Bone Biologics Corporation — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. The unaudited financial statements are consolidated. Bone Biologics is a development-stage medical device company developing NELL-1/DBM for bone regeneration in spinal fusion; it has not generated revenue.
Financial results and liquidity
- Revenue: $0 for Q2 and the first six months of 2023, unchanged from the comparable 2022 periods. Gross profit was also $0.
- Q2 results: Operating expenses were $3.04 million, including $2.30 million of R&D and $745,000 of G&A. Net loss was $1.77 million, or $1.69 per basic and diluted share, versus a $469,000 loss, or $1.36 per share, in Q2 2022.
- Six-month results: Operating expenses were $6.19 million, including $4.89 million of R&D and $1.30 million of G&A. Net loss was $5.48 million, or $6.90 per basic and diluted share, versus a $1.16 million loss, or $3.36 per share, in the first half of 2022.
- Margins: Not meaningful because the company had no revenue.
- Cash flow: Operating activities used $4.98 million in the first half, versus $1.22 million in 2022. A public offering provided $4.45 million net; cash decreased by $531,000 to $7.01 million.
- Balance sheet at June 30: Total assets were $7.62 million; current and total liabilities were $1.93 million, comprising $1.69 million of accounts payable and accrued expenses and $241,000 of warrant liability. No borrowings or other interest-bearing debt are reported. Stockholders’ equity was $5.69 million.
- Warrant valuation: The warrant liability fell from $1.66 million at year-end 2022 to $241,000. The company recorded a favorable $1.27 million fair-value change in Q2 and $707,000 for the first half, affecting reported net loss.
Changes versus the prior comparable period
- R&D expense increased sharply from $18,000 to $2.30 million in Q2, and from $54,000 to $4.89 million for the first half, principally due to NELL-1 development in preparation for a pilot clinical study.
- G&A rose 65% in Q2 to $745,000, attributed primarily to incentive bonus accruals and higher legal costs. First-half G&A increased 18% to $1.30 million, with higher legal expense partly offset by lower option-related expense.
- First-half operating cash use increased to $4.98 million from $1.22 million, primarily reflecting development spending.
- On June 5, the company effected a 1-for-30 reverse stock split; share and per-share figures in the filing are retrospectively adjusted. A June public offering issued 2,538,071 shares at $1.97 per share, raising $5.0 million gross and $4.45 million net.
Outlook, risks and unusual items
- Management estimates operating expenditures of $6.1 million for the next 12 months. Cash on hand was expected to fund operations through reporting six-month pilot-study data, which the company expected in Q2 2024.
- The company states it needs approximately $8.6 million to complete first-in-human studies and an estimated additional $27 million to obtain FDA approval for a spine interbody fusion indication. It plans to seek additional debt or equity financing, but says funding may not be available on acceptable terms. Insufficient funding could force development cutbacks, a strategic alliance involving relinquished technology rights, or reduced or discontinued operations.
- The filing reports substantial doubt about the company’s ability to continue as a going concern within one year of issuance; the prior-year auditor had also expressed substantial doubt. The company had accumulated losses of approximately $77.4 million.
- NELL-1/DBM is expected to be regulated as a device/drug combination product requiring FDA premarket approval. Clinical-trial execution, regulatory approval, financing, third-party manufacturing, intellectual-property protection, and market acceptance remain key risks.
- A pending lawsuit concerning former professional service agreements remains at an early stage; the company says a possible loss range cannot be estimated. It intends to defend the claims.
- Nasdaq confirmed minimum-bid-price compliance, but imposed a Panel Monitor through June 27, 2024. A failure to meet a continued-listing requirement during the monitoring period could expose the securities to delisting.
- The UCLA license requires, among other items, at least $1 million of annual preclinical or clinical development spending until completion of a Phase III pivotal study; failure to meet diligence milestones could result in termination or conversion of the license to non-exclusive status. No listed license milestones had been met as of June 30.
Important facts for investors to verify
- Whether additional financing is secured and how long available cash supports clinical development.
- Timing and results of the pilot study’s six-month data reporting, expected in Q2 2024.
- Clinical, FDA, and other regulatory milestones and the funding needed to reach them.
- Compliance with UCLA license spending and diligence obligations, and any change in the lawsuit’s status or potential exposure.
- Nasdaq continued-listing compliance during the Panel Monitor period and the potential effects of further equity issuance and warrant dilution.