UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
For the transition period from _________ to _________
Commission
File No.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or formation) |
(I.R.S. employer identification number) |
(Address of principal executive offices and Zip Code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The Capital Market | ||||
| The Capital Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐
Yes
As of November 14, 2024, there were shares of the issuer’s common stock, $ par value, outstanding.
Bone Biologics Corporation
- INDEX -
| 2 |
NOTE ON FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements. Such forward-looking statements include those that express plans, anticipation, intent, contingency, goals, targets or future development and/or otherwise are not statements of historical fact. These forward-looking statements are based on our current expectations and projections about future events and they are subject to risks and uncertainties known and unknown that could cause actual results and developments to differ materially from those expressed or implied in such statements. These forward-looking statements are subject to a number of risks, uncertainties and assumptions. For a more detailed listing of some of the risks and uncertainties facing the Company, please see our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission (“SEC”) on February 21, 2024 and subsequent Quarterly Reports on Form 10-Q or other reports filed with the SEC.
All statements other than historical facts contained in this report, including statements regarding our future financial position, capital expenditures, cash flows, business strategy and plans and objectives of management for future operations are forward-looking statements. The words “anticipate,” “believe,” “expect,” “plan,” “estimate,” “could,” “may,” “will,” and similar expressions are intended to identify forward-looking statements. These statements include, among others, information regarding future operations, future capital expenditures, and future net cash flow. Such statements reflect our management’s current views with respect to future events and financial performance and involve risks and uncertainties, including, without limitation, our ability to raise additional capital to fund our operations, inflation, rising interest rates, governmental responses there to and possible recession caused thereby, obtaining Food and Drug Administration and other regulatory authorization to market our drug and biological products, successful completion of our clinical trials, our ability to achieve regulatory authorization to market our lead product NELL-1/DBM, our reliance on third party manufacturers for our drug products, market acceptance of our products, our dependence on licenses for certain of our products, our reliance on the expected growth in demand for our products, exposure to product liability and defect claims, development of a public trading market for our securities, and various other matters, many of which are beyond our control.
Should one or more of these risks or uncertainties occur, or should underlying assumptions prove to be incorrect, actual results may vary materially and adversely from those anticipated, believed, estimated or otherwise indicated. Consequently, all of the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and accordingly there can be no assurances made with respect to the actual results or developments. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
Unless expressly indicated or the context requires otherwise, the terms “Company,” “we,” “us,” and “our” in this document refer to Bone Biologics Corporation, a Delaware corporation and its wholly owned subsidiary as defined under the heading “Management’s Discussion and Analysis” in this Form 10-Q.
| 3 |
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
Bone Biologics Corporation
Condensed Consolidated Balance Sheets
September 30, 2024 | December 31, 2023 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Advances on research and development contract services | ||||||||
| Prepaid insurance | ||||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Research and development contract liabilities | ||||||||
| Accrued legal settlement | ||||||||
| Warrant liability | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ Equity | ||||||||
| Preferred Stock, $ par value per share; shares authorized; issued or outstanding at September 30, 2024 and December 31, 2023 | ||||||||
| Common stock, $ par value per share; shares authorized; and shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| F-1 |
Bone Biologics Corporation
Condensed Consolidated Statements of Operations
Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Operating expenses | ||||||||||||||||
| Research and development | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expenses) | ||||||||||||||||
| Change in fair value of warrant liability | ( | ) | ||||||||||||||
| Interest income | ||||||||||||||||
| Total other income (expenses) | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Deemed dividend on warrant inducements | ( | ) | ( | ) | ||||||||||||
| Net loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares of common outstanding – basic and diluted | ||||||||||||||||
| Loss per share – attributable to common stockholders, basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| F-2 |
Bone Biologics Corporation
Consolidated Statement of Stockholders’ Equity
For the Nine Months ended September 30, 2024
(unaudited)
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Equity | Equity | ||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ( | ) | $ | | |||||||||||||
| Fair value of vested stock options | - | |||||||||||||||||||
| Options issued to settle accrued bonus | - | |||||||||||||||||||
| Proceeds from sale of common stock, warrants, and pre-funded warrants in public offering, net of offering costs of $ | ||||||||||||||||||||
| Exercise of pre-funded warrants | ||||||||||||||||||||
| Net Loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance at March 31, 2024 | ( | ) | ||||||||||||||||||
| Fair value of vested stock options | - | |||||||||||||||||||
| Exercise of pre-funded warrants | ||||||||||||||||||||
| Net Loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance at June 30, 2024 | ( | ) | ||||||||||||||||||
| Fair value of vested stock options | - | |||||||||||||||||||
| Issuance of common shares from warrant inducement, net of costs of $ | ||||||||||||||||||||
| Incremental value of warrant inducement | - | |||||||||||||||||||
| Deemed dividend on warrant inducement | - | ( | ) | ( | ) | |||||||||||||||
| Net Loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | ( | ) | $ | ||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| F-3 |
Bone Biologics Corporation
Consolidated Statement of Stockholders’ Equity
For the Nine Months ended September 30, 2023
(unaudited)
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Equity | Equity | ||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | ( | ) | $ | | |||||||||||||
| Fair value of vested stock options issued to employees and directors | - | |||||||||||||||||||
| Exercise of warrants | ( | ) | ||||||||||||||||||
| Extinguishment of warrant liability upon exercise of warrants | - | |||||||||||||||||||
| Net Loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Fair value of vested stock options issued to employees and directors | - | |||||||||||||||||||
| Exercise of warrants | ( | ) | ||||||||||||||||||
| Extinguishment of warrant liability upon exercise of warrants | - | |||||||||||||||||||
| Proceeds from sale of common stock in public offering, net of offering costs $ | ||||||||||||||||||||
| Net Loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Fair value of vested stock options issued to employees and directors | - | |||||||||||||||||||
| Net Loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| F-4 |
Bone Biologics Corporation
Condensed Consolidated Statements of Cash Flows
Nine months Ended September 30, 2024 | Nine months Ended September 30, 2023 | |||||||
| (unaudited) | (unaudited) | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation | ||||||||
| Change in fair value of warrant liability | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Advances on research and development contract services | ( | ) | ||||||
| Prepaid insurance and prepaid expenses | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Research and development contract liabilities | ||||||||
| Accrued legal settlement | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from sale of common stock, warrants, and pre-funded warrants in public offering, net of offering costs | ||||||||
| Exercise of pre-funded warrants | ||||||||
| Proceeds from issuance of common shares from warrant inducement, net of costs | ||||||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash | ( | ) | ||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Supplemental information | ||||||||
| Income taxes paid | $ | $ | ||||||
| Noncash investing and financing activities | ||||||||
| Options issued to settle accrued bonus | $ | |||||||
| Deemed dividend – warrant inducement | $ | |||||||
| Extinguishment of warrant liability upon exercise of warrants | ||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
| F-5 |
Bone Biologics Corporation
Notes to Unaudited Condensed Consolidated Financial Statements
For the Nine months ended September 30, 2024 and 2023
1. The Company
Bone Biologics Corporation (the “Company”) was incorporated under the laws of the State of Delaware on October 18, 2007, as AFH Acquisition X, Inc. Pursuant to a Merger Agreement, dated September 19, 2014, by and among the Company, its wholly-owned subsidiary, Bone Biologics Acquisition Corp., (“Merger Sub”), and Bone Biologics, Inc., Merger Sub merged with and into Bone Biologics Inc., with Bone Biologics Inc. remaining as the surviving corporation. On September 22, 2014, the Company changed its name to “Bone Biologics Corporation” and Bone Biologics, Inc. became a wholly owned subsidiary of the Company. Bone Biologics, Inc. was incorporated in California on September 9, 2004.
The Company is a medical device company that is currently focused on bone regeneration in spinal fusion using the recombinant human protein known as NELL-1. NELL-1 in combination with DBM, demineralized bone matrix, is an osteopromotive recombinant protein that provides target specific control over bone regeneration. The NELL-1 technology platform has been licensed exclusively for worldwide applications to the Company through a technology transfer from the UCLA Technology Development Group on behalf of UC Regents (“UCLA TDG”). UCLA TDG and the Company received guidance from the Food and Drug Administration (“FDA”) that NELL-1/DBM will be classified as a device/drug combination product that will require an FDA-approved pre-market approval application before it can be commercialized in the United States.
The production and marketing of the Company’s products and its ongoing research and development activities will be subject to extensive regulation by numerous governmental authorities in the United States. Prior to marketing in the United States, any combination product developed by the Company must undergo rigorous preclinical (animal) and clinical (human) testing and an extensive regulatory approval process implemented by the FDA under the Food, Drug and Cosmetic Act. There can be no assurance that the Company will not encounter problems in clinical trials that will cause the Company or the FDA to delay or suspend clinical trials.
The Company’s success will depend in part on its ability to obtain patents and product license rights, maintain trade secrets, and operate without infringing on the proprietary rights of others, both in the United States and other countries. There can be no assurance that patents issued to or licensed by the Company will not be challenged, invalidated, or circumvented, or that the rights granted thereunder will provide proprietary protection or competitive advantages to the Company.
Going Concern and Liquidity
The
Company has not generated any revenue from operations and since inception to September 30, 2024 has incurred accumulated losses of approximately
$
| F-6 |
As
of September 30, 2024, the Company had $
The Company will continue to attempt to raise additional debt and/or equity financing to fund future operations and to provide additional working capital. However, there is no assurance that such financing will be consummated or obtained in sufficient amounts necessary to meet the Company’s needs. If cash resources are insufficient to satisfy the Company’s on-going cash requirements, the Company will be required to scale back or discontinue its product development programs, or obtain funds if available (although there can be no certainties) through strategic alliances that may require the Company to relinquish rights to its technology, or substantially reduce or discontinue its operations entirely. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on the Company’s operations, in the case of debt financing, or cause substantial dilution for its stockholders, in the case of equity financing.
Reverse stock splits
On
June 5, 2023,
On
December 14, 2023,
All share and per share amounts have been retro-actively restated as if the reverse splits occurred at the beginning of the earliest period presented.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying interim condensed consolidated financial statements include all material adjustments (consisting of normal recurring adjustments and reflect all adjustments) which, in the opinion of management, are ordinary and necessary for a fair presentation of results for the interim periods. Certain information and footnote disclosures required under the accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The Company believes that the disclosures are adequate to make the information presented not misleading. The condensed consolidated balance sheet information as of December 31, 2023 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K filed with the SEC on February 21, 2024 (the “2023 Annual Report”). These condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2023 and notes thereto included in the 2023 Annual Report.
The results of operations for the nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the entire fiscal year ended December 31, 2024 or for any other period.
Segment Information
The Company operates and reports in one segment, which focuses on bone regeneration in spinal fusion using the recombinant human protein known as NELL-1. The Company’s operating segment is reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker, which is the Company’s Chief Executive Officer and President.
Use of Estimates
The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of expenses during the reporting period. Significant estimates include the assumptions used in the accrual for potential liabilities, the valuation of the warrant liability, the valuation of debt and equity instruments, the valuation of stock options and warrants issued for services, and deferred tax asset valuation allowances. Actual results could differ from those estimates.
| F-7 |
Inflation
Macroeconomic factors such as inflation, rising interest rates, governmental responses there to and possible recession caused thereby also add significant uncertainty to the Company’s operations and possible effects to the amount and type of financing available to the Company in the future.
Cash
Cash
primarily consists of bank demand deposits maintained by a major financial institution. The Company’s policy is to maintain its
cash balances with financial institutions with high credit ratings and in accounts insured by the Federal Deposit Insurance Corporation
(the “FDIC”) and/or by the Securities Investor Protection Corporation (the “SIPC”). The Company may periodically
have cash balances in financial institutions in excess of the FDIC and SIPC insurance limits of $
Research and Development Costs
Research and development costs include, but are not limited to, payroll and other personnel expenses, consultants, expenses incurred under agreements with contract research and manufacturing organizations and animal clinical investigative sites and the cost to manufacture clinical trial materials. Research and development costs are generally charged to operations ratably over the life of the underlying contracts, unless the achievement of milestones, the completion of contracted work, the termination of an agreement, or other information indicates that a different expensing schedule is more appropriate. However, payments for research and development costs that are contractually defined as non-refundable are charged to operations as incurred.
Payments made pursuant to contracts are initially recorded as advances on research and development contract services in the Company’s consolidated balance sheets and are then charged to research and development costs in the Company’s consolidated statements of operations as those contract services are performed. Expenses incurred under contracts in excess of amounts advanced are recorded as research and development contract liabilities in the Company’s consolidated balance sheets, with a corresponding charge to research and development costs in the Company’s consolidated statements of operations. The Company reviews the status of its various clinical trial and research and development contracts on a quarterly basis.
Accounting for Warrants
The Company evaluates all of its financial instruments, including issued warrants, to determine if such instruments are liability classified, pursuant to Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity or derivatives or contain features that qualify as embedded derivatives pursuant to ASC 815, Derivatives and Hedging (“ASC 815”). The classification of instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Liability classified warrants are measured at fair value at inception and at each reporting date, with changes in fair value recognized in the statements of operations in the period of change.
Fair Value of Financial Instruments
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value. The Company defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs that may be used to measure fair value, of which the first two are considered observable and the last is considered unobservable:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 assumptions: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities including liabilities resulting from embedded derivatives associated with certain warrants to purchase common stock.
The fair value of financial instruments measured on a recurring basis was as follows as of September 30, 2024:
| As of September 30, 2024 | ||||||||||||||||
| Description | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
| Liabilities: | ||||||||||||||||
| Warrant liability | $ | $ | ||||||||||||||
| Total liabilities at fair value | $ | $ | ||||||||||||||
The following table provides a roll-forward of the warrant liability measured at fair value on a recurring basis using unobservable level 3 inputs for the nine month period ended September 30, 2024 as follows:
| September 30, 2024 | ||||
| Warrant liability | ||||
| Balance as of beginning of period – December 31, 2023 | $ | |||
| Change in fair value | ( | ) | ||
| Balance as of September 30, 2024 | $ | |||
The Company believes the carrying amount of certain financial instruments, including cash and accounts payable approximate their values based on their short-term nature and are excluded from the fair value tables above.
| F-8 |
Stock Based Compensation
ASC 718, Compensation – Stock Compensation, prescribes accounting and reporting standards for all share-based payment transactions to employees and non-employees. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the consolidated financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for the services.
Basic loss per share is computed by dividing the loss available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Diluted loss per common share reflects the potential dilution that could occur if options and warrants were to be exercised or converted or otherwise resulted in the issuance of common stock that then shared in the earnings of the entity.
Since the effects of outstanding options and warrants are anti-dilutive for the nine months ended September 30, 2024 and 2023, shares of common stock underlying these instruments have been excluded from the computation of loss per common share.
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Warrants | ||||||||
| Stock options | ||||||||
New Accounting Standards
The Company’s management has evaluated all the recently issued, but not yet effective, accounting standards and guidance that have been issued or proposed by the Financial Accounting Standards Board or other standards-setting bodies through the filing date of these financial statements and does not believe the future adoption of any such pronouncements will have a material effect on the Company’s financial position and results of operations.
| F-9 |
3. Warrant Liability
In
October 2022, the Company completed a public equity offering, which included the issuance of
The warrant liability was valued at the following dates using a Black-Scholes model with the following assumptions:
| September 30, 2024 | December 31, 2023 | |||||||
| Warrant liability: | ||||||||
| Risk-free interest rate | % | % | ||||||
| Expected volatility | % | % | ||||||
| Expected life (in years) | ||||||||
| Expected dividend yield | ||||||||
| Fair Value of warrant liability | $ | $ | ||||||
The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The Company determines expected volatility based upon the historical volatility of the Company’s common stock. The Company does not believe that the future volatility of its common stock over an option’s expected term is likely to differ significantly from the past. The expected term of the warrants granted are determined based on the duration of time the warrants are expected to be outstanding. The dividend yield on the Company’s warrants is assumed to be zero as the Company has not historically paid dividends.
4. Stockholders’ Equity
Preferred Stock
The Company’s amended and restated certificate of incorporation, as amended, authorizes the Company to issue a total of shares of preferred stock. shares have been issued as of September 30, 2024 and December 31, 2023.
Common Stock
The Company’s amended and restated certificate of incorporation, as amended, authorizes the Company to issue a total of shares of common stock. As of September 30, 2024 and December 31, 2023, the Company had an aggregate of and shares of common stock outstanding, respectively.
March 2024 Offering
On
March 6, 2024, the Company sold shares of common stock together with warrants to purchase
The
During
the three months ended March 31, 2024,
In
addition, warrants to purchase
August 2024 Warrant Inducement
On
August 2, 2024, existing warrants to purchase
The
Inducement Warrants have an exercise price of $
In
addition, warrants to purchase shares of common stock were issued to the placement agent, in connection with the August 2024 warrant
inducement. The placement agent warrants have an exercise price of $
Due
to certain beneficial ownership limitations set forth in the March 2024 warrants, the Company issued the number of shares that would
not cause a holder to exceed such beneficial ownership limitation and agreed to hold such balance of shares of common stock in abeyance.
For the
September 2024 ATM Offering
On
September 27, 2024, the Company entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright
& Co., LLC (“Wainwright”) with respect to an “at the market” offering program, under which the Company may,
from time to time, in its sole discretion, issue and sell through Wainwright, acting as agent or principal, up to approximately $
Pursuant to the ATM Agreement, the Company may sell the shares through Wainwright by any method permitted that is deemed an “at the market” offering as defined in Rule 415 under the Securities Act of 1933, as amended. Wainwright will use commercially reasonable efforts consistent with its normal trading and sales practices to sell the shares from time to time, based upon instructions from the Company (including any price or size limits or other customary parameters or conditions the Company may impose). The Company will pay Wainwright a commission of % of the gross sales price per share sold under the ATM Agreement.
The Company is not obligated to sell any shares under the ATM Agreement. The offering of shares pursuant to the ATM Agreement will terminate upon the earlier to occur of (i) the issuance and sale, through Wainwright, of all of the shares of our common stock subject to the ATM Agreement and (ii) termination of the ATM Agreement in accordance with its terms.
Subsequent
to September 30, 2024, we sold shares of common stock through the ATM Facility for net proceeds of $
| F-10 |
5. Common Stock Warrants
A summary of warrant activity for the nine months ended September 30, 2024 is presented below:
| Subject to Exercise | Number of Warrants | Weighted Average Exercise Price | Weighted Average Life (Years) | |||||||||
| Outstanding as of December 31, 2023 | $ | |||||||||||
| Granted – 2024 | ||||||||||||
| Forfeited/Expired – 2024 | - | |||||||||||
| Exercised – 2024 | ( | ) | ||||||||||
| Outstanding as of September 30, 2024 | $ | |||||||||||
As of September 30, 2024, the Company had outstanding exercisable, but unexercised Common Stock Warrants as follows:
| Date Issued | Exercise Price | Number of Warrants | Expiration date | |||||||
| October 2021 | $ | |||||||||
| October 2022 | $ | |||||||||
| October 2022 | $ | |||||||||
| October 2022 | $ | |||||||||
| November 2023 | $ | |||||||||
| November 2023 | $ | |||||||||
| March 2024 | $ | |||||||||
| August 2024 | $ | |||||||||
| August 2024 | $ | |||||||||
| August 2024 | $ | |||||||||
| Total outstanding warrants at September 30, 2024 | ||||||||||
Based on a fair market value of $ per share on September 30, 2024, there were exercisable but unexercised in-the-money common stock warrants on that date. Accordingly, the intrinsic value attributed to exercisable but unexercised common stock warrants at September 30, 2024 was $.
2015 Equity Incentive Plan
The
Company has shares of common stock authorized and reserved for issuance under its 2015 Equity Incentive Plan for option awards.
This reserve may be increased by the Board each year by up to the number of shares of stock equal to
Awards may be granted under the 2015 Equity Incentive Plan to the Company’s employees, including officers, director or consultants, and its present or future affiliated entities. While the Company may grant incentive stock options only to employees, it may grant non-statutory stock options, stock appreciation rights, restricted stock purchase rights or bonuses, restricted stock units, performance shares, performance units and cash-based awards or other stock based awards to any eligible participant.
| F-11 |
The 2015 Equity Incentive Plan is administered by the Company’s compensation committee. Subject to the provisions of the 2015 Equity Incentive Plan, the compensation committee determines, in its discretion, the persons to whom, and the times at which, awards are granted, as well as the size, terms and conditions of each award. All awards are evidenced by a written agreement between the Company and the holder of the award. The compensation committee has the authority to construe and interpret the terms of the 2015 Equity Incentive Plan and awards granted under the 2015 Equity Incentive Plan.
| Subject to Exercise | Number of Options | Weighted Average Exercise Price | Weighted Average Life (Years) | Aggregate Intrinsic Value | ||||||||||||
| Outstanding as of December 31, 2023 | $ | $ | ||||||||||||||
| Granted – 2024 | - | |||||||||||||||
| Forfeited/Expired – 2024 | ( | ) | - | |||||||||||||
| Exercised – 2024 | - | - | ||||||||||||||
| Outstanding as of September 30, 2024 | $ | $ | ||||||||||||||
| Options vested and exercisable at September 30, 2024 | $ | $ | ||||||||||||||
| Date Issued | Exercise Price | Number of Options | Expiration date | |||||||
| August 2015 | $ | |||||||||
| September 2015 | $ | |||||||||
| November 2015 | $ | |||||||||
| December 2015 | $ | |||||||||
| January 2016 | $ | |||||||||
| May 2016 | $ | |||||||||
| September 2016 | $ | |||||||||
| January 2017 | $ | |||||||||
| January 2018 | $ | |||||||||
| January 2019 | $ | |||||||||
| October 2021 | $ | |||||||||
| January 2022 | $ | |||||||||
| August 2022 | $ | |||||||||
| January 2023 | $ | |||||||||
| September 2023 | $ | |||||||||
| January 2024 | $ | |||||||||
| January 2024 | $ | |||||||||
| September 2024 | $ | |||||||||
| Total outstanding options at September 30, 2024 | ||||||||||
Based
on a fair value of $ per share on September 30, 2024, there were exercisable but unexercised in-the-money common stock options
on that date. Accordingly, the intrinsic value attributed to exercisable but unexercised common stock options at September 30, 2024 was
$
During
the nine months ended September 30, 2024, options exercisable into shares of common stock were granted with a fair value of $.
Vesting of options differs based on the terms of each option. During the nine months ended September 30, 2024 and 2023, the Company had
stock-based compensation expense of $ and $, respectively, related to the vesting of stock options granted to the Company’s
employees and directors included in our reported net loss. In addition, during the nine months ended September 30, 2024, options exercisable
into shares of common stock were issued to employees in settlement of previously accrued bonuses of $
In January 2024, options exercisable into shares of common stock were forfeited upon the resignation of a director. The Company’s policy is to account for forfeitures of the unvested portion of option grants when they occur; therefore, these forfeitures are recorded as a reversal to expense, which can result in a credit balance in the statement of operations.
| F-12 |
| September 30, 2024 | ||||
| Risk free interest rate | % | |||
| Expected Volatility | % | |||
| Expected life (in years) | ||||
| Expected dividend yield | % | |||
The expected volatility is a measure of the amount by which the Company stock price is expected to fluctuate during the expected term of options granted. The Company determines the expected volatility based upon the historical volatility of our common stock since listing on The Nasdaq Capital Market. The Company does not believe that the future volatility of its common stock over an option’s expected term is likely to differ significantly from the past. The risk-free interest rate used in the calculations is based on the implied yield available on U.S. Treasury issues with an equivalent term approximating the expected life of the options as calculated using the simplified method. The expected life of the options used was based on the contractual life of the option granted. Stock-based compensation is a non-cash expense because the Company settles these obligations by issuing shares of its common stock from its authorized shares instead of settling such obligations with cash payments.
As of September 30, 2024, total unrecognized compensation cost related to unvested stock options was $. The cost is expected to be recognized over a weighted average period of years.
7. Commitments and Contingencies
UCLA TDG Exclusive License Agreement
Effective April 9, 2019, the Company entered into an Amended and Restated Exclusive License Agreement dated as of March 21, 2019 and amended through three sets of amendments (as so amended the “Amended License Agreement”) with the UCLA TDG. The Amended License Agreement amends and restates the Amended and Restated Exclusive License Agreement, dated as of June 19, 2017 (the “2017 Agreement”). The 2017 Agreement amended and restated the Exclusive License Agreement, effective March 15, 2006, between the Company and UCLA TDG, as amended by ten amendments. Under the terms of the Amended License Agreement, the Regents have continued to grant the Company exclusive rights to develop and commercialize NELL-1 (the “Licensed Product”) for spinal fusion by local administration, osteoporosis and trauma applications. The Licensed Product is a recombinant human protein growth factor that is essential for normal bone development.
The
Company has agreed to pay an annual maintenance fee to UCLA TDG of $
The Company is obligated to make the following milestone payments to UCLA TDG for each Licensed Product or Licensed Method:
| ● | $ | |
| ● | $ | |
| ● | $ | |
| ● | $ |
| F-13 |
The
Company is also obligated pay to UCLA TDG a fee (the “Diligence Fee”) of $
| ● | ||
| ● | ||
| ● |
The Company’s obligation to pay the Diligence Fee will survive termination or expiration of the agreement and it is prohibited from assigning, selling, or otherwise transferring any of its assets related to any Licensed Product unless its Diligence Fee obligation is assigned, sold, or transferred along with such assets, or unless it pays UCLA TDG the Diligence Fee within ten (10) days of such assignment, sale or other transfer of such rights to any Licensed Product.
The Company is also obligated to pay UCLA TDG a cash milestone payment within thirty (30) days of a Liquidity Event (including a Change of Control Transaction and a payment election by UCLA TDG exercisable after December 22, 2016) such payment to equal the greater of:
| ● | $ | |
| ● |
During the nine months ended September 30, 2024, the first patients were treated in the multicenter, prospective, randomized pilot clinical study of the Company’s NB1 bone graft device, triggering the payment of the initial $100,000 Feasibility Study milestone.
The Company is obligated to diligently proceed with developing and commercializing licensed products under UCLA TDG patents set forth in the Amended License Agreement. UCLA TDG has the right to either terminate the license or reduce the license to a non-exclusive license if it does not meet certain diligence milestone deadlines set forth in the Amended License Agreement.
The Company must reimburse or pre-pay UCLA TDG for patent prosecution and maintenance costs incurred during the term of the Amended License Agreement. The Company has the right to bring infringement actions against third party infringers of the Amended License Agreement, UCLA TDG may join voluntarily, at its own expense, or, at the Company’s expense, be joined involuntarily to the action. The Company is required to indemnify UCLA TDG against any third party claims arising out of its exercise of the rights under the Amended License Agreement or any sublicense.
Payments
to UCLA TDG under the Amended License Agreement for the nine months ended September 30, 2024 and 2023 were $
Contingencies
The Company is subject to claims and assessments from time to time in the ordinary course of business. The Company’s management does not believe that any such matters, individually or in the aggregate, will have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.
8. Subsequent Events
Subsequent to September 30, 2024, we sold shares of common stock
through the ATM Facility for net proceeds of $
On October 16, 2024, the Company’s Board of Directors appointed Phillip Meikle to the Board of Directors. Don Hankey resigned from the Board of Directors on October 1, 2024, effective immediately. Mr. Meikle received an initial option grant to purchase shares of common stock under the Company’s 2015 Equity Incentive Plan at an exercise price of $ per share. The initial director option grant vests and becomes exercisable on the date of the next annual meeting of the stockholders following the grant date. Mr. Meikle also received an annual director option grant to purchase shares of common stock under the 2015 Equity Incentive Plan at an exercise price of $ per share. The annual director option grant vests and becomes exercisable in four equal installments on December 17, 2024, March 19, 2025, June 19, 2025 and September 17, 2025.
| F-14 |
Item 2. Management’s Discussion and Analysis.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and audited consolidated financial statements for the years ended December 31, 2023 and 2022 and the related notes included in our Annual Report on Form 10-K filed for the fiscal year ended December 31, 2023, with the SEC on February 21, 2024. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. See “Note on Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors.
Company Overview
We are a medical device company that is currently focused on bone regeneration in spinal fusion using the recombinant human protein known as NELL-1. NELL-1 in combination with DBM, demineralized bone matrix, is an osteopromotive recombinant protein that provides target specific control over bone regeneration. The NELL-1 technology platform has been licensed exclusively for worldwide applications to us through a technology transfer from the UCLA Technology Development Group on behalf of UC Regents (“UCLA TDG”). UCLA TDG and the Company received guidance from the Food and Drug Administration (“FDA”) that NELL-1/DBM will be classified as a device/drug combination product that will require an FDA-approved pre-market approval application before it can be commercialized in the United States.
We were founded by University of California professors in collaboration with an Osaka University professor and a University of Southern California surgeon in 2004 as a privately-held company with proprietary, patented technology that has been validated in sheep and non-human primate models to facilitate bone growth. We believe our platform technology has application in delivering improved outcomes in the surgical specialties of spinal, orthopedic, general orthopedic, plastic reconstruction, neurosurgery, interventional radiology, and sports medicine. Lead product development and clinical studies are targeted on spinal fusion surgery, one of the larger segments in the orthopedic market.
We are a development stage entity. The production and marketing of our products and ongoing research and development activities are subject to extensive regulation by numerous governmental authorities in the United States. Prior to marketing in the United States, any combination product developed by us must undergo rigorous preclinical (animal) and clinical (human) testing and an extensive regulatory approval process implemented by the FDA under the Federal Food, Drug, and Cosmetic Act. There can be no assurance that we will not encounter problems in clinical trials that will cause us or the FDA to delay or suspend the clinical trials.
Our success will depend in part on our ability to obtain patents and product license rights, maintain trade secrets, and operate without infringing on the proprietary rights of others, both in the United States and other countries. There can be no assurance that patents issued to or licensed by us will not be challenged, invalidated, rendered unenforceable, or circumvented, or that the rights granted thereunder will provide proprietary protection or competitive advantages to us.
On June 20, 2024, we announced that the first patient had been treated in the multicenter, prospective, randomized pilot clinical study of the Company’s NB1 bone graft device. NB1 is NELL-1 protein combined with demineralized bone matrix (DBM) to provide rapid, specific and guided control over bone regeneration.
This pilot clinical study will evaluate NB1 in 30 adult subjects who undergo transforaminal lumbar interbody fusion (TLIF) to treat degenerative disc disease (DDD) and will evaluate safety and effectiveness, fusion success, pain, function improvement and adverse events. To be enrolled in the study, patients must have DDD at one level from L2-S1 and may also have up to Grade 1 spondylolisthesis or Grade 1 retrolisthesis at the involved level. Patient treatment is conducted in Australia. The study design was previously reviewed and agreed upon by the U.S. Food and Drug Administration’s Division of Orthopedic Devices in a Pre-submission to support progression to a pivotal clinical trial in the United States.
UCLA TDG Exclusive License Agreement
Effective April 9, 2019, we entered into an Amended and Restated Exclusive License Agreement dated as of March 21, 2019, which was subsequently amended through three sets of amendments (as so amended the “Amended License Agreement”) with the UCLA TDG. The Amended License Agreement amends and restates the Amended and Restated Exclusive License Agreement, dated as of June 19, 2017 (the “2017 Agreement”). The 2017 Agreement amended and restated the Exclusive License Agreement, effective March 15, 2006, between the Company and UCLA TDG, as amended by ten amendments. Under the terms of the Amended License Agreement, the Regents have continued to grant us exclusive rights to develop and commercialize NELL-1 (the “Licensed Product”) for spinal fusion by local administration, osteoporosis and trauma applications. The Licensed Product is a recombinant human protein growth factor that is essential for normal bone development.
| 4 |
We have agreed to pay an annual maintenance fee to UCLA TDG of $10,000 as well as pay certain royalties to UCLA TDG under the Amended License Agreement at the rate of 3.0% of net sales of licensed products or licensed methods. We must pay the royalties to UCLA TDG on a quarterly basis. Upon a first commercial sale, we also must pay a minimum annual royalty between $50,000 and $250,000, depending on the calendar year which is after the first commercial sale. If we are required to pay any third party any royalties as a result of us making use of UCLA TDG patents, then we may reduce the royalty owed to UCLA TDG by 0.333% for every percentage point paid to a third party. If we grant sublicense rights to a third party to use the UCLA TDG patent, then we will pay UCLA TDG 10% to 20% of the sublicensing income we receive from such sublicense.
We are obligated to make the following milestone payments to UCLA TDG for each Licensed Product or Licensed Method:
| ● | $100,000 upon enrollment of the first subject in a Feasibility Study; | |
| ● | $250,000 upon enrollment of the first subject in a Pivotal Study: | |
| ● | $500,000 upon Pre-Market Approval of a Licensed Product or Licensed Method; and | |
| ● | $1,000,000 upon the First Commercial Sale of a Licensed Product or Licensed Method. |
We are also obligated pay to UCLA TDG a fee (the “Diligence Fee”) of $8,000,000 upon the sale of any Licensed Product (the “Triggering Sale Date”) in accordance with the payment schedule below:
| ● | Due upon cumulative Net Sales equaling $50,000,000 following the Triggering Sale Date - $2,000,000; | |
| ● | Due upon cumulative Net Sales equaling $100,000,000 following the Triggering Sale Date - $2,000,000; and | |
| ● | Due upon cumulative Net Sales equaling $200,000,000 following the Triggering Sale Date - $4,000,000. |
Our obligation to pay the Diligence Fee will survive termination or expiration of the Amended License Agreement and we are prohibited from assigning, selling, or otherwise transferring any of its assets related to any Licensed Product unless our Diligence Fee obligation is assigned, sold, or transferred along with such assets, or unless we pay UCLA TDG the Diligence Fee within ten (10) days of such assignment, sale or other transfer of such rights to any Licensed Product.
We are also obligated to pay UCLA TDG a cash milestone payment within thirty (30) days of a Liquidity Event (including a Change of Control Transaction and a payment election by UCLA TDG exercisable after December 22, 2016) such payment to equal the greater of:
| ● | $500,000; or | |
| ● | 2% of all proceeds in connection with a Change of Control Transaction. |
During the nine months ended September 30, 2024, the first patients were treated in the multicenter, prospective, randomized pilot clinical study of the Company’s NB1 bone graft device, triggering the payment of the initial $100,000 Feasibility Study milestone.
We are obligated to diligently proceed with developing and commercializing licensed products under UCLA TDG patents set forth in the Amended License Agreement. We are required to meet certain diligence milestone deadlines pursuant to the Amended License Agreement. Applicable for the current year, we are required to spend at least $1,000,000 per calendar year on pre-clinical or clinical development until the date that we complete a Phase III pivotal study. If we fail to meet this or the other diligence milestone deadlines, UCLA TDG has the right to either terminate the license or reduce the license to a non-exclusive license.
| 5 |
We must reimburse or pre-pay UCLA TDG for patent prosecution and maintenance costs incurred during the term of the Amended License Agreement. We have the right to bring infringement actions against third party infringers of the Amended License Agreement, UCLA TDG may join voluntarily, at its own expense, or, at our expense, be joined involuntarily to the action. We are required to indemnify UCLA TDG against any third party claims arising out of our exercise of the rights under the Amended License Agreement or any sublicense.
Payments to UCLA TDG under the Amended License Agreement for the nine months ended September 30, 2024 and 2023 were $123,058 and $23,238, respectively.
Appointment of Director
On October 16, 2024, the Company’s Board of Directors appointed Phillip Meikle to the Board of Directors. Don Hankey resigned from
the Board of Directors on October 1, 2024, effective immediately. Mr. Meikle received an initial option grant to purchase 9 shares of
common stock under the Company’s 2015 Equity Incentive Plan at an exercise price of $1.88 per share. The initial director option
grant vests and becomes exercisable on the date of the next annual meeting of the stockholders following the grant date. Mr. Meikle also
received an annual director option grant to purchase 28,185 shares of common stock under the 2015 Equity Incentive Plan at an exercise
price of $1.88 per share. The annual director option grant vests and becomes exercisable in four equal installments on December 17, 2024,
March 19, 2025, June 19, 2025 and September 17, 2025.
ATM Offering
On September 27, 2024, we entered into the ATM Agreement pursuant to which we could sell, at our option, up to an aggregate of $1,143,121 in shares of our common stock through Wainwright through the ATM Facility. Subsequent to September 30, 2024, we sold 366,794 shares of common stock through the ATM Facility for net proceeds of $640,613, after accounting for $131,396 in offering costs.
August 2024 Warrant Inducement
On August 2, 2024, existing warrants to purchase 781,251 shares of common stock issued in March 2024, were exercised for cash at the exercise price of $2.43 per share, for gross proceeds of $1,898,440. As an inducement for the warrant holders to exercise the existing warrants for cash, Inducement Warrants were issued to the warrant holders for consideration of $0.125 per share, for gross proceeds of $195,313. The proceeds received from the exercise of the 781,251 existing warrants, and the issuance of the Inducement Warrants, net of cash costs of $287,233, was $1,806,520.
The Inducement Warrants have an exercise price of $2.00 per share and were immediately exercisable upon issuance. 781,251 of the Inducement Warrants expire on February 2, 2026, and 781,251 of the Inducement Warrants expire on August 2, 2029.
In addition, warrants to purchase 46,875 shares of common stock were issued to Wainwright, in connection with the August 2024 warrant inducement. The warrants issued to Wainwright have an exercise price of $3.35 per share and expire in five years.
Results of Operations
Since our inception, we devoted substantially all of our efforts and funding to the development of the NELL-1 protein and raising capital. We have not yet generated revenues from our planned operations.
Three months ended September 30, 2024 compared to the three months ended September 30, 2023
| Three-months ended September 30, 2024 | Three-months ended September 30, 2023 | % Change | ||||||||||
| Operating expenses | ||||||||||||
| Research and development | $ | 429,747 | $ | 1,574,850 | (72.71 | )% | ||||||
| General and administrative | 521,274 | 506,040 | 3.01 | % | ||||||||
| Total operating expenses | 951,021 | 2,080,890 | (54.30 | )% | ||||||||
| Loss from operations | (951,021 | ) | (2,080,890 | ) | (54.30 | )% | ||||||
| Change in fair value of warrant liability | (9,974 | ) | 160,645 | (106.21 | )% | |||||||
| Interest income | 19,993 | 536 | 3630.04 | % | ||||||||
| Net loss | $ | (941,002 | ) | $ | (1,919,709 | ) | (50.98 | )% | ||||
| 6 |
Research and Development
Our research and development expenditures saw a notable decline, dropping from $1,574,850 for the three months ending September 30, 2023, to $429,747 for the same period in 2024, marking a decrease of $1,145,103. The decrease in costs can be attributed to the significant expenses incurred in 2023 for the production of the NELL-1 protein necessary for our initial clinical study. Moving forward, we anticipate continued substantial investment in development activities for NELL-1 as we prepare for our pivotal clinical study in the future.
General and Administrative
Our general and administrative costs increased from $506,040 for the three months ending September 30, 2023, to $521,274 for the corresponding period in 2024, reflecting a $15,234 minimal increase.
Change in fair value of warrant liability
In October 2022, we completed a public equity offering, which included the issuance of 54,174 warrants. The warrants provide for a Black Scholes value calculation in the event of certain transactions (“Fundamental Transactions,” as defined), which includes a floor on volatility utilized in the value calculation at 100% or greater. We have determined that this provision introduces leverage to the holders of the warrants that could result in a value that would be greater than the settlement amount of a fixed-for-fixed option on the Company’s own equity shares. Accordingly, pursuant to ASC 815, we have classified the fair value of the warrants as a liability to be re-measured at the end of every reporting period with the change in value reported in the statement of operations.
The change in fair value of warrant liability represents the re-measurement of the outstanding warrant liabilities at September 30, 2024.
Nine months ended September 30, 2024 compared to the nine months ended September 30, 2023
| Nine-months ended September 30, 2024 | Nine-months ended September 30, 2023 | % Change | ||||||||||
| Operating expenses | ||||||||||||
| Research and development | $ | 1,025,814 | $ | 6,460,747 | (84,12 | )% | ||||||
| General and administrative | 1,638,409 | 1,807,548 | (9.36 | )% | ||||||||
| Total operating expenses | 2,664,223 | 8,268,295 | (67.78 | )% | ||||||||
| Loss from operations | (2,664,223 | ) | (8,268,295 | ) | (67.78 | )% | ||||||
| Change in fair value of warrant liability | 38,122 | 867,930 | (95.61 | )% | ||||||||
| Interest income | 35,396 | 1,519 | 2230.22 | % | ||||||||
| Net loss | $ | (2,590,705 | ) | $ | (7,398,846 | ) | (64.99 | )% | ||||
Research and Development
Our research and development expenditures saw a notable decline, dropping from $6,460,747 for the nine months ending September 30, 2023, to $1,025,814 for the same period in 2024, marking a decrease of $5,434,933. The decrease in costs can be attributed to the significant expenses incurred in 2023 for the production of the NELL-1 protein necessary for our initial clinical study. Moving forward, we anticipate continued substantial investment in development activities for NELL-1 as we prepare for our pivotal clinical study in the future.
General and Administrative
Our general and administrative costs decreased from $1,807,548 for the nine months ending September 30, 2023, to $1,638,409 for the corresponding period in 2024, reflecting a $169,139 decrease. This decrease can mainly be attributed to legal expenses stemming from litigation matters in 2023.
Change in fair value of warrant liability
In October 2022, we completed a public equity offering, which included the issuance of 54,174 warrants. The warrants provide for a Black Scholes value calculation in the event of certain transactions (“Fundamental Transactions,” as defined), which includes a floor on volatility utilized in the value calculation at 100% or greater. We have determined that this provision introduces leverage to the holders of the warrants that could result in a value that would be greater than the settlement amount of a fixed-for-fixed option on the Company’s own equity shares. Accordingly, pursuant to ASC 815, we have classified the fair value of the warrants as a liability to be re-measured at the end of every reporting period with the change in value reported in the statement of operations.
The change in fair value of warrant liability represents the re-measurement of the outstanding warrants at September 30, 2024.
| 7 |
Liquidity and Capital Resources
Going Concern and Liquidity
Since inception to September 30, 2024, we have incurred accumulated losses of approximately $83.5 million. We will continue to incur significant expenses for development activities for our lead product NELL-1/DBM. Operating expenditures for the next twelve months are estimated at $5.4 million. The accompanying consolidated financial statements for the nine months ended September 30, 2024 have been prepared assuming the Company will continue as a going concern. As reflected in the financial statements, we incurred a net loss of $2.6 million, and used net cash in operating activities of $2.8 million during the nine months ended September 30, 2024. These factors raise substantial doubt about the Company’s ability to continue as a going concern within a reasonable period of time, which is considered to be one year from the issuance date of these financial statements. In addition, our independent registered public accounting firm, in its audit report to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, expressed substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
March 2024 Offering
On March 6, 2024, the Company sold 119,000 shares of common stock together with warrants to purchase 119,000 shares of common stock (exercise price of $2.43 per share), expiring on March 6, 2029, at a combined public offering price of $2.56. In addition, the Company sold pre-funded warrants to purchase 662,251 shares of common stock together with warrants to purchase 662,251 shares of common stock, for a combined price of $2.559. The net proceeds received from the sale of common stock, pre-funded warrants and warrants, net of cash costs of $495,227, was $1,504,113.
The 781,251 warrants have an exercise price of $2.43 per share, and are exercisable immediately for a term of five years. The 662,251 pre-funded warrants have an exercise price of $0.001 per share and are exercisable immediately for a term of five years.
During the three months ended March 31, 2024, 363,251 pre-funded warrants were exercised and 363,251 shares of common stock were issued. During the three months ended June 30, 2024, the balance of 299,000 pre-funded warrants were exercised and 299,000 shares of common stock were issued.
In addition, warrants to purchase 46,875 shares of common stock were issued to Wainwright, in connection with the March 2024 offering. The warrants issued to Wainwright have an exercise price of $3.20 per share and expire in five years.
August 2024 Warrant Inducement
On August 2, 2024, existing warrants to purchase 781,251 shares of common stock issued in March 2024, were exercised for cash at the exercise price of $2.43 per share, for gross proceeds of $1,898,440. As an inducement for the warrant holders to exercise the existing warrants for cash, Inducement Warrants were issued to the warrant holders for consideration of $0.125 per share, for gross proceeds of $195,313. The proceeds received from the exercise of the 781,251 existing warrants, and the issuance of the Inducement Warrants, net of cash costs of $287,233, was $1,806,520.
The Inducement Warrants have an exercise price of $2.00 per share and were immediately exercisable upon issuance. 781,251 of the Inducement Warrants expire on February 2, 2026, and 781,251 of the Inducement Warrants expire on August 2, 2029.
In addition, warrants to purchase 46,875 shares of common stock were issued to Wainwright, in connection with the August 2024 warrant inducement. The warrants issued to Wainwright have an exercise price of $3.35 per share and expire in five years.
September 2024 ATM Offering
On September 27, 2024, the Company entered into the ATM Agreement with Wainwright with respect to the ATM Facility, under which the Company may, from time to time, in its sole discretion, issue and sell through Wainwright, acting as agent or principal, up to approximately $1.1 million of shares of its common stock. Subsequent to September 30, 2024, we sold 366,794 shares of common stock through the ATM Facility for net proceeds of $640,613, after accounting for $131,396 in offering costs.
We will continue to attempt to raise additional debt and/or equity financing to fund future operations and to provide additional working capital. However, there is no assurance that such financing will be consummated or obtained in sufficient amounts necessary to meet our needs. If cash resources are insufficient to satisfy our on-going cash requirements, we will be required to scale back or discontinue our product development programs, or obtain funds if available (although there can be no certainties) through strategic alliances that may require us to relinquish rights to our technology or substantially reduce or discontinue our operations entirely. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to us. Even if we are able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing.
At September 30, 2024 and December 31, 2023, we had cash of $3,566,426 and $3,026,569, respectively. Available cash is anticipated to cover our operational needs into the second quarter of 2025.
We anticipate that we will require approximately $5 million to complete first-in-man studies, and an estimated additional $24 million in scientific expenses to achieve FDA approval, if possible, for a spine interbody fusion indication.
| 8 |
Cash Flows
Operating activities
For the nine months ended September 30, 2024, cash used in operating activities was $2,771,438, compared to $7,537,889 for the same period in 2023. The reduction in cash expenditures for 2024 is attributed to the development activities in 2023 related to our NELL-1 protein as we prepared for our pilot clinical study. During the nine months ended September 30, 2024, the first patients were treated in the multicenter, prospective, randomized pilot clinical study of the Company’s NB1 bone graft device.
Financing activities
During the nine months ended September 30, 2024, cash provided by financing activities of $3,311,295 resulted from the net proceeds of the March Offering and the Warrant Inducement.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Critical Accounting Policies and Use of Estimates
See our most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2023 for a discussion of our critical accounting policies and use of estimates. There have been no material changes to our critical accounting policies and use of estimates discussed in such report.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Financial Officer and Chief Executive Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of September 30, 2024. Based upon that evaluation, our Chief Financial Officer and Chief Executive Officer concluded that as of September 30, 2024, our disclosure controls and procedures were effective.
Changes in Internal Controls
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(d) and 15d-15(d) under the Exchange Act) that occurred during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
There are no material updates to the matters previously disclosed in “Part I—Item 3—Legal Proceedings” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and “Part II—Item 1—Legal Proceedings” of our Quarterly Report on Form 10-Q for the period ended March 31, 2024.
Item 1A. Risk Factors.
For a discussion of the Company’s potential risks or uncertainties, please see “Part I—Item 1A—Risk Factors” and “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC, and “Part I—Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein. There have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023 except as noted herein.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the third quarter of the year ended December 31, 2024, we did not issue any shares in reliance on Section 4(a)(2) of the Securities Act, as amended as a transaction not involving a public offering which have not previously been reported in a Current Report on Form 8-K.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Mine Safety Disclosures.
Not Applicable
Item 5. Other Information.
During
the three months ended September 30, 2024, no director or officer of the Company
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Item 6. Exhibits.
| (a) | Exhibits required by Item 601 of Regulation S-K. |
* Filed Herewith
+ Management contract or compensatory arrangement.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BONE BIOLOGICS CORPORATION | ||
| Dated: November 14, 2024 | By: | /s/ Jeffrey Frelick |
| Name: | Jeffrey Frelick | |
| Title: | Chief Executive Officer | |
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