Bone Biologics Corporation — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Bone Biologics is a pre-revenue medical-device company developing NELL-1/DBX for bone regeneration in spinal fusion. Its lead product is expected to be regulated by the FDA as a combination product with a device lead.
Financial performance and liquidity
| Metric | Q3 2021 / Sep. 30, 2021 | Comparable period / prior balance |
|---|---|---|
| Revenue | $0 | $0 in Q3 2020 |
| Operating expenses | $229,789 | $145,823 in Q3 2020 |
| Net loss | $509,303; $0.17 per share | $394,049; $0.14 per share in Q3 2020 |
| Nine-month net loss | $1,432,948; $0.49 per share | $1,370,979; $0.47 per share in 2020 |
| Cash used in operations, nine months | $1,041,734 | $301,240 in the comparative period |
| Cash | $3,374 | $0 at Dec. 31, 2020 |
| Total assets / liabilities | $52,393 / $15,177,651 | At Sep. 30, 2021 |
| Related-party notes payable | $12,767,896 | $11,712,179 at Dec. 31, 2020 |
| Related-party interest payable | $2,041,980 | $1,251,626 at Dec. 31, 2020 |
There was no gross profit or meaningful margin to report because the company had no revenue. At September 30, 2021, accumulated deficit was $70.3 million and stockholders’ deficit was $15.1 million.
Changes and management commentary
- Q3 operating expenses rose 57.6% year over year. R&D fell to zero from $142,877 as operations were curtailed; G&A rose to $229,789 from $2,946, attributed to resumed operations and registration-statement costs. Related-party interest expense increased 12.6% to $279,514.
- For the first nine months, R&D declined 85.1% to $47,516, while G&A increased 98.6% to $595,078. Management attributed the G&A increase to resuming operations, bringing filings current, and offering-related work.
- Management estimated $6.6 million in operating expenditures for the next 12 months. It estimated approximately $10 million to complete first-in-human studies and a further $27 million to achieve FDA approval for a spine interbody-fusion indication.
Outlook, financing, risks, and unusual items
- The filing states that substantial doubt exists about the company’s ability to continue as a going concern within one year after issuance of the financial statements. It may need to reduce or discontinue development or operations if it cannot raise sufficient capital.
- After quarter-end, the company completed an October 2021 public offering of 1,510,455 units at $5.25 each, for reported gross proceeds of $7,929,889. Each unit included one share and a warrant exercisable at $6.30. Hankey Capital converted $12,767,894 of principal and $2,054,039 of accrued interest into 5,928,774 shares; collateral shares were cancelled. These events occurred after the reporting date and are not reflected in September 30 balances.
- The company had relied on Hankey Capital for working capital; Hankey Capital and related interests controlled approximately 70% of common shares, and Hankey-affiliated representatives served as directors. The related-party financing concentration and post-offering conversion are material considerations.
- COVID-19 had delayed or extended clinical trials by several months, according to the company’s clinical research organizations, and could increase trial costs or constrain financing. The UCLA license carries development milestones, royalties, and fees; the filing says no listed milestones had been met by September 30, 2021. Failure to meet diligence deadlines could lead to termination or loss of exclusivity.
- A 2019 lawsuit alleges breach of contract and tortious interference related to terminated professional service agreements. The company intends to defend the case; it said the potential loss could not be estimated.
- Management concluded disclosure controls were ineffective and identified a material weakness tied to insufficient staffing for financial reporting and SEC filings. It said the CFO would be engaged full-time following the offering.
- A 1-for-2.5 reverse stock split became effective October 12, 2021. The filing states that share and per-share amounts were retroactively restated for the split.
Key facts for investors to verify
- Whether offering proceeds and debt conversion provide adequate runway against the stated spending needs, and the company’s updated cash position and burn rate.
- Current clinical-development timelines, trial status, FDA requirements, and remaining financing required to reach milestones.
- The terms and potential dilution of offering warrants, including the underwriter’s exercise of its over-allotment option for warrants.
- Hankey Capital’s post-conversion ownership and the implications of continued related-party influence.
- Remediation of the material weakness and progress on the UCLA license obligations and pending litigation.
- The cash-flow statement’s comparative-period heading appears to say September 30, 2019, while the MD&A and comparative figures identify 2020; verify the intended period. The filing’s financial-statement text does not provide a clear resolution of this labeling inconsistency.