Bone Biologics Corporation — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; comparisons are with the year ended December 31, 2020. The filing does not provide standalone fourth-quarter results.
Business context
Bone Biologics is a development-stage medical-device company with no product revenue. Its lead candidate, NELL-1/DBX, combines recombinant NELL-1 protein with demineralized bone matrix for spinal fusion. The company holds an exclusive worldwide license from UCLA for specified applications. The FDA has indicated the product is a combination product with a device lead; the company expects a Class III device pathway requiring premarket approval.
The company reported HREC approval for the first center of a planned Australian, 30-patient pilot study evaluating safety and effectiveness in lumbar spinal fusion. No clinical outcomes are reported. Nasdaq trading under BBLG and BBLGW began in October 2021, following a 1-for-2.5 reverse stock split.
Financial results and liquidity
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $82,044 | $340,672 |
| General and administrative expense | $1,019,432 | $484,342 |
| Total operating expenses / operating loss | $1,101,476 | $825,014 |
| Interest expense | $805,109 | $998,076 |
| Net loss | $1,610,685 | $1,824,690 |
| Basic and diluted loss per share | $0.35 | $0.63 |
| Cash used in operating activities | $1,228,586 | $426,933 |
| Cash at year-end | $6,675,365 | $0 |
Gross margin is not applicable because the company had no revenue or cost of revenue. At December 31, 2021, total assets were $6,675,365, consisting of cash; total liabilities were $99,909, all reported as accounts payable and accrued expenses. The company reported no notes payable or related-party interest payable at year-end, following conversion of its debt.
Financing activities provided $7,903,951 in 2021, including $6,858,843 net proceeds from an October public offering and approximately $1.06 million of related-party credit-facility borrowings. Hankey Capital converted $12,767,894 of principal and $2,054,041 of accrued interest into 5,928,774 shares. The company reported approximately $70.5 million of accumulated losses and estimated operating expenditures of $6.5 million for the next 12 months.
Changes and notable items
- Operating expenses rose 33.5%: lower R&D spending was more than offset by higher G&A, which increased 110.5% as operations resumed and the company brought filings current. The company attributed reduced R&D spending to funding constraints and COVID-19 delays.
- Net loss narrowed 11.7%, partly reflecting lower interest expense after debt conversion and a $297,500 gain from forgiveness of deferred compensation.
- The October offering issued 1,510,455 units at $5.25 each, with one share and one warrant per unit; warrants have a $6.30 exercise price. The company reported 1,827,650 warrants outstanding at year-end.
- Hankey Capital directly and indirectly controlled approximately 70% of common stock, creating significant ownership concentration and dependence on a related-party funding source.
Outlook, risks and contingencies
- Going concern: Management and the auditor reported substantial doubt about the company’s ability to continue as a going concern. The company plans to seek additional financing, but availability and terms are uncertain; insufficient funds could force it to curtail or discontinue development or operations.
- Development funding: Management estimated approximately $10 million to complete first-in-human studies and a further $27 million to reach FDA approval for a spine interbody-fusion indication. These are estimates, not commitments or assured funding.
- Clinical and regulatory uncertainty: The candidate remains early-stage and requires further testing and regulatory review. Trial delays, safety or efficacy findings, manufacturing issues, or FDA requirements could delay or prevent approval. COVID-19 was reported to have delayed or extended clinical studies by several months.
- Other material risks: Dependence on third-party manufacturers, CROs and MTF; competition; reliance on the UCLA license and its diligence obligations; potential dilution from future financing; and the controlling shareholder’s influence.
- Litigation: A 2019 complaint alleges breach of contract and tortious interference related to terminated professional-service agreements. The company intends to defend the matter; the potential loss could not be estimated.
- Internal controls: Management concluded disclosure controls were ineffective and identified a material weakness related to insufficient staffing for financial-statement and SEC-filing preparation and review. The CFO became full-time in January 2022; the filing does not report that the weakness was remediated.
Key facts for investors to verify
- Cash use, financing needs, and whether subsequent funding covers the estimated $6.5 million of next-12-month operating expenditures.
- Progress, enrollment and results of the Australian pilot study, and the FDA’s current clinical and PMA requirements.
- Reconciliation of R&D disclosures: the financial statements report $82,044 for 2021 and $340,672 for 2020, while a business-section passage gives $45,500 and $102,293, respectively; those latter amounts are also reported as UCLA license payments.
- Remediation of the material weakness and any updates to disclosure-control effectiveness.
- Developments in the pending litigation, the UCLA license milestones, and the company’s relationship and financing arrangements with Hankey Capital.