Business Context and Reporting Period
Company: Bone Biologics Corp (Emerging Growth Company)
Filing Type: Form 8-K (Current Report)
Date of Report: August 18, 2017 (Events reported August 18, 2017)
Business Focus: The company is engaged in research and development activities, specifically regarding protein development (NELL-1), regulatory and clinical expenses, and extending patent life.
Key Financial Metrics and Transactions
This filing details specific financing transactions rather than periodic financial performance metrics (revenue, profit, cash flow). The filing text does not provide clear values for revenue, profit, margins, or existing debt levels prior to these transactions.
- Debt Financing: Issued a secured convertible promissory note of $700,000 to Hankey Capital, LLC.
- Interest Rate: 8.5% per annum.
- Maturity Date: December 31, 2017.
- Conversion Terms: Convertible at $1.00 per share at the holder's discretion. Mandatory conversion required if a financing of at least $5,000,000 occurs.
- Security: Obligations secured by a first priority security interest on all company assets.
- Equity Financing: The Musculoskeletal Transplant Foundation purchased 233,333 restricted shares of common stock at $3.00 per share (Total: $699,999).
Material Changes and Use of Proceeds
The primary material change is the entry into definitive agreements for debt and equity financing. The company intends to use the proceeds from the Convertible Note for:
- Working capital.
- Protein development and laboratory/testing equipment.
- Regulatory and clinical expenses.
- Development work to extend the patent life of NELL-1.
- Other purposes related to growing current business and R&D.
Outlook, Risks, and Contingencies
Management Commentary: The financing is designed to support the company's current business and research activities. A press release regarding the financing was issued on August 22, 2017.
Risks and Contingencies:
- Dilution Risk: The Convertible Note allows for conversion at $1.00 per share, which is significantly below the $3.00 per share price paid by The Musculoskeletal Transplant Foundation, creating potential dilution for existing shareholders if converted.
- Asset Security: The debt is secured by a first priority lien on all company assets, limiting the company's ability to secure other secured financing.
- Short Maturity: The note matures in approximately four months (December 31, 2017), requiring repayment or conversion shortly after issuance.
Investor Verification Checklist
- Verify the company's current cash position to assess the ability to repay the $700,000 note by December 31, 2017, if not converted.
- Confirm the total number of authorized shares to calculate the potential dilution impact of the $1.00 conversion price versus the $3.00 equity sale price.
- Review the "piggyback registration rights" granted to Hankey Capital to understand future liquidity implications for the Conversion Shares.
- Check for any subsequent filings regarding the $5,000,000 financing threshold that would trigger mandatory conversion of the note.