on the Company's current operating plan and available cash resources, the Company will need substantial additional funding to support future operating activities. The Company has concluded that the prevailing conditions and ongoing liquidity risks faced by the Company raise substantial doubt about its ability to continue as a going concern for at least one year following the date these Consolidated 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 services, research, 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.

Nasdaq Deficiency Notices

On July 18, 2024, the Company received a written notice from the Listing Qualifications Staff (the "Staff") of the Nasdaq Stock Market LLC (“Nasdaq”) indicating that, based upon the closing bid price of the Company’s common stock for the last 30 consecutive business days, the Company no longer meets the requirement to maintain a minimum bid price of $1 per share, as set forth in Nasdaq Listing Rule 5550(a)(2) (“Rule 5550(a)(2)”). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided an initial period of 180 calendar days, or until January 14, 2025, to regain compliance.

On January 16, 2025, the Staff provided a notice to the Company (the “Nasdaq Notice”) that it had not regained compliance with Rule 5550(a)(2) and was not eligible for a second 180 calendar day compliance period as it did not comply with the requirements for initial listing on the Nasdaq Capital Market. The Nasdaq Notice further indicated that, unless the Company timely requested a hearing before a Hearings Panel (the “Hearings Panel”), the Company’s common stock would be subject to delisting. The Company timely requested a hearing, which automatically stayed any delisting or suspension action pending the hearing and the expiration of any extension period granted by the Hearings Panel following the hearing.

On February 19, 2025, the Company received a written notice from the Staff of Nasdaq indicating that, since the Company’s Quarterly Report on Form 10-Q for the period ended December 31, 2024 reported stockholders’ equity of $364,000, and as of February 19, 2025, the Company did not meet the alternatives of market value of listed securities or net income from continuing operations, the Company no longer met the requirement to maintain a minimum of $2,500,000 in stockholders’ equity, as set forth in Nasdaq Listing Rule 5550(b)(1) (“Rule 5550(b)(1)”).

On March 31, 2025, the Company effected a 1-for-12 reverse stock split of its common stock (the “Reverse Stock Split”). On March 27, 2025, the Hearings Panel granted the Company an exception until April 15, 2025 to demonstrate compliance with Rule 5550(a)(2) and Rule 5550(b)(1). On April 30, 2025, the Company received a letter from Nasdaq notifying it that it has demonstrated compliance with Rule 5550(a)(2) and Rule 5550(b)(1) as required by the Hearings Panel’s March 27, 2025 decision. Pursuant to Nasdaq Listing

Rule 5815(d)(4)(B), the Company will be subject to a Mandatory Panel Monitor for a period of one year from the date of Nasdaq’s letter.

Reverse Stock Split

The par value per share and the number of authorized shares were not adjusted as a result of the Reverse Stock Split. The shares of

common stock underlying outstanding stock options, common stock warrants and other equity instruments were proportionately reduced and the respective exercise prices, if applicable, were proportionately increased in accordance with the terms of the agreements governing such securities. In addition, the shares available for grants under the Company’s incentive plans were adjusted as a result of the Reverse Stock Split. All references to common stock, options to purchase common stock, outstanding common stock

warrants, common stock share data, per share data, and related information contained in the consolidated financial statements have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented.

Basis of Presentation and Principles of Consolidation

The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the Accounting Standards Codification ("ASC") and Accounting Standards Updates promulgated by the Financial Accounting Standards Board ("FASB").

The Consolidated Financial Statements include the accounts of VivoSim and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the Consolidated 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.

Financial Instruments

For certain of the Company’s financial instruments, including cash and cash equivalents, prepaid expenses and other assets, accounts payable, accrued expenses, the carrying amounts are generally considered to be representative of their respective fair values because of the short-term nature of those instruments.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

Credit Risk and Significant Customers

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash equivalents and short-term investments. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any material losses in such accounts and believes it is not exposed to significant risk. The Company has invested its excess cash primarily in money market funds and U.S. Treasury securities. Additionally, the Company adheres to established guidelines regarding approved investments and maturities of investments, which are designed to preserve their principal value and maintain liquidity.

The Company is also potentially subject to concentrations of credit risk in its revenues and receivable accounts. The Company’s receivables to date have been derived from a relatively small number of customers and third parties. The Company makes judgment as to its ability to collect outstanding receivables and provides reserves against receivables for estimated losses that may result from a customer or third party's ability to pay. Specific amounts determined to be uncollectable are charged against the reserve. The Company has not historically experienced any receivable write-downs and management does not believe significant credit risk exists as of March 31, 2025.

Restricted Cash

As of March 31, 2025 and 2024, the Company had approximately $0.1 million of restricted cash, deposited with a financial institution. The entire amount was held in certificates of deposit to support a letter of credit agreement related to the Company’s facility leases entered into in November 2020 and amended in November 2021.

Investments

Investments consist of investments in debt securities.

Investments in debt securities consist of investments in U.S. Treasury bills. Any investments that have original maturities of three months or less are classified as cash equivalents on the Consolidated Balance Sheets. As of March 31, 2025, all Company investments, which consisted of U.S. Treasury bills, matured. As of March 31, 2024, all investments were 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 are risk-free, any declines in fair value are considered temporary.

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:

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Level 1 — Quoted prices in active markets for identical assets or liabilities.

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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.

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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.

Insurance Premium Financing Liability

In September 2024, the Company entered into an insurance premium financing agreement for $0.4 million, with a term of nine months and an annual interest rate of 8.57%. The Company made a down payment of 10% and is required to make monthly principal and interest payments of $44,281 over the term of the agreement, which matures in June 2025. The insurance premium financing liability was approximately $0.1 million as of March 31, 2025. Related prepaid insurance at March 31, 2025 of $0.2 million is included in prepaid expenses and other current assets on the accompanying Consolidated Balance Sheets.

Inventory

Inventories are stated at the lower of cost or net realizable value. Inventory as of March 31, 2024 consisted of approximately $0.3 million in finished goods, which was related to the Company's former division, Mosaic. There wasno inventory as of March 31, 2025. The Company ended Mosaic's commercial operations in the third quarter of fiscal 2025. At that time, all remaining inventory was internally transferred to R&D and written off to research and development expenses.

Fixed Assets and Depreciation

Fixed assets are carried at cost less accumulated depreciation. Expenditures that extend the life of the asset are capitalized and depreciated. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the related assets or, in the case of leasehold improvements, over the lesser of the useful life of the related asset or the remaining lease term. The estimated useful lives of the fixed assets range betweenone andseven years.

Impairment of Long-Lived Assets

In accordance with authoritative guidance, the Company reviews its long-lived assets, including fixed assets and other assets, for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. To determine recoverability of its long-lived assets, the Company evaluates whether future undiscounted net cash flows will be less than the carrying amount of the assets and adjusts the carrying amount of its assets to fair value. Management has determined thatno impairment of long-lived assets occurred as of March 31, 2025 and 2024.

Research and Development

Research and development expenses, including direct and allocated expenses, consist of independent research and development costs, as well as costs associated with sponsored research and development. Research and development costs are expensed as incurred.

Acquired In-Process Research and Development

FXR Program

In March 2023, the Company acquired Metacrine's FXR program for $4.0 million. The FXR program was determined to have no alternative future use, and therefore was considered acquired in-process research and development and fully expensed. Acquired in-process research and development expenses were included in total research and development expenses on the Consolidated Statements of Operations and Other Comprehensive Loss. In the year ended March 31, 2023, the Company paid a $2.0 million upfront payment, and the remaining $2.0 million was paid in the year ended March 31, 2024, upon the final transfer of the drug compounds, related data, and IP.

On March 25, 2025, the Company sold its FXR program and related assets to Eli Lilly and Company (the “FXR Asset Sale”). The consideration for the FXR Asset Sale consisted of (i) an upfront cash payment by Lilly to the Company equal to $10.0 million, of which $9.0 million was paid at closing and the remaining $1.0 million was deposited into escrow for 15 months to satisfy any claims for indemnification during such period, (ii) the assumption by Eli Lilly and Company of certain liabilities related to the FXR program, and (iii) potential milestone payments by Eli Lilly and Company of up to $50.0 million in the aggregate, which are contingent upon the achievement of certain development, regulatory and commercial milestones.

The Company assessed whether this agreement was considered a contract with a customer pursuant to Topic 606 or subject to guidance pursuant to ASC Topic 610, Other Income ("Topic 610"). The Company considered a variety of factors in determining the appropriate assumptions under this arrangement, such as whether the counterparty was a customer, the nature of its operations, both historically and ongoing, and any contingent consideration constraints. The Company determined the counterparty was not a customer based on the nature of its ordinary business operations and recorded the transaction within other income under Topic 610. Furthermore, the Company determined the $1.0 million held in escrow was not constrained due to the terms of the indemnification language and it was therefore recognized as a component of the consideration received at the time of closing; however, the Company did determine future potential milestone payments that may be made by Eli Lilly and Company were constrained due to the uncertainty of the milestones being met. If and when the future milestone payments are no longer considered constrained, the Company will record such payments in other income.

Segment Reporting

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated on a regular basis by the chief operating decision maker in deciding how to allocate resources to an individual segment and in assessing performance. As of March 31, 2025, the Company identified onlyone operating segment. Please refer to "Note 15. Business Segment Information" for further information.

Income Taxes

Deferred income taxes are recognized for the tax consequences in future years for differences between the tax basis of assets and liabilities and their financial reporting amounts at each year end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the combination of the tax payable for the year and the change during the year in deferred tax assets and liabilities. The Company’s policy regarding uncertainty in income taxes is pursuant to ASC Topic 740-10. Interest and penalties that would be assessed in relation to the settlement value of unrecognized tax benefits is recognized as a component of income tax expense.

Revenue Recognition

Royalty revenue

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 or 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.

Product revenue, net

The Company’s former product-based division, Mosaic, which was established in the fourth quarter of fiscal 2024, produced high-quality cell-based products for use in its R&D and for use by life science customers. The Company recognized product revenue when the performance obligation is satisfied, which was at the point in time the customer obtained control of the Company’s product, typically upon delivery. Product revenues were recorded at the transaction price under Topic 606. The Company provided no right of return to its customers except in cases where a customer obtained authorization from the Company for the return. To date, there have been no product returns. The Company ended Mosaic's commercial operations during the third quarter of fiscal 2025.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with the ASC Topic 718, Compensation — Stock Compensation, which establishes accounting for equity instruments exchanged for employee and non-employee services. Under such provisions, stock-based compensation cost is measured at the grant date, based on the calculated fair value of the award (determined using either the Black-Scholes or Monte Carlo option-pricing models, depending on the complexity of the equity grant), and is recognized as an expense, under the straight-line method, over the employee or non-employee's requisite service period (generally the vesting period of the equity grant). The assumed dividend yield is based on the Company’s expectation of not paying dividends in the foreseeable future. The Company uses its Company-specific historical volatility rate. The risk-free interest rate assumption is based on U.S. Treasury rates. The weighted average expected life of options is estimated using the average of the contractual term and the weighted average vesting term of the options. Option forfeitures are treated as a reduction of stock-based compensation expense and accounted for as they occur.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. The Company is required to record all components of comprehensive income (loss) in the consolidated financial statements in the period in which they are recognized. Net income (loss) and other comprehensive income (loss), including unrealized gains and losses on investments, are reported, net of their related tax effect, to arrive at comprehensive income (loss).

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 includes the assumed exercise of any outstanding pre-funded warrants, and excludes any assumed exercise of stock options, shares reserved for purchase under the Company’s 2023 Employee Stock Purchase Plan, the assumed vesting of restricted stock units, the exercise of common warrants, and shares subject to repurchase as the effect would be anti-dilutive. No dilutive effect was calculated for the years ended March 31, 2025 and 2024 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 0.7 million shares and less than 0.1 million shares for the years ended March 31, 2025 and 2024, respectively.

Note 2. Investments and fair value measurement

Investments in debt securities

As of March 31, 2025, all Company investments that consisted of U.S. Treasury bills matured. For the year ended March 31, 2025, there was approximately $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 Company didnot have any investments in debt securities as of March 31, 2025. The following table summarizes the Company's investments in debt securities that are measured at fair value as of March 31, 2024 (in thousands):

Note 3. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

Prepaid expenses and other current assets for the years ended March 31, 2025 and 2024 was approximately $0.8 million and $0.7 million, respectively.

Note 4. Fixed Assets

Fixed assets consisted of the following (in thousands):

As of March 31, 2025 and 2024, all of the Company’s fixed assets were active and in use. Depreciation expense for each of the years ended March 31, 2025 and 2024 was approximately $0.3 million.

Note 5. Accrued Expenses

Accrued expenses consisted of the following (in thousands):

Note 6. Collaborative Research, Development, and License Agreements

License Agreements

BICO Group AB

In February 2022, the Company entered into a license agreement with Cellink AB and its subsidiaries (collectively, “BICO Group AB”), where the Company agreed to grant a non-exclusive license to BICO Group AB to use the Company’s aforementioned patents for its business operations of manufacturing and selling bioprinters as well as bioinks. As part of the license agreement, BICO Group AB agreed to pay the Company a one time, nonrefundable upfront fee of $1,500,000, as well as ongoing sales-based royalties (based on percentages of BICO Group AB’s net sales) for the use of the granted license, which was recorded as revenue. The sales-based royalties became effective beginning on February 22, 2022, the effective date of the license agreement, and continues until the expiration of the last surviving licensed patent. As the sales-based royalties are required to be paid 45 days after the end of every quarter, there is variable consideration that must be estimated to determine royalty revenue within a given reporting period. Once actual revenue earned is determined in the following fiscal quarter, an adjustment is made from the previously estimated amount. For the years ended March 31, 2025 and 2024, the Company recorded $119,000 and $109,000, respectively, of royalty revenue based on sales-based royalties from the license agreement.

Also as part of the license agreement, certain patents involved in the agreement are sublicensed by the Company from the University of Missouri and certain patents were previously sublicensed by the Company from Clemson University. See below for further information.

University of Missouri

In March 2009, the Company entered into a license agreement with the Curators of the University of Missouri to in-license certain technology and intellectual property relating to self-assembling cell aggregates and to intermediate cellular units. The Company received the exclusive worldwide rights to commercialize products comprising this technology for all fields of use. The Company is required to pay the University of Missouri royalties ranging from 1% to 3% of net sales of covered tissue products, and of the fair market value of covered tissues transferred internally for use in the Company’s commercial service business, depending on the level of net sales achieved by the Company each year.

On December 5, 2022, the Company amended the license agreement with the University of Missouri, whereby the Company agreed to pay a single, upfront payment of $50,000 to the University of Missouri in exchange for the aforementioned licensed intellectual property to be fully paid up by the Company. As a result, the Company will continue to have rights to the licensed intellectual property until its expiration in June 2028, but will no longer owe minimum annual royalty payments, royalty payments based on net sales, or any other payments (other than patent annuities and any prosecution costs) in the future.

Clemson University

In May 2011, the Company entered into a license agreement with Clemson University Research Foundation ("CURF") to in-license certain technology and intellectual property relating to ink-jet printing of viable cells. The Company received the exclusive worldwide rights to commercialize products comprising this technology for all fields of use. The Company was required to pay the university royalties ranging from 1.5% to 3% of net sales of covered tissue products and the fair market value of covered tissues transferred internally for use in the Company’s commercial service business, depending on the level of net sales reached each year. The license agreement terminated in May 2024 upon expiration of the patents licensed and was subject to certain conditions as defined in the license agreement. Minimum annual royalty payments of $40,000 per year were due beginning in calendar 2016. Royalty payments of $40,000 were made for the years ended March 31, 2025 and 2024. The annual minimum royalty was creditable against royalties owed during the same calendar year.

In addition to the annual royalty noted above, CURF was owed 40% of all payments including but not limited to, upfront payments, license fees, issue fees, maintenance fees, and milestone payments received from third parties, including sublicensees, in consideration for sublicensing rights to licensed products. However, per the agreement, in the event that the Company defended the technology by litigation, it could offset any royalties due by legal expenses incurred. As of the expiration of the license agreement in May 2024, the Company’s legal expenses exceeded royalties owed from the upfront payment and sales-based royalties related to the BICO Group AB license agreement. Therefore, no royalty expense to CURF was recorded for the year ended March 31, 2025 and no royalty expense related to sales-based royalties was ever recorded under the agreement.

Capitalized License Fees

Capitalized license fees consisted of the following (in thousands):

The above license fees, net of accumulated amortization, are included in prepaid expenses and other assets in the accompanying Consolidated Balance Sheets and are being amortized over the life of the related patents. Amortization expense of licenses was approximately $3,000 and $5,000 for the years ended March 31, 2025 and 2024, respectively, which are included in selling, general, and administrative expenses. At March 31, 2025, the weighted average remaining amortization period for all licenses was approxima tely 2 years. The annual amortization expense of licenses for the next three years is estimated to be approximately$2,000 per year.

The Salk Institute for Biological Studies

In March 2023, the Company acquired the FXR Agonist program from Metacrine. All patent rights related to this program were assigned to the Company in connection with the acquisition. In addition, the Company assumed and was assigned a license agreement with the Salk Institute for Biological Studies (hereafter “Salk”) that provided for certain payments to Salk upon the successful development and commercialization of the lead compound, FXR314. The Company was required to pay Salk royalties ranging from 1% to 1.125% of net sales of therapeutics based on FXR314. In addition, the Company was required to make certain milestone payments based on the successful initiation and/or completion of certain development milestones, including $500,000 within 45 days of the dosing of the first patient in a phase III clinical trial, $1,000,000 within 45 days of FDA approval of the first Licensed Product and $1,500,000 within 45 days of the first commercial sale of a Licensed Product in the Territory. There were also reduced milestone payments application to a second or third licensed product, if any. In March 2025, the Company closed the sale of its FXR program under which the license agreement was assigned to the buyer thereof. Pursuant to the license agreement with Salk, the Company paid $100,000 to Salk following the closing of the sale of the FXR program, which was recorded as selling, general, and administrative royalty expense.

Note 7. Stockholders’ Equity

Preferred stock

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

Common stock

In January 2012, the Company's Board of Directors ("Board") approved the 2012 Amended and Restated Equity Incentive Plan ("2012 Plan"). The 2012 Plan initially authorized the issuance of up to 27,308 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, and the number of shares issuable pursuant thereto was increased several times to an aggregate of 193,974 shares.

In March 2021, the Board approved the 2021 Inducement Equity Incentive Plan ("Inducement Plan"). The Inducement Plan authorized the issuance of up to 62,500 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. In February 2022,4,166 incentive stock options were issued 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 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 113,583 sharesof the Company’s common stock was initially reserved for issuance under the 2022 Plan. The Company committed to reducing the new 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 10,521 shares of its common stock under the 2012 Plan. As a result, the number of shares reserved for future issuance under the 2022 Plan was 103,062 shares of common stock. The Company also committed to reducing the aggregate number of shares of its common stock issuable pursuant to the Inducement Plan from 62,500 shares to 4,250 shares (which includes 4,166 shares of its common stock issuable pursuant to an outstanding option to purchase common stock with an exercise price of $33 per share, leaving only 83 shares available for future issuance under the Inducement Plan) and the share reserve was reduced effective October 12, 2022. On November 20, 2024, the Company’s stockholders approved the amendment and restatement of the 2022 Plan (the “A&R 2022 Plan”) to increase the number of shares reserved for issuance thereunder by 147,916 shares.

The Company previously had an effe ctive shelf registration statement on Form S-3 (File No. 333-252224), declared effective by the SEC on January 29, 2021 (the “2021 Shelf”), which registered $150.0 million of common stock, preferred stock, warrants and units, or any combination of the foregoing, that expired on January 29, 2024. On January 26, 2024, the Company filed a new shelf registration statement on Form S-3 (File No. 333-276722) to register $150.0 million of the Company's common stock, preferred stock, debt securities, warrants and units, or any combination of the foregoing (the "2024 Shelf"). The 2024 Shelf was declared effective by the SEC on February 8, 2024 and replaced the 2021 Shelf at that time.

On March 16, 2018, the Company entered into a Sales Agreement with Jones Trading Institutional Services LLC (the “Agent”). On January 29, 2021, the Company filed a prospectus supplement to the 2021 Shelf, pursuant to which the Company may offer and sell, from time to time through the Agent, shares of its common stock in ATM sales transactions having an aggregate offering price of up to $50.0 million. Any shares offered and sold were issued pursuant to the 2021 Shelf until it was replaced by the 2024 Shelf.

On January 26, 2024, the Company filed a prospectus with the 2024 Shelf (the "2024 ATM Prospectus"), pursuant to which the Company may offer and sell, from time to time through the Agent, shares of its common stock in ATM sales transactions having an aggregate offering price of upto $2,605,728. The Company filed amendments to the 2024 ATM Prospectus on February 26, 2025 and again on April 11, 2025, providing that the Company may offer and sell, from time to time through the Agent, shares of its common stock in ATM sales transactions having an additional aggregate offering price of up to $5,311,508 and $4,766,105, respectively. Any shares offered and sold in these ATM transactions will be issued pursuant to the 2024 Shelf.

During the year ended March 31, 2025, the Company issued 493,372 shares of common stock in ATM offerings, pursuant to the 2024 Shelf. As of March 31, 2025, the Company has sold an aggregate of 496,405 shares of common stock in ATM offerings under the 2024 ATM Prospectus, with gross proceeds of approximately $5.0 million. As of March 31, 2025, there was approximately $142.7 million unallocated and available for future offerings under the 2024 Shelf, and approximately $2.3 million available for future offerings through the Company’s ATM program under the 2024 ATM Prospectus.

In the event that the aggregate market value of the Company’s common stock held by non-affiliates (“public float”) is less than $75.0 million, the amount the Company can raise through primary public offerings of securities, including sales under the Sales Agreement, in any twelve-month period using shelf registration statements is limited to an aggregate of one-third of its public float. As of the date of filing of this Annual Report, the Company’s public float was less than $75.0 million, and therefore it is limited to an aggregate of one-third of its public float in the amount it could raise through primary public offerings of securities in any twelve-month period using shelf registration statements, with such public float recalculated at the time of sale. If the Company’s public float meets or exceeds $75.0 million at any time, the Company will no longer be subject to the restrictions set forth in General Instruction I.B.6 of Form S-3.

May 2024 Best Efforts Public Offering

On May 8, 2024, the Company priced a best efforts public offering (the “Offering”) of: (i)130,202 shares of its common stock and accompanying common warrants (“Common Warrants”) to purchase up to 130,202 shares of common stock at a combined public offering price of $9.60 per share and accompanying Common Warrant to purchase one share of common stock and (ii) pre-funded warrants (“Pre-Funded Warrants”) to purchase 416,666 shares of common stock and accompanying Common Warrants to purchase up to 416,666 shares of common stock at a combined public offering price of $9.588 per Pre-Funded Warrant and accompanying Common Warrant to purchase one share of common stock. In connection with the Offering, the Company entered into Securities Purchase Agreements with the purchasers of the securities in the Offering on May 8, 2024.

The per share exercise price for the Pre-Funded Warrants was $0.001, subject to adjustment as provided therein. The Pre-Funded Warrants were immediately exercisable, subject to certain beneficial ownership limitations, andwere to expire when exercised in full. The holders could exercise the Pre-Funded Warrants by means of a “cashless exercise.”During the year ended March 31, 2025, all 416,666 Pre-Funded Warrants were exercised.

The per share exercise price for the Common Warrants is $9.60, subject to adjustment as provided therein. The Common Warrants were immediately exercisable, subject to certain beneficial ownership limitations, and will expire on the date that isfive years followingthe original issuance date. If a registration statement covering the issuance of the shares of common stock issuable upon exercise of the Common Warrants is not available for the issuance, then the holders may exercise the Common Warrants by means of a “cashless exercise.”

In connection with the Offering, the Company paid JonesTrading Institutional Services LLC, which acted as the placement agent in connection with the Offering, a cash fee of 5.0% of the aggregate gross proceeds raised in the Offering.

The closing of the Offering occurred on May 13, 2024. The Company received net proceeds of approximately $4.5 million from the Offering, after deducting the offering expenses payable by the Company, including the Placement Agent fees.

The Company sold(i)130,202 shares of its common stock and Common Warrants to purchase up to 130,202 shares of common stock and (ii) Pre-Funded Warrants to purchase 416,666 shares of common stock and accompanying Common Warrants to purchase up to 416,666 shares of common stock. As of March 31, 2025, all of the Pre-Funded Warrants had been exercised and 7,810 shares of common stock had been issued upon exercise of Common Warrants.

Restricted stock units

The following table summarizes the Company’s RSUs activity for the year ended March 31, 2025:

Stock options

During the year ended March 31, 2025, under the A&R 2022 Plan,96,169 stock options were granted at various exercise prices.

On August 5, 2024, the Company granted 83,841 stock options to its Executive Chairman under the A&R 2022 Plan. Of the stock options granted,47,910 will vest evenly on an annual basis over three years.11,977 of the options granted have unique vesting criteria based on market conditions, more specifically the Company's stock price. As the market condition based stock options require significant estimates and assumptions to calculate their fair value, the Company engaged with valuation specialists to calculate the fair value and requisite service periods using Monte Carlo simulations. The stock options will be expensed over their determined requisite service periods. The remaining 23,954 options granted have unique vesting criteria based on specific Company performance conditions. The vesting criteria for 11,977 of these options includes the Company achieving cumulative revenue of $1.5 million. The vesting criteria for the remaining 11,977 options includes the Company entering into a definitive agreement that constitutes a major strategic partnership, at the discretion of the Board. As of March 31, 2025, no performance conditions have been met. The grant date fair value of the performance based awards is $118,000 inthe aggregate, which will be recognized when the performance condition is satisfied.

The following table summarizes stock option activity for the year ended March 31, 2025:

The weighted-average remaining contractual term of stock options exercisable and outstanding at March 31, 2025 was approximately 8.3 years.

Warrants

In connection with the Offering described above, the Company issued Common Warrants to purchase up to 130,202 shares of common stock at a combined public offering price of $9.60 per share and accompanying Common Warrant to purchase one share of common stock and (ii) Pre-Funded Warrants to purchase 416,666 shares of common stock and accompanying Common Warrants to purchase up to 416,666 shares of common stock at a combined public offering price of $9.588 per Pre-Funded Warrant and accompanying Common Warrant to purchase one share of common stock. The Company has determined that these warrants should be classified as equity instruments since they do not require the Company to repurchase the underlying common stock and do not require the Company to issue a variable amount of common stock. In addition, these warrants are indexed to common stock and do not have any antidilution rights.

The following table summarizes the Company’s Common Warrant activity from March 31, 2024 to March 31, 2025:

During the year ended March 31, 2025, all 416,666 Pre-Funded Warrants were exercised. The following table summarizes the Company’s Pre-Funded Warrants activity from March 31, 2024 to March 31, 2025:

Employee Stock Purchase Plan

In July 2023, the Board adopted, and subsequently on October 31, 2023, the Company's stockholders approved, the 2023 ESPP. The ESPP became effective on October 31, 2023. The Company rese rved 3,750 shares of common stock for issuance thereunder. The ESPP permits employees to purchase common stock through payroll deductions, limited to 15 percent of each employee’s compensation up to $25,000 per employee per year or 42 shares per employee per six-month purchase period. Shares under the ESPP are purchased at 85 percent of the fair market value at the lower of (i) the closing price on the first trading day of thesix-month purchase period or (ii) the closing price on the last trading day of the six-month purchase period. The initial offering under the ESPP commenced on March 1, 2024. During the year ended March 31, 2025,42 shares were issued under the ESPP. At March 31, 2025, there were 3,708 shares remaining available for purchase under the ESPP.

Common stock reserved for future issuance

Common stock reserved for future issuance consisted of the following at March 31, 2025:

Stock-based compensation expense and valuation information

Stock-based awards include stock options and RSUs under the Company's A&R 2022 Plan, 2012 Plan, inducement awards, performance-based RSUs under an Incentive Award Performance-Based Restricted Stock Unit Agreement, the Inducement Plan, and rights to purchase stock under the ESPP.

Stock-based compensation expense for all stock-based awards consists of the following (in thousands):

The total unrecognized compensation cost related to unvested stock option grants as of March 31, 2025 was approximately $0.6 millionand the weighted average period over which these grants are expected to vest is 2.51 years.

The total unrecognized stock-based compensation cost related to unvested RSUs as of March 31, 2025 was less than $0.1 million, which will be recognized over a weighted average period of 0.35 years.

The Company uses either the Black-Scholes or Monte Carlo option-pricing models to calculate the fair value of stock options, depending on the complexity of the equity grants. Stock-based compensation expense is recognized over the vesting period using the straight-line method. The assumed dividend yield is based on the Company’s expectation of not paying dividends in the foreseeable future. The Company uses the Company-specific historical volatility rate as the indicator of expected volatility. The risk-free interest rate assumption is based on U.S. Treasury rates. The weighted average expected life of options was estimated using the average of the contractual term and the weighted average vesting term of the options. The measurement and classification of share-based payments to non-employees is consistent with the measurement and classification of share-based payments to employees. The fair value of stock options was estimated at the grant date using the following weighted average assumptions:

The fair value of each RSU is recognized as stock-based compensation expense over the vesting term of the award. The fair value is based on the closing stock price on the date of the grant.

The Company uses the Black-Scholes valuation model to calculate the fair value of shares issued pursuant to the ESPP. Stock-based compensation expense is recognized over the purchase period using the straight-line method. The fair value of the ESPP shares was estimated at the purchase period commencement date using the following assumptions:

The assumed dividend yield was based on the Company’s expectation of not paying dividends in the foreseeable future. The Company uses the Company-specific historical volatility rate as the indicator of expected volatility. The risk-free interest rate assumption was based on U.S. Treasury rates. The expected life is the 6-month purchase period.

Note 8. Leases

After the initial adoption of ASC Topic 842, on an on-going basis, the Company evaluates all contracts upon inception and determines whether the contract contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of identified asset in exchange for consideration over a period of time. If a lease is identified, the Company will apply the guidance from ASC Topic 842 to properly account for the lease.

Operating Leases

On November 23, 2020, the Company entered into a lease agreement, pursuant to which the Company permanently leased approximately 8,051 square feet of office space (the “Permanent Lease”) in San Diego once certain tenant improvements were completed by the landlord and the premises were ready for occupancy. Additionally, on November 17, 2021, the Permanent Lease was amended to add an additional 2,892 square feet of office space in the same building. The Permanent Lease commenced on December 17, 2021 and is intended to serve as the Company’s permanent premises for approximately sixty-two months. Monthly rental payments are approximately $40,800 with 3% annual escalators.

The Company determined that the Permanent Lease is considered an operating lease under ASC Topic 842, and therefore upon the lease commencement date of December 17, 2021, recognized lease liabilities and corresponding right-of-use assets of $2.3 million. The Company records operating lease expense on a straight-line basis over the life of the lease (referred to as “operating lease expense”). Variable lease expenses associated with the Company’s leases, such as payments for additional monthly fees to cover the Company’s share of certain facility expenses (common area maintenance) are expensed as incurred.

The table below summarizes the Company’s lease liabilities and corresponding right-of-use assets as of March 31, 2025 (in thousands):

Variable lease expense was approximately$93,000 and $153,000 for the years ended March 31, 2025 and 2024, respectively. Operating lease expense was approximately$503,000 for the years ended March 31, 2025 and 2024, respectively.

Cash outflows associated with the Company’s operating lease for the years ended March 31, 2025 and 2024 were $524,000 and $509,000, respectively.

Future lease payments relating to the Company’s operating lease liabilities as of March, 31, 2025 are as follows (in thousands):

Note 9. Commitments and Contingencies

Legal matters

In addition to commitments and obligations in the ordinary course of business, the Company may be subject, from time to time, to various claims and pending and potential legal actions arising out of the normal conduct of its business.

On August 27, 2024, H.C. Wainwright & Co., LLC (“H.C. Wainwright”) filed a complaint against the Company in the Supreme Court of the State of New York, County of New York alleging that the Company breached a tail financing provision included in an engagement agreement the Company entered into with H.C. Wainwright in May 2023. In its complaint, H.C. Wainwright is seeking compensatory and consequential damages and attorneys’ fees. On October 18, 2024, the Company filed an answer to the complaint. The Company is defending these claims vigorously, but there is no guarantee that it will be successful in these efforts.

The Company assesses contingencies to determine the degree of probability and range of possible loss for potential accrual in its Consolidated Financial Statements. Accruals are recognized when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. Gain contingencies are not recognized until realized. Legal fees are expensed as incurred. Because litigation is inherently unpredictable and unfavorable resolutions could occur, assessing litigation contingencies is subjective and requires judgments about future events. When evaluating contingencies, the Company may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the presence of complex or novel legal theories, and/or the ongoing discovery and development of information important to the matters. In addition, damage amounts claimed in litigation against it may be unsupported, exaggerated or unrelated to possible outcomes, and as such are not meaningful indicators of its potential liability.

The Company regularly reviews contingencies to determine the adequacy of its accruals and related disclosures. During fiscal 2025, the Company recorded an accrual of $0.6 million (which was considered a financing fee related to the Offering discussed in Note 7. Stockholders' Equity) for the loss contingencies associated with the above described H.C. Wainwright complaint. Of the $0.6 million loss contingency accrual, $0.4 million is included in accrued expenses on the accompanying Consolidated Balance Sheets. The remaining $0.2 million of the loss contingency accrual is classified as a liability to be settled in equity on the accompanying Consolidated Balance Sheets. The liability to be settled in equity relates to a fixed number of warrants that were included in the complaint as part of the sought compensatory damages. The Company recorded the loss contingency accrual as it determined that an unfavorable outcome is probable or reasonably possible and believed that the amount or range of any possible loss was reasonably estimable. However, amounts accrued for legal contingencies often result from a complex series of judgments about future events and uncertainties that rely heavily on estimates and assumptions including timing of related payments, and the outcome of legal proceedings and claims brought against the Company is subject to significant uncertainty. If one or more legal matters were resolved against the Company in a reporting period, the Company’s Consolidated Financial Statements for that reporting period could be materially adversely affected.

Note 10. Income Taxes

A reconciliation of the statutory federal rate and the effective rate, for operations, is as follows for the years ended March 31, 2025 and 2024 (in thousands, except percentages):

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred tax assets are as follows as of March 31, 2025 and 2024 (in thousands, except percentages):

A full valuation allowance has been established to offset the deferred tax assets as management cannot conclude that realization of such assets is more likely than not. Under the Internal Revenue Code Sections 382 and 383, annual use of the Company’s net operating loss and research tax credit carryforwards to offset taxable income may be limited based on cumulative changes in ownership. The Company has not completed an analysis to determine whether any such limitations have been triggered as of March 31, 2025. Until this analysis is completed, the Company has removed the deferred tax assets related to net operating losses from its deferred tax asset schedule. Further, until a study is completed and any limitation known, approximately $1.8 million and $1.7 million for the years ended March 31, 2025 and 2024, respectively, would be considered as an uncertain tax position if netted against the deferred tax asset. Due to the existence of the valuation allowance, future changes in the Company’s unrecognized tax benefits will not impact its effective tax rate. Any carryforwards that will expire prior to utilization as a result of such limitations will be removed from deferred tax assets with a corresponding reduction of the valuation allowance. The valuation allowance decreased by approximately $177,000 and increased by approximately $525,000 for the years ended March 31, 2025 and 2024, respectively.

The Company had federal and state net operating loss carryforwards of approximately $222.2 million and $44.3 million, respectively, as of March 31, 2025. Federal net operating loss carryforwards of approximately $78.6 million will carryforward indefinitely and be available to offset up to 80% of future taxable income each year subject to revisions made by the Coronavirus Aid, Relief, and Economic Security Act. The remaining federal net operating losses will begin to expire in 2028, unless previously utilized. The state net operating loss carryforwards will begin to expire in 2028, unless previously utilized.

The Company had federal and state research tax credit carryforwards of approximately $5.3 million and $4.8 million at March 31, 2025, respectively. The federal research tax credit carryforwards begin expiring in 2028. The state research tax credit carryforwards do not expire.

The Company didnot record any accruals for income tax accounting uncertainties for the year ended March 31, 2025.

The Company didnot accrue either interest or penalties from inception through March 31, 2025.

The Company does not expect its unrecognized tax benefits to significantly increase or decrease within the next 12 months.

The Company is subject to tax in the United States and in California. As of March 31, 2025, the Company’s tax years from inception are subject to examination by the tax authorities due to the generation of net operating losses. The Company is not currently under examination by any jurisdiction.

Note 11. Related Parties

From time to time, the Company enters into agreements with one or more related parties in the ordinary course of its business. These agreements are ratified by the Board or a committee thereof pursuant to its related party transaction policy.

Viscient Biosciences (“Viscient”) is an entity for which Keith Murphy, the Company’s Executive Chairman, serves as the Chief Executive Officer and President.

On December 28, 2020, the Company entered into an intercompany agreement (the “Intercompany Agreement”) with Viscient and Organovo, Inc., the Company’s wholly-owned subsidiary, which included an asset purchase agreement for certain lab equipment. Pursuant to the Intercompany Agreement, the Company agreed to provide Viscient certain services related to 3D bioprinting technology, which includes, but is not limited to, histology services, cell isolation, and proliferation of cells and Viscient agreed to provide the Company certain services related to 3D bioprinting technology, including bioprinter training, bioprinting services, and qPCR assays, in each case on payment terms specified in the Intercompany Agreement and as may be further determined by the parties. In addition, the Company and Viscient each agreed to share certain facilities and equipment and, subject to further agreement, to each make certain employees available for specified projects for the other party at prices to be determined in good faith by the parties. During the second quarter of fiscal 2025 and first quarter of fiscal 2026, the companies added Statements of Work to the Intercompany Agreement, where Viscient agreed to provide the Company with certain testing services related to the Company's ongoing R&D. The Company evaluated the accounting for the Intercompany Agreement and concluded that any services provided by Viscient to the Company will be expensed as incurred, and any compensation for services provided by the Company to Viscient will be considered a reduction of personnel related expenses. Any services provided to Viscient do not fall under Topic 606 as the Intercompany Agreement is not a contract with a customer. For the fiscal year ended March 31, 2025, the Company incurred $118,000 in R&D consulting expenses from Viscient. The Company did not incur any consulting expenses during the fiscal year ended March 31, 2024. Additionally, for the fiscal years ended March 31, 2025 and 2024, the Company provided approximately $3,000 and $14,000 of histology services to Viscient, respectively.

Note 12. Defined Contribution Plan

The Company has a defined contribution 401(k) plan covering substantially all employees. During the year ended March 31, 2015, the 401(k) plan was amended (the “Amended Plan”) to include an employer matching provision. Under the terms of the Amended Plan, the Company will make matching contributions on up to the first 6% of compensation contributed by its employees. Amounts expensed under the Company’s 401(k) plan for the years ended March 31, 2025 and 2024 were approximately$66,000 and $61,000, respectively.

Note 13. Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies. Unless otherwise stated, the Company believes that the impact of the recently issued accounting pronouncements that are not yet effective will not have a material impact on its consolidated financial position or results of operations upon adoption.

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment's profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements. Please refer to "Note 16. Business Segment Information" for further information.

Recently Issued Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The update requires a public business entity to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. Adoption of the ASU allows for either the prospective or retrospective application of the amendment and is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company has not yet completed its assessment of the impact of ASU 2023-09 on the Company’s Consolidated Financial Statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which is intended to improve the disclosures of expenses by providing more detailed information about the types of expenses in commonly presented expense captions. The standard is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The standard can be applied either prospectively or retrospectively. The Company has not yet completed its assessment of the impact of ASU 2024-03 on the Company’s Consolidated Financial Statements.

Note 14. Restructuring

On August 18, 2023, the Company announced to its employees a plan to reduce the Company’s workforce, effective August 25, 2023, by approximatelysix employees, which represented approximately 24% of its employees as of August 18, 2023. The Company refocused operations on FXR314, its clinical drug candidate. This decision to reduce the Company’s workforce was made in order to focus spending on the Company’s clinical program for FXR314, reduce ongoing operating expenses not related to clinical expenses, and extend the Company’s cash runway. The Company incurred approximately $0.4 million of cash expenditures for the year ended March 31, 2024, in connection with the reduction in force, which related to severance pay. As of March 31, 2024, all restructuring costs were paid in full. The Company's annual cost savings for the fiscal year ended March 31, 2025 was approximately $1.4 million resulting from the reduction in force.

Note 15. Business Segment Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated on a regular basis by the CODM in deciding how to allocate resources to an individual segment and in assessing performance. The Company identifiedtwo operating segments in fiscal 2024, which did not impact prior periods, and during fiscal 2025 had a change in the operating segments fromtwo toone operating segment. During fiscal 2024, the Company's operating segments were as follows:

Research & Development

The R&D segment consisted of the Company's drug development efforts. The Company's clinical focus was in advancing FXR314 in IBD, including ulcerative colitis and Crohn’s disease. In March 2025, the Company sold its FXR program. The Company now focuses on providing testing of drugs and drug candidates in 3D human tissue models of liver and intestine, offering partners liver and intestinal toxicology insights using its NAM models. The Company plans to work with pharmaceutical and biotech companies at all stages of drug development to reduce the significant risk and cost of bringing therapeutics to market through the regulatory process and offer bespoke services in the areas of investigational toxicology, mechanism of drug action elucidation, and other applications of these complex human tissue models.

Mosaic Cell Sciences

The Mosaic segment, which began operations in February 2024, consisted of the Company's Mosaic Cell Sciences division, which served as a key source of certain of the primary human cells that the Company utilized in its research and development efforts. Mosaic provided the Company with qualified human cells for use in its clinical research and development programs. In addition to supplying the Company with primary human cells, Mosaic offered human cells for sale to life science customers, both directly and through distribution partners, which the Company expected to offset costs and over time become a profit center that offset overall R&D spending by the Company. However, the Company ended Mosaic's operations in the third quarter of fiscal 2025.

Change to Reportable Segments

The Company had a change in reportable segments in the fourth quarter of fiscal 2025, due to Mosaic ending its operations during the third quarter of fiscal 2025. As a result, there was an update to the financial information that is evaluated on a regular basis by the CODM for purposes of allocating resources and assessing performance, where the chief operating decision maker now regularly reviews the entity-wide operating results and performance. As a result, the Company's single operating segment constitutes all of the consolidated entity. The change in reportable segments does not affect prior period segment reporting.

The Company analyzed whether the closing of the Mosaic business segment qualified for reporting as a discontinued operation under ASC Topic 205. The Company's main operations are its R&D activities. Mosaic was initially formed to generate primary human cells for use by R&D rather than purchasing from third parties, while also selling excess inventory commercially to external customers, as a way to offset costs. However, the Company did not achieve significant revenues from Mosaic as initially expected. Therefore, Mosaic's remaining saleable inventory was internally transferred to R&D and Mosaic ended its commercial operations. The Company concluded that the closing of the Mosaic business segment does not qualify for reporting as a discontinued operation because the closing of the segment does not represent a strategic shift that will have a major effect on the Company's operations and financial results.

For purposes of evaluating performance and allocating resources, the Company’s CODM, its Executive Chairman, regularly reviews Consolidated Net Loss as reported in the Company’s Consolidated Statements of Operations and Comprehensive Loss as compared to budget. The measure of segment assets is reported in the Consolidated Balance Sheets as Total Consolidated Assets.

In addition to the significant expense categories included within Consolidated Net Loss presented in the Company’s Consolidated Statements of Operations and Other Comprehensive Loss, see below for disaggregated expense amounts for the years ended March 31, 2025 and 2024 (in thousands):

(a) Stock-based compensation expense of $86,000 and $138,000 related to research and development and $446,000 and $1,370,000, related to selling, general, and administration have been excluded for the years ended March 31, 2025 and 2024, respectively.

(b) Depreciation and amortization expense of $227,000 related to research and development for each of the years ended March 31, 2025 and 2024. Depreciation and amortization expense of $39,000 and $53,000 related to selling, general, and administration have been excluded for the years ended March 31, 2025 and 2024, respectively.

Note 16. Subsequent Events

Between April 1, 2025 and the date of the filing of this Annual Report on Form 10-K, the Company issued 701,729 shares of common stock in ATM offerings under the 2024 ATM Prospectus for net proceeds of approximately $1.8 million.