Bone Biologics Corporation — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. The company is a pre-revenue medical-device developer focused on NELL-1/DBM for bone regeneration in spinal fusion. Its product is expected to be regulated by the FDA as a combination product with a device lead.
Financial results and position
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Operating expenses | $469,304 | $231,881 | $1,157,203 | $412,805 |
| Net loss | $469,304 | $491,898 | $1,158,803 | $923,645 |
| Basic and diluted loss per share | $0.05 | $0.17 | $0.11 | $0.32 |
| Net cash used in operating activities | Not separately stated | Not separately stated | $1,220,843 | $763,964 |
At June 30, 2022, cash was $5.45 million, prepaid expenses were $204,359, total assets were $5.66 million, and total liabilities were $70,636. The company reported no debt on its balance sheet. Six-month cash decreased by $1.22 million; there were no financing cash flows in the period. Accumulated deficit was $71.63 million.
Changes versus comparable periods
- Q2 operating expenses more than doubled, primarily as general and administrative costs rose to $451,704 from $229,865; R&D increased to $17,600 from $2,016. Management attributed higher G&A to resumed operations, including D&O insurance, director compensation, full-time CFO services, and investor-relations services.
- Six-month operating expenses increased to $1.16 million from $412,805, largely reflecting the same increase in G&A. The financial statements report six-month total operating expenses of $1,157,203; the MD&A comparison table appears to contain a conflicting figure.
- Net loss improved in Q2 despite higher operating expenses, mainly because related-party interest expense fell to zero from $260,017. For the six months, net loss increased, as higher operating costs outweighed the absence of the prior-year $510,840 related-party interest expense.
- All outstanding convertible notes were converted in October 2021. Cash fell from $6.68 million at December 31, 2021 to $5.45 million at June 30, 2022.
Outlook, risks, and notable items
- Management estimates operating expenditures of approximately $9.5 million over the next 12 months, versus $5.45 million in cash at quarter-end. It estimates approximately $10 million to complete first-in-human studies and an additional $27 million to achieve FDA approval for a spinal interbody fusion indication.
- The filing states that substantial doubt exists about the company’s ability to continue as a going concern within one year of issuance. Management plans to seek additional debt or equity financing, but gives no assurance funding will be available. Failure to raise funds could require reduced or discontinued development or operations; equity financing could dilute shareholders.
- The company has historically relied on Hankey Capital for debt and equity funding; Hankey Capital controls approximately 70% of common shares. Future support is not assured.
- COVID-19 was reported to be delaying or extending clinical trials by several months and could increase trial costs. Inflation, higher interest rates, and possible recession add financing and operating uncertainty.
- The exclusive UCLA license covers NELL-1 development and commercialization. It includes annual fees, royalties, clinical and regulatory milestones, and an $8 million diligence fee payable as specified sales thresholds are reached. UCLA may terminate or reduce exclusivity if diligence milestones are missed. The agreement was amended May 9, 2022; the filing identifies the amendment but does not detail its substantive changes.
- A 2019 lawsuit alleges breach of contract and tortious interference related to terminated professional service agreements. The company intends to defend the claims; a potential loss cannot be estimated at this stage.
- Management concluded disclosure controls and internal control over financial reporting were effective as of June 30, 2022. No material change in internal controls was reported.
Important facts for investors to verify
- Whether the company can secure funding sufficient to cover its stated 12-month operating needs and planned clinical development.
- Clinical-trial timing, costs, and progress toward first-in-human studies, including any continuing COVID-related delays.
- The company’s progress against UCLA license diligence milestones and the implications of the May 2022 amendment.
- Developments in the litigation and any resulting legal costs or exposure.
- The apparent discrepancy in the MD&A six-month operating-expense table versus the financial statements.