Bone Biologics Corp. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited. Bone Biologics is a pre-revenue medical device company developing NELL-1/DBX for bone regeneration in spinal fusion. The product is expected to be regulated by the FDA as a combination product with a device lead.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development | $36,400 | $45,500 |
| General and administrative | $620,022 | $135,424 |
| Total operating expenses | $656,422 | $180,924 |
| Net loss | $689,499 | $431,747 |
| Net cash used in operating activities | $860,779 | $127,983 |
At March 31, 2022, cash was $5.81 million, total assets were $6.09 million, current liabilities were $54,913, and stockholders’ equity was $6.04 million. The filing reports no debt at quarter-end; the related-party convertible notes had been converted in October 2021. No revenue or gross profit was recorded, so operating margins are not meaningful. The company reported a $33,077 income-tax provision.
Changes from the prior comparable period
- Net loss increased 59.7%, while operating expenses rose 262.8%. General and administrative expense increased by $484,598, which management attributed mainly to resumed operations, directors’ and officers’ insurance, director compensation, full-time CFO services, investor-relations services, and $152,844 of stock-based compensation.
- Research and development expense decreased 20.0%; management said research activities continued after operations were curtailed during 2021.
- Related-party interest expense fell from $250,823 to zero following the October 2021 conversion of outstanding convertible notes.
- Cash declined by $860,779 from year-end 2021. There were no financing cash flows in Q1 2022, compared with $199,148 provided by financing activities in Q1 2021.
Outlook, risks, and other notable items
- Management estimates operating expenditures of approximately $6.5 million over the next 12 months, compared with $5.81 million of cash at quarter-end. It estimates a further $10 million will be needed to complete first-in-human studies and an additional $27 million to achieve FDA approval for a spinal interbody fusion indication.
- The company has incurred approximately $71.1 million of accumulated losses. Management states that these conditions raise substantial doubt about its ability to continue as a going concern within one year after the financial statements are issued; the 2021 audit report also expressed substantial doubt. The company plans to seek additional debt or equity financing, but says funding is not assured. A shortfall could require it to reduce or discontinue development or operations; equity financing could dilute shareholders.
- Hankey Capital has historically provided working capital and controls approximately 70% of common shares, directly and indirectly. Future financing from Hankey Capital is not assured. The October 2021 public offering generated net proceeds of $6.86 million.
- COVID-19-related clinical-trial delays and added costs remain possible; the company said research organizations had indicated delays or extensions of several months. Availability of future financing is also uncertain.
- The company’s exclusive NELL-1 license from UCLA TDG carries development milestones, maintenance and patent-cost obligations, and royalties. UCLA TDG may terminate or reduce exclusivity if specified diligence milestones are not met. Q1 payments to UCLA TDG were $10,000.
- A 2019 lawsuit alleges breach of contract and tortious interference related to terminated professional-service agreements. The company intends to defend the case, but says the possible loss cannot currently be estimated.
- Management concluded disclosure controls and internal control over financial reporting were effective as of March 31, 2022. The CFO began full-time services under a revised agreement in January 2022 to address a previously identified staffing weakness.
Important facts for investors to verify
- Whether the company can obtain sufficient financing, on acceptable terms, to fund its stated development plans and address the going-concern uncertainty.
- Current clinical-development status, trial timelines and costs, and whether COVID-19 or other factors have further affected progress.
- Progress against UCLA TDG development milestones and the status of license-related payments and obligations.
- Updates on the lawsuit and any change in the company’s ability to estimate potential exposure.
- Potential dilution: 10,350,579 common shares were outstanding at March 31, 2022, with 1,827,650 warrants and 342,294 options outstanding.