Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations
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/DBX®. The NELL-1/DBX® combination product is an osteostimulative recombinant protein that provides target specific control
over bone regeneration. The protein, as part of the UCB-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 FDA that NELL-1/DBX® will be classified as a combination product with a device lead.
The
Company was 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. 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 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 us 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 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, or circumvented, or that the rights granted thereunder will provide proprietary protection
or competitive advantages to us.
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.
Year ended December 31, 2021 Year ended December 31, 2020 % Change
Operating expenses
Gain on forgiveness of deferred compensation 297,500 - 100.00 %
Provision for income taxes 1,600 1,600 - %
Research
and Development
Our
research and development decreased from $340,672 during the year ended December 31, 2020 to $82,044 during the year ended December 31,
2021. The $258,628 decrease was due to curtailing of operations due to lack of necessary funds. The lack of capital occurring simultaneously
during the COVID-19 pandemic caused a delay in R&D activities, and a scale back in all operations other than fund raising. As a result
starting in 2020, the company engaged in cost-cutting measures in an attempt to extend our cash resources as long as possible. As a result,
of the October 2021 Primary Offering we have resumed our research and development activities. We will continue to incur significant expenses
for development activities for NELL-1 in the future.
General and
Administrative
Our
general and administrative expenses increased from $484,342 during the year ended December 31, 2020 to $1,019,432 during the year ended
December 31, 2021. The $535,090 increase was primarily due to resuming operations and bringing the Company’s filings current. The increase also includes the fair value, $207,035, of options granted to our new Directors consistent
with our Director’s Compensation Policy.
Interest
Expense
Our
interest expense decreased from $998,076 for the year ended December 31, 2020 to $805,109 during the year ended December 31, 2021. The
decrease of $192,967 resulted from the conversation of the outstanding debt in conjunction with the October 2021 Primary Offering.
Liquidity
and Capital Resources
Going
Concern and Liquidity
The
Company has no significant operating history and since inception to December 31, 2021 has incurred accumulated losses of approximately
$70.5 million. The Company will continue to incur significant expenses for development activities for their lead product NELL-1/DBX®.
Operating expenditures for the next twelve months are estimated at $6.5 million. The accompanying consolidated financial statements for
the period ended December 31, 2021 have been prepared assuming the Company will continue as a going concern. As reflected in the financial
statements, the Company incurred a net loss of $1,610,685, and used net cash in operating activities of $1,228,586 during the year ended
December 31, 2021. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year
after the date that the financial statements are issued. In addition, our independent accounting firm, in its audit report to the financial
statements included in our Annual Report for the year ended December 31, 2021, 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.
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, 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 our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing.
We note that there is significant uncertainty from the affect that the novel coronavirus may have on the availability, cost and type of
financing.
On
October 15, 2021, the Company completed a public offering (the “October 2021 Primary Offering”) of 1,510,455 units (the “Units”).
Each Unit consists of one share of common stock of the Company, par value $0.001 per share (the “Common Stock”), and one warrant
(a “Public Warrant”) to purchase one share of Common Stock for $6.30 per share. The Units were sold at a price of $5.25 per
Unit, generating net proceeds to the Company of $6,858,843. The Company granted to WallachBeth Capital LLC, the underwriter in the Offering
a 45-day option to purchase up to 226,568 additional shares of Common Stock and/or 226,568 Public Warrants to cover over-allotments, if
any. The underwriter has exercised its option with respect to the Warrants. WallachBeth also received 90,627 warrants as part of
the October 2021 Primary Offering at an exercise price of $6.30 per common share representing 6% of the raise.
For
the past several years, we have depended on our relationship with Hankey Capital for working capital to fund our operations, which has
been raised in the form of both debt and equity capital. Hankey Capital, directly and indirectly, controls approximately 70% of our issued
and outstanding shares of common stock. In connection with the October 2021 Primary Offering, Hankey Capital converted the outstanding
convertible notes ($12,767,894 in principal amount and $2,054,041 of accrued interest) into 5,928,774 shares of our common stock
and call collateral shares were cancelled. Representatives of Hankey Capital also currently serve as directors of the Company. 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 our operations, in the case of debt
financing, or cause substantial dilution for our stockholders, in the case of equity financing.
As
of December 31, 2021 and 2020, we had cash of $6,675,365 and $-0-, respectively.
Cash Flows
The
following is a summary of our cash flows from operating, investing and financing activities for the years ended December 31, 2021 and
2020:
Operating
activities
During
the year ended December 31, 2021 and 2020, cash used in operating activities was $1,228,586 and $426,933 respectively. Cash expenditures
for the year ended December 31, 2021 increased primarily due to resuming operations, bringing the Company’s filings current and
costs associated with the October 2021 Primary Offering.
Financing
activities
During
the year ended December 31, 2021, cash provided by financing activities of $7,903,951 resulted primarily from draws on our second and
third credit facilities with Hankey Capital and the October 2021 Primary Offering which provided proceeds from sale of common stock units
in public offering, net of offering costs of $6,858,843. During the year ended December 31, 2020, cash provided by financing activities
of $402,788 primarily resulted from draws on our second credit facilities with Hankey Capital.
Application
of Critical Accounting Policies
We
believe that our critical accounting policies are as follows:
● Research and Development Costs;
● Stock Based Compensation;
● Fair Value of Financial Instruments;
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 valuation of stock options and warrants and income tax valuation allowances. Actual results could differ from
those estimates.
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. Costs related to research, design and development of products are charged to research and development expense as incurred.
Stock
Based Compensation
ASC
718, Compensation – Stock Compensation, prescribes accounting and reporting standards for all share-based payment transactions
in which employee services are acquired. 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).
The
Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50,
Equity – based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on
the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The
fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion
date.
Fair Value
Measurements
We
use fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.
We base our fair values on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Additionally, from time to time, we may be required to record certain assets at fair
value on a non-recurring basis, such as certain impaired loans held for investment and securities held to maturity that are other-than-temporarily
impaired. These non-recurring fair value adjustments typically involve write-downs of individual assets due to application of lower-of-cost
or market accounting.
We
have established and documented a process for determining fair value. We maximize the use of observable inputs and minimize the use of
unobservable inputs when developing fair value measurements. Whenever there is no readily available market data, management uses its best
estimate and assumptions in determining fair value, but these estimates involve inherent uncertainties and the application of management’s
judgment. As a result, if other assumptions had been used, our recorded earnings or disclosures could have been materially different from
those reflected in these financial statements. For detailed information on our use of fair value measurements and our related valuation
methodologies, see Note 2 to the Consolidated Financial Statements of this report.
Recently
Issued Accounting Standards
See
discussion in Note 2 to the consolidated financial statements.
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.
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
Not
applicable.
Item 8. Financial
Statements and Supplementary Data
The
financial statements and supplementary data required by Regulation S-X are included in Item 15. “Exhibits, Financial Statements
Schedules” contained in Part IV, Item 15 of this Annual Report.
Item 9. Changes
in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A.
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 (Exchange Act)) as of December 31, 2021. Based upon that evaluation, our Chief Financial Officer and
Chief Executive Officer concluded that as of December 31, 2021, our disclosure controls and procedures were not effective.
Management’s
Annual Report on Internal Control over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial
reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or
under the supervision of, the company’s principal executive officers and effected by the company’s board of directors, management
and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with GAAP and includes those policies and procedures that:
Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial
statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements
may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are
known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not
eliminate, this risk.
As
of December 31, 2021, management assessed the effectiveness of our internal control over financial reporting and based on that evaluation
assessment, we identified a material weakness in internal controls and procedures were not effective over financial reporting as of December
31, 2021 as further described below.
A
material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is
a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented
or detected on a timely basis.
Insufficient
staffing for the preparation and review procedures of the Company’s financial statements and required SEC filings. During 2020,
Bone Biologics had to curtail operations due to lack of necessary funds. The lack of capital occurring simultaneously during the COVID-19
pandemic has caused a scale back in operations. As a result, the company engaged in cost-cutting measures in an attempt to extend our
cash resources as long as possible. We do not have sufficient staffing for the preparation and review procedures of the Company’s
financial statements and required SEC filings. During the year ended December 31, 2021, we had limited personnel that performed nearly
all aspects of our financial reporting process, including, but not limited to, access to the underlying accounting records and systems,
the ability to post and record journal entries and responsibility for the preparation of the financial statements. As a result of the
October 2021 Primary Offering, the Company engaged the current Chief Financial Officer on a full-time basis effective January 3, 2022.
Changes in
Internal Control over Financial Reporting
There
were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2021 that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.
This
annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal
control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered
accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s
report in this annual report.
Item 9B.
Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions
that Prevent Inspections
Not applicable.
Part III
Item 10.
Directors, Executive Officers and Corporate Governance
The
Company’s directors are elected annually for a one year term or until their respective successors are duly elected and qualified
or until their earlier resignation or removal. The following table sets forth certain information regarding the Company’s directors
and executive officers as of February 28, 2022:
Name Age Position
Jeffrey Frelick 57 Chief Executive Officer and President
Deina H. Walsh 57 Chief Financial Officer
Don Hankey 78 Chairman of the Board of Directors
Stephen R. LaNeve 61 Director
Bruce Stroever 70 Director
Erick Lucera 53 Director
Siddhesh Angle 37 Director
Jeffrey Frelick:
Chief Executive Officer and President
Jeffrey
Frelick serves as the President and Chief Executive Officer of Bone Biologics, bringing more than 25 years of leadership, operational,
and investment experience in the life science industry. He joined Bone Biologics in 2015 as the company’s Chief Operating Officer
and assumed his current role in June 2019. Prior to Bone Biologics, Mr. Frelick spent 15 years on Wall Street as a sell-side analyst following
the med-tech industry at investment banks Canaccord Genuity, ThinkEquity and Lazard. He also previously worked at Boston Biomedical Consultants
where he provided strategic planning assistance, market research data and due diligence for diagnostic companies. He began his career
at Becton Dickinson in sales and sales management positions after gaining technical experience as a laboratory technologist with Clinical
Pathology Facility. Mr. Frelick received a B.S. in Biology from University of Pittsburgh and an M.B.A. from Suffolk University’s
Sawyer Business School.
Deina H.
Walsh: Chief Financial Officer
Deina
Walsh has served as our Chief Financial Officer since November 2014. She is a certified public accountant and owner/founder of DHW CPA,
PLLC a Public Companies Accounting Oversight Board (PCAOB) registered firm since 2014. Prior to forming her firm, Ms. Walsh has 13 years
at a public accounting firm where as a partner she was actively responsible for leading firm audit engagements of publicly held entities
in accordance with PCAOB standards and compliance with SEC regulations, including internal control requirements under section 404 of the
Sarbanes-Oxley Act. Ms. Walsh had a global client base including entities throughout the United States, Canada and China. These entities
encompass a diverse range of industries including manufacturing, wholesale, life sciences, pharmaceuticals, and technology. Her experience
includes work with start-up companies and well-established operating entities. She has assisted many entities seeking debt and equity
capital. Areas of specialty include mergers, acquisitions, reverse mergers, consolidations, complex equity structures, foreign currency
translations and revenue recognition complexities. Ms. Walsh has an Associates of Science Degree in Business Administration from Monroe
Community College and a Bachelor of Science Degree in Accounting from the State University of New York at Brockport.
Don Hankey:
Chairman of the Board of Directors
Mr.
Hankey has served as Chairman of the Board of Directors since 2018. Mr. Hankey holds his BA and post-graduate work from the University
of Southern California. At age 27, Mr. Hankey became Vice President of a major investment banking firm, which would later become part
of USB Paine Weber. Mr. Hankey acquired Midway Ford in 1972 and founded Hankey Investment Company. During the 1980s, Mr. Hankey’s
organization grew its portfolio and established a foothold in the financial services industry. Mr. Hankey has incorporated technology
into every aspect of the Hankey Group of companies improving efficiencies and outcomes. Mr. Hankey has been the manager of Hankey Capital,
LLC, since its formation in 2002. Given Mr. Hankey’s financial experience, the Company believes he is well qualified to serve as
the Chairman of the Board of Directors.
Stephen R.
LaNeve: Director
Mr.
LaNeve has served on the Company’s Board of Directors since 2015 bringing thirty-five years of medical device experience. From 2019
to the present, Mr. La Neve has served as President of Global Medical’s (an orthopedic device company) international business. Previously,
Mr. La Neve was Chief Executive Officer of the Company from 2015 to 2019. Mr. La Neve held leadership roles in the medical device and
diagnostic segments which include: CEO and president of Etex Corporation; president of Becton Dickinson’s Pre-Analytical Systems
business; president of Medtronic’s $3.5b Spine and Biologics business; and president of Medtronic’s then second largest country
business unit, Medtronic Japan. He also served as senior vice president and executive vice president at Premier, one of the largest GPOs
in the United States and ran the global Injection Systems business unit for Becton Dickinson. Additionally, Mr. LaNeve has held a number
of commercial leadership roles at Becton Dickinson, Roche Diagnostics and E Merck Diagnostic Systems in sales, marketing, strategic planning
and project management both in the US and outside the US. He serves on the board of directors for SkelRegen, LLC and Life Science Enterprise,
and has served on the Board of Rapid Pathogen Screening, Inc. (RPS) up through its sale of the eye-care business. Mr. La Neve has consulted
for private equity companies in the medical device area. Mr. LaNeve holds a B.S. in Health Planning and Administration from the Pennsylvania
State University, an M.B.A. from West Chester University, and is a member of the Omicron Delta Epsilon honor society for academic excellence
in economics. Given Mr. Laneve’s extensive experience in leadership roles in the biotech industry and the continuity he brings to
the Board of Directors, we believe he is well qualified to serve as a member of the Board of Directors.
Bruce Stroever:
Director
Mr.
Stroever has served on Biologics board of directors since 2012, bringing forty years of product development and general management experience
in the medical device and orthobiologics fields. Mr. Stroever most recently served as President and Chief Executive Officer at MTF until
he retired in 2020 after 32 years of service. Under Mr. Stroever’s leadership, MTF grew to be the largest tissue bank in the world.
From 1971 to 1988, Mr. Stroever held several positions with Ethicon, Inc., a Johnson & Johnson, Inc. subsidiary. Mr. Stroever served
on the advisory board for the New Jersey Organ and Tissue Sharing Network. He was also elected to the Board of Governors of the American
Association of Tissue Banks for a three-year term in 1999 and subsequently in 2012. He was a founding member of the Tissue Policy Group
subsidiary of the AATB and served as its Chairman for two terms. Mr. Stroever received his B.E. in Mechanical/Chemical Engineering from
Stevens Institute of Technology in 1972 and a Masters of Science in Bioengineering from Columbia University in 1977. Given Mr. Stroever’s
educational background , his senior management experience in our industry and the continuity he brings to the Board of Directors, .we
believe that Mr. Stroever is well qualified to serve as a member of the Board of Directors.
Erick Lucera:
Director
Mr.
Lucera’s appointment to the Board became effective upon completion of the October 2021 Primary Offering. From 2020 to the present,
Mr. Lucera served as Chief Financial Officer of AVEO Oncology, a public biotech company. From 2016 to 2020, Mr. Lucera served as Chief
Financial Officer, Treasurer and Secretary of VALERITAS, a publicly held medical device company. From 2017 to the present, Mr.
Lucera has served as a member of the Board of Directors and Audit Chairman of Beyond Air, a publicly held medical device company. From
2015 to 2016, Mr. Lucera served as Chief Financial Officer, Treasurer and Secretary of VIVENTIA Bio, a privately held biotech
company. From 2012 to 2015, Mr. Lucera served as Vice President, Corporate Development of Aratana Therepeutics, a publicly held biotech
company. In 2012, Mr. Lucera served as Vice President, Corporate Development of Sunshine Heart, a publicly held medical device manufacturer.
From 2008 to 2011, Mr. Lucera served as Vice President, Healthcare Analyst at Eaton Vance. From 2004 to 2008, he served as Portfolio
Manager, Triathlon Life Sciences Fund. From 1995 to 2004, he served as Senior Vice President and Principal of Independence Investments,
as head of healthcare research team. From 1990 to 1993, Mr. Lucera served as Staff Accountant at Price Waterhouse. Given Mr. Lucera’s
extensive experience in strategic planning and finance, we believe that Mr. Lucera is well qualified to serve as a member of the Board
of Directors.
Siddhesh (Sid) R. Angle: Director
Dr. Angle’s appointment to the Board became
effective upon completion of October 2021 Offering. From 2018 to the present, Dr. Angle is Co-Founder, President and Chief Executive
Officer of Regenosine, an early stage start-up for osteoarthritic disease. From 2021 to present, Dr. Angle also serves on the Executive
Team of Vetosine, an animal health affiliate of Regenosine. From 2020 to 2021, Dr. Angle was Associate Director, Innovation Commercialization
at NYU Langone. From 2017 to 2020, Dr. Angle was Program Manager, Innovation Commercialization at NYU Langone. From 2013 to 2017, Dr.
Angle worked in various R&D capacities at Zimmer Biomet, culminating as R&D manager of global orthobiologics. From 2011 to 2013,
Dr. Angle served as Research Scientist at Carnegie Mellon University. Given Mr. Angle’s extensive background in research and development,
we believe that Mr. Angle is well qualified to serve as a member of the Board of Directors.
Director
Terms; Qualifications
Members
of our board of directors serve until the next annual meeting of stockholders, or until their successors have been duly elected.
When
considering whether directors and nominees have the experience, qualifications, attributes and skills to enable the board of directors
to satisfy its oversight responsibilities effectively in light of the Company’s business and structure, the board of directors focuses
primarily on the industry and transactional experience, and other background, in addition to any unique skills or attributes associated
with a director.
Family Relationships
None.
Board of
Directors and Corporate Governance
Our
Board of Directors consists of five (5) members, consisting of Don Hankey, Bruce Stroever, Stephen R. LaNeve, Erick Lucera, and Sid Angle.
Board Committees
Our
Board of Directors has appointed an audit committee, governance committee and compensation committee. The Board of Directors met or acted
by written consent three times during 2021.
Audit Committee
The
audit committee is responsible for overseeing: (i) our accounting and reporting practices and compliance with legal and regulatory requirements
regarding such accounting and reporting practices; (ii) the quality and integrity of our financial statements; (iii) our internal control
and compliance programs; (iv) our independent auditors’ qualifications and independence and (v) the performance of our independent
auditors and our internal audit function. In so doing, the audit committee maintains free and open means of communication between our
directors, internal auditors and management.
The
Audit Committee consists of Bruce Stroever, Erick Lucera, and Sid Angle, with Mr. Lucera acting as Chairman and the Audit Committee financial
expert. The Audit Committee met or acted by written consent once during 2021.
Compensation
Committee
The
compensation committee is responsible for reviewing and approving the compensation of our executive officers and directors and our performance
plans and other compensation plans. The compensation committee makes recommendations to our Board of Directors in connection with such
compensation and performance plans.
The
Compensation Committee consists of Bruce Stroever, Erick Lucera, and Sid Angle, with Mr. Stroever acting as Chairman. The Compensation
Committee met or acted by written consent once during 2021.
Nominating
and Corporate Governance Committee
The
nominating and corporate governance committee is responsible for (i) identifying, screening and reviewing individuals qualified to serve
as directors (consistent with criteria approved by our Board of Directors) and recommending to our Board candidates for nomination for
election at the annual meeting of shareholders or to fill board vacancies or newly created directorships; (ii) developing and recommending
to our Board of Directors and overseeing the implementation of our corporate governance guidelines (if any); (iii) overseeing evaluations
of our Board of Directors and (iv) recommending to our Board of Directors candidates for appointment to board committees.
The
Nominating and Corporate Governance Committee consists of Bruce Stroever, Erick Lucera, and Sid Angle, with Dr. Angle acting as Chairman.
Section 16(a)
Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who own more than ten percent of
a registered class of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes
in ownership of Common Stock and other equity securities of the Company. Officers, directors and greater than ten percent stockholders
are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
To
the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company during the fiscal year
ended December 31, 2021, all Section 16(a) filing requirements applicable to its officers, directors and greater than ten percent beneficial
owners were complied with except Erick Lucera and Sid Angle each failed to file two reports of one transaction and Jeffrey
Frelick and Deina Walsh each failed to file one report of one transaction.
Indemnification
Agreements
Our
Board has approved a form of indemnification agreement for our directors and executive officers (“Indemnification Agreement”).
Following Board approval, we entered into Indemnification Agreements with each of our current directors and executive officers.
The
Indemnification Agreement provides for indemnification against expenses, judgments, fines and penalties actually and reasonably incurred
by an indemnitee in connection with threatened, pending or completed actions, suits or other proceedings, subject to certain limitations.
The Indemnification Agreement also provides for the advancement of expenses in connection with a proceeding prior to a final, non-appealable
judgment or other adjudication, provided that the indemnitee provides an undertaking to repay to us any amounts advanced if the indemnitee
is ultimately found not to be entitled to indemnification by us. The Indemnification Agreement sets forth procedures for making and responding
to a request for indemnification or advancement of expenses, as well as dispute resolution procedures that will apply to any dispute between
us and an indemnitee arising under the Indemnification Agreement.
The
foregoing description is qualified in its entirety by reference to the form of Indemnification Agreement filed as Exhibit 10.17 to the
Current Report on Form 8-K filed on September 25, 2014.
Item 11.
Executive Compensation
The
table below summarizes the compensation earned for services rendered to us in all capacities, for the fiscal years indicated, by its named
executive officers:
Deina Walsh, Chief Financial Officer(2) 2021 $ - $ - $ - $ - $ 21,100 $ 21,100
2020 $ - $ - $ - $ - $ - $ -
Our
2015 Equity Incentive Plan was approved by majority shareholder consent on December 30, 2015 and all options outstanding as of the effective
date were cancelled and re-issued under the new plan at current plan terms.
Our
Board of Directors approved the following compensation for our named executive officers:
Jeffrey Frelick,
Chief Executive Officer and President:
Base Salary:
Mr. Frelick’s base salary is $300,000.
Bonus:
During each calendar year, Mr. Frelick shall be eligible to earn an annual target bonus of fifty percent (50%) of his base salary
as in-effect for the applicable calendar year, subject to the achievement of personal and corporate objectives or milestones to be established
by the board of directors, or any compensation committee thereof, (after considering any input or recommendations from Mr. Frelick) within
sixty (60) days following the beginning of each calendar year during Mr. Frelick’s employment. In order to earn the annual bonus
under this provision, the applicable objectives must be achieved and Mr. Frelick must be employed by Company at the time the annual bonus
is distributed by Company. The annual bonus, if any, shall be paid on or before March 15th of the calendar year following the year in
which it is considered earned. The actual annual bonus paid may be more or less than fifty percent (50%) of Mr. Frelick’s base salary.
There
was no bonus accrual during the year ended December 31, 2021 and 2020.
Stock
Options: On January 1, 2022, Mr. Frelick received a stock option grant whereby he is entitled to 50,000 shares of Common Stock of
the Company as of the date of the grant on the condition that i) the exercise price will be the current market price on the date of the
grant; and ii) the options will be issued with a two-year maturity. Any portion of this stock option grant that is not exercised on the
date of termination shall be forfeited on such date of termination except: (i) in the case of Termination by the Company Without Cause;
and (ii) upon a Change in Control (as defined in the Equity Incentive Plan) of the Company. To allow Mr. Frelick to prevent or mitigate
dilution of his equity interests in the Company, in connection with each financing, Mr. Frelick will be provided an opportunity
to invest in the Company such that his interest, at his option, remains undiluted or partially diluted.
Deina H.
Walsh, Chief Financial Officer:
Ms.
Walsh was retained through an independent contractor agreement through December 31, 2021. On December 17, 2021, Bone Biologics Corporation
entered into a revised Employment Agreement with Deina H. Walsh. The Employment Agreement is effective January 3, 2022.
Base Salary:
Ms. Walsh’s base salary is $200,000.
Bonus:
During each calendar year, Ms. Walsh shall be eligible to earn an annual target bonus of twenty-five percent (25%) of her base salary
as in-effect for the applicable calendar year, subject to the achievement of personal and corporate objectives or milestones to be established
by the board of directors, or any compensation committee thereof, (after considering any input or recommendations from Ms. Walsh) within
sixty (60) days following the beginning of each calendar year during Ms. Walsh’s employment. In order to earn the annual bonus under
this provision, the applicable objectives must be achieved and Ms. Walsh must be employed by Company at the time the annual bonus is distributed
by Company. The annual bonus, if any, shall be paid on or before March 15th of the calendar year following the year in which it is considered
earned. The actual annual bonus paid may be more or less than twenty-five percent (25%) of Ms. Walsh’s base salary.
Ms.
Walsh received a stock option grant whereby she is entitled to 25,000 shares of Common Stock of the Company as of the date of the grant
on the condition that i) the exercise price will be the current market price on the date of the grant; and ii) the options will be issued
with a two-year maturity. Any portion of this stock option grant that is not exercised on the date of termination shall be forfeited on
such date of termination except: (i) in the case of Termination by the Company Without Cause; and (ii) upon a Change in Control (as defined
in the Equity Incentive Plan) of the Company. To allow Ms. Walsh to prevent or mitigate dilution of her equity interests in the Company,
in connection with each financing, Ms. Walsh shall be provided an opportunity to invest in the Company such that her interest, at her
option, remains undiluted or partially diluted.
The
Company’s compensation committee believes the agreements and other incentives granted to these named executive officers align our
named executive officers’ interests with those of our stockholders. Our compensation committee and board of directors continues
to evaluate our executive compensation program with a view toward motivating our named executive officers to meet our strategic operational
and financial goals in the best interests of our stockholders.
Potential
Payments upon Termination of Change in Control
None.
Changes to
Potential Payments upon Termination of Change in Control
None.
Consulting
Agreements for Executives
None
other than noted above.
Grants of
Plan-Based Awards
None.
Executives
Outstanding Equity Awards at Fiscal Year End
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
Director
Compensation
The
following table shows information regarding the compensation earned during the year ended December 31, 2021 by the members of our board
of directors.
Name Fees Earned or Paid in Cash Option Awards Share Awards Total
Don Hankey(1) - - - -
Stephen R. La Neve(1) - - - -
Bret Hankey(1)(2) - - - -
(2) Resigned effective October 12, 2021.
(3) Appointed effective October 12, 2021.
The
Board adopted a Non-Employee Director Compensation Policy (the “Director Compensation Policy”) as following:
Annual Cash
Compensation
Each
Non-Employee Director will receive the cash compensation set forth below for service on the Board. The annual cash compensation amounts
will be payable in equal quarterly installments, in arrears following the end of each quarter in which the service occurred, pro-rated
for any partial months of service. All annual cash fees are vested upon payment.
1. Annual Board Service Retainer:
a. All Non-Employee Directors other than the Board Chair: $25,000
b. Non-Employee Director who is the Board Chair: $35,000
a. Chairman of the Audit Committee: $5,000
b. Chairman of the Compensation Committee: $5,000
c. Chairman of the Corporate Governance Committee: $5,000
Equity Compensation
Equity
awards will be granted under the Company’s 2015 Equity Incentive Plan or any successor equity incentive plan (the “Plan”).
All stock options granted under this Director Compensation Policy will be Nonstatutory Stock Options (as defined in the Plan), with a
term of ten years from the date of grant and an exercise price per share equal to 100% of the Fair Market Value (as defined in the Plan)
of the underlying common stock of the Company (“Common Stock”) on the date of grant.
(a) Automatic Equity Grants.
(i)
Initial Grant for New Directors. Without any further action of the Board, each person who, after the Effective Date, is elected or
appointed for the first time to be a Non-Employee Director will automatically, upon the date of his or her initial election or appointment
to be a Non-Employee Director, be granted a Nonstatutory Stock Option to purchase 20,000 shares of Common Stock (the “Initial Grant”),
regardless of when such person is elected or appointed to the Board. Each Initial Grant will fully vest on the date of the annual meeting
of the stockholders of the Company (“Annual Meeting”) next following the Initial Grant.
(ii)
Annual Grant. Without any further action of the Board, at the close of business on the date of each Annual Meeting following the Effective
Date, each person who is then a Non-Employee Director will automatically be granted a Nonstatutory Stock Option to purchase a number of
shares of Common Stock having an Option Value (calculated on the date of grant) of $50,000 (the “Annual Grant”). Each Annual
Grant will vest in a series of four (4) successive equal quarterly installments over the one-year period measured from the date of grant.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The
following table sets forth certain information regarding beneficial ownership of our common stock as of the date of this prospectus by
(i) each person (or group of affiliated persons) who is known by us to own more than five percent (5%) of the outstanding shares of our
common stock, (ii) each director and executive officer, and (iii) all of our directors, executive officers and director nominees as a
group. As of February 28, 2022, there were 10,350,574 shares of our common stock issued and outstanding.
Beneficial
ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. For
purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock
that such person currently owns or has the right to acquire within 60 days of the date of this prospectus. With respect to options and
warrants, this would include options and warrants that are currently exercisable within 60 days. With respect to convertible securities,
this would include securities that are currently convertible within 60 days.
Except
as indicated in footnotes to this table, we believe that the stockholders named in this table have sole voting and investment power with
respect to all shares of common stock shown to be beneficially owned by them, based on information provided to us by such stockholders.
Unless otherwise indicated, the address for each director and executive officer listed is: c/o Bone Biologics Corporation, 2 Burlington
Woods Drive, Suite 100, Burlington, MA 01803.
5% or greater stockholders:
Executive Officers and Directors:
(4) Includes 102,389 shares underlying stock options exercisable within 60 days.
(5) Includes 25,000 shares underlying stock options exercisable within 60 days.
(6) Includes 2,949 shares underlying stock options exercisable within 60 days.
(7) Includes 22,949 shares underlying stock options exercisable within 60 days.
(8) Includes 22,949 shares underlying stock options exercisable within 60 days.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Except
as disclosed below, none of the following persons has any direct or indirect material interest in any transaction to which we are a party
since our incorporation or in any proposed transaction to which we are proposed to be a party:
● Any of our directors or officers;
● Any proposed nominee for election as our director;
Hankey
Capital LLC - please refer to Liquidity and Capital Resources section of the MD&A
Review, Approval
or Ratification of Transactions with Related Persons
Due
to the small size of our Company, we do not at this time have a formal written policy regarding the review of related party transactions,
and rely on our full Board of Directors to review, approve or ratify such transactions and identify and prevent conflicts of interest.
Our Board of Directors reviews any such transaction in light of the particular affiliation and interest of any involved director, officer
or other employee or stockholder and, if applicable, any such person’s affiliates or immediate family members. Management aims to
present transactions to our Board of Directors for approval before they are entered into or, if that is not possible, for ratification
after the transaction has occurred. If our Board of Directors finds that a conflict of interest exists, then it will determine the appropriate
action or remedial action, if any. Our Board of Directors approves or ratifies a transaction if it determines that the transaction is
consistent with our best interests and the best interest of our stockholders.
Director
Independence
Our
Board of Directors consists of five (5) members: Don Hankey, Bruce Stroever, Stephen R. LaNeve, Erick Lucera and Sid Angle. Our Board
of Directors undertook a review of the composition of our Board of Directors and the independence of each director. Based upon information
requested from and provided by each director concerning their background, employment and affiliations, including family relationships,