Bone Biologics Corporation — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2022. The company is a pre-revenue medical-device developer focused on NELL-1/DBM for spinal fusion, a combination product expected to be regulated with a device lead. Financial statements are unaudited.
Financial performance and position
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $769,410 | $0 | $823,410 | $47,516 |
| General and administrative | $449,867 | $229,789 | $1,553,070 | $595,078 |
| Total operating expenses | $1,219,277 | $229,789 | $2,376,480 | $642,594 |
| Net loss | $1,219,277 | $509,303 | $2,378,080 | $1,432,948 |
| Operating cash used | Not stated for quarter | Not stated for quarter | $1,616,122 | $1,041,734 |
At September 30, 2022, cash was $5.06 million, prepaid expenses were $141,734, total assets were $5.20 million, and current liabilities were $799,475, entirely accounts payable and accrued expenses. The filing reports no debt at quarter-end; prior-period related-party interest expense was eliminated after convertible notes were converted in October 2021. Stockholders’ equity was $4.40 million, compared with $6.58 million at December 31, 2021. Gross margin is not meaningful because there was no revenue or cost of revenue.
Changes versus prior periods
- Q3 operating expenses rose 431% year over year, primarily reflecting resumed development activity and higher corporate costs.
- Nine-month operating expenses rose 270%; net loss increased 66%. R&D and G&A both increased substantially from the reduced-activity 2021 period.
- Nine-month operating cash use increased from $1.04 million to $1.62 million. There were no financing cash flows in the 2022 period, compared with $1.05 million provided by financing in 2021.
- Interest expense fell to zero in 2022 from $790,354 for the nine months of 2021 as the outstanding convertible notes had been converted.
Liquidity, outlook, risks, and other matters
- Going concern: The company reported accumulated losses of approximately $72.9 million and stated that substantial doubt exists about its ability to continue as a going concern within one year from issuance. Management estimated next-12-month operating expenditures of $11.5 million.
- Subsequent financing: On October 12, 2022, the company completed a public offering with $5.1 million gross and approximately $4.454 million net proceeds. Management said available cash was expected to fund operations through commencement of a pilot clinical study. The offering included 3,777,778 units, each with one common share and three warrants. The company expects to classify approximately $7.6 million of warrant fair value as a current liability because of the warrants’ provisions.
- Development funding: Management estimated approximately $15 million would be needed to complete first-in-human studies and a further $27 million to achieve FDA approval for a spine interbody fusion indication. Additional financing is not assured; failure to obtain it could require curtailing or discontinuing development or operations and could dilute shareholders or constrain operations.
- Funding concentration: Hankey Capital and related parties controlled approximately 70% of common stock at September 30, 2022, and have historically provided working capital. Future support is not assured.
- Development and operating risks: FDA authorization and successful clinical trials remain uncertain. The filing cites potential trial delays and increased costs from COVID-19, as well as inflation, rising interest rates, supply-chain disruption, economic uncertainty, and possible recession.
- Commitments: A Wuxi Biologics development contract had estimated total costs of $2.09 million; $634,900 was incurred during the nine months. The UCLA license includes maintenance fees, royalties, development milestones, and other contingent payments; none of the stated milestones had been met by September 30.
- Litigation: A 2019 federal lawsuit alleges breach of contract and tortious interference related to former professional service agreements. The company intends to defend the matter; potential loss could not be estimated.
- Management concluded disclosure controls and internal control over financial reporting were effective as of September 30, 2022. The filing reports no material off-balance-sheet arrangements.
Key facts for investors to verify
- Post-offering cash, warrant-liability accounting, and the offering’s total potential dilution, including the underwriters’ warrant-related provisions.
- Whether available funding is sufficient to commence the pilot study and how the company plans to finance the estimated $15 million and $27 million development requirements.
- Clinical and regulatory milestones, trial timing and costs, and continued compliance with UCLA license diligence requirements.
- Developments in the lawsuit and any potential financial exposure.