Notes
to Condensed Consolidated Financial Statements
Period
Ended September 30, 2022
(Unaudited)
Note
1. Organization and Description of Business
Vyant
Bio, Inc. (the “Company”, “Vyant Bio”, “VYNT” or “we”), is an innovative
biotechnology company transforming drug discovery for complex neurodevelopmental and neurodegenerative disorders. Our central
nervous system (“CNS”) drug discovery platform combines the scientific knowhow of our team coupled with the application
of human-derived organoid models of brain disease, scaled biology, and machine learning. Our platform is designed to: 1) elucidate
disease pathophysiology; 2) formulate key therapeutic hypotheses; 3) identify and validate drug targets, cellular assays, and
biomarkers to guide candidate molecule selection; and 4) guide clinical trial patient selection and trial design. Our current
programs are focused on identifying repurposed and novel small molecule clinical candidates for rare CNS genetic disorders including
Rett Syndrome (“RTT”), CDKL5 Deficiency Disorders (“CDD”) and familial Parkinson’s Disease
(“PD”). The Company’s management believes that drug discovery needs to progressively shift as the widely used
preclinical models for predicting safe and effective drugs have under-performed, as evidenced by the time and cost of bringing novel
drugs to market. As a result, Vyant Bio is focused on combining sophisticated data science capabilities with highly functional human
cell derived disease models. We leverage our ability to identify validated targets and molecular-based biomarkers to screen and test
thousands of small molecule compounds in highly standardized human diseased 3D brain organoids in order to create a unique approach
to assimilating biological data that supports decision making iteratively throughout the discovery phase of drug development to
identify both novel and repurposed drug candidates.
vivoPharm
Sale
On
November 2, 2022 the Company completed the sale of its principal vivoPharm subsidiary, vivoPharm LLC, located in
Hershey, Pennsylvania, to Reaction Biology Corporation for $5.5 million
in an upfront cash payment, subject to customary adjustments for working capital, closing cash, indebtedness and transaction
expenses. After these closing adjustments were reflected, $5.5 million
was paid at closing. Vyant Bio expects to net approximately $4.4 million
in cash after tax and transaction related expenses, as well as incur $0.6 million
in exit costs associated with this transaction. Exit costs associated with the vivoPharm business are expected to be paid by
March 31, 2023. The Company continues to operate its vivoPharm Australia subsidiary,
RDDT a vivoPharm Company Pty Ltd (“RDDT”), which is held for sale.
Reverse
Stock Split
On
July 14, 2022, the Company’s stockholders approved a reverse stock split (the “Reverse Split”) of the
Company’s issued and outstanding shares of Common Stock in the range of one for five to one for fifteen shares. On October 18,
2022, the Company’s Board of Directors approved a Reverse Split of one for five shares effective November 1, 2022. As
a result of the reverse split, every 5 shares of the Company’s Common Stock issued and outstanding were converted into one
share of Common Stock. No fractional shares were issued in connection with the reverse split. Stockholders who would otherwise be
entitled to a fractional share of Common Stock instead received cash in lieu of fractional shares based on the average of the
closing sales prices of the Company’s Common Stock as quoted on the Nasdaq Capital Market on the five trading days immediately
prior to November 1, 2022. The reverse split did not reduce the number of authorized shares of the Common Stock or preferred stock
(the “Preferred Stock”) or change the par values of the Company’s Common Stock or Preferred Stock. The Reverse
Split affected all stockholders uniformly and did not affect any stockholder’s ownership percentage of the Company’s
shares of Common Stock (except to the extent that the reverse split would result in some of the stockholders receiving cash in lieu
of fractional shares). All outstanding common stock options, warrants and restricted stock units entitling their holders to receive
or purchase shares of the Company’s Common Stock have been adjusted as a result of the reverse split, as required by the terms
of each security. All historical share and per share amounts presented herein have been retroactively adjusted to reflect the impact
of the Reverse Split.
The
accompanying unaudited condensed consolidated financial statements include all accounts and wholly-owned subsidiaries and have been
prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) and reflect all adjustments (including normal recurring accruals) which, in the opinion of management, are considered
necessary for the fair presentation of the results for the periods presented. All intercompany
transactions have been eliminated. In accordance with the rules and regulations of the U.S. Securities and Exchange Commission
(“SEC”), the Company has omitted footnote disclosures that would substantially duplicate the disclosures contained in
the audited consolidated financial statements of the Company.
No
new accounting pronouncement issued or effective has had, or is expected to have, a material impact on the Company’s condensed
consolidated financial statements.
These
unaudited condensed consolidated financial statements should be read together with the audited consolidated financial statements for
the year ended December 31, 2021, and notes thereto included in our Annual Report on Form 10-K as filed with the SEC. The preparation
of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the condensed consolidated financial
statements and the reported amounts of revenue and expenses during the reporting period. Ultimate results could differ from those estimates.
The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may
be expected for the entire 2022 year.
Dollar
amounts in tables are stated in thousands of U.S. dollars.
Note
2. Cancer Genetics, Inc. Merger
The
Company formerly known as Cancer Genetics, Inc. (“CGI”), StemoniX and CGI Acquisition, Inc. (“Merger Sub”) entered
into a merger agreement on August 21, 2020, which was amended on February 8, 2021 and February 26, 2021 (as amended, the “Merger
Agreement”). Pursuant to the terms of the Merger Agreement, Merger Sub was merged (the “Merger”) with and into StemoniX
on March 30, 2021, with StemoniX surviving the Merger as a wholly owned subsidiary of the Company. For U.S. federal income tax purposes,
the Merger qualified as a tax-free “reorganization”. Concurrent with the Merger closing, the Company changed its name to
Vyant Bio, Inc. Under the terms of the Merger Agreement, upon consummation of the Merger, the Company issued (i) an aggregate of 3,595,508
shares of VYNT common stock, par value $0.0001 per share (the “Common Stock”) to the holders of StemoniX capital stock (after
giving effect to the conversion of all StemoniX preferred shares and StemoniX 2020 Convertible Notes) and StemoniX warrants (which does
not include a certain warrant (the “Investor Warrant”) issued to a certain StemoniX convertible note holder (the “Major
Investor”)), (ii) options to purchase an aggregate of 178,356 shares of Common Stock to the holders of StemoniX options with exercise
prices ranging from $3.30 to $23.05 per share and a weighted average exercise price of $7.30 per share, and (iii) a warrant (the “Major
Investor Warrant”) to the Major Investor, expiring February 23, 2026 to purchase 28,778 shares of Common Stock at a price of $29.5295
per share in exchange for the Investor Warrant.
The
Merger was accounted for as a reverse acquisition with StemoniX being the accounting acquirer of CGI using the acquisition method of
accounting. Under acquisition accounting, the assets and liabilities (including executory contracts, commitments and other obligations)
of CGI, as of March 30, 2021, the closing date of the Merger, were recorded at their respective fair values and added to those of StemoniX.
Any excess of purchase price consideration over the fair values of the identifiable net assets is recorded as goodwill. The total consideration
paid by StemoniX in the Merger amounted to $59.9 million, which represents the fair value of CGI’s 2,201,437 shares of Common Stock
or $50.74 million, 431,537 Common Stock warrants or $9.04 million and 11,181 Common Stock options outstanding on the closing date of
the Merger with a fair value of $139 thousand. In addition, at the effective time of the Merger, existing StemoniX shareholders received
an additional 160,942 incremental shares in accordance with the conversion ratio set forth in the Merger Agreement.
The
Company incurred $2.3 million of costs associated with the Merger that have been reported on the condensed consolidated statement of
operations as Merger related costs for the nine months ended September 30, 2021.
The
following details the allocation of the preliminary purchase price consideration recorded on March 30, 2021, the acquisition date, with
adjustments recorded through March 30, 2022, the end of the period for which purchase accounting adjustments can be recorded, and the
final purchase price allocation.
Schedule of Preliminary Allocation of the Purchase Price Consideration
| |
Preliminary | | |
Adjustments | | |
Final | |
Assets acquired: | |
| | | |
| | | |
| | |
Cash and equivalents | |
$ | 30,163 | | |
$ | - | | |
$ | 30,163 | |
Accounts receivable | |
| 705 | | |
| - | | |
| 705 | |
Other current assets | |
| 806 | | |
| 227 | | |
| 1,033 | |
Intangible assets | |
| 9,500 | | |
| - | | |
| 9,500 | |
Fixed assets | |
| 416 | | |
| (256 | ) | |
| 160 | |
Goodwill | |
| 22,164 | | |
| 216 | | |
| 22,380 | |
Long-term prepaid expenses and other assets | |
| 1,381 | | |
| - | | |
| 1,381 | |
Total assets acquired | |
$ | 65,135 | | |
$ | 187 | | |
$ | 65,322 | |
| |
| | | |
| | | |
| | |
Liabilities assumed: | |
| | | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 2,670 | | |
$ | 437 | | |
$ | 3,107 | |
Current liabilities of discontinuing operations | |
| 588 | | |
| (141 | ) | |
| 447 | |
Obligations under operating leases | |
| 198 | | |
| - | | |
| 198 | |
Obligations under finance leases | |
| 106 | | |
| - | | |
| 106 | |
Deferred revenue | |
| 1,293 | | |
| (114 | ) | |
| 1,179 | |
Payroll and income taxes payable | |
| 360 | | |
| 5 | | |
| 365 | |
Total liabilities assumed | |
$ | 5,215 | | |
$ | 187 | | |
$ | 5,402 | |
| |
| | | |
| | | |
| | |
Net assets acquired: | |
$ | 59,920 | | |
$ | - | | |
$ | 59,920 | |
The
Company has completed valuation analyses necessary to assess the fair values of the tangible and intangible assets acquired and liabilities
assumed and the amount of goodwill to be recognized as of the acquisition date. Fair values were based on management’s estimates
and assumptions. The Company recognized intangible assets related to the Merger, which consist of the tradename valued at $1.5 million
with an estimated useful life of ten years and customer relationships valued at $8.0 million with an estimated useful life of ten years.
The initial measurement of these intangible assets were classified as Level 3 measurements within the fair value hierarchy. The value
of the vivoPharm tradename was determined using the relief from royalty method based on analysis of profitability and review of
market royalty rates. The Company determined that a 1.0% royalty rate was appropriate given the business-to-business nature of the vivoPharm
operations. The value of the vivoPharm customer relationships was determined using an excess earnings method based on projected
discounted cash flows and historic customer data. Key assumptions in this analysis included an estimated 10% annual customer attrition
rate based on historical vivoPharm operations, a blended U.S. federal, state and Australian income tax rate of 27.1%, a present value
factor of 8.5% as well as revenue, cost of revenue and operating expense assumptions regarding the future growth, operating expenses,
including corporate overhead charges, and required capital investments.
The
following presents the unaudited pro forma combined financial information as if the Merger had occurred as of January 1, 2020:
Schedule of Proforma Financial Information
|
|
Nine months ended September 30,
2021 | |
Total revenue |
|
$ | 5,294 | |
Net loss |
|
| (10,777 | ) |
Pro forma loss per common share, basic and diluted |
|
| (1.85 | ) |
Pro forma weighted average number of common shares basic and diluted |
|
| 5,795,520 | |
The
pro forma combined results of operations are not necessarily indicative of the results of operations that actually would have occurred
had the Merger been completed as of January 1, 2020, nor are they necessarily indicative of future consolidated results.
Note
3. Discontinuing Operations
In
December 2021, the Company’s Board of Directors approved a plan to
sell the business of vivoPharm Pty Ltd and its subsidiaries (“vivoPharm”) to focus the Company on the development
of neurological developmental and degenerative disease therapeutics. In December 2021, the Company engaged an investment bank to sell
the vivoPharm business which is expected to be completed 2022.
On November 2, 2022 the Company
completed the sale of its principal vivoPharm subsidiary, vivoPharm LLC located in Hershey, Pennsylvania, to Reaction
Biology Corporation for $5.5
million in an upfront cash payment, subject to customary adjustments for working capital, closing cash, indebtedness and transaction
expenses. After these closing adjustments were reflected, $5.5
million was paid at closing. Vyant Bio expects to net approximately $4.4
million in cash after transaction related expenses and income taxes, as well as incur $0.6
million in exit costs associated with this transaction. Exit costs associated with the vivoPharm business are expected to be
paid by March 31, 2023. In connection with the sale of the vivoPharm LLC business, the Company agreed to retain certain
liabilities aggregating to $357
thousand.
The
Company classified the vivoPharm business as held for sale as of December 31, 2021, and, given the significance of the change
in the Company’s strategy, classified this business as discontinuing operations in these condensed consolidated financial statements.
Therefore, the results for the three and nine months ended September 30, 2021 have been retroactively restated to reflect the vivoPharm
business as discontinuing operations. In connection with the reclassification of the vivoPharm business as held for sale in the
fourth quarter of 2021, the Company completed a valuation of the net carrying value of this business and recorded a goodwill impairment
charge of $20.2 million.
The Company valued the vivoPharm business as of December 31, 2021 equally weighting public company revenue multiples as of December
31, 2021 and comparable transaction revenue multiples, which are classified as Level 3 measurements within the fair value hierarchy.
The Company updated the valuation of the vivoPharm business as of March 31, 2022 based on equally weighting public company revenue
multiples as of the valuation date and comparable transaction revenue multiples. As a result of this analysis, the Company recorded an
additional impairment charge of $4.3
million during the quarter ended March 31, 2022 consisting
of the write-off of the remaining $2.2
million goodwill balance and reducing the cost
basis of customer relationships and tradenames by $1.8
million and $0.3
million, respectively. During the second quarter
of 2022, the Company received two offers for mutually exclusive components of the vivoPharm business and assessed the carrying
value of each asset group using the estimated net sales proceeds based on these offers. As a result, the Company recorded a net impairment
charge of $1.5 million
during the second quarter of 2022 which was reduced in the third quarter of 2022 by $388
thousand based upon revised estimated net sales
proceeds as of September 30, 2022.
Also
included in discontinuing operations are pre-Merger-related payables related to Cancer Genetic’s sale of its BioPharma and
Clinical businesses (“Pre-Merger discontinuing operations”). As of September 30, 2022 and December 31, 2021, $280
thousand and $409
thousand, respectively, of liabilities relating to these businesses are classified as other current liabilities – discontinuing
operations on the Company’s condensed consolidated balance sheets.
Results
of discontinuing operations were as follows for the three and nine months ended September 30, 2022 and 2021:
Schedule of Discontinuing Operations from Income Statement and Balance Sheet
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
Three months ended September 30, | | |
Nine months ended September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Revenue | |
$ | 2,140 | | |
$ | 1,251 | | |
$ | 5,180 | | |
$ | 2,887 | |
Cost of goods sold | |
| 1,097 | | |
| 952 | | |
| 2,477 | | |
| 1,901 | |
General and administrative | |
| 1,287 | | |
| 1,489 | | |
| 3,428 | | |
| 2,419 | |
Impairment charge (recovery) of goodwill and intangible assets | |
| (388 | ) | |
| - | | |
| 5,415 | | |
| - | |
Total operating costs and expenses | |
| 1,996 | | |
| 2,441 | | |
| 11,320 | | |
| 4,320 | |
Income (loss) from discontinuing operations | |
| 144 | | |
| (1,190 | ) | |
| (6,140 | ) | |
| (1,433 | ) |
Total other (expense) income | |
| - | | |
| 3 | | |
| 3 | | |
| 6 | |
Income (loss) from discontinuing operations before income taxes | |
| 144 | | |
| (1,187 | ) | |
| (6,137 | ) | |
| (1,427 | ) |
Income tax benefit | |
| 40 | | |
| - | | |
| 84 | | |
| - | |
Net income (loss) from discontinuing operations | |
$ | 184 | | |
$ | (1,187 | ) | |
$ | (6,053 | ) | |
$ | (1,427 | ) |
Assets
and liabilities of discontinuing operations were as follows as of September 30, 2022 and December 31, 2021:
| |
September 30, 2022 | | |
December 31, 2021 | |
Accounts receivable | |
$ | 796 | | |
$ | 457 | |
Other current assets | |
| 326 | | |
| 345 | |
Assets of discontinuing operations - current | |
| 1,122 | | |
| 802 | |
| |
| | | |
| | |
Fixed assets, net of accumulated depreciation | |
| 242 | | |
| 163 | |
Operating lease right-of-use assets | |
| 844 | | |
| 30 | |
Intangible assets, net | |
| 5,511 | | |
| 8,787 | |
Goodwill | |
| - | | |
| 2,164 | |
Other assets | |
| 366 | | |
| 364 | |
Assets of discontinuing operations - non-current | |
| 6,963 | | |
| 11,508 | |
| |
| | | |
| | |
Accounts payable | |
$ | 810 | | |
$ | 358 | |
Accrued expense | |
| 363 | | |
| 418 | |
Obligation under operating lease, current | |
| 152 | | |
| 29 | |
Obligation under finance lease, current | |
| 30 | | |
| 32 | |
Deferred revenue | |
| 1,935 | | |
| 1,911 | |
Taxes payable | |
| 275 | | |
| 365 | |
Other current liabilities | |
| 280 | | |
| 409 | |
Liabilities of discontinued operations - current | |
| 3,845 | | |
| 3,522 | |
| |
| | | |
| | |
Obligations under operating leases, less current | |
| 709 | | |
| 2 | |
Obligations under finance leases, less current | |
| 19 | | |
| 47 | |
Liabilities of discontinued operations - non-current | |
| 728 | | |
| 49 | |
In
January 2022, the vivoPharm business signed an extension to its Hershey, Pennsylvania facility lease and a new lease in South
Australia resulting in an increase of $1.0
million of right-of-use (“ROU”) assets
and related liability within discontinuing operations.
Intangible
assets consisted of the following as of September 30, 2022 and December 31, 2021:
Schedule of Intangible Assets
| |
September 30, 2022 | | |
December 31, 2021 | |
Customer relationships | |
$ | 5,241 | | |
$ | 8,000 | |
Trade name | |
| 983 | | |
| 1,500 | |
Intangible assets, net | |
| 6,224 | | |
| 9,500 | |
Less accumulated amortization | |
| (713 | ) | |
| (713 | ) |
Intangible assets, net | |
$ | 5,511 | | |
$ | 8,787 | |
Goodwill
arising from the Merger was solely attributed to the vivoPharm business. The following is a roll forward of goodwill as of and
for the nine months ended September 30, 2022:
Schedule of Goodwill Rollforward
| |
2022 | |
| |
| |
Beginning balance, January 1 | |
$ | 2,164 | |
Purchase price adjustments | |
| - | |
Impairment charge | |
| (2,164 | ) |
Ending balance, September 30 | |
$ | - | |
Note
4. Inventory
Inventory
consists of the following:
Schedule of Inventory
| |
September 30, 2022 | | |
December 31, 2021 | |
Finished goods | |
$ | - | | |
$ | 23 | |
Work in process | |
| 59 | | |
| 138 | |
Raw materials | |
| 7 | | |
| 314 | |
Total inventory | |
$ | 66 | | |
$ | 475 | |
Note
5. Fixed Assets
Presented
in the table below are the major classes of fixed assets by category:
Schedule of Fixed Assets
| |
September 30, 2022 | | |
December 31, 2021 | |
Equipment | |
$ | 2,962 | | |
$ | 2,733 | |
Furniture and fixtures | |
| 6 | | |
| 6 | |
Leasehold improvements | |
| 612 | | |
| 251 | |
Fixed assets, gross | |
| 3,580 | | |
| 2,990 | |
Less accumulated depreciation | |
| (2,357 | ) | |
| (1,970 | ) |
Total | |
$ | 1,223 | | |
$ | 1,020 | |
Depreciation
expense recognized during the three months ended September 30, 2022 and 2021 was $124 thousand and $143 thousand, respectively, and for
the nine months ended September 30, 2022 and 2021, was $400 thousand and $410 thousand, respectively.
Note
6. Leases
The
Company leases its laboratory, research and administrative office space under various operating leases. In January 2022, the Company
recorded a $1.2 million ROU asset and related liability upon the signing of a new 5-year lease in San Diego, California.
The
components of operating and finance lease expenses for the three and nine months ended September 30, 2022 and 2021 are as follows:
Components of Lease Expense and Supplemental Information
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
Three months ended September
30, | | |
Nine months ended September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Operating lease costs | |
$ | 110 | | |
$ | 149 | | |
$ | 332 | | |
$ | 441 | |
Finance lease costs: | |
| | | |
| | | |
| | | |
| | |
Depreciation of ROU assets | |
| 61 | | |
| - | | |
| 141 | | |
| - | |
Interest on lease liabilities | |
| 11 | | |
| - | | |
| 25 | | |
| - | |
Total finance lease cost | |
| 72 | | |
| - | | |
| 166 | | |
| - | |
Variable lease costs | |
| - | | |
| - | | |
| - | | |
| - | |
Short-term lease costs | |
| - | | |
| - | | |
| - | | |
| - | |
Total lease cost | |
$ | 182 | | |
$ | 149 | | |
$ | 498 | | |
$ | 441 | |
Amounts
reported in the condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021 are as follows:
Schedule of Amounts Reported in the Consolidated Balance Sheet
| |
2022 | | |
2021 | |
Operating leases: | |
| | | |
| | |
Operating lease ROU assets, net | |
$ | 1,617 | | |
$ | 673 | |
Operating lease current liabilities | |
| 303 | | |
| 174 | |
Operating lease long-term liabilities | |
| 1,383 | | |
| 516 | |
Total operating lease liabilities | |
| 1,686 | | |
| 690 | |
Finance leases: | |
| | | |
| | |
Equipment | |
| 743 | | |
| 477 | |
Accumulated depreciation | |
| (181 | ) | |
| (63 | ) |
Finance leases, net | |
| 562 | | |
| 414 | |
Current installment obligations under finance leases | |
| 247 | | |
| 157 | |
Long-term portion of obligations under finance leases | |
| 338 | | |
| 293 | |
Total finance lease liabilities | |
$ | 585 | | |
$ | 450 | |
Other
information related to leases from continuing operations for the nine months ended September 30, are as follows:
Schedule
of Other Information Related to Lease
|
|
2022 |
|
|
2021 |
|
Supplemental
cash flow information: |
|
|
|
|
|
|
|
|
Cash
paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
Operating
cash flow from operating leases |
|
$ |
193 |
|
|
$ |
263 |
|
Financing
cash flow from finance leases |
|
|
135 |
|
|
|
- |
|
Weighted
average remaining lease term: |
|
|
|
|
|
|
|
|
Operating
leases |
|
|
4.69
years |
|
|
|
5.68
years |
|
Finance
leases |
|
|
2.29
years |
|
|
|
- |
|
Weighted
average discount rate: |
|
|
|
|
|
|
|
|
Operating
leases |
|
|
8.3 |
% |
|
|
9.9 |
% |
Finance
leases |
|
|
6.9 |
% |
|
|
- |
|
Annual
payments of lease liabilities under noncancelable leases from continuing operations as of September 30, 2022 are as follows:
Schedule of Annual Payments of Lease Liabilities Under Noncancelable Leases
| |
Operating leases | | |
Finance leases | |
Remainder of 2022 | |
$ | 106 | | |
$ | 70 | |
2023 | |
| 433 | | |
| 280 | |
2024 | |
| 423 | | |
| 235 | |
2025 | |
| 427 | | |
| 51 | |
2026 | |
| 441 | | |
| - | |
2027 | |
| 215 | | |
| - | |
Thereafter | |
| - | | |
| - | |
Total undiscounted lease payments | |
| 2,045 | | |
| 636 | |
Less: Imputed interest | |
| (359 | ) | |
| (51 | ) |
Total lease liabilities | |
$ | 1,686 | | |
$ | 585 | |
Note
7. Income Taxes
The
Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets include, among others, capitalized research and development costs, net operating loss carryforwards and research
and development tax credit carryforwards. Deferred tax assets are partially offset by deferred tax liabilities arising from intangibles,
fixed assets and lease assets. Realization of net deferred tax assets is dependent upon future earnings, if any, the timing and amount
of which are uncertain based on the Company’s history of losses. Accordingly, the Company’s net deferred tax assets have
been fully offset by a valuation allowance. Utilization of net operating loss and credit carryforwards may be subject to substantial
annual limitation due to ownership change provisions of Section 382 of the Internal Revenue Code, as amended and similar state provisions.
The annual limitation may result in the expiration of net operating losses and credits before utilization.
As
of September 30, 2022 and December 31, 2021, the Company’s liability for gross unrecognized tax benefits (excluding interest and
penalties) totaled $0 thousand and $0, respectively, in continuing operations. The Company had accrued interest and penalties relating
to unrecognized tax benefits of $0 and $0 on a gross basis as of September 30, 2022 and December 31, 2021, respectively, in continuing
operations. The Company does not currently expect significant changes in the amount of unrecognized tax benefits during the next twelve
months.
Note
8. Long-Term Debt
Long-term
debt as of September 30, 2022 and December 31, 2021 consists of a $57 thousand Economic Injury Disaster Loan with annual principal payments
of approximately $1 thousand per year.
2020
Convertible Notes
Effective
February 8, 2021 the Company’s shareholders and 2020 Convertible Note holders approved amendments to the 2020 Convertible Notes
to allow for the issuance of up to $10.0 million in 2020 Convertible Notes for cash (plus up to approximately $3.9 million of 2020 Convertible
Notes in exchange for the cancellation of Series B Preferred stock) as well as modifications to the financing’s terms for any 2020
Convertible Noteholder that invested at least $3.0 million of cash since May 4, 2020 in the offering (a “Major Investor”).
As of March 12, 2021, the Company completed the $10.0 million 2020 Convertible Note offering. The Company raised approximately $5.0 million
from the sale of 2020 Convertible Notes from January 1, 2021 through March 12, 2021 of which approximately $3.9 million were to related
parties, including former StemoniX Board members as well as a more than 5% owner of Series B Preferred stock. For any Major Investor,
the modified terms provide for a fixed conversion discount on the 2020 Convertible Notes of 20% and a common stock warrant equal to 20%
of the amount invested in all 2020 Convertible Notes by such Major Investor divided by the weighted average share price of the Common
Stock over the five trading days prior to the closing of the Merger. One 2020 Convertible Note holder that had previously invested $1.25
million in the offering invested an additional $3.0 million on February 23, 2021 and upon the Merger received a warrant to purchase 28,778
shares of the Company’s common stock at an exercise price of $29.5295 per share (the “Major Investor Warrant”). At
the time of the Merger, the outstanding principal of the 2020 Convertible Notes of approximately $12.7 million plus accrued interest
of $468 thousand were exchanged for 667,788 shares of the Company’s common stock. In connection with this exchange, the Company
recorded a debt extinguishment loss of $2.5 million in the first quarter of 2021. The weighted average interest rate on the 2020 notes
during the nine-months ended September 30, 2021 was 18.22%.
Payroll
Protection Plan Loan
In
April 2020, the Company applied for and received a $730 thousand loan under the Payroll Protection Plan (“PPP”) as part of
the Coronavirus Aid, Relief, and Economic Security Act’s (“CARES Act”). Under the PPP, the Company was able to receive
funds for two and a half months of payroll, rent, utilities, and interest cost. In April 2021 the SBA fully forgave the PPP loan. The
$730 thousand of PPP loan forgiveness was recorded as a reduction of operating costs during 2020.
Economic
Injury Disaster Loan
The
Company applied for and received a $57 thousand Economic Injury Disaster Loan (“EIDL”) loan and a $10 thousand grant from
the Small Business Administration in connection with the COVID-19 impact on the Company’s business. This loan bears interest at
3.75% and is repayable in monthly installments starting in December 2022 with a final balance due on June 21, 2050.
Note
9. Stockholders’ Equity
Common
Stock
Holders
of common stock are entitled to one vote per share, to receive dividends if and when declared, and, upon liquidation or dissolution,
are entitled to receive all assets available for distribution to stockholders. The holders have no preemptive or other subscription rights
and there are no redemption or sinking fund provisions with respect to such shares. Common stock is subordinate to the preferred stock
with respect to dividend rights and rights upon liquidation, winding up and dissolution of the Company.
Lincoln
Park Capital Fund, LLC Agreement
On
March 28, 2022, the Company entered into a purchase agreement, or Purchase Agreement, with Lincoln Park Capital Fund, LLC (“Lincoln
Park”), which, subject to the terms and conditions, provides that the Company has the right to sell to Lincoln Park and Lincoln
Park is obligated to purchase up to $15.0 million of its common shares. Additionally, on March 28, 2022, the Company entered into a registration
rights agreement (the “Registration Rights Agreement”) with Lincoln Park, pursuant to which the Company agreed to file a
registration statement with the Securities and Exchange Commission (the “SEC”), covering the resale of shares of common stock
issued to Lincoln Park under the Purchase Agreement. In addition, under the Purchase Agreement, the Company agreed to issue a commitment
fee of 81,190 common shares, or the Commitment Shares, as consideration for Lincoln Park entering into the Purchase Agreement. Under
the Purchase Agreement, the Company may from time to time for 30 months following May 9, 2022 (the “Commencement Date”),
at its discretion, direct Lincoln Park to purchase on any single business day, or a Regular Purchase, up to (i) 10,000 common shares,
(ii) 15,000 common shares if the closing sale price of its common shares is not below $7.50 per share on Nasdaq or (iii) 20,000 common
shares if the closing sale price of its common shares is not below $12.50 per share on Nasdaq. In addition to Regular Purchases, the
Company may also direct Lincoln Park to purchase other amounts as accelerated purchases or as additional accelerated purchases on the
terms and subject to the conditions set forth in the Purchase Agreement. In any case, Lincoln Park’s commitment in any single Regular
Purchase may not exceed $1.0 million absent a mutual agreement to increase such amount. The purchase price per share for each Regular
Purchase will be based on prevailing market prices of the Common Stock immediately preceding the time of sale as computed in accordance
with the terms set forth in the Purchase Agreement. There are no upper limits on the price per share that Lincoln Park must pay for shares
of Common Stock under the Purchase Agreement. The Purchase Agreement may be terminated by the Company at any time after the Commencement
Date, at its sole discretion, without any cost or penalty, by giving one business day notice to Lincoln Park to terminate the Purchase
Agreement.
At
The Market (“ATM”) Financing
On
April 8, 2022, the Company entered into an Equity Distribution Agreement (the “Sales Agreement”) with Canaccord Genuity LLC
(the “Agent”), pursuant to which the Company may issue and sell, from time to time, shares of its common stock having an
aggregate offering price of up to $20,000,000 (the “Shares”), depending on market demand, with the Agent acting as an agent
for sales. Sales of the Shares may be made by any method permitted by law deemed to be an “at the market offering” as defined
in Rule 415(a)(4) of the Securities Act of 1933, as amended (the “Securities Act”), including, without limitation, sales
made directly on or through the NASDAQ Capital Market. The Agent will use its commercially reasonable efforts to sell the Shares requested
by the Company to be sold on its behalf, consistent with the Agent’s normal trading and sales practices, under the terms and subject
to the conditions set forth in the Sales Agreement. The Company has no obligation to sell any of the Shares. The Company may instruct
the Agent not to sell the Shares if the sales cannot be effected at or above the price designated by the Company from time to time and
the Company may at any time suspend sales pursuant to the Sales Agreement. The Company will pay the Agent a commission of up to 3.0%
of the gross proceeds from the sale of Shares by the Agent under the Sales Agreement. The Company has also agreed to reimburse the Agent
for its reasonable documented out-of-pocket expenses, including fees and disbursements of its counsel, in the amount of $75,000. In addition,
the Company has agreed to provide customary indemnification rights to the Agent. The Offering will terminate upon the earlier of (i)
the issuance and sale of all Shares subject to the Sales Agreement, or (ii) the termination of the Sales Agreement as permitted therein,
including by either party at any time without liability of any party.
For
the three and nine months ended September 30, 2022, the Company incurred $0 and $250 thousand, respectively, of issuance costs related
to Lincoln Park and Canaccord Genuity LLC ATM arrangements which were recorded in the Condensed Consolidated Statements of Stockholders’
Equity. As of September 30, 2022, the Company had not issued any shares of common stock under the Purchase Agreement with Lincoln
Park or the Sales Agreement with the Agent, other than the Commitment Shares issued to Lincoln Park.
Preferred
Stock
Series
A and B Preferred Stock
As
of December 31, 2020, the Company had 4,611,587 shares of Series A Preferred Stock (the “Series A Preferred”) 3,489,470 shares
of Series B Preferred Stock (the “Series B”) issued and outstanding (collectively the “Preferred Stock”). The
Company had classified the Preferred Stock as temporary equity in the condensed consolidated balance sheets as the Preferred Shareholders
controlled a Deemed Liquidation Event, as defined below, under the terms of the Series A and Series B Preferred Stock as described below.
Effective with the Merger, all the Series A Preferred and the Series B Preferred shares were exchanged for 1,194,701 and 904,834 shares
of common stock, respectively, and the related carrying value was reclassified to common stock and additional paid-in capital.
Series
C Preferred Stock
Effective
March 15, 2021, StemoniX’s shareholders approved the Merger with Cancer Genetics and the authorization of $2.0 million of StemoniX’s
Series C Preferred Stock (“Series C Preferred”). Effective with the Merger on March 30, 2021, the Series C Preferred shares
were exchanged for 139,879 shares of Vyant Bio common stock and the related carrying value was reclassified to common stock and additional
paid-in capital.
Warrants
Common
Stock Warrants
The
Company issued the Investor Warrant on February 23, 2021. Effective with the Merger, the Investor Warrant was exchanged for a warrant
to purchase 28,778 shares of the Company’s common stock at an exercise price of $29.5295. Prior to this exchange, the Investor
Warrant was classified as a liability and the Company recognized a $214 thousand gain in the first quarter of 2021 related to fair value
adjustments. The fair value of the Investor Warrant was $421 thousand at the time of the Merger and reclassified to additional paid in
capital.
In
connection with the Merger, the Company assumed 431,537 common stock warrants issued in prior financings of which 429,820 remain outstanding
as of September 30, 2022. A summary of all common stock warrants outstanding as of September 30, 2022 is as follows:
Summary of All Common Stock Warrants Outstanding
Issuance Related to: | |
Exercise Price | | |
Outstanding Warrants | | |
Expiration Dates |
2020 Convertible Note | |
$ | 29.55 | | |
| 28,778 | | |
Feb 23, 2026 |
2021 offerings | |
$ | 17.50 | | |
| 324,828 | | |
Feb 10, 2026 - Aug 3, 2026 |
Advisory fees | |
$ | 12.10 - $37.95 | | |
| 98,578 | | |
Jan 9, 2024 - Oct 28, 2025 |
Debt | |
$ | 138.00 | | |
| 2,955 | | |
Mar 22, 2024 |
Debt | |
$ | 2,250.00 | | |
| 1,837 | | |
Oct 17, 2022 - Dec 7, 2022 |
Debt | |
$ | 1,500.00 | | |
| 1,622 | | |
Oct 17, 2022 |
Total | |
| | | |
| 458,598 | | |
|
Preferred
Stock Warrants
In
connection with the issuance of the Series A Convertible Preferred and Series B Convertible Preferred, the Company issued warrants (the
“Series A Warrants” and “Series B Warrants”, respectively, and collectively, the “Preferred Warrants”)
as compensation to non-employee placement agents. The Series A Warrants and Series B Warrants were issued on April 28, 2017 and May 18,
2019, respectively. The Company determined the Preferred Warrants should be classified as equity as they were issued as vested share-based
payment compensation to nonemployees. The Preferred Warrants were recorded in stockholders’ equity at fair value upon issuance
with no subsequent remeasurement. As part of the Merger, the Preferred Warrants were converted and settled for a total of 8,621 shares
of the Company’s common stock.
Note
10. Fair Value Measurements
During
the first quarter of 2021, the Company elected to account for the $3.0 million investment in the 2020 Convertible Notes issued to the
Major Investor using the fair value method. Further, the Major Investor Warrant was deemed to be a liability classified instrument due
its variable settlement features. Both of these instruments were classified as Level 3 measurements within the fair value hierarchy.
The
fair value of the Company’s 2020 Convertible Note issued to the Major Investor is measured as the sum of the instrument’s
parts, being the underlying debt instrument and the conversion feature. The conversion feature was valued using the probability weighted
conversion price discount. The instrument provided the holder the right to convert the instrument into shares of Series B Preferred Stock
at a 20% discount. Given the timing of the issuance of the instrument near the Merger date, management determined that there was a 99.5%
probability of the holders converting the instrument to Company shares at a 20% discount.
The
Company valued the warrants issued with the 2020 Convertible Notes using a Black-Scholes-Merton model using the value of the underlying
stock and exercise price of $2.01, along with a risk-free interest rate of 0.59% and volatility of 86%. The Company estimated the term
of the warrant to be 5 years.
The
Company’s 2020 Convertible Notes contain a share settled redemption feature (“Embedded Derivative”) that requires conversion
at the lesser of specified discounts from qualified financing price per share or the fair value of the common stock at the time of conversion.
The discount changes based on the passage of time between issuance of the convertible note and the conversion event. This feature is
considered a derivative that requires bifurcation because it provides a specified premium to the holder of the note upon conversion.
The Company measures the share-settlement obligation derivative at fair value based on significant inputs that are not observable in
the market. This results in the liability classified as a Level 3 measurement within the fair value hierarchy.
Upon
the Merger, all of the Level 3 instruments were exchanged for Vyant Bio equity classified instruments. Prior to their exchange, all of
these instruments were marked to their fair market values with corresponding changes recorded in the statement of operations in the first
quarter of 2021.
In
the fourth quarter of 2021, the Company classified the vivoPharm business as discontinuing operations and applied held for
sale accounting. The Company valued the vivoPharm business as of December 31, 2021 equally weighting public company revenue
multiples as of December 31, 2021 and comparable transaction revenue multiples, which are classified as Level 3 measurements within
the fair value hierarchy. The Company updated the valuation of the vivoPharm business during the quarter ending March 31,
2022 based on equally weighting public company revenue multiples and comparable transaction revenue multiples, which resulted in a
$4.5 million
decrease to the fair value of vivoPharm in the first quarter of. The Company recognized an impairment charge of $4.3 million
during the quarter ended March 31, 2022, which decreased vivoPharm’s net carrying value, net of estimated disposal
costs from $9.2 million
as of December 31, 2021 to $4.9 million.
During the second quarter of 2022, the Company received two offers for mutually exclusive components of the vivoPharm
business and assessed the carrying value of each asset group using the estimated net sales proceeds based on these offers. As a
result, the Company recorded a net impairment charge of $1.5 million
during the second quarter of 2022. The Company recorded an impairment recovery of $388 thousand
during the third quarter of 2022 based upon September 30, 2022 vivoPharm net assets.
The
following tables present changes in fair value of level 3 valued instruments as of and for the nine months ended September 30, 2022 and
2021:
Schedule of Changes in Fair Value of Level 3 Valued Instruments
| |
vivoPharm Business | |
Balance – December 31, 2021 | |
$ | 11,000 | |
Additions | |
| - | |
Measurement adjustments | |
| (5,528 | ) |
Settlement | |
| - | |
Balance – September 30, 2022 | |
$ | 5,472 | |
| |
2020 Convertible Note | | |
Warrant | | |
Embedded Derivative | |
Balance – December 31, 2020 | |
$ | - | | |
$ | - | | |
$ | 1,690 | |
Additions | |
| 3,746 | | |
| 635 | | |
| 325 | |
Measurement adjustments | |
| 4 | | |
| (214 | ) | |
| 250 | |
Settlement | |
| (3,750 | ) | |
| (421 | ) | |
| (2,265 | ) |
Balance – September 30, 2021 | |
$ | - | | |
$ | - | | |
$ | - | |
Note
11. Loss Per Share
Basic
loss per share is computed by dividing the net loss after tax attributable to common stockholders by the weighted average shares outstanding
during the period. Diluted loss per share is computed by including potentially dilutive securities outstanding during the period in the
calculation of weighted average shares outstanding. The Company did not have any dilutive securities during the periods presented; therefore,
diluted loss per share is equal to basic loss per share.
Presented
in the table below is a reconciliation of the numerator and denominator for the basic and diluted income (loss) per share calculations for the
three and nine months ended September 30, 2022 and 2021:
Schedule
of Reconciliation of Numerator and Denominator for Basic and Diluted Income (Loss) Per Share
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
Three months ended September 30, | | |
Nine months ended September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Net loss from continuing operations | |
$ | (3,647 | ) | |
$ | (3,274 | ) | |
$ | (12,378 | ) | |
$ | (14,586 | ) |
Net income (loss) from discontinuing operations | |
| 184 | | |
| (1,187 | ) | |
| (6,053 | ) | |
| (1,427 | ) |
Net loss | |
$ | (3,463 | ) | |
$ | (4,461 | ) | |
$ | (18,431 | ) | |
$ | (16,013 | ) |
Basic and diluted weighted average shares outstanding | |
| 5,882,560 | | |
| 5,797,162 | | |
| 5,856,159 | | |
| 4,095,951 | |
Basic and diluted net income (loss) per share: | |
| | | |
| | | |
| | | |
| | |
Continuing operations | |
$ | (0.62 | ) | |
$ | (0.57 | ) | |
$ | (2.11 | ) | |
$ | (3.56 | ) |
Discontinuing operations | |
| 0.03 | | |
| (0.20 | ) | |
| (1.04 | ) | |
| (0.35 | ) |
Net loss per shares attributable to common stockholder, basic and diluted | |
$ | (0.59 | ) | |
$ | (0.77 | ) | |
$ | (3.15 | ) | |
$ | (3.91 | ) |
The
following securities were not included in the computation of diluted shares outstanding for the for the three and nine months ended September
30, 2022 and 2021 because the effect would be anti-dilutive:
Schedule of Computation of Diluted Shares Outstanding
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
Three months ended September
30, | | |
Nine months ended September
30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Common stock warrants | |
| 458,598 | | |
| 460,315 | | |
| 458,598 | | |
| 460,315 | |
Common stock options | |
| 484,781 | | |
| 430,567 | | |
| 484,781 | | |
| 430,567 | |
Restricted stock | |
| 68,899 | | |
| - | | |
| 68,899 | | |
| - | |
Total | |
| 1,012,278 | | |
| 890,882 | | |
| 1,012,278 | | |
| 890,882 | |
Anti-dilutive securities | |
| 1,012,278 | | |
| 890,882 | | |
| 1,012,278 | | |
| 890,882 | |
Note
12. Stock-Based Compensation
The
Company has two pre-Merger legacy equity incentive plans: the Cancer Genetics Inc. 2011 Equity Incentive Plan (the “2011 Plan”),
and the StemoniX Inc. 2015 Stock Option Plan (the “2015 Plan”, and collectively, the “Frozen Stock Option Plans”).
The Frozen Stock Option Plans as well as the 2021 Plan (as defined below) are meant to provide additional incentive to officers, employees
and consultants to remain in the Company’s employment. Options granted are generally exercisable for up to 10 years. Effective
with the Merger, the Company is no longer able to issue options from the Frozen Stock Option Plans. Effective with the Merger, the Vyant
Bio 2021 Equity Incentive Plan (the “2021 Plan”) came into effect, pursuant to which the Company’s Board of Directors
may grant up to 900,000 of equity-based instruments to officers, key employees, and non-employee consultants.
As
StemoniX was the acquirer for accounting purposes, the pre-Merger vested stock options granted by CGI under the 2008 and 2011 Plans are
deemed to have been exchanged for equity awards of the Company. The exchange of StemoniX stock options for options to purchase Company
common stock was accounted for as a modification of the StemoniX stock options; however, the modification did not result in any incremental
compensation expense as the modification did not increase the fair value of the stock options.
For
StemoniX stock options issued prior to the Merger, the expected volatility was estimated based on the average historical volatility of
similar entities with publicly traded shares as StemoniX’s shares historically were not publicly traded and its shares rarely traded
privately. After the Merger, the Company used Vyant’s historical volatility to determine the expected volatility of post-Merger
option grants. The risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve at the date of grant.
The
Company uses a simplified method to determine the expected term for the valuation of employee options. This method effectively assumes
that exercise occurs over the period from vesting until expiration, and therefore the expected term is the midpoint between the service
period and the contractual term of the award. The simplified method is applicable to options with service conditions. For options granted
to nonemployees, the contractual term is used for the valuation of the options.
On
March 30, 2021, the Company granted 230,300 stock options to officers and other employees, 15,618 stock options to independent Board
members and a restricted stock unit (“RSU”) of 1,735 shares to the Company’s Board chair. The options granted to officers
and employees vest 25% one year from the grant date and thereafter equally over the next 36 months. The options granted to Board members
vested upon grant. The Board chair RSU vested one year from the grant date.
During
the nine months ended September 30, 2022, the Company granted 27,516 stock options to officers and other employees and 81,929 restricted stock
units (“RSUs”) to the Company’s Board of Directors. The options granted to officers and employees vest over various
terms based on the underlying agreement, as 121,344 contain performance vesting criteria. The RSUs granted to Board members vest one
year from the grant date. As of September 30, 2022 68,899 of the RSU’s remain outstanding.
As
of September 30, 2022, there were 492,288 additional shares available for the Company to grant under the 2021 Plan. The grant-date fair value
of each option award is estimated on the date of grant using the Black-Scholes-Merton option-pricing model. The assumptions for stock
option grants during the nine months ended September 30, 2022 and 2021 are provided in the following table.
Schedule of Assumptions for Stock Option Grants
| |
2022 | | |
2021 | |
Valuation assumptions | |
| | | |
| | |
Expected dividend yield | |
| 0.0 | % | |
| 0.0 | % |
Expected volatility | |
| 56.3%
–70.7 | % | |
| 70.0%-123.0 | % |
Expected term (years) – simplified method | |
| 3.0
– 6.1 | | |
| 5.5
– 6.1 | |
Risk-free interest rate | |
| 2.04% – 3.0 | % | |
| 0.95% – 1.16 | % |
Stock
option activity during the nine months ended September 30, 2022 and 2021 is as follows:
Schedule of Stock Option Activity
| |
Number of Options | | |
Weighted average exercise price | | |
Weighted average remaining contractual
term | |
Balance as of January 1, 2021 | |
| 151,277 | | |
$ | 9.10 | | |
| 8.7 | |
Granted | |
| 256,187 | | |
| 22.70 | | |
| | |
Additional options grant StemoniX holders | |
| 38,376 | | |
| 23.05 | | |
| | |
Options assumed in Merger | |
| 11,168 | | |
| 229.75 | | |
| | |
Exercised | |
| (5,983 | ) | |
| 6.20 | | |
| | |
Forfeited | |
| (18,217 | ) | |
| 19.10 | | |
| | |
Expired | |
| (2,241 | ) | |
| 7.25 | | |
| | |
Balance as of September 30, 2021 | |
| 430,567 | | |
$ | 23.80 | | |
| 8.8 | |
| |
| | | |
| | | |
| | |
Balance as of January 1, 2022 | |
| 464,019 | | |
| 20.95 | | |
| 7.4 | |
Granted | |
| 148,860 | | |
| 5.02 | | |
| | |
Exercised | |
| (1,034 | ) | |
| 4.80 | | |
| | |
Forfeited | |
| (94,364 | ) | |
| 14.94 | | |
| | |
Expired | |
| (32,700 | ) | |
| 42.51 | | |
| | |
Balance as of September 30, 2022 | |
| 484,781 | | |
$ | 15.34 | | |
| 8.2 | |
| |
| | | |
| | | |
| | |
Exercisable as of September 30, 2022 | |
| 198,844 | | |
$ | 19.58 | | |
| 7.1 | |
The
weighted average grant-date fair value of options granted during the nine months ended September 30, 2022 and 2021 was $2.51 and $19.45, respectively.
The
aggregate intrinsic value of options outstanding as of September 30, 2022 was $1 thousand. The intrinsic value of options exercisable
as of September 30, 2022 was $1 thousand. The total intrinsic value of options exercised was $5 thousand and $0 thousand for the nine
months ended September 30, 2022 and 2021, respectively.
The
Company recognized stock-based compensation related to different instruments for the three and nine months ended September 30 as follows:
Schedule of Share Based Compensation Activity
| |
| 1 | | |
| 2 | | |
| 3 | | |
| 4 | |
| |
For the three months ended September 30, | | |
For the nine months ended September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Stock Options | |
$ | 162 | | |
$ | 117 | | |
$ | 559 | | |
$ | 805 | |
Shares issued for services | |
| 143 | | |
| 10 | | |
| 306 | | |
| 20 | |
Total | |
$ | 305 | | |
$ | 127 | | |
$ | 865 | | |
$ | 825 | |
Share
based compensation | |
$ | 305 | | |
$ | 127 | | |
$ | 865 | | |
$ | 825 | |
As
of September 30, 2022, there was $2.5 million of total unrecognized compensation cost related to unvested stock options granted under the
Plan. That cost is expected to be recognized over a weighted average period of 2.5 years.
Note
13. Segment Information
The
Company reports segment information based on how the Company’s chief operating decision maker (“CODM”) regularly reviews
operating results, allocates resources and makes decisions regarding business operations. For segment reporting purposes, the Company’s
business structure is comprised of one operating and reportable segment.
During
the three and nine months ended September 30, 2022, three and four customers accounted for approximately 91%
and 76%,
respectively, of the consolidated revenue from continuing operations. During the three and nine months ended September 30, 2021 four customers accounted for
approximately 67%
and 56%
of the respective consolidated revenue from continuing operations.
During
the three and nine months ended September 30, 2022, approximately, 47%
and 44%,
respectively, of the Company’s consolidated revenue from continuing operations were earned outside of the U.S. During the
three and nine months ended September 30, 2021, approximately, 17%
and 23%
respectively, of the Company’s consolidated revenue from continuing operations were earned outside of the U.S.
Customers
representing 10% or more of the Company’s total revenue from continuing operations for the three and nine months ended
September 30, 2022 and 2021 are presented in the table below:
Schedule of Customers Representing Revenues
| |
Three months ended September 30, | | |
Nine months ended September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Customer A | |
| 47 | % | |
| 13 | % | |
| 39 | % | |
| 18 | % |
Customer B | |
| n/a | | |
| 12 | % | |
| 11 | % | |
| 11 | % |
Customer C | |
| n/a | | |
| 19 | % | |
| 4 | % | |
| 12 | % |
Customer D | |
| 26 | % | |
| 1 | % | |
| 16 | % | |
| n/a | |
Customer E | |
| 18 | % | |
| n/a | | |
| 10 | % | |
| n/a | |
Customer F | |
| n/a | | |
| 23 | % | |
| n/a | | |
| 15 | % |
Note
14. Related Party Transactions
The
Company raised approximately $3.9 million from the sale of 2020 Convertible Notes from January 1, 2021 through March 12, 2021 from related
parties, including former StemoniX Board members as well as one shareholder who owned more than 5% of Series B Preferred stock. This
Series B preferred stock shareholder was also a Major Investor and received an Investor Warrant on February 23, 2021. Effective with
the Merger, the Investor Warrant was exchanged for a warrant to purchase 28,778 shares of the Company’s common stock at an exercise
price of $29.5295 per share.
During
the first quarter of 2022, the Company paid a third-party collaboration partner $39 thousand as a reimbursement of third-party costs
incurred by the collaborator in connection with the collaboration arrangement. In September 2021, an executive’s family member
became an employee of this collaborator. The arrangements with this third-party collaborator had arms-length terms.
Note
15. Contingencies
We
are not currently subject to any material legal proceedings. However, we may from time to time become a party to various legal proceedings
arising in the ordinary course of our business.
Note
16. Subsequent Events
vivoPharm
Sale
As
described in Note 1, on November 2, 2022, the Company closed on a definitive agreement with Reaction Biology Corporation for Reaction
to acquire Vyant Bio’s subsidiary vivoPharm LLC, located in Hershey, Pennsylvania.
Reverse
Stock Split
As
described in Note 1, on July 14, 2022, the Company’s stockholders approved a reverse stock split (the “Reverse
Split”) of the Company’s issued and outstanding shares of Common Stock in the range of one for five to one for fifteen
shares. On October 18, 2022, the Company’s Board of Directors approved a Reverse Split of one for five shares effective November 1, 2022.
As a result of the reverse split, every 5 shares of the Company’s Common Stock issued and outstanding were converted into one share
of Common Stock. No fractional shares were issued in connection with the reverse split. Stockholders who would otherwise be entitled to
a fractional share of Common Stock instead will receive cash in lieu of fractional shares based on the closing sales price of the Company’s
Common Stock as quoted on the Nasdaq Global Market on the five trading days immediately prior to November 1, 2022. The reverse split did
not reduce the number of authorized shares of the Common Stock or preferred stock (the “Preferred Stock”) or change the par
values of the Company’s Common Stock or Preferred Stock. The Reverse Split affected all stockholders uniformly and did not affect
any stockholder’s ownership percentage of the Company’s shares of Common Stock (except to the extent that the reverse split
would result in some of the stockholders receiving cash in lieu of fractional shares). All outstanding common stock options, warrants
and restricted stock units entitling their holders to receive or purchase shares of the Company’s Common Stock have been adjusted
as a result of the reverse split, as required by the terms of each security. All historical share and per share amounts presented herein
have been retroactively adjusted to reflect the impact of the Reverse Split.
Equipment Financing Arrangement
In July 2022, the Company signed an equipment
financing arrangement to finance $238
thousand of equipment that is expected to be delivered in January 2023. The Company funded a $17
thousand down payment and will make 60 monthly payments of $5
thousand starting in approximately February 2023.
Australian Adult Clinical Trial
The Company’s Australian subsidiary, vivoPharm Pty Ltd, entered into a master services agreement
and related statement of work with an Australian contract research organization in November 2022 to support the Company’s adult
Rett Syndrome clinical trial. The statement of work aggregates approximately 3.9 million Australian dollars and can be cancelled with
60 days notice.