UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

For the quarterly period ended September 30, 2021

OR

For the transition period from                      to                     

Commission File Number 001-35996

Organovo Holdings, Inc.

(Exact name of registrant as specified in its charter)

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

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.

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, 2021, a total of 8,705,454 shares of the registrant’s Common Stock, $0.001 par value, were outstanding.

ORGANOVO HOLDINGS, INC.

INDEX

PART I. FINANCIAL INFORMATION

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PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Organovo Holdings, Inc.

Condensed Consolidated Balance Sheets

(in thousands except for share and per share data)

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

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Organovo Holdings, Inc.

Unaudited Condensed Consolidated Statements of Operations and Other Comprehensive Loss

(in thousands except share and per share data)

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

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Organovo Holdings, Inc.

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)

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

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Organovo Holdings, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

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

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Organovo Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our historical consolidated financial statements and the related notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2021. This management’s discussion and analysis contains forward-looking statements, such as statements related to our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect” and the like, and/or future tense or conditional constructions such as “will,” “may,” “could,” “should,” or similar expressions, identify certain of these forward-looking statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to risks and uncertainties, including those described in this Quarterly Report on Form 10-Q, as well as the risk factors disclosed in our Annual Report on the Form 10-K for the fiscal year ended March 31, 2021, filed with the Securities and Exchange Commission on June 15, 2021, and discussed in the section titled “Risk Factors” under Part II, Item 1A in this Quarterly Report on Form 10-Q, that could cause our actual results or events to differ materially from those expressed or implied by such forward-looking statements. Unless the context otherwise requires, the terms “Organovo,” the “Company”, “we”, “us” and “our” in this Quarterly Report on Form 10-Q refer to Organovo Holdings, Inc. and its wholly owned subsidiaries, Organovo, Inc. and Opal Merger Sub, Inc.

Except to the limited extent required by applicable law, we do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report.

Basis of Presentation

The unaudited condensed consolidated financial statements included in this Form 10-Q have been prepared in accordance with the Securities and Exchange Commission (the “SEC”) instructions to Quarterly Reports on Form 10-Q. Accordingly, the unaudited condensed consolidated financial statements presented elsewhere in this Form 10-Q and discussed below are unaudited and do not contain all the information required by U.S. generally accepted accounting principles (“GAAP”) to be included in a full set of financial statements. The audited financial statements for the year ended March 31, 2021, filed with the SEC on Form 10-K on June 15, 2021, include a summary of our significant accounting policies and should be read in conjunction with this Form 10-Q. In the opinion of management, all material adjustments necessary to present fairly the results of operations for such periods have been included in this Form 10-Q. All such adjustments are of a normal recurring nature. The results of operations for interim periods are not necessarily indicative of the results of operations for the entire year.

Overview

We are an early-stage biotechnology company that is focusing on building high fidelity, 3D tissues that recapitulate key aspects of human disease. We use these models to identify gene targets capable of modulating the disease phenotype across multiple patients and intend to initiate drug discovery programs around these validated targets. We are initially targeting the intestine and have ongoing 3D tissue development efforts in Ulcerative colitis (“UC”) and Crohn’s disease (“CD”). We intend to add additional tissues/diseases/targets to our portfolio in the coming year. In line with these plans, we are building upon both our external and in-house scientific expertise, which will be essential to our drug development effort.

We use our proprietary technology to build functional 3D human tissues that mimic key aspects of native human tissue composition, architecture, function and disease. Our advances include cell type-specific compartments, prevalent intercellular tight junctions, and the formation of microvascular structures. Management believes these attributes can enable critical complex, multicellular disease models that can be used to develop clinically effective drugs for selected therapeutic areas.

Our NovoGen Bioprinters^® are automated devices that enable the fabrication of 3D living tissues comprised of mammalian cells. We believe that the use of our bioprinting platform as well as complementary 3D technologies will allow us to develop an understanding of disease biology that leads to validated novel drug targets, and  therapeutics to those targets to treat disease.

The majority of our current focus is on inflammatory bowel disease (“IBD”), including CD and UC. We expect to create disease models, leveraging our prior work including the work found in our 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.) Our current understanding of intestinal tissue models and IBD disease models leads us to believe that we can create models that provide greater insight into the biology of these diseases than are generally currently available.  Using these disease models, we intend to identify and validate novel therapeutic targets. After finding therapeutic drug targets, we will focus on developing novel small molecule, antibody, or other therapeutic drug candidates to treat the disease, and advance these drug candidates towards an IND and clinical trials.  

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We expect to broaden our work into additional therapeutic areas over time and are currently exploring specific tissues for development. In our work to identify the areas of interest, we evaluate areas that might be better served with 3D disease models than currently available models as well as the commercial opportunity.

COVID-19

In December 2019 a respiratory illness caused by a novel strain of coronavirus, SARS-CoV-2, causing the Coronavirus Disease 2019, also known as COVID-19 emerged. While initially the outbreak was largely concentrated in China, it has since spread globally and been declared a pandemic by the World Health Organization. Global health concerns relating to the COVID-19 pandemic have been weighing on the macroeconomic environment, and the pandemic has significantly increased economic volatility and uncertainty. The pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place or stay-at-home orders, and business shutdowns. In 2020, we adapted quickly to COVID-19, instituting universal masking and distancing in the lab and in the offices. We encouraged and enabled remote work whenever possible. We instituted safety check software to monitor symptoms. We have successfully maintained a robust level of progress while ensuring the safety of our employees. As the viral load and variants allow, we intend to carefully return to more typical lab and office work flow.

The extent to which COVID-19 impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the rise of vaccine-resistant variants, duration of the outbreak, travel bans, restrictions, quarantines, shelter-in-place or stay-at-home orders, and business shutdowns. In particular, the continued COVID-19 pandemic could adversely impact various aspects of our operations, including among others, our ability to raise additional capital, the timing and ability to pursue our revised strategy, given the impact the pandemic may have on the manufacturing and supply chain, sales and marketing and clinical trial operations of potential strategic partners and the ability to advance our research and development activities and pursue development of our pipeline products each of which could have an adverse impact on our business and our financial results. Our employees and consultants have recently returned to working at our office and lab when necessary and we currently believe our operations have not been negatively impacted by the pandemic.

Critical Accounting Policies, Estimates, and Judgments

Our financial statements are prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments, the most critical of which are those related to stock-based compensation expense and the valuation allowance on deferred tax assets. Though the impact of the COVID-19 pandemic to our business and operating results presents additional uncertainty, we continue to use the best information available to inform our critical accounting estimates. We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. Besides the estimates identified above that are considered critical, we make many other accounting estimates in preparing our financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent assets and liabilities. These estimates and judgments are also based on historical experience and other factors that are believed to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known, even for estimates and judgments that are not deemed critical.

There have been no significant changes to our critical accounting policies since March 31, 2021. For a description of critical accounting policies that affect our significant judgments and estimates used in the preparation of our audited condensed consolidated financial statements, refer to Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Note 1. Description of Business and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended March 31, 2021, filed with the SEC on June 15, 2021.

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Results of Operations

Comparison of the three months ended September 30, 2021 and 2020

The following table summarizes our results of operations for the three months ended September 30, 2021 and 2020 (in thousands, except %):

Costs and Expenses

Research and Development Expenses

The following table summarizes our research and development expenses for the three months ended September 30, 2021 and 2020 (in thousands, except %):

For the three months ended September 30, 2021, research and development expenses were $0.7 million, an increase of 2,325% from the prior year period. For the three months ended September 30, 2020, we had less than $0.1 million research and development activities as we were in the midst of a process to evaluate strategic alternatives. Our average full-time research and development staff increased from zero full-time employees for the three months ended September 30, 2020 to an average of eight full-time employees for the three months ended September 30, 2021. Research and development activities consisted of $0.3 million in personnel related costs, $0.2 million in lab expenses, $0.1 million in facility costs, and $0.1 million in consulting fees, depreciation, and other miscellaneous expenses. Going forward, we intend to continue to increase headcount and research and development activities with an associated increase in expenses.

Selling, General and Administrative Expenses

The following table summarizes our selling, general and administrative expenses for the three months ended September 30, 2021 and 2020 (in thousands, except %):

For the three months ended September 30, 2021, selling, general and administrative expenses were approximately $2.8 million, a decrease of $6.1 million, or approximately 68%, compared to the prior year period. The decrease year over year is due to the change in business operations from fiscal 2021 to fiscal 2022. During the three months ended September 30, 2020, the majority of our costs were for personnel and general corporate costs, as we were in the midst of a strategic alternatives process and at the time we had an average of six full-time employees, three of whom were executives. A change in control occurred in September 2020, which triggered the resignations and related severance costs for the three executives. This included the accelerated vesting of any outstanding share based compensation. During the three months ended September 30, 2021, we had an average of four full-time employees, only one of whom is an executive. This decrease in headcount and a shift in business operations resulted in the decrease of personnel related costs by approximately $6.9 million year over year, which was offset by a $0.1 million increase in consulting costs year over year, as we

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utilized part-time consultants for officer positions in the Company as well as various other consultants for operations. Lastly, we had an increase in corporate costs of $0.7 million year over year, which was a result of a shift in business operations. Our corporate costs during the three months ended September 30, 2021 were approximately $1.9 million. Of these corporate costs, approximately $0.2 million are legal costs directly related to IPR proceedings and $0.6 million are legal costs directly related to ongoing litigation regarding patent enforcement. See “Operations Funding Requirements” below for further information on these legal expenses.

Other Income (Expense)

Other income was less than $0.1 million for both of the three months ended September 30, 2021 and September 30, 2020.

Comparison of the six months ended September 30, 2021 and 2020

The following table summarizes our results of operations for the six months ended September 30, 2021 and 2020 (in thousands, except %):

Costs and Expenses

Research and Development Expenses

The following table summarizes our research and development expenses for the six months ended September 30, 2021 and 2020 (in thousands, except %):

For the six months ended September 30, 2021, research and development expenses were $1.3 million, an increase of 4,396% from the prior year period. For the six months ended September 30, 2020, we had less than $0.1 million in research and development activities as we were in the midst of a process to evaluate strategic alternatives. Our average full-time research and development staff increased from zero full-time employees for the three months ended September 30, 2020 to an average of seven full-time employees for the six months ended September 30, 2021. Research and development activities consisted of $0.7 million in personnel related costs, $0.3 million in lab expenses, $0.2 million in facility costs, and $0.1 million in consulting fees, depreciation, and other miscellaneous expenses. Going forward, we intend to continue to increase headcount and research and development activities with an associated increase in expenses.

Selling, General and Administrative Expenses

The following table summarizes our selling, general and administrative expenses for the six months ended September 30, 2021 and 2020 (in thousands, except %):

For the six months ended September 30, 2021, selling, general and administrative expenses were approximately $4.8 million, a decrease of $6.9 million, or approximately 59%, compared to the prior year period. The decrease year over year is due to the change in

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business operations from fiscal 2021 to fiscal 2022. During the six months ended September 30, 2020, the majority of our costs were for personnel and general corporate costs, as we were in the midst of a strategic alternatives process and at the time we had an average of six full-time employees, three of whom were executives. A change in control occurred in September 2020, which triggered the resignations and related severance costs for the three executives. This included the accelerated vesting of any outstanding share based compensation. During the six months ended September 30, 2021, we had an average of four full-time employees, only one of whom is an executive. This decrease in headcount and a shift in business operations resulted in the decrease of personnel related costs by approximately $7.9 million year over year, and a decrease in facility costs of $0.2 million year over year, which was offset by a $0.4 million increase in consulting costs year over year, as we utilized part-time consultants for officer positions in the Company as well as various other consultants for operations. Lastly, we had an increase in corporate costs of $0.8 million year over year, which was a result of a shift in business operations. Our corporate costs during the six months ended September 30, 2021 were approximately $3.0 million. Of these corporate costs, approximately $0.2 million are legal costs directly related to IPR proceedings and $0.7 million are legal costs directly related to ongoing litigation regarding patent enforcement. See “Operations Funding Requirements” below for further information on these legal expenses.

Other Income (Expense)

Other income was less than $0.1 million for both of the six months ended September 30, 2021 and September 30, 2020.  

Financial Condition, Liquidity and Capital Resources

We originally devoted our efforts to developing a platform technology to produce and study living tissues, with a focus on liver tissue, that emulate key aspects of human biology and disease, raising capital and building infrastructure. Following the decision to explore strategic alternatives, we took steps to manage our resources and extend our cash runway. These steps included reducing all commercial and research and development laboratory activities related to our liver tissues, except for sales of primary human cells out of inventory, negotiating an exit from our long-term facility lease, selling lab equipment and other inventory, and reducing our workforce. We have retained certain key management, employees and consultants, our core intellectual property, licenses, collaborations with research institutions and universities, and proprietary equipment. Going forward, we intend to leverage our proprietary technology platform to develop therapeutic drugs. Our initial plan is to focus on IBD, including CD and UC with a goal of broadening our work into additional therapeutic areas over time. In connection with our new strategy, we intend to rebuild our research and development functions to support our screening and drug development efforts.

At September 30, 2021, we had cash and cash equivalents of approximately $33.8 million and an accumulated deficit of $302.3 million. We had negative cash flow from operations of $3.6 million during the six months ended September 30, 2021. At March 31, 2021, we had cash and cash equivalents of approximately $37.4 million and an accumulated deficit of $296.3 million.

At September 30, 2021, we had total current assets of approximately $34.3 million and current liabilities of approximately $1.7 million, resulting in working capital of $32.6 million. At March 31, 2021, we had total current assets of approximately $38.4 million and current liabilities of approximately $0.7 million, resulting in working capital of $37.7 million.

The following table summarizes the primary sources and uses of cash for the six months ended September 30, 2021 and 2020 (in thousands):

Operating activities

Net cash used in operating activities for the six months ended September 30, 2021 was approximately $3.6 million as compared to $9.7 million used in operating activities for the six months ended September 30, 2020. This $6.1 million decrease in operating cash usage can be attributed primarily to a change in business operations, resulting from the change in control in fiscal 2021.

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Investing activities

Net cash used in investing activities, consisting primarily of fixed asset purchases, was $0.2 million for the six months ended September 30, 2021. Net cash provided by investing activities, consisting primarily of proceeds from the sale of assets, was less than $0.1 million for the six months ended September 30, 2020.

Financing activities

Net cash provided by financing activities was $0.2 million during the six months ended September 30, 2021 compared to net cash provided by financing activities of less than $0.1 million during the six months ended September 30, 2020. Financing in fiscal 2022 was driven by the sale of common stock through at-the-market (“ATM”) offerings.

Operations funding requirements

Through September 30, 2021, we have financed our operations primarily through the sale of convertible notes, warrants, the private placement of equity securities, the sale of common stock through public and ATM offerings, and through revenue derived from products and research service-based agreements, collaborative agreements, licenses, and grants. During the six months ended September 30, 2021, we raised net proceeds of approximately $0.3 million through the sale of 27,545 shares of our common stock through ATM offerings.

Our ongoing cash requirements include research and development expenses, compensation for personnel, consulting fees, legal and accounting support, insurance premiums, facilities, maintenance of our intellectual property portfolio, license and collaboration agreements, listing on the Nasdaq Capital Market, and other miscellaneous fees to support our operations. We expect our total operating expense for the fiscal year ending March 31, 2022 will be between $12.0 million and $14.0 million. Based on our current operating plan and available cash resources, we believe we have sufficient resources to fund our business for at least the next twelve months.

In June 2021, our U.S. Pat. Nos. 9,855,369 and 9,149,952, which relate to our bioprinter technology, became the subject of IPR proceedings filed by Cellink AB and its subsidiaries, MatTek Incorporated and Visikol, Inc. (collectively, “Cellink AB”). The objective of the IPR proceedings is to invalidate the claims in the noted patents. We estimate the costs of these IPR proceedings to total between $850,000 and $950,000.

In September 2021, Cellink AB filed two additional IPR proceedings against our U.S. Pat. Nos. 9,315,043 and 9,752,116 (exclusively licensed by the Company from the MUSC Fourndation for Research and Development),which relate to our bioprinter technology. The objective of the IPR proceedings is to invalidate the claims in the noted patents. We estimate the costs of these IPR proceedings to total between $850,000 and $950,000.

As of September 30, 2021, we have incurred approximately $150,000 of total legal costs related to the IPR proceedings described above.

We previously had an effective shelf registration statement on Form S-3 (File No. 333-222929) (the “2018 Shelf”) that registered $100.0 million of common stock, preferred stock, warrants and units, or any combination of the foregoing, that was set to expire on February 22, 2021. On January 19, 2021, we filed a shelf registration statement on Form S-3 (File No. 333-252224) to register $150.0 million of common stock, preferred stock, debt securities, warrants and units, or any combination of the foregoing (the “2021 Shelf”) and a related prospectus. The 2021 Shelf registration statement was declared effective by the SEC on January 29, 2021 and replaced the 2018 Shelf at that time.

On January 29, 2021, we entered into a Sales Agreement (“Sales Agreement”) with H.C. Wainwright & Co., LLC and Jones Trading Institutional Services LLC (each an “Agent” and together, the “Agents”) and filed a prospectus supplement to the 2021 Shelf, pursuant to which we could offer and sell, from time to time through the Agents, shares of our common stock in ATM sales transactions having an aggregate offering price of up to $50.0 million. Any shares offered and sold are issued pursuant to our 2021 Shelf.

During the three and six months ended September 30, 2021, we sold 0 and 27,545 shares of common stock in ATM offerings, with net proceeds of approximately $0 and $0.3 million under the Sales Agreement, respectively. As of September 30, 2021, we have sold an aggregate of 1,580,862 shares of common stock in ATM offerings under the Sales Agreement, for gross proceeds of approximately $21.7 million. As of September 30, 2021, there was approximately $128.3 million available in future offerings under the 2021 Shelf, and approximately $28.3 million available for future offerings through our ATM program under the Sales Agreement.

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Having insufficient funds may require us to relinquish rights to our technology on less favorable terms than we would otherwise choose. Failure to obtain adequate financing could eventually adversely affect our ability to operate as a going concern. If we raise additional funds from the issuance of equity securities, substantial dilution to our existing stockholders would likely result. If we raise additional funds by incurring debt financing, the terms of the debt may involve significant cash payment obligations as well as covenants and specific financial ratios that may restrict our ability to operate our business. We cannot be sure that additional financing will be available if and when needed, or that, if available, we can obtain financing on terms favorable to our stockholders. Any failure to obtain financing when required will have a material adverse effect on our business, operating results, financial condition and ability to continue as a going concern.

As of September 30, 2021, we had 8,705,454 total issued and outstanding shares of common stock.

In addition, our 2008 Equity Incentive Plan provided for the issuance of up to 76,079 shares of common stock upon the exercise of outstanding stock options, of which 44,812 shares were issued. The 2008 Equity Incentive Plan terminated on July 1, 2018. The 2012 Equity Incentive Plan, as amended, provides for the issuance of up to 1,427,699 shares of our common stock, of which 301,879 shares remain available for issuance as of September 30, 2021, to executive officers, directors, advisory board members, employees and consultants. Additionally, 75,000 shares of common stock have been reserved for issuance under the 2016 Employee Stock Purchase Plan (“ESPP”), of which 59,435 shares remain available for future issuance as of September 30, 2021. We also have 750,000 available for issuance pursuant to the 2021 Inducement Equity Incentive Plan. In aggregate, issued and outstanding common stock and shares issuable under outstanding equity awards or reserved for future issuance under the 2008 and 2012 Equity Incentive Plans, the Inducement Award Agreements, and the ESPP total 9,749,660 shares of common stock as of September 30, 2021.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements, including unrecorded derivative instruments that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. We have certain options outstanding but we do not expect to receive sufficient proceeds from the exercise of these instruments unless and until the underlying securities are registered, and/or all restrictions on trading, if any, are removed, and in either case the trading price of our common stock is significantly greater than the applicable exercise prices of the options and warrants. 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required for smaller reporting companies under Item 305(e) of Regulation S-K.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures as of the end of the quarterly period covered by this report were designed and operating effectively.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the fiscal quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our principal executive officer and our principal financial officer, do not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

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PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 4 of the Notes to the Unaudited Condensed Consolidated Financial Statements within this Form 10-Q for a discussion of our legal proceedings and contingencies.

ITEM 1A. RISK FACTORS

Investment in our common stock involves a substantial degree of risk and should be regarded as speculative. As a result, the purchase of our common stock should be considered only by persons who can reasonably afford to lose their entire investment. Before you elect to purchase our common stock, you should carefully consider the risk and uncertainties described below in addition to the other information incorporated herein by reference. Additional risks and uncertainties of which we are unaware or which we currently believe are immaterial could also materially adversely affect our business, financial condition or results of operations. If any of the risks or uncertainties discussed in this Quarterly Report occur, our business, prospects, liquidity, financial condition and results of operations could be materially and adversely affected, in which case the trading price of our common stock could decline, and you could lose all or part of your investment.

Risk factors marked with an asterisk (*) below include a substantive change from or an update to the risk factors included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2021, filed with the SEC on June 15, 2021.

Risks Related to COVID-19

*We face risks related to health epidemics, including the recent COVID-19 pandemic, which could have a material adverse effect on our business and results of operations.

In December 2019, a respiratory illness caused by a novel strain of coronavirus, SARS-CoV-2, causing the Coronavirus Disease 2019, also known as COVID-19, emerged. While initially the outbreak was largely concentrated in China, it has since spread globally and been declared a pandemic by the World Health Organization. Global health concerns relating to the COVID-19 pandemic have been weighing on the macroeconomic environment, and the pandemic has significantly increased economic volatility and uncertainty. The COVID-19 pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place or stay-at-home orders, and business shutdowns. The extent to which COVID-19 impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the rise of vaccine-resistant variants, duration of the outbreak, travel bans, restrictions, quarantines, shelter-in-place or stay-at-home orders, and business shutdowns. The continued COVID-19 pandemic could adversely impact our operations, including among others, the impact it may have on the manufacturing and supply chain, sales and marketing and clinical trial operations of potential strategic partners, and the ability to advance our research and development activities and pursue development of any of our pipeline products, each of which could have an adverse impact on our business and our financial results. In particular, we require access to a constant, steady, reliable supply of human cells to support our development activities. The COVID-19 pandemic could negatively impact our ability to obtain a reliable supply of sufficient human cells or a supply at cost effective prices, which would harm our business and our results of operations and could cause us to be unable to support our drug development efforts.

In addition, the stock market has been unusually volatile during the COVID-19 pandemic and such volatility may continue. Our stock price has also experienced volatility during this time, including occasional significant increases and decreases. For example, from July 1, 2020 to September 30, 2021, our closing stock price ranged from $6.08 to $21.70 per share. Such increases and decreases in our stock price may repeat or continue for the foreseeable future.

There are no comparable recent events which may provide guidance as to the effect of the COVID-19 pandemic, and, as a result, the ultimate impact of the COVID-19 pandemic, or any similar health epidemic that may occur in the future, is highly uncertain and subject to change. We do not yet know the full extent of COVID-19’s impact on our business, our operations, or the global economy as a whole. However, the effects may have a material adverse impact on our future results of operations.

Risks Related to our Business

We have recommenced our operations as an early-stage company focusing on 3D bioprinting technology to develop human tissues and disease models for drug discovery and development, which is an unproven business strategy that may never achieve profitability.

Following the election of the new board of directors at our 2020 annual meeting of stockholders, we have recommenced operations and are focusing our efforts on utilizing our 3D bioprinting technology to develop human tissues and disease models for drug discovery and development. We have recommenced our operations as an early-stage company with an unproven business strategy, and may never achieve profitability. Our success will depend upon the viability of our platform technology and any disease models we

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develop, as well as on our ability to determine which drug candidates we should pursue. Our success will also depend on our ability to select an appropriate development strategy for any drug candidates we identify, including internal development or partnering or licensing arrangements with pharmaceutical companies. We may not be able to partner or license our drug candidates. We may never achieve profitability, or even if we achieve profitability, we may not be able to maintain or increase our profitability.

We will incur substantial additional operating losses over the next several years as our research and development activities increase.

We will incur substantial additional operating losses over the next several years as our research and development activities increase. The amount of future losses and when, if ever, we will achieve profitability are uncertain. Our ability to generate revenue and achieve profitability will depend on, among other things:

We might not succeed at any of these undertakings. If we are unsuccessful at one or more of these undertakings, our business, prospects, and results of operations will be materially adversely affected.  

Using our platform technology to develop human tissues and disease models for drug discovery and development is new and unproven.

Utilizing our 3D bioprinting platform technology to develop human tissues and disease models for drug discovery and development will involve new and unproven technologies, disease models and approaches, each of which is subject to the risk associated with new and evolving technologies. To date, we have not identified or developed any drug candidates utilizing our new business model. Our future success will depend on our ability to utilize our 3D bioprinting platform to develop human tissues and disease models that will enable us to identify and develop viable drug candidates. We may experience unforeseen technical complications, unrecognized defects and limitations in our technology or our ability to develop disease models or identify viable drug candidates. These complications could materially delay or substantially increase the anticipated costs and time to identify and develop viable drug candidates, which would have a material adverse effect on our business and financial condition and our ability to continue operations.

We will face intense competition in our drug discovery efforts.