UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, ~~2021~~2022

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

For the transition period from to

Commission file number 001-35817

VYANT BIO, INC.

(Exact name of registrant as specified in its charter)

Delaware

04-3462475

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

2 Executive Campus

2370 State Route 70, Suite 310

Cherry Hill, NJ 08002

(201) 479-1357

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

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

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock, $0.0001 par value per share		VYNT		The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes: ☐ No: ☒

Indicate by check mark if 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes: ☒ No: ☐

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was $8024.7 million on June 30, ~~2021~~2022, the last business day of the registrant’s most recently completed second fiscal quarter, based on the closing price of $34.0355 on that date.

Indicate the number of shares outstanding of each of the registrant’s classes of common equity, as of March 15, ~~2022~~2023:

Class		Number of Shares
Common Stock, $.0001 par value		286,~~998~~267,~~169~~708

Documents incorporated by reference

None.

TABLE OF CONTENTS

PART I	1.	Business	3
	1A.	Risk Factors	20
	1B.	Unresolved Staff Comments	4947
	2.	Properties	4947
	3.	Legal Proceedings	4947
	4.	Mine Safety Disclosures	4947
PART II	5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	4947
	6.	Reserved	5048
	7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5048
	7A.	Quantitative and Qualitative Disclosures About Market Risk	60
	8.	Financial Statements and Supplementary Data	61
	9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	8991
	9A.	Controls and Procedures	8991
	9B.	Other Information	9091
	9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	91
PART III	10.	Directors, Executive Officers and Corporate Governance	9192
	11.	Executive Compensation	9695
	12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	~~101~~100
	13.	Certain Relationships and Related Transactions, and Director Independence	~~103~~102
	14.	Principal Accounting Fees and Services	~~105~~104
PART IV	15.	Exhibits, Financial Statement Schedules	~~106~~104
	16.	Form 10-K Summary	~~106~~104

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential,” or the negative of those terms, and similar words expressions and comparable terminology intended to identify forward-looking statements. These statements reflect the Company’s current views with respect to future events and are based on assumptions and subject to risks and uncertainties including those set forth below and under Part I, Item 1A, “Risk Factors” in this annual report on Form 10-K. Given these uncertainties, you should not place undue reliance on these forward-looking statements. These forward-looking statements represent the Company’s estimates and assumptions only as of the date of this annual report on Form 10-K and, except as required by law, the Company undertakes no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this annual report on Form 10-K. You should read this annual report on Form 10-K and the documents referenced in this annual report on Form 10-K and filed as exhibits completely and with the understanding that the Company’s actual future results may be materially different from what the Company expects. The Company qualifies all of its forward-looking statements by these cautionary statements. Such statements may include, but are not limited to, statements concerning the following:

● our ~~strategic plans; ● our~~ ability to ~~discover~~consummate ~~and~~any ~~develop~~strategic ~~novel~~transaction, ~~therapeutics;~~whether ●by ~~our~~acquisition, ~~ability~~sale toof ~~license~~ any ~~therapeutics~~part ~~we develop to larger companies; ● the ability~~ of our ~~licensees~~business, toor ~~achieve~~otherwise, ~~milestones~~and ~~under~~effectively ~~future~~operate ~~licensing~~our ~~agreements~~business ~~that~~during ~~will~~any ~~generate~~such ~~revenue~~transaction ~~for us~~process; ● ~~our~~substantial ~~ability~~doubt toabout ~~secure strategic and clinical co-development partnerships with pharmaceutical and biotechnology companies; ●~~ our ability to ~~make~~continue ~~capital~~as ~~expenditures~~a ~~and~~going ~~to finance operations~~concern; ● our cash position; ● our ability to ~~effectively~~finance ~~manage~~operations; ~~current~~● ~~and~~our ~~future~~ability ~~collaboration~~to ~~partnerships,~~execute ~~joint~~on ~~venture~~our orcurrent ~~acquisition~~business ~~initiatives~~plans ~~undertaken~~while byexploring ~~the~~strategic ~~Company~~alternatives; ● ~~our~~the ability to ~~develop~~maintain ~~and~~the ~~build~~listing ~~infrastructure~~of ~~and~~our ~~teams~~securities toon ~~manage~~Nasdaq, ~~our research~~ and ~~development,~~the ~~partnering~~potential liquidity and ~~clinical~~trading ~~development~~of ~~activities~~our securities; ● our ability to ~~continue to~~ retain ~~and hire~~ key talent; ● our ability to ~~sell~~discover ~~the vivoPharm business~~ and ~~effectively~~develop ~~operate~~novel ~~the business during the sales process~~therapeutics; ● our ability to ~~deter~~license ~~cyberattacks~~any ontherapeutics ~~our~~we ~~business~~develop to larger companies; ● our ability to ~~obtain~~deter ~~compounds~~cyberattacks ~~used~~on ~~for~~our ~~drug discovery and development could be affected as a result of the tensions between Ukraine and Russia~~business; and ● the impact of COVID-19 on the economy, demand for our services and products and our operations, including measures taken by government authorities to address the pandemic, which may precipitate or exacerbate other risks and/or uncertainties.

PART I

Item 1.

Business.

Overview

Vyant Bio, Inc. (the “Company”, “Vyant Bio”, “VYNT” or “we”), isincorporates an innovative biotechnology company reinventing drug discovery for complex neurodevelopmental and neurodegenerative disorders. Our central nervous system (“CNS”) drug discovery platform combines human-derived organoid models of brain disease, scaled biology, and ~~machine~~data ~~learning.~~science ~~Our platform is designed~~ to: 1)improve ~~elucidate disease pathophysiology; 2) formulate key therapeutic hypotheses; 3) identify and validate~~ drug ~~targets,~~discovery ~~cellular~~for ~~assays,~~complex ~~and~~neurodevelopmental ~~biomarkers to guide candidate molecule selection;~~ and ~~4) guide~~neurodegenerative ~~clinical trial patient selection and trial design~~disorders. ~~Our~~As ~~current~~noted ~~programs are focused on identifying repurposed and novel small molecule clinical candidates for rare CNS genetic disorders including Rett Syndrome (“Rett”)~~below, ~~CDKL5~~in ~~Deficiency~~January ~~Disorders~~2023 ~~(“CDD”) and~~we ~~familial~~have ~~Parkinson’s~~ceased ~~Disease~~substantially ~~(“PD”).~~all ~~The Company’s management believes that drug discovery needs to progressively shift as the widely used~~ preclinical ~~models for predicting safe~~ and ~~effective~~clinical ~~drugs~~development ~~have~~activities ~~under-performed,~~ as ~~evidenced~~we ~~by the time and~~complete ~~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~~review ~~to identify validated targets and molecular-based biomarkers to screen and test thousands~~ of ~~small~~our ~~molecule~~strategic compounds in 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 candidatesalternatives.

InOur ~~December~~central ~~2021,~~nervous ~~the~~system ~~Company’s~~(“CNS”) ~~Board~~drug discovery platform combines human-derived organoid models of ~~Directors~~brain ~~approved~~disease, ascaled ~~plan~~biology, and machine learning. Our platform is designed to: ~~sell~~1) ~~the~~elucidate ~~vivoPharm~~disease ~~Pty~~pathophysiology; ~~Ltd~~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 (“~~vivoPharm~~Rett”), CDKL5 Deficiency Disorders (“CDD”) and familial ~~business~~Parkinson’s toDisease ~~allow~~(“PD”). ~~the~~The Company’s management believes that drug discovery needs to ~~focus~~progressively onshift as the ~~development~~widely used preclinical models for predicting safe and effective drugs have under-performed, as evidenced by the time and cost of ~~neurological~~bringing novel drugs to market. As a result, Vyant Bio is focused on combining sophisticated data science capabilities with highly ~~developmental~~functional ~~and~~human ~~degenerative~~cell derived disease ~~therapeutics~~models. We ~~engaged~~leverage anour ~~investment~~ability ~~banker~~to identify validated targets and molecular-based biomarkers to screen and test thousands of small molecule compounds in ~~December~~human ~~2021~~diseased 3D brain organoids in order to ~~sell~~create ~~the~~a ~~vivoPharm~~unique ~~business~~approach to assimilating ~~before~~biological data that supports decision making iteratively throughout the ~~end~~discovery phase of ~~2022~~drug development to identify both novel and repurposed drug candidates.

On January 4, 2023, the Company announced that it had engaged LifeSci Capital as its financial advisor to assist in exploring a range of strategic alternatives focused on enhancing shareholder value. There can be no assurance that this review process will result in any changes to the Company’s current business plans or lead to any specific action or transaction.

The Company’s Board of Directors (the “Board”), after an assessment of the status of the Company’s efforts to seek strategic alternatives and the Company’s then current cash position, approved a plan on January 31, 2023 to preserve the Company’s cash to be able to continue to pursue a satisfactory strategic alternative for the purpose of maximizing the value of the Company’s business while also having sufficient cash to adequately fund an orderly wind down of the Company’s operations (the “Cash Preservation Plan”) in the event it is unable to secure a satisfactory strategic alternative. As part of the Cash Preservation Plan, the Company implemented a reduction in force, resulting in the retention of a core group of employees required for one or more potential strategic transactions and/or to execute an orderly wind down of the Company if required. The Company also deferred pending efforts with respect to its current preclinical and clinical programs.

Further, on January 31, 2023, John A. Roberts and Robert T. Fremeau, Jr., agreed in principle that Mr. Roberts and Dr. Fremeau would step down as President and Chief Executive Officer and Chief Scientific Officer, respectively, of the Company, effective as of February 3, 2023, and pursuant to their employment agreements, would be deemed terminated as of that date by the Company without cause for purposes of determining severance thereunder. Mr. Roberts remains a member of the Board of Directors of the Company. Andrew D. C. LaFrence, the Company’s Chief Financial Officer, assumed the role of President and Chief Executive Officer following Mr. Roberts’ departure. Mr. LaFrence became Chief Financial Officer upon the Company’s merger with StemoniX, Inc. on March 30, 2021, pursuant to the terms of an employment agreement, dated March 30, 2021, which remains in effect.

StemoniX Merger

On March 30, 2021, Vyant Bio, formerly known as Cancer Genetics, Inc. (“CGI”), completed its business combination (the “Merger”) with StemoniX, Inc., a Minnesota corporation (“StemoniX”), in accordance with the Agreement and Plan of Merger and Reorganization, dated as of August 21, 2020 (the “Initial Merger Agreement”) by and among the Company, StemoniX and CGI Acquisition, Inc., a Minnesota corporation and wholly-owned subsidiary of the Company (“Merger Sub”), as amended by Amendment No. 1 thereto made and entered into as of February 8, 2021 (the “First Amendment”) and Amendment No. 2 thereto made and entered into as of February 26, 2021 (the “Second Amendment”) (the Initial Merger Agreement, as amended by the First Amendment and Second Amendment, the “Merger Agreement”), pursuant to which Merger Sub merged with and into StemoniX, with StemoniX surviving the Merger as a wholly-owned subsidiary of the Company.

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 ~~the~~those ~~historical accounts~~ of StemoniX. Any ~~The~~ excess of purchase price consideration over the fair values of the identifiable net assets ~~was~~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 11 2,~~007~~201,~~186~~437 shares of Common Stock or $50.74 million, 2431,~~157,686~~537 Common Stock warrants or $9.04 million and 5511,~~907~~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 ~~804~~160,~~711~~942 incremental shares in accordance with the conversion ratio set forth in the Merger Agreement.

Effective with the Merger, the historical financial statements of StemoniX, as the accounting acquiror, became the historical financial statements of the Company under U.S. generally accepted accounting principles (“US GAAP”) and Cancer Genetics, Inc. was renamed Vyant Bio, Inc. Therefore, the underlying operations of CGI and subsidiaries are consolidated in the Vyant Bio consolidated financial statements from March 30, 2021 onward. The discussions regarding the Company’s business herein reflect the operations of StemoniX prior to the Merger as well as the post-Merger combined operations of Vyant Bio and StemoniX.

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 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.

vivoPharm Business

~~vivoPharm~~In December ~~has~~2021, athe ~~large~~Company’s ~~set~~Board of ~~anti-tumor~~Directors ~~referenced~~approved ~~data~~the ~~based~~engagement onof ~~xenograft,~~an ~~syngeneic~~investment ~~predictive~~banker ~~orthotopic~~to ~~tumor~~seek ~~models~~ to ~~provide discovery~~sell ~~services~~the ~~such~~vivoPharm asbusiness to ~~contract~~allow ~~research~~the ~~services,~~Company ~~focused on predictive and unique specialized models~~ to ~~guide drug discovery with a major~~ focus inon ~~immuno-oncology.~~the ~~vivoPharm~~development ~~offers a suite~~ of ~~protocols~~neurological developmental and ~~standard~~degenerative ofdisease ~~care~~therapeutics. ~~(“SoC”)~~As ~~data~~of ~~and~~December ~~supports~~31, ~~planning and conducting unique~~2021, ~~specialized~~the ~~studies~~Company tocommenced ~~guide~~accounting ~~drug~~for ~~discovery~~vivoPharm ~~and~~as ~~development~~discontinuing ~~programs~~operations. ~~These~~In ~~studies range~~the ~~from~~fourth ~~early~~quarter ~~compound selection to developing comprehensive sets~~ of ~~in vitro and in vivo data~~2022, ~~as needed for investigational~~ ~~new~~the ~~drug~~Company ~~(“IND”)~~sold ~~applications~~substantially ~~as required~~all byof ~~regulatory~~the ~~bodies,~~operations ~~such~~of asvivoPharm ~~the~~in ~~United~~two ~~States~~separate ~~Food~~transactions. ~~and~~On ~~Drug~~March ~~Administration~~13, ~~(“FDA”)~~2023, the ~~European Medicines Agency (“MEA”) and Therapeutic Goods Administration (“TGA”) in Australia.~~remaining vivoPharm’s ~~current~~business ~~discovery~~was ~~services~~sold. ~~include~~For ~~preclinical~~further ~~anti-tumor efficacy~~information, ~~good~~see ~~laboratory~~section ~~practice~~entitled (“~~GLP~~Discontinuing Operations”~~) compliant~~ ~~toxicity~~later ~~studies~~in ~~and small and bio-molecule analytical services. vivoPharm~~this ~~provides~~Part ~~the~~I, ~~tools~~ and ~~testing~~Note ~~methods~~3, ~~for~~Discontinuing ~~companies~~Operations, ~~and researchers seeking~~ to ~~identify~~the ~~and~~Company’s toConsolidated ~~develop~~Financial ~~new~~Statements ~~compounds~~included ~~and~~in ~~molecular-based biomarkers~~Part ~~for~~II. ~~diagnostics~~Item ~~and~~8 ~~therapeutics~~herein.

vivoPharm’s international presence enables it to access global market opportunities. vivoPharm’s headquarters in Australia specializes in safety and toxicology studies, including mammalian, genetic and in vitro, along with bioanalytical services including immune-analytical capabilities. vivoPharm operates from multiple locations in Melbourne (VIC) and Adelaide (SA). vivoPharm’s U.S.-based laboratory, located at the Hershey Center for Applied Research in Hershey, Pennsylvania, primarily focuses on screening and efficacy testing for a wide range of pharmaceutical and chemical products. The third location, in Munich, Germany, hosts project management and business development personnel for the European customers.

As of December 31, 2021, the Company has accounted for vivoPharm as discontinuing operations. For further information, see section entitled “Discontinuing Operations” later in this Part I, and Note 3, Discontinuing Operations, to the Company’s Consolidated Financial Statements included in Part II. Item 8 herein.

Business Strategy

Drug Discovery

The Company’s strategy ishas been to ~~continue~~utilize ~~building~~ a unique and robust “human-first” drug discovery platform to discover repurposed and novel therapeutics to treat neurodevelopmental and neurodegenerative diseases, initially focusing on rare CNS genetic disorders including Rett, CDD and familial PD. Key to the Company’s strategy ishas been the development ~~and continued enhancement of specialized disease models~~ by utilizing human-derived induced pluripotent ~~stem~~ stem cells (“iPSC”) to generate three dimensional organoids that exhibit spontaneous synchronized neuronal activity that can be detected in a high-throughput fashion. Vyant Bio has industrialized the production of iPSC-derived organoids into standard multi-well plate formats that we believe are sufficiently robust and reproducible to enable high throughput drug screening and provide insightful data for optimized selection of therapeutic candidates.

The human organoid platform is combined with software analytics and machine learning systems, branded by the Company as its proprietary AnalytiX™ system. This integrated approach enables standardized, high-throughput screening of drug candidates to establish t human efficacy prior to conducting human clinical studies, mitigating or in some cases avoiding the inadequacies of testing in clonal cell lines or preclinical animal models. The Company believes that its technologies will permit drug discovery in human disease areas that are difficult to address using current methodologies, such as brain diseases, accelerate preclinical drug discovery and development, reduce risk of clinical failure, predict drug candidate efficacy with greater degrees of confidence and, ultimately, reduce the cost of discovering new therapeutic agents. The Company’s strategy is to strive to file two IND applications with the FDA starting in 2023. The Company intends to license its therapeutic candidates to third parties before or after Phase I clinical trials for subsequent clinical development and receive a mixture of upfront payments, licensing fees, milestone-based fees, and ongoing royalty payments.

The Company began transforming its Maple Grove, Minnesota facility to a high throughput manufacturing and screening facility in the fourth quarter of 2021 to expand the Company’s internal research and development capabilities. This transition is in line with the Company’s strategy to leverage its iPSC technology to pursue wholly owned and partnered drug discovery projects that yield higher valued proprietary therapeutic assets. This facility transformation iswas ~~expected~~substantially ~~to be~~ completed in the second half of 2022 and the Company expects nominal product sales in 2023. Previously, the Company derived revenue from the sale of iPSC-based microOrganTM plates to pharmaceutical, biotechnology and research customers and through the performance of Discovery as a Service (“DaaS”) for these customers. The Company anticipates revenue generated from these activities will substantially cease in the first half of 2022 as the Company plans to use those resources to support its internal disease model and therapeutic drug development. The Company is also exploring potential opportunities to out-license access to its proprietary iPSC technologies to be used by pharmaceutical and biotechnology companies in their internal drug discovery programs.

Therapeutic Programs

~~The~~Prior to February 2023 the Company iswas actively seeking to discover repurposed and novel (New Chemical Entity, or “NCE”) lead candidates for Rett, CDD and familial PD which ~~will~~was intended to become the foundation of the Company’s therapeutic platform. ~~The~~In ~~Company’s~~February ~~therapeutic~~2023, ~~asset~~the ~~pipeline~~Company isplaced all its preclinical and clinical development activities on hold as ~~follows:~~it evaluates its strategic alternatives.

Rett Syndrome (“Rett”)

Rett is a rare genetic neurological disorder that occurs almost exclusively in girls and leads to severe impairments, affecting nearly every aspect of the child’s life including their ability to speak, walk, eat, and even breathe easily. The hallmark of Rett is near constant repetitive hand movements. Rett is usually recognized in children between 6 to 18 months as they begin to miss developmental milestones or lose abilities they had gained. Rett is caused by mutations on the X chromosome in a gene called MECP2. There are more than 900 different mutations found on the MECP2 gene. Most of these mutations are found in eight different “hot spots.” Rett is not a degenerative disorder with individuals living to middle age or beyond. Rett occurs worldwide in 1 of every 10,000 female births and is even rarer in boys. Rett can present with a wide range of disability ranging from mild to severe. The course and severity of Rett is determined by the location, type and severity of the mutation and X-inactivation. A 2022 report from Mellalta estimates the total global market opportunity for Rett therapeutic treatments is approximately $1.5 billion. On March 10, 2023, Acadia Pharmaceuticals announced that the United States Food and Drug Administration (“FDA”) has approved DAYBUE™ (trofinetide) for the treatment of Rett syndrome in adult and pediatric patients two years of age and older. DAYBUE is the first and only drug approved for the treatment of Rett syndrome.

4The Company had two programs focused on Rett, that were identified based on a phenotypic screen of the SMART library provided by the International Rett Syndrome Foundation on our Rett patient-derived organoids: Donepezil, a repurposed drug candidate (referred to as “VYNT0126”) and two families of new chemical entity compounds.

~~The~~Donepezil ~~Company~~is ~~currently~~a ~~has~~promising ~~two~~repurposed ~~programs~~candidate ~~focused~~for onseveral ~~Rett~~reasons. The compound has already been approved by the FDA, ~~that~~including ~~were~~in ~~identified~~a ~~based~~recently onapproved transdermal patch delivery system, as a ~~phenotypic~~cognition-enhancing ~~screen~~medication offor ~~the~~dementia ~~SMART~~related ~~library~~to ~~provided~~Alzheimer’s bydisease, and there is readily available safety data. It exhibits a consistent dose-dependent rescue of the ~~International~~functional diseased Rett ~~Syndrome~~phenotype ~~Foundation~~ on our Rett patient-derived organoids: aand ~~repurposing~~across additional ~~candidate~~functional readouts such as multielectrode electrophysiology assays, and cellular phenotypes (~~VYNT0126~~synaptogenesis). The Company has engaged a contract research organization in Australia to execute a Phase II clinical trial for adult Rett patients in Australia and New ~~several~~Zealand. ~~novel~~The ~~compounds~~Company has not yet enrolled patients in this trial. As part of the Company’s Cash Preservation Plan in February 2023, the Company placed this clinical trial on hold. If we restart this clinical trial, we will need to evaluate the trial’s scope given the recent announcement of DAYBUE’s approval.

The ~~VYNT0126~~Company ~~molecule~~was isalso apursuing ~~promising~~novel ~~repurposed candidate~~compounds for ~~several reasons. The compound has already been approved by the FDA as a cognition-enhancing medication for dementia related~~ toRett ~~Alzheimer’s~~identified ~~disease,~~in ~~and there is readily available safety data. VYNT0126 exhibits a consistent dose-dependent rescue of~~ the ~~functional~~ ~~diseased~~SMART ~~Rett~~screen ~~phenotype~~in oncollaboration ~~our~~with ~~Rett~~Atomwise ~~patient-derived organoids and across additional functional readouts such~~ (as ~~multielectrode electrophysiology~~described ~~assays, and cellular phenotypes (synaptogenesis~~below).

The Company is also pursuing novel compounds for Rett identified in the SMART screen in collaboration with Atomwise (as described below). We are applying machine learning to drive compound progression and we expect to complete our hit-to-lead optimization efforts in 2022 and commence IND-enabling studies in the first half of 2023.6

CDKL5 Deficiency Disorder (“CDD”)

CDD is a neurodevelopmental condition characterized by early-onset seizures, intellectual delay, and motor dysfunction. Although crucial for proper brain development, the precise targets of CDKL5 and its relation to patients’ symptoms are under investigation. Our microBrain organoid screening platform enlightens cellular, molecular, and neural network mechanisms of genetic epilepsy that we are researching to ultimately promote novel therapeutic opportunities for patients. While genetic testing is currently available to determine if patients have mutation in the CDKL5 gene, the limited knowledge of pathology has hindered development of therapeutics, leaving CDD as an ultra-rare disease with a defined unmet medical need and no currently approved therapeutic treatments.

The Company’s researchers screened approximately 5,200 custom library compounds composed of FDA approved molecules, molecules that passed Phase 1 clinical trials, and a panel of phenotypic screening compounds. This effort led to the potential to identify both internal NCE’s and potential repurposing molecules. Approximately 288 compounds showed some degree of rescue of the CDD hyperexcitability phenotype, and we are conducting further confirmatory screening followed by dose response studies and pharmacologic deconvolution. In collaboration with Cyclica (as described below), we ~~are~~were applying machine learning to identity in silico molecules for screening of 3 novel CDD targets. To drive hit-to-lead optimization we are establishing in vitro binding and cell-based functional assays for these targets to examine the relationship between target potency and degree of phenotypic rescue.

Parkinson’s Disease (“PD”)

PD is a progressive neurodegenerative disorder that affects predominately dopamine-producing (“dopaminergic”) neurons in a specific area of the brain called the substantia nigra. PD symptoms generally develop slowly over time and include tremors, muscle rigidity, gait and balance problems, and slow, imprecise movements. PD afflicts more than 10 million people worldwide, with 60,000 new cases per annum diagnosed in the US alone, typically middle-aged and elderly people. The market for therapeutics to treat the many symptoms and ~~different~~ different types of Parkinson’s disease is expected to expand to $7.2 billion by 2028, according to business intelligence provider ~~Coherent~~ Coherent Market Insights.

The etiology of PD is poorly understood but it is widely accepted that a combination of genetics and environmental factors are the cause. About 10-15 percent of people with PD have a family history of the condition, and family-linked cases can result from genetic mutations in a group of genes, including GBA, LRRK2, PARK2, PARK7, PINK1 or the SNCA gene.

Joint Venture and Collaborations

Joint Venture

Atomwise Joint Venture

On December 3, 2019, StemoniX announced a non-exclusive joint venture with Atomwise, Inc. (“Atomwise”), a San Francisco based company, which combines StemoniX’s human microOrgan platform with Atomwise’s structure-based Artificial Intelligence (“AI”) ~~technology~~ technology to enable the rapid discovery and development of novel small molecule therapies. The joint venture is initially targeting Rett. In the joint venture, Atomwise is using its AI technology to analyze billions of compounds in silico to identify potent and selective binders for proteins that are important for Rett. ~~StemoniX~~The isCompany ~~currently~~has identified two promising families of molecules identified through this arrangement and testing ~~the~~related compounds on its human microBrain 3D disease model to determine biological activity. We believe this joint effort ~~will~~could decrease the traditional medicinal chemistry timeline as well as increase the number of promising compounds that can be tested, and thereby result in an efficient path to successful drug development. Each party owns 50% of this venture and is required to fund their respective development activities related to this arrangement. Consistent with Company’s Cash Preservation Plan, we have placed on hold our development activities with Atomwise.

Ordaos Collaboration

We had a collaboration to design and qualify biomarker-specific small protein therapeutics in an arrangement that included Ordaos’ generative AI technology to accelerate and optimize small protein (50 to 100 amino acids) drug discovery and development processes. In this collaboration, Ordaos provided a pipeline of digitally optimized therapeutics for further development. Preliminary data from newly-designed optimized proteins indicates the design parameters generated an improved class of proteins that were sufficient to predict ELISA EC50 binding in nanomolar (“nM”) range. We are working together to further optimize proteins for future drug development.

Cyclica Collaboration

On August 12, 2021, we entered into a non-exclusive Strategic Collaboration Agreement (“SCA”) with Cyclica, Inc., a Toronto, Ontario-based company that uses a proprietary AI and machine learning (“ML”) platform to identify potential new therapeutic targets, re-purposed compounds, and NCEs. In this collaboration we ~~are currently~~ were focusing on identifying new targets and NCE for CDD,. The collaboration combines patient-derived neural organoids of the Company’s human-first neural platform with Cyclica’s in-silico platform to generate a disease-based, proteome-wide, discovery platform. The clinically linked biological signal of the CDD organoids and their responses to biologically active compounds drives the Cyclica platform to generate high-quality predictions for therapeutic targets based on their proprietary knowledge and structure-based algorithms. The predictions are tested in the Company’s platform, and if verified, advanced into AI/ML-based NCE synthesis. Together the platforms enable rapid interrogation of the human proteome to accelerate the discovery of new cures for this debilitating disease and the SCA has identified four novel targets, three of which are being actively pursued under the SCA. The Company owns all inventions and discoveries resulting from the collaboration (“Work Product”). Cyclica is entitled to a decreasing percentage of any consideration that the Company receives for the sale, licensing, or other disposition of Work Product, ranging from the mid-double digits in the early preclinical stages of development down to the mid-single digits from and after late-stage clinical development. Consistent with Company’s Cash Preservation Plan, we have placed on hold our development activities with Cyclica.

OrganoTherapeutics Collaboration

On March 29, 2022, we announced a collaboration with OrganoTherapeutics to advance our work on the identification of lead compounds to address the complexities of Parkinson’s Disease, with our initial focus on the GBA and LRRK2 familial mutations. Haploinsufficiency of the GBA gene which makes the enzyme glucocerebrosidase is the most common genetic mutation that causes PD. People with PD who have the GBA mutation tend to experience motor symptom deficits sooner, cognitive decline more rapidly and have particular difficulty with their gait and postural balance.

NIH Collaboration

In April 2019, the National Center for the Advancement of Translational Sciences (“NCATS”), the institute charged with finding better technology models for the National Institutes of Health (“NIH”), and StemoniX entered into a Research Collaboration Agreement (“RCA”). The RCA is part of the HEAL (Helping to End Addiction Long-Term) Initiative, a multi-institute effort to fight the opioid epidemic, and screening of over 300 compounds has been completed. The analysis by the NIH was supported with AnalytiX, described above, and provided an unbiased and deep analysis of the microBrain waveforms. The resulting output was developed into a joint publication that demonstrated how the Company’s neural platform responds across a wide range of chemicals and drugs and can be used to separate different mechanisms of action. More importantly, the joint project validated a high-throughput, human-based platform for further insight into drug action and provided a foundation for future drug development that would treat pain without opioids with a goal of combatting the opioid crisis.

Competition

The pharmaceutical industry is intensely competitive, where a company’s proprietary advancements in science and technology play a critical role in its competitive advantage. Any product candidates that we may successfully discover and develop, may compete with existing therapies, or new therapies that may become available in the future. Our commercial opportunities could be reduced or eliminated if our competitors develop and commercialize products that are more effective, have fewer side effects, are more convenient or are less expensive than any products that we may develop.

At this time, our primary competitors are other pharmaceutical and biotechnology or biomedical development companies that are trying to discover and develop compounds to be used in the treatment of Rett, CDKL5, PD and other CNS diseases, including those companies ~~already~~ already doing so. Some of those companies include Acadia Pharmaceuticals (NASDAQ:ACAD), Anavex Life Sciences (NASDAQ:AVXL) Biogen (NASDAQ:BIIB), Pfizer Inc. (NYSE:PFE), Abbvie Plc (NYSE:ABBV), Novartis AG (NYSE:NVS), GlaxoSmithKline Plc (NYSE:GSK), Merck & Co. Inc. (NYSE:MRK), Eli Lilly & Co. (NYSE: LLY), Johnson & Johnson (NYSE:JNJ), Roche Holding AG (VTX:ROG), Zogenix (NASDAQ:ZGNX), UCB (Euronext:UCB), Cerevel Therapeutics (NASDAQ:CERE), Corium, Inc., and Marinus Pharmaceuticals, Inc. (NASDAQ:MRNS). We also face competition from academic institutions and government agencies, both in the United States and abroad.

Intellectual Property

Patents and Trade Secrets

We protect and expand our intellectual property primarily through a combination of patent filings, trade secrets and exclusive/non-exclusive in-licensing. For processes and products that can be reverse-engineered, we typically file utility patent applications.

Regarding our patent portfolio, the Company does not rely on a singular patent to execute our business plan. Our objective is to create a significant barrier to entry for competitors by applying for patents not only on our lead products and processes but also on possible workarounds. Our intellectual property portfolio (including both owned patent applications and licensed-in technology) covers stem cells, manufacturing processes, product packaging, digital cellular electronics, cell micro-environments and structure, and cell networks. Each patent application includes its own strategy, which may involve the use of provisional patent application filings and related domestic and foreign patent applications that claim the benefits of the provisional applications and that are intended to provide the Company coverage in key geographical markets. Our patent portfolio is designed to grow with our Company.

~~The Company has 12 issued patents in various countries globally, defined in the table below:~~8

TITLE

COUNTRY

APP NUMBER

PATENT NUMBER

GRANT DATE

PRIORITY DATE

PUBLICATION NUMBER

METHOD OF FABRICATING CELL ARRAYS AND USES THEREOF

Japan

2017-530976

6510649

Apr 12, 2019

Aug 28, 2014

2017532061

METHOD OF FABRICATING CELL ARRAYS AND USES THEREOF

Singapore

11201701540P

May 22, 2020

Aug 28, 2014

METHOD OF FABRICATING CELL ARRAYS AND USES THEREOF

United States of America

14/839,170

10,625,234

Apr 21, 2020

Aug 28, 2014

US20160059203A1

SURFACE ENERGY DIRECTED CELL SELF ASSEMBLY

United States of America

15/199,419

11,248,212

Feb 15, 2022

Jun 30, 2015

US20170002324A1

METHOD OF MANUFACTURING OR DIFFERENTIATING MAMMALIAN PLURIPOTENT STEM CELLSOR PROGENITOR CELLS USING A HOLLOW FIBER BIOREACTOR

United States of America

15/293,563

10,760,053

Sep 1, 2020

Oct 15, 2015

US20170107488A1

CELL MEDIUM FORMULATION FOR CELL STABILIZATION

Switzerland

17701262.2

3402330

Dec 29, 2021

Jan 12, 2016

3402330

CELL MEDIUM FORMULATION FOR CELL STABILIZATION

Germany

17701262.2

602017051503.5

Dec 29, 2021

Jan 12, 2016

3402330

CELL MEDIUM FORMULATION FOR CELL STABILIZATION

European Patent Office

17701262.2

3402330

Dec 29, 2021

Jan 12, 2016

3402330

CELL MEDIUM FORMULATION FOR CELL STABILIZATION

France

17701262.2

3402330

Dec 29, 2021

Jan 12, 2016

3402330

CELL MEDIUM FORMULATION FOR CELL STABILIZATION

United Kingdom

17701262.2

3402330

Dec 29, 2021

Jan 12, 2016

3402330

PROJECTED CAPACITIVE MULTI ELECTRODE EUKARYOTIC CELL ARRAY

United States of America

15/588,154

11,054,408

Jul 6, 2021

May 6, 2016

US20170322194A1

HIGH THROUGHPUT OPTICAL ASSAY OF HUMAN MIXED CELL POPULATION SPHEROIDS

United States of America

16/035,039

11,193,159

Dec 7, 2021

Jul 14, 2017

US20190017097A1

The Company has 13 issued patents in various countries globally, defined in the table below:

TITLE

COUNTRY

APP NUMBER

PATENT NUMBER

GRANT DATE

PRIORITY DATE

PUBLICATION NUMBER

METHOD OF FABRICATING CELL ARRAYS AND USES THEREOF

Japan

2017-530976

6510649

Apr 12, 2019

Aug 28, 2014

2017532061

METHOD OF FABRICATING CELL ARRAYS AND USES THEREOF

Singapore

11201701540P

May 22, 2020

Aug 28, 2014

11201701540P

METHOD OF FABRICATING CELL ARRAYS AND USES THEREOF

United States of America

14/839,170

10,625,234

Apr 21, 2020

Aug 28, 2014

US20160059203A1

SURFACE ENERGY DIRECTED CELL SELF ASSEMBLY

United States of America

15/199,419

11,248,212

Feb 15, 2022

Jun 30, 2015

US20170002324A1

METHOD OF MANUFACTURING OR DIFFERENTIATING MAMMALIAN PLURIPOTENT STEM CELLSOR PROGENITOR CELLS USING A HOLLOW FIBER BIOREACTOR

United States of America

15/293,563

10,760,053

Sep 1, 2020

Oct 15, 2015

US20170107488A1

CELL MEDIUM FORMULATION FOR CELL STABILIZATION

United States of America

16/069,410

11,613,732

March 28, 2023

Jan. 12, 2016

US20190002831A1

CELL MEDIUM FORMULATION FOR CELL STABILIZATION

Switzerland

17701262.2

3402330

Dec 29, 2021

Jan 12, 2016

3402330

CELL MEDIUM FORMULATION FOR CELL STABILIZATION

Germany

17701262.2

602017051503.5

Dec 29, 2021

Jan 12, 2016

3402330

CELL MEDIUM FORMULATION FOR CELL STABILIZATION

European Patent Office

17701262.2

3402330

Dec 29, 2021

Jan 12, 2016

3402330

CELL MEDIUM FORMULATION FOR CELL STABILIZATION

France

17701262.2

3402330

Dec 29, 2021

Jan 12, 2016

3402330

CELL MEDIUM FORMULATION FOR CELL STABILIZATION

United Kingdom

17701262.2

3402330

Dec 29, 2021

Jan 12, 2016

3402330

PROJECTED CAPACITIVE MULTI ELECTRODE EUKARYOTIC CELL ARRAY

United States of America

15/588,154

11,054,408

Jul 6, 2021

May 6, 2016

US20170322194A1

HIGH THROUGHPUT OPTICAL ASSAY OF HUMAN MIXED CELL POPULATION SPHEROIDS

United States of America

16/035,039

11,193,159

Dec 7, 2021

Jul 14, 2017

US20190017097A1

We believe our combination of owned and licensed-in patents, covering both our products and processes and our ownership of intellectual property that provides protection against anticipated workarounds by potential competitors, and trade secrets is a unique advantage.

Trademarks

The Company has the following registered trademarks: StemoniX, microHeart, microBrain, ~~microKidney, microNerve, microLiver,~~ microTumor, microPancreas, BeYourCure, Person-on-a-Plate, Clinical Trial on-a-Plate, ~~and~~ microOrgan, VyantBio, Vyant Bio, and Human-powered ~~and the following pending trademark application: Biological Intelligence~~. ~~In addition, the Company claims common law trademark rights with respect to the mark AnalytiX.~~

Licenses

The Company licenses multiple patents and protocols from the University of California, San Diego, as well as from (1) Academia Japan for technology that we need in order to create and sell induced pluripotent stem cells, (2) ID Pharma for the Sendai virus vector technology, and (3) the Max Plank Innovation GmbH for mid-brain organoid production.

In the context of our drug development effort, whenever possible, we obtain licenses from customers to use the data we collect while providing drug screening services to those customers. We believe that this data will have significant value to our business as it refines its screening models.

IDP License Agreement

StemoniX entered into a Non-Exclusive License Agreement (the “IDP License Agreement”) with ID Pharma Co., Ltd., a Japanese corporation (“IDP”) effective as of January 29, 2016. Under the terms of the IDP License Agreement, IDP has granted StemoniX a royalty bearing, non-exclusive and non-transferable license in the United States and, upon exercise of the option described below, worldwide, to use the technology and processes covered by certain patents owned by IDP (the “IDP Licensed Patents”) to (i) generate iPSCs covered by the IDP Licensed Patents and differentiated cells derived from such iPSCs (collectively, the “IDP Licensed Products”), (ii) sell the IDP Licensed Products that are differentiated cells, and (iii) provide services involving the IDP Licensed Products (the “IDP Licensed Services”).

Pursuant to the IDP License Agreement, StemoniX agreed to pay IDP a non-credible and non-refundable up-front fee. The IDP License Agreement provides StemoniX the option, at any time during the term of the IDP License Agreement, to pay IDP an additional non-creditable and non-refundable fee in exchange for the rights to sell the IDP Licensed Products and IDP Licensed Services worldwide. Additionally, StemoniX has agreed to pay IDP a single digit percentage royalty on net sales of IDP Licensed Products sold by StemoniX. Royalties are payable within 60 days after the close of each consecutive 12-month period after the effective date of the IDP License Agreement, and annual minimum royalties apply. The IDP License Agreement may be terminated by either party upon an uncured breach of any material provision of the IDP License Agreement by the other party and under certain other circumstances.

Academia Japan License Agreement

StemoniX signed an Amended and Restated Non-Exclusive License Agreement (the “AJ License Agreement”) with iPS Academia Japan, Inc., a Japanese corporation (“Academia Japan”) effective as of April 1, 2017. Under the terms of the AJ License Agreement, Academia Japan has granted StemoniX a royalty bearing, non-exclusive, non-transferable license to use the technology and processes covered by two groups of patents owned by Academia Japan (collectively, the “AJ Licensed Patents”) to (i) develop, make, use, sell, have sold by one or more distributors, offer to sell and have offered to sell by one or more distributors iPSCs covered by the AJ Licensed Patents and differentiated cells derived from such iPSCs (collectively, the “AJ Licensed Products”), and (ii) provide services involving the AJ Licensed Products (the “AJ Licensed Services”). Similarly, StemoniX granted Academia Japan a non-exclusive, worldwide, royalty free license to certain of its patents solely for academic and educational purposes.

Pursuant to the AJ License Agreement, StemoniX has agreed to pay Academia Japan a non-creditable and non-refundable upfront fee as well as running royalties for the AJ Licensed Patents, with single digit percentage royalties payable at varying rates depending on the applicable group of AJ Licensed Patents and the applicable group of AJ Licensed Products and/or AJ Licensed Services.

The AJ License Agreement may be terminated by Academia Japan upon a material, uncured breach of the AJ License Agreement by StemoniX, and under certain other circumstances.

Manufacturing and Supply

We ~~manufacture~~ ~~iPSC~~do ~~microOrgans~~not athave ~~our~~any manufacturing facilities inor ~~Maple~~personnel for ~~Grove,~~our ~~Minnesota~~therapeutic ~~and La Jolla, California~~assets. We ~~do not~~ have ~~any~~manufactured ~~manufacturing~~microBrains ~~facilities or~~at ~~personnel~~our ~~for~~facility ~~our~~in ~~therapeutic~~Maple ~~assets~~Grove, Minnesota. We expect to rely on third parties to manufacture our therapeutic product candidates for preclinical and clinical testing.

Sales and Marketing

We ~~have~~ ~~and~~ plan to utilize third-party, specialized business development firms to support our internal staff as we pursue licenses for our proprietary disease models and, once developed, our therapeutic assets. We are currently not pursuing marketing or sales activities as we evaluate our strategic alternatives.

Government Regulation

Government authorities in the United States, at the federal, state and local level, and other countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, marketing and export and import of products such as those we are developing. A new drug must be approved by the FDA before it may be legally marketed in the United States. We are subject to various government regulations in connection with the development of our pipeline.

U.S. Drug Development and Regulation

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act and its implementing regulations (“FDCA”). The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval may subject an applicant to administrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, a clinical hold, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.

Once a drug candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies. An ND Investigational New Drug (“IND”) sponsor must submit the results of the preclinical tests, together with manufacturing information and analytical data, to the FDA as part of the IND. The sponsor must also include a protocol detailing, among other things, the objectives of the first phase of clinical trials, the parameters to be used in monitoring the safety of the trial, and the effectiveness criteria to be evaluated should the first phase lend itself to an efficacy evaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective thirty (30) days after receipt by the FDA, unless the FDA, within the 30-day time period, places the clinical trial on a clinical hold. Clinical holds also may be imposed by the FDA at any time before or during clinical trials due to safety concerns about on-going or proposed clinical trials or non-compliance with specific FDA requirements, and the trials may not begin or continue until the FDA notifies the sponsor that the hold has been lifted.

8All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with the FDA good clinical practice (“GCP”) requirements, which include a requirement that all research subjects provide their informed consent in writing for their participation in any clinical trial. Clinical trials must be conducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and/or effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND, and timely safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events. An Institutional Review Board (“IRB”) at each institution participating in the clinical trial must review and approve each protocol before a clinical trial may commence at the institution and must also approve the information regarding the trial as well as the consent form that must be provided to each trial subject or his or her legal representative, monitor the study until completed and otherwise comply with all applicable IRB regulation.

All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with FDA good clinical practice (“GCP”) requirements, which include a requirement that all research subjects provide their informed consent in writing for their participation in any clinical trial. Clinical trials must be conducted under protocols detailing the objectives of the trial, dosing procedures, subject selection and exclusion criteria and the safety and/or effectiveness criteria to be evaluated. Each protocol must be submitted to FDA as part of the IND, and timely safety reports must be submitted to FDA and the investigators for serious and unexpected adverse events. An Institutional Review Board (“IRB”) at each institution participating in the clinical trial must review and approve each protocol before a clinical trial may commence at the institution and must also approve the information regarding the trial as well as the consent form that must be provided to each trial subject or his or her legal representative, monitor the study until completed and otherwise comply with all applicable IRB regulation.11

Human clinical trials are typically conducted in three sequential phases that may overlap or be combined in certain cases:

Phase 1: The compound is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion and, if possible, to gain an early indication of its effectiveness. In most cases, initial Phase 1 clinical trials are conducted with healthy volunteers. However, where the compound being evaluated is for the treatment of severe or life-threatening diseases, such as cancer, and especially when the product may be too toxic to ethically administer to healthy volunteers, the initial human testing may be conducted on patients with the target disease or condition. Sponsors sometimes subdivide their Phase 1 clinical trials into Phase 1a and Phase 1b clinical trials. Phase 1b clinical trials are typically aimed at confirming dosage, pharmacokinetics and safety in a larger number of patients. Some Phase 1b studies evaluate biomarkers or surrogate markers that may be associated with efficacy in patients with specific types of diseases or conditions.

Phase 2: This phase involves clinical trials in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases or conditions and to confirm dosage tolerance and appropriate dosage.

Phase 3: Phase 3 clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population, generally at geographically dispersed clinical study sites. These clinical trials, often referred to as “pivotal” clinical trials, are intended to establish the overall risk-benefit ratio of the compound and provide, if appropriate, an adequate basis for product labeling.

The FDA or the sponsor may suspend a clinical trial at any time on various grounds, including any finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected, serious harm to study subjects. In addition, clinical trials may be overseen by an independent group of qualified experts organized by the sponsor, known as a data safety monitoring board or committee. Depending on its charter, this committee may determine whether a trial may move forward at designated check points based on access to certain data from the trial.

Post-approval trials may also be conducted after a drug receives initial marketing approval. These trials, often referred to as “Phase 4” trials, are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of such clinical trials as a condition of approval of a drug.

9During the development of a new drug, sponsors are given several opportunities to meet with the FDA. These meetings can provide an opportunity for the sponsor to share information about the progress of the application or clinical trials, for the FDA to provide advice, and for the sponsor and the FDA to reach agreement on the next phase of development. These meetings may occur prior to the submission of an IND, at the end of Phase 2 clinical trials, or before a New Drug Application (“NDA”) is ultimately submitted. Sponsors typically use the meetings at the end of the Phase 2 trials to discuss Phase 2 clinical results and present plans for the pivotal Phase 3 clinical trials that they believe will support approval of the new drug. Meetings at other times may be made upon request.

~~During the~~Concurrent ~~development~~with ofclinical ~~a new drug~~trials, ~~sponsors~~companies ~~are~~typically complete ~~given~~additional ~~several~~animal ~~opportunities~~and tolaboratory ~~meet~~studies, ~~with~~develop ~~FDA.~~additional ~~These~~information ~~meetings~~about ~~can provide an opportunity for~~ the ~~sponsor~~chemistry toand ~~share~~physical ~~information~~characteristics ~~about the progress~~ of the ~~application~~drug, orand ~~clinical~~finalize ~~trials,~~a process for manufacturing the ~~FDA~~product toin ~~provide~~commercial ~~advice,~~quantities ~~and~~in ~~for~~accordance ~~the sponsor~~with ~~and~~ the FDA’s tocurrent ~~reach~~Good Manufacturing ~~agreement~~Practices on(“cGMP”) ~~the next phase of development~~requirements. ~~These~~The ~~meetings~~manufacturing ~~may~~process ~~occur~~must ~~prior~~consistently toproduce ~~the~~quality ~~submission~~batches of anthe drug, ~~IND~~and, at ~~the~~among ~~end~~other ~~of Phase 2 clinical trials~~things, orthe ~~before~~manufacturer amust ~~New~~develop ~~Drug~~methods ~~Application~~for ~~(“NDA”)~~testing ~~is ultimately submitted. Sponsors typically use~~ the ~~meetings~~identity, atstrength, ~~the~~quality ~~end~~and purity of the ~~Phase~~final drug. 2In ~~trials~~addition, toappropriate ~~discuss~~packaging ~~Phase~~must 2be ~~clinical~~selected ~~results~~ and ~~present~~tested, ~~plans~~and ~~for~~stability ~~the~~studies ~~pivotal~~must ~~Phase 3~~be ~~clinical~~conducted ~~trials~~to ~~that~~demonstrate ~~they~~the ~~believe~~effectiveness of ~~will~~the ~~support~~packaging ~~approval~~and ofthat the ~~new~~compound ~~drug.~~does ~~Meetings~~not atundergo ~~other~~unacceptable ~~times~~deterioration ~~may~~over beits ~~made~~shelf ~~upon request~~life.

~~Concurrent with~~While ~~clinical~~the ~~trials,~~IND ~~companies~~is ~~typically complete additional animal and laboratory studies~~active, ~~develop~~progress ~~additional~~reports ~~information about~~summarizing the ~~chemistry~~results ~~and~~of ~~physical~~ongoing ~~characteristics~~clinical oftrials ~~the~~and ~~drug,~~nonclinical ~~and~~studies ~~finalize~~performed asince ~~process~~the ~~for~~last ~~manufacturing~~progress ~~the~~report ~~product~~must inbe ~~commercial~~submitted ~~quantities in~~on ~~accordance~~at ~~with~~least an ~~FDA’s~~annual ~~current~~basis ~~Good~~to ~~Manufacturing~~the ~~Practices~~FDA, ~~(“cGMP”)~~and ~~requirements.~~written ~~The~~IND ~~manufacturing~~safety ~~process~~reports must ~~consistently~~ ~~produce~~be ~~quality~~submitted ~~batches~~to of the ~~drug,~~FDA and, ~~among~~investigators ~~other~~for ~~things,~~serious ~~the~~and ~~manufacturer~~unexpected ~~must~~adverse events, ~~develop~~findings ~~methods~~from ~~for~~other ~~testing~~studies ~~the identity,~~suggesting ~~strength,~~a ~~quality~~significant ~~and~~risk ~~purity~~to ofhumans exposed to the ~~final~~same ~~drug.~~or Insimilar ~~addition~~drugs, ~~appropriate~~findings ~~packaging~~from ~~must~~animal or bein ~~selected~~vitro ~~and~~testing ~~tested,~~suggesting ~~and~~a ~~stability studies~~significant ~~must~~risk beto ~~conducted~~humans, toand ~~demonstrate~~any ~~the~~clinically ~~effectiveness~~important, ofincreased ~~the~~incidence ~~packaging~~of ~~and~~a ~~that~~serious ~~the~~adverse ~~compound~~reaction compared ~~does~~to ~~not~~that ~~undergo~~listed ~~unacceptable~~in ~~deterioration over~~the ~~its~~protocol ~~shelf~~or ~~life~~investigator brochure.

While the IND is active, progress reports summarizing the results of ongoing clinical trials and nonclinical studies performed since the last progress report must be submitted on at least an annual basis to FDA, and written IND safety reports must be submitted to FDA and investigators for serious and unexpected adverse events, findings from other studies suggesting a significant risk to humans exposed to the same or similar drugs, findings from animal or in vitro testing suggesting a significant risk to humans, and any clinically important, increased incidence of a serious adverse reaction compared to that listed in the protocol or investigator brochure.12

There are also requirements governing the submission of certain clinical trials and completed trial results to public registries. Sponsors of certain clinical trials of FDA-regulated products are required to register and disclose specified clinical trial registration and results information, which is made publicly available at www.clinicaltrials.gov. Failure to properly report clinical trial results can result in civil monetary penalties. Disclosure of clinical trial results can often be delayed until the new product or new indication being studied has been approved.

U.S. review and approval process

The results of product development, preclinical and other non-clinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the drug, proposed labeling and other relevant information are submitted to the FDA as part of an NDA. The submission of an NDA is subject to the payment of substantial user fees; a waiver of which may be obtained under certain limited circumstances.

The FDA reviews NDAs to determine, among other things, whether the product is safe and effective for its intended use and whether it is manufactured in a cGMP-compliant manner, which will assure and preserve the product’s identity, strength, quality and purity. Under the Prescription Drug User Fee Act (“PDUFA”), as amended, the FDA has a goal of ten months from the date of “filing” of a standard, completed NDA for a new molecular entity to review and act on the submission. This review typically takes twelve months from the date the NDA is submitted to the FDA because FDA has approximately two months to make a “filing” decision after the application is submitted. The FDA conducts a preliminary review of all NDAs within the first sixty days after submission, before accepting them for filing, to determine whether they are sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing.

10The FDA may refer an application for a new drug to an advisory committee within the FDA. An advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether and under what conditions the application should be approved. The FDA is not bound by the recommendations of such an advisory committee, but it considers advisory committee recommendations carefully when making decisions.

~~FDA may~~Before ~~refer~~approving an ~~application~~NDA, ~~for~~the aFDA ~~new~~will ~~drug~~also toinspect the anfacility ~~advisory~~where ~~committee~~the ~~within~~product ~~FDA~~is manufactured. AnThe ~~advisory~~FDA ~~committee~~will isnot aapprove ~~panel~~an ofapplication ~~independent~~unless ~~experts, including~~it ~~clinicians~~determines ~~and~~that ~~other~~the ~~scientific~~manufacturing ~~experts,~~processes and ~~that~~facilities ~~reviews,~~are ~~evaluates~~in ~~and~~compliance ~~provides~~with acGMP ~~recommendation~~requirements asand are adequate to ~~whether~~assure ~~and~~consistent ~~under what~~production ~~conditions~~of the ~~application~~product ~~should~~within ~~be approved~~required specifications. ~~FDA~~Before isapproving ~~not~~an ~~bound~~NDA, by the ~~recommendations~~FDA ofmay ~~such~~also aninspect ~~advisory~~one ~~committee,~~or ~~but~~more itclinical ~~considers advisory~~trial ~~committee~~sites ~~recommendations~~to ~~carefully~~assure ~~when~~compliance ~~making~~with ~~decisions~~GCP requirements.

~~Before approving~~After the FDA evaluates an NDA, ~~FDA~~it will ~~also~~issue ~~inspect~~an approval letter or a Complete Response Letter. A Complete Response Letter indicates that the ~~facility~~review ~~where~~cycle of the ~~product~~application is ~~manufactured.~~complete, ~~FDA~~and the application will not ~~approve~~be anapproved ~~application~~in ~~unless~~its ~~it determines~~present ~~that~~form. A Complete Response Letter usually describes the ~~manufacturing~~specific ~~processes~~deficiencies in the NDA identified by the FDA and ~~facilities~~may ~~are~~require inadditional ~~compliance~~clinical ~~with~~data, ~~cGMP~~such ~~requirements~~as an additional pivotal Phase 3 trial or other significant and ~~are~~time-consuming requirements ~~adequate~~related to ~~assure~~clinical ~~consistent~~trials, nonclinical studies or manufacturing. If a Complete Response Letter is issued, the sponsor must ~~production~~resubmit the NDA, addressing all of the ~~product~~deficiencies ~~within~~identified ~~required~~in ~~specifications~~the letter, or withdraw the application. ~~Before~~Even ~~approving~~if ansuch ~~NDA~~data and information are submitted, the FDA may ~~also~~decide ~~inspect~~that ~~one~~the orNDA ~~more~~does ~~clinical~~not ~~trial sites~~satisfy tothe ~~assure~~criteria ~~compliance~~for approval. An approval letter authorizes commercial marketing of the drug with ~~GCP~~prescribing ~~requirements~~information for specific indications.

~~After~~The Pediatric Research Equity Act (“PREA”) ~~the~~requires ~~FDA~~IND ~~evaluates~~sponsors anto ~~NDA,~~conduct itpediatric ~~will~~clinical ~~issue~~trials anfor ~~approval~~most ~~letter~~drugs, orfor a ~~Complete~~new ~~Response~~active ~~Letter.~~ingredient, Anew ~~Complete~~indication, ~~Response~~new ~~Letter~~dosage ~~indicates~~form, new ~~that~~dosing ~~the review~~regimen ~~cycle~~or ofnew ~~the~~route ~~application~~of isadministration. ~~complete~~Under PREA, original NDAs and ~~the~~supplements ~~application~~must ~~will~~contain ~~not~~a bepediatric ~~approved~~assessment inunless the ~~its~~sponsor ~~present~~has ~~form~~received a deferral or waiver. AThe ~~Complete~~required ~~Response~~assessment ~~Letter usually~~must ~~describes~~evaluate the ~~specific~~safety ~~deficiencies~~and ineffectiveness of the ~~NDA~~product ~~identified~~for bythe claimed ~~FDA~~indications in all relevant pediatric subpopulations and ~~may~~support ~~require~~dosing ~~additional~~and ~~clinical~~administration ~~data,~~for ~~such~~each pediatric subpopulation for aswhich anthe ~~additional~~product ~~pivotal~~is ~~Phase~~safe 3and ~~trial~~effective. The sponsor or ~~other~~the ~~significant~~FDA ~~and~~may ~~time-consuming~~request ~~requirements~~a ~~related~~deferral toof pediatric clinical trials, ~~nonclinical studies~~for some or ~~manufacturing~~all of the pediatric subpopulations. IfA adeferral ~~Complete~~may ~~Response~~be ~~Letter~~granted isfor ~~issued~~several reasons, ~~the~~including ~~sponsor~~a ~~must~~finding ~~resubmit~~that the ~~NDA,~~drug ~~addressing~~is ~~all~~ready offor ~~the~~approval ~~deficiencies~~for ~~identified~~use in ~~the~~adults ~~letter,~~before orpediatric ~~withdraw~~clinical ~~the~~trials ~~application.~~are ~~Even~~complete ifor ~~such~~that ~~data~~additional ~~and~~safety ~~information~~or ~~are~~effectiveness ~~submitted,~~data ~~FDA~~needs ~~may~~to ~~decide~~be ~~that~~collected ~~the~~before ~~NDA~~the ~~does~~pediatric ~~not~~clinical ~~satisfy~~trials ~~the~~begin. ~~criteria~~The ~~for~~FDA ~~approval.~~must Ansend ~~approval~~a non-compliance letter ~~authorizes~~to ~~commercial~~any ~~marketing~~sponsor ofthat ~~the~~fails ~~drug~~to ~~with~~submit ~~prescribing~~the ~~information~~required assessment, keep a deferral current or fails to submit a request for ~~specific~~approval ~~indications~~of a pediatric formulation.

The Pediatric Research Equity Act (“PREA”) requires IND sponsors to conduct pediatric clinical trials for most drugs, for a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration. Under PREA, original NDAs and supplements must contain a pediatric assessment unless the sponsor has received a deferral or waiver. The required assessment must evaluate the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The sponsor or FDA may request a deferral of pediatric clinical trials for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding that the drug is ready for approval for use in adults before pediatric clinical trials are complete or that additional safety or effectiveness data needs to be collected before the pediatric clinical trials begin. FDA must send a non-compliance letter to any sponsor that fails to submit the required assessment, keep a deferral current or fails to submit a request for approval of a pediatric formulation.13

If a drug receives the FDA approval, the approval may be limited to specific diseases and dosages, which could restrict the commercial value of the product. In addition, the FDA may require testing and surveillance programs to monitor the safety of approved products which have been commercialized and may require a sponsor to conduct post-marketing clinical trials, which are designed to further assess a drug’s safety and effectiveness after NDA approval. The FDA may also place other conditions on approval, including a requirement for a risk evaluation and mitigation strategy (“REMS”) to assure the safe use of the drug. If the FDA concludes a REMS is needed, the sponsor of the NDA must submit a proposed REMS. ~~FDA~~The FDA will not approve the NDA without an approved REMS, if required. A REMS could include medication guides, physician communication plans or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescribing or dispensing of products. Marketing approval may be withdrawn for non-compliance with REMS or other regulatory requirements, or if problems occur following initial marketing.

Post-approval requirements

Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory standards is not maintained or if problems occur after the drug reaches the market. Later discovery of previously unknown problems with a drug may result in restrictions on the drug or even complete withdrawal of the drug from the market. After approval, some types of changes to the approved drug, such as adding new indications, certain manufacturing changes and additional labeling claims, are subject to further the FDA review and approval. Manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP regulations and other laws and regulations.

11Any drug product manufactured or distributed by us pursuant to FDA approval will be subject to continuing regulation by the FDA, including, among other things, record-keeping requirements, reporting of adverse experiences with the drug, providing the FDA with updated safety and efficacy information, drug sampling and distribution requirements, complying with certain electronic records and signature requirements, and complying with the FDA’s promotion and advertising requirements. The FDA strictly regulates labeling, advertising, promotion and other types of information regarding approved drugs that are placed on the market, and imposes requirements and restrictions on drug manufacturers, such as those related to direct-to-consumer advertising, the prohibition on promoting products for uses or in patient populations that are not described in the product’s approved labeling (known as “off-label use”), industry-sponsored scientific and educational activities, and promotional activities involving the internet. Discovery of previously unknown problems or the failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product for a certain indication or withdrawal of the product from the market as well as possible civil or criminal sanctions. Failure to comply with the applicable governmental requirements at any time during the product development process, approval process or after approval, may subject an applicant or manufacturer to administrative or judicial civil or criminal sanctions and adverse publicity. The FDA sanctions could include refusal to approve pending applications, withdrawal of an approval, clinical holds on post-marketing clinical trials, enforcement letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, mandated corrective advertising or communications with doctors, debarment, restitution, disgorgement of profits, or civil or criminal penalties.

Any drug product manufactured or distributed by us pursuant to FDA approval will be subject to continuing regulation by FDA, including, among other things, record-keeping requirements, reporting of adverse experiences with the drug, providing FDA with updated safety and efficacy information, drug sampling and distribution requirements, complying with certain electronic records and signature requirements, and complying with FDA promotion and advertising requirements. FDA strictly regulates labeling, advertising, promotion and other types of information regarding approved drugs that are placed on the market, and imposes requirements and restrictions on drug manufacturers, such as those related to direct-to-consumer advertising, the prohibition on promoting products for uses or in patient populations that are not described in the product’s approved labeling (known as “off-label use”), industry-sponsored scientific and educational activities, and promotional activities involving the internet. Discovery of previously unknown problems or the failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product for a certain indication or withdrawal of the product from the market as well as possible civil or criminal sanctions. Failure to comply with the applicable governmental requirements at any time during the product development process, approval process or after approval, may subject an applicant or manufacturer to administrative or judicial civil or criminal sanctions and adverse publicity. FDA sanctions could include refusal to approve pending applications, withdrawal of an approval, clinical holds on post-marketing clinical trials, enforcement letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, mandated corrective advertising or communications with doctors, debarment, restitution, disgorgement of profits, or civil or criminal penalties.

Expedited development and review programs

The FDA administers a number of programs that can expedite the development and review of new drugs.

The fast track designation program is intended to expedite or facilitate the process for reviewing new drug products that meet certain criteria. Specifically, new drugs are eligible for fast track designation if they are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. With regard to a fast track product, the FDA may consider for review sections of the NDA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the NDA, the FDA agrees to accept sections of the NDA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the NDA.

A product is eligible for priority review if it is intended to treat a serious condition, and if approved, would provide a significant improvement in safety or efficacy compared to currently marketed products. FDA will attempt to direct additional resources to the evaluation of an application for a new drug designated for priority review in an effort to facilitate the review. FDA endeavors to review applications with priority review designations within six months of the filing date, as compared to ten months for review of NDAs under its current PDUFA review goals.14

A product is eligible for priority review if it is intended to treat a serious condition, and if approved, would provide a significant improvement in safety or efficacy compared to currently marketed products. The FDA will attempt to direct additional resources to the evaluation of an application for a new drug designated for priority review in an effort to facilitate the review. The FDA endeavors to review applications with priority review designations within six months of the filing date, as compared to ten months for review of NDAs under its current PDUFA review goals.

In addition, a product may be eligible for accelerated approval. Drugs intended to treat serious or life-threatening diseases or conditions may be eligible for accelerated approval upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require that a sponsor of a drug receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials. Drugs receiving accelerated approval may be subject to expedited withdrawal procedures if the sponsor fails to conduct the required post-marketing trials or if such trials fail to verify the predicted clinical benefit. In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product.

12Also, the Food and Drug Administration Safety and Innovation Act (“FDASIA”) established a category of drugs referred to as “breakthrough therapies” that may be eligible to receive breakthrough therapy designation. A sponsor may seek FDA designation of a compound as a “breakthrough therapy” if the product is intended, alone or in combination with one or more other products, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The designation includes all of the fast track program features, as well as more intensive FDA interaction and guidance. The breakthrough therapy designation is a distinct status from both accelerated approval and priority review, which can also be granted to the same drug if relevant criteria are met. If a product is designated as breakthrough therapy, the FDA will work to expedite the development and review of such drug.

~~The Food~~Fast ~~and~~track ~~Drug~~designation, ~~Administration~~priority ~~Safety~~review and ~~Innovation Act (“FDASIA”) established a category of drugs referred to as “~~breakthrough ~~therapies” that may be eligible to receive breakthrough~~ therapy designation. Ado ~~sponsor~~not ~~may~~change ~~seek~~the ~~FDA~~standards ~~designation~~for ofapproval abut ~~compound~~may ~~as a~~expedite ~~“breakthrough therapy” if~~ the ~~product~~development ~~is intended, alone~~ or inapproval ~~combination~~process. ~~with one or more other products~~However, toeven ~~treat~~if a ~~serious or life-threatening disease or condition and preliminary clinical evidence indicates that the~~ product ~~may~~qualifies ~~demonstrate~~for ~~substantial improvement over existing therapies on~~ one or more ~~clinically~~of ~~significant~~these ~~endpoints~~programs, ~~such as substantial treatment effects observed early in clinical development. The designation includes all of~~ the ~~fast track program features, as well as more intensive~~ FDA ~~interaction and~~may ~~guidance.~~later ~~The~~decide ~~breakthrough~~that ~~therapy~~the ~~designation~~product isno alonger ~~distinct~~meets ~~status~~the ~~from~~conditions ~~both~~for ~~accelerated approval and priority review, which can~~qualification ~~also~~or bedecide ~~granted~~that to the ~~same~~time ~~drug~~period iffor ~~relevant~~the ~~criteria~~FDA ~~are~~review ~~met.~~or Ifapproval ~~a product is designated as breakthrough therapy, FDA~~ will ~~work~~not tobe ~~expedite the development and review of such drug~~shortened.

Fast track designation, priority review and breakthrough therapy designation do not change the standards for approval but may expedite the development or approval process. However, even if a product qualifies for one or more of these programs, FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.

Orphan drug designation

Under the Orphan Drug Act, the FDA may grant orphan designation to a drug intended to treat a rare disease or condition, which is a disease or condition that affects fewer than 200,000 individuals in the United States or, if it affects more than 200,000 individuals in the United States, there is no reasonable expectation that the cost of developing and making a drug product available in the United States for this type of disease or condition will be recovered from sales of the product. Orphan designation must be requested before an NDA is submitted. After the FDA grants orphan designation, the identity of the therapeutic agent and its potential orphan use are publicly disclosed by the FDA. Orphan designation does not convey any advantage in or shorten the duration of the regulatory review and approval process.

If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity or inability to manufacture the product in sufficient quantities. The designation of such drug also entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. However, competitors, may receive approval of different products for the indication for which the orphan product has exclusivity or obtain approval for the same product but for a different indication for which the orphan product has exclusivity. Orphan exclusivity also could block the approval of one of our compounds for seven years if our compound is determined to be contained within the competitor’s product for the same indication or disease, or if a competitor obtains approval of the same drug as defined by the FDA. In addition, if an orphan designated product receives marketing approval for an indication broader than what is designated, it may not be entitled to orphan exclusivity.

Marketing exclusivity

Market exclusivity provisions under the FDCA can delay the submission or approval of certain marketing applications. The FDCA provides a five-year period of non-patent marketing exclusivity within the United States to the first applicant to obtain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance.

During the exclusivity period, the FDA may not approve or even accept for review an abbreviated new drug application (“ANDA”), or an NDA submitted under Section 505(b)(2) (a “505(b)(2) NDA”), submitted by another company for another drug based on the same active moiety, regardless of whether the drug is intended for the same indication as the original innovative drug or for another indication, where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement to one of the patents listed with the FDA by the innovator NDA holder.

The FDCA alternatively provides three years of marketing exclusivity for an NDA, or supplement to an existing NDA, if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the modification for which the drug received approval on the basis of the new clinical investigations and does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs for drugs containing the active ingredient for the original indication or condition of use. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.

Pediatric exclusivity is another type of marketing exclusivity available in the United States. Pediatric exclusivity provides for an additional six months of marketing exclusivity attached to another period of exclusivity if a sponsor conducts clinical trials in children in response to a written request from the FDA. The issuance of a written request does not require the sponsor to undertake the described clinical trials. In addition, orphan drug exclusivity, as described above, may offer a seven-year period of marketing exclusivity, except in certain circumstances.

Foreign Approval and Sales

Sales outside the United States of potential drug compounds we develop will also be subject to foreign regulatory requirements governing human clinical trials and marketing for drugs. The requirements vary widely from country to country, but typically the registration and approval process takes several years and requires significant resources. In most cases, if the FDA has not approved a potential drug compound for sale in the United States, the potential drug compound may be exported for sale outside of the United States, only if it has been approved in any one of the following: the European Union, Canada, Australia, New Zealand, Japan, Israel, Switzerland and South Africa. There are specific FDA regulations that govern this process.

Health Insurance Portability and Accountability Act

The Health Insurance Portability and Accountability Act, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), and implementing regulations thereunder (collectively, “HIPAA”) requires certain healthcare providers, health plans and healthcare clearinghouses who conduct specified electronic healthcare transactions (“covered entities”), as well as their independent contractors and agents who conduct certain activities involving protected health information on their behalf (“business associates”) to comply with enumerated requirements relating to the privacy, security and transmission of protected health information. Failure to comply with HIPAA can result in corrective action, as well as civil fines and penalties and government oversight. Among other changes, HITECH made HIPAA security standards directly applicable to business associates, increased the tiered civil and criminal fines and penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file actions to enforce HIPAA. Further, the breach notification rule implemented under HITECH requires covered entities to notify affected individuals, the U.S. Department of Health and Human Services Office of Civil Rights (“OCR”), the agency that enforces HIPAA, and for breaches affecting more than 500 individuals, the media, of any breaches of unsecured protected health information. HIPAA does not create a private right of action for individuals, though individuals may submit complaints related to HIPAA to OCR.

1416

European General Data Protection Regulation

The collection and use of personal health data in the European Union had previously been governed by the provisions of the Data ~~Protection~~ Protection Directive, which has been replaced by the General Data Protection Regulation (“GRPR”) which became effective on May 25, 2018 . While the Data Protection Directive did not apply to organizations based outside the EU, the GDPR has expanded its reach to include any business, regardless of its location, that provides goods or services to residents in the EU. This expansion would incorporate the Company’s clinical trial activities in EU members states. The GDPR imposes strict requirements on controllers and processors of personal data, including special protections for “sensitive information” which includes health and genetic information of data subjects residing in the EU. GDPR grants individuals the opportunity to object to the processing of their personal information, allows them to request deletion of personal information in certain circumstances, and provides the individual with an express right to seek legal remedies in the event the individual believes his or her rights have been violated. Further, the GDPR imposes strict rules on the transfer of personal data out of the European Union to the United States or other regions that have not been deemed to offer “adequate” privacy protections. Failure to comply with the requirements of the GDPR and the related national data protection laws of the European Union Member States, which may deviate slightly from the GDPR, may result in fines of up to 4% of global revenue, or €20,000,000, whichever is greater. As a result of the implementation of the GDPR, the Company may be required to put in place additional mechanisms ensuring compliance with the new data protection rules.

The Company’s research activities in the EU are currently limited to non-human preclinical studies, and as such, the Company does not collect, store, maintain, process, or transmit any Personal Data (as that term is defined under the GDPR) of trial subjects. ~~However, since~~The ~~the~~ Company ~~currently~~had ~~has~~several ~~three~~ employees located in the EU, prior to the sale of its ~~processing~~remaining ~~and~~vivoPharm ~~transfer~~business ~~for~~in ~~employee~~March ~~Personal~~2023 whosePersonal Data iswas subject to GDPR requirements. The Company has implemented a privacy and security program that is designed to adhere to the requirements of the GDPR in order to protect employee Personal Data, and in the event the Company progresses to research or clinical trials involving humans, to protect participant Personal Data. However, there is significant uncertainty related to the manner in which data protection authorities will seek to enforce compliance with GDPR. For example, it is not clear if the authorities will conduct random audits of companies doing business in the EU, or if the authorities will wait for complaints to be filed by individuals who claim their rights have been violated. Enforcement uncertainty and the costs associated with ensuring GDPR compliance be onerous and adversely affect the Company’s business, financial condition, results of operations and prospects. As a result, the Company cannot predict the impact of the GDPR regulations on its current or future business, either in the US or the EU.

Other Regulatory Requirements

The Company’s laboratory is subject to federal, state and local regulations relating to the handling and disposal of regulated medical waste, hazardous waste and biohazardous waste, including chemical, biological agents and compounds, blood and bone marrow samples and other human tissue. Typically, the Company uses outside vendors who are contractually obligated to comply with applicable laws and regulations to dispose of such waste. These vendors are licensed or otherwise qualified to handle and dispose of such waste.

OSHA has established extensive requirements relating to workplace safety for health care employers, including requirements to develop and implement programs to protect workers from exposure to blood-borne pathogens by preventing or minimizing any exposure through needle stick or similar penetrating injuries.

Discontinuing Operations

vivoPharm Business

InThe Company owned and operated the vivoPharm Pty Ltd (“vivoPharm”) business which it acquired in 2017. In December 2021, the Company’s Board of Directors approved athe ~~plan~~engagement of an investment banker to seek to sell the vivoPharm business to allow ~~focus~~ the Company to focus on the development of neurological developmental and degenerative disease therapeutics. As of ~~noted~~December in31, ~~Note~~2021, ~~3 to~~ the Company’s ~~Consolidated Financial~~commenced ~~Statements~~accounting ~~contained~~for invivoPharm ~~Part~~as IIdiscontinuing operations. ~~Item~~In 8the ~~herein~~fourth quarter of 2022, the weCompany ~~have~~sold ~~accounted~~substantially ~~for~~all of the operations of vivoPharm ~~business~~in astwo ~~discontinuing operations~~separate astransactions. ofOn ~~December~~March 3113, ~~2021~~2023, the remaining vivoPharm business was sold. WeFor ~~plan~~further toinformation, ~~sell~~see section entitled “Discontinuing Operations” later in this Part I, and Note 3, Discontinuing Operations, to the ~~vivoPharm~~Company’s ~~business~~Consolidated ~~during~~Financial ~~2022~~Statements included in Part II. Item 8 herein.

~~Overview - vivoPharm~~17

~~vivoPharm~~On ~~offers~~November ~~preclinical~~2, ~~services~~2022, ~~such~~the Company entered into an Equity asPurchase ~~predictive~~Agreement ~~tumor~~(the ~~models~~“Purchase Agreement”) by and among the Company, ~~human~~Reaction ~~orthotopic~~Biology ~~xenografts~~Corporation (“Reaction”) and ~~syngeneic~~vivoPharm, ~~immuno-oncology relevant~~pursuant ~~tumor~~to ~~models~~which inthe Company sold the U.S. operations of its ~~Hershey~~subsidiary, PAvivoPharm ~~facility~~to Reaction, ~~and~~in isexchange for aapproximately ~~leader~~$5.8 million in ~~the~~cash. ~~field~~Including offinal ~~immuno-oncology~~customary ~~preclinical~~adjustments ~~services~~for working capital, closing cash, indebtedness and ~~orthotopic~~transaction ~~predictive~~expenses, ~~models.~~the ~~This~~Company ~~service~~received isnet ~~supplemented~~proceeds ~~with~~from ~~GLP~~the ~~toxicology~~Reaction ~~and~~transaction ~~extended~~of ~~bioanalytical~~approximately ~~services~~$4.8 inmillion. In addition, the Company’s ~~Australian-based~~incurred ~~facilities~~$0.4 million in ~~Melbourne,~~exit ~~Victoria,~~costs ~~and~~associated ~~Adelaide,~~with ~~South~~the ~~Australia~~Reaction transaction.

~~The~~ On December 30, 2022, vivoPharm, ~~business~~entered isinto a ~~based~~Share onPurchase ~~demand~~Agreement ~~for~~(the ~~preclinical~~“Share ~~and~~Agreement”) ~~discovery~~with ~~services~~Sabine ~~from~~Brandt ~~biotechnology~~as ~~and~~trustee ~~pharmaceutical~~for ~~companies~~the Brandt Family Trust (“Buyer”), ~~academia~~pursuant ~~and~~to ~~the~~which ~~research~~vivoPharm ~~community.~~sold ~~Biotechnology~~the ~~and~~entirety ~~pharmaceutical~~of ~~companies~~the ~~engaged~~Company’s inremaining ~~drug~~vivoPharm ~~development~~operating ~~with~~business ~~the~~for ~~desire~~early todiscovery ~~run~~services, ~~clinical~~represented ~~trials~~by to100% ~~determine~~of the ~~safety~~outstanding ~~and~~shares ~~effectiveness~~of (i) of ~~treatments~~RDDT ~~and~~a ~~therapeutics~~vivoPharm ~~continuously~~Company ~~benefit~~Pty ~~from~~Ltd; ~~its~~and ~~services.~~ (ii) vivoPharm’s ~~preclinical~~Europe Ltd, ~~development~~to ofBuyer ~~biomarker~~in ~~detection~~exchange ~~methods~~for a nominal cash amount, ~~response~~subject to ~~immuno-oncology~~adjustments ~~directed~~for ~~novel~~closing ~~treatments~~cash and accounts payable, on and subject to the terms and ~~early~~conditions ~~prediction~~set offorth ~~clinical~~therein ~~outcome~~(the is“Second ~~supported~~Transaction”). byThe ~~its~~Second ~~extended~~Transaction ~~portfolio~~resulted in the Company delivering target closing cash as part of ~~orthotopic,~~the ~~xenografts~~sold entities of approximately $827 thousand and ~~syngeneic~~the ~~tumor~~assumption ~~test~~by ~~systems~~Buyer of liabilities of the sold asentities aaggregating ~~specialized~~to ~~service~~approximately ~~offering~~$2.0 inmillion. ~~the~~The ~~immuno-oncology~~Second ~~space~~Transaction was consummated effective December 31, 2022.

~~vivoPharm has~~To ~~developed~~complete ~~industry~~the ~~recognized~~disposition ~~capabilities~~of inthe ~~early~~Company’s former ~~phase~~vivoPharm ~~development~~business and ~~discovery,~~to ~~especially~~resolve incertain ~~immuno-oncology~~issues ~~models,~~that ~~tumor micro-environment~~had ~~studies,~~arisen ~~and~~with ~~specialized~~the ~~pharmacology~~Buyer, ~~services~~on ~~that~~March ~~support~~13, ~~basic discovery~~2023, ~~preclinical~~the ~~and~~Company ~~phase~~sold ~~1 clinical trials.~~ vivoPharm~~’s studies have been utilized~~ to ~~support~~the ~~over~~Buyer ~~300~~for ~~IND~~a ~~submissions~~nominal tosum. ~~date~~As ~~across~~part ~~a range~~ of ~~therapeutic indications,~~the ~~including~~sale ~~lymphomas,~~of ~~leukemia,~~vivoPharm ~~breast~~to ~~cancer~~Buyer, ~~GI-cancers,~~the ~~liver~~Company ~~cancer,~~provided ~~pancreatic~~that ~~cancer,~~vivoPharm ~~non-small~~had ~~cell lung cancer,~~cash ~~and~~of ~~other~~at ~~non-cancer~~least ~~rare~~$200 ~~diseases.~~thousand ~~vivoPharm~~and isthe ~~presently~~Company ~~serving~~assumed ~~over~~certain 50specific ~~biotechnology~~vivoPharm ~~and~~liabilities, ~~pharmaceutical~~principally ~~companies~~liabilities ~~across~~directly ~~four~~associated ~~continents~~with inthe ~~over~~proposed ~~100~~Phase ~~studies~~2 ~~and~~Donepezil ~~trials with highly specialized development,~~ clinical ~~and~~trial ~~preclinical~~in ~~research.~~Australia ~~Over~~(which the ~~past~~Company ~~18 years, vivoPharm~~ has ~~also~~placed ~~generated~~on anhold ~~extensive~~as ~~library~~it ofevaluates ~~human~~its ~~xenograft~~strategic alternatives) and ~~syngeneic~~certain ~~tumor~~vivoPharm ~~models,~~tax ~~including~~liabilities ~~subcutaneous,~~through ~~orthotopic and~~the ~~metastatic~~transaction’s ~~models~~closing. ~~vivoPharm~~The ~~offers~~transaction ~~its~~was ~~expertise~~consummated ineffective ~~small~~March 13, ~~and bio-molecules~~2023.

vivoPharm ~~continues~~had a large set of anti-tumor referenced data based on xenograft, syngeneic predictive orthotopic tumor models to ~~leverage~~provide ~~its~~discovery ~~international~~services such ~~presence~~as contract research services, focused on predictive and unique specialized models to ~~access~~guide ~~global~~drug ~~market~~discovery ~~opportunities~~with a major focus in immuno-oncology. vivoPharm’s ~~headquarters in~~offered ~~Australia~~a ~~specializes~~suite inof ~~safety~~protocols and ~~toxicology~~standard ~~studies,~~of ~~including~~care ~~mammalian,~~(“SoC”) ~~genetic~~data and insupports ~~vitro~~planning and conducting unique, ~~along~~specialized ~~with~~studies ~~bioanalytical~~to ~~services including~~guide ~~immune-analytical~~drug ~~capabilities~~discovery and development programs. ~~vivoPharm~~These ~~operates~~studies ranged from ~~multiple~~early ~~locations~~compound selection to developing comprehensive sets of in ~~Victoria~~vitro and ~~South~~in vivo data, as needed for IND applications as required by regulatory bodies, such as the FDA, the European Medicines Agency (“MEA”) and Therapeutic Goods Administration (“TGA”) in Australia. vivoPharm’s ~~U.S.~~discovery services include preclinical anti-~~based~~tumor ~~laboratory~~efficacy, ~~located~~good atlaboratory ~~the~~practice ~~Hershey~~(“GLP”) ~~Center~~compliant ~~for~~toxicity ~~Applied~~studies and ~~Research~~small inand ~~Hershey,~~bio-molecule ~~Pennsylvania,~~analytical ~~primarily~~services. ~~focuses~~vivoPharm onprovided ~~screening~~the tools and ~~efficacy~~ testing methods for acompanies ~~wide~~and ~~range~~researchers ofseeking ~~pharmaceutical~~to identify and ~~chemical~~to ~~products.~~develop ~~The~~new ~~third~~compounds ~~location,~~and inmolecular-based ~~Munich,~~biomarkers ~~Germany,~~for ~~hosts project management~~diagnostics and ~~business development personnel~~therapeutics.

vivoPharm’s international presence enabled ~~Market~~it ~~Overview~~to access global market opportunities. vivoPharm’s headquarters in Australia specialized in safety and toxicology studies, including mammalian, genetic and in vitro, along with bioanalytical services including immune-analytical capabilities. vivoPharm operated from multiple locations in Melbourne (VIC) and Adelaide (SA). vivoPharm’s U.S.-based laboratory, located at the Hershey Center for Applied Research in Hershey, Pennsylvania, primarily focused on screening and efficacy testing for a wide range of pharmaceutical and chemical products. The third location, in Munich, Germany, hosted project management and business development personnel for the European customers.

United States Clinical Oncology Market Overview

Despite many advances in the treatment of cancer, it remains one of the greatest areas of unmet medical need. In 2021, the World Health Organization attributed 10 million deaths globally to cancer, which prior to the COVID-19 was approximately about 1 in 6 deaths. Within the United States, excluding COVID-19 related deaths, cancer is the second most common cause of death, exceeded only by heart disease, accounting for nearly one out of every four deaths.

United States and International Clinical Trials Market Overview

The global preclinical Contract Research Organization (“CRO”) market size was valued at $4.5 billion in 2020 and is expected to grow at a compound annual growth rate (“CAGR”) of 8.1% from 2021 to 2028. Increased R&D budget for drug development is leading to rising demand for preclinical CRO services, thus boosting the market growth during the forecast period, according to a September 2021 report published by Grand View Research, Inc. Outside of the United States, growth in the pharmaceuticals and clinical trials market is continuing, and trials are increasingly becoming more complex. Growth in the European pharma market is anticipated to be driven largely by the United Kingdom, Germany, Spain, France and Italy.

While oncology drugs have the potential to be among the most personalized therapeutics, very few successfully make it to market. The application of pharmacogenomics to oncology clinical trials enables researchers to better predict differences, initially driven by data derived in preclinical research. The Company believes a growing demand for faster development of personalized medicines and more effective clinical trials are growth drivers of this market, and its core expertise is preclinical efficacy, toxicity and bioanalytical services.

vivoPharm has a particularly strong set of experiences working in the preclinical area of checkpoint inhibitors and specifically immunotherapies. Drug development is continuing to attract biotech companies transforming scientific innovation into practice-changing cancer drugs, thereby driving demand for vivoPharm’s services. When considering druggable targets within the different immuno-oncology drug classes, T cell immunomodulators and cell therapies had the largest increase in new targets in the past 2 years, which suggests that more innovation is going into these drug classes than the other immune-oncology drug classes.

vivoPharm is currently focused on delivering its pre-clinical CRO and drug discovery services to a diverse group of market participants, including biotechnology and pharmaceutical companies; governmental agencies; and academic research centers. These participants require syngeneic and xenograft tumor models to support the development of novel biomarkers and increasing technological expertise to collect key data sets for their clinical trials, understand and manage therapeutic development and design customized therapy choices. vivoPharm believes that its approach to rapidly translate research insights about the genetics and molecular mechanisms of cancer into the research community will lead to innovative products being developed, particularly in the area of immuno-oncology therapies.

vivoPharm’s Service Offerings

vivoPharm~~’s focus~~ focuses on the preclinical market,. Its ~~its~~ services are primarily sought by biotechnology and pharmaceutical companies engaged in designing and preparing to run clinical trials, for their value and efficacy in oncology and immuno-oncology treatments and therapeutics. vivoPharm believes trial participants’ likelihood of experiencing either favorable or adverse responses to the trial treatment can be determined first by its extended portfolio of orthotopic, xenografts and syngeneic tumor test systems, and in early development through biomarker identification and development, thereby increasing trial efficiency, participant safety and trial success rates. Biotechnology and pharmaceutical companies also seek vivoPharm’s services in preclinical trial design and drug development, in order to effectively and efficiently select those therapeutic candidates most likely to progress to clinical treatment options. vivoPharm’s services are also sought by researchers and research groups seeking to identify biomarkers and panels and develop methods for diagnostic technologies and tests for disease.

vivoPharm Discovery Services

vivoPharm offers proprietary preclinical test systems valued by the pharmaceutical industry, biotechnology companies and academic research centers. In particular, vivoPharm’s preclinical development of biomarker detection methods, response to immuno-oncology directed novel treatments and early prediction of clinical outcome is supported by its extended portfolio of orthotopic, xenografts and syngeneic tumor test systems. vivoPharm specializes in conducting studies tailored to guide drug development, starting from compound libraries and ending with a comprehensive set of in vitro and in vivo data and reports, as needed for Investigational New Drug filing. vivoPharm operates in AAALAC accredited and GLP-compliant audited facilities. vivoPharm provides its preclinical services, with a focus on efficacy models, from its Hershey, PA facility for the U.S. and European markets, and supplemented with GLP toxicology and extended bioanalytical services in its Australia-based facility in Melbourne, Victoria, and Adelaide, South Australia.

vivoPharm’s Discovery Services provide the tools and testing methods for companies and researchers seeking to identify new molecular- and biomarker-based indicators for disease and to determine the pharmacogenomics, safety and effectiveness of potential therapeutic candidate compounds. Discovery Services offered include development of both xenograft and syngeneic animal models, toxicology and genetic toxicology services, pharmacology testing, pathology services, and validation of biomarkers for diseases including cancers. vivoPharm also provides consulting, guidance and preparation of samples and clinical trial design. vivoPharm believes the ability to analyze variations in biomarkers, tumor cells and compounds, and to interpret results into meaningful predictors of disease or indicators of therapeutic success is essential to discovering new molecular markers for cancer, new therapeutics, and targets for therapies.

vivoPharm executes its market strategy by delivering results-oriented information and insights which we believe is or will become important to drug discovery and development and ultimately to accelerated therapy approvals and commercialization.

vivoPharm’s Discovery Services aim to accelerate the development of novel treatment candidates and precision medicine, with a current focus in oncology. vivoPharm believes the level of personalized treatment required to optimize a patient’s treatment regimen and to maximize clinical trial success rates may be significantly improved using molecular- and biomarker-based characterization.

Solid Tissue Cancers

The term “solid tumors” encompasses abnormal masses of cells that do not include fluid areas (e.g., blood) or cysts. Solid tumors are composed of abnormal cell growths that originate in organs or soft tissue and are normally named after the types of cells that form them. Examples of solid tumors include breast cancer, lung cancer, ovarian cancer and melanoma. Solid tumors may be benign (not cancerous) or malignant (cancerous) and may spread from their primary tissue of origin to other locations in the body (metastasis). There are over 200 individual chemotherapeutic drugs available for combating solid tumor cancers. Selection of an appropriate course of treatment for a patient may depend on identification of the gene mutation or mutations present in their particular cancer and on determining the cancer’s tissue of origin. Metastatic tumors with an uncertain primary site can be a difficult clinical problem. In tens of thousands of oncology patients every year, no confident diagnosis is ever issued, making standard-of-care treatment impossible.

Sales and Marketing

vivoPharm’s sales and marketing efforts consist of both direct and indirect efforts, with the majority of efforts focused on direct sales in the United States, Europe and Australia. vivoPharm collaborates with preclinical development and translational science teams at pharmaceutical and biotech companies on studies involving tumor models and therapeutic candidate compound testing.

vivoPharm’s U.S. and European business development and sales professionals have scientific backgrounds in hematology, pathology, and laboratory services, with many years of experience in biopharmaceutical and clinical oncology sales, esoteric laboratory sales from leading biopharmaceutical, pharmaceutical or specialty reference laboratory companies. VivoPharm currently has a team of four business development and sales professionals in the United States and Europe.

vivoPharm also promotes its services through marketing channels commonly used by the biopharma and pharmaceutical industries, such as internet, medical meetings and broad-based publication of its scientific and economic data. In addition, vivoPharm provides easy-to-access information to its customers over the internet through dedicated websites. vivoPharm’s customers value easily accessible information in order to quickly review patient or study information.

Competition

The largest competitors in the global preclinical CRO market are companies like Pharmaceutical Product Development, LLC (US), MD Biosciences (US)., IQVIA (US), PAREXEL International Corporation (US), Envigo (US), Charles River (US), Inotiv (US), ICON PLC (Dublin), PRA Health Sciences (US), Medpace (US), Laboratory Corporation of America Holdings (US), WuXi AppTec (China) and Eurofins Scientific (Luxembourg). The players operating in the global preclinical CRO market are focusing on product unveilings, along with intensifying their global presence by entering untouched markets.

Projects related to the molecular mechanisms driving cancer development have received increased government funding, both in the United States and internationally. The National Cancer Institutes’ Cancer Moonshot is anticipated to increase both patient awareness and federal government funding for research and clinical trials. The Federal Government has committed $1.8 billion over a 7-year period to fund the 21st Century Cures Act. As more information regarding cancer genomics and biomarkers becomes available to the public, vivoPharm anticipates that more products aimed at identifying targeted treatment options will be developed and that these products may compete with its products.

Third-Party Suppliers

vivoPharm currently relies on third-party suppliers for its specialized research and scientific instrumentation and related supplies of reagents, tumor cell lines, and other inventory for it to successfully perform its CRO services for its customers. vivoPharm does not believe a short-term disruption from any one of these suppliers would have a material effect on its business, nor has vivoPharm experienced any material disruptions due to COVID-19.

Operations and Production Facilities

As a preclinical oncology CRO, vivoPharm’s leased facilities are built to house immunocompromised mice, conventional rodents and specialized models. They incorporate surgical suites, gowning rooms, and holding rooms. In order to ensure an environment of utmost sterility, while also minimizing the workload by negating dependency on cage-wash infrastructure, vivoPharm relies on its landlords and licensors to manage the vivariums at its animal facilities. This allows for capacity utilization flexibility and focus of time and energy into scientific endeavors.

Quality Assurance

vivoPharm is committed to maintaining a standard of excellence and to providing reliable and accurate laboratory services to its customers. To that goal, vivoPharm’s independent Quality Assurance Unit (“QAU”) has implemented a comprehensive and integrated Quality Management System (“QMS”) designed to drive consistent high quality testing services while ensuring the highest ethical standards across its business. vivoPharm’s QMS satisfies FDA requirements for nonclinical studies conduct and content, computer systems validation, electronic records and signatures, and GLP.

vivoPharm Governmental Regulations

vivoPharm’s Pennsylvania and Australia research laboratory facilities comply with GLP” to the extent required by the FDA, Environmental Protection Agency, USDA, Organization for Economic Co-operation and Development (“OECD”), as well as other international regulatory agencies. Furthermore, vivoPharm’s early-stage discovery work, which is not subject to GLP standards, is typically carried out under a quality management system or internally developed quality systems. vivoPharm’s facilities are regularly inspected by U.S. and other regulatory compliance monitoring authorities, its clients’ quality assurance departments, and its own internal quality assessment program.

Other Discontinuing Operations

InPrior to the Merger with StemoniX, in July 2019, CGI sold all assets related to its ~~BioPharma~~biopharma and ~~Clinical~~clinical businesses. As of December 31, 2022 and 2021, $267 thousand and $409 thousand of liabilities, respectively, relating to these businesses are classified as other current liabilities –- discontinuing operations on the Company’s consolidated balance sheets.

Employees and Human Capital Management

As of March 15, ~~2022~~2023, we had 348 full-time employees, including 81 with ~~Ph.D.~~a ~~degrees~~PhD degree in our continuing Vyant Bio and StemoniX operations. Of these employees, 244 ~~are in~~support our research and development and historical manufacturing capabilities and 104 are general and administrative. ~~As of March 15, 2022, we had 38 full-time employees in our vivoPharm business, including 10 with Ph.D. degrees.~~ We have never had a work stoppage, and none of our employees are represented by a labor organization or under any collective-bargaining arrangements. We consider our employee relations to be good.

Our human capital management objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants. The principal purposes of our equity and cash incentive plans, along with a comprehensive benefits package and a 401(k) plan, are to attract, retain and reward personnel through the granting of stock-based and cash-based compensation awards.

The Company’s employees are in high demand in in the industries in which we operate. We have experienced ~~higher~~ employee turnover in ~~the~~2022 ~~past~~of ~~year~~52.4% ~~given~~employees. ~~the~~The demand for our employees remains ~~and~~subject to the overall employment market conditions, including increased salaries and a high number of job openings, ~~which have been part of the “Great Resignation” that has been~~ experienced by many companies that are highly dependent on human capital talent. ~~The~~From ~~retention of~~January ~~our~~1, ~~employees~~2023 isthrough March 15, 2023, a ~~high~~total ~~priority~~of as18 ~~well~~jobs aswere ~~recruiting~~eliminated by ~~key~~the ~~talent~~Company toas ~~meet~~part ~~our~~of ~~business~~the ~~goals~~Cash Preservation Plan.

Segment and Geographical Information

The Company operates in one reportable business segment and ~~derive~~derives revenue from ~~multiple~~one ~~countries~~country as of December 31, 2022, with 6153% and 8061% of its continuing operations revenue coming from the United States in fiscal year ~~2021~~2022 and ~~2020~~2021, respectively.

Corporate and Available Information

The Company was incorporated in the State of Delaware on April 8, 1999. On March 30, 2021, the Company completed its Merger with StemoniX, which is now a wholly-owned subsidiary of the Company.

The Company’s principal executive offices are located at 2370 State Route 70 West, Two Executive Campus, Suite 310, Cherry Hill, NJ 08002-4102. The Company’s telephone number is (201) 479-1357 and the corporate website address is www.vyantbio.com. ~~The~~On the Company’s website, investors can obtain, free of ~~included~~charge, ~~the~~a ~~website~~copy ~~address~~of inits ~~this~~Annual ~~annual~~Report ~~report~~on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, ~~only~~Code asof anConduct ~~inactive~~and ~~textual~~Business Ethics, ~~reference~~including disclosure related to any amendments or waivers thereto, other reports and ~~does~~any ~~not~~amendments ~~intend~~thereto itfiled or furnished pursuant to beSection an13(a) or 15(d) of the Exchange Act of 1934, as amended, as soon as reasonably practicable after the Company files ~~active~~such ~~link~~material electronically with, or furnishes it to, the ~~Company~~U.S. ~~website~~Securities and Exchange Commission (the “SEC”). ~~The~~None of the information posted on the Company’s website is ~~not~~ incorporated by reference ininto this ~~annual~~Annual ~~report~~Report. onThe ~~Form~~SEC ~~10-K~~also maintains a website at http://www.sec.gov that contains reports, proxy and information statements and other information regarding the Company and other companies that file materials with the SEC electronically.

This annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports, as well as other documents the Company files with the U.S. Securities and Exchange Commission (“SEC”), are available free of charge through the Investors section of the Company website at https://ir.vyantbio.com/sec-filings as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. The public can obtain documents that the Company files with the SEC at www.sec.gov.

Item 1A. Risk Factors

An investment in our common stock involves a high degree of risk including the risk of a loss of your entire investment. You should carefully consider the risks and uncertainties described below and the other information contained in this report and the other reports we filed with the Securities and Exchange Commission. The risks set forth below are not the only ones facing us. Additional risks and uncertainties may exist that could also adversely affect our business, operations and financial condition. If any of the following risks actually materialize, our business, financial condition and/or operations could suffer. In such event, the value of our common stock could decline, and you could lose all or a substantial portion of the money that you have paid for our common stock.

Summary of Risk Factors

● We have a history of net losses, expect to incur net losses in the future and may never achieve sustained profitability. ● We have limited experience in drug discovery and drug development, and we have never advanced a drug to human development or had a drug approved alone or with collaborators. ● We may not be successful in our efforts to identify or discover drug candidates and may fail to capitalize on programs, collaborations, or drug candidates that may present a greater commercial opportunity or for which there is a greater likelihood of success. ● We do not have any experience in clinical development and have not advanced any drug candidates into clinical development. ● Clinical trials are expensive, time-consuming and difficult to design and implement, and have traditionally had high attrition. ● Our future revenue is unpredictable and operating results are expected to fluctuate from period to period. ● Our business is subject to risks arising from epidemic diseases, such as the global outbreak of COVID-19.

~~● The regulatory approval processes~~ Summary of ~~the~~Risk FDA and comparable foreign authorities are lengthy, time consuming, expensive and inherently challenging, and if we or our collaborators are ultimately unable to obtain regulatory approval for our drug candidates, our business could be significantly limited. ● Our success depends upon achieving a critical mass of customers and strategic relationships. ● We may acquire other businesses or make investments in other companies or technologies that could harm operating results, dilute its stockholders’ ownership, increase debt or cause us to incur significant expense. ● We may not be able to sell the vivoPharm business and/or any sales we consummate may not produce the desired results. ● If we are unable to obtain and maintain patent and other intellectual property protection for our products and processes, or if the scope of the patent and other intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our technology and products may be adversely affected. ● The loss or transition of any member of our senior management team or the inability to attract and retain highly skilled scientists, clinicians and salespeople could adversely affect our business. ● If we are unable to manage growth, our prospects may be limited, and our future results of operations may be adversely affected. ● Because we do not expect to pay cash dividends for the foreseeable future, you must rely on appreciation of our common stock price for any return on your investment. Even we change that policy, we may be restricted from paying dividends on our common stock.Factors

~~Risks Relating~~● We may not be successful in our efforts to identify and/or consummate any strategic transaction, and any such transactions we consummate may not produce the desired results. ● Recurring losses and negative cash flows from operations raise substantial doubt regarding our ability to continue as a going concern. ● We have a history of net losses, expect to incur net losses in the future and may never achieve sustained profitability. ● If a strategic transaction is not consummated, our Board may decide to pursue a dissolution and liquidation of our remaining assets. In such an event, the amount of cash available for distribution to our stockholders, if any, will depend heavily on the timing of such liquidation as well as the amount of cash that will need to be reserved for current debts and commitments and contingent liabilities. ● Any strategic business combination or other transactions that we may consummate in the future could have a variety of negative consequences and we may implement a course of action or consummate a transaction that yields unexpected results that adversely affect our business and decrease the value of the Company. ● There can be no assurance that we will be able to comply with the continued listing standards of Nasdaq. ● Clinical trials are expensive, time-consuming and difficult to design and implement, and have traditionally had high attrition. ● Our ~~Financial~~future ~~Condition~~revenue is unpredictable and ~~Capital~~operating ~~Requirements~~results are expected to fluctuate from period to period. ● If we are unable to obtain and maintain patent and other intellectual property protection for our products and processes, or if the scope of the patent and other intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our technology and products may be adversely affected. ● The loss or transition of any member of our management team could adversely affect our business. ● Because we do not expect to pay cash dividends for the foreseeable future, you must rely on appreciation of our common stock price for any return on your investment. Even we change that policy, we may be restricted from paying dividends on our common stock. ● Our business is subject to risks arising from epidemic diseases, such as the global outbreak of COVID-19.

~~We have~~Risks aRelated ~~history of net losses, expect~~ to ~~incur~~our ~~net~~Strategic ~~losses~~Alternative ~~in the future and may never achieve sustained profitability.~~Process

We ~~have~~ historically incurred substantial net losses. We had net losses of $40.9 million and $8.7 million for the years ended December 31, 2021 and 2020, respectively, and had an accumulated deficit of $78.8 million as of December 31, 2021. The 2021 results including a net loss from discontinuing operations of $22.3 million, which includes a $20.2 million goodwill impairment charge as well as continuing operations non-cash expenses of $4.8 million and merger related costs of $2.3 million. We expect losses to continue. These losses have had, and will continue to have, an adverse effect on working capital, total assets and stockholders’ equity. Because of the numerous risks and uncertainties associated with our revenue growth and costs associated with being a public company, we are unable to predict when we will become profitable, and we may ~~never become profitable. Even if we do achieve profitability, we may~~ not be ~~able~~successful toin ~~sustain~~identifying ~~or increase profitability on a quarterly or annual~~and ~~basis.~~implementing ~~Our~~any ~~inability~~strategic ~~to achieve, and then maintain, profitability would negatively affect our~~ business, ~~financial~~combination ~~condition,~~or ~~results of~~other ~~operations and cash flows~~transaction.

~~Prior~~We have engaged LifeSci Capital to assist us in seeking a strategic transaction to benefit our shareholders. We continue to evaluate various potential strategic options for the ~~Merger~~Company, including a merger, reverse merger, sale, wind-down, liquidation and ~~receipt~~dissolution ofor ~~the~~other ~~net~~strategic ~~proceeds~~transaction. ofHowever, we have not been able to identify a counterparty willing to move forward with us in the ~~financings~~past three months and there can be no assurance that ~~were~~we will be able to identify such counterparty or, if we do, successfully consummate any particular strategic transaction. The biotech industry is a ~~condition~~competitive industry and thus there are numerous competitors of the ~~Merger,~~Company ~~recurring~~for ~~losses~~strategic ~~from~~transactions ~~operations~~with a limited number of parties seeking a ~~raised~~transaction ~~substantial~~on ~~doubt~~terms ~~regarding~~that ~~our~~would ~~ability~~be beneficial to ~~continue~~our asshareholders. aThe ~~going~~process ~~concern~~of evaluating these strategic options may be very costly, time-consuming and complex and we have incurred, and may ~~need~~in the future incur, significant costs related to ~~raise~~this continued evaluation, such as legal and accounting fees and expenses and other related charges. We may also incur additional ~~capital~~unanticipated byexpenses ~~issuing~~in connection ~~securities~~with this process. A considerable portion of these costs will be incurred regardless of whether any such course of action is implemented or ~~debt~~transaction is completed. Any such expenses will decrease the remaining cash available for use in our business and may diminish or delay ~~through~~any ~~licensing~~future ~~arrangements~~distributions to our stockholders. Any delays in identifying a potential counterparty will cause our cash balance to continue to deplete, which could make us less attractive as a strategic counterparty. The continued review of our strategic options may also ~~cause~~create ~~dilution~~continued uncertainty for our employees and this uncertainty may adversely affect our ability to ~~stockholders~~retain orkey ~~restrict~~employees necessary to maintain our ongoing operations or ~~proprietary~~to execute any potential strategic options, which could have a material adverse effect on our business. ~~rights~~Further, the market capitalization of our Company is below the value of our cash and cash equivalents. Potential counterparties in a strategic transaction involving our company may place minimal or no value on our remaining assets. As a result, we may not be able to execute on a strategic transaction before our cash position gets reduced, as a result of running a public company, to the point that we will need to pursue the winding down and dissolution of the Company.

~~For the~~Any ~~years~~strategic ~~ended~~transactions ~~December~~that ~~31, 2021 and 2020,~~ we ~~had net~~may ~~cash used~~ consummate in ~~operating~~the ~~activities~~future ~~from~~could ~~continuing~~have ~~operations~~negative ~~of $16~~consequences.~~5 million and $5.8 million, respectively. We expect our expenses to increase in connection with our ongoing activities.~~

~~The Company~~Any ~~had~~strategic ~~cash~~business ~~and~~combination ~~cash~~or ~~equivalents~~other oftransactions that ~~$20.6~~we ~~million~~may asconsummate ofin ~~December~~the ~~31,~~future ~~2021.~~could ~~The~~have ~~Company’s~~a ~~management~~variety ~~has~~of ~~projected~~negative ~~that the~~consequences ~~Company’s~~and ~~cash~~we onmay ~~hand,~~implement ~~together~~a ~~with~~course ~~net proceeds from the planned sale~~ of ~~the vivoPharm~~action ~~business~~or ~~during 2022~~consummate asa ~~well~~transaction asthat ~~proceeds~~yields ~~from~~unexpected ~~sales~~results ofthat ~~common~~adversely ~~stock~~affect ~~pursuant~~our tobusiness ~~the~~and ~~Purchase~~decrease ~~Agreement~~the ~~(as~~value ~~defined~~of ~~below)~~the ~~with~~Company. ~~Lincoln~~There ~~Park~~can ~~Capital,~~be ~~LLC will~~no beassurances ~~adequate~~that toany ~~fund~~particular ~~the~~course ~~Company’s~~of ~~currently~~action, ~~planned~~business ~~operations~~arrangement ~~into~~or ~~the~~transaction, ~~second~~or ~~quarter~~series of ~~2023.~~transactions, ~~Such~~will ~~estimate~~be ~~may~~pursued, ~~prove~~be successfully consummated, lead to beincreased ~~wrong~~stockholder value, ~~and~~ weor ~~could~~achieve ~~use~~the ~~our~~results ~~available~~hoped ~~capital~~for. ~~resources~~Any ~~sooner~~failure ~~than~~of wesuch ~~currently~~potential ~~expect,~~transaction ~~and/or~~to achieve the ~~capital~~anticipated ~~resources~~results ~~that~~could wesignificantly ~~are~~impair ~~assuming~~the ~~will be~~ability ~~present~~of ~~could~~a ~~fail~~shareholder to ~~materialize~~realize atany ~~the~~benefit ~~amounts~~from weany ~~project~~future orstrategic ~~at all~~transaction.

~~For instance,~~If ~~changing~~we ~~circumstances,~~are ~~some~~successful ofin ~~which~~completing ~~may~~any bestrategic ~~beyond our control~~transaction, ~~could~~we may ~~cause~~be usexposed to ~~consume~~other ~~capital~~operational ~~significantly faster than we currently anticipate,~~ and wefinancial ~~may need to seek additional funds sooner than planned~~risks. ~~Future capital requirements depend upon many factors, including, but not limited to:~~

●The ~~the~~negotiation ~~rate at which invest in our disease model~~ and ~~therapeutic~~consummation ~~drug~~of ~~development;~~any ●strategic ~~the~~transaction ~~rate~~may atrequire ~~which~~more wetime ~~are~~or ~~able~~greater tocash ~~enter~~resources ~~into~~than ~~strategic relationships; ● the extent to which~~ we ~~commence~~anticipate ~~development~~and ~~activities~~expose ~~for~~us ~~new therapeutic indications; ● the response of competitors~~ to ~~our~~other ~~products~~operational and ~~services;~~financial ~~● the costs of preparing~~risks, ~~filing and prosecuting patent applications, maintaining and protecting our intellectual property rights~~ including ~~enforcing and defending intellectual property related claims; and ● the costs of operating as a public company.~~:

● increased near-term and long-term expenditures;

● exposure to unknown liabilities;

● higher than expected acquisition or integration costs;

● incurrence of substantial debt or dilutive issuances of equity securities to fund future operations;

● write-downs of assets or goodwill or incurrence of non-recurring, impairment or other charges;

● increased amortization expenses;

● difficulty and cost in combining the operations and personnel of any acquired business with our operations and personnel;

● impairment of relationships with key suppliers or customers of any acquired business due to changes in management and ownership;

● inability to retain key employees of our Company or any acquired business; and

● possibility of future litigation.

~~We may~~Any ~~seek additional capital through a combination~~ of ~~public and private equity offerings, debt financings, strategic partnerships and alliances, licensing arrangements or monetization transactions. To~~ the ~~extent~~foregoing ~~that~~risks we raise additional capital through the sale of equity, convertible debt securities or other equity-based derivative securities, our existing shareholders’ ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights. Any indebtedness we incur would result in increased fixed payment obligations and could ~~involve~~have ~~restrictive~~a ~~covenants,~~material ~~such~~adverse aseffect ~~limitations~~ on our ~~ability~~ ~~to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our~~ business~~. Furthermore~~, ~~the~~financial ~~issuance~~condition ~~of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our common stock to decline~~ and ~~existing shareholders may not agree with our financing plans or the terms of such financings~~prospects. If we raise additional funds through strategic partnerships and alliances, licensing arrangements or monetization transactions with third parties, we may have to relinquish valuable rights to our technologies, or our products, or grant licenses on terms unfavorable to us. Adequate additional financing may not be available to us on acceptable terms, or at all. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.

If a strategic transaction is not consummated, our Board may decide to pursue a dissolution and liquidation of our remaining assets. In such an event, the amount of cash available for distribution to our stockholders, if any, will depend heavily on the timing of such liquidation as well as the amount of cash that will need to be reserved for current debts and commitments and contingent liabilities.

There can be no assurance that a strategic transaction will be completed. If a strategic transaction is not completed, our Board may decide to pursue a dissolution of the Company and liquidation of all of our remaining assets. In such an event, the amount of cash available for distribution to our stockholders, if any, will depend heavily on the timing of such decision, as with the passage of time the amount of cash available for distribution will be reduced as we continue to fund our operations. The process of liquidation may be lengthy and we cannot make any assurances regarding the timing of completing such a process. If our Board were to approve and recommend, and our stockholders were to approve, a dissolution and liquidation, we would be required under Delaware corporate law to pay our outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to our stockholders. There can be no assurance as to the amount of available cash that will be available to distribute to stockholders after paying our debts and other obligations and setting aside funds for reserves, nor as to the timing of any such distribution. Our financial commitments and contingent liabilities would include: (i) personnel costs, including severance; (ii) contractual obligations to vendors and clinical study sites; (iii) non-cancelable lease obligations; and (iv) potential litigation against us. Non-cancelable lease obligations include our Maple Grove, MN and Cherry Hill, NJ leases. No assurances can be given as to the terms for cancellation that we will be able to negotiate with our landlords. We also have contingent liabilities related to our former vivoPharm subsidiary described below.

As a result of the requirement to reserve for contingencies, a portion of our assets may need to be reserved pending the resolution of such obligations and the timing of any such resolution is uncertain. In addition, we may be subject to litigation or other claims related to a dissolution and liquidation. If a dissolution and liquidation were pursued, our Board, in consultation with our advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of our common stock could lose all or a significant portion of their investment in the event of a liquidation, dissolution or winding up.

We may become involved in securities class action litigation that could divert management’s attention and harm the Company’s business, and insurance coverage may not be sufficient to cover all costs and damages.

In the past, securities class action litigation has often followed certain significant business transactions, such as the sale of a company or announcement of any other strategic transaction, or the announcement of negative events, such as discontinuations of clinical programs. We suffered such costs in connection with the Cancer Genetics-StemoniX merger consummated in March 2021. These events may also result in investigations by the SEC. We may be exposed to such litigation or investigation even if no wrongdoing occurred. Litigation and investigations are usually expensive and divert management’s attention and resources, which could adversely affect our business and cash resources and our ability to consummate a potential strategic transaction or the ultimate value our stockholders receive in any such transaction.

We may have certain liability with respect to claims related to the vivoPharm business that we sold in two transactions during the fourth quarter of 2022.

As a result of the sale of the U.S. operations of the Company’s vivoPharm business to Reaction in November 2022 and the sale of the remaining parts of the business in December 2022 and March 2023, we may be subject to adjustments and/or claims for money owed to the buyers with respect to the vivoPharm business.

Regarding the sale of the non-U.S. portion of the business (“Australian Business”), a customer and creditor of the Australian Business has asserted that moneys are due it. As part of the disposition of the balance of the Company’s former vivoPharm business on March 13, 2023, the Buyer agreed to be responsible for this for this claim.

Risks Relating to our Financial Condition and Capital Requirements

We have a history of net losses, expect to incur net losses in the future and may never achieve sustained profitability.

We have historically incurred substantial net losses. We had net losses of $22.7 million and $40.9 million for the years ended December 31, 2022 and 2021, respectively, and had an accumulated deficit of $101.5 million as of December 31, 2022. The 2022 and 2021 results including a net loss from discontinuing operations of $6.9 million and $22.3 million, respectively, which include $5.4 million and $20.2 million of net goodwill and intangible asset impairment charges, as well as continuing operations non-cash expenses of $2.1 million and $4.8 million, respectively, and merger related costs of $2.3 million in 2021. We expect losses to continue. These losses have had, and will continue to have, an adverse effect on working capital, total assets and stockholders’ equity. Because of the numerous risks and uncertainties associated with our drug discovery efforts, and the uncertainty of generating revenue associated with these efforts, and costs associated with being a public company, we are unable to predict when we will become profitable, and we may never become profitable. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our inability to achieve, and then maintain, profitability would negatively affect our business, financial condition, results of operations and cash flows.

Recurring losses and negative cash flows from operations raise substantial doubt regarding our ability to continue as a going concern.

The Company has suffered recurring losses and negative cash flows from operations since inception, has an accumulated deficit, has substantially ceased revenue generation, and is projecting insufficient liquidity to meet our obligations as they become due over the next twelve months. As of December 31, 2022, the Company had cash and cash equivalents of $10.0 million, an accumulated deficit of $101.5 million, operating cash outflows from continuing operations of $12.8 million and a net loss from continuing operations of $15.8 million for the year then ended. These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern.

Therefore, in connection with the preparation of this Annual Report for the year ended December 31, 2022, our management has concluded that these conditions and events raise substantial doubt about the Company’s ability to continue as a going concern for the twelve months following the issuance of this Annual Report. In response to these conditions and based on our current cash preservation plan, the Company has been attempting to reduce expenses and slow cash flows. Meanwhile, we have been seeking and evaluating strategic partners to acquire our assets, including our public company as a reverse merger candidate. We currently do not plan to raise additional capital to fund our operations through public or private equity offerings or debt financings, and we have terminated our at-the-market equity offering program. There are no assurances that we will be able to sell any of our assets to raise cash or find a partner in any strategic transactions or find a reverse merger candidate and we may therefore need to complete an orderly winddown of the Company’s operations or, if sufficient funds are not available, bankruptcy.

The Company’s ability to satisfy claims of all its creditors in full is uncertain.

The Company remains liable to various unsecured creditors, including amounts due to its landlords in Maple Grove, Minnesota and Cherry Hill, New Jersey. As of December 31, 2022, the Company had an aggregate of $3.7 million of current liabilities and $5.3 million in total liabilities. On March 9, 2023, the Company terminated its San Diego lease agreement with an early termination fee of $45 thousand. The San Diego facility represented $201 thousand of current liabilities and $1.1 million of total liabilities as of December 31, 2022. This is compared to current assets of $11.5 million, as of December 31, 2022. Additional losses have been incurred since December 31, 2022 and expenses will be incurred in connection with any strategic transaction of wind down process. No assurances can be given that the Company will be able to pay its unsecured creditors in full or that claims will not be asserted in addition to the amounts which the Company believes it is liable for at this time.

Our future revenue is unpredictable and operating results are expected to fluctuate from period to period.

The emerging nature of the markets in which we compete make it difficult for us to accurately forecast our revenue in any given period.

Historically, most of our revenue ~~has~~was ~~been~~ derived from ~~our~~the vivoPharm business, which we ~~have~~sold ~~committed~~before tothe aend ~~plan~~of ~~to sell~~2022. Revenue from StemoniX have historically derived from the sale of iPSC-based microOrgan plates to pharmaceutical, biotechnology and research customers or the performance of DaaS for these customers. WeOur ~~anticipate~~ revenue previously generated from these activities ~~will~~ substantially ~~cease~~ ceased in ~~the first half of~~ 2022, ~~and~~as we ~~will~~focused ~~focus~~ on our therapeutic drug discovery and development using our iPSC human disease models. Therefore, we will not generate revenue until we are able to successfully develop and discover drug candidates and partner with pharmaceutical and biotechnology companies and other industry partners.

To date, we have not generated revenue from licensing our iPSC disease models or therapeutic assets. Additionally, our ability to obtain license and/or subscription agreements with pharmaceutical companies and other industry partners is unproven, and in the best of circumstances it may take several months or more in order to enter into such agreements. There can be no assurances that we will be successful in entering into collaborations with pharmaceutical companies, artificial intelligence/technology and other industry partners. Moreover, even after entering into such agreements, it may take months or years before they generate revenue, if at all. There is no assurance that any revenue generated will recover the costs23

For these reasons, it is difficult for us to predict, when, if ever, we will generate revenue and become profitable.

Our operating results are likely to fluctuate substantially from period to period as a result of several factors, many of which are beyond our control. These factors include:

●	the ability to derive licensing contracts for Company-identified drug candidates or Company developed human iPSC disease models;
●	the ability to enter into successful strategic relationships;
●	the unpredictable expenses associated with drug development and clinical trials;
●	the amount and timing of operating costs and capital expenditures relating to expansion of our operations;
●	the announcement or introduction of new or enhanced technologies, products, or services by competitors; and
●	the ability to attract and retain qualified personnel.

22Prior to the Merger, CGI identified a material weakness in its internal control over financial reporting. We had not fully remediated this material weakness as of December 31, 2021. If we are not able to maintain an effective system of internal control over financial reporting, the reliability of our financial reporting, investor confidence in us and the value of our common stock could be adversely affected.

CGI identified a material weakness in its internal control over financial reporting. If we are not able to remediate the material weakness and otherwise maintain an effective system of internal control over financial reporting, the reliability of its financial reporting, investor confidence in us and the value of our common stock could be adversely affected.

As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls. Section 404 of the Sarbanes-Oxley Act (“Section 404”) requires that we evaluate and determine the effectiveness of internal controls over financial reporting and provide a management report on internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected and corrected on a timely basis.

During the audit for the 2020 fiscal year of CGI, the accounting predecessor (as the Merger was a reverse merger) and legal acquiror of StemoniX, identified a material weakness in internal control over financial reporting related to our accounting for the potential impairment of intangible assets. This material weakness was not remediated at the time of the Merger and therefore, became part of the post-Merger internal control structure of Vyant Bio. This accounting requires us to record an impairment charge if the carrying amount of the asset group is not recoverable and is in excess of the fair value of the asset group. CGI’s calculation of undiscounted future cash flows resulted in a conclusion that no impairment was necessary, however, we could not supply supporting evidence that its calculation was accurate.

We began the process of implementing changes to its internal control over intangible assets to remediate the control deficiencies that gave rise to the material weakness, and implemented the following enhancements to internal controls to address this material weakness:

●	Hired a new CFO with significant experience in internal controls, US GAAP and financial forecasting;
●	Established a financial planning and analysis function in June 2021 to analyze, forecast and report on the Company’s operations; and
●	Developed a financial model to forecast vivoPharm revenue based on inputs from management.

We determined that the underlying revenue forecasting model to support the determination of cash flows for ~~our~~the vivoPharm business contained data input errors that required additional analysis and validation during the first quarter of 2022. While these data errors did not impact our assessment of the carrying value of ~~our~~the vivoPharm business as of December 31, 2021, the redesign of this control and ongoing testing of its operational effectiveness ~~will~~did not occur until 2022. As a result, the Company concluded that the deficiency in our internal control over financial reporting related to revenue and cash flow forecasting would give rise to the level of a material weakness as of December 31, 2021. ~~The~~As ~~Company~~the ~~expects~~underlying vivoPharm businesses were sold in 2022, the control related to ~~remediate~~forecasting the vivoPharm revenue and operating results is no longer required as of December 31, 2022. The Company remediated this control in 2022 through enhanced data validation and management review.

Our ability to establish and maintain an effective system of internal control over financial reporting could impact the reliability of our financial reporting, investor confidence in us and the value of our common stock could be materially and adversely affected. Effective internal control over financial reporting is necessary for us to provide reliable and timely financial reports and, together with adequate disclosure controls and procedures, are designed to reasonably detect and prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet its reporting obligations. For as long as we are a “smaller reporting company” under the U.S. securities laws, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404. An independent assessment of the effectiveness of internal control over financial reporting could detect problems that management’s assessment might not. Undetected material weaknesses in our internal control over financial reporting could lead to financial statement restatements and require us to incur the expense of remediation.

We do not expect that disclosure controls or internal control over financial reporting will prevent all errors 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. Further, 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. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Failure of its control systems to prevent error or fraud could materially adversely impact us.

Risks Relating to Our Business and Strategy

~~Our business~~We ismay ~~subject~~not be able to ~~risks~~sell ~~arising~~our ~~from~~business ~~epidemic~~and/or any ~~diseases,~~sales ~~such~~we asconsummate ~~the~~may ~~global~~not ~~outbreak~~produce ofthe ~~COVID-19~~desired results.

~~The outbreak~~On ofJanuary ~~COVID-19~~4, ~~which~~2023, ~~has~~we ~~been~~announced ~~declared~~our bycommitment ~~the World Health Organization~~ to be a ~~pandemic,~~plan ~~has~~to ~~spread~~seek ~~across~~strategic ~~the~~alternatives ~~globe~~for ~~and~~our ~~is impacting worldwide economic activity. A pandemic~~business, including ~~COVID-19 or other public health epidemic, poses~~ the ~~risk~~sale ~~that~~of weall or parts of our ~~employees~~Company, ~~contractors,~~ ~~suppliers,~~as ~~courier~~we ~~delivery~~believe ~~services~~it ~~and~~is ~~other~~in ~~partners may be prevented from conducting business activities for an indefinite~~the ~~period~~best ofinterest ~~time, including due to spread~~ of ~~the~~our ~~disease~~stockholders. ~~within~~To ~~these~~date, ~~groups~~no oralternatives ~~due~~have tobeen ~~shutdowns~~found. ~~that~~Meanwhile, ~~may~~our bepreclinical ~~requested~~and orclinical ~~mandated~~programs byhave ~~governmental~~been ~~authorities~~delayed.

23We can provide no assurances that we will be successful in seeking strategic alternatives for our business, that we will do so in accordance with our expected timeline or that we will recover the carrying value of the assets. Additionally, any decisions made regarding our deployment or use of any sales proceeds we receive in any sale involves risks and uncertainties. As a result, our decisions with respect to such proceeds may not lead to increased long-term stockholder value, or may result in a material charge to our statement of operations.

~~The continued~~A ~~spread~~number of ~~COVID-19~~factors ~~and~~will ~~its~~impact ~~variants, and~~ the ~~measures~~value ~~taken~~of byour ~~the~~business which ~~governments~~are ofoutside ~~countries~~our ~~affected~~control, ~~could~~therefore, ~~disrupt~~there ~~the~~can ~~supply chain~~be ofno ~~material~~assurance ~~needed~~that ~~for~~ our business ~~and~~can ~~could~~be ~~delay~~sold ~~future~~for ~~projects~~a ~~from~~price ~~commencing~~that ~~due~~in toour ~~COVID-19~~opinion ~~related~~reflects its ~~impacts~~fair onvalue. ~~the~~If ~~demand for~~a sale of our ~~services~~business ~~and~~at ~~therefore~~what ~~have~~we consider to be a ~~material~~reasonable ~~adverse~~price ~~effect~~is onnot ~~business~~available, ~~financial~~we ~~condition~~may decide to cease efforts to sell our business and ~~results~~wind ofdown ~~operations~~our business.

Many of our customers worldwide were impacted by COVID-19 and temporarily closed their facilities which impacted revenue in the first half of 2020 for our StemoniX business. While the impact of the pandemic on our business has lessened, the global outbreak of COVID-19 continues with new variants and is impacting the way we operate our business as well as in certain circumstances limiting the availability of lab supplies. The extent to which the COVID-19 pandemic may impact the our future business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the availability and effectiveness of vaccines, the duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

We are actively monitoring the impact of the COVID-19 pandemic on its business, results of operations and financial condition. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition in the future is unknown at this time and will depend on future developments that are highly unpredictable.

We face competition in drug discovery from other biotechnology, pharmaceutical, artificial intelligence and other drug discovery companies and technologies and our operating results may be negatively affected if we fail to compete effectively.

The biotechnology, pharmaceutical and drug discovery and development industries are intensely competitive and subject to rapid and significant technological change. We have competitors in a number of jurisdictions, many of which have substantially greater name recognition, commercial infrastructures and financial, technical and personnel resources than we have. Established competitors may invest heavily to quickly discover and develop novel compounds that could make our drug candidates obsolete or uneconomical. Any new product that competes with an approved product may need to demonstrate compelling advantages in efficacy, cost, convenience, tolerability and safety to be commercially successful. In recent years drug discovery has integrated biology, chemistry and technology, including machine learning, augmented and artificial intelligence as well as several forms of human cells to accelerate research and development activities and its effectiveness and efficiency. Other competitive factors, including generic competition, could force us to lower prices or could result in reduced sales. In addition, new products developed by others could emerge as competitors to our drug candidates. If we are not able to compete effectively against our current and future competitors, our business will not grow and our financial condition and operations will suffer.

We have limited experience in drug discovery, drug development, disease model development and clinical development, and we have never advanced a drug to human development or had a drug approved alone or with collaborators.

The convergence in drug discovery of human organoid disease models along with new in silico technologies including artificial intelligence, machine learning, and new chemistry creation is unproven. There is limited evidence that such an approach will reduce time and risk around preclinical development. Regarding our business model to date, we are pursuing two distinct but parallel tracks to identify novel and repurposed drug therapies: we develop and license access to human cell-derived disease models, and in conjunction with applying data science and in vivo testing, use this technology to identify candidates to bring through the discovery phase which we plan to then partner with pharmaceutical companies to pursue clinical development and commercialization. We may also out license our iPSC disease model development capabilities to strategic partners to co-develop drugs associated with such disease models. To date, we have made very limited independent drug discovery efforts, have not licensed our iPSC disease models and no assurances can be given that we will be successful in generating revenue from these activities.

2425

The Company’s strategy ishas been to attempt to file approximately two ~~investigational new drug (“~~IND”) applications with ~~United States Food and Drug Administration (“~~FDA”) starting in 2023 and perform clinical trials up through Phase I. In connection with our strategic alternatives review and Cash Preservation Plan initiated in January 2023, we ceased all clinical and preclinical development activities in January 2023. We do not have any experience in clinical development and have not advanced any drug candidates into clinical development. Our lack of experience in conducting clinical development activities may adversely impact the likelihood that we will be successful in advancing our programs, if we are not able to find experienced partners. Further, any predictions you make about the future success or viability of our internal drug discovery programs may not be as accurate as they could be if we had a history of conducting clinical trials and developing our own drug candidates.

In addition, as our internal drug discovery business grows, we may encounter unforeseen expenses, difficulties, complications, delays, and other known and unknown factors. ~~Our internal drug discovery business may need to transition to a business capable of supporting clinical development activities. We may not be successful in such a transition.~~

Our approach to the discovery and development of drug candidates based on our microOrgan plates and our AnalytiX tools is novel and unproven, and we do not know whether we will be able to develop any products of commercial value.

We are leveraging our microOrgan plates and our AnalytiX tools to attempt to create a pipeline of drug candidates for patients whose diseases have not been adequately addressed to date by other approaches, and to identify drug candidates with a higher likelihood of success in clinical trials. While we believe that our technology may potentially enable drug research and clinical development that is more efficient than conventional drug research and development, our approach is both novel and unproven. Because our approach is both novel and unproven, the cost and time needed to discover our drug candidates is difficult to predict, and our efforts may not result in the discovery and development of commercially viable medicines or therapies. We may also be incorrect about the effects of any drug candidates we pursue on disease states, which may limit the utility of our approach or the perception of the utility of our approach. Furthermore, our estimates of our defined patient populations available for study and treatment may be lower than expected, which could adversely affect our or our partners’ ability to conduct clinical trials and may also adversely affect the size of any market for medicines we may license for commercialization. Our approach may not result in time savings, higher success rates or reduced costs as we expect it to, and if not, we may not attract collaborators or develop new drugs as quickly or cost effectively as expected and therefore we may not be able to commercialize our approach as expected at this time.

We may never realize return on our investment of resources and cash in our drug discovery collaborations.

We intend to use our high-throughput drug screening on our microOrgan plate technology and use our data science-based AnalytiX tools to quickly test and evaluate a drug for toxicity and efficacy. We believe such technologies, which we have developed at significant expense, will provide us or our collaborators with valuable drug discovery insights. Our collaborators could include start-up, pre-commercial biotechnology, in silico and large-scale pharmaceutical companies. When we engage in drug discovery with these collaborators, we will strive to receive a mixture of upfront payments, including licensing fees, milestone-based fees, and ongoing royalty payments in addition to any charges for in vivo, in vitro and in silico testing, and our SaaS services. However, we have not yet been successful in generating any significant payments or contracts using this business model and may never be.

We may never enter into any material drug discovery collaborations nor realize return on our investment of resources and cash in our drug discovery collaborations. Drug discovery is complex, capital intensive and is prone to high failure rates and uncertain outcomes. Our drug discovery collaborators may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of any drug candidates. In addition, our ability to realize return from our drug discovery collaborations is subject to the following risks, among others:

● drug discovery collaborators have significant discretion in determining the amount and timing of efforts and resources that they will apply to our collaborations and may not perform their obligations as expected; ● drug discovery collaborators may not pursue development or commercialization of any drug candidates for which we are entitled to option fees, milestone payments, or royalties or may elect not to continue or renew development or commercialization programs based on results of clinical trials or other studies, changes in the collaborator’s strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities; ● drug discovery collaborators may delay clinical trials for which we are entitled to milestone payments; ● we may not have access to, or may be restricted from disclosing, certain information regarding our collaborators’ drug candidates being developed or commercialized and, consequently, may have limited ability to inform our stockholders about the status of, and likelihood of achieving, milestone payments or royalties under such collaborations; ● drug discovery collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with any drug candidates and products for which we are entitled to milestone payments or royalties if the collaborator believes that the competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive; ● drug candidates discovered in drug discovery collaborations with us may be viewed by our collaborators as competitive with their own drug candidates or products, which may cause our collaborators to cease to devote resources to the commercialization of any such drug candidates; ● drug discovery collaborators may begin to perceive us to be a competitor more generally, particularly if we advance our internal drug discovery programs, and therefore may be unwilling to continue then existing collaborations with us or to enter into new collaborations with us; ● a drug discovery collaborator may fail to comply with applicable regulatory requirements regarding the development, manufacture, distribution, or marketing of a drug candidate or product, which may impact our ability to receive milestone payments; ● disagreements with drug discovery collaborators, including disagreements over intellectual property or proprietary rights, contract interpretation, or the preferred course of development, might cause delays or terminations of the research, development, or commercialization of drug candidates for which we are eligible to receive milestone payments, or might result in litigation or arbitration; ● drug discovery collaborators may not properly obtain, maintain, enforce, defend or protect our intellectual property or proprietary rights or may use our proprietary information in such a way as to potentially lead to disputes or legal proceedings that could jeopardize or invalidate our or their intellectual property or proprietary information or expose us and them to potential litigation; ● drug discovery collaborators may infringe, misappropriate, or otherwise violate the intellectual property or proprietary rights of third parties, which may expose us to litigation and potential liability; ● drug discovery collaborators could suffer from operational delays as a result of global health impacts, such as the COVID-19 pandemic; and ● drug discovery collaborations may be terminated prior to our receipt of any significant value from the collaboration.

● drug discovery collaborators may delay clinical trials for which we are entitled to milestone payments; ● we may not have access to, or may be restricted from disclosing, certain information regarding our collaborators’ drug candidates being developed or commercialized and, consequently, may have limited ability to inform our stockholders about the status of, and likelihood of achieving, milestone payments or royalties under such collaborations; ● drug discovery collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with any drug candidates and products for which we are entitled to milestone payments or royalties if the collaborator believes that the competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive; ● drug candidates discovered in drug discovery collaborations with us may be viewed by our collaborators as competitive with their own drug candidates or products, which may cause our collaborators to cease to devote resources to the commercialization of any such drug candidates; ● drug discovery collaborators may begin to perceive us to be a competitor more generally, particularly if we advance our internal drug discovery programs, and therefore may be unwilling to continue then existing collaborations with us or to enter into new collaborations with us; ● a drug discovery collaborator may fail to comply with applicable regulatory requirements regarding the development, manufacture, distribution, or marketing of a drug candidate or product, which may impact our ability to receive milestone payments; ● disagreements with drug discovery collaborators, including disagreements over intellectual property or proprietary rights, contract interpretation, or the preferred course of development, might cause delays or terminations of the research, development, or commercialization of drug candidates for which we are eligible to receive milestone payments, or might result in litigation or arbitration; ● drug discovery collaborators may not properly obtain, maintain, enforce, defend or protect our intellectual property or proprietary rights or may use our proprietary information in such a way as to potentially lead to disputes or legal proceedings that could jeopardize or invalidate our or their intellectual property or proprietary information or expose us and them to potential litigation; ● drug discovery collaborators may infringe, misappropriate, or otherwise violate the intellectual property or proprietary rights of third parties, which may expose us to litigation and potential liability; ● drug discovery collaborators could suffer from operational delays as a result of global health impacts, such as the COVID-19 pandemic; and ● drug discovery collaborations may be terminated prior to our receipt of any significant value from the collaboration.

Any drug discovery collaborations we enter into may not lead to development or commercialization of drug candidates that results in our receipt of fees, milestone payments, or royalties in a timely manner, or at all. If any drug discovery collaborations that we enter into do not result in the successful development and commercialization of drug products that result in fees, milestone payments, or royalties to us, we may not receive return on the resources we have invested in the drug discovery collaboration. Moreover, even if a drug discovery collaboration initially leads to the achievement of milestones that result in payments to us, it may not continue to do so.

We also will likely rely on collaborators for the development and potential commercialization of drug candidates we discover internally when we believe it will help maximize the commercial value of the drug candidate. Such collaborators may not achieve the research, development, regulatory and sales milestones for those development candidates that result in material payments to us.

We may not be successful in our efforts to identify or discover drug candidates and may fail to capitalize on programs, collaborations, or drug candidates that may present a greater commercial opportunity or for which there is a greater likelihood of success.

Research programs to identify new drug candidates require substantial technical, financial human resources, and external expertise. As a newly formed organization of existing technologies, we have not yet developed any drug candidates, and we may fail to identify potential drug candidates for clinical development. Similarly, a key element of our business plan is to expand the use of our technology in drug discovery collaborations with third parties. A failure to demonstrate the utility of our platform by successfully using it ourselves to discover internal drug candidates could harm our business prospects.

Because we have limited resources, we focus our research programs on diseases where we have some know-how and where we believe there is a meaningful commercial opportunity, among other factors. The focus of our initial internal drug discovery programs is in the area of neurological disorders including Rett Syndrome, CDLK5 Deficiency Disorder, and Parkinson’s Disease. We may forego or delay pursuit of opportunities with certain programs, collaborations, or drug candidates or for indications that later prove to have greater commercial potential. However, the development of any drug candidate we pursue may ultimately prove to be unsuccessful or less successful than another potential drug candidate that we might have chosen to pursue on a more aggressive basis with our capital resources. If we do not accurately evaluate the commercial potential for a particular drug candidate, we may relinquish valuable rights to that drug candidate through strategic collaboration, partnership, licensing, or other arrangements in cases in which it would have been more advantageous for us to retain development and commercialization rights to such drug candidate. Alternatively, we may allocate internal resources to a drug candidate in a therapeutic area in which it would have been more advantageous to enter into a collaboration.

If we are not able to establish or maintain collaborations to develop and commercialize any of the disease models we develop or drug candidates we discover, we may have to alter our development and commercialization plans for those disease models and drug candidates and our business could be adversely affected.

We have not yet established license collaborations for our disease models and related AnalytiX tools. We expect to rely on future collaborators for either the development of our disease models or leverage such licensed models for drug discovery. We face significant competition in seeking appropriate collaborators for these activities, and a number of more established companies may also be pursuing such collaborations.

We have also not yet identified any drug candidates or advanced any of our drug discovery programs past the discovery stage and into preclinical studies or human clinical trials. We expect to rely on future collaborators for the development and potential commercialization of drug candidates we discover internally when we believe it will help maximize the commercial value of the drug candidate. We face significant competition in seeking appropriate collaborators for these activities, and a number of more established companies may also be pursuing such collaborations. These established companies may have a competitive advantage over us due to their size, financial resources, and greater clinical development and commercialization expertise. Whether we reach a definitive agreement for such collaborations will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration, and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of preclinical studies and clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject drug candidate, the costs and complexities of manufacturing and delivering such drug candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge, and industry and market conditions generally. The collaborator may also consider alternative drug candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our drug candidate. Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large biopharmaceutical companies that have resulted in a reduced number of potential future collaborators.

If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms or at all, we may have to curtail the development of a drug candidate, reduce, or delay its development program or one or more of our other development programs, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to fund and undertake development or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all. If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop any drug candidates or bring them to market.

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Our drug discovery collaborators will have significant discretion in determining when to make announcements, if any, about the status of our collaborations, including about clinical developments and timelines for advancing collaborative programs, and the price of our common stock may decline as a result of announcements of unexpected results or developments.

Our drug discovery collaborators will have significant discretion in determining when to make announcements about the status of our collaborations, including about preclinical and clinical developments and timelines for advancing the collaborative programs. While as a general matter we intend to periodically report on the status of our collaborations, our drug discovery collaborators may wish to report such information more or less frequently than we intend to or may not wish to report such information at all unless legally required to do so. The price of our common stock may decline as a result of the public announcement of unexpected results or developments in our collaborations or as a result of our collaborators withholding such information.

If any current or future collaborators are unable to successfully complete clinical development, obtain regulatory approval for, or commercialize any drug candidates, or experience delays in doing so, our business may be materially harmed.

The success of any current or future collaborators’ development and commercialization programs will depend on several factors associated with our collaborators’ operations, including the following:

●	acceptable data based on in vitro or in silico screenings;
●	acceptable data at the completion of necessary preclinical studies to enable the initiation of clinical trials;
●	successful enrollment of patients in, and the completion of, the clinical trials;
●	acceptance by the FDA or other regulatory agencies of regulatory filings for any drug candidates we and our current or future collaborators may develop;
●	expanding and maintaining a workforce of experienced scientists and others to continue to develop any drug candidates;
●	obtaining and maintaining intellectual property protection and regulatory exclusivity for any drug candidates we and our current or future collaborators may develop;
●	making arrangements with third-party manufacturers for, or establishing, clinical and commercial manufacturing capabilities;
●	establishing sales, marketing, and distribution capabilities for drug products and successfully launching commercial sales, if and when approved;
●	acceptance of any drug candidates we and our current or future collaborators may develop, if and when approved, by patients, the medical community, and third-party payors;
●	effectively competing with other therapies;
●	obtaining and maintaining coverage, adequate pricing, and adequate reimbursement from third-party payors, including government payors;
●	patients’ willingness to pay out-of-pocket in the absence of coverage and/or adequate reimbursement from third-party payors; or
●	maintaining a continued acceptable safety profile following receipt of any regulatory approvals.

Many of these factors are beyond our control, including clinical outcomes, the regulatory review process, potential threats to our intellectual property rights, and the manufacturing, marketing, and sales efforts of any current or future collaborator. Clinical drug development involves a lengthy and expensive process, with an uncertain outcome. If we or our current or future collaborators are unable to develop, receive marketing approval for, and successfully commercialize any drug candidates, or if we or they experience delays as a result of any of these factors or otherwise, we may need to spend significant additional time and resources, which would adversely affect our business, prospects, financial condition, and results of operations.

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The use of any of our drug candidates in clinical trials may expose us to liability claims, which may cost us significant amounts of money to defend against or pay out, causing our business to suffer.

The nature of our business exposes us to potential liability risks inherent in the testing, manufacturing and marketing of our drug candidates. If any of our drug candidates enter clinical trials or become marketed products, they could potentially harm people or allegedly harm people possibly subjecting us to costly and damaging product liability claims. Some of the patients who participate in clinical trials are already ill when they enter a trial or may intentionally or unintentionally fail to meet the exclusion criteria. The waivers we obtain may not be enforceable and may not protect us from liability or the costs of product liability litigation. Although we intend to obtain product liability insurance that we believe is adequate, we are subject to the risk that our insurance will not be sufficient to cover claims. The insurance costs along with the defense or payment of liabilities above the amount of coverage could cost us significant amounts of money and management distraction from other elements of the business, causing our business to suffer.

Clinical trials are expensive, time-consuming and difficult to design and implement, and have traditionally had high attrition.

Before obtaining marketing approval from the FDA or other comparable foreign regulatory authorities for the sale of our drug candidates, we or our collaborators must complete preclinical development and extensive clinical trials to demonstrate the safety and efficacy of our drug candidates. We currently ~~plan~~lack sufficient funding and are otherwise unable to carry out plans to design, fund and operate Phase 1 clinical trials, ~~and the~~ license our drug candidates ~~and~~ or rely on our collaboration partners to undertake future clinical trial funding and related activities. Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. We We and our collaborators may experience delays in their clinical trials and it is unknown whether clinical trials will begin on time, ~~need~~ need to be redesigned, enroll patients on time or be completed on schedule, if at all. Clinical trials can be delayed for a variety of of reasons, including delays related to:

● we and our collaboration partner’s funding and operational execution; ● regulatory requirements for prolonged in vivo dosing regimens due to proposed treatment protocols; ● the FDA or comparable foreign regulatory authorities requiring additional preclinical assessment of the candidate or disagreeing as to the design or implementation of clinical studies; ● obtaining regulatory authorizations to commence a trial or consensus with regulatory authorities on trial designs; ● reaching agreement on acceptable terms with prospective contract research organizations, or “CROs”, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; ● diversion of healthcare resources to combat epidemics, such as the COVID-19 pandemic; ● obtaining institutional review board, or IRB, approval at each site, or independent ethics committee, or IEC, approval at any sites outside the United States; ● dependence on the needs and timing of third-party collaborators; ● changes to clinical trial protocols; ● recruiting suitable patients to participate in a trial in a timely manner and in sufficient numbers; ● clinical sites deviating from trial protocol or dropping out of a trial; ● addressing patient safety concerns that arise during the course of a trial; ● having patients complete a trial or return for post-treatment follow-up; ● imposition of a clinical hold by regulatory authorities, including as a result of unforeseen safety issues or side effects or failure of trial sites to adhere to regulatory requirements; ● the occurrence of serious adverse events in trials of the same class of agents conducted by other companies or institutions; ● subjects choosing an alternative treatment for the indications for which we are developing our drug candidates, or participating in competing trials; ● adding a sufficient number of clinical trial sites; ● manufacturing sufficient quantities of a drug candidate for use in clinical trials; ● challenges in transporting the drug candidate to investigation sites; ● lack of adequate funding to continue the clinical trial;

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●	selection of clinical end points that require prolonged periods of clinical observation or analysis of the resulting data;
●	failure to meet deadlines for annual reports or untimely review of reports by regulators;
●	a facility manufacturing our drug candidates or any of their components being ordered by the FDA or comparable foreign regulatory authorities to temporarily or permanently shut down due to violations of current good manufacturing practice, or cGMP, regulations or other applicable requirements, or infections or cross-contaminations of drug candidates in the manufacturing process;
●	any changes to the manufacturing process that may be necessary or desired;
●	third-party clinical investigators losing the licenses or permits necessary to perform the clinical trials, not performing clinical trials on anticipated schedule or consistent with the clinical trial protocol, good clinical practice, or GCP, or other regulatory requirements; or
●	third-party contractors not performing data collection or analysis in a timely or accurate manner; or third-party contractors providing poor quality data that requires extensive cleansing; or third-party contractors becoming debarred or suspended or otherwise penalized by the FDA or other government or regulatory authorities for violations of regulatory requirements or of the US Foreign Corrupt Practices Act while conducting non-US trials, in which case we or our collaborators may need to find a substitute contractor, and we or our collaborators may not be able to use some or all of the data produced by such contractors in support of our marketing applications.

In addition, disruptions caused by ~~the~~pandemics ~~COVID-19 pandemic~~ or other public health crises may increase the likelihood that our collaborators ~~encounter~~ encounter such difficulties or delays in initiating, enrolling, conducting or completing clinical trials or research and development. Our collaborators could encounter delays if a clinical trial is suspended or terminated by them, by the IRBs (or IECs) of the institutions in which such trials are being conducted, by the Data Safety Monitoring Board, or DSMB, for such trial or by the FDA or other regulatory authorities. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. Furthermore, our collaborators may rely on CROs and clinical trial sites to ensure the proper and timely conduct of clinical trials and, while there may be agreements governing these activities, our collaborators would have limited influence over their actual performance.

Further, conducting clinical trials in foreign countries, as our collaborators may do for our current and future drug candidates, presents additional risks that may delay completion of clinical trials. These risks include the failure of enrolled patients in foreign countries to adhere to clinical protocol as a result of differences in healthcare services or cultural customs, managing additional administrative burdens associated with foreign regulatory schemes, failure to account for foreign currency exchange rates in budgeting and financial considerations, customs and trade practices in the shipment of drug substances, as well as political and economic risks relevant to such foreign countries.

If we or our collaborators experience delays in the completion of, or termination of, any clinical trial of our drug candidates, the commercial prospects of our drug candidates will be harmed, and our ability to generate product and/or license revenue from any of these drug candidates will be delayed. In addition, any delays in completing clinical trials will increase our collaborators’ costs, slow down our drug candidate development and approval process and jeopardize the ability to commence product sales and generate revenue. Any of these occurrences may harm our business, financial condition and prospects significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our drug candidates.

We and our collaborators will depend on enrollment of patients in their clinical trials in order to continue development of our drug candidates. If they are unable to enroll patients in those clinical trials, our and their research and development efforts could be adversely affected.

The timely completion of clinical trials in accordance with their protocols depends, among other things, on our collaborators’ ability to enroll a sufficient number of patients who remain in the study until its conclusion. Our collaborators may experience difficulties in patient enrollment in their clinical trials for a variety of reasons. Patient enrollment is affected by many factors including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, the size of the patient population required for analysis of the trial’s primary endpoints, the proximity of patients to study sites, our collaborators’ ability to recruit clinical trial investigators with the appropriate competencies and experience, our collaborators’ ability to obtain and maintain patient consents, the risk that patients enrolled in clinical trials will drop out of the trials before completion, and competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating. Our collaborators’ ability to enroll patients in clinical trials may be impacted by governmental restrictions and diversion of healthcare resources resulting from the COVID-19 pandemic. Many pharmaceutical companies may conduct clinical trials in patients with the disease indications that our potential drug products may target. As a result, we and our collaborators may need to compete with them for clinical sites, physicians and the limited number of patients who fulfill the stringent requirements for participation in clinical trials. Also, due to the confidential nature of clinical trials, it is unknown how many of the eligible patients may be enrolled in competing studies and who are consequently not available for our collaborators’ clinical trials. Our Phase 1 clinical trials or our collaborators’ clinical trials may be delayed or terminated due to the inability to enroll enough patients. The delay or inability to meet planned patient enrollment may result in increased costs and delay or termination of the trials, which could have a harmful effect on our and our collaborators’ ability to develop products.

The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming, expensive and inherently challenging, and if we or our collaborators are ultimately unable to obtain regulatory approval for our drug candidates, our business could be significantly limited.

The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. The results of preclinical studies and early clinical trials of our drug candidates may not be predictive of the results of later-stage clinical trials. Drug candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. It is common for companies in the biopharmaceutical industry to suffer significant setbacks in advanced clinical trials due to nonclinical findings made while clinical studies were underway and safety or efficacy observations made in clinical studies, including previously unreported adverse events. Our collaborators’ future clinical trial results may not be successful, and notwithstanding any potential promising results in earlier studies, we cannot be certain that we and our collaborators’ will not face similar setbacks. The historical failure rate for drug candidates in our industry is high. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a drug candidate’s clinical development, is subject to individual or review panel interpretation, and may vary among jurisdictions. We have not obtained regulatory approval for any drug candidate and it is possible that none of our existing drug candidates or any drug candidates we may seek to develop in the future will ever obtain regulatory approval.

Our drug candidates could fail to receive regulatory approval for many reasons, including the following:

● the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our collaborators’ clinical trials; ● we or our collaborators’ may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a drug candidate is safe and effective for its proposed indication; ● the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval; ● the FDA or comparable foreign regulatory authorities may disagree with our or our collaborators’ interpretation of data from preclinical studies or clinical trials; ● the data collected from clinical trials of our drug candidates may not be sufficient to support the submission of ana ~~New Drug Application (~~NDA), or Biologics License Application (“BLA”), or other submission or to obtain regulatory approval in the United States or elsewhere; the FDA or comparable foreign regulatory authorities may disagree that changes to branded reference drugs meet the criteria for the 505(b)(2) regulatory pathway or foreign regulatory pathways such as the hybrid medicinal product pathway; ● the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we or our collaborators contract for clinical and commercial supplies; and ● the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering clinical data insufficient for approval.

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The lengthy approval process as well as the unpredictability of future clinical trial results may result in our or our collaborators failing to obtain regulatory approval to market our drug candidates, which would significantly harm our business, results of operations and prospects.

In addition, even if we were to obtain approval, regulatory authorities may approve any of our potential drug candidates for fewer or more limited indications than we request, may not approve the price we intend to charge for our products, may grant approval contingent on the performance of costly post-marketing clinical trials, may approve a drug candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that drug candidate, may classify our drug candidates in a way that hinders market acceptance, and/or may restrict distribution of our approved drugs. Any of the foregoing scenarios could materially harm the commercial prospects for our potential drug candidates.

We have not previously submitted an NDA or BLA to the FDA or similar drug approval filings to comparable foreign authorities, for any drug candidate, and we cannot be certain that any of our drug candidates will be successful in clinical trials or receive regulatory approval. Further, our drug candidates may not receive regulatory approval even if they are successful in clinical trials. If we do not receive regulatory approvals for our drug candidates, we may not be able to continue our operations. Even if we successfully obtain regulatory approvals to market one or more of our drug candidates, our revenue will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory approval and have commercial rights. If the markets for patients that we or our collaborators are targeting for our drug candidates are not as significant as we estimate, we may not generate significant revenue from sales of such products, if approved.

We may plan to seek regulatory approval to commercialize our drug candidates in the United States, the European Union, and in additional foreign countries. While the scope of regulatory approval is similar in other countries, to obtain separate regulatory approval in many other countries we must comply with numerous and varying regulatory requirements of such countries regarding safety and efficacy and governing, among other things, clinical trials and commercial sales, pricing and distribution of our drug candidates, and we cannot predict success in these jurisdictions.

Our success depends upon achieving a critical mass of customers and strategic relationships.

Our success is dependent upon achieving significant market acceptance and strategic relationships. To date, we have achieved only limited market acceptance and formed only limited strategic relationships. We do not know whether we will be able to create all the customer and strategic relationships necessary to make our business model function.

The degree of market acceptance and adoption of our products will depend on a number of factors, including cost, potential efficacy and potential advantages over alternatives, ease of use and quality, the strength of marketing and distribution support and timing of market introduction of competitive products and services, publicity concerning our products and services or competing products and services or the standards of our competitors who are trying to improve on their own stem cell development technologies. Another risk of adoption is changes in the allocated spending by these companies as our products come online, which is unpredictable and could hurt our business. Other changes in the healthcare landscape, including current treatments and reimbursements, will impact interest in adopting our technology.

Even if a product or service displays a favorable efficacy in development, market acceptance of the product or service will not be known until after it is launched. Our efforts to educate the medical community on the benefits of our products and services may require significant resources and may never be successful. Such efforts to educate the marketplace may require more resources than are required by the conventional technologies marketed by our competitors, particularly due to the novelty of our approach. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenue and may not become profitable.

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Any investigation of our customers could damage our business.

From time to time, one or more of our customers may be audited or investigated by regulatory authorities or enforcement agencies with respect to regulatory compliance of their clinical trials, programs or the marketing and sale of their drugs. There is a risk that either our customers or regulatory authorities could claim that we performed services improperly or that we are responsible for clinical trial or program compliance. If our customers or regulatory authorities make such claims against us and prove them, we could be subject to damages, fines or penalties. In addition, negative publicity regarding regulatory compliance of customers’ clinical trials, programs or drugs could have an adverse effect on our business and reputation.

We may acquire other businesses or make investments in other companies or technologies that could harm operating results, dilute its stockholders’ ownership, increase debt or cause us to incur significant expense.

As part of our business strategy, we may pursue other mergers or acquisitions of businesses and assets. If we make any acquisitions, we may not be able to integrate these acquisitions successfully into existing business, and could assume unknown or contingent liabilities. Any future acquisitions also could result in significant write-offs or the incurrence of debt and contingent liabilities, any of which could have a material adverse effect on our financial condition, results of operations and cash flows. Integration of an acquired company also may disrupt ongoing operations and require management resources that would otherwise focus on developing existing business. We may experience losses related to investments in other companies, which could have a material negative effect on the results of operations. We may not identify or complete these transactions in a timely manner, on a cost-effective basis, or at all, and may not realize the anticipated benefits of any acquisition, technology license, strategic alliance or joint venture.

To finance any mergers or acquisitions, we may choose to issue shares of common stock as consideration, which would dilute the ownership of its stockholders. If the price of our common stock is low or volatile, we may not be able to acquire other companies using stock as consideration. Alternatively, it may be necessary for us to raise additional funds for acquisitions through public or private financings. Additional funds may not be available on terms that are favorable to us, or at all.

If our laboratory facilities become damaged or inoperable, or we are required to vacate any facility, the ability to provide services may be jeopardized.

We currently derive substantially all revenue from preclinical services. Our facilities and equipment could be harmed or rendered inoperable by natural or man-made disasters, including fire, flooding and power outages, which may render it difficult or impossible for us to perform tests or provide laboratory services for some period of time. The inability to perform services or the backlog of projects that could develop if any of our facilities is inoperable for even a short period of time may result in the loss of customers or harm to our reputation or relationships with key researchers, collaborators, and customers, and we may be unable to regain those customers or repair our reputation in the future. Furthermore, our facilities and the equipment used to perform research and development work could be costly and time-consuming to repair or replace.

If we use biological and hazardous materials in a manner that causes injury, we could be liable for damages.

Our activities currently require the controlled use of potentially harmful biological materials and hazardous materials and chemicals. We cannot eliminate the risk of accidental contamination or injury to employees or third parties from the use, storage, handling or disposal of these materials. In the event of contamination or injury, we could be held liable for any resulting damages, and any liability could exceed our resources or any applicable insurance coverage we may have. Additionally, we are subject to, on an ongoing basis, federal, state and local laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products. The cost of compliance with these laws and regulations may become significant and could have a material adverse effect on the financial condition, results of operations and cash flows. In the event of an accident or if we otherwise fail to comply with applicable regulations, we could lose permits or approvals or be held liable for damages or penalized with fines.

Cyber-attacks or other failures in telecommunications or information technology systems could result in information theft, data corruption and significant disruption of our business operations.

We depend on information technology and telecommunications systems for significant aspects of operations. These information technology and telecommunications systems support a variety of functions, including test processing, sample tracking, quality control, customer service and support, billing, and general and administrative activities. Information technology and telecommunications systems are vulnerable to damage from a variety of sources, including telecommunications or network failures, malicious human acts and natural disasters. In May of 2019, an unknown individual gained unauthorized access to the then StemoniX chief executive officer’s email account and fraudulently sent an email instructing an employee to wire company funds to a bank account. As a result of this breach, we suffered financial loss of $109,000. In response, StemoniX implemented additional information technology security precautions, including enhanced e-mail security software, employee training, verbal acknowledgement of requests for payment and dual authorization payment controls at a new bank, as well as hired our current Chief Financial Officer. However, we can provide no assurances that a cyber-attack or security breach will not occur again. If we are subjected to one or more cyber-attacks or security breaches, we would suffer additional financial loss. Furthermore, as use of digital technologies has increased, cyber incidents, including deliberate attacks and attempts to gain unauthorized access to computer systems and networks, have increased in frequency and sophistication and make us even more at risk. These threats pose a risk to the security of our systems and networks, the confidentiality and the availability and integrity of our data. Any disruption or loss of information technology or telecommunications systems on which critical aspects of our operations depend could have an adverse effect on business.

Our results of operations may be adversely affected if we fail to realize the full value of our assets.

We assess the realizable condition of goodwill annually and conducts an interim evaluation of these assets as well as amortizing indefinite-lived intangible assets whenever events or changes in circumstances, such as operating losses or a significant decline in earnings associated with the acquired business or asset, indicate that these assets may be impaired. In connection with the Merger and in accordance with US GAAP, we recorded $9.5 million of amortizing intangible assets and $22.0 million of goodwill based on the fair value of the Cancer Genetic’s outstanding common stock, stock options and warrants on the day of the Merger. All of the amortizing intangible assets and goodwill were allocated to the vivoPharm business. During the fourth quarter of 2021, we commenced a process to sell our vivoPharm business and reclassified its operations as discontinuing operations. Upon this change in classification, we recorded an impairment charge of $20.2 million to reflect the estimated net proceeds from the sale of this business. Our ability to realize the carrying value of the vivoPharm business recorded as of December 31, 2021 will depend on the future cash flows from the sale of the vivoPharm business. If we are not able to realize the value of the goodwill and indefinite-lived intangible assets, we may be required to incur additional material charges relating to the impairment of those assets. Such impairment charges could materially and adversely affect our operating results and financial condition.

Our business model and technology are evolving and unproven.

Our historic StemoniX business model is relatively new, unproven, and likely to continue to evolve. Accordingly, our business model may not be successful, and it may need to be changed. Our ability to generate significant revenue will depend, in large part, on its ability to successfully market its products. We intend to continue to develop our business model as the market for our products and services continues to evolve.

In addition, the technology our business model depends on is rapidly changing. Our current model is based on current knowledge and technologies in stem cell sciences, which change frequently. These changes may soon cause our current model to be less relevant, decreasing potential business revenue.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials as well as known and novel therapeutic drug candidates. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources.

We also could incur significant costs associated with civil or criminal fines and penalties. Furthermore, environmental laws and regulations are complex, change frequently and have tended to become more stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance. In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

Although we maintain workers’ compensation insurance to cover us for costs and expenses, we may incur due to injuries to our employees resulting from the use of hazardous materials or other work-related injuries, this insurance may not provide adequate coverage against potential liabilities. In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions or liabilities, which could materially adversely affect our business, financial condition, results of operations and prospects.

Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our drug candidates and affect the prices we may obtain.

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval for our drug candidates, restrict or regulate post-approval activities and affect our ability to profitably sell our drug candidates. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We do not know whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our drug candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

In the United States, under the Medicare Modernization Act, or MMA, Medicare Part D provides coverage to the elderly and disabled for outpatient prescription drugs by approving and subsidizing prescription drug plans offered by private insurers. The MMA also authorizes Medicare Part D prescription drug plans to use formularies where they can limit the number of drugs that will be covered in any therapeutic class. The Part D plans use their formulary leverage to negotiate rebates and other price concessions from drug manufacturers. Also under the MMA, Medicare Part B provides coverage to the elderly and disabled for physician-administered drugs on the basis of the drug’s average sales price, a price that is calculated according to regulatory requirements and that the manufacturer reports to Medicare quarterly.

Both Congress and the Centers for Medicare & Medicaid Services (CMS), the agency that administers the Medicare program, from time to time consider legislation, regulations, or other initiatives to reduce drug costs under Medicare Parts B and D. For example, under the 2010 Affordable Care Act, drug manufacturers are required to provide a 50% discount on prescriptions for branded drugs filled while the beneficiary is in the Medicare Part D coverage gap, also known as the “donut hole.” There have been legislative proposals to repeal the “non-interference” provision of the MMA to allow CMS to leverage the Medicare market share to negotiate larger Part D rebates. Further cost reduction efforts could decrease the coverage and price that we receive for our drug candidates and could seriously harm our business. Private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates, and any reduction in reimbursement under the Medicare program may result in a similar reduction in payments from private payors.

The 2010 Affordable Care Act is intended to broaden access to health insurance and reduce or constrain the growth of healthcare spending. Further, the Affordable Care Act imposes a significant annual fee on companies that manufacture or import branded prescription drug products. It also increased the amount of the rebates drug manufacturers must pay to state Medicaid programs, required that Medicaid rebates be paid on managed Medicaid utilization, and increased the additional rebate on “line extensions” (such as extended-release formulations) of solid oral dosage forms of branded products. The law also contains substantial provisions affecting fraud and abuse compliance and transparency, which may require us to modify our business practices with healthcare practitioners and incur substantial costs to ensure compliance.

In addition, other legislative changes that affect the pharmaceutical industry have been proposed and adopted in the United States since the ACA was enacted. For example, the Inflation Reduction Act of 2022 included, among other things, a provision that authorizes CMS to negotiate a “maximum fair price” for a limited number of high-cost, single-source drugs every year, and another provision that requires drug companies to pay rebates to Medicare if prices rise faster than inflation. In addition, various states have adopted or are considering adopting laws that require pharmaceutical companies to provide notice prior to raising prices and to justify price increases. We expect that additional healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, and in turn could significantly reduce the projected value of certain development projects and reduce our profitability.

Future governmental regulation or lack of regulatory approvals of the industry could affect our business.

Legislative and regulatory proposals are continuously under consideration by federal, state, local, and foreign governmental organizations, and it is possible that laws or regulations may exist or may be adopted with respect to our industry. The adoption of any such laws or regulations may decrease the growth in the use of our products, our ability to attract and retain personnel, increase our cost of doing business, or otherwise have a material adverse effect on our business. Regulatory changes or failure to comply with existing regulations could adversely affect our business and financial condition and results of operations. We may need to obtain regulatory approvals in the use of stem cells and our other technologies and may not receive these approvals. We also may not receive approvals for our potential therapeutic applications. We would be unable to act without approval, as that would be a regulatory violation and expose the business to significant liability.

We are exposed to the risks of natural and man-made catastrophes, pandemics and malicious and terrorist acts that could materially adversely affect our business, financial condition and results of operations.

Natural and man-made catastrophes, pandemics, and malicious and terrorist acts present risks that could materially adversely affect our results of operations. While we have taken steps to identify and mitigate these risks, such risks cannot be predicted, nor fully protected against even if anticipated. In addition, such events could result in overall macroeconomic volatility or specifically a decrease or halt in economic activity in large geographic areas, adversely affecting the marketing or operation of our business within such geographic areas or the general economic climate, which in turn could have an adverse effect on our business, operations and financial condition.

In particular, the COVID-19 outbreak, which has been declared a global pandemic by the World Health Organization, has significantly and negatively impacted financial markets and economic conditions in the United States and globally. As a result, our operations have been, and may be further, negatively impacted. Consequently, our business, financial condition and results of operations has been, and could be further, significantly and adversely affected.

Our ability to obtain compounds used for drug discovery and development could be affected as a result of the tensions between Ukraine and Russia.

Certain of our collaborators purchase a significant portion of their supply of systemized compounds used for drug discovery and development from a supplier headquartered in Ukraine. Tensions between Ukraine and Russia have escalated in recent months, culminating in Russia’s recent invasion of Ukraine. Continued escalation of political tensions, economic instability, military activity or civil hostilities in Ukraine could disrupt our ability to obtain these compounds on a timely basis or at all. If we and our collaborators are unable to continue to obtain supplies from Ukraine or secure one or more replacement suppliers capable of production at a substantially equivalent cost, our developmental efforts could be delayed and our costs increased, and our business, financial condition and results of operation could be adversely affected.

Risks Related to vivoPharm

We may not be able to sell the vivoPharm business and/or any sales we consummate may not produce the desired results.

During the year ended December 31, 2021, we committed to a plan to sell the vivoPharm business as we believe it is in the best interest of our stockholders. As a result, the vivoPharm business been classified as discontinuing operations in the consolidated financial statements in this Annual Report on Form 10-K. As of December 31, 2021, our net assets held for sale totaled $9.4 million, excluding cash. See Note 3 – Discontinuing Operations to the consolidated financial statements in this Annual Report on Form 10-K for more information.

We can provide no assurances that we will successfully sell the vivoPharm business, that we will do so in accordance with our expected timeline or that we will recover the carrying value of the assets. Additionally, any decisions made regarding our deployment or use of any sales proceeds we receive in any sale involves risks and uncertainties. As a result, our decisions with respect to such proceeds may not lead to increased long-term stockholder value, or may result in a material charge to our statement of operations.

A number of factors will impact the sales price of the vivoPharm business which are outside our control, therefore, there can be no assurance that the vivoPharm business can be sold for a price that in our opinion reflects its fair value. If a sale of the vivoPharm business at what we consider to be a reasonable price is not available, we may decide to cease efforts to sell the vivoPharm business and would be required to again reflect the vivoPharm business as part of our continuing operations for financial accounting and reporting purposes. Such a change would also require us to restate our financial statements retroactively for all reportable periods, which would change the information being reported herein. Because vivoPharm incurred an operating loss for fiscal 2021, such a change would negatively affect our fiscal 2021 results from continuing operations.

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~~Most of~~Adverse ~~our~~global ~~discovery~~conditions, ~~services~~including ~~customers~~economic uncertainty, ~~can terminate the contracts upon 30 to 90 days’ notice. These customers~~ may ~~delay,~~negatively ~~terminate or~~impact ~~reduce the scope of the contracts for a variety of reasons beyond~~ our ~~control,~~financial ~~including but not limited to:~~results.

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Our business is subject to risks arising from epidemic diseases, such as the global outbreak of COVID-19.

The outbreak of COVID-19, which has been declared by the World Health Organization to be a pandemic, has spread across the globe and is impacting worldwide economic activity. A pandemic, including COVID-19 or other public health epidemic, poses the risk that we or our employees, contractors, suppliers, courier delivery services and other partners may be prevented from conducting business activities for an indefinite period of time, including due to spread of the disease within these groups or due to shutdowns that may be requested or mandated by governmental authorities.

The continued spread of COVID-19 and its variants, and the measures taken by the governments of countries affected could disrupt the supply chain of material needed for our business and could delay future projects from commencing due to COVID-19 related impacts on the demand for our services and therefore have a material adverse effect on business, financial condition and results of operations.

If we fail to perform the services in accordance with contractual requirements, regulatory standards and ethical considerations, we could be subject to significant costs or liability and our reputation could be harmed.

In connection with the discovery services business, we contract with biopharmaceutical companies to provide specialized services to assist them in planning and conducting unique, specialized studies to guide drug discovery and development programs with a concentration in oncology and immuno-oncology. Our services include managing pre-clinical trials, data and laboratory analysis, electronic data capture and other related services. Such services are complex and subject to contractual requirements, regulatory standards and ethical considerations. If we fail to perform the services in accordance with these requirements, regulatory agencies may take action against us for failure to comply with applicable regulations governing clinical trials. Customers may also bring claims against us for breach of contractual obligations. Any such action could have a material adverse effect on results of operations, financial condition and reputation.

The performance of clinical development services is complex and time-consuming. For example, we may make mistakes in conducting a clinical trial that could negatively impact or obviate the usefulness of the clinical trial or cause the results of the clinical trial to be reported improperly. If the clinical trial results are compromised, we could be subject to significant costs or liability, which could have an adverse impact on the ability to perform services. As examples:

● non-compliance generally could result in the termination of ongoing clinical trials or sales and marketing projects or the disqualification of data for submission to regulatory authorities; ● compromise of data from a particular clinical trial, such as failure to verify that informed consent was obtained from patients, could require us to repeat the clinical trial under the terms of the contract at no further cost to the customer, but at a substantial cost to us; and ● breach of a contractual term could result in liability for damages or termination of the contract.

While we endeavor to contractually limit exposure to such risks, improper performance of our services could have an adverse effect on our financial condition, damage reputation and result in the cancellation of current contracts by or failure to obtain future contracts from the affected customer or other customers.

In our preclinical CRO business unit doing early-stage discovery work we conduct testing on animals, which could subject us to disruptions by animal rights activists, and we are subject to laws and standards dealing with animal testing, each of which could affect our business negatively.

Our Pennsylvania and Australia research laboratory facilities comply with Good Laboratory Practices (“GLP”) to the extent required by the FDA, Environmental Protection Agency, USDA, Organization for Economic Co-operation and Development (“OECD”), as well as other international regulatory agencies. Furthermore, our early-stage discovery work, which is not subject to GLP standards, is typically carried out under a quality management system or internally developed quality systems. Our facilities are regularly inspected by U.S. and other regulatory compliance monitoring authorities, its clients’ quality assurance departments, and its own internal quality assessment program. We are also accredited by American Association for Accreditation of Laboratory Animal Care (“AAALAC”) International, a private, nonprofit organization that promotes the humane treatment of animals in science through voluntary accreditation and assessment programs. We volunteer to participate in the AAALAC’s program to demonstrate its commitment to responsible animal care and use, in addition to its compliance with local, state and federal laws that regulate animal research.

Animal rights group, such as People for the Ethical Treatment of Animals (“PETA”) have in the past targeted scientific research, which, if targeted at us or our customers, could affect our business.

International expansion of our business exposes us to business, regulatory, political, operational, financial and economic risks associated with doing business outside of the United States.

Our business strategy incorporates international expansion, including recent acquisitions which have provided facilities in Australia, and the possibility of establishing and maintaining other locations outside of the United States and expanding relationships with biopharmaceutical, academic and governmental research organizations. Doing business internationally involves a number of risks, including:

● multiple, conflicting and changing laws and regulations such as tax and transfer pricing laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses; ● being subject to additional privacy and cybersecurity laws, including the Australian Privacy Act of 1988; ● failure by us or our distributors to obtain regulatory approvals for the sale or use of tests in various countries, including failure to achieve “CE Marking”, a conformity mark which is required to market in vitro diagnostic medical devices in the European Economic Area and which is broadly accepted in other international markets; ● difficulties in managing foreign operations; ● financial risks, such as longer payment cycles, difficulty enforcing contracts and collecting accounts receivable and exposure to foreign currency exchange rate fluctuations; ● reduced protection for intellectual property rights; ● natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; and ● failure to comply with the Foreign Corrupt Practices Act (“FCPA”), including its books and records provisions and its anti-bribery provisions, by maintaining accurate information and control over sales and distributors’ activities.

Any of these risks, if encountered, could significantly harm future international expansion and operations and, consequently, have a material adverse effect on our financial condition, results of operations and cash flows.

Our operating results may be adversely affected by fluctuations in foreign currency exchange rates and restrictions on the deployment of cash across global operations.

Although we report operating results in U.S. dollars, a portion of our revenue and expenses are or will be denominated in currencies other than the U.S. dollar, particularly in Australia and Europe. Fluctuations in foreign currency exchange rates can have a number of adverse effects on the Company. Because our consolidated financial statements are presented in U.S. dollars, we must translate revenue, expenses and income, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting period. Therefore, changes in the value of the U.S. dollar against other currencies will affect revenue, income from operations, other income (expense), net and the value of consolidated balance sheet items originally denominated in other currencies. There is no guarantee that our financial results will not be adversely affected by currency exchange rate fluctuations. In addition, in some countries we could be subject to strict restrictions on the movement of cash and the exchange of foreign currencies, which could limit our ability to use these funds across its global operations.

We could be adversely affected by violations of the FCPA and other worldwide anti-bribery laws.

The FCPA and anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business or other commercial advantage. Our policies mandate compliance with these anti-bribery laws, which often carry substantial penalties, including criminal and civil fines, potential loss of export licenses, possible suspension of the ability to do business with the federal government, denial of government reimbursement for products and exclusion from participation in government health care programs. We may operate in jurisdictions that have experienced governmental and private sector corruption to some degree, and, in certain circumstances, strict compliance with anti-bribery laws may conflict with certain local customs and practices. We cannot assure that the internal control policies and procedures always will protect us from reckless or other inappropriate acts committed by affiliates, employees or agents. Violations of these laws, or allegations of such violations, could have a material adverse effect on our business, financial position and results of operations.

Risks Related to Our Dependence on Third Parties

We expect that we will rely on third parties to assist us and our collaborators in conducting clinical trials for our drug candidates. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our drug candidates and our business would be substantially harmed.

We expect that we and our collaborators will enter into agreements with third-party CROs to assist our collaborators in conducting and managing their clinical programs, including contracting with clinical sites to perform clinical studies. We and our collaborators may rely on these parties for execution of clinical studies for our drug candidates, and they would control only certain aspects of conducting the clinical studies. Nevertheless, our collaborators will be responsible for ensuring that each of their studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and their reliance on CROs and clinical sites will not relieve them of their regulatory responsibilities. Such CROs will be required to comply with current Good Clinical Practices regulations, or cGCPs, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the European Economic Area and comparable foreign regulatory authorities for any products in clinical development. The FDA enforces these cGCP regulations through periodic inspections of trial sponsors, principal investigators and trial sites. If our collaborators or their CROs fail to comply with applicable cGCPs, the clinical data generated in clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require our collaborators to perform additional clinical trials before approving their marketing applications. We cannot assure you that, upon inspection, the FDA will determine that any of the clinical trials comply with cGCPs. In addition, clinical trials must be conducted with products produced under current Good Manufacturing Practices, or cGMP regulations and will require a large number of test subjects. The failure of us, our collaborators, CROs or clinical sites to comply with these regulations may require them to repeat clinical trials, which would delay the regulatory approval process and could also subject them to enforcement action up to and including civil and criminal penalties.

Although we expect our collaborators to design the clinical trials for our drug candidates in consultation with CROs, we expect that the CROs will manage and assist our collaborators with the clinical trials conducted at contracted clinical sites. As a result, many important aspects of our drug development programs would be outside of our collaborators’ direct control. In addition, the CROs and clinical sites may not perform all of their obligations under arrangements with us or our collaborators or in compliance with regulatory requirements. If the CROs or clinical sites do not perform clinical trials in a satisfactory manner, or if they breach their obligations to our collaborators or fail to comply with regulatory requirements, the development and commercialization of our drug candidates for the subject indications may be delayed or our development program materially and irreversibly harmed. We cannot control the amount and timing of resources these CROs and clinical sites will devote to our program or our drug candidates. If our collaborators are unable to rely on clinical data collected by CROs through the clinical research sites, our collaborators could be required to repeat, extend the duration of, or increase the size of clinical trials, which could significantly delay commercialization and require significantly greater expenditures.

If any of our collaborators’ relationships with these third-party CROs or clinical sites terminate, our collaborators may not be able to enter into arrangements with alternative CROs or clinical sites. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to clinical protocols, regulatory requirements or for other reasons, any such clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize our drug candidates. As a result, our financial results and the commercial prospects for our drug candidates would be harmed, our costs could increase and our ability to generate revenue could be delayed.

We expect that we will rely on third parties to assist us and our collaborators in formulation and manufacture of our drug candidates and approved drugs. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for our drug candidates or commercialize approved drugs and our business would be substantially harmed.

We do not currently, nor do we expect in the future to, have expertise in the formulation and manufacturing of drug candidates for use in clinical trials or commercial drug products. As such, we expect to engage a contract manufacturing organization (“CMO”) for the formulation, production, packaging, and distribution of high-quality drug products in sufficient quantities for clinical trials and market entry. These products must meet FDA and other regulatory authority standards for quality, strength, and potency. Regulatory authorities require submission of manufacturing specification in the IND ~~investigational new drug~~ application ~~(IND)~~, which must adhere to quality standards and be manufactured according to guidance on cGMP.

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The CMO is reliant on the availability of the active pharmaceutical ingredient (“API”) in sufficient quantities to meet the requirements for the production of the specified dosage form for the clinical trial as well as subsequent manufacturing requirements for the marketed drug. The CMO may manufacture the API in-house or contract with a third-party chemical manufacturer to supply the API in sufficient quantity. If the CMO or the third-party API supplier are not able to produce the API or drug product because of scarcity of raw materials, manufacturing equipment malfunction, manufacturing facility inoperability or damage, disruption of shipping or transport logistics, or other unplanned for complications the approval of the IND will be delayed until a replacement CMO can be secured. Likewise, disruptions to the production of the dosage form for marketed drug manufacture will delay the final approval of the NDA or BLA or will affect our ability to enter the market. If the CMO fails to meet quality standards in the manufacture of the drug product for any reason, significant delays in the availability of the product will adversely affect the availability of the marketed product.

We require third-party relationships that may not provide needed services. If such collaborators or partners fail to perform as expected the potential for us to generate future revenue from our technologies and products and services would be significantly reduced and our business would be harmed.

Many aspects of our business require third-party relationships, including but not limited to equipment, materials, technology, knowledge, sales, business development and distribution. We also utilize a number of banking, payroll, enterprise software and computer applications, and data storage that relay upon third-party vendors and cloud-based applications.

Specific and unique material needs are human cells and co-factors to support the growth and development of those cells. These partners may not allocate the resources, including time and capital, necessary to supply whatever is needed for our business. This and other issues may require termination or conflict with partners that our business model depends upon. We have been sourcing a number of our lab supplies from alternative suppliers due to product availability from our normal suppliers. For our StemoniX business, 384 well plates used to grow microOrgans are in scarce supply to due to product availability and a lack of alternative suppliers.

Our current and any future partnerships are subject to numerous risks, including:

●	partners have significant discretion in determining the efforts and resources that they will apply to the partnerships;
●	partners may not perform their obligations as expected or fail to fulfill their responsibilities in a timely manner, or at all;
●	we may not have access to, or may be restricted from disclosing, certain information regarding products or services being developed or commercialized under a partnership and, consequently, may have limited ability to inform our shareholders about the status of such developments;
●	partners could independently develop, or develop with third parties, products that compete directly or indirectly with ours if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;
●	products or services developed with partners may be viewed by our partners as competitive with their own products or services, which may cause partners to stop work on our behalf; or
●	partners may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation.

In addition, certain partnership agreements provide our partners with rights to terminate such agreements, which rights may or may not be subject to conditions, and which rights, if exercised, could adversely affect our product development efforts and could make it difficult for us to attract new partners. In that event: we would likely be required to limit the size and scope of efforts for the development and commercialization; we would likely be required to seek additional financing to fund further development or identify alternative strategic collaborations; our potential to generate future revenue from royalties and milestone payments would be significantly reduced, delayed or eliminated; and it could have an adverse effect on our business and future growth prospects.

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If conflicts arise with our partners, collaborators or licensors, they may act in their own self-interest, which may be adverse to the interests of our Company.

We may in the future experience disagreements with our partners, collaborators or licensors. Conflicts may arise in our collaboration and license arrangements with third parties due to one or more of the following:

●	disputes with respect to milestone or payments that are believed due under the applicable agreements;
●	disagreements with respect to the ownership of intellectual property rights or scope of licenses;
●	disagreements with respect to the scope of any obligations;
●	unwillingness on the part of a partner or collaborator to keep us informed regarding the progress of its activities; and
●	disputes with respect to our efforts with respect to the agreement with a partner or collaborator.

Conflicts with our partners, collaborators or licensors could materially adversely affect our business, financial condition or results of operations and future growth prospects.

A partner may choose to violate confidentiality agreements or use knowledge of our business operations to compete, decreasing our potential collaborators and increasing competition, which could lead to a loss of business revenue.

Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.

Because we collaborate with various organizations and academic institutions, we must, at times, share trade secrets with them. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements or other similar agreements with our collaborators, advisors, employees and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, such as trade secrets.

Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business. A competitor’s discovery of our trade secrets would impair our competitive position and have an adverse impact on our business.

Intellectual Property Risks Relating to Our Business

If we are unable to obtain and maintain patent and other intellectual property protection for our products and processes, or if the scope of the patent and other intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our technology and products may be adversely affected.

Our ability to compete effectively will depend, in part, on our ability to maintain the proprietary nature of our technology and processes. We rely on know-how, patents, trade secrets, license agreements and contractual provisions to establish our intellectual property rights and protect our products. These legal means, however, afford only limited protection and may not adequately protect our rights.

Through our StemoniX subsidiary, we currently have ~~twenty~~nine patent applications pending in the United States. The main risks related to these patent applications is that the underlying patents will not be issued, or if they are issued, that the technology will still be used or challenged by competitors. If the patents are issued and need to be defended from lawsuits, such defense would require significant time and financial costs, and there is the risk of losing the challenge. In addition, we may not be issued similar patent rights throughout the world. These risks apply to any of our trademarks as well. Furthermore, competitors may allege that our business infringes on their intellectual property. If challenged, there will be legal costs and the risk of loss, even if such allegations are false.

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Moreover, the patent application and approval process is expensive and time-consuming. We may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. Furthermore, we, or any future partners, collaborators, or licensees, may fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them. Therefore, we may miss potential opportunities to seek additional patent protection. If we fail to establish, maintain or protect such patents and other intellectual property rights, such rights may be reduced or eliminated. If there are material defects in the form, preparation, prosecution or enforcement of our patents or patent applications, such patents may be invalid and/or unenforceable, and such applications may never result in valid, enforceable patents.

Even if they are unchallenged, our patents and patent applications, if issued, may not provide us with any meaningful protection or prevent competitors from designing around our patent claims by developing similar or alternative technologies in a non-infringing manner. For example, a third party may develop a competitive technology that is similar to ours, but that falls outside the scope of our patent protection. If the patent protection provided by the patents and patent applications we hold or pursue is not sufficiently broad to impede such competition, our ability to successfully commercialize our technology could be negatively affected.

In addition to patent protection, we expect to rely heavily on trade secrets, know-how and other unpatented technology, which are difficult to protect. Although we seek such protection in part by entering into confidentiality agreements with our vendors, employees, consultants and others who may have access to proprietary information, we cannot be certain that these agreements will not be breached, adequate remedies for any breach would be available, or our trade secrets, know-how and other unpatented proprietary technology will not otherwise become known to or be independently developed by our competitors. If we are unsuccessful in protecting our intellectual property rights, sales of our products may suffer and our ability to generate revenue could be severely impacted.

Our rights to use technologies licensed from third parties are not within our control and may we lose existing rights or may not be able to obtain new rights on reasonable terms.

We are heavily dependent on licensed in technology in order to operate our business. We license multiple patents and protocols from the University of California, San Diego, as well as from (1) Academia Japan for technology that we need in order to create and sell induced pluripotent stem cells, (2) ID Pharma for the Sendai virus vector technology, and (3) the Max Plank Innovation GmbH for mid-brain organoid production. None of these licenses are exclusive. In addition, we may need to obtain additional licenses that are also non-exclusive. The lack of exclusivity could decrease the barriers of entry for potential competitors. Additionally, if one or more of our license agreements terminates, we may not be able to enter into new license agreements for comparable technology or on comparable terms.

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our marks of interest and our business may be adversely affected.

Our trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We rely on both registration and common law protection for our trademarks. We may not be able to protect our rights to these trademarks and trade names or may be forced to stop using these names, which we need for name recognition by potential partners or customers in our markets of interest. During trademark registration proceedings, we may receive rejections. Although we would be given an opportunity to respond to those rejections, we may be unable to overcome such rejections. In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively and our business may be adversely affected.

We may become involved in lawsuits or other proceedings to protect or enforce patents or other intellectual property rights, which could be time-consuming and costly to defend, and could result in loss of significant rights and the assessment of treble damages.

From time to time we may face intellectual property infringement (or misappropriation) claims from third parties. Some of these claims may lead to litigation. The outcome of any such litigation can never be guaranteed, and an adverse outcome could affect us negatively. For example, were a third-party to succeed on an infringement claim against ~~the~~ us, we may be required to pay substantial damages (including up to treble damages if such infringement were found to be willful). In addition, we could face an injunction, barring us from conducting the allegedly infringing activity. The outcome of the litigation could require us to enter into a license agreement which may not be pursuant to acceptable or commercially reasonable or practical terms or which may not be available at all. It is also possible that an adverse finding of infringement against us may require us to dedicate substantial resources and time in developing non-infringing alternatives, which may or may not be possible. In the case of diagnostic tests, we would also need to include non-infringing technologies which would require us to re-validate tests. Any such re-validation, in addition to being costly and time consuming, may be unsuccessful.

Furthermore, we may initiate claims to assert or defend intellectual property against third parties. Any intellectual property litigation, irrespective of whether we are the plaintiff or the defendant, and regardless of the outcome, is expensive and time-consuming, and could divert management’s attention from our business and negatively affect operating results or financial condition. We may not be able to prevent, alone or with third-party collaborators or suppliers, misappropriation of our proprietary rights, particularly in countries where the laws may not protect those rights as fully as in the United States. In addition, interference proceedings brought by the USPTO may be necessary to determine the priority of inventions with respect to patents and patent applications or those of our current or future collaborators, suppliers or customers.40

Furthermore, we may initiate claims to assert or defend intellectual property against third parties. Any intellectual property litigation, irrespective of whether we are the plaintiff or the defendant, and regardless of the outcome, is expensive and time-consuming, and could divert management’s attention from our business and negatively affect operating results or financial condition. We may not be able to prevent, alone or with third-party collaborators or suppliers, misappropriation of our proprietary rights, particularly in countries where the laws may not protect those rights as fully as in the United States. In addition, interference proceedings brought by the United States Patent and Trademark Office (“USPTO”) may be necessary to determine the priority of inventions with respect to patents and patent applications or those of our current or future collaborators, suppliers or customers.

Finally, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential and proprietary information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on our financial condition.

We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.

Many of our current and former employees, including our senior management, were previously employed at universities or at other biotechnology or pharmaceutical companies, including some which may be competitors or potential competitors. Some of these employees may be subject to proprietary rights, non-disclosure and non- competition agreements, or similar agreements, in connection with such previous employment. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such third party. Litigation may be necessary to defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel or sustain damages. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to commercialize our technology or products. Such a license may not be available on commercially reasonable terms or at all. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

In addition, while we typically require our employees, consultants and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own, which may result in claims by or against us related to the ownership of such intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our senior management and scientific personnel.

Issued patents covering our technology or products could be found invalid or unenforceable if challenged in court or in administrative proceedings. We may not be able to protect our trade secrets in court.

If we initiate legal proceedings against a third-party to enforce a patent, should such a patent issue, the defendant could counterclaim that the patent covering is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, written description or non- enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld information material to patentability from the USPTO, or made a misleading statement, during prosecution. Third parties also may raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. An adverse determination could result in the revocation or cancellation of, or amendment to, our patents. Such a loss of patent protection could have a material adverse impact on our business.

In addition, our trade secrets may otherwise become known or be independently discovered by competitors. Competitors and other third parties could attempt to replicate some or all of the competitive advantages we derive from our development efforts, willfully infringe, misappropriate or otherwise violate our intellectual property rights, design around our protected technology or develop their own competitive technologies that fall outside of our intellectual property rights. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If our trade secrets are not adequately protected or sufficient to provide an advantage over our competitors, our competitive position could be adversely affected, as could our business. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating our trade secrets.

We may be subject to claims challenging the inventorship or ownership of the patents and other intellectual property.

We may be subject to claims that former employees, collaborators or other third parties have an ownership interest in the patents and intellectual property that we own or that we may own or license in the future. While it is our policy to require our employees and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own or such assignments may not be self-executing or may be breached. We could be subject to ownership disputes arising, for example, from conflicting obligations of employees or consultants. Litigation may be necessary to defend against any claims challenging inventorship or ownership. If we or fail in defending any such claims, we may have to pay monetary damages and may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property, which could adversely impact our business, results of operations and financial condition.

If we fail to comply with our obligations under any future intellectual property licenses with third parties, we could lose license rights that are important to our business.

We may enter into license agreements in the future. We expect that such license agreements will impose, various diligence, milestone payment, royalty, insurance and other obligations on us. If we fail to comply with our obligations under these licenses, our licensors may have the right to terminate these license agreements. Termination of these license agreements or reduction or elimination of our licensed rights may also result in our having to negotiate new or reinstated licenses with less favorable terms.

If we do not obtain patent term extension and exclusivity, our business may be materially harmed.

Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our proprietary technology are obtained, once the patent life has expired, we may be open to competition from competitive products. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting, maintaining, defending and enforcing patents in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States could be less extensive than those in the United States. The requirements for patentability may differ in certain countries, particularly in developing countries; thus, even in countries where we do pursue patent protection, there can be no assurance that any patents will issue. There can be no assurance that we will obtain or maintain patent rights in or outside the United States under any future license agreements. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in countries outside the United States, even in jurisdictions where we pursue patent protection, or from selling or importing technologies or products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not pursued and obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These competitors may compete with us, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Risks Related to Employee Matters and Managing Growth

We only have a limited number of employees to manage and operate our business.

As of March 15, 2023, we had 348 employees, including 1 with a Ph.D. degree in our continuing ~~operations~~Vyant Bio and 38StemoniX operations. Of these employees, in4 support our ~~vivoPharm~~research ~~business.~~and development and historical manufacturing capabilities and 4 are general and administrative. Our focus on the development of our drug candidates and disease models requires us to optimize cash utilization and to manage and operate our business in a highly efficient manner. We cannot assure you that we will be able to ~~hire or~~ retain adequate staffing levels ~~to develop our technology or run our operations or to accomplish all of the objectives that we otherwise would seek to accomplish~~.

There is a scarcity of experienced professionals in our industry. If we are not able to retain and recruit personnel with the requisite technical skills, we may be unable to successfully execute the business strategy.

The specialized nature of our industry results in an inherent scarcity of experienced personnel in the field. Our future success depends upon the ability to attract and retain highly skilled personnel (including medical, scientific, technical, commercial, business, regulatory and administrative personnel) necessary to support anticipated growth, develop business and perform certain contractual obligations. Given the scarcity of professionals with the scientific knowledge that we require and the competition for qualified personnel among life science businesses, we may not succeed in attracting or retaining the personnel required to continue and grow operations. The loss of a key employee, the failure of a key employee to perform in his or her current position or our inability to attract and retain skilled employees could result in the inability to continue to grow our business or to implement business strategy.

The loss or transition of any member of our senior management team or the inability to attract and retain highly skilled scientists, clinicians and salespeople could adversely affect our business.

Our success depends on the skills, experience, and performance of ~~key~~our ~~members of the~~ senior management ~~team~~. ~~The~~In ~~individual~~the ~~and~~first ~~collective efforts~~quarter of ~~these~~2023, ~~employees~~in ~~will~~connection bewith the ~~important~~Company’s asCash wePreservation ~~continue~~Plan tothe ~~develop~~Company’s ~~tests~~CEO and ~~services,~~CSO ~~and~~left asthe weCompany ~~expand~~leaving ~~commercial~~the ~~activities.~~Company ~~We have~~with ~~experienced~~one ~~increased~~senior ~~turnover~~member of in the ~~past~~management. ~~year~~The ~~and the~~ loss ~~or incapacity~~ of ~~existing~~our ~~members~~remaining ~~of the~~ senior management team member could adversely ~~affect~~impact ~~operations~~our ifability weto ~~experience~~execute ~~difficulties~~strategic inalternatives and/or ~~hiring~~wind ~~qualified~~down ~~successors~~the business.

The complexity inherent in integrating a new key member of the senior management team with existing senior management may limit the effectiveness of any such successor or otherwise adversely affect our business. Leadership transitions can be inherently difficult to manage and may cause uncertainty or a disruption to business or may increase the likelihood of turnover of other key officers and employees. Specifically, a leadership transition in the commercial team may cause uncertainty about or a disruption to our commercial organization, which may impact the ability to achieve sales and revenue targets.

Our officers and directors have significant influence over critical decisions.

Our officers and directors have a significant stake in the Company and are likely to have influence over any critical decisions relating to the Company. Our officers and directors beneficially own, directly or indirectly, approximately ~~10.~~9.8% of our outstanding common ~~stock~~ stock as of March 15, ~~2022~~2023. As a result, such individuals are likely to continue to have a significant influence in determining the outcome of any matter submitted to the shareholders for approval (including the election of directors and any merger, consolidation or sale of all or substantially all of the Company’s assets) and to have significant influence in the management and affairs of the Company. The interests of the officers and directors may differ from the interests of other shareholders due to various factors, which may include the differing price at which they acquired their ownership in the Company as compared to other shareholders, the significant ~~investment~~ investment of personal time and effort by the officers and directors into the Company, and differing views on the effect of sunk costs with regard to potential future liquidity events.

Our employees, independent contractors, consultants, collaborators and contract research organizations may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements, which could cause significant liability for us and harm our reputation.

We are exposed to the risk that our employees, independent contractors, consultants, collaborators and contract research organizations may engage in fraudulent conduct or other illegal activity. Misconduct by those parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violates: (1) FDA regulations or similar regulations of comparable non-U.S. regulatory authorities, including those laws requiring the reporting of true, complete and accurate information to such authorities, (2) manufacturing standards, (3) federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable non-U.S. regulatory authorities, and (4) laws that require the reporting of financial information or data accurately. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self- dealing, bribery and other abusive practices. These laws and regulations restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee or collaborator misconduct could also involve the improper use of, including trading on, information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We have adopted and maintained a code of conduct and in connection with the merger, we intend to maintain our code of conduct and business ethics, but it is not always possible to identify and deter misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws, standards or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, imprisonment, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could have a material adverse effect on our ability to operate our business and our results of operations.

If we are unable to manage growth, our prospects may be limited and our future results of operations may be adversely affected.

We intend to continue to attempt to expand our business with sales and marketing programs and other activities as needed to meet future demand. Any significant expansion may strain managerial, financial and other resources. If we are unable to manage such growth, business, operating results and financial condition could be adversely affected. We will need to improve continually the operations, financial and other internal systems to manage growth effectively, and any failure to do so may lead to inefficiencies and redundancies, and result in reduced growth prospects and diminished operational results.

Risks Relating to Our Common Stock

The price of our common stock has been and could remain volatile, and the market price of common stock may decrease.

The market price of our common stock has historically experienced and may continue to experience significant volatility. From ~~consummation of the merger of Cancer Genetics and StemoniX on~~ March 3031, ~~2021~~ 2022 through March 15, ~~2022~~2023, the market price of our common stock has fluctuated from a high of $47.8100 per share in the second quarter of ~~2021~~ 2022 to a low of $0.9960 in the first quarter of ~~2022~~2023. Market prices for securities of development-stage life sciences companies have historically been particularly volatile. The factors that may cause the market price of our common stock to fluctuate include, but are not limited to:

● progress, or lack of progress, in developing and commercializing our drug discovery candidates; ● our ability to recruit and retain qualified regulatory and research and development personnel; ● changes in the relationship with key collaborators, suppliers, customers and third parties; ● changes in the market valuation or earnings of competitors or companies viewed as similar to us; ● changes in key personnel; ● depth of the trading market in our common stock; ● changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; ● the granting or exercise of employee stock options or other equity awards; ● realization of any of the risks described under this section titled “Risk Factors;” and ● general market and economic conditions.

●	changes in the market valuation or earnings of competitors or companies viewed as similar to us;
●	changes in key personnel;
●	depth of the trading market in our common stock;
●	changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;
●	the granting or exercise of employee stock options or other equity awards;
●	realization of any of the risks described under this section titled “Risk Factors;” and
●	general market and economic conditions.

In addition, the equity markets have experienced significant price and volume fluctuations that have affected the market prices for the securities of newly public companies for a number of reasons, including reasons that may be unrelated to business or operating performance. These broad market fluctuations may result in a material decline in the market price of our common stock and you may not be able to sell your shares at prices you deem acceptable. In the past, following periods of volatility in the equity markets, securities class action lawsuits have been instituted against public companies. Such litigation, if instituted against us, could result in substantial cost and the diversion of management attention.

We are currently listed on The Nasdaq Capital Market. If we are unable to maintain listing of our securities on The Nasdaq Capital Market or any stock exchange, our stock price could be adversely affected and the liquidity of our stock and our ability to obtain financing could be impaired and it may be more difficult for our stockholders to sell their securities.

Although our common stock is currently listed on The Nasdaq Capital Market, we may not be able to continue to meet the exchange’s minimum listing requirements or those of any other national exchange. If we are unable to maintain listing on Nasdaq or if a liquid market for our common stock does not develop or is sustained, our common stock may remain thinly traded.

The Listing Rules of Nasdaq require listing issuers to comply with certain standards in order to remain listed on its exchange. If, for any reason, we should fail to maintain compliance with these listing standards and Nasdaq should delist our securities from trading on its exchange and we are unable to obtain listing on another national securities exchange, a reduction in some or all of the following may occur, each of which could have a material adverse effect on our stockholders:

●	the liquidity of our common stock;
●	the market price of our common stock;
●	our ability to obtain financing for the continuation of our operations;
●	the number of institutional and general investors that will consider investing in our common stock;
●	the number of investors in general that will consider investing in our common stock;
●	the number of market makers in our common stock;
●	the availability of information concerning the trading prices and volume of our common stock; and
●	the number of broker-dealers willing to execute trades in shares of our common stock.

We are not currently in compliance with the continued listing requirements for The Nasdaq Capital Market. If we do not regain compliance and continue to meet the continued listing requirements, our common stock may be delisted from The Nasdaq Capital Market, which could affect the market price and liquidity for our common stock and reduce our ability to raise additional capital.

Our common stock is listed on The Nasdaq Capital Market. In order to maintain that listing, we must satisfy minimum financial and other requirements including, without limitation, a requirement that listed securities maintain a minimum closing bid price of $1.00 per share. On March 20, 2023, we received a written notice (the “Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market (“Nasdaq”) indicating that we are not in compliance with the $1.00 Minimum Bid Price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market (the “Bid Price Requirement”). The Notice does not result in the immediate delisting of our common stock from The Nasdaq Capital Market.

Based upon the closing bid price of our common stock for the prior 30 consecutive business days, we no longer meet this requirement. The Nasdaq rules provide us a compliance period of 180 calendar days from the date of the Notice in which to regain compliance with the Bid Price Requirement. As a result, the date by which we have to regain compliance with the Bid Price Requirement is September 18, 2023. If at any time prior to September 18, 2023 the bid price of our common stock closes at or above $1.00 per share for a minimum of 10 consecutive business days (or longer at Nasdaq’s discretion), the Nasdaq staff (the “Staff”) will provide us with a written confirmation of compliance and the matter will be closed.

Alternatively, if we fail to regain compliance with the Bid Price Requirement prior to the expiration of the initial period, we may be eligible for an additional 180 calendar day compliance period, provided (i) we meets the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on The Nasdaq Capital Market (except for the Bid Price Requirement) and (ii) we provide written notice to Nasdaq of our intention to cure this deficiency during the second compliance period by effecting a reverse stock split, if necessary. In the event we do not regain compliance with the Bid Price Requirement prior to the expiration of the initial period, and if it appears to the Staff that we will not be able to cure the deficiency, or if we are not otherwise eligible, the Staff will provide us with written notification that our securities are subject to delisting from The Nasdaq Capital Market. At that time, we may appeal the delisting determination to a hearings panel.

We intend to monitor the closing bid price of our common stock and are considering our options with respect to compliance with the Bid Price Requirement. However, there can be no assurance that we will regain compliance with the Bid Price Requirement during the 180-day compliance period, secure a second period of 180 days to regain compliance, or maintain compliance with any other Nasdaq listing requirements.

If we fail to regain compliance with the Bid Price Requirement or to meet the other applicable continued listing requirements for The Nasdaq Capital Market in the future, and Nasdaq determines to delist our common stock, the delisting could adversely affect the market price and liquidity of our common stock and reduce our ability to raise additional capital. In addition, if our common stock is delisted from The Nasdaq Capital Market and the trading price remains below $5.00 per share, trading in our common stock might also become subject to the requirements of certain rules promulgated under the Exchange Act, which require additional disclosure by broker-dealers in connection with any trade involving a stock defined as a “penny stock” (generally, any equity security not listed on a national securities exchange or quoted on Nasdaq that has a market price of less than $5.00 per share, subject to certain exceptions).

Reports published by securities or industry analysts, including projections in those reports that exceed actual results, could adversely affect our common stock price and trading volume.

Securities research analysts establish and publish their own periodic projections for our business. These projections may vary widely from one another and may not accurately predict the results we actually achieve. Our stock price may decline if the actual results do not match securities research analysts’ projections. Similarly, if one or more of the analysts who authors reports on us downgrades our stock or publishes inaccurate or unfavorable research about our business, stock price could decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, our stock price or trading volume could decline. While we expect securities research analyst coverage, if no securities or industry analysts begin to cover us, the trading price for our stock and the trading volume could be adversely affected.

We are incurring significant costs and devotes substantial management time as a result of operating as a public company.

As a public company, we are incurring significant legal, accounting and other expenses. For example, in addition to being required to comply with certain requirements of the Sarbanes-Oxley Act of 2002, we are required to comply with certain requirements of the Dodd Frank Wall Street Reform and Consumer Protection Act, as well as rules and regulations subsequently implemented by the SEC, including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. We expect that compliance with these requirements will continue to increase legal and financial compliance costs and will make some activities more time consuming and costly. In addition, we expect that management and other personnel will continue to need to divert attention from operational and other business matters to devote substantial time to these public company requirements.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. In particular, we must perform system and process evaluation and testing of internal control over financial reporting to allow management to report on the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. In addition, if we lose status as a “non-accelerated filer,” we will be required to have our independent registered public accounting firm attest to the effectiveness of internal control over financial reporting. Our compliance with Section 404 of the Sarbanes-Oxley Act, as applicable, requires us to incur substantial accounting expense and expend significant management efforts. We currently do not have an internal audit group, and we will need to continue to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. If we or the independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the NASDAQ, the SEC or other regulatory authorities, which would require additional financial and management resources.

Our ability to successfully implement our business plan and maintain compliance with Section 404, as applicable, requires us to be able to prepare timely and accurate financial statements. We expect that we will need to continue to improve existing, and implement new operational and financial systems, procedures and controls to manage our business effectively. Any delay in the implementation of, or disruption in the transition to, new or enhanced systems, procedures or controls, may cause operations to suffer and we may be unable to conclude that internal control over financial reporting is effective. If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report financial results, and current and potential stockholders may lose confidence in our financial reporting. This, in turn, could have an adverse impact on trading prices for our common stock, and could adversely affect our ability to access the capital markets.

Anti-takeover provisions of our certificate of incorporation, bylaws and Delaware law could make an acquisition of the Company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove the current members of the board and management.

Certain provisions of our amended and restated certificate of incorporation and bylaws could discourage, delay or prevent a merger, acquisition or other change of control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. Furthermore, these provisions could prevent or frustrate attempts by our stockholders to replace or remove members of the board of directors. These provisions also could limit the price that investors might be willing to pay in the future for our common stock, thereby depressing the market price of our common stock. Stockholders who wish to participate in these transactions may not have the opportunity to do so. These provisions, among other things:

●	authorize the board of directors to issue, without stockholder approval, preferred stock, the rights of which will be determined at the discretion of the board of directors and that, if issued, could operate as a “poison pill” to dilute the stock ownership of a potential hostile acquirer to prevent an acquisition that the board of directors does not approve;
●	establish advance notice requirements for stockholder nominations to the board of directors or for stockholder proposals that can be acted on at stockholder meetings; and
●	limit who may call a stockholder meeting.

In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, or DGCL, which may, unless certain criteria are met, prohibit large stockholders, in particular those owning 15% or more of the voting rights on our common stock, from merging or combining with the Company for a prescribed period of time.

Because we do not expect to pay cash dividends for the foreseeable future, you must rely on appreciation of our common stock price for any return on your investment. Even we change that policy, we may be restricted from paying dividends on our common stock.

We do not intend to pay cash dividends on shares of common stock for the foreseeable future. Any determination to pay dividends in the future will be at the discretion of the board of directors and will depend upon results of operations, financial performance, contractual restrictions, restrictions imposed by applicable law and other factors the board of directors deems relevant. Accordingly, you will have to rely on capital appreciation, if any, to earn a return on your investment in our common stock. Investors seeking cash dividends in the foreseeable future should not purchase our common stock.

4846

Item 1B.

Unresolved Staff Comments

None.

Item 2.

Properties

As of December 31, ~~2021~~2022, the Company has lease agreements for our three locations for continuing operations, including a 54,~~837~~995 square foot research and development ~~space,~~facility asand ~~well as shared~~ office ~~suite space,~~ in LaSan ~~Jolla~~Diego, California, a 14,932 square foot lab, manufacturing and office ~~space~~ in Maple Grove, Minnesota, and a 1,625 square foot corporate headquarters office ~~space~~ in Cherry Hill, New Jersey. All leases have escalating payment schedules. The LaSan ~~Jolla~~Diego ~~lease expires in March, 2022, at which time the La Jolla operations will move to a 4,995 square foot facility in La Jolla. The new La Jolla~~ and Maple Grove leases expire in 2027 and the Cherry Hill lease expires on March 31, 2024. We believe that these facilities are adequate for our current needs. ~~and~~On ~~that~~March ~~suitable~~9, ~~additional~~2023, ~~space~~the ~~will~~Company beterminated ~~available as~~its ~~needed~~San Diego lease agreement with an early termination fee of $45 thousand.

vivoPharm operates in leased facilities in Hershey, Pennsylvania, Berlin, Germany and two locations in Australia.

Item 3.

Legal Proceedings

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.

Item 4.

Mine Safety Disclosures

Not applicable.

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

The Company’s common stock trades on The NASDAQ Stock Market LLC under the symbol “VYNT.”

4947

Holders

As of December 31, ~~2021~~2022, the Company had approximately 8381 holders of record of the Company’s common stock. The number of record holders was determined from the records of the transfer agent and does not include beneficial owners of common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies. The transfer agent of the Company’s common stock is Continental Stock Transfer & Trust, 1 State Street, 30th Floor, New York, New York, 10004.

Dividends

The Company has never declared dividends on the Company’s equity securities, and currently does not plan to declare dividends on shares of the Company’s common stock in the foreseeable future. The Company expects to retain future earnings, if any, for use in the operation and expansion of the Company’s business. The payment of cash dividends in the future, if any, will be at the discretion of the board of directors and will depend upon such factors as earnings levels, capital requirements, overall financial condition and any other factors deemed relevant by the board of directors.

Item 6.

Reserved.

Item 7.

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

As used herein, the “Company” refers to Vyant Bio, Inc. and its wholly owned subsidiaries: StemoniX, Inc. (“StemoniX”) and vivoPharm Pty Ltd (“vivoPharm”), except as expressly indicated or unless the context otherwise requires. The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help facilitate an understanding of the Company’s financial condition and its historical results of operations for the periods presented. This MD&A should be read in conjunction with the audited consolidated financial statements and notes thereto included in this annual report on Form 10-K. This MD&A may contain forward-looking statements that involve risks and uncertainties. For a discussion on forward-looking statements, see the information set forth in the Introductory Note to this Annual Report under the caption “Forward Looking Statements”, which information is incorporated herein by reference.

Overview

Vyant Bio, Inc. (the “Company”, “Vyant Bio”, “VYNT” or “we”), is an innovative biotechnology company reinventing drug discovery for complex neurodevelopmental and neurodegenerative disorders. Our central nervous system (“CNS”) drug discovery platform combines 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 (“Rett”), 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 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.

InWe have incurred substantial operating losses and ~~December~~have ~~2021~~used cash in our operating activities since inception. On January 4, 2023, the Company announced that it had engaged LifeSci Capital as its financial advisor to assist in exploring a range of strategic alternatives focused on enhancing shareholder value. There can be no assurance that this review process will result in any changes to the Company’s current business plans or lead to any specific action or transaction. On January 31, 2023 the Company’s Board of Directors, approved a plan to ~~sell~~preserve the ~~vivoPharm~~Company’s ~~Pty~~cash to ~~Ltd~~be ~~(“vivoPharm”) business~~able to ~~allow~~continue ~~the~~to ~~Company~~pursue toa ~~focus~~satisfactory onstrategic alternative for the ~~development~~purpose of ~~neurological~~maximizing the value of the Company’s business ~~developmental~~while ~~and~~also ~~degenerative~~having ~~disease~~sufficient ~~therapeutics.~~cash Weto ~~engaged~~adequately fund an ~~investment~~orderly ~~banker~~wind down of the Company’s operations (the “Cash Preservation Plan”) in ~~December~~the ~~2021~~event it is unable to ~~sell~~secure ~~the~~a ~~vivoPharm~~satisfactory ~~business~~strategic alternative. See further discussion regarding our liquidity ~~during~~and ~~2022~~capital resources below.

5048

Cancer Genetics, Inc. Merger

On March 30, 2021, Vyant Bio, ~~Inc. (the “Company”, “Vyant Bio”, “VYNT” or “we”),~~ formerly known as Cancer Genetics, Inc. (“CGI”), completed its business combination (the “Merger”) with StemoniX, Inc., a Minnesota corporation (“StemoniX”), in accordance with the Agreement and Plan of Merger and Reorganization, dated as of August 21, 2020 (the “Initial Merger Agreement”) by and among the Company, StemoniX and CGI Acquisition, Inc., a Minnesota corporation and wholly-owned subsidiary of the Company (“Merger Sub”), as amended by Amendment No. 1 thereto made and entered into as of February 8, 2021 (the “First Amendment”) and Amendment No. 2 thereto made and entered into as of February 26, 2021 (the “Second Amendment”) (the Initial Merger Agreement, as amended by the First Amendment and Second Amendment, the “Merger Agreement”), pursuant to which Merger Sub merged with and into StemoniX, with StemoniX surviving the Merger as a wholly-owned subsidiary of the Company.

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 112,~~007~~201,~~186~~437 shares of Common ~~Stock~~ Stock or $50.74 million, 2431,~~157,686~~537 Common Stock warrants or $9.04 million and 5511,~~907~~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~~ received an additional ~~804~~160,~~711~~942 incremental shares in accordance with the conversion ratio set forth in the Merger Agreement.

~~Business~~As ~~Disposals~~the -Merger ~~Discontinuing~~was ~~Operations~~consummated at the close of business on March 30, 2021, the Company’s consolidated statement of operations for the year ended December 31, 2021 includes nine months and one day of operations associated with the historical CGI business.

~~In December~~Business ~~2021,~~Disposals ~~vivoPharm,~~– met the criteria to be reported as discontinuing operations. Therefore, the related assets, liabilities, operating results and cash flows of the vivoPharm business are reported as discontinuing operations as of December 31, and for period from the Merger date of March 30, 2021 through December 31, 2021. See Note 3 Discontinuing ~~operations,~~ ~~to the Consolidated Financial Statements included in Part II, Item 8 below for additional information.~~Operations

Prior to December 31, 2022, the Company owned and operated the vivoPharm Pty Ltd (“vivoPharm”) business which it acquired in 2017. In December 2021, the Company’s Board of Directors approved the engagement of an investment banker to seek to sell the vivoPharm business to allow the Company to focus on the development of neurological developmental and degenerative disease therapeutics. As of December 31, 2021, the Company commenced accounting for vivoPharm as discontinuing operations. For further information, see section entitled “Discontinuing Operations” later in this Part I, and Note 3, Discontinuing Operations, to the Company’s Consolidated Financial Statements included in Part II. Item 8 herein.

On November 2, 2022, the Company entered into an Equity Purchase Agreement (the “Purchase Agreement”) by and among the Company, Reaction Biology Corporation (“Reaction”) and vivoPharm, pursuant to which the Company sold the U.S. operations of its subsidiary, vivoPharm to Reaction, in exchange for approximately $5.8 million in cash. Including final customary adjustments for working capital, closing cash, indebtedness and transaction expenses, the Company expects net proceeds from the Reaction Transaction to be approximately $4.8 million. In addition, the Company incurred $0.4 million in exit costs associated with the Reaction Transaction.

On December 30, 2022, vivoPharm, entered into a Share Purchase Agreement (the “Share Agreement”) with Sabine Brandt as trustee for the Brandt Family Trust (“Buyer”), pursuant to which vivoPharm sold the entirety of the Company’s remaining vivoPharm business for early discovery services, represented by 100% of the outstanding shares of (i) of RDDT a vivoPharm Company Pty Ltd; and (ii) vivoPharm Europe Ltd, to Buyer in exchange for a nominal cash amount, subject to adjustments for closing cash and accounts payable, on and subject to the terms and conditions set forth therein (the “Second Transaction”). The Second Transaction resulted in the Company delivering target closing cash as part of the sold entities of approximately $827 thousand and the assumption by Buyer of liabilities of the sold entities aggregating to approximately $2.0 million. The Second Transaction was consummated effective December 31, 2022.

To complete the disposition of the Company’s former vivoPharm business and to resolve certain issues that had arisen with the Buyer, on March 13, 2023, the Company sold vivoPharm to the Buyer for a nominal sum. As part of the sale of vivoPharm to Buyer, the Company provided that vivoPharm had cash of at least $200 thousand and the Company assumed certain specific vivoPharm liabilities, principally liabilities directly associated with the proposed Phase 2 Donepezil clinical trial in Australia (which the Company has placed on hold as it evaluates its strategic alternatives) and certain vivoPharm tax liabilities through the transaction’s closing. The transaction was consummated effective March 13, 2023.

Management Changes

On January 31, 2023, John A. Roberts and Robert T. Fremeau, Jr., agreed in principle that Mr. Roberts and Dr. Fremeau would step down as President and Chief Executive Officer and Chief Scientific Officer, respectively, of the Company, effective as of February 3, 2023, and pursuant to their employment agreements, would be deemed terminated as of that date by the Company without cause for purposes of determining severance thereunder. Such agreement was not the result of any disagreement Mr. Roberts or Dr. Fremeau had with the Company on any matters relating to the Company’s operations, policies or practices. Mr. Roberts will remain a member of the Board of Directors of the Company. Andrew D. C. LaFrence, the Company’s Chief Financial Officer, assumed the role of President and Chief Executive Officer following Mr. Roberts’ departure. Mr. LaFrence became Chief Financial Officer upon the Company’s merger with StemoniX, Inc. on March 30, 2021, pursuant to the terms of an employment agreement, dated March 30, 2021, which will remain in effect.

Revenue from Continuing Operations

The Company’s primary revenue sources are microOrgan plate product sales and the performance of preclinical drug testing services using our microOrgan technology, referred to as Discovery as a Service, or DaaS. ~~The~~In December 2021, the Company ~~plans~~announced toits plan to focus its resources on internal drug discovery development programs and ~~will~~ wind down substantially all customer revenue generation. The Company expects nominal sales in the first ~~half~~quarter of ~~2022~~2023. For the years ended December 31, ~~2021~~2022 and ~~2020~~ 2021, 47% and 21% of revenue, respectively, ~~in each year~~ was generated from customers located outside of the United States. During the years ended December 31, ~~2021~~2022 and ~~2020~~2021, four and three customers accounted for approximately 4777% and ~~two customers accounted for approximately 39~~47%, respectively, of the consolidated revenue from continuing operations.

Cost of Goods from Continuing Operations

The Company separately reports cost of goods for product sales and service revenue. Product revenue costs include labor and product costs such as labware, plates and reagents required to develop iPSC’s into microOrgans as well as overhead, facility and equipment costs at the Company’s Maple Grove, Minnesota facility. As the facility was designed to accommodate the Company’s long-term growth, it has historically operated at less than 25% of capacity. The Company isconverted ~~converting~~its ~~the~~ Maple Grove facility to a research and development facility in ~~the first half of~~ 2022 to focus its resources on internal drug discovery development programs. Cost of goods for service revenue includes internal labor, materials and allocated overhead costs to perform services for DaaS projects.

Operating Expenses from Continuing Operations

The Company classifies its operating expenses into three categories: research and development, selling, general and administrative as well as merger related costs. Operating expenses principally consist of personnel costs, including non-cash stock-based compensation, outside services, laboratory consumables, rent, overhead, development costs, and marketing program costs, legal and accounting fees.

Research and Development Expenses. Research and development expenses reflect the personnel related expenses, overhead and lab consumable costs to develop its microOrgan technology at its La Jolla, California facility as well as development activities undertaken at the Maple Grove, Minnesota facility. ~~The Company intends to accelerate its drug discovery development activities in 2022 and beyond.~~

Selling, General and Administrative Expenses. Selling, general and administrative expenses consist principally of personnel-related expenses, professional fees, such as legal, accounting, occupancy costs and other general expenses as well as personnel and related overhead costs for its business development team and related support personnel, travel and entertainment expenses, other selling costs, and trade shows.

Merger Related Costs. Merger related costs are direct professional service and investor banker costs incurred by the Company in connection with the Merger.

Coronavirus (COVID-19) Pandemic. On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic and recommended containment and mitigation measures worldwide. Many of the Company’s customers worldwide were impacted by COVID-19 and temporarily closed their facilities which impacted revenue in the first half of 2020. While the impact of the pandemic on our business has lessened in 2021, the global outbreak of COVID-19 continued in late 2021 with new variants and has impacted the way we operate our business, including remote working, including its impact on technology security risks and employee retention. The extent to which the COVID-19 pandemic may impact the Company’s future business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as, the duration of the outbreak, travel restrictions and social distancing in the U.S. and other countries, business closures or business disruptions, and the effectiveness of actions taken in the U.S. and other countries to contain and treat the disease.

The Company is actively monitoring the impact of the COVID-19 pandemic on its business, results of operations and financial condition. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition in the future is unknown at this time and will depend on future developments that are highly unpredictable.

As the Merger was consummated at the close of business on March 30, 2021, the Company’s consolidated statement of operations for the year ended December 31, 2021 includes nine months and one day of operations associated with the historical CGI business. Further, as noted in Note 3 Discontinuing operations, to the Consolidated Financial Statements included in Part II, Item 8 below for additional information, the vivoPharm business has been classified as discontinuing operations as of December 31, 2021.51

Results of Operations

Years Ended December 31, ~~2021~~2022 and ~~2020~~2021

The following table sets forth certain information concerning the Company’s results from continuing operations for the periods shown (in thousands):

	For the year ended December 31,						Change
	2021			2020			$			%
	2022			2021			$			%
Revenue:
Service	$	~~665~~99		$	~~588~~665		$	77(566	)		13(85	)%
Product		~~483~~567			~~279~~483			~~204~~84			7317	%
Total revenue		~~1,148~~666			~~867~~1,148			~~281~~(482	)		32(42	)%
Operating costs and expenses:
Cost of goods sold - service		~~408~~44			~~384~~408			24(364	)		6(89	)%
Cost of goods sold - product		~~1,439~~964			~~717~~1,439			~~722~~(475	)		~~101~~(33	)%
Research and development		46,~~273~~772			34,~~232~~273			12,~~041~~499			3258	%
Selling, general and administrative		8,~~424~~798			28,~~717~~424			~~5,707~~374			~~210~~4	%
Merger related costs		~~2,310~~-			12,~~440~~310			~~870~~(2,310	)		60(100	)%
Total operating costs and expenses		16,~~854~~578			816,~~490~~854			~~8,364~~(276	)		99(2	)%
Loss from operations		(15,~~706~~912	)		(715,~~623~~706	)		(~~8,083~~206	)		~~106~~1	%
Other expense:
Change in fair value of warrant liability		~~214~~-			-214			(214	)		~~N/A~~(100	)%
Change in fair value of share settlement obligation derivative		~~(250~~-	)		(~~503~~250	)		~~253~~250			(50100	)%
Loss on debt conversions		~~(2,518~~-	)		-(2,518			(2,518	)		~~N/A~~(100	)%
Other income, net		5712			1157			46(45	)		~~418~~(79	)%
Interest expense, net		(372	)		(535	)		163			(30	)%
Interest income (expense), net		93			(372	)		465			(125	)%
Total other expense, net		(2,869	)		(1,027	)		(1,842	)		179	%
Total other income (expense), net		105			(2,869	)		2,974			(104	)%
Loss from continuing operations before income taxes		(1815,~~575~~807	)		(818,~~650~~575	)		(92,~~926~~768	)		~~115~~(15	)%
Income tax expense (benefit)		-			-			-			-
Net loss from continuing operations	$	(1815,~~575~~807	)	$	(818,~~650~~575	)	$	(92,~~926~~768	)		~~115~~(15	)%

Revenue from Continuing Operations

Total revenue from continuing operations ~~increased~~decreased 3242%, or $~~281~~482 thousand, to $~~1.1~~666 ~~million~~thousand for the year ended December 31, ~~2021~~2022, from $~~867~~1.1 ~~thousand~~million for the year ended December 31, ~~2020~~2021. The ~~increase~~decrease in ~~service~~the ~~revenue~~current-year periods ~~was~~were ~~primarily~~the ~~due~~result toof ~~increased~~our ~~sales~~planned ~~after~~decrease ~~COVID slowdown~~ in ~~2020. Product~~ revenue ~~increased~~generating byactivities ~~$204~~at ~~thousand~~our inMaple ~~2021~~Grove facility as ~~compared~~we ~~with~~transitioned ~~2020~~its ~~as the~~operations ~~result~~to ofan internal research and development facility in 2022. Product revenue increased ~~sales~~in ~~volume~~2022 ofas ~~$147~~compared ~~thousand~~with ~~and~~2021, ~~average~~primarily ~~selling~~from ~~prices~~increased shipping ofvolumes ~~$57~~and ~~thousand~~increased pricing.

Cost of Goods from Continuing Operations

Cost of goods sold – service aggregated $~~408~~44 thousand and $~~384~~408 thousand, respectively, for the years ended December 31, ~~2021~~2022 and ~~2020~~2021, resulting in a cost of goods sold of 6144.4% and 6561.34%, respectively, of service revenue. The ~~2020~~2022 period was favorably impacted by ~~two~~a ~~negative~~ higher margin ~~service~~project ~~contracts~~and the 2021 period was negatively impacted by incremental costs incurred to achieve contract deliverables.

Cost of goods sold – product aggregated $~~1.4~~964 ~~million~~thousand and $~~717~~1.4 ~~thousand~~ million for the years ended December 31, ~~2021~~2022 and ~~2020~~2021, respectively, resulting in a gross margin deficit of $~~956~~ 397 thousand and $~~438~~956 thousand, respectively, resulting from StemoniX’s excess manufacturing capacity at its Maple Grove facility. The ~~increase~~decrease in ~~the~~ cost of goods sold ~~and~~ margin deficit in ~~the~~2022 ~~2021 period~~ as compared with ~~the~~2021 ~~2020 period~~ was the result of increased ~~employee~~ ~~related costs due to increased headcount~~revenue, asa ~~the~~decrease ~~2020~~in ~~period~~scrap ~~reflecting~~materials ~~lower~~and ~~costs~~our ~~from~~focus ~~the benefit of the Paycheck~~on ~~Protection~~transforming ~~Program~~our ~~(“PPP”)~~Maple ~~loan~~Grove ~~forgiveness,~~location ~~which~~to ~~is reflected as~~ a ~~reimbursement~~research ~~of manufacturing~~ and ~~quality~~development ~~salaries, and~~facility ~~additional production costs~~ in ~~2021 due to increased sales volume~~2022.

5452

Operating Expenses from Continuing Operations

Research and Development Expenses. Research and development expenses from continuing operations increased 3258%, or $12.05 million, to $46.38 million for the year ended December 31, ~~2021~~2022, from $34.23 million for the year ended December 31, ~~2020~~2021. ~~principally~~This increase is primarily due to atransforming our ~~$750~~Maple ~~thousand~~Grove ~~increase~~location ~~in personnel~~to ~~costs~~a ~~resulting~~research ~~from~~and ~~additional~~development ~~headcount,~~facility ~~including~~in ~~the~~2022 ~~hiring~~which ofincluded a ~~Chief~~$1.2 ~~Scientific~~million ~~Officer~~increase in ~~October~~payroll-related ~~2021 as~~expenses, ~~well as a~~ $~~315~~553 thousand ~~reduction~~increase in ~~the 2020~~ research and development ~~expense~~activities, ~~reimbursement~~$448 ~~from~~thousand ~~the~~reserve ~~Company’s~~for ~~PPP~~manufacturing ~~loan.~~inventory Inrepurposed ~~addition,~~as ~~the~~research and ~~Company~~development ~~increased~~expense ~~collaboration~~and ~~developmental~~$223 ~~expenses~~thousand byrelated ~~$224~~to ~~thousand as~~moving ~~well~~to asa ~~other~~new ~~lab~~facility ~~and~~in ~~legal~~California ~~expenses~~in byorder ~~$401~~to ~~thousand~~reduce inthe ~~2021~~annual aslease ~~compared~~expense in ~~with~~that ~~2020~~location.

Selling, ~~General~~ General and Administrative Expenses. Selling, general and administrative expenses from continuing operations increased ~~over 200~~4%, or $~~5.7~~374 ~~million~~thousand, to $8.48 million for the year ended December 31, ~~2021~~2022, from $28.74 million for the year ended December 31, 2021. ~~2020~~The 2021 period reflects the Company as a privately held company during the first quarter whereas the 2022 period reflects the Company as a publicly held company. The decrease is primarily due to ~~post-Merger~~transforming ~~public~~our ~~company~~Maple ~~costs~~Grove ~~including~~location ~~increased~~to ~~headcount~~a ~~costs~~research ofand development facility in 2022 which included a $1.42 million, ~~stock~~increase in payroll-~~based~~related ~~compensation of~~expenses, offset by a $~~855~~793 thousand, ~~professional~~increase ~~fees~~in ofemployee $1compensation.7 The ~~million, insurance~~2022 ~~costs~~period also includes one-time severance benefits for two former employees of $1437 thousand.2 ~~million~~The ~~and~~Company ~~other~~incurred ~~Board~~$467 thousand of ~~Director,~~additional ~~software, franchise~~insurance ~~tax~~expense ~~and~~in ~~investor~~2022 ~~relations~~as ~~costs~~compared ~~aggregating~~with ~~$487~~2021 ~~thousand~~largely due to public-company related insurance premiums.

Merger Related Costs. Merger related costs for the ~~years~~year ended December 31, 2021 ~~and 2020,~~ were $2.3 million ~~and $1~~.4 ~~million,~~There ~~respectively.~~were ~~The~~no ~~increase in the 2021~~ merger related costs ~~was primarily from investment banker fees related to~~ for the ~~closing~~year ofended ~~the~~December ~~Merger~~31, 2022.

Change in Fair Value of Warrant Liability

The Company issued a warrant with multiple settlement terms in the first quarter of 2021 and as a result, this warrant was classified as liability. Upon the close of the Merger, the warrant’s settlement terms were finalized resulting in a final mark-to-market adjustment resulting in a non-cash gain of $214 thousand during the year ended December 31, 2021.

Change in Fair Value of Share Settlement Obligation Derivative

The Company recorded $250 thousand ~~and $503 thousand~~ mark-to-market losses during the ~~years~~year ended December 31, 2021 ~~and 2020, respectively,~~ for an embedded compound derivative from the 2020 Convertible Notes. Upon the close of the Merger the 2020 Convertible Notes were converted to equity.

Loss on Debt Conversion

The year ended December 31, 2021 included a $2.5 million loss on the conversion of the 2020 Convertible Notes to equity upon the closing of the Merger.

Interest Expense, Net

Net interest expense from continuing operations decreased by $~~163~~465 thousand, or 30125%, to $~~372~~93 thousand interest income during the year ended December 31, ~~2021~~2022, from $~~535~~372 thousand interest expense during the year ended December 31, ~~2020,~~2021. ~~primarily~~Total ~~related~~other toexpense ~~the~~in ~~conversion~~2021 consisted of a $250 thousand mark-to-market loss for an embedded compound derivative from the 2020 Convertible Notes, $2.5 million loss on the conversion of these notes to equity upon the closing of the Merger, a $214 thousand mark to market warrant liability gain, and interest expense of $368 thousand primarily related to the 2020 Convertible Notes.

Discontinuing Operations

In connection with the Merger, the Company was deemed to be the accounting acquiror of CGI, which included the vivoPharm business on March 30, 2021. Therefore, ~~the~~upon ~~vivoPharm~~classification ~~business~~as ~~is not~~discontinuing ~~reflected~~ operations in the ~~Company’s~~fourth ~~2020~~quarter ~~operating~~of ~~results. After the Merger~~2021, the vivoPharm business ~~generated~~is ~~$4.0~~reflected ~~million~~ in ~~revenue~~ indiscontinued ~~2021~~operations and incurred a $22.3 million net loss. This net loss includes a goodwill impairment charge of $20.2 million, $713 thousand of amortization of intangible assets arising from the merger, $112 thousand of professional service costs related to accounting for ~~the vivoPharm~~nine ~~business~~months and aone ~~$1.25~~day ~~million operating loss. The 2021 operating loss was significantly impacted by lower than expected revenue resulting from turnover~~ in the ~~vivoPharm business development team and the delay in the commencement of two large customer~~ ~~contracts~~year ~~which~~ended ~~were~~December ~~signed~~31, in2021 (the ~~second~~“Merger ~~and third quarter~~Impact”).

The vivoPharm business generated $6.4 million in revenue for 2022, an increase of $2.4 million, or 60% from $4.0 million in 2021 due to the Merger Impact and increased revenue from two customer contracts.

The vivoPharm business incurred a $6.9 million net loss in 2022, a decrease of $15.4 million, or 69% from a $22.3 million net loss in 2021. The 2022 net loss includes an operating loss of $1.4 million, an impairment charge for goodwill and intangible assets of $5.4 million, which was the result of changes in market valuations for contract research organizations during 2022 which impacted the Company’s valuation of the vivoPharm business and a $106 thousand loss on the sale of the vivoPharm businesses during the fourth quarter of 2022. The 2021 net loss includes an operating loss of $1.25 million and a goodwill impairment charge of $20.2 million.

Substantially all of vivoPharm operations were sold in the fourth quarter of 2022.

Liquidity and Capital Resources

Sources and Uses of Liquidity

The ~~Company’s~~ ~~operating~~Company ~~activities~~has ~~have~~financed ~~been~~its ~~primarily~~operations ~~funded~~through ~~with~~CGI ~~proceeds~~cash ~~from~~balances ~~the~~on ~~sale~~hand ofon ~~convertible notes and preferred stock securities. Prior to~~ the Merger date, ~~CGI’s~~product ~~primary sources of liquidity had been cash collections from its customers~~ and ~~funds~~services ~~generated~~revenues, ~~from~~the ~~debt~~sale ~~and~~of ~~equity financings. The Company is expected to generate minimal revenue from~~ the ~~StemoniX~~vivoPharm business ~~during~~and the ~~first~~sale ~~half~~ of ~~2022~~common asstock ~~it winds~~under ~~down~~ its ~~revenue~~at-the-market ~~producing~~financing ~~operations to support its internal drug discovery programs~~vehicle. ~~The~~Prior ~~Company~~to ~~had~~the ~~cash and cash equivalents of $20.6 million as of December 31~~Merger, ~~2021.~~the ~~The~~ Company’s operating ~~management~~activities ~~has~~have ~~projected~~been ~~that~~primarily ~~the~~funded ~~Company’s cash on hand, together~~ with ~~the net~~ proceeds from the ~~planned~~ sale of ~~the vivoPharm~~convertible ~~business~~notes ~~during 2022~~ and ~~proceeds~~preferred ~~from sales of common~~ stock ~~pursuant~~ ~~to the Purchase Agreement with Lincoln Park Capital, LLC, will be adequate to fund the Company’s currently planned operations into the second quarter of 2023~~securities. Such estimate may prove to be wrong, and we could use our available capital resources sooner than we currently expect, and/or the capital resources that we are assuming will be present could fail to materialize at the amounts we project or at all.

The Company’s Board of Directors (the “Board”), after an assessment of the status of the Company’s efforts to seek strategic alternatives and the Company’s then current cash position, approved a plan on January 31, 2023 to preserve the Company’s cash to be able to continue to pursue a satisfactory strategic alternative for the purpose of maximizing the value of the Company’s business while also having sufficient cash to adequately fund an orderly wind down of the Company’s operations (the “Cash Preservation Plan”) in the event it is unable to secure a satisfactory strategic alternative. As part of the Cash Preservation Plan, the Company implemented a reduction in force, resulting in the retention of a core group of employees required for one or more potential strategic transactions and/or to execute an orderly wind down of the Company if required. The Company estimates that it will incur approximately $1.4 million for retention, severance and other employee termination-related costs in the first and second quarters of 2023. The Company has put on hold its pending efforts with respect to its current preclinical and clinical programs.

The Company is expected to generate minimal revenue from continuing operations as we have substantially ceased the Maple Grove facility’s revenue producing operations to support internal drug discovery programs. The Company had cash and cash equivalents of $10.0 million as of December 31, 2022, an accumulated deficit of $101.5 million, cash outflows from continuing operations of $12.8 million for the year then ended 2022, and a net loss from continuing operations of $15.8 million. Based on our current operating plan, we are attempting to find strategic partners to acquire our assets, including our public company as a reverse merger candidate. There are no assurances that we will be able to raise cash in these transactions or find a reverse merger candidate and we may therefore need to complete an orderly winddown of the Company’s operations or, if sufficient funds are not available, file for bankruptcy. Therefore, we believe we do not have sufficient cash and cash equivalents on hand to support current operations for the twelve months following the filing of this Annual Report which raises substantial doubt about our ability to continue as a going concern.

Financing Arrangements

On April 8, 2022, the Company entered into an Equity Distribution Agreement with Canaccord Genuity LLC (the “Canaccord”), 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, depending on market demand, with Canaccord acting as an agent for sales.

In 2022 the Company raised $61 thousand from at-the-market facility and in January 2023 raised an additional $458 thousand under that facility.

On March 23, 2023, the Company terminated the arrangements with both Lincoln Park and Canaccord.

The Company expects to continue to incur operating losses in the future, unless and until the Company’s drug discovery efforts or other revenue from collaborators are able to demonstrate a level of success that would lead to licensing potential. In addition, the Company will continue to incur the costs of being public, including legal and audit fees and director’s and officer’s liability insurance. These losses have had, and will continue to have, an adverse effect on the Company’s working capital, total assets and stockholders’ equity. Because of the numerous risks and uncertainties associated with drug discovery and development efforts and costs associated with being a public company, the Company is unable to predict when it will become profitable, and it may never become profitable. Even if the Company does achieve profitability, it may not be able to sustain or increase profitability on a quarterly or annual basis. The Company’s inability to achieve and then maintain profitability would negatively affect its business, financial condition, results of operations and cash flows.

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 405,953 common shares, or the Commitment Shares, as consideration for Lincoln Park entering into the Purchase Agreement. The Company cannot sell any shares to Lincoln Park until the date that a registration statement covering the resale of shares of common stock that have been, and may in the future be, issued to Lincoln Park under the Purchase Agreement is declared effective by the SEC and a final prospectus in connection therewith is filed and all of the other conditions set forth in the Purchase Agreement are satisfied (such date, the “Commencement Date”). Under the Purchase Agreement, the Company may from time to time for 30 months following the Commencement Date, at its discretion, direct Lincoln Park to purchase on any single business day, or a Regular Purchase, up to (i) 50,000 common shares, (ii) 75,000 common shares if the closing sale price of its common shares is not below $1.50 per share on Nasdaq or (iii) 100,000 common shares if the closing sale price of its common shares is not below $2.50 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.

During the next twelve months, the Company may take further steps to raise additional capital to meet our long-term liquidity needs including, but not limited to, one or more of the following: the licensing of drug candidates with existing or new collaborative partners, possible business combinations, issuance of debt, or the issuance of common stock or other securities via private placements or public offerings. Although the Company has been successful in raising capital in the past, there can be no assurance that additional financing will be available on acceptable terms, if at all, and its negotiating position in capital raising efforts may worsen as existing resources are used. There is also no assurance that the Company will be able to enter into collaborative relationships that will provide sources of liquidity. Additional equity financings may be dilutive to our stockholders. Debt financing, if available, may involve significant cash payment obligations and covenants that restrict the Company’s ability to operate as a business. Licensing or strategic collaborations may result in royalties or other terms which reduce our economic potential from products under development. If the Company is unable to raise the funds necessary to meet its long-term liquidity needs, the Company may have to delay or discontinue the development of one or more discovery programs, license out programs earlier than expected, raise funds at a significant discount or on other unfavorable terms, if at all, or sell all or a part of the business.

The Company’s forecast of the period of time through which its current financial resources will be adequate to support its operations and its expected operating expenses are forward-looking statements and involve risks and uncertainties. Actual results could vary materially and negatively as a result of a number of factors, including:

● the ~~expected benefits of, and potential value, including synergies, created by, the Merger for the stockholders of the~~ Company~~; ● the Company~~’s ability to ~~adapt~~consummate ~~its~~any ~~business~~strategic ~~for~~transaction, ~~future~~whether ~~developments~~by inacquisition, ~~light~~sale of ~~the~~any ~~global~~part ~~outbreak~~ of ~~COVID-19~~its business, ~~which~~or ~~continues~~otherwise, ~~to rapidly evolve; ● the Company’s ability to internally identify~~ and ~~develop~~effectively ~~new~~operate ~~iPSC~~its ~~disease~~business ~~models,~~during ~~drug~~any ~~candidates~~such ~~and~~transaction ~~intellectual property~~process; ● ~~the~~The ~~Company’s~~time ~~ability~~needed to ~~negotiate~~consummate a strategic ~~partnerships,~~transaction ~~where~~if ~~appropriate,~~a ~~for~~counterparty ~~technology~~is ~~and research data, iPSC and human primary cell-based disease models or drug candidates~~found; ● the Company’s ability to ~~secure~~execute ~~clinical~~on ~~co-development~~its ~~partnerships~~current ~~with~~business ~~pharmaceutical~~plans ~~and~~while ~~biotechnology~~exploring ~~companies~~strategic alternatives; ● the Company’s need for significant additional capital and the Company’s ability to satisfy its capital needs; ● the Company’s ~~ability~~potential toproduct ~~complete~~liability ~~required clinical trials of its products and obtain approval from the FDA~~ or ~~other~~intellectual ~~regulatory~~property ~~agencies~~infringement ~~in different jurisdictions~~claims; ● the Company’s ability to ~~execute~~maintain onor ~~its~~protect ~~marketing~~the ~~and~~validity ~~sales~~of ~~strategy for~~ its ~~preclinical~~patents ~~research services~~ and ~~gain~~other ~~acceptance~~intellectual ~~of its services in the market~~property; ● the Company’s ~~ability~~dependency toon ~~keep~~third-party ~~pace~~manufacturers ~~with~~to ~~rapidly~~supply ~~advancing~~it ~~market~~with instruments and ~~scientific~~specialized ~~developments~~supplies; ● the Company’s ability to ~~satisfy~~adapt ~~U.S.~~its ~~(including~~business ~~the~~for ~~FDA)~~future ~~and~~developments ~~international~~in ~~regulatory~~light ~~requirements~~of ~~with~~the ~~respect~~global tooutbreak ~~its~~of ~~services;~~COVID-19, ●which ~~the~~continues ~~Company’s ability~~ to ~~maintain~~rapidly ~~its present customer base and obtain new customers~~evolve; ● the Company’s ~~ability~~dependency toon ~~maintain~~ the ~~Company’s~~intellectual ~~clinical~~property ~~and~~licensed ~~research collaborations and enter into new collaboration agreements with highly regarded organizations so that, among other things, the Company has access~~ to ~~thought leaders in advanced preclinical and translational science; ●~~ the Company’s ~~potential product liability~~ or ~~intellectual~~possessed ~~property~~by ~~infringement~~third ~~claims~~parties; and ● the Company’s ability to ~~maintain~~retain orkey ~~protect the validity of its patents and other intellectual property;~~talent.

56Tax Contingency

●In August ~~the~~2022, ~~Company’s~~in ~~dependency~~connection onwith ~~third-party~~efforts ~~manufacturers~~ to ~~supply~~sell itits ~~with~~vivoPharm ~~instruments~~subsidiary, ~~and~~the ~~specialized~~Company ~~supplies;~~determined ●that ~~the~~certain ~~Company’s~~historical ~~ability~~vivoPharm tax toreturns ~~attract~~either ~~and~~had ~~retain~~not abeen ~~sufficient~~filed ~~number~~or ofwere ~~scientists,~~incorrectly ~~clinicians,~~filed ~~sales~~with ~~personnel~~the ~~and~~U.S. ~~other~~Internal ~~key~~Revenue ~~personnel~~Service ~~with~~(“IRS”). ~~extensive~~As ~~relevant~~a ~~experience~~result of this finding, ~~who~~the ~~are~~Company indetermined ~~short~~that ~~supply;~~it ●is more-likely-than not that the ~~Company’s~~tax ~~ability~~exposure is not significant to ~~effectively~~the ~~manage~~consolidated financial ~~its~~statements ~~international~~taken ~~businesses~~as ina ~~Australia~~whole. ~~and~~This ~~Europe,~~conclusion ~~including~~is based on the ~~expansion~~specific offacts ~~its~~related ~~customer~~to ~~base~~this matter and ~~volume~~how ofwe ~~new~~believe ~~contracts~~the inIRS will treat these ~~markets;~~facts. ●Corrective ~~the~~tax ~~Company’s~~returns ~~dependency~~were onfiled with the ~~intellectual~~IRS ~~property~~in ~~licensed~~September to2022. In the ~~Company~~event orthe ~~possessed~~IRS bydoes ~~third~~not ~~parties;~~accept ~~and~~our ● position, the Company’s ~~ability~~tax liability could aggregate up to ~~adequately~~$2.8 ~~support~~million ~~future~~plus ~~growth~~interest and penalties.

Cash Flows from Continuing Operations

The Company’s net cash flow from operating, investing and financing activities from continuing operations for the periods below were as follows (in thousands):

	Year Ended December 31,
	2021			2020
	2022			2021
Cash provided by (used in) continuing operations:
Cash (used in) provided by continuing operations:
Operating activities	$	(1612,~~488~~888	)	$	(516,~~812~~488	)
Investing activities		~~29,678~~(617	)		~~(43~~29,678	)
Financing activities		~~7,222~~(113	)		67,~~332~~222
Net increase in cash and cash equivalents from continuing operations	$	20,412		$	477
Net (decrease) increase in cash and cash equivalents from continuing operations	$	(13,618	)	$	20,412

The Company had cash and cash equivalents of $2010.6 0 million and $~~792~~20.6 ~~thousand~~million as of December 31, ~~2021~~2022 and ~~2020~~2021, respectively.

Cash Used in Operating Activities from Continuing Operations

Net cash used in operating activities from continuing operations was $12.9 million for the year ended December 31, 2022, consisting of a net loss of $15.8 million, decreased for net non-cash adjustments of $2.0 million and additional cash provided by operating assets and liabilities items of $891 thousand, largely from a reduction of inventory of $422 thousand as we transitioned the Maple Grove location to a research and development facility as well as an increase in accrued compensation and employee benefits.

Net cash used in operating activities from continuing operations was $16.5 million for the year ended December 31, 2021, consisting of a net loss from continuing operations of $18.6 million, decreased for net non-cash adjustments of $4.8 million. The non-cash adjustments include (i) stock-based compensation of $1.0 million, (ii) depreciation and amortization expense of $1.1 million, and (iii) a net loss related to the pre-merger StemoniX capital structure and related debt conversions of $2.7 million. Operating assets and liabilities used net cash of $2.7 million including Merger related costs in 2021. The net loss for the year ended December 31, 2021, also includes $2.3 million of Merger related costs.

Net cash used in operating activities from continuing operations was $5.8 million for the year ended December 31, 2020, consisting of a loss of $8.7 million, increased for net non-cash adjustments of $1.5 million, which includes a reduction of $740 thousand in operating expenses from the PPP loan. Operating assets and liabilities provided $1.3 million of cash from the $740 thousand funding of the Company’s PPP loan, an increase of $878 thousand in accounts payable principally resulting from accrued merger related professional service costs, offset by $485 thousand in cash utilized for operating lease payments.

Cash Provided by Investing Activities from Continuing Operations

Net cash ~~provided~~used byin investing activities from continuing operations was $~~29.7~~617 ~~million~~thousand for the year ended December 31, ~~2021~~2022, ~~principally from~~related ~~CGI~~to ~~cash~~investments in ~~balances at the close of the Merger of $30.2 million, offset by $535 thousand of~~ equipment ~~purchases. Investing~~and ~~activity~~our ~~cash~~new ~~flows~~leased ~~from~~facility ~~continuing~~in ~~operations were not significant for the year ended December 31, 2020~~California.

5756

Net cash provided by investing activities from continuing operations was $29.7 million for the year ended December 31, 2021, principally from CGI cash balances at the close of the Merger of $30.2 million, offset by $535 thousand of equipment purchases.

Cash Provided by Financing Activities from Continuing Operations

Net cash ~~provided~~used byin financing activities from continuing operations was $~~7.2~~113 ~~million~~thousand for the year ended December 31, ~~2021 due~~2022, primarily related to ~~$5.0 million from the~~ issuance ofcosts ~~2020~~related ~~Convertible~~to ~~Notes and $1.8 million from~~ the ~~issuance of~~Lincoln ~~Series~~Park ~~Preferred~~Capital CFund ~~shares.~~LLC ~~The~~agreement ~~net~~partially ~~cash~~offset ~~provided~~ by ~~financing~~a ~~activities~~new ~~from~~financing ~~continuing operations~~lease ofentered ~~$6.3~~into ~~million~~in ~~for~~ the ~~year ended December 31, 2020 was principally from the issuance of $4.9 million of 2020 Convertible~~ ~~Notes~~third ~~and $1~~quarter.~~3 million of Series Preferred B shares.~~

Net cash provided by financing activities from continuing operations was $7.2 million for the year ended December 31, 2021 due to $5.0 million from the issuance of 2020 Convertible Notes and $1.8 million from the issuance of Series Preferred C shares.

Income Taxes

Over the past several years the Company has generated operating losses in all jurisdictions in which it may be subject to income taxes. As a result, the Company has accumulated significant net operating losses and other deferred tax assets. Because of the Company’s history of losses and the uncertainty as to the realization of those deferred tax assets, a full valuation allowance has been recognized. The Company does not expect to report a benefit related to the deferred tax assets until it has a history of earnings, if ever, that would support the realization of its deferred tax assets.

Critical Accounting Policies and Significant Judgment and Estimates

The Company’s management’s discussion and analysis of financial condition and results of operations is based on its financial statements and condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of the financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates based on historical experience and makes various assumptions, which management believes to be reasonable under the circumstances, and which form the basis for judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 4 to our December 31, ~~2021~~2022 and ~~2020~~2021 consolidated financial statements appearing elsewhere herein, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.

Revenue recognition. Prior to the Merger, the Company’s primary sources of revenue were product sales from the sale of microOrgan plates and the performance of preclinical drug testing services using the microOrgan technology. Subsequent to the Merger, the Company’s revenue includes vivoPharm’s discovery services, consisting primarily of contract research services focused primarily on unique specialized studies to guide drug discovery. As noted herein, the vivoPharm business has been classified as discontinuing operations as of December 31, 2021 and revenue earned from that business are included therein.

The Company recognizes revenue when it satisfies performance obligations under the terms of its contracts, and transfers control of the product to its customers in an amount that reflects the consideration the Company expects to receive from its customers in exchange for those products. This process involves identifying the customer contract, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. A performance obligation is considered distinct from other obligations in a contract when it (a) provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and (b) is separately identified in the contract. The Company considers a performance obligation satisfied once it has transferred control of a product to a customer, which is generally upon shipment as the customer has the ability to direct the use and obtain the benefit of the product.

For product contracts, revenue is recognized at a point-in-time upon delivery to the customer. Product contracts with customers generally state the terms of the sale, including the quantity and price of each product purchased. Payment terms and conditions may vary by contract, although terms generally include a requirement of payment within a range of 30 to 90 days after the performance obligation has been satisfied. As a result, the contracts do not include a significant financing component. In addition, contacts typically do not contain variable consideration as the contracts include stated prices. The Company provides assurance-type warranties on all of its products, which are not separate performance obligations.

For service contracts, revenue is recognized over time and is generally defined pursuant to an enforceable right to payment for performance completed on service projects for which the Company’s has no alternative use as customer furnished compounds are added to Company plates for testing. The Company does not obtain control of the customer furnished compounds as the Company does not have the ability to direct the use. Revenue is measured by the costs incurred to date relative to the estimated total direct costs to fulfill each contract (cost-to-cost method). Incurred costs represent work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, materials and overhead.

Some contracts offer price discounts after a specified volume has been purchased. The Company evaluates these options to determine whether they provide a material right to the customer, representing a separate performance obligation. If the option provides a material right to the customer, revenue is allocated to these rights and deferred; subsequently the revenue is recognized when those future goods or services are transferred, or when the option expires.

Contract assets primarily represent revenue earnings over time that are not yet billable based on the terms of the contracts. Contract liabilities consist of fees invoiced or paid by Vyant Bio’s customers for which the associated performance obligations have not been satisfied and revenue has not been recognized based on Vyant Bio’s revenue recognition criteria described above.

Given the Company’s exit from selling products and services, which was substantially completed in 2022, the Company no longer considers revenue recognition as a critical accounting policy as of December 31, 2022.

Derivative Instruments. Prior to the closing of the Merger on March 30, 2021 the Company had a number of the financial instruments that were classified as derivatives. Upon the closing of the Merger, these instruments were converted to Company common stock at which time final mark-to-market adjustments were recorded by the Company.

The Company recognized all derivative instruments as either assets or liabilities in the consolidated balance sheets at their respective fair values. The Company evaluated its debt and equity issuances to determine if those contracts or embedded components of those contracts qualify as derivatives requiring separate recognition in its financial statements. The result of this accounting treatment is that the fair value of embedded derivatives was revalued as of each reporting date and recorded as a liability, and the change in fair value during the reporting period is recorded in other income (expense) in the statements of operations. In circumstances where the embedded conversion option in a convertible instrument was required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments were accounted for as a single, compound derivative instrument. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, was reassessed at the end of each reporting period. Derivative instrument liabilities are classified in the consolidated balance sheets as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within twelve months of the balance sheet date.

The 2020 Convertible Notes contained a share settled redemption feature that required conversion to equity 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 changed based on the passage of time between issuance of the convertible note and the conversion event. This feature was considered a derivative that required bifurcation because it provide a specified premium to the holder of the note upon conversion. We measured the share-settlement derivative obligation at fair value based on significant inputs that are not observable in the market and require significant judgement. This instrument was settled upon the closing of the Merger.

The Company issued a warrant during the first quarter of 2021 that contained an indexation feature not indexed to the Company’s stock resulting in this warrant to be accounted for as a derivative. As a result, this warrant was accounted for as a liability and marked to market from its issuance date in February 2021 through the Merger date, at which time the warrant’s indexation features were finalized.58

~~Business~~The ~~Combinations.~~Company ~~Accounting~~issued ~~for~~a ~~acquisitions~~warrant ~~requires~~during ~~extensive use of estimates and judgment to measure~~ the ~~fair~~first ~~value~~quarter of ~~the~~2021 ~~identifiable tangible~~that ~~and~~contained ~~intangible assets acquired and liabilities assumed. Additionally, we must determine whether~~ an ~~acquired~~indexation ~~entity~~feature isnot ~~considered a~~indexed ~~business~~to ~~or a set of net assets because~~ the ~~excess~~Company’s ~~of the purchase price over the fair value of net assets acquired can only be recognized~~stock asresulting ~~goodwill~~ in athis ~~business~~warrant ~~combination.~~to Webe accounted for ~~the Merger with CGI~~ as a ~~business combination under the acquisition method of accounting~~derivative. ~~Consideration~~As ~~transferred~~a toresult, ~~acquire~~this ~~CGI~~warrant was ~~measured~~accounted ~~at fair value. The determination of the $59.9 million purchase price consideration~~ for ~~the Merger was based on the closing stock price of the CGI common stock on the Merger date~~ as ~~well~~a asliability ~~the fair value of CGI common stock warrants~~ and ~~options outstanding on the Merger date using the Black Scholes Mertons option pricing model. We allocated~~marked ~~the purchase price~~ to ~~the~~market ~~acquired~~from ~~tangible~~its ~~and~~issuance ~~intangible~~date ~~assets~~in ~~and~~February ~~assumed~~2021 ~~liabilities~~through ~~of CGI based on their estimated fair values as of~~ the ~~acquisition~~Merger date., ~~Significant~~at ~~judgement~~which istime ~~required to value and allocate~~ the ~~purchase~~warrant’s ~~price,~~indexation ~~especially~~features ~~for identified intangible~~were ~~assets~~finalized. The ~~allocation~~Company ofno ~~the~~longer ~~purchase~~deemed ~~price~~derivative ~~resulted~~instruments inas ~~recognition~~a ofcritical ~~intangible~~accounting ~~assets~~policy ~~related~~as toof ~~tradename~~December 31, ~~customer relationships aggregating $9~~2022.5 ~~million and goodwill of $22.4 million.~~

Business Combinations. Accounting for acquisitions requires extensive use of estimates and judgment to measure the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed. Additionally, we must determine whether an acquired entity is considered a business or a set of net assets because the excess of the purchase price over the fair value of net assets acquired can only be recognized as goodwill in a business combination. We accounted for the Merger with CGI as a business combination under the acquisition method of accounting. Consideration transferred to acquire CGI was measured at fair value. The determination of the $59.9 million purchase price consideration for the Merger was based on the closing stock price of the CGI common stock on the Merger date as well as the fair value of CGI common stock warrants and options outstanding on the Merger date using the Black Scholes Merton option pricing model. We allocated the purchase price to the acquired tangible and intangible assets and assumed liabilities of CGI based on their estimated fair values as of the acquisition date. Significant judgement is required to value and allocate the purchase price, especially for identified intangible assets. The allocation of the purchase price resulted in recognition of intangible assets related to tradename, customer relationships aggregating to $9.5 million and goodwill of $22.4 million. Given the completion of purchase accounting adjustments in Q1 2022 and there being no business combinations in 2022, the Company no longer deems business combinations to be a critical accounting policy as of December 31, 2022.

Valuation of Goodwill and Intangible Assets. Goodwill represents the excess of the purchase price over the fair value of net tangible and identified intangible assets acquired in a business combination. Goodwill is not amortized but is evaluated at least annually for impairment or when a change in facts and circumstances indicate that the fair value of the goodwill may be below the carrying value. The Company did not record Goodwill prior to the March 30, 2021 Merger. As a result of the Merger, the Company recorded $22.4 million of goodwill attributed to the vivoPharm business.

As a described in Note 3 to the Company’s consolidated financial statements, in the ~~Company~~fourth ~~changed~~quarter of 2021, the ~~classification~~Company ofclassified the vivoPharm business toas adiscontinuing operations and applied held for sale ~~asset~~accounting. inThe ~~the~~Company ~~fourth quarter~~valued ofthe ~~2021.~~vivoPharm ~~Upon~~business ~~change~~as inof ~~classification~~December of31, ~~this~~2021 ~~asset~~equally ~~from~~weighting ~~held~~public company ~~for~~revenue ~~use~~multiples toas ~~held~~of ~~for~~December ~~sale~~31, ~~the~~2021 ~~Company~~and ~~was~~comparable ~~required~~transaction torevenue ~~perform an~~multiples, ~~analysis~~which ofare ~~the~~classified ~~carrying value of the vivoPharm business~~ as ~~compared~~Level ~~with~~3 ~~its~~measurements within ~~estimated~~the fair ~~market~~ value ~~assuming the business would be sold~~hierarchy. The Company ~~determined~~updated the ~~carrying~~valuation ~~value~~ 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 ~~are~~resulted ~~classified~~in asa ~~Level~~$4.5 million 3decrease ~~measurements~~to ~~within~~ the fair value ~~hierarchy.~~of AsvivoPharm ~~described~~ in ~~Note~~the 11first toquarter ~~the~~of 2022. The Company’s ~~financial~~recognized ~~statements,~~an impairment charge of $4.3 million during the ~~Company~~quarter ~~valued~~ended ~~the~~March 31, 2022, which decreased vivoPharm’s ~~business~~net atcarrying value, net of estimated disposal costs from $119.2 million as of December 31, 2021 to $4.9 ~~This~~million. ~~value,~~During ~~less~~the ~~estimated~~second ~~transaction~~quarter ~~costs and~~of 2022, the Company’s ~~currency~~received ~~translation~~two ~~adjustment,~~offers ~~which~~for mutually isexclusive ~~solely~~components ~~related~~of to the vivoPharm business, ~~were~~and ~~compared~~assessed ~~with~~ the carrying value of each asset group using the ~~vivoPharm~~estimated net ~~business~~sales proceeds based on these offers. As a result, ~~and~~the ~~resulted~~Company inrecorded a net impairment charge of $201.25 million ~~goodwill~~during the second quarter of 2022. The Company recorded an impairment ~~charge~~recovery inof $388 thousand during the ~~fourth~~third quarter of ~~2021~~2022 based upon September 30, 2022 vivoPharm net assets. The valuation of goodwill and intangible assets is no longer a critical accounting policy as of December 31, 2022.

Intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. As of December 31, 2021 and 2020, the Company determined that there were no indicators of impairment and did not recognize any fixed asset impairment. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and appraisals, as considered necessary.59

Valuation of Long-Lived Assets. Long-lived assets, such as fixed assets subject to depreciation and right-of-use assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. If circumstances require a long-lived asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset group to its carrying amount. If the carrying amount of the long-lived asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. As of December 31, 2022 and 2021 the Company determined that there were no indicators of impairment and did not recognize any fixed asset impairment in continuing operations.

Item 7A.

Qualitative and Quantitative Disclosures about Market Risk

The Company has exposure to financial market risks, including changes in foreign currency exchange rates, and risk associated with how it invests its cash.

Foreign Exchange Risk

The Company ~~conducts~~conducted its business in foreign markets through its subsidiary in Australia (vivoPharm Pty Ltd.). ~~The~~In the fourth quarter of 2022, the Company ~~plans~~sold tosubstantially ~~sell~~all of the operations of vivoPharm ~~business~~in ~~during~~two ~~2022~~separate transactions. For the years ended December 31, ~~2021~~2022 and ~~2020~~2021, ~~approximately 21~~0% and 21%, respectively, of the Company’s continuing revenue ~~were~~was earned outside the United States and collected in local currency. The Company also commenced plans for a clinical trial in 2023 of which substantially all costs are denominated in Australian Dollars. This clinical trial has been placed on hold as part of the Company’s cash preservation plan. As the vivoPharm entities were sold in the fourth quarter of 2022, translation of foreign currencies is ~~subject~~not material to the Company’s consolidated financial position. Since the Merger, the Company was subject to risk for exchange rate fluctuations between such local currencies and the United States dollar and the subsequent translation of the Australia Dollar or Euro to United States dollars. The Company currently does not hedge currency risk. ~~The translation adjustments for the years ended December 31, 2021 and 2020 were not significant.~~

Investment of Cash

The Company invests its cash primarily in cash and US government money market funds which are held by JPMorgan Chase Bank, N. A. and its affiliates. Because of the short-term nature of these investments, the Company does not believe it has material exposure due to market risk. The impact to the Company’s financial position and results of operations from likely changes in interest rates is not material.

Item 8.

Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

Vyant Bio, Inc. and Subsidiaries

Consolidated Financial Report December 31, ~~2021~~2022

Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)	62
Consolidated Balance Sheets	64
Consolidated Statements of Operations and Other Comprehensive Loss	65
Consolidated Statements of Temporary Equity and Common Stockholders’ Equity (Deficit)	66
Consolidated Statements of Cash Flows	67
Notes to Consolidated Financial Statements	68

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Vyant Bio, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Vyant Bio, Inc. and subsidiaries (the “Company”) as of December 31, ~~2021~~2022 and ~~2020~~ 2021, the related consolidated statements of operations and comprehensive loss, temporary equity and common stockholders’ equity (deficit), and cash flows, for each of the two years in the period ended December 31, ~~2021~~2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2021~~2022 and ~~2020~~2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, ~~2021~~2022, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses and negative cash flows from operations since inception, has an accumulated deficit, has substantially ceased revenue generation, and is projecting insufficient liquidity to meet its obligations as they become due over the next twelve months, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to ~~obtain~~ obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

~~Critical~~Our ~~Audit~~audits ~~Matter~~included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

~~Fair Value Measurements Included in Discontinuing~~Critical ~~Operations~~Audit ~~— Refer to Notes 3, 4 and 11 to the financial statements~~Matters

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Long-lived Assets — Determination of Impairment Indicators — Refer to Notes 4, 6 and 7 to the financial statements

Critical Audit Matter Description

InThe ~~December 2021, the~~ Company’s ~~Board~~evaluation of ~~Directors~~long-lived ~~approved~~assets afor ~~plan~~impairment toinvolves ~~sell~~an ~~the~~initial ~~vivoPharm~~assessment ~~Pty~~of ~~Ltd~~each ~~(“vivoPharm”)~~asset ~~business and~~group ~~classified~~to ~~the~~determine ~~business~~whether events asor ~~held~~changes ~~for~~in ~~sale~~circumstances ~~and~~exist ~~discontinuing~~that ~~operations.~~may Asindicate athat ~~result,~~ the ~~Company~~carrying ~~performed~~amounts ~~a valuation~~ of ~~the vivoPharm~~an ~~disposal~~asset group, ~~including~~is ~~goodwill~~no ~~and~~longer ~~intangible~~recoverable. ~~assets,~~Possible indications ~~and~~of ~~compared~~impairment ~~its~~may ~~fair~~include ~~value~~events ~~less~~or ~~costs~~changes toin ~~sell~~circumstances toaffecting ~~its~~the ~~carrying~~recoverability ~~value. The~~of ~~Company’s valuation included~~ an ~~equally~~asset ~~weighted~~group’s ~~analysis of similar company sales transactions over the past several years~~carrying asvalue. ~~well~~When asevents ~~guideline~~or ~~public~~changes ~~company~~in ~~multiples~~circumstances ofexist, ~~revenue~~the asCompany ofevaluates ~~December~~its ~~31,~~assets ~~2021.~~for ~~This~~impairment ~~valuation~~by ~~requires~~comparing ~~management~~undiscounted ~~to make significant~~future ~~estimates~~cash ~~and~~flows ~~assumptions~~expected ~~related~~ to ~~valuation~~be ~~multiples~~generated ~~and~~over ~~forecasts~~the life of ~~fiscal~~each ~~year~~asset ~~2022~~group ~~revenue.~~to ~~Changes~~the inrespective ~~these~~carrying ~~assumptions~~amount. ~~could have~~If ~~a significant impact on~~ the ~~fair~~carrying ~~value~~amount ~~and~~of ~~the~~an asset ~~goodwill~~group ~~impairment~~exceeds ~~charge taken during~~ the ~~year.~~undiscounted Asfuture acash ~~result of this valuation~~flows, ~~the~~ ~~Company~~an ~~recorded a goodwill~~ impairment ~~charge~~is ~~of $20~~recognized.~~2 million.~~

WeThe ~~identified~~Company ~~the~~makes ~~valuation of the vivoPharm disposal group as a critical audit matter because of the~~ significant ~~judgments~~assumptions ~~made by management~~ to ~~estimate~~evaluate ~~the~~an ~~fair~~asset ~~value~~group ~~vivoPharm~~for ~~and~~possible ~~the~~indications ~~resulting~~of impairment ~~charge~~. ~~This~~Changes ~~required~~in athese ~~high~~assumptions could ~~degree~~have ofa ~~auditor~~significant ~~judgment~~impact ~~and~~on an ~~increased extent~~asset ofgroup ~~effort,~~identified ~~including~~for ~~the~~further ~~need~~analysis. toFor ~~involve~~the ~~our~~year ~~fair~~ended ~~value~~December ~~specialists~~31, ~~when~~2022, ~~performing~~no ~~audit procedures to evaluate the reasonableness~~impairment ofloss ~~management’s~~has ~~estimates~~been ~~and~~recognized ~~assumptions~~on ~~related~~its tolong-lived ~~selection of the valuation multiples and forecasts of fiscal 2022 revenue~~assets.

Given the Company’s evaluation of possible indications of impairment of an asset group requires management to make significant assumptions, performing audit procedures to evaluate whether management appropriately identified events or changes in circumstances indicating that the carrying amounts of assets may not be recoverable required a high degree of auditor judgment and the use of fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the ~~valuation~~assessment of ~~the~~long-lived ~~vivoPharm~~asset ~~disposal~~groups ~~group~~for possible indications of impairment included the following, among others:

● Performed sensitivity analyses of the valuation multiples and revenue growth assumptions used in the model. ● Perform substantive testing procedures over the forecasted 2022 revenue used within the valuation model, including inspecting signed contracts for a significant portion of the population. For the remainder of the population where signed contracts were not available, we inquired of management as to the stage of contract negotiations with the customer and obtained cost breakdowns and presentations to the customer to support the value and likelihood of the forecasted revenue. ● With the assistance of ~~our~~ fair value specialists, we evaluated ~~the~~management’s ~~reasonableness~~analysis of ~~the~~impairment ~~(1)~~indicators ~~valuation methodology and (2) valuation multiples~~ by:

-– ~~Testing~~Performing ~~the~~inquiries ~~source~~of ~~information~~management ~~underlying~~regarding the ~~determination~~process and assumptions used to identify potential indicators of impairment and evaluating the ~~multiples~~consistency ~~and~~of the ~~mathematical~~assumptions ~~accuracy~~with evidence obtained in other areas of the ~~calculation~~audit. – Developing an independent ~~range~~expectation of ~~valuation~~impairment ~~multiples~~indicators ~~and~~(or ~~comparing~~lack ~~those~~thereof) toand ~~the~~comparing ~~multiples~~such ~~selected~~expectation byto management’s analysis. – ~~Compared~~Testing ~~quantitative~~long-lived ~~factors~~asset ~~including~~groups ~~size,~~for ~~profitability~~possible indications of impairment, including searching for adverse asset group-specific and/or ~~growth~~market ~~prospects~~conditions. of– ~~vivoPharm~~Inspecting tominutes ~~that~~of the board of directors, the ~~guideline~~Company’s public ~~companies~~statements, operating plans, and industry data to identify evidence that may contradict management’s assumptions.

/s/ DELOITTE & TOUCHE LLP Minneapolis, Minnesota March 31, 2023 We have served as the Company’s auditor since 2020.

Minneapolis, Minnesota

March 30, 2022

We have served as the Company’s auditor since 2020.

Vyant Bio, Inc.

(Formerly Known as Cancer Genetics, Inc.)

Consolidated Balance Sheets

(Shares and USD in ~~Thousands~~thousands)

	2022			2021
	December 31,
	2021			2020
	2022			2021
Assets
Current assets:
Cash and cash equivalents	$	2010,~~608~~041		$	~~792~~20,608
Trade accounts and other receivables		~~434~~323			~~357~~434
Inventory		~~475~~53			~~415~~475
Prepaid expenses and other current assets		~~895~~747			~~223~~895
Assets of discontinuing operations – current		~~802~~345			-802
Total current assets		2311,~~214~~509			123,~~787~~214
Non-current assets:
Fixed assets, net		1,~~020~~106			1,~~031~~020
Operating lease right-of-use assets, net		~~673~~1,542			~~1,095~~673
Long-term prepaid expenses and other assets		1,~~221~~048			~~136~~1,221
Assets of discontinuing operations – non-current		~~11,508~~-			-11,508
Total non-current assets		143,~~422~~696			214,~~262~~422
Total Assets	$	3715,~~636~~205		$	437,~~049~~636
Liabilities, Temporary Equity and Stockholders’ Equity (Deficit)
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	~~740~~655		$	~~1,300~~740
Accrued expenses		~~764~~1,154			~~162~~764
Deferred revenue		7472			9274
Obligations under operating leases, current portion		~~174~~313			~~486~~174
Obligation under finance lease, current portion		~~157~~252			-157
Other current liabilities		-			9
Liabilities of discontinuing operations – current		1,219			3,522
Liabilities of discontinuing operations – current		3,522			-
Total current liabilities		3,665			5,431
Total current liabilities		5,431			2,049
Obligations under operating leases, less current portion		1,301			516
Obligations under operating leases, less current portion		516			627
Obligations under finance leases, less current portion		273			293
Obligations under finance leases, less current portion		293			-
Long-term debt		57			57
Share-settlement obligation derivative		-			1,690
Liabilities of discontinuing operations – non-current		-			49
Accrued interest		-			277
Total Liabilities		5,296			6,346
Long-term debt		57			6,839
Commitments and Contingencies (Note 16)		-
Liabilities of discontinuing operations – non-current		49			-
Stockholders’ Equity
Total Liabilities		6,346			11,482
Preferred stock, authorized 9,764 shares $ 0.0001 par value, 0 shares issued and outstanding as of December 31, 2022 and 2021		-			-
Commitments and Contingencies (Note 16)		-			-
Common stock, authorized 100,000 shares, $0.0001 par value, 5,922 and 5,798 shares issued and outstanding as of December 31, 2022 and 2021, respectively		1			1
Temporary Equity
Additional paid-in capital		111,443			110,176
Series A Convertible Preferred stock, $0.0001 par value; 4,700 shares authorized, 0 and 4,612 shares issued and outstanding as of December 31, 2021 and 2020, respectively (liquidation value of $0 and $11,732, respectively, as of December 31, 2021 and 2020)		-			12,356
Accumulated comprehensive loss		(32	)		(74	)
Series B Convertible Preferred stock, $0.0001 par value; 4,700 shares authorized, 0 and 3,489 shares issued and outstanding, as of December 31, 2021 and 2020, respectively (liquidation value of $0 and $15,707, respectively, as of December 31, 2021 and 2020)		-			16,651
Accumulated deficit		(101,503	)		(78,813	)
Series C Convertible Preferred stock, $0.0001 par value; 2,000 shares authorized, 0 shares issued and outstanding as of December 31, 2021 and 2020 (liquidation value of $0 as of December 31, 2021 and 2020)		-			-
Total Common Stockholders’ Equity		9,909			31,290
Total Temporary Equity		-			29,007
Total Liabilities and Stockholders’ Equity	$	15,205		$	37,636
Stockholders’ Equity (Deficit)
Preferred stock, authorized 9,764 shares $ 0.0001 par value, 0 shares issued and outstanding as of December 31, 2021 and 2020		-			-
Common stock, authorized 100,000 shares, $0.0001 par value, 28,993 and 2,594 shares issued and outstanding as of December 31, 2021 and 2020, respectively		3			-
Additional paid-in capital		110,174			1,514
Accumulated comprehensive loss		(74	)		-
Accumulated deficit		(78,813	)		(37,954	)
Total Common Stockholders’ Equity (Deficit)		31,290			(36,440	)
Total Liabilities and Stockholders’ Equity (Deficit)	$	37,636		$	4,049

See Notes to Consolidated Financial Statements.

Vyant Bio, Inc.

(Formerly Known as Cancer Genetics, Inc.)

Consolidated Statements of Operations and Comprehensive Loss

(Shares and USD in ~~Thousands~~thousands, except per share amounts)

	2022			2021
	Years Ended December 31,
	2021			2020
	2022			2021
Revenue:
Service	$	~~665~~99		$	~~588~~665
Product		~~483~~567			~~279~~483
Total revenue		~~1,148~~666			~~867~~1,148
Operating costs and expenses:
Cost of goods sold – service		~~408~~44			~~384~~408
Cost of goods sold – product		~~1,439~~964			~~717~~1,439
Cost of goods sold
Research and development		6,772			4,273
Research and development		4,273			3,232
Selling, general and administrative		8,798			8,424
Selling, general and administrative		8,424			2,717
Merger related costs		-			2,310
Merger related costs		2,310			1,440
Total operating costs and expenses		16,578			16,854
Total operating costs and expenses		16,854			8,490
Loss from operations		(15,912	)		(15,706	)
Loss from operations		(15,706	)		(7,623	)
Other income (expense):
Change in fair value of warrant liability		~~214~~-			-214
Change in fair value of share-settlement obligation derivative		~~(250~~-	)		(~~503~~250	)
Loss on debt conversions		~~(2,518~~-	)		-(2,518	)
Other income		5712			1157
Interest expense, net		~~(372~~93	)		(~~535~~372	)
Total other income (expense)		~~(2,869~~105	)		(12,~~027~~869	)
Loss from continuing operations before income taxes		(1815,~~575~~807	)		(818,~~650~~575	)
Income tax expense (benefit)		-			-
Loss from continuing operations		(1815,~~575~~807	)		(818,~~650~~575	)
Discontinuing operations (net of $0 tax benefit in 2021)		(22,284	)		-
Discontinuing operations (net of ($21) and $0 tax (benefit) expense in 2022 and 2021, respectively)		(6,883	)		(22,284	)
Net loss		(4022,~~859~~690	)		(840,~~650~~859	)
Cumulative translation adjustment		~~(74~~42	)		-(74	)
Comprehensive loss	$	(4022,~~933~~648	)	$	(840,~~650~~933	)
Net loss per share attributed to common stock – basic and diluted:
Net loss per share from continuing operations	$	(02.8269	)	$	(34.4811	)
Net loss per share from discontinuing operations		(01.9918	)		-(4.92	)
Net loss per share	$	(13.8187	)	$	(39.4803	)
Weighted average shares outstanding:
Weighted average common shares outstanding – basic and diluted		225,~~614~~868			24,~~486~~525

See Notes to Consolidated Financial Statements.

Vyant Bio, Inc.

(Formerly Known as Cancer Genetics, Inc.)

Consolidated Statements of Temporary Equity and Common Stockholders’ Equity (Deficit)

~~Years~~(Shares ~~Ended~~and ~~December~~USD ~~31,~~in ~~2021 and 2020~~thousands)

~~(in~~Years ~~thousands)~~Ended December 31, 2022 and 2021

		Series A Preferred Stock						Series B Preferred Stock						Series C Preferred Stock						Total Temporary			Common Stock				Additional Paid In		Accumulated			Accumulated Comprehensive			Total Common Stockholders’ Equity
					Shares			Amount			Capital			Deficit			Income (Loss)			Equity
		Shares			Amount			Shares			Amount			Shares			Amount			Equity			Shares		Amount		Capital		Deficit			Loss			(Deficit)
					Common Stock						Additional Paid In			Accumulated			Accumulated Comprehensive			Total Stockholders’
Balance as of December 31, 2019			4,612		$	12,356			3,735		$	18,045			-		$	-		$	30,401			2,456	$	-	$	1,047	$	(29,304	)	$	-		$	(28,257	)
					Shares			Amount			Capital			Deficit			Loss			Equity
Stock-based compensation			-			-			-			-			-			-			-			-		-		216		-			-			216
Balance as of January 1, 2022	-	-	-	-		5,798		$	1		$	110,176		$	(78,813	)	$	(74	)	$	31,290
Exercise of stock options
Beginning balance value	-	-	-	-		5,798		$	1		$	110,176		$	(78,813	)	$	(74	)	$	31,290
Exercise of stock options, shares
Stock-based compensation	-	-	-	-		-			-			1,455			-			-			1,455
Issuance of Series C Convertible Preferred shares, net of issuance costs of $214
Exercise of stock options						1			-			4			-			-			4
Issuance of Series C Convertible Preferred shares, net of issuance costs of $214, shares
Vesting of restricted stock						2			-			-			-			-			-
Issuance of Common Stock for acquisition consideration
Issuance of common stock, net of issuance costs of $250						121			-			(192	)		-			-			(192	)
Issuance of Common Stock for acquisition consideration
Foreign currency translation adjustment						-			-			-			-			42			42
Issuance of shares for services			-			-			5			30			-			-			30			20		-		40		-			-			40
Net loss						-			-			-			(22,690	)		-			(22,690	)
Exercise of stock options in exchange for a note payable			-			-			-			-			-			-			-			12		-		26		-			-			26
Balance as of December 31, 2022	-	-	-	-		5,922		$	1		$	111,443		$	(101,503	)	$	(32	)	$	9,909
Issuance of shares upon exercise of common stock options			-			-			-			-			-			-			-			63		-		99		-			-			99
Ending balance value	-	-	-	-		5,922		$	1		$	111,443		$	(101,503	)	$	(32		$	9,909
Executives restricted common stock grants			-			-			-			-			-			-			-			43		-		86		-			-			86
Issuance of Series B Convertible Preferred shares, net of issuance costs of $41			-			-			236			1,250			-			-			1,250			-		-		-		-			-			-
Exchange of Series B Preferred Stock for 2020 Convertible Notes			-			-			(487	)		(2,674	)		-			-			(2,674	)		-		-		-		-			-			-
Warrant liability reclassified to equity upon Merger
Foreign currency translation adjustment
Net loss			-			-			-			-			-			-			-			-		-		-		(8,650	)		-			(8,650	)
Balance as of December 31, 2020			4,612		$	12,356			3,489		$	16,651			-		$	-		$	29,007			2,594	$	-	$	1,514	$	(37,954	)	$	-		$	(36,440	)
Balance			4,612		$	12,356			3,489		$	16,651			-		$	-		$	29,007			2,594	$	-	$	1,514	$	(37,954	)	$	-		$	(36,440	)
Stock-based compensation			-			-			-			-			-			-			-			-		-		1,298		-			-			1,298
Exercise of stock options			-			-			-			-			-			-			-			8		-		41		-			-			41
Issuance of Series C Convertible Preferred shares, net of issuance costs of $214			-			-			-			-			567			1,786			1,786			-		-		-		-			-			-
Issuance of Common Stock for acquisition consideration			-			-			-			-			-			-			-			11,007		2		59,918		-			-			59,920
Issuance of incremental shares to StemoniX shareholders upon Merger			-			-			-			-			-			-			-			805		-		-		-			-			-
Conversion of Preferred Stock to Common Stock upon Merger			(4,612	)		(12,356	)		(3,489	)		(16,651	)		(567	)		(1,786	)		(30,793	)		11,197		1		30,792		-			-			30,793
Conversion of 2020 Convertible Notes to Common Stock upon Merger			-			-			-			-			-			-			-			3,339		-		16,190		-			-			16,190
Preferred stock warrant settled for Common Stock upon Merger			-			-			-			-			-			-			-			43		-		-		-			-			-
Warrant liability reclassified to equity upon Merger			-			-			-			-			-			-			-			-		-		421		-			-			421
Foreign currency translation adjustment			-			-			-			-			-			-			-			-		-		-		-			(74	)		(74	)
Net loss			-			-			-			-			-			-			-			-		-		-		(40,859	)		-			(40,859	)
Balance as of December 31, 2021			-		$	-			-		$	-			-		$	-		$	-			28,993	$	3	$	110,174	$	(78,813	)	$	(74	)	$	31,290
Balance			-		$	-			-		$	-			-		$	-		$	-			28,993	$	3	$	110,174	$	(78,813	)	$	(74	)	$	31,290

	Shares			Amount			Shares			Amount			Shares			Amount			Equity			Shares		Amount		Capital		Deficit			Loss			(Deficit)
	Series A Preferred Stock						Series B Preferred Stock						Series C Preferred Stock						Total Temporary			Common Stock				Additional Paid In		Accumulated			Accumulated Comprehensive			Total Common Stockholders’ Equity
	Shares			Amount			Shares			Amount			Shares			Amount			Equity			Shares		Amount		Capital		Deficit			Loss			(Deficit)
Balance as of January 1, 2021		4,612		$	12,356			3,489		$	16,651			-		$	-		$	29,007			519	$	-	$	1,514	$	(37,954	)	$	-		$	(36,440	)
Stock-based compensation		-			-			-			-			-			-			-			-		-		1,298		-			-			1,298
Exercise of stock options		-			-			-			-			-			-			-			1		-		41		-			-			41
Issuance of Series C Convertible Preferred shares, net of issuance costs of $214		-			-			-			-			567			1,786			1,786			-		-		-		-			-			-
Issuance of Common Stock for acquisition consideration		-			-			-			-			-			-			-			2,201		-		59,920		-			-			59,920
Issuance of Incremental shares to StemoniX shareholders upon Merger		-			-			-			-			-			-			-			161		-		-		-			-			-
Conversion of Preferred Stock to Common Stock upon Merger		(4,612	)		(12,356	)		(3,489	)		(16,651	)		(567	)		(1,786	)		(30,793	)		2,239		1		30,792		-			-			30,793
Conversion of 2020 Notes to Common Stock upon Merger		-			-			-			-			-			-			-			668		-		16,190		-			-			16,190
Preferred stock warrant settled for Common Stock upon Merger		-			-			-			-			-			-			-			9		-		-		-			-			-
Warrant liability reclassified to equity upon Merger		-			-			-			-			-			-			-					-		421		-			-			421
Foreign currency translation adjustment		-			-			-			-			-			-			-					-		-					(74	)		(74	)
Net loss		-			-			-			-			-			-			-			-		-		-		(40,859	)		-			(40,859	)
Balance as of December 31, 2021		-		$	-			-		$	-			-		$	-			-			5,798	$	1	$	110,176	$	(78,813	)	$	(74	)	$	31,290

See Notes to Consolidated Financial Statements.

Vyant Bio, Inc.

~~(Formerly~~Condensed ~~Known~~Consolidated asStatements ~~Cancer~~of ~~Genetics,~~Cash ~~Inc.)~~Flows

~~Consolidated~~(USD ~~Statements~~in ~~of Cash Flows~~Thousands)

(USD in thousands)

	2022			2021
	Years Ended December 31,
	2022			2021
Cash Flows from Operating Activities:
Net loss	$	(22,690	)	$	(40,859	)
Net loss from discontinuing operations		6,883			22,284
Reconciliation of net loss to net cash used in operating activities, continuing operations:
Stock-based compensation		1,186			1,003
Amortization of operating lease right-of-use assets		321			504
Depreciation and amortization expense		522			550
Change in fair value of share-settlement obligation derivative		-			250
Change in fair value of financial instruments		-			(210	)
Accretion of debt discount		-			173
Loss on conversion of debt		-			2,518
Other		(1	)		(14	)
Changes in operating assets and liabilities, net of impacts of business combination:
Trade accounts and other receivables		111			(77	)
Inventory		422			(60	)
Prepaid expense and other assets		321			(165	)
Accounts payable		(85	)		(1,146	)
Obligations under operating leases		(265	)		(499	)
Accrued expenses and other liabilities		387			(740	)
Net cash used in operating activities, continuing operations		(12,888	)		(16,488	)
Net cash used in operating activities, discontinuing operations		(793	)		(505	)
Net cash used in operating activities		(13,681	)		(16,993	)
Cash Flows from Investing Activities:
Purchase of equipment		(617	)		(535	)
Proceeds from patent held for sale and equipment sales		-			50
Cash acquired from acquisition		-			30,163
Net cash (used in) provided by investing activities, continuing operations		(617	)		29,678
Net cash provided by (used in) investing activities, discontinuing operations		3,880			(59	)
Net cash provided by investing activities		3,263			29,619
Cash Flows from Financing Activities:
Issuance of common stock, net of issuance costs		(188	)		41
Issuance of Series C Convertible Preferred Stock, net of issuance costs		-			1,786
2020 Convertible Note proceeds, net of issuance costs		-			5,022
Principal payments on long-term debt		-			(82	)
Proceeds from lease financing		266			492
Principal payments on obligations under financing leases		(191	)		(37	)
Net cash (used in) provided by financing activities, continuing operations		(113	)		7,222
Net cash used in financing activities, discontinuing operations		(36	)		(32	)
Net cash (used in) provided by financing activities		(149	)		7,190
Net (decrease) increase in cash and cash equivalents		(10,567	)		19,816
Cash and cash equivalents, beginning of year		20,608			792
Cash and cash equivalents, end of year	$	10,041		$	20,608

Supplemental disclosure of cash flow information:
Cash paid for interest	$	34		$	8
Cash paid for income taxes		8			-
Non-cash investing activities:
Fair value of non-cash merger consideration	$	-		$	59,920
Right-of-use assets obtained in exchange for new operating lease liabilities		1,189			83
Non-cash financing activities:
Conversion of Convertible Preferred Stock to Common Stock upon Merger	$	-			30,793
Conversion of 2020 Convertible Notes and accrued interest to Common Stock upon Merger		-			16,190
Reclass warrant liability to equity upon Merger		-			421

	Years Ended December 31,
	2021			2020
Cash Flows from Operating Activities:
Net loss	$	(40,859	)	$	(8,650	)
Net loss from discontinuing operations		22,284			-
Reconciliation of net loss to net cash used in operating activities, continuing operations:
Stock-based compensation		1,003			372
Amortization of operating lease right-of-use assets		504			538
Depreciation and amortization expense		550			572
Change in fair value of share-settlement obligation derivative		250			503
Change in fair value of financial instruments		(210	)		-
Accretion of debt discount		173			235
Loss on conversion of debt		2,518			-
PPL loan and EIDL grant forgiveness		-			(740	)
Other		(14	)		29
Changes in operating assets and liabilities, net of impacts of business combination:
Trade accounts and other receivables		(77	)		(127	)
Inventory		(60	)		(43	)
Prepaid expense and other assets		(165	)		68
Accounts payable		(1,146	)		878
PPL loan and EIDL grant proceeds		-			740
Obligations under operating leases		(499	)		(485	)
Accrued expenses and other liabilities		(740	)		298
Net cash used in operating activities, continuing operations		(16,488	)		(5,812	)
Net cash provided by operating activities, discontinuing operations		(505	)		-
Net cash used in operating activities		(16,993	)		(5,812	)
Cash Flows from Investing Activities:
Purchase of equipment		(535	)		(60	)
Proceeds from patent held for sale and equipment sales		50			17
Cash acquired from acquisition		30,163			-
Net cash provided by (used in) investing activities, continuing operations		29,678			(43	)
Net cash used in investing activities, discontinuing operations		(59	)		-
Net cash provided by (used in) investing activities		29,619			(43	)
Cash Flows from Financing Activities:
EIDL loan proceeds		-			57
Issuance of common stock, net of issuance costs		41			98
Issuance of Series B Convertible Preferred Stock, net of issuance costs		-			1,250
Issuance of Series C Convertible Preferred Stock, net of issuance costs		1,786			-
2020 Convertible Note proceeds, net of issuance costs		5,022			4,923
Related party notes payable		-			80
Principal payments on long-term debt		(82	)		-
Proceeds from lease financing		492			-
Principal payments on obligations under financing leases		(37	)		(76	)
Net cash provided by financing activities, continuing operations		7,222			6,332
Net cash used in financing activities, discontinuing operations		(32	)		-
Net cash provided by financing activities		7,190			6,332
Net increase in cash and cash equivalents		19,816			477
Cash and cash equivalents, beginning of year		792			315
Cash and cash equivalents, end of year	$	20,608		$	792
Supplemental disclosure of cash flow information:
Cash paid for interest	$	8		$	5
Cash paid for income taxes		-			1
Non-cash investing activities:
Fair value of non-cash merger consideration	$	59,920		$	-
Right-of-use assets obtained in exchange for new operating lease liabilities		83			373
Non-cash financing activities:
Conversion of Convertible Preferred Stock to Common Stock upon Merger		30,793			-
Conversion of 2020 Convertible Notes and accrued interest to Common Stock upon Merger		16,190			-
Exchange of Series B Convertible Preferred Stock for 2020 Convertible Notes		-			2,674
Related party note payable converted to 2020 Convertible Notes		-			55
Related party note payable exchanged for stock option exercise		-			26
Reclass warrant liability to equity upon Merger		421			-

See Notes to Consolidated Financial Statements.

Vyant Bio, Inc.

(Formerly Known as Cancer Genetics, Inc.)

Notes to Consolidated Financial Statements

Note 1. Organization, Description of Business, Business Disposals, Offerings and Merger

Vyant Bio, Inc. (the “Company”, “Vyant Bio”, “VYNT” or “we”), is an innovative biotechnology company reinventing drug discovery for complex neurodevelopmental and neurodegenerative disorders. Our central nervous system (“CNS”) drug discovery platform combines 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 (“Rett”), 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 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.

As further described in Note 3, in December 2021, the Company’s Board of Directors approved a plan to sell the vivoPharm Pty Ltd (“vivoPharm”) business to focus the Company on the development of neurological developmental and degenerative disease therapeutics. ~~The~~In ~~Company engaged~~the anfourth ~~investment~~quarter ~~banker~~of in2022, ~~December~~the ~~2021~~Company tosold ~~sell~~substantially all of the operations of vivoPharm ~~business~~in ~~during~~two ~~2022~~separate transactions.

OnThe ~~March~~Company ~~11,~~is ~~2020,~~expected ~~the~~to ~~World~~generate ~~Health~~minimal revenue ~~Organization~~from ~~declared~~continuing ~~the~~operations ~~novel~~as ~~strain~~we ofhave ~~coronavirus~~substantially ~~(“COVID-19”)~~ceased athe ~~global~~Maple ~~pandemic~~Grove ~~and~~facility’s ~~recommended~~revenue ~~containment~~producing ~~and~~operations to support internal ~~mitigation~~drug ~~measures~~discovery ~~worldwide~~programs. ~~Many~~The ofCompany ~~the~~had ~~Company’s~~cash ~~customers~~and ~~worldwide~~cash ~~were~~equivalents ~~impacted~~of by$10.0 ~~COVID-19~~million ~~and~~as ~~temporarily~~of ~~closed their~~December ~~facilities~~31, ~~which~~2022, ~~impacted~~an ~~revenue~~accumulated indeficit ~~the~~of $101.5 ~~first~~million, ~~half~~cash ofoutflows ~~2020~~from ~~for~~continuing ~~StemoniX~~operations of $12.8 ~~While~~million for the ~~impact~~year ofthen ~~the~~ended ~~pandemic~~2022, onand ~~our~~a ~~business~~net loss from continuing ~~has~~operations ~~lessened~~of $15.8 million. As further described in ~~2021~~Note 17, on January 4, 2023, the ~~global~~Company ~~outbreak~~announced ofthat ~~COVID-19~~it ~~continued~~had engaged LifeSci Capital as its financial advisor to assist in ~~late~~exploring ~~2021~~a ~~with~~wide ~~new~~range ~~variants~~of ~~and~~strategic ~~has~~alternatives ~~impacted the~~focused ~~way~~on weenhancing ~~operate~~shareholder ~~our~~value ~~business~~which ~~including~~could include ~~remote~~selling ~~working~~the Company, selling Company assets, or including ~~its~~our ~~impact~~public oncompany ~~technology~~as ~~security~~a ~~risks~~reverse ~~and~~merger ~~employee retention~~candidate. The ~~extent~~Company’s Board toof ~~which~~Directors (the ~~COVID-19~~“Board”) ~~pandemic~~approved ~~may~~a ~~impact~~plan on January 31, 2023 to preserve the Company’s ~~future~~cash ~~business~~to ~~will~~be ~~depend~~able onto ~~future~~continue ~~developments,~~to ~~which~~pursue ~~are~~a ~~highly~~satisfactory ~~uncertain~~strategic ~~and~~alternative ~~cannot~~for bethe ~~predicted~~purpose ~~with~~of ~~confidence,~~maximizing ~~such~~the ~~as,~~value of the ~~duration~~Company’s business while also having sufficient cash to adequately fund an orderly wind down of the ~~outbreak~~Company’s operations (the “Cash Preservation Plan”) in the event it is unable to secure a satisfactory strategic alternative. On March 24, ~~travel~~2023 the Company terminated its (a) Equity Distribution ~~restrictions~~Agreement, dated April 8, 2022, by and ~~social~~between ~~distancing~~the inCompany and Canaccord Genuity LLC, regarding the ~~U.S.~~issue and ~~other~~sale, ~~countries~~from time to time, of ~~business~~shares ~~closures~~of orthe ~~business~~Company’s ~~disruptions~~common stock for an aggregate offering price of up to $20,000,000, and ~~the~~(b) ~~effectiveness~~Purchase Agreement, dated ofMarch ~~actions~~28, ~~taken~~2022, inby and between the ~~U.S.~~Company and ~~other~~Lincoln ~~countries~~Park toCapital ~~contain~~Fund, LLC, regarding the issue and ~~treat~~sale, from time to time, of shares of the ~~disease~~Company’s common stock for an aggregate offering price of up to $15,000,000.

~~The Company~~Going is actively monitoring the impact of the COVID-19 pandemic on its business, results of operations and financial condition. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition in the future is unknown at this time and will depend on future developments that are highly unpredictable.Concern

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

The Company has suffered recurring losses and negative cash flows from operations since inception, has an accumulated deficit, and is expected to generate minimal revenue from continuing operations as we have substantially ceased the Maple Grove facility’s revenue producing operations to support internal drug discovery programs. The Company is projecting insufficient liquidity to meet its obligations as they become due over the next twelve months. The Company had cash and cash equivalents of $10.0 million as of December 31, 2022, an accumulated deficit of $101.5 million, cash outflows from continuing operations of $12.8 million for the year then ended 2022, and a net loss from continuing operations of $15.8 million. As further described in Note 17, on January 4, 2023, the Company announced that it had engaged LifeSci Capital as its financial advisor to assist in exploring a wide range of strategic alternatives focused on enhancing shareholder value which could include selling the Company, selling Company assets, or including our public company as a reverse merger candidate. The Company’s Board of Directors (the “Board”) approved a plan on January 31, 2023 to preserve the Company’s cash to be able to continue to pursue a satisfactory strategic alternative for the purpose of maximizing the value of the Company’s business while also having sufficient cash to adequately fund an orderly wind down of the Company’s operations (the “Cash Preservation Plan”) in the event it is unable to secure a satisfactory strategic alternative. On March 24, 2023 the Company terminated its (a) Equity Distribution Agreement, dated April 8, 2022, by and between the Company and Canaccord Genuity LLC, regarding the issue and sale, from time to time, of shares of the Company’s common stock for an aggregate offering price of up to $20,000,000, and (b) Purchase Agreement, dated March 28, 2022, by and between the Company and Lincoln Park Capital Fund, LLC, regarding the issue and sale, from time to time, of shares of the Company’s common stock for an aggregate offering price of up to $15,000,000. These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern.

In response to these conditions and based on our current operating plan, the Company plans to reduce expenses, slow cash flows, and evaluate strategic partners to acquire our assets, including our public company as a reverse merger candidate. There are no assurances that we will be able to raise cash in these transactions or find a reverse merger candidate and we may therefore need to complete an orderly winddown of the Company’s operations or, if sufficient funds are not available, bankruptcy. These plans have not yet been finalized and are not within the Company’s control, and therefore cannot be deemed probable. As a result, the Company has concluded that management’s plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern.

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

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~~ 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 173,~~977~~595,~~544 shares~~508 shares of VYNT common stock, par value $0.0001 ~~per~~ 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 “Major Investor Warrant”) issued to a certain StemoniX convertible note holder (the “Major Investor”)), (ii) options to purchase an aggregate of ~~891~~178,~~780 shares~~356 shares of Common Stock to the holders of StemoniX options with exercise prices ranging from $03.~~66 to~~30 to $423.~~61 per~~05 per share and a weighted average exercise price of $17.4630 per share, and (iii) a warrant (the “Major Investor Warrant”) to the Major Investor, expiring February 23, 2026 to purchase ~~143~~28,~~890 shares~~778 shares of Common Stock at a price of $529.~~9059 per~~5295 per share in exchange for the Major 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 consolidated statements of operations as Merger related costs for the year ended December 31, 2021.

The ~~Merger~~following ~~was~~details ~~accounted for as a reverse acquisition with StemoniX being~~ the ~~accounting~~allocation ~~acquirer~~ of ~~CGI using~~ the ~~acquisition~~preliminary ~~method~~purchase ~~of accounting.~~price ~~Under~~consideration ~~acquisition~~recorded ~~accounting,~~on ~~the assets and liabilities (including executory contracts, commitments and other obligations) of CGI, as of~~ March 30, 2021, the ~~closing~~acquisition date ~~of the Merger~~, ~~were recorded at their respective fair values and added to those of StemoniX.~~with ~~Any~~adjustments ~~excess of purchase price consideration over the fair values of the identifiable net assets is~~ recorded asthrough ~~goodwill. The total consideration paid by StemoniX in~~ the ~~Merger~~first ~~amounted~~quarter ~~to $59.9 million, which represents the fair value~~ of ~~CGI’s 11~~2022,~~007,186~~ ~~shares of Common Stock or $50.74 million, 2,157,686 Common Stock warrants or $9.04 million and 55,907 Common Stock options outstanding on~~ the ~~closing date~~end of the ~~Merger~~purchase ~~with~~price aallocation ~~fair value of $139 thousand~~period. In addition, at the effective time of the Merger, existing StemoniX shareholders received an additional 804,711 incremental shares in accordance with the conversion ratio set forth in the Merger Agreement.

~~The~~ Schedule ~~Company incurred $2.3 million and $1.4 million~~ of ~~costs~~Preliminary ~~associated~~Allocation ~~with the Merger that have been reported on the consolidated statements~~ of ~~operations~~Purchase asPrice ~~Merger related costs for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021 and 2020, accounts payable includes $0 thousand and $1.0 million of Merger related costs.~~Consideration

The following details the allocation of the preliminary purchase price consideration recorded on March 30, 2021, the acquisition date, with adjustments recorded in the remainder of 2021, and purchase price allocation.

	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

~~Schedule~~The Company substantially completed valuation analyses necessary to assess the fair values of ~~Preliminary~~the ~~Allocation~~tangible and intangible assets acquired and liabilities assumed and the amount of goodwill to be recognized as of the ~~Purchase~~acquisition ~~Price~~date. ~~Consideration~~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 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.

	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 substantially 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. As of December 31, 2021, the Company has recorded provisional payroll and income taxes payable liabilities. 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 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.

These intangible assets are classified as Level 3 measurements within the fair value hierarchy.

The following presents the unaudited pro forma combined financial information as if the Merger had occurred as of January 1, ~~2020~~2021:

	Years ended December 31,
	Year ended December 31,
	2021			~~2020~~
Total revenue	$	6,726		$	~~6,618~~
Net loss		(35,623	)		~~(13,138~~	)
Pro forma loss per common share, basic and diluted		(1.23	)		(0.45	)
Pro forma loss per common share,		(6.15	)
Pro forma weighted average number of common shares basic and diluted		285,~~977~~795,~~491~~498			~~28,875,162~~

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~~2021, nor are they necessarily indicative of future consolidated results.

Note 3. Discontinuing Operations

In ~~December~~ December 2021, the Company’s Board of Directors approved a plan to sell the vivoPharm Pty Ltd (“vivoPharm”) business 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 iswas ~~expected~~substantially ~~to be~~ completed ~~2022. No amounts~~ in ~~2020 were classified as discontinuing operations as~~ the ~~vivoPharm~~fourth ~~business~~quarter ~~was acquired as part~~ of ~~the Merger on March 30, 2021~~2022.

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 2021 consolidated financial statements. In connection with the reclassification of the vivoPharm business as held for sale, 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 and comparable transaction revenue multiples, which are classified as Level 3 measurements within the fair value hierarchy.69

~~Also~~On ~~included~~November in2, ~~discontinuing~~2022 ~~operations~~the ~~are~~Company ~~pre-Merger-related~~completed ~~payables~~the ~~related~~sale toof ~~Cancer~~its ~~Genetic’s~~principal ~~sale~~vivoPharm ofsubsidiary, ~~its~~vivoPharm ~~BioPharma~~LLC ~~and~~located ~~Clinical~~in ~~businesses~~Hershey, ~~(“Pre-Merger~~Pennsylvania, ~~discontinuing~~to ~~operations”)~~Reaction Biology Corporation for $5.5 Asmillion in ofan ~~December~~upfront 31cash payment, ~~2021~~subject to customary adjustments for working capital, closing cash, indebtedness and transaction expenses. After these closing adjustments were reflected, $~~409~~5.5 million ~~thousand~~was ofpaid ~~liabilities~~at ~~relating~~closing toand ~~these~~an additional $0.3 million was paid in February 2023. Vyant Bio received approximately $4.8 million ~~businesses~~in ~~are~~cash ~~classified~~after transaction related expenses and income taxes, as ~~other~~well ~~current~~as ~~liabilities~~incur –$0.4 ~~discontinuing~~million in ~~operations~~exit oncosts associated with this transaction. Exit costs associated with the vivoPharm business were paid in January 2023. In connection with the sale of the vivoPharm LLC business, the Company’s ~~consolidated~~agreed ~~balance~~to ~~sheets~~retain certain liabilities aggregating to $357 thousand.

~~The~~On ~~following~~December ~~tables~~30, ~~reflect~~2022, the ~~Pre-Merger~~Company ~~discontinuing~~entered ~~operations~~into ~~and~~a Share Purchase Agreement (the “Agreement”) with Sabine Brandt as trustee for the Brandt Family Trust (“Buyer”), pursuant to which vivoPharm sold the entirety of the Company’s remaining vivoPharm business ~~operations~~for ~~from~~early ~~March~~discovery 30services, ~~2021,~~ represented by 100% of the ~~Merger~~outstanding ~~date~~shares of (i) of RDDT a vivoPharm Company Pty Ltd; and (ii) vivoPharm Europe Ltd, ~~through~~to ~~December~~Buyer 31in exchange for a nominal cash amount, ~~2021~~subject to adjustments for closing cash and accounts payable, on and ~~related~~subject ~~assets~~to the terms and ~~liabilities~~conditions set forth therein. The sale resulted in the Company delivering target closing cash as part of the sold entities of approximately $827 thousand and the assumption by Buyer of liabilities of the sold entities aggregating to approximately $2.0 million. The Transaction was consummated effective December 31, ~~2021~~2022. The Agreement contains customary representations, warranties, covenants and indemnification provisions.

As further described in note 17, the Company sold the remainder of the vivoPharm business in Australia on March 13, 2023.

In connection with the classification 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. In 2022, the Company recorded an additional impairment charges of $5.4 million consisting of the write-off of the remaining $2.2 million goodwill balance and reducing the cost basis of customer relationships and tradenames by $2.7 million and $0.5 million, respectively.

Also included in discontinuing operations are pre-Merger-related payables related to Cancer Genetics’ sale of its BioPharma and Clinical businesses (“Pre-Merger discontinuing operations”). As of December 31, 2022 and 2021, $267 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:

Revenue	$	3,978
		2022		2021
Cost of goods sold		2,524
	Years ended December 31,
General and administrative		3,531
	2022			2021
Impairment of goodwill		20,216
Revenue	$	6,406		$	3,978
Total operating costs and expenses	$	26,271
Cost of goods sold		3,189			2,524
Loss from discontinuing operations	$	(22,293	)
General and administrative		4,709			3,531
Total other income	$	9
Impairment of goodwill and intangible assets		5,415			20,216
Loss from discontinuing operations before income taxes	$	(22,284	)
Total operating costs and expenses	$	13,313		$	26,271
Income tax benefit		-
Loss from discontinuing operations	$	(6,907	)	$	(22,293	)
Net loss from discontinuing operations	$	(22,284	)
Total other income	$	3		$	9
Loss from discontinuing operations before income taxes	$	(6,904	)	$	(22,284	)
Income tax expense (benefit)		(21	)		-
Net loss from discontinuing operations	$	(6,883	)	$	(22,284	)

Asset and liabilities of discontinuing operations were as follows:

Accounts receivable	$	457
		2022	2021
Other current assets		345
	December 31,
Assets of discontinuing operations - current	$	802
	2022		2021
Fixed assets, net of accumulated depreciation	$	163
Accounts receivable	$	11	$	457
Operating lease right-of-use assets		30
Due from Reaction Biology Corporation		334
Patents and other intangible assets, net		8,787
Other current assets		-		345
Goodwill		2,164
Assets of discontinuing operations - current	$	345	$	802
Other assets		364
Fixed assets, net of accumulated depreciation	$	-	$	163
Assets of discontinuing operations - non-current	$	11,508
Operating lease right-of-use assets		-		30
Accounts payable	$	358
Patents and other intangible assets, net		-		8,787
Accrued expense		418
Goodwill		-		2,164
Obligation under operating lease, current		29
Other assets		-		364
Obligation under finance lease, current		32
Assets of discontinuing operations - non-current	$	-	$	11,508
Deferred revenue		1,911
Accounts payable	$	47	$	358
Taxes payable		365
Due to RDDT a vivoPharm Company Pty Ltd		216
Other current liabilities		409
Accrued expense		577		418
Liabilities of discontinued operations - current	$	3,522
Obligation under operating lease, current		-		29
Obligations under operating leases, less current	$	2
Obligation under finance lease, current		-		32
Obligations under finance leases, less current		47
Deferred revenue		43		1,911
Liabilities of discontinued operations -non- current	$	49
Taxes payable		69		365
Other current liabilities		267		409
Liabilities of discontinued operations - current	$	1,219	$	3,522
Obligations under operating leases, less current	$	-	$	2
Obligations under finance leases, less current		-		47
Liabilities of discontinued operations -non- current	$	-	$	49

~~Intangible~~There were no intangible assets as of December 31, 2022. Intangible assets consisted of the following as of December 31, 2021:

Schedule of Intangible Assets

	2021
Intangible Assets:
Customer relationships	$	8,000
Trade name		1,500
Intangible assets gross		9,500
Less accumulated amortization		(713	)
Intangible assets, net	$	8,787

Amortization expense for intangible assets aggregated $713 thousand for the year ended December 31, 2021. There was no amortization expense for intangible assets recorded in 2022.

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 year ended December 31, 2022 and 2021:

	2021
Beginning balance, January 1, 2021	$	-
Beginning balance, January 1	$	-
Initial balance upon consummation of the Merger		22,164
Purchase price adjustments		216
Impairment charge		(20,216	)
Ending balance, December 31	$	2,164
Ending balance, December 31, 2021	$	2,164
Impairment charge		(2,164	)
Ending balance, December 31, 2022	$	-

7071

Note 4. Significant Accounting Policies

Basis of presentation: The Company prepares its financial statements on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).

Segment reporting: Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. All of the Company’s assets from continuing operations are maintained in the U.S. The Company views and manages its continuing operations as one segment. Per Note 2, the Merger on March 30, 2021, combined the StemoniX business with Vyant Bio and its vivoPharm business. The Company completed its review of the ongoing strategy and reporting structure of its operations in the fourth quarter of 2021 resulting in the Company’s Board of Directors approval to engage investment bankers to sell the vivoPharm business in 2022. As a result of this strategic decision, the Company completed its analysis of segment and reporting unit accounting arising from the Merger, identified vivoPharm as a reporting unit, and allocated all of the goodwill arising from the Merger to the vivoPharm business’ discontinuing operations. See Note 3 for further information regarding the vivoPharm discontinuing operations.

Principles of consolidation: The accompanying consolidated financial statements include the accounts of Vyant Bio, Inc. and its wholly-owned subsidiaries. All significant intercompany account balances and transactions have been eliminated in consolidation.

~~Reclassification~~Foreign currency: The Company translates the financial statements Asof its foreign subsidiaries, which have a ~~result~~functional ofcurrency in the ~~Merger~~respective country’s local currency, ~~the~~to ~~Company~~U.S. ~~has~~dollars ~~reclassified~~using month-end ~~$92~~exchange ~~thousand~~rates offor ~~deferred~~assets and liabilities and average exchange rates for revenue, costs and expenses. Translation gains and losses are recorded in accumulated comprehensive loss as a component of stockholders’ equity. For the years ended December 31, 2022 ~~2020~~and ~~previously~~2021 ~~included~~there were foreign currency translation gains of $42 inthousand and losses of $74 thousand, respectively, all related to the ~~balance~~vivoPharm business. ~~sheet~~Gains ~~caption~~and losses resulting from foreign currency transactions that are denominated in currencies other ~~current~~than ~~liabilities~~the toentity’s functional ~~deferred~~currency ~~revenue~~are toincluded ~~conform~~within todiscon

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