| Significant Accounting Policies | Note
3. Significant Accounting Policies Use
of Estimates The
preparation of financial statements in conformity with U.S. generally accepted accounting principles (“US GAAP”) requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. The Company’s significant estimates include estimated transaction price,
including variable consideration, of the Company’s revenue contracts; the value of intangible assets arising from the Merger, the
useful lives of fixed assets; the valuation of derivatives and one 2020 Convertible Note accounted for under the fair-value election;
deferred tax assets, inventory, right-of-use assets and lease liabilities, stock-based compensation, income tax uncertainties, and other
contingencies. 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 As
a result of the Merger, the Company has reclassified $ 92
thousand of deferred revenue as of December 31,
2020 previously included in the balance sheet caption other current liabilities to deferred revenue to conform to the post-Merger presentation. Foreign
currency The
Company translates the financial statements of its foreign subsidiaries, which have a functional currency in the respective country’s
local currency, to U.S. dollars using month-end exchange rates for assets and liabilities and average exchange rates for revenue, costs
and expenses. Translation gains and losses are recorded in accumulated other comprehensive loss as a component of stockholders’
equity. For the three and six months ended June 30, 2021 there were foreign currency translation losses of $ 1
thousand and $ 1
thousand, respectively. Gains and losses
resulting from foreign currency transactions that are denominated in currencies other than the entity’s functional currency are
included within the consolidated statements of operations. There were no foreign currency translation or transaction gains
or losses for the three and six months ended June 30, 2020 as the Merger, which includes significant foreign operations, occurred
on March 30, 2021. 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. Substantially all
of the Company’s assets are maintained in the United States and, effective with the Merger, Australia. The Company views its operations
and has managed its business as one segment. Risks
and Uncertainties The
Company operates in an industry that is subject to intense competition, government regulation and rapid technological change. The Company’s
operations are subject to significant risk and uncertainties including financial, operational, technological, regulatory, and other risks,
including the potential risk of business failure. Cash
and Cash Equivalents The
Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Included
in cash and cash equivalents at December 31, 2020 is $ 738
thousand of restricted cash related to the Company’s
PPP loan. The Company was required to escrow the PPP loan proceeds plus accrued interest as the Company’s PPP loan forgiveness
application had not been processed by the U.S. Small Business Administration at the time of the Merger. This amount was returned to the
Company in April 2021 when the PPP loan was fully forgiven. The cash and cash equivalents balance at June 30, 2021 includes $ 12
million invested
in a U.S. government money market fund. Trade
Accounts Receivable Trade
accounts receivable are recorded at the invoiced amount and do not bear interest. The Company records an allowance for doubtful accounts
for estimated losses inherent in its accounts receivable portfolio. In establishing the required allowance, management considers historical
losses adjusted to consider current market conditions and the Company’s customers’ financial condition, the amount of receivables
in dispute, and the current receivables aging and current payment patterns. The Company reviews its allowance for doubtful accounts monthly.
No allowances
were recorded as of June 30, 2021 or December 31, 2020. Write-offs
for the three and six months ended June 30, 2021 and 2020 were not significant. The Company does not have any off-balance-sheet credit
exposure related to its customers. Concentration
of Credit Risk Financial
instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and
trade receivables. The Company places cash and cash equivalents in various financial institutions with high credit rating and limits
the amount of credit exposure to any one financial institution. Trade receivables are primarily from clients in the pharmaceutical and
biotechnology industries, as well as academic and government institutions. Concentrations of credit risk with respect to trade receivables,
which are typically unsecured, are limited due to the wide variety of customers using the Company’s products and services as well
as their dispersion across many geographic areas. As of June 30, 2021 and December 31, 2020, two and three customers, respectively, represented
10% or more of the Company’s total trade accounts receivable. In the aggregate, these customers represented 49%
73 Inventory Inventory
is stated at the lower of cost or net realizable value, with cost being determined on a first-in first-out basis. Cost includes materials,
labor and manufacturing overhead related to the purchase and production of inventory. Costs associated with the underutilization of capacity
are expensed to Cost of goods sold - products as incurred. Inventory is adjusted for excess and obsolete amounts. Evaluation of excess
inventory includes items such as inventory levels, anticipated usage, and customer demand, among others. Prepaid
Assets and Other Assets In
connection with the merger on March 30, 2021, a number of Director and Officer insurance contracts were in place, including tail policies
accounted for as acquired assets. Aggregate premiums of $ 2.65
million are being expensed over the term
of each respective policy. As of June 30, 2021, $ 1.17
million
has been classified in the consolidated balance sheet as non-current prepaid assets related to amounts that will be expensed
more than one year from after June 30, 2021. For
certain cells used by the Company in the vivoPharm services business, the Company acquires cells and then creates an inventory of cells
for future use (the “Cell Bank”). This process produces larger batches of established products than current sales requirements
due to economies of scale through a highly controlled manufacturing process. Accordingly, the manufacturing process for these products
has and will continue to produce quantities in excess of forecasted usage. The Company forecasts usage for its products based on several
factors including historical demand, current market dynamics, and technological advances. The Company forecasts product usage on an individual
product level for a period that is consistent with our ability to reasonably forecast inventory usage for that product. There have been no material
changes to the Company’s estimates of the net realizable value for excess and obsolete inventory or other types of inventory reserves
and inventory cost adjustments since the Merger. Additionally, current and historical reserves recorded to reduce the cost of inventory
to its net realizable value become part of the new cost basis for the inventory. Given the long-term utilization period of the frozen
Cell Bank, this asset is included in the consolidated balance sheets as non-current other assets. The carrying value of the Cell Bank
was $ 350 Revenue
Recognition 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. Prior
to the Merger, the Company’s primary sources of revenue are 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 revenues include
vivo 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 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 the Company’s customers for which the associated performance obligations have not been satisfied
and revenue has not been recognized based on the Company’s revenue recognition criteria described above. The
Company records all amounts collected for shipping as revenue. Amounts collected from customers for sales tax are recorded in sales net
of amounts paid to related taxing authorities. Contract
assets were $ 119 thousand and $ 32
thousand as of June 30, 2021 and December 31,
2020, respectively. Contract liabilities related to unfulfilled performance obligations were $ 1.4
million and $ 92
thousand as of June 30, 2021 and December 31,
2020, respectively, and are recorded in deferred revenue. Remaining performance obligations
as of June 30, 2021 are expected to be recognized as revenue in the next twelve months. Derivative
Instruments The
Company recognizes all derivative instruments as either assets or liabilities in the balance sheet at their respective fair values. The
Company evaluates its debt and equity issuances to determine if those contracts or embedded components of those contracts qualify as
derivatives requiring separate recognition in the Company’s financial statements. The result of this accounting treatment is that
the fair value of the embedded derivative is 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 is 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 are 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, is 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 consolidated balance sheet date. Warrants Except
as noted in the next paragraph, the Company accounts for its preferred stock warrants issued to non-employees in equity as issuance costs,
as the warrants were issued as vested share-based payment compensation to nonemployees. The
Company issued a warrant during first quarter of 2021 that contained an indexation feature not indexed to the Company’s stock resulting
in this warrant being accounted for as a derivative. Derivative warrants are recorded as liabilities in the accompanying consolidated
balance sheets. These common stock purchase warrants do not trade in an active securities market, and as such, the Company estimated
the fair value of these warrants using the Black-Scholes valuation pricing model with the assumptions as follows: the risk-free interest
rate for periods within the contractual life of the warrant is based on the U.S. Treasury yield curve. The expected life of the warrants
is based upon the contractual life of the warrants. The Company uses the historical volatility of its common stock and the closing price
of its shares on the NASDAQ Capital Market. As further described in Note 10 to the consolidated financial statements, as a result of
the Merger, the terms of this warrant were finalized through the conversion to a Vyant warrant resulting in the Vyant warrant being equity
classified. Net
Loss Per Share Basic
loss per share is computed by dividing loss available to common shareholders by the weighted-average number of shares of common stock
outstanding during the period. Diluted loss per share is computed by dividing loss available to common shareholders by the weighted-average
number of shares of common shares outstanding during the period increased to include the number of additional common shares that would
have been outstanding if the potentially dilutive securities had been issued, using the treasury-stock method. As the Company incurred
losses for all periods presented, potentially dilutive securities have been excluded from fully diluted loss per share as their impact
is anti-dilutive and would reduce the loss per share. Convertible
Notes The
Company accounts for convertible notes using an amortized cost model. Debt issuance costs and the initial fair value of bifurcated compound
derivatives reduce the initial carrying amount of the convertible notes. The carrying value is accreted to the stated principal amount
at contractual maturity using the effective-interest method with a corresponding charge to interest expense. Debt discounts are presented
on the consolidated balance sheets as a direct deduction from the carrying amount of that related debt. Fair
Value Option The
Company has the irrevocable option to report most financial assets and financial liabilities at fair value on an instrument-by-instrument
basis, with changes in fair value reported in earnings. The Company elected to account for the convertible note issued to the Major Investor
in February 2021 under the fair value option. See Note 10 to the consolidated financial statements. Intangible
Assets Intangible
assets consist of Vyant’s customer relationships and tradename that were acquired in the Merger, which are being amortized
using the straight-line method over the estimated useful lives of the assets of ten
years . Amortization 238
9.5 9.3 . Fixed
Assets The
Company’s purchased fixed assets are stated at cost. Fixed assets under finance leases are stated at the present value of minimum
lease payments. Depreciation
is calculated using the straight-line method over the estimated useful lives of the assets. The estimated useful life of equipment is
two to five years Long-lived
assets, such as fixed assets subject to depreciation, 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 June 30, 2021 and December 31, 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. Goodwill 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. No impairment losses were recognized during the
three and six months ended June 30, 2021 and 2020. Leases The
Company leases office space, laboratory facilities, and equipment. The Company determines if an arrangement is or contains a lease at
contract inception and recognizes a right-of-use (ROU) asset and a lease liability at the lease commencement date. For
operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments at the
lease commencement date. For finance leases, the lease liability is initially measured in the same manner and date as for operating leases
and is subsequently measured at amortized cost using the effective-interest method. The Company has elected the practical expedient to
account for lease and non-lease components as a single lease component. Therefore, the lease payments used to measure the lease liability
includes all of the fixed consideration in the contract. Key
estimates and judgments include how the Company determines (1) the discount rate it uses to discount the unpaid lease payments to present
value, (2) lease term and (3) lease payments. The Company discounts its unpaid lease payments using the interest rate implicit in the
lease or, if that rate cannot be readily determined, its incremental borrowing rate. Generally, the Company cannot determine the interest
rate implicit in the lease because it does not have access to the lessor’s estimated residual value or the amount of the lessor’s
deferred initial direct costs. Therefore, the Company generally uses its incremental borrowing rate as the discount rate for the lease.
The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to
borrow an amount equal to the lease payments under similar terms. Because the Company does not generally borrow on a collateralized basis,
it uses the interest rate it pays on its non-collateralized borrowings as an input to deriving an appropriate incremental borrowing rate,
adjusted for the lease payments, the lease term and the effect on that rate of designating specific collateral with a value equal to
the unpaid lease payments for that lease. The
lease term for all of the Company’s leases includes the noncancellable period of the lease plus any additional periods covered
by either a Company option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option
to extend (or not to terminate) the lease controlled by the lessor. Research
and Development Research
and development are expensed as incurred. Research and development costs primarily consist of personnel costs, including salaries and
benefits, lab materials and supplies, and overhead allocation consisting of various support and facility related costs. Research and
development costs were $ 910 thousand
and $ 1.7 million
for the three and six months ended June 30, 2021, respectively.
Research and development costs were $ 593
thousand and $ 1.6
million for the three and six months ended
June 30, 2020, respectively. Advertising
Costs Advertising costs are expensed as incurred. Advertising
costs were $ 9 $17
thousand, respectively, 4
16 Stock
Option Plan The
Company recognizes all employee stock-based compensation as a cost in the consolidated financial statements. Equity-classified
awards are measured at the grant date fair value of the award. The Company estimates grant date fair value using the Black-Scholes-Merton
option-pricing model and accounts for forfeitures as they occur. Excess tax benefits of awards related to stock option exercises are
recognized as an income tax benefit in the consolidated statements of operations and reflected in operating activities in the consolidated
statements of cash flows. Commitments
and Contingencies Liabilities
for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable
that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies
are expensed as incurred. Fair
Value Measurements The
Company uses valuation approaches that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent
possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability
in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following
fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
● Level
1 inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the
measurement date.
● Level
2 inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or
indirectly, for substantially the full term of the asset or liability.
● Level
3 inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not
available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement
date. The
fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when
measuring fair value. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input
that is significant to the fair value measurement. Discontinued
Operations Prior
to the Merger, Cancer Genetics, Inc. (“CGI”) entered into asset purchase agreements whereby CGI sold all assets related
to its BioPharma and Clinical businesses. CGI classified the disposals as discontinuing operations. As of June 30, 2021, $ 436
thousand Valuation
of Business Combination The
Company allocates the consideration of a business acquisition to the assets acquired and liabilities assumed based on their
fair values at the date of acquisition, including identifiable intangible assets which either arise from a contractual or legal right
or are separable from goodwill. The Company bases the fair value of identifiable intangible assets acquired in a business combination
on detailed valuations that use information and assumptions provided by management, which consider management’s best estimates
of inputs and assumptions that a market participant would use. The Company allocates to goodwill any excess purchase price over the fair
value of the net tangible and identifiable intangible assets acquired. Transaction costs associated with a business combination are expensed
as incurred and recorded as merger related costs. Recently
Issued Accounting Standards In
December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes In
January 2020, the FASB issued ASU No. 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint
Ventures (Topic 323), and Derivatives and Hedging (Topic 815) In
March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform
on Financial Reporting |
