Bone Biologics Corp. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Bone Biologics is a development-stage medical-device company developing NELL-1 with demineralized bone matrix (DBM) for bone regeneration, initially targeting spinal fusion. The company has not generated revenue. Its NELL-1/DBM product is expected to require FDA premarket approval as a device/drug combination product.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development | $2.59 million | $36,400 |
| General and administrative | $556,892 | $653,099 |
| Total operating expenses / operating loss | $3.15 million | $689,499 |
| Net loss | $3.71 million | $689,499 |
| Basic and diluted loss per share | $0.23 | $0.07 |
| Cash used in operating activities | $1.35 million | $860,779 |
With no revenue or cost of revenue, gross profit and operating margins are not meaningful. At March 31, cash was $6.19 million, down from $7.54 million at year-end 2022. Total assets were $6.78 million; total liabilities were $4.01 million, including $2.28 million of accounts payable and accrued expenses and a $1.73 million warrant liability. The filing reports no borrowings or other debt. Stockholders’ equity was $2.77 million, versus $5.95 million at December 31, 2022.
Accumulated losses were approximately $75.7 million. Management estimates operating expenditures of $9.8 million over the next 12 months and says available cash is expected to fund operations only through commencement of a pilot clinical study. The company states that substantial doubt exists about its ability to continue as a going concern; additional financing is needed, with no assurance it will be available.
Material changes and unusual items
- R&D expense increased by $2.55 million, primarily due to NELL-1 development activities; total operating expenses rose 356.5% year over year.
- Net loss increased by 438.1%. It includes a $562,918 expense from remeasuring the warrant liability; this is a fair-value item, not operating cash use.
- Operating cash use increased by approximately $489,000 year over year. The company reported $1.39 million more in accounts payable and accrued expenses, partly offsetting cash use.
- In February 2023, 1,400,926 Series C warrants were exchanged for common shares. Shares outstanding increased to 16,702,912 from 15,301,986 at year-end.
- One development vendor was owed $2.13 million at quarter-end, with $3.65 million of remaining services under its contracts. The filing also states that approximately 96% of payables were concentrated with one vendor, but gives a March 31, 2021 date for that statement; the date is inconsistent with this reporting period.
Outlook, risks and contingencies
- Management estimates that approximately $15 million will be needed to complete first-in-human studies and a further $27 million to achieve FDA approval for a spine interbody fusion indication. The company plans to seek debt and/or equity financing; financing could dilute shareholders, impose restrictions, or fail to materialize. Without adequate funds, the company may scale back or discontinue development or operations.
- Key risks include clinical-trial execution and timing, FDA authorization, reliance on third-party manufacturers, product acceptance, intellectual-property rights, and access to capital. The filing also cites inflation, higher interest rates, possible recession, banking-market disruption, and potential clinical-trial delays and added costs.
- Nasdaq had given the company until May 16, 2023 to regain compliance with the $1.00 minimum bid-price requirement. As of March 31, the company did not meet the stockholders’ equity standard for a second compliance period and expected a possible delisting notice. On May 1, shareholders approved authorizing a reverse split in a range of 1-for-20 to 1-for-50; the board had not approved the split as of the filing date, and the company cautioned that it might not restore compliance.
- A 2019 lawsuit alleging breach of contract and tortious interference remained in an early stage; the company said a possible loss could not be estimated. No other material legal proceeding outcome is quantified.
- Under its UCLA license, the company owes ongoing maintenance and patent costs and may owe royalties, milestones, and other payments upon specified events. No listed development or commercial milestones had been met as of March 31, 2023.
Important facts for investors to verify
- Cash runway relative to the $9.8 million estimated next-12-month expenditures, and the timing, amount, and terms of any financing.
- Clinical-study start and progress, development spending, and whether the estimated $15 million and $27 million funding needs change.
- Nasdaq listing status and whether the board implements a reverse split; confirm any subsequent compliance or delisting notices.
- Warrant-liability valuation, potential dilution from outstanding warrants and options, and changes in shares outstanding.
- Vendor payable concentration and the inconsistent date in the filing’s concentration disclosure; also monitor the lawsuit and any resulting exposure.