SEC Filing | Invivo Therapeutics

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 001-37350

InVivo Therapeutics Holdings Corp.

(Exact name of registrant as specified in its charter)


Nevada		36-4528166
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

One Kendall Square, Suite B14402
Cambridge, MA		02139
(Address of principal executive offices)		(Zip code)

(617) 863-5500

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.00001 par value per share	NVIV	The Nasdaq 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. Yes ⌧ No ◻

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

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 ◻

Non-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 Act). Yes ☐ No ☒

As August 5, 2022 1,391,160 shares of the registrant’s Common Stock, $0.00001 par value, were issued and outstanding.

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INVIVO THERAPEUTICS HOLDINGS CORP.

Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2022

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		Page
1. Risk Factors Summary		3

PART I - FINANCIAL INFORMATION

1. Financial Statements (Unaudited)		4
	Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021	4
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2022 and 2021	5
	Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2022 and 2021	6
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021	7
	Notes to Consolidated Financial Statements	8
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
3. Quantitative and Qualitative Disclosures about Market Risk		24
4. Controls and Procedures		24

PART II - OTHER INFORMATION

1A. Risk Factors		25
6. Exhibits		48

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Risk Factors Summary

Our business is subject to a number of risks of which you should be aware before making an investment decision. Below we summarize what we believe are the principal risk factors but these risks are not the only ones we face, and you should carefully review and consider the full discussion of our risk factors in the section titled “Risk Factors”, together with the other information in this Quarterly Report.

●

We will need additional funding before achieving potential profitability. If we are unable to raise capital when needed, we could be forced to delay, reduce, or eliminate our product development programs or commercialization efforts, engage in one or more potential transactions, or cease our operations entirely.

●

Increases in authorized shares will be required for future financings or other strategic transactions. We have experienced difficulties obtaining quorum for our annual meetings of stockholders and achieving the number of votes required for increases in authorized shares. If we continue to experience such difficulties, we will be limited in our efforts to raise additional capital, and our operations, financial condition and our ability to continue as a going concern may be materially and adversely affected.

●

We anticipate that we will continue to incur substantial losses for the foreseeable future and may never achieve or maintain profitability.

●

We are wholly dependent on the success of one product candidate, the Neuro-Spinal Scaffold implant. Even if we are able to obtain favorable clinical results, we may not be able to obtain regulatory approval for, or successfully commercialize, our Neuro-Spinal Scaffold implant.

●

The continuing COVID-19 pandemic may have adverse effects on our business and operations, including, for example, the disruption of regulatory activities. In addition, this pandemic has caused substantial disruption in economies worldwide, and may cause disruption in the financial markets, both of which could result in adverse effects on our business and operations.

●

If we cannot protect, maintain and, if necessary, enforce our intellectual property rights, our ability to develop and commercialize products will be adversely impacted.

●

We will depend upon strategic relationships to develop and manufacture our products. If these relationships are not successful, we may not be able to capitalize on the market potential of these products.

●

Our success depends on our ability to retain our management and other key personnel.

●

We may face, and in the past have faced, lawsuits, which could divert management’s attention and harm our business.

●

The price of our common stock has been and may continue to be volatile, which could lead to losses by investors and costly securities litigation.

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PART I — FINANCIAL INFORMATION

Item 1.Financial Statements.

InVivo Therapeutics Holdings Corp.

Consolidated Balance Sheets

(In thousands, except share and per-share data)

(Unaudited)


	As of
	June 30,		December 31,
	2022		2021
ASSETS:
Current assets:
Cash and cash equivalents	$	13,028	$	19,031
Prepaid expenses and other current assets		549		111
Total current assets		13,577		19,142
Property, equipment and leasehold improvements, net		183		127
Restricted cash - non-current		150		150
Operating lease right-of-use assets		1,039		1,229
Prepaid clinical trial expenses		1,122		1,122
Total assets	$	16,071	$	21,770
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable	$	1,124	$	605
Operating lease liabilities		378		361
Accrued expenses		905		1,646
Total current liabilities		2,407		2,612
Other liabilities		95		94
Operating lease liabilities - non-current		755		949
Total liabilities		3,257		3,655
Commitments and contingencies (Note 5)
Stockholders’ equity:
Common stock, $0.00001 par value, authorized 2,000,000 at June 30, 2022 and December 31, 2021. 1,391,160 and 1,370,595 shares issued and outstanding including 200 and 254 shares of unvested restricted stock awards, at June 30, 2022 and December 31, 2021, respectively.		3		3
Additional paid-in capital		256,314		256,241
Accumulated deficit		(243,503)		(238,129)
Total stockholders’ equity		12,814		18,115
Total liabilities and stockholders’ equity	$	16,071	$	21,770

See notes to the unaudited consolidated financial statements.

(Reflects the retrospective application of the 1-for-25 reverse stock split effective April 26, 2022)

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InVivo Therapeutics Holdings Corp.

Consolidated Statements of Operations

(In thousands, except share and per-share data)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Operating expenses:
Research and development	$	1,349	$	928	$	2,780	$	1,940
General and administrative		1,381		1,382		2,615		2,594
Total operating expenses		2,730		2,310		5,395		4,534
Operating loss		(2,730)		(2,310)		(5,395)		(4,534)
Other income:
Interest and other income, net		11		1		21		2
Net loss	$	(2,719)	$	(2,309)	$	(5,374)	$	(4,532)
Net loss per share, basic and diluted	$	(1.97)	$	(1.68)	$	(3.90)	$	(3.55)
Weighted average number of common shares outstanding, basic and diluted		1,383,280		1,370,341		1,376,849		1,275,172

See notes to the unaudited consolidated financial statements.

(Reflects the retrospective application of the 1-for-25 reverse stock split effective April 26, 2022)

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InVivo Therapeutics Holdings Corp.

Consolidated Statements of Changes in Stockholders’ Equity

(In thousands, except share and per-share data)

(Unaudited)


				Additional				Total
	Common Stock			Paid-in		Accumulated		Stockholders’
	Shares	Amount		Capital		Deficit		Equity
Balance as of December 31, 2021	1,370,595	$	3	$	256,241	$	(238,129)	$	18,115
Share-based compensation expense	—		—		56		—		56
Net loss	—		—		—		(2,655)		(2,655)
Balance as of March 31, 2022	1,370,595	$	3	$	256,297	$	(240,784)	$	15,516
Share-based compensation expense	—		—		17		—		17
Forfeiture of restricted stock	(54)		—		—		—		—
Fractional shares issued due to 1 for 25 reverse stock split	20,619		—		—		—		—
Net loss	—		—		—		(2,719)		(2,719)
Balance as of June 30, 2022	1,391,160	$	3	$	256,314	$	(243,503)	$	12,814


				Additional				Total
	Common Stock			Paid-in		Accumulated		Stockholders’
	Shares	Amount		Capital		Deficit		Equity
Balance as of December 31, 2020	945,276	$	3	$	247,417	$	(228,234)	$	19,186
Share-based compensation expense	—		—		52		—		52
Issuance of common stock upon exercise of warrants	425,317		—		8,509		—		8,509
Net loss	—		—		—		(2,223)		(2,223)
Balance as of March 31, 2021	1,370,593	$	3	$	255,978	$	(230,457)	$	25,524
Share-based compensation expense	—		—		95		—		95
Issuance of common stock upon vesting of restricted stock units	2		—		—		—		—
Net loss	—		—		—		(2,309)		(2,309)
Balance as of June 30, 2021	1,370,595	$	3	$	256,073	$	(232,766)	$	23,310

See notes to the unaudited consolidated financial statements.

(Reflects the retrospective application of the 1-for-25 reverse stock split effective April 26, 2022)

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InVivo Therapeutics Holdings Corp.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Six Months Ended
	June 30,
	2022		2021
Cash flows from operating activities:
Net loss	$	(5,374)	$	(4,532)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		26		26
Amortization of operating lease right-of-use assets		191		153
Share-based compensation expense		73		147
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(438)		(368)
Accounts payable		519		129
Operating lease liability		(177)		(157)
Accrued expenses and other liabilities		(741)		(336)
Net cash used in operating activities		(5,921)		(4,938)
Cash flows from investing activities:
Purchases of property and equipment		(82)		—
Net cash used in investing activities		(82)		—
Cash flows from financing activities:
Proceeds from exercise of warrants		—		8,509
Net cash provided by financing activities		—		8,509
(Decrease) / Increase in cash and cash equivalents and restricted cash		(6,003)		3,571
Cash, cash equivalents and restricted cash at beginning of period		19,181		19,603
Cash, cash equivalents and restricted cash at end of period	$	13,178	$	23,174
Supplemental disclosure of cash flow information and non-cash investing and financing activities:
Increase in operating right-of-use assets and liabilities related to lease modifications	$	—	$	143

See notes to the unaudited consolidated financial statements.

(Reflects the retrospective application of the 1-for-25 reverse stock split effective April 26, 2022)

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InVivo Therapeutics Holdings Corp.

Notes to Consolidated Financial Statements for the Quarter Ended June 30, 2022 (Unaudited)

1.	NATURE OF OPERATIONS AND GOING CONCERN, BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS

Business

InVivo Therapeutics Holdings Corp., including its subsidiary (the “Company”) is a biomaterials and biotechnology company with a focus on the treatment of spinal cord injuries (“SCIs”). The Company’s proprietary technologies incorporate intellectual property that is licensed under an exclusive, worldwide license from Boston Children’s Hospital (“BCH”) and the Massachusetts Institute of Technology (“MIT”), as well as intellectual property that has been developed internally in collaboration with its advisors and partners.

Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, acquiring operating assets, and raising capital. The Company has historically financed its operations primarily through the sale of equity-related securities. The Company has not achieved profitability and may not be able to realize sufficient revenue to achieve or sustain profitability in the future. The Company does not expect to be profitable in the next several years, but rather expects to incur additional operating losses. The Company has limited liquidity and capital resources and must obtain significant additional capital resources in order to sustain its product development efforts, for acquisition of technologies and intellectual property rights, for preclinical and clinical testing of its anticipated products, pursuit of regulatory approvals, acquisition of capital equipment, laboratory and office facilities, establishment of production capabilities, for selling, general and administrative expenses, and other working capital requirements.

Going Concern

The Company’s consolidated financial statements as of June 30, 2022 were prepared under the assumption that the Company will continue as a going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. However, as of June 30, 2022, substantial doubt about the Company’s ability to continue as a going concern exists. During the six months ended June 30, 2022, the Company recorded a net loss of $5.4 million. As of June 30, 2022, the Company had unrestricted cash and cash equivalents of $13.0 million and working capital of $11.2 million. Given the Company’s current plans, the Company estimates cash resources will be sufficient to fund its operations through the second quarter of 2023. The Company will require additional liquidity to continue operations over the next 12 months.

The Company is evaluating strategies to obtain the required additional funding for future operations. These strategies may include but are not limited to equity offerings, debt financings, other third-party funding, marketing and distribution arrangements, and other collaborations, strategic alliances, and licensing arrangements. However, given a variety of external factors including the impact of the recent economic downturn in the U.S. and global financial markets, the Company may be unable to access further equity or debt financing when needed. In addition, the Company’s liquidity is impacted by the limited number of authorized shares that remain available under its certificate of incorporation, and the resulting constraints on financing options and alternatives. As such, there can be no assurance that the Company will be able to obtain additional liquidity when needed or under acceptable terms, if at all. The Company believes that it can be successful in obtaining additional capital; however, no assurance can be provided that it will be able to do so. There is no assurance, moreover, that any funds raised will be sufficient to enable the Company to attain profitable operations or continue as a going concern.

The Company’s consolidated financial statements as of June 30, 2022, do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern. If the Company is unable to continue as a going concern, it may have to liquidate its assets and may receive less than the value at which those assets are carried on its consolidated financial statements, and it is likely that investors will lose all or part of their investment.

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COVID-19

As a result of the COVID-19 pandemic, a significant number of the Company’s clinical sites temporarily suspended enrollment into the INSPIRE 2.0 Study at their institution in 2020. As such, the COVID-19 pandemic did affect enrollment in the Company’s INSPIRE 2.0 Study. On June 2, 2022, the Company announced that it had completed enrollment in the INSPIRE 2.0 Study. The Company did not experience any significant impact from the COVID-19 pandemic on its financial condition, liquidity, other operations, suppliers, industry, and workforce during the three and six months ended June 30, 2022. The full impact of the COVID-19 pandemic continues to evolve as of the date of filing this Quarterly Report on Form 10-Q. The Company is actively monitoring the impact of the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce, as there remains significant uncertainty related to the COVID-19 pandemic globally. Given the evolution of the COVID-19 pandemic and the global responses to curb its spread, the Company is not able to estimate the ultimate effects of the COVID-19 pandemic on its future results of operations, financial condition, or liquidity in the future. However, as the COVID-19 pandemic continues, it may have an adverse effect on the Company’s results of future operations, financial position, and liquidity, and even after the COVID-19 pandemic has subsided, the Company may experience adverse impacts to its business as a result of any economic recession or depression that has occurred or may occur in the future.

Reverse Stock Split

On April 26, 2022, the Company effected a reverse stock split of its common stock, par value $0.00001 per share, at a ratio of 1-for-25 (the “2022 Reverse Stock Split”). As a result of the 2022 Reverse Stock Split, (i) every 25 shares of the issued and outstanding common stock were automatically converted into one newly issued and outstanding share of common stock, without any change in the par value per share; (ii) the number of shares of common stock into which each outstanding warrant or option to purchase common stock is exercisable was proportionally decreased, and (iii) the number of authorized shares of common stock outstanding was proportionally decreased. Shares of common stock underlying outstanding stock options and other equity instruments convertible into common stock were proportionately reduced and the respective exercise prices, if applicable, were proportionately increased in accordance with the terms of the agreements governing such securities.

The 2022 Reverse Stock Split became effective at 5:00 pm New York time on April 26, 2022, with the common stock trading on a post-split basis under the Company's existing trading symbol, “NVIV,” at the market open on April 27, 2022. Fractional shares resulting from the 2022 Reverse Stock Split were rounded up to the nearest whole share, and all shares of common stock (including fractions thereof) issuable upon the 2022 Reverse Stock Split to a given stockholder were aggregated for the purpose of determining whether the 2022 Reverse Stock Split would result in the issuance of a fractional share. Pursuant to Section 78.209 of the Nevada Revised Statutes, the Company’s Board of Directors was able take action to effect the 2022 Reverse Stock Split by filing a Certificate of Change with the Secretary of State of the State of Nevada without the consent of the Company’s stockholders.

All of the Company’s historical share and per share information related to issued and outstanding common stock and outstanding options and warrants exercisable for common stock in these consolidated financial statements have been adjusted, on a retroactive basis, to reflect the 2022 Reverse Stock Split.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) consistent with those applied in, and should be read in conjunction with, the Company’s audited consolidated financial statements and related footnotes for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K as filed with the United States Securities and Exchange Commission (“SEC”) on March 7, 2022. The unaudited consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the Company’s financial position as of June 30, 2022 and its results of operations and cash flows for the interim periods presented, and are not necessarily indicative of results for subsequent interim periods or for the full year. The interim consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements, as allowed by the

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relevant SEC rules and regulations; however, the Company believes that its disclosures are adequate to ensure that the information presented is not misleading.

New Accounting Pronouncements

No accounting standards known by the Company to be applicable to it that have been issued by the Financial Accounting Standards Board (“FASB”) or other standard-setting bodies and that do not require adoption until a future date are expected to have a material impact on the Company’s consolidated financial statements upon adoption.

2.	CASH AND CASH EQUIVALENTS

The Company considers only those investments that are highly liquid, readily convertible to cash, and that mature within three months from date of purchase to be cash equivalents. From time to time, the Company may have cash balances in financial institutions in excess of insurance limits. The Company has not experienced any losses related to these balances. Management believes it is not exposed to significant credit risk.

Cash and cash equivalents consisted of the following:


	June 30,		December 31,
(In thousands)	2022		2021
Cash	$	71	$	5
Money market funds		12,957		19,026
Total cash and cash equivalents	$	13,028	$	19,031

The following table provides a reconciliation of cash, cash equivalents, and restricted cash within the statement of financial position that sum to the total of the same such amounts shown in the statement of cash flows.


	June 30,		December 31,
(In thousands)	2022		2021
Cash and cash equivalents	$	13,028	$	19,031
Restricted cash included in other non-current assets		150		150
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	13,178	$	19,181

3.	RESTRICTED CASH

Restricted cash as each of June 30, 2022 and December 31, 2021 was $150 thousand. Restricted cash as of June 30, 2022 and December 31, 2021 included a $50 thousand security deposit related to the Company’s credit card account and a $100 thousand standby letter of credit in favor of a landlord (see Note 5).

4.	FAIR VALUES OF ASSETS AND LIABILITIES

The Company groups its assets and liabilities generally measured at fair value into three levels based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

Level 1 — Valuation is based on quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 — Valuation is based on observable inputs other than Level 1 prices, 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.

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Level 3 — Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

Assets and liabilities measured at fair value on a recurring basis are summarized below:


	As of June 30, 2022
(In thousands)	Level 1		Level 2		Level 3		Fair Value
Cash equivalents	$	12,957	$	—	$	—	$	12,957


	As of December 31, 2021
(In thousands)	Level 1		Level 2		Level 3		Fair Value
Cash equivalents	$	19,026	$	—	$	—	$	19,026

During the three and six months ended June 30, 2022 and 2021, there were no transfers between levels. The fair value of the Company’s cash equivalents, consisting of a money market fund, is based on quoted market prices in active markets with no valuation adjustment.

The Company believes the carrying amounts of its prepaid expenses and other current assets, restricted cash, accounts payable and accrued expenses approximate their fair value due to the short-term nature of these amounts.

5.	COMMITMENTS AND CONTINGENCIES

Operating Leases

On May 3, 2018, the Company entered into a sublease for 5,104 square feet of space for its corporate offices and laboratory space in Cambridge Massachusetts (the “Cambridge Sublease”). The Cambridge Sublease commenced on May 3, 2018 and was scheduled to expire on October 31, 2023. In May 2021, the Company entered into an agreement to terminate the Cambridge Sublease (the “Sublease Termination”). In connection with the Sublease Termination, the $60 thousand standby letter of credit was cancelled and returned to the Company.

Concurrent with the Sublease Termination, the Company entered into a new lease for the same space with ARE-MA (the “Cambridge Lease”). The Cambridge Lease commenced on June 1, 2021 and was scheduled to expire on December 31, 2023. The Cambridge Lease contains rent escalation clauses. In connection with the Cambridge Lease, a new standby letter of credit was established for $100 thousand. Under the Cambridge Lease, the Company will be required to pay its proportionate share of certain operating costs and property taxes applicable to the leased premises in excess of new base year amounts. These costs are considered to be variable lease payments and are not included in the determination of the lease’s right-of-use asset or lease liability.

The Sublease Termination and concurrent execution of the Cambridge Lease was determined to be a lease modification that qualified as a change of accounting on the existing lease and not a separate contract. As such, the right-of-use assets and operating lease liabilities were remeasured using an incremental borrowing rate at the date of modification of 5.74%, which resulted in an increase of $143 thousand in both the right-of-use asset and operating lease liabilities.

On November 23, 2021, the Company amended the Cambridge Lease to extend the term through December 31, 2024. No other terms within the Cambridge Lease were amended. The amendment of the Cambridge Lease was determined to be a lease modification that qualified as a change of accounting on the existing lease and not a separate contract. As such, the right-of-use assets and operating lease liabilities were remeasured using an incremental borrowing rate at the date of modification of 5.97%, which resulted in an increase of $486 thousand in both the right-of-use asset and operating lease liabilities.

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The Company identified and assessed the following significant assumptions in recognizing its right-of-use assets and corresponding lease liabilities:

●

As the Cambridge Lease does not provide an implicit rate, the Company estimated the incremental borrowing rate in calculating the present value of the lease payments.

●

Since the Company elected to account for each lease component and its associated non-lease components as a single combined component, all contract consideration was allocated to the combined lease component.

●

The expected lease terms include noncancelable lease periods.

The elements of lease expense are as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
Lease cost (In thousands)	2022		2021		2022		2021
Operating lease cost	$	113	$	94	$	226	$	185
Short-term lease cost		1		2		1		4
Variable lease cost		34		32		98		59
Total lease cost	$	148	$	128	$	325	$	248

Other information (In thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from short term leases	$	1	$	2	$	1	$	4
Operating cash flows from operating leases		106		98		300		194
Total cash paid for leases	$	107	$	100	$	301	$	198
Weighted-average remaining lease term - operating leases		2.51 Years		2.5 Years		2.51 Years		2.5 Years
Weighted-average discount rate - operating leases		6.0%		5.7%		6.0%		5.7%

Maturities of the lease liability due under the Cambridge Lease as of June 30, 2022 are as follows:


Leases (In thousands)	As of June 30, 2022
2022 (excluding the six months ended June 30, 2022)	$	215
2023		440
2024		568
Total lease payments		1,223
Less: imputed interest		(90)
Present value of lease liabilities	$	1,133

Right-of-use lease assets and lease liabilities are reported in the Company’s consolidated balance sheets as follows:


Leases (In thousands)	Classification	June 30, 2022		December 31, 2021
Assets
Lease asset, net	Operating	$	1,039	$	1,229
Total lease assets		$	1,039	$	1,229

Liabilities
Current	Operating	$	378	$	361
Non-current	Operating		755		949
Total lease liabilities		$	1,133	$	1,310

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Clinical Trial Commitments

The Company has engaged and executed contracts with clinical research organizations (“CROs”) to assist with the administration of its ongoing INSPIRE 1.0 and INSPIRE 2.0 clinical trials. As of June 30, 2022, approximately $4.5 million remains to be paid on these contracts.

6. FIXED ASSETS

Property, equipment, and leasehold improvements, net consisted of the following:


	June 30,		December 31,
(In thousands)	2022		2021
Computer hardware	$	63	$	52
Computer software		5		5
Research and lab equipment		651		580
Leasehold improvements		66		66
Property and equipment		785		703
Less accumulated depreciation		(602)		(576)
Property and equipment, net	$	183	$	127

Depreciation expense for the three and six months ended June 30, 2022 was $13 thousand and $26 thousand, respectively. Depreciation expense for the three and six months ended June 30, 2021 was $8 thousand and $17 thousand, respectively. Maintenance and repairs are charged to expense as incurred and any additions or improvements are capitalized.

7. ACCRUED EXPENSES

Accrued expenses consisted of the following:


	June 30,		December 31,
(In thousands)	2022		2021
Compensation	$	406	$	1,287
Clinical		272		218
Legal		59		—
Other accrued expenses		168		141
Total accrued expenses	$	905	$	1,646

8.	EMPLOYEE BENEFIT PLAN

In November 2006, the Company adopted a 401(k) plan (the “401k Plan”) covering all employees. Employees must be 21 years of age in order to participate in the 401k Plan. Under the 401k Plan, the Company has the option to make matching contributions. During the three and six months ended June 30, 2022, the Company contributed $17 thousand and $42 thousand, respectively, in cash as a matching contribution to employee 401(k) accounts which is included in the accrued expenses balances on the balance sheet. During the three and six months ended June 30, 2021, the Company contributed $20 thousand and $41 thousand, respectively, in cash as a matching contribution to employee 401(k) accounts which is included in the accrued expenses balances on the balance sheet.

9.	COMMON STOCK

The Company has authorized 2,000,000 shares of common stock, $0.00001 par value per share, of which 1,391,160 and 1,370,595, shares were issued and outstanding as each of June 30, 2022 and December 31, 2021 respectively.

During the three and six months ended June 30, 2022, as part of the adjustment to reflect the 2022 Reverse Stock Split, the Company issued an aggregate of 20,619 shares of common stock to account for the fractional roundup of shareholders.

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During the three and six months ended June 30, 2022, 54 restricted stock awards that were considered issued and outstanding as of December 31, 2021 were forfeited.

During the three and six months ended June 30, 2022, there was no exercise activity related to any of the warrants that were issued in 2018, 2019 and 2020.

During the six months ended June 30, 2021, the Company issued an aggregate of 424,829 and 488 shares of common stock upon the exercise of certain of the October 2020 Series A Warrants and October 2020 Placement Agent Warrants, respectively, for aggregate proceeds of $8.5 million. During the three and six months ended June 30, 2021, there was no exercise activity related to any of the warrants that were issued in 2018 and 2019.

During the three and six months ended June 30, 2021, the Company issued an aggregate of 2 shares of common stock upon vesting of restricted stock units.

10.

STOCK-BASED COMPENSATION

On October 26, 2010, the Company’s Board of Directors adopted, and the Company’s shareholders subsequently approved, the 2010 Equity Incentive Plan (as subsequently amended, the “2010 Plan”). The 2010 Plan provided for grants of incentive stock options to employees, and nonqualified stock options and restricted common stock to employees, consultants, and non-employee directors of the Company.

In April 2015, the Company’s Board of Directors adopted, and the Company’s shareholders subsequently approved, the 2015 Equity Incentive Plan (the “2015 Plan”). The 2015 Plan provides for grants of incentive stock options to employees, and nonqualified stock options, restricted common stock, restricted stock units (“RSUs”), and stock appreciation rights to employees, consultants, and non-employee directors of the Company.

As of June 30, 2022, the total number of shares available for issuance under the 2015 Plan was 111,283 shares. While 111,283 shares are available for issuance under the 2015 Plan as of June 30, 2022, only 31,696 shares can be issued under the 2015 Plan due to restrictions on the usage of the 2015 Plan resulting from the total number of shares of common stock authorized under the Company’s certificate of incorporation.

Options issued under the 2010 Plan, and 2015 Plan (collectively, the “Plans”) are exercisable for up to 10 years from the date of issuance.

Stock-based compensation

The following table summarizes stock-based compensation expense by financial statement line item in the Company’s condensed consolidated statements of operation for each of the three and six months ended June 30, 2022 and 2021:


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2022		2021		2022		2021
Research and development	$	(17)	$	6	$	(11)	$	9
General and administrative		34		89		84		138
Total	$	17	$	95	$	73	$	147

The fair value of each option award is estimated on the date of grant using the Black‑Scholes option pricing model, which uses the following assumptions; (i) Risk-free interest rate, (ii) Expected dividend yield, (iii) Expected term and (iv) Expected volatility. The Company uses historical data, as well as subsequent events occurring prior to the issuance of the financial statements, to estimate option exercises within the valuation model. The expected term of options granted under the Plans, all of which qualify as “plain vanilla,” is based on the average of the contractual term (10 years) and the vesting period (generally, 48 months). For non‑employee options, the expected term is the contractual term. The risk‑free rate is based on the yield of a U.S. Treasury

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security with a term consistent with the option. The impact of forfeitures on compensation expense is recorded as they occur.

The Company grants RSUs and restricted stock awards (“RSAs”), collectively referred to as Restricted Securities under the 2015 Equity Incentive Plan. These Restricted Securities generally vest over a three-year period, contingent on the recipient’s continued employment. Prior to vesting, all RSAs have the right to vote and receive dividends under the 2015 Equity Incentive Plan; however, the Company’s form of Restricted Stock Agreement provides that the payment of dividends on unvested RSAs shall be deferred until such time as the shares vest. The grant date fair value of these awards is based on the fair market value of our common stock on the date of grant.

The Company did not grant any awards during the six months ended June 30, 2022.

Stock options

The following table summarizes the stock option activity for the six months ended June 30, 2022:


				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
		Exercise		Contractual	Intrinsic
Options	Shares	Price		Term in Years	Value
Outstanding at December 31, 2021	14,582	$	437.78	9.18		$	—
Cancelled/Forfeited	(600)	$	27.50
Outstanding as of June 30, 2022	13,982	$	455.39	8.67		$	—
Vested and Exercisable as of June 30, 2022	8,882	$	701.08	8.65		$	—
Vested and expected to vest as of June 30, 2022	13,982	$	455.39	8.67		$	—

The total fair value of options that vested in the three and six months ended June 30, 2022 was $239 thousand, respectively. The total fair value of options that vested in the three and six months ended June 30, 2021 was $10 thousand and $63 thousand, respectively. During the three and six months ended June 30, 2022, the Company recorded stock-based compensation expense of $29 thousand and $77 thousand, respectively, related to stock options. During the three and six months ended June 30, 2021, the Company recorded stock-based compensation expense of $70 thousand and $98 thousand, respectively, related to stock options. As of June 30, 2022, total unrecognized compensation expense related to non-vested share-based option compensation arrangements amounted to $84 thousand and is estimated to be recognized over a period of 0.71 years.

Restricted Securities

The following table summarizes the restricted securities activity for the six months ended June 30, 2022;


		Weighted-Average
Restricted Securities	Number of Grants	Grant Date Fair Value
Unvested balance as of December 31, 2021	254	$	387.05
Forfeited	(54)	$	385.38
Unvested balance as of June 30, 2022	200	$	387.50

During the three and six months ended June 30, 2022, the Company recorded credits to stock-based compensation expense of $11 thousand and $4 thousand, respectively, related to the time-based Restricted Securities as a result of forfeitures. During the three and six months ended June 30, 2021, the Company recorded stock-based compensation expense of $25 thousand and $49 thousand, respectively, related to the time-based Restricted Securities. As of June 30, 2022, total unrecognized compensation expense related to non-vested Restricted Securities amounted to $6 thousand which the Company expects to recognize over a remaining weighted-average of 0.24 years. All the Restricted Securities that remain unvested and outstanding as of June 30, 2022 are subject to time-based vesting.

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11. WARRANTS

The following table presents information about warrants to purchase common stock issued and outstanding as of June 30, 2022:


			Number of	Exercise Price as of
Year Issued	Defined Name	Classification	Warrants	June 30, 2022		Date of Expiration
2018	2018 Series A Warrants	Equity	8,483	$	174.53	6/25/2023
2019	2019 Placement Agent Warrants	Equity	610	$	112.50	11/21/2024
2020	March 2020 Series A Warrants	Equity	101,829	$	68.75	3/10/2025
2020	March 2020 Placement Agent Warrants	Equity	6,620	$	85.94	3/5/2025
2020	March 2020 Series B Warrants	Equity	510	$	0.00025	Until Fully Exercised
2020	April 2020 Series C Warrants	Equity	67,211	$	40.50	10/17/2025
2020	April 2020 Placement Agent Warrants	Equity	4,461	$	54.6900	4/15/2025
2020	October 2020 Placement Agent Warrants	Equity	48,264	$	25.00	10/22/2025
2020	October 2020 Series A Warrants	Equity	325,174	$	20.00	10/27/2025
Total			563,162
Weighted average exercise price				$	35.15
Weighted average life in years						3.16

12. NET LOSS PER COMMON SHARE

Basic and diluted net loss per share of common stock has been computed by dividing net loss by the weighted average number of shares outstanding during the period. Diluted net loss per share of common stock is computed by dividing net income by the weighted average number of shares outstanding plus the dilutive effect, if any, of outstanding stock options, warrants and convertible securities. In a net loss period, options, warrants, unvested Restricted Securities and convertible securities are anti-dilutive and, therefore, excluded from diluted loss per share calculations.

For the six months ended June 30, 2022 and 2021 the following potentially dilutive securities were not included in the computation of net loss per share because the effect would be anti-dilutive:


	June 30,
	2022	2021
Warrants	563,162	563,162
Stock options	13,982	14,583
Unvested RSUs	—	2
Unvested RSAs	200	254
Total potentially dilutive securities	577,344	578,001

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13. INCOME TAXES

The Company did not record a federal or state income tax provision or benefit for each of the six months ended June 30, 2022 and 2021 due to the expected loss before income taxes to be incurred for the years ended December 31, 2022 and 2021, as well as the Company’s continued maintenance of a full valuation allowance against its net deferred tax assets.

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Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following management’s discussion and analysis should be read in conjunction with the unaudited consolidated financial statements included elsewhere in this Quarterly Report and with our historical consolidated financial statements, and the related notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Annual Report”). The management’s discussion and analysis contains forward-looking statements within the meaning of the safe harbor provisions under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements include statements made regarding our commercialization strategy, future operations, cash requirements and liquidity, capital requirements, and other statements on our business plans and strategy, financial position, and market trends. In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,” “should,” “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and other similar expressions. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Quarterly Report, including factors such as our ability to raise substantial additional capital to finance our planned operations and to continue as a going concern; our ability to execute our strategy and business plan; our ability to obtain regulatory approvals for our products, including the Neuro-Spinal Scaffold™; our ability to successfully commercialize our current and future product candidates, including the Neuro-Spinal Scaffold; the progress and timing of our development programs; market acceptance of our products; our ability to retain management and other key personnel; our ability to promote, manufacture, and sell our products, either directly or through collaborative and other arrangements with third parties; the impact of the COVID-19 pandemic and our response to it; and other factors detailed under “Risk Factors” in Part II, Item 1A of this Quarterly Report. These forward-looking statements speak only as of the date hereof. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report, except as required by law.

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate such estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

All share amounts presented in this Item 2 give effect to the 1-for-25 reverse stock split of our outstanding shares of common stock, par value $0.00001 per share (“common stock”), that occurred on April 26, 2022.

Overview

We are a research and clinical-stage biomaterials and biotechnology company with a focus on treatment of spinal cord injuries, or SCIs. Our approach to treating acute SCIs is based on our investigational Neuro-Spinal Scaffold™ implant, a bioresorbable polymer scaffold that is designed for implantation at the site of injury within a spinal cord and is intended to treat acute SCI. The Neuro-Spinal Scaffold implant incorporates intellectual property licensed under an exclusive, worldwide license from Boston Children’s Hospital, or BCH, and the Massachusetts Institute of Technology, or MIT. We also plan to evaluate other technologies and therapeutics that may be complementary to our development of the Neuro-Spinal Scaffold implant, such as stem cells, therapeutics or electrical stimulation, including in combination with learnings applied from our Neuro-Spinal Scaffold implant or technologies that offer the potential to bring us closer to our goal of redefining the life of the SCI patient.

The current standard of care for acute management of spinal cord injuries focuses on preventing further injury to the spinal cord. However, the current standard of care does not address repair of the spinal cord.

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Our Clinical Program

We currently have one clinical development program for the treatment of acute SCI.

Neuro-Spinal Scaffold Implant for acute SCI

Our Neuro-Spinal Scaffold implant is an investigational bioresorbable polymer scaffold that is designed for implantation at the site of injury within a spinal cord. The Neuro-Spinal Scaffold implant is intended to promote appositional, or side-by-side, healing by supporting the surrounding tissue after injury, minimizing expansion of areas of necrosis, and providing a biomaterial substrate for the body’s own healing/repair processes following injury. We believe this form of appositional healing may spare white matter, increase neural sprouting, and diminish post-traumatic cyst formation.

The Neuro-Spinal Scaffold implant is composed of two biocompatible and bioresorbable polymers that are cast to form a highly porous investigational product:

●

Poly lactic-co-glycolic acid, a polymer that is widely used in resorbable sutures and provides the biocompatible support for Neuro-Spinal Scaffold implant; and

●

Poly-L-Lysine, a positively charged polymer commonly used to coat surfaces in order to promote cellular attachment.

Because of the complexity of SCIs, it is likely that multi-modal therapies will be required to maximize positive outcomes in SCI patients. In the future, we may attempt to further enhance the performance of our Neuro-Spinal Scaffold implant by multiple combination strategies involving electrostimulation devices, additional biomaterials, drugs approved by the U.S. Food and Drug Administration, or FDA, or growth factors. We expect the Neuro-Spinal Scaffold implant to be regulated by the FDA as a Class III medical device.

INSPIRE 2.0 Study

Our Neuro-Spinal Scaffold implant has been approved to be studied under our approved Investigational Device Exemption, or IDE, in the INSPIRE 2.0 Study, which is titled the “Randomized, Controlled, Single-blind Study of Probable Benefit of the Neuro-Spinal Scaffold™ for Safety and Neurologic Recovery in Subjects with Complete Thoracic AIS A Spinal Cord Injury as Compared to Standard of Care.” The purpose of the INSPIRE 2.0 Study is to assess the overall safety and probable benefit of the Neuro-Spinal Scaffold for the treatment of neurologically complete thoracic traumatic acute SCI. The INSPIRE 2.0 Study is designed to enroll 10 subjects into each of the two study arms, which we refer to as the Scaffold Arm and the Comparator Arm. Patients in the Comparator Arm will receive the standard of care, which is spinal stabilization without dural opening or myelotomy. The INSPIRE 2.0 Study is a single blind study, meaning that the patients and assessors are blinded to treatment assignments. The FDA approved the enrollment of up to 35 patients in this study so that there would be at least 20 evaluable patients (10 in each study arm) at the primary endpoint analysis, accounting for events such as randomization or screen failures or deaths that would prevent a patient from reaching the primary endpoint visit. On June 2, 2022, we announced that we completed enrollment in the INSPIRE 2.0 Study and expect to present topline data from the INSPIRE 2.0 Study in the first quarter of 2023.

The primary endpoint of the INSPIRE 2.0 Study is defined as the proportion of patients achieving an improvement of at least one American Spinal Injury Association Impairment Scale (“AIS”) grade at six months post-implantation. Assessments of AIS grade are at hospital discharge, three months, six months, 12 months and 24 months. The definition of study success for INSPIRE 2.0 is that the difference in the proportion of subjects who demonstrate an improvement of at least one grade on AIS assessment at the 6-month primary endpoint follow-up visit between the Scaffold Arm and the Comparator Arm must be equal to or greater than 20%. In one example, if 50% of subjects in the Scaffold Arm have an improvement of AIS grade at the six-month primary endpoint and 30% of subjects in the Comparator Arm have an improvement, then the difference in the proportion of subjects who demonstrated an improvement is equal to 20% (50% minus 30% equals 20%) and the definition of study success would be met. In another example, if 40% of subjects in the Scaffold Arm have an improvement of AIS grade at the six-month primary endpoint and 30% of subjects in the Comparator Arm have an improvement, then the difference in the proportion of subjects who

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demonstrated an improvement is equal to 10% (40% minus 30% equals 10%) and the definition of study success would not be met. Additional endpoints include measurements of changes in neurological level of injury, sensory levels and motor scores, bladder, bowel and sexual function, pain, Spinal Cord Independence Measure, and quality of life.

Our Neuro-Spinal Scaffold was previously studied in The INSPIRE Study: the “InVivo Study of Probable Benefit of the Neuro- Spinal Scaffold for Safety and Neurologic Recovery in Subjects with Complete Thoracic AIS A Spinal Cord Injury,” under an IDE application for the treatment of neurologically complete thoracic traumatic acute SCI. Although The INSPIRE Study was structured with an Objective Performance Criterion, or the OPC as the primary component for demonstrating probable benefit, the OPC is not the only variable that the FDA would evaluate when reviewing a future human device exemption, or HDE, application. Similarly, while our INSPIRE 2.0 Study is structured with a definition of study success requiring a minimum difference between study arms in the proportion of subjects achieving improvement, that success definition is not the only factor that the FDA would evaluate in the future HDE application. Approval is not guaranteed if the OPC is met for The INSPIRE Study or the definition of study success is met for the INSPIRE 2.0 Study, and even if the OPC or definition of study success are not met, the FDA may approve a medical device if probable benefit is supported by a comprehensive review of all clinical endpoints and preclinical results, as demonstrated by the sponsor’s body of evidence.

In 2016, the FDA accepted our proposed HDE modular shell submission and review process for the Neuro-Spinal Scaffold implant. The HDE modular shell is comprised of three modules: a preclinical module, a manufacturing module, and a clinical data module. As part of its review process, the FDA reviews each module, which are individual sections of the HDE submission, on a rolling basis. Following the submission of each module, the FDA reviews and provides feedback, typically within 90 days, allowing the applicant to receive feedback and potentially resolve any deficiencies during the review process. Upon receipt of all three modules, which constitutes the complete HDE submission, the FDA makes a filing decision that may trigger the review clock for an approval decision. We submitted the first module (the preclinical module) in March 2017. In July 2021, the FDA informed us that our preclinical module was accepted. In December 2021, we submitted the second module (the manufacturing module) to the FDA. In June 2022, we received feedback from the FDA on the second module (the manufacturing module) and we are actively assessing the FDA’s responses and potential timelines for submitting a response for the second module.

Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to make estimates and assumptions and, in connection therewith, adopt certain accounting policies that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

On an ongoing basis, we evaluate our estimates and judgments for all assets and liabilities, stock-based compensation expense, and the fair value determined for stock purchase warrants classified as derivative liabilities. We base our estimates and judgments on historical experience, current economic and industry conditions, and on various other factors that we believe to be reasonable under the circumstances. Such factors form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. There have been no changes in our critical accounting policies and estimates from the disclosure provided in our 2021 Annual Report.

We believe that the consolidated financial statements accurately reflect our best estimate of the results of operations, financial position, and cash flows for the periods presented.

Results of Operations

Comparison of the Three Months Ended June 30, 2022 and 2021

Research and Development Expenses

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June 30, 2022 were $1.3 million, an increase of $0.4 million compared to the three months ended June 30, 2021. The increase in research and development expenses for the three months ended June 30, 2022 can be attributed an increase in compensation related expense of $0.2 million primarily due to a severance payment made to a former employee, an increase in consulting costs of $0.1 million primarily due to increased quality activities and an increase of $0.1 million in other immaterial balances.

General and Administrative Expenses

General and administrative expenses consisted primarily of payroll, rent, and professional services. General and administrative expenses for the three months ended June 30, 2022 were relatively flat at $1.4 million compared to the three months ended June 30, 2021.

Other Income and Expense

Other income for the three months ended June 30, 2022, was comprised of interest income of $11 thousand. Other income for the three months ended June 30, 2021 was immaterial.

Comparison of the Six Months Ended June 30, 2022 and 2021

Research and Development Expenses

Research and development expenses consisted primarily of expenses related to contract research organizations and clinical sites, professional services, and payroll. Research and development expenses for the six months ended June 30, 2022 were $2.7 million, an increase of $0.8 million compared to the six months ended June 30, 2021. The increase in research and development expenses for the six months ended June 30, 2022 can be attributed an increase in compensation related expense of $0.3 million primarily due to a severance payment made to a former employee, an increase in clinical trial and consulting costs of $0.3 million primarily due to increased clinical trial and quality activities, an increase in scaffold manufacturing costs of $0.1 million primarily as a result of higher clinical demand and an increase of $0.1 million in facilities related costs.

General and Administrative Expenses

General and administrative expenses consisted primarily of payroll, rent, and professional services. General and administrative expenses for the six months ended June 30, 2022 were relatively flat at $2.6 million compared to the six months ended June 30, 2021.

Other Income and Expense

Other income for the six months ended June 30, 2022, was comprised of interest income of $12 thousand and other income of $9 thousand. Other income for the six months ended June 30, 2021 was immaterial.

Liquidity, Capital Resources and Going Concern

Liquidity is a measure of our ability to meet potential cash requirements, including planned capital expenditures. Since inception, we have devoted substantially all of our efforts to business planning, research and development, recruiting management and technical staff, acquiring operating assets, and raising capital. We have historically financed our operations primarily through the sale of equity-related securities. We have not achieved profitability and may not be able to realize sufficient revenue to achieve or sustain profitability in the future. We do not expect to be profitable in the next several years, but rather expects to incur additional operating losses.

As of June 30, 2022, we had approximately $11.2 million in working capital, our accumulated deficit was $243.5 million, we had total assets of $16.1 million, total liabilities of $3.3 million, and total stockholders’ equity of $12.8 million. During the six months ended June 30, 2022, we recorded a net loss of $5.4 million. We have not achieved profitability and may not be able to realize sufficient revenue to achieve or sustain profitability in the future. We do not expect to be profitable in the next several years, but rather expect to incur additional operating losses. We believe that our cash and cash equivalents as of June 30, 2022 will provide necessary funding to fund operations through the second

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quarter of 2023. This estimate is based on assumptions that may prove to be wrong; expenses could prove to be significantly higher, leading to a more rapid consumption of our existing resources.

Our consolidated financial statements as of June 30, 2022 were prepared under the assumption that we will continue as a going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal cause of business. However, substantial doubt about our ability to continue as a going concern exists and we will require additional liquidity to continue operations over the next 12 months.

We have limited liquidity and capital resources and must obtain significant additional capital resources in order to fund our operations and sustain our product development efforts, for acquisition of technologies and intellectual property rights, for preclinical and clinical testing of our anticipated products, pursuit of regulatory approvals, acquisition of capital equipment, laboratory and office facilities, establishment of production capabilities, for selling, general and administrative expenses and for other working capital requirements. We will need to raise additional capital through a combination of equity offerings, debt financings, other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. Additionally, the COVID-19 pandemic could have a continued adverse impact on economic and market conditions and extend the period of global economic slowdown, which could impair our ability to raise needed funds. Our liquidity is also impacted by the limited number of authorized shares that remain available under our certificate of incorporation, and the resulting constraints on financing options and alternatives.

We may pursue various other dilutive and non‑dilutive funding alternatives depending upon our clinical path forward and the extent to which we require additional capital to proceed with development of some or all of our product candidates on expected timelines. The source, timing and availability of any future financing will depend principally upon market conditions and the status of our clinical development programs. Funding may not be available when needed, at all, or on terms acceptable to us. Lack of necessary funds may require us to, among other things, delay, scale back or eliminate some or all of our research and product development programs, planned clinical trials, and capital expenditures or to license our potential products or technologies to third parties. We may alternatively engage in cost-cutting measures in an attempt to extend our cash resources as long as possible. If we are unable to raise additional capital, we may be forced to cease operations entirely.

Our consolidated financial statements as of June 30, 2022, do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if we were unable to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate its assets and may receive less than the value at which those assets are carried on our financial statements, and it is likely that investors will lose all or part of their investment.

Cashflows

Net cash used in operating activities for the six months ended June 30, 2022, consisted of net loss of $5.4 million, non-cash items of $0.3 million and cash used by working capital of $0.8 million. Adjustments for non-cash items consisted primarily of $0.2 million in amortization of operating lease right-of-use assets and $0.1 million in stock-based compensation expense. The change in cash from working capital included a $0.7 million decrease in accrued expenses, a $0.4 million increase in prepaid expenses and other assets and a $0.2 million decrease in the operating lease liability. These changes were offset by a $0.5 million increase in accounts payable.

Net cash used in operating activities for the six months ended June 30, 2021 consisted of net loss of $4.5 million, non-cash items of $0.3 million and cash used by working capital of $0.7 million. Adjustments for non-cash items consisted primarily of $0.2 million in amortization of operating lease right-of-use assets and $0.1 million in stock-based compensation expense. The change in cash from working capital included a $0.3 million decrease in accrued expenses, a $0.4 million increase in prepaid expenses and other assets and a $0.2 million decrease in the operating lease liability. These changes were offset by a $0.1 million increase in accounts payable.

Net cash used in investing activities for the six months ended June 30, 2022 was $82 thousand related to the purchase of manufacturing and lab equipment. The Company did not generate or use cash in investing activities during the six months ended June 30, 2021.

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The Company did not generate or use cash in financing activities during the six months ended June 30, 2022. Net cash generated by financing activities for the six months ended June 30, 2021 was $8.5 million related to proceeds from the exercise of warrants.

Inflation and Changing Prices

We do not believe that inflation has had, or will have, a material impact on our operating costs and earnings.

Material Cash Requirements from Contractual Obligations

Leases

As of June 30, 2022, we reported current and long-term operating lease liabilities of $0.4 million and $0.8 million, respectively. These balances represent our contractual obligation to make future payments on our Cambridge Sublease (as described in Note 5 in the Notes to Consolidated Financial Statements), discounted to reflect our cost of borrowing. In the event that we were to vacate the Cambridge facility, we may be obliged to continue making payments under the Cambridge Lease (as described in Note 5 in the Notes to Consolidated Financial Statements).

Clinical Trial Commitments

We have engaged and executed contracts with clinical research organizations to assist with the administration of our ongoing INSPIRE 1.0 and INSPIRE 2.0 clinical trials. As of June 30, 2022, approximately $4.5 million remains to be paid on these contracts.

See Note 5, “Commitments and Contingencies,” in the Notes to Consolidated Financial Statements for information regarding our commitments.

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Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this item.

Item 4.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms promulgated by the Securities and Exchange Commission. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of the Company’s disclosure controls and procedures as of June 30, 2022, the Company’s chief executive officer and chief financial officer concluded that, as of such date, the Company’s disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2022 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 1A. Risk Factors.

Certain factors may have a material adverse effect on our business, financial condition, and results of operations. You should consider carefully the risks and uncertainties described below, in addition to other information contained in this Quarterly Report on Form 10-Q, including our consolidated financial statements and related notes. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the following risks actually occurs, our business, financial condition, results of operations, and future prospects could be materially and adversely affected.

Risks Related to Our Financial Position and Need for Additional Capital

We believe we have sufficient cash resources to continue our business operations through the second quarter of 2023. We expect that our expenses will increase in connection with our ongoing activities, particularly as we seek potential regulatory approval for our Neuro-Spinal Scaffold implant. If we obtain regulatory approval for any of our current or future product candidates, we expect to incur significant commercialization expenses related to manufacturing, marketing, sales, and distribution. Accordingly, we will need to obtain additional funding in connection with our continuing operations.

If we are unable to raise additional capital, we may seek to engage in one or more potential transactions, such as the sale of our company, a strategic partnership with one or more parties or the licensing, sale or divestiture of some of our assets or proprietary technologies, or we may be forced to cease our operations entirely. There can be no assurance that we will be able to enter into such a transaction or transactions on a timely basis or on terms that are favorable to us. If we are unable to raise capital when needed or on attractive terms, or should we engage in one or more potential strategic transactions, we could be forced to delay, reduce, or eliminate our research and development programs or any future commercialization efforts or to cease operations entirely. If we determine to change our business strategy or to seek to engage in a strategic transaction, our future business, prospects, financial position and operating results could be significantly different than those in historical periods or projected by our management. Because of the significant uncertainty regarding these events, we are not able to accurately predict the impact of any potential changes in our existing business strategy.

Our future funding requirements, both near and long term, will depend on many factors, including, but not limited to:

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our ability to obtain increases in authorized shares, which will be required for future financings. We have previously experienced difficulties obtaining quorum for our annual meetings of stockholders and achieving the number of shareholder votes required for increases in authorized shares;

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the scope, progress, results, and costs of preclinical development, laboratory testing, clinical trials, and potential regulatory approval for our Neuro-Spinal Scaffold implant and any other product candidates that we may develop or acquire, including our INSPIRE 2.0 Study;

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future clinical trial results of our Neuro-Spinal Scaffold implant; including the results of the INSPIRE 2.0 Study;

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the timing of, and the costs involved in, obtaining regulatory approvals for the Neuro-Spinal Scaffold implant, and the outcome of regulatory review of the Neuro-Spinal Scaffold implant;

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the cost and timing of future commercialization activities for our products if any of our product candidates are approved for marketing, including product manufacturing, marketing, sales, and distribution costs;

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the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;

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the cost of having our product candidates manufactured for clinical trials in preparation for regulatory approval and in preparation for commercialization;

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the cost and delays in product development as a result of any changes in regulatory oversight applicable to our product candidates;

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our ability to establish and maintain strategic collaborations, licensing, or other arrangements and the financial terms of such agreements;

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the cost and timing of establishing sales, marketing, and distribution capabilities;

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the costs involved in preparing, filing, prosecuting, maintaining, defending, and enforcing our intellectual property portfolio;

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the efforts and activities of competitors and potential competitors;

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the effect of competing technological and market developments; and

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the extent to which we acquire or invest in businesses, products, and technologies.

Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive, and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory approval and achieve product sales. For example, the top-line data from our INSPIRE 2.0 Study is expected in the first quarter of 2023, and the data may not support regulatory approval for the Neuro-Spinal Scaffold implant. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for several years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

Increases in authorized shares will be required for future financings or other strategic transactions. We have previously experienced difficulties obtaining quorum for our annual meetings of stockholders and achieving the number of votes required for increases in authorized shares. If we continue to experience such difficulties, we will be limited in our efforts to raise additional capital, and our operations, financial condition and our ability to continue as a going concern may be materially and adversely affected.

We will need to seek the additional capital necessary to fund our operations through public or private equity offerings, debt financings, and collaborative and licensing arrangements. We have limited capital and in order for us to execute on our business plan and remain viable as a going concern, we must have the flexibility to engage in capital raising transactions until we are able to generate sufficient revenue and cash flow. Investors in prior transactions have purchased our common stock or our derivative securities, such as warrants, for which we must reserve unissued common stock. We therefore will need to increase the number of authorized shares of our common stock in order to issue common stock or securities convertible or exercisable into common stock to investors and other strategic partners, and as a result enable us to engage in capital raising transactions and other strategic transactions involving the issuance of equity securities.

Such increases to our authorized common stock require shareholder approval. Our 2019 Annual Meeting of stockholders was initially postponed due to a lack of quorum, and we were able to successfully achieve quorum and the votes required to pass the proposal to increase the number of authorized shares only after announcing a new record date for the meeting, which was held in January 2020. Our 2020 Annual Meeting of stockholders was held in August 2020, and we were able to achieve quorum and obtain the number of votes necessary to approve an increase in our authorized common stock, without having to postpone the meeting. Our 2021 Annual Meeting of stockholders was held in July 2021, and we were able to achieve quorum but we were not able to obtain the number of necessary votes to approve an increase in our authorized common stock. In connection with our upcoming 2022 Annual Meeting of Stockholders, which is anticipated to take place on August 24, 2022, our Board has adopted a voting rights plan, which allows certain

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shareholders exercise additional voting rights with respect to their shares of common stock to which the voting rights are applied (the “Voting Rights Plan”). The Voting Rights Plan is of limited scope of and purpose and is designed to facilitate the approval of an amendment to the Company’s Articles of Incorporation to increase the number of authorized shares of common stock and another amendment to the Company’s Articles of Incorporation to authorize shares of “blank-check” preferred stock at the 2022 Annual Meeting. We cannot be certain that the adoption or implementation of the Voting Rights Plan will allow us to successfully pass either proposal at the 2022 Annual Meeting, and we cannot be sure that we will not experience future difficulties in obtaining quorum for our annual meetings or difficulties in obtaining the necessary votes required to pass proposals such as increases in authorized shares, as we experienced at the 2021 Annual Meeting and prior meetings. In such events, we will be limited in our efforts to raise additional capital, and our operations, financial condition and our ability to continue as a going concern may be materially and adversely affected. As a result of the reverse splits which have been effected under a provision of Nevada law that requires a concurrent reduction in the number of authorized shares, the total authorized shares we have available for issuance, including for potential financing transactions, is only 31,696 shares.

We have a limited operating history and have incurred significant losses since our inception.

We have incurred net losses each year since our inception, including net losses of $5.4 million for the six months ended June 30, 2022, and net losses of $9.9 million for the year ended December 31, 2021 and $9.1 million for the year ended December 31, 2020. As of June 30, 2022, we had an accumulated deficit of $243.5 million. We have a limited operating history on which to base an evaluation of our business and investors should consider the risks and difficulties frequently encountered by early-stage companies in new and rapidly evolving markets, particularly companies engaged in the development of medical devices. To date, we have not commercialized any products or generated any revenues from the sale of products, and we do not expect to generate any product revenues in the foreseeable future. We do not know whether or when we will generate revenue or become profitable. Moreover, we may allocate significant amounts of capital towards products and technologies for which market demand is lower than anticipated and, as a result, may not achieve expectations or may elect to abandon such efforts.

We have devoted most of our financial resources to research and development, including our clinical and preclinical development activities related to our Neuro-Spinal Scaffold implant. Overall, we expect our research and development expenses to be substantial and to increase for the foreseeable future as we continue the development and clinical investigation of our current and future products. We expect that it could be several years, if ever, before we have a product candidate ready for commercialization. Even if we obtain regulatory approval to market our Neuro-Spinal Scaffold implant or other products, our future revenues will depend upon the size of any markets in which our products have received approval, our ability to achieve sufficient market acceptance, reimbursement from third-party payers, and other factors.

We anticipate that we will continue to incur substantial losses for the foreseeable future and may never achieve or maintain profitability.

We expect to continue to incur significant expenses and increasing net losses for at least the next several years. We expect our expenses will increase substantially in connection with our ongoing activities, as we:

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continue clinical development of our Neuro-Spinal Scaffold implant;

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initiate or restart the research and development of other product candidates;

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have our product candidates manufactured for clinical trials and for commercial sale;

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establish a sales, marketing, and distribution infrastructure to commercialize any products for which we may obtain marketing approval;

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maintain, protect, and expand our intellectual property portfolio; and

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continue our research and development efforts for new product opportunities.

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To become and remain profitable, we must succeed in developing and commercializing our product candidates with significant market potential. This will require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials of our current and future product candidates, developing additional product candidates, obtaining regulatory approval for these product candidates, and manufacturing, marketing, and selling any products for which we may obtain regulatory approval. We are only in the initial stages of most of these activities. We may never succeed in these activities and, even if we do, may never generate revenues that are significant enough to achieve profitability.

Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable could depress the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product offerings, or even continue our operations. A decline in the value of our company could cause an investor to lose all or part of their investment.

Raising additional capital may cause dilution to our existing stockholders, restrict our operations, or require us to relinquish rights to our product candidates on unfavorable terms to us.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, and other third party funding alternatives including license and collaboration agreements. To raise additional capital or pursue strategic transactions, we may in the future sell additional shares of our common stock, or other securities convertible into or exchangeable for our common stock, which will dilute the ownership interest of our current stockholders, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our current stockholders. If we raise additional funds through collaborations, strategic alliances, or marketing, distribution, or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, future revenue streams or research programs, or grant licenses on terms that may not be favorable to us or that may reduce the value of our common stock. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce, or terminate our product development or commercialization efforts for our Neuro-Spinal Scaffold implant or any other product candidates that we develop or acquire or to cease operations entirely.

Changes in tax laws or in their implementation or interpretation may adversely affect our business and financial condition.

As part of Congress’ response to the COVID-19 pandemic, the Families First Coronavirus Response Act, or FFCR Act, was enacted on March 18, 2020, and the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was enacted on March 27, 2020. Both contain numerous tax provisions. In particular, the CARES Act retroactively and temporarily (for taxable years beginning before January 1, 2021) suspends application of the 80%-of-income limitation on the use of net operating losses, or NOLs, which was enacted as part of the Tax Act. It also provides that NOLs arising in any taxable year beginning after December 31, 2017 and before January 1, 2021 are generally eligible to be carried back up to five years. The CARES Act also temporarily (for taxable years beginning in 2019 or 2020) relaxes the limitation of the tax deductibility for net interest expense by increasing the limitation from 30% to 50% of adjusted taxable income. The Company has evaluated the impact of the CARES Act and determined it to have an immaterial effect on the Company’s tax position.

Regulatory guidance under the Tax Act, the FFCR Act and the CARES Act is and continues to be forthcoming, and such guidance could ultimately increase or lessen impact of these laws on our business and financial condition. Congress is also considering and may enact further tax law changes in connection with the COVID-19 pandemic, some of which could have an impact on our company. In addition, state tax legislation or administration guidance conforming to or decoupling from particular provisions of the Tax Act, the FFCR Act and the CARES Act could affect our business or financial condition.

Our ability to use our net operating loss carryforwards and tax credit carryforwards may be limited.

We have generated significant NOLs and research and development tax credits, or R&D credits, as a result of our incurrence of losses and our conduct of research activities since inception. We generally are able to carry NOLs and R&D credits forward to reduce our tax liability in future years but certain NOL carryforwards could expire unused and

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be unavailable to offset our future income tax liabilities. As described above in “Changes in tax laws or in their implementation or interpretation may adversely affect our business and financial condition,” the Tax Act, as amended by the CARES Act, includes changes to U.S. federal tax rates and the rules governing NOLs that may significantly impact our ability to utilize our NOLs to offset taxable income in the future. Nor is it clear how various states will respond to the Tax Act, the FFCR Act or the CARES Act. In addition, state NOLs generated in one state cannot be used to offset income generated in another state. For these reasons, even if we attain profitability, we may be unable to use a material portion of our NOLs and other tax attributes.

In addition, our ability to utilize the NOLs and R&D credits is subject to the rules of Sections 382 and 383, respectively, of the Code. Those sections generally restrict the use of NOLs and R&D credits after an “ownership change.” An ownership change occurs if, among other things, the stockholders (or specified groups of stockholders) who own or have owned, directly or indirectly, 5% or more of a corporation’s common stock or are otherwise treated as 5% stockholders under Section 382 of the Code and the United States Treasury Department regulations promulgated thereunder increase their aggregate percentage ownership of that corporation’s stock by more than 50 percentage points over the lowest percentage of the stock owned by these stockholders over the applicable testing period. In the event of an ownership change, Section 382 imposes an annual limitation on the amount of taxable income a corporation may offset with NOL carryforwards and Section 383 imposes an annual limitation on the amount of tax a corporation may offset with business credit (including the R&D credit) carryforwards. Any unused annual limitation may be carried over to later years until the applicable expiration date for the respective NOL or R&D credit carryforwards. We have completed several financings since our inception, which may have resulted in an ownership change as defined by Sections 382 and 383 of the Code, or could result in an ownership change in the future, but we have not completed an analysis of whether a limitation as noted above exists. As of June 30, 2022, we have not performed a Section 382 study yet, but we will complete an appropriate analysis before our tax attributes are utilized.

Acquisitions of companies, businesses, or technologies may substantially dilute our stockholders and increase our operating losses.

We continue to actively evaluate business partnerships and acquisitions of businesses, technologies, or intellectual property rights that we believe would be necessary, useful, or complementary to our current business. Any such acquisition may require assimilation of the operations, products or product candidates, and personnel of the acquired business and the training and integration of its employees, and could substantially increase our operating costs, without any offsetting increase in revenue. We may also acquire the right to use certain intellectual property through licensing agreements, which could substantially increase our operating costs. Acquisitions and licensing agreements may not provide the intended technological, scientific or business benefits and could disrupt our operations and divert our limited resources and management’s attention from our current operations, which could harm our existing product development efforts. While we may use cash or equity to finance a future acquisition or licensing agreement, it is likely we would issue equity securities as a significant portion or all of the consideration in any acquisition. The issuance of equity securities for an acquisition could be substantially dilutive to our stockholders. Any investment made in, or funds advanced to, a potential acquisition target could also significantly, adversely affect our results of operations and could further reduce our limited capital resources. Any acquisition or action taken in anticipation of a potential acquisition or other change in business activities could substantially depress the price of our stock. In addition, our results of operations may suffer because of acquisition related costs, or the post-acquisition costs of funding the development of an acquired technology or product candidates or operations of the acquired business, or due to amortization or impairment costs for acquired goodwill and other intangible assets.

Risks Related to our Business

The COVID-19 pandemic, which began in late 2019 and has had impacts worldwide, previously delayed our potential to enroll patients in our INSPIRE 2.0 clinical trial and may, in the future continue to have other adverse effects on our business and operations, including the disruption of regulatory activities. In addition, this pandemic has caused substantial disruption to economies worldwide and may adversely impact the financial markets, both of which could result in adverse effects on our business and operations.

The COVID-19 pandemic, which began in December 2019, has had impacts worldwide, causing many governments to implement measures to slow the spread of the outbreak through quarantines, travel restrictions, heightened border scrutiny, and other measures. The outbreak and government measures taken in response, including

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widespread emergency orders requiring business and residents to curtail non-essential activities, have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen. The future progression of the outbreak and its effects on our business and operations are uncertain. We and our clinical research organizations, as well as clinical trial sites, have faced disruptions related to the INSPIRE 2.0 clinical trial arising from suspension of activity at numerous clinical trial sites due to hospital staff shortages or state or city ‘‘stay at home’’ or ‘‘shelter in place’’ orders, delays in the ability to obtain necessary institutional review board, or IRB, or other necessary site approvals, as well as other delays at clinical trial sites. Specifically, we are aware that a significant number of our clinical sites had previously temporarily suspended enrollment into the INSPIRE 2.0 Study at their institution due to the coronavirus pandemic. Although we have now completed enrollment into our INSPIRE 2.0 Study, the full impact of the COVID-19 pandemic continues to evolve as of the date of filing this Quarterly Report on Form 10-Q, including the impact of potential COVID-19 variants and the impact of vaccine rollout efforts, and we cannot be certain what future impact the COVID-19 pandemic may have on our business and operations. Additionally, the response to the COVID-19 pandemic may redirect resources of regulators in a way that would adversely impact our ability to progress regulatory approvals. In addition, we may face impediments to regulatory meetings and approvals due to measures intended to limit in-person interactions. Any of these factors could continue to adversely impact our ability to seek potential regulatory approval of our Neuro-Spinal Scaffold implant. Additionally, the pandemic could cause significant disruptions in the financial markets, which could impact our ability to raise additional funds through public offerings and may also impact the volatility of our stock price and trading in our stock. Moreover, it is possible the pandemic will continue to significantly impact economies worldwide, which could result in adverse effects on our business and operations. We cannot be certain what the overall impact of the COVID-19 pandemic will be on our business and it has the potential to adversely affect our business, financial condition, results of operations, and prospects.

In addition, clinical trials can be delayed or aborted for a variety of reasons, including delay or failure to:

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obtain regulatory approval to commence future clinical trials;

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reach agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

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obtain IRB approval at each site;

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recruit, enroll, and retain patients through the completion of clinical trials;

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maintain clinical sites in compliance with trial protocols through the completion of clinical trials;

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address patient safety concerns that arise during the course of the trial;

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initiate or add a sufficient number of clinical trial sites; or

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manufacture sufficient quantities of our product candidate for use in clinical trials.

We could encounter delays if a clinical trial is suspended or terminated by us, by the relevant IRB at the sites at which such trials are being conducted, by the Data Safety Monitoring Board for such trial, or by the FDA or other regulatory authorities. Such authorities may suspend or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, a problematic inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse events, or changes in laws or regulations. In addition, regulatory agencies may require an audit with respect to the conduct of a clinical trial, which could cause further delays or increase costs. For example, in December 2017, we and several of our clinical sites and our CRO were subject to an FDA inspection in association with The INSPIRE Study. At the close of the inspection at the Company, the FDA issued a Form 483 with two observations relating to our oversight of clinical trial sites in The INSPIRE Study. We sought input from the FDA regarding the scope and timing of our proposed remediation efforts and the FDA has indicated that our corrective actions appear adequate. We cannot be certain that we will not be subject to additional regulatory action by the FDA. Our remediation efforts have added, and may continue to add, costs to our clinical development plans. Any

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delays in completing our clinical trials will increase our costs, slow down our product candidate development and regulatory review process, and jeopardize our ability to obtain approval and commence product sales and generate revenues. Any of these occurrences may harm our business, financial condition, and prospects significantly.

Risks Related to the Development, Regulatory Approval, and Commercialization of Our Product Candidates

We are wholly dependent on the success of one product candidate, the Neuro-Spinal Scaffold implant, for which we recently completed enrollment into the INSPIRE 2.0 Study, and for which we expect top-line clinical results in the first quarter of 2023. We cannot be certain that we will be able to obtain favorable clinical results in our clinical trials, including in the INSPIRE 2.0 Study, and further, we cannot be certain that regulatory authorities will accept the results of our clinical trials or interpret them the way that we do. Further, even if we are able to obtain favorable clinical results, including in the INSPIRE 2.0 Study, we may not be able to obtain regulatory approval for, or successfully commercialize, our Neuro-Spinal Scaffold implant.

We currently have only one product candidate, the Neuro-Spinal Scaffold implant, in clinical development, and our business depends almost entirely on the successful clinical development, regulatory approval, and commercialization of that product candidate, which may never occur. We currently have no products available for sale, generate no revenues from sales of any products, and we may never be able to develop marketable products. Our Neuro-Spinal Scaffold implant will require substantial additional clinical development, testing, manufacturing process development, and regulatory approval before we are permitted to commence its commercialization. Before obtaining regulatory approval via the Humanitarian Device Exemption, or HDE, pathway for the commercial sale of any product candidate, we must demonstrate through extensive preclinical testing and clinical trials that the product candidate does not pose an unreasonable or significant risk of illness or injury, and that the probable benefit to health outweighs the risk of injury or illness from its use, taking into account the probable risks and benefits of currently available devices or alternative forms of treatment.

Although we have completed enrollment into our INSPIRE 2.0 Study, our clinical trial results may subsequently fail to meet the safety and probable benefit standards required to obtain regulatory approvals. For example, in the INSPIRE Study, two of the 16 evaluable patients were initially assessed to have improved from complete AIS A SCI to incomplete AIS B SCI, but each was later assessed to have reverted to complete AIS A SCI prior to the patient’s 6-month examination. Of these two patients, one patient had converted back to AIS B and the other patient remained at AIS A at the six-month examination. There is known and published variability in some of the measures used to assess AIS improvement and these measures can vary over time or depending upon the examiner. While we implemented procedures in The INSPIRE Study and the INSPIRE 2.0 Study to limit such variations and will also implement procedures in any future clinical study to limit such variations, we cannot be certain that regulatory authorities will accept the results of our clinical trials or interpret them the way that we do.

Alternatively, if we were to seek premarket approval, or PMA, for our product candidate, that would require demonstration that the product is safe and effective for use in each target indication. This process can take many years. Of the large number of medical devices in development in the United States, only a small percentage successfully complete the regulatory approval process required by the FDA and are commercialized. Accordingly, even if we are able to obtain the requisite capital to continue to fund our development and clinical programs, we may be unable to successfully develop or commercialize our Neuro-Spinal Scaffold implant or any other product candidate.

The clinical trials of any of our current or future product candidates are, and the manufacturing and marketing of any such product candidates will be, subject to extensive and rigorous review and regulation by the FDA and other government authorities in the United States and in other countries where we intend to test and, if approved, market such product candidates.

We have experienced delays in our clinical development of our Neuro-Spinal Scaffold implant. Clinical trials for future product candidates may also experience delays or may not be able to commence.

Before we can obtain regulatory approval for the sale of any of our product candidates, including the Neuro-Spinal Scaffold implant, we must complete the clinical studies that are required. We previously experienced delays in our clinical development of the Neuro-Spinal Scaffold implant, and we cannot be certain that we won’t experience future delays in or not successfully complete the clinical development of other product candidates. For example, in July 2017,

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the INSPIRE Study of our Neuro-Spinal Scaffold implant was placed on hold following the third patient death in the trial. We subsequently closed enrollment in The INSPIRE Study and will follow the active patients until completion. Although we have now completed enrollment into the INSPIRE 2.0 Study, we experienced delays in the enrollment of subjects into the study. Future clinical studies and clinical development may take longer than anticipated because of any number of factors, including potential delays in the enrollment of subjects in the study, including delays due to the COVID-19 pandemic, the availability of scaffold implants or other investigational products to supply to our clinical sites, failure to demonstrate clinical success, the lack of adequate funding to continue any clinical trials, or unforeseen safety issues. Further, enrolling patients into any clinical trial will continue to require the approval of the institutional review boards, or IRBs, at each clinical site.

In addition, clinical trials can be delayed or aborted for a variety of reasons, including delay or failure to:

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obtain regulatory approval to commence future clinical trials;

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obtain IRB approval at each site;

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recruit, enroll, and retain patients through the completion of clinical trials;

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maintain clinical sites in compliance with trial protocols through the completion of clinical trials;

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address patient safety concerns that arise during the course of the trial;

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initiate or add a sufficient number of clinical trial sites; or

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manufacture sufficient quantities of our product candidate for use in clinical trials.

Clinical trials involve a lengthy and expensive process with an uncertain outcome, and results of earlier nonclinical studies and clinical trials may not be predictive of future trial results.

The results of preclinical studies and early clinical trials of new medical devices do not necessarily predict the results of later-stage clinical trials. The design of our clinical trials is based on many assumptions about the expected effects of our product candidates, and if those assumptions are incorrect, the trials may not produce results to support regulatory approval. We are currently pursuing marketing approval via the HDE regulatory pathway which requires us to show the device does not pose an unreasonable or significant risk of illness or injury, and that the probable benefit of health outweighs the risk of injury or illness from its use. Preliminary results may not be confirmed upon full analysis of the detailed results of an early clinical trial. Product candidates in later stages of clinical development may fail to show

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safety and probable benefit sufficient to support intended use claims despite having progressed through initial clinical testing. The data collected from clinical trials of our product candidates may not be sufficient to obtain regulatory approval in the United States or elsewhere. It is also possible that patients enrolled in clinical trials will experience adverse events or unpleasant side effects that are not currently part of the product candidate’s profile. Because of the uncertainties associated with clinical development and regulatory approval, we cannot determine if or when we will have an approved product ready for commercialization or achieve sales or profits, including in connection with the results of our INSPIRE 2.0 Study for our Neuro-Spinal Scaffold implant.

We must obtain FDA approval before we can sell any of our products in the United States and approval of similar regulatory authorities in countries outside the United States before we can sell our products in such countries. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our products if such approval is denied or delayed.

The development, manufacture, and marketing of our products are subject to government regulation in the United States and other countries. In the United States and most foreign countries, we must complete rigorous preclinical testing and extensive human clinical trials that demonstrate the safety and efficacy of a product in order to apply for regulatory approval to market the product. If the FDA grants regulatory approval of a product, the approval may be limited to specific indications or limited with respect to its distribution. Expanded or additional indications for approved devices may not be approved, which could limit our potential revenues. Foreign regulatory authorities may apply similar or additional limitations or may refuse to grant any approval. Consequently, even if we believe that preclinical and clinical data are sufficient to support regulatory approval for our products, the FDA and foreign regulatory authorities may not ultimately grant approval for commercial sale in any jurisdiction. If our product candidates are not approved, our ability to generate revenues will be limited and our business will be adversely affected.

We are currently pursuing an HDE regulatory pathway in the United States for our Neuro-Spinal Scaffold implant. The HDE requires that there is no other comparable device available to provide therapy for a condition and requires sufficient information for the FDA to determine that the device does not pose an unreasonable or significant risk of illness or injury, and that the probable benefit to health outweighs the risk of injury or illness from its use. The amended protocol for The INSPIRE Study, which was approved in February 2016, established an Objective Performance Criteria, or OPC, which is a measure of study success used in clinical studies designed to demonstrate safety and probable benefit in support of an HDE approval. The OPC for The INSPIRE Study is currently defined as 25% or more of the patients in the study demonstrating an improvement of at least one ASIA Impairment Scale, or AIS, grade by six months post-implantation. While we expect The INSPIRE Study to serve as one source of data used to support HDE approval in the future, we did not complete full enrollment of that study. In addition, although The INSPIRE Study is structured with the OPC as the primary component for demonstrating probable benefit, the OPC is not the only variable that the FDA would evaluate when reviewing a future HDE application.

The FDA had previously recommended that we include a randomized, concurrent control arm in the study and we have proposed and received approval for the INSPIRE 2.0 Study. The primary endpoint is defined as the proportion of patients achieving an improvement of at least one AIS grade at six months post-implantation. The definition of study success is that the difference in the proportion of subjects who demonstrate an improvement of at least one grade on AIS assessment at the six-month primary endpoint follow-up visit between the Scaffold Arm and the Comparator Arm must be equal to or greater than 20%. While our INSPIRE 2.0 Study is structured with a definition of study success requiring a minimum difference between groups in the percentage of subjects achieving improvement, that success definition is not the only factor that the FDA would evaluate in the future HDE application.

Approval is not guaranteed if the OPC is met for The INSPIRE Study or the definition of study success is met for the INSPIRE 2.0 Study, and even if the OPC or definition of study success are not met, the FDA may approve a medical device if probable benefit is supported by a comprehensive review of all clinical endpoints and preclinical results, as demonstrated by the sponsor’s body of evidence.

In addition, as one source of comparator data, we completed the CONTEMPO Registry Study, utilizing existing databases and registries to develop a historical comparator that, to the extent possible, matches patients to those patients enrolled in The INSPIRE Study. Analysis of data from the CONTEMPO Registry Study may suggest a higher threshold for evidencing probable benefit. For example, AIS conversion rates at approximately six months post-injury across the three registries used in CONTEMPO varied from 16.7% – 23.4%, which are higher than the approximately 15.5%

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conversion rate from the historical registries that were the basis for the selection of the current OPC for The INSPIRE Study.

Even if we successfully complete the INSPIRE 2.0 Study, we cannot be certain that the FDA will agree that this study, together with the CONTEMPO Registry Study, provides sufficient information for the FDA to determine that the device does not pose an unreasonable or significant risk of illness or injury, and that the probable benefit to health outweighs the risk of injury or illness from its use.

In the event our clinical data is not acceptable to the FDA, our ability to obtain approval under the HDE pathway may be delayed or may not be feasible. If the FDA does not approve our product candidates in a timely fashion, or at all, our business and financial condition will be adversely affected.

The 21st Century Cures Act increased the upper population limit for an HDE from 4,000 to 8,000, which allows us to potentially request an expansion of our current Humanitarian Use Device, or HUD to include additional patient populations beyond our current HUD for complete SCI. If we choose to pursue such an expansion, this may cause our application to be delayed or cause the FDA to request additional information. In addition, our current study is not designed to support approval beyond complete SCI. Thus, expansion would require additional studies. We cannot be certain that we will be able to increase the potential population that we might be able to treat based on the HDE pathway. If any of these events occur, our business and financial condition will be adversely affected.

There are risks associated with pursuing FDA approval via an HDE pathway, including the possibility that the approval could be withdrawn in the future if the FDA subsequently approves another device for the same intended use, as well as limitations on the ability to profit from sales of the product.

If the FDA subsequently approves a PMA or clears a 510(k) for the HUD or another comparable device with the same indication, the FDA may withdraw the HDE. Once a comparable device becomes legally marketed through PMA or 510(k) clearance to treat or diagnose the disease or condition in question, there may no longer be a need for the HUD and so the HUD may no longer meet the requirements of section 520(m)(2)(B) of the Food Drug & Cosmetic Act, or the FDCA.

Except in certain circumstances, products approved under an HDE cannot be sold for an amount that exceeds the costs of research and development, fabrication, and distribution of the device (i.e., for profit). Currently, under section 520(m)(6)(A)(i) of the FDCA, as amended by the Food and Drug Administration Safety and Innovation Act, a HUD is only eligible to be sold for profit after receiving HDE approval if the device (1) is intended for the treatment or diagnosis of a disease or condition that occurs in pediatric patients or in a pediatric subpopulation, and such device is labeled for use in pediatric patients or in a pediatric subpopulation in which the disease or condition occurs; or (2) is intended for the treatment or diagnosis of a disease or condition that does not occur in pediatric patients or that occurs in pediatric patients in such numbers that the development of the device for such patients is impossible, highly impracticable, or unsafe. If an HDE-approved device does not meet either of the eligibility criteria, the device cannot be sold for profit. With enactment of the FDA Reauthorization Act of 2017, Congress provided that the exemption for HUD / HDE profitability is available as long as the request for an exemption is submitted before October 1, 2022.

Some of our future products may be viewed by the FDA as combination products and the review of combination products is often more complex and more time consuming than the review of other types of products.

Our future products may be regulated by the FDA as combination products. For a combination product, the FDA must determine which center or centers within the FDA will review the product candidate and under what legal authority the product candidate will be reviewed. The process of obtaining FDA marketing clearance or approval is lengthy, expensive, and uncertain, and we cannot be sure that any of our combination products, or any other products, will be cleared or approved in a timely fashion, or at all. In addition, the review of combination products is often more complex and more time consuming than the review of a product candidate under the jurisdiction of only one center within the FDA. We cannot be sure that the FDA will not select to have our combination products reviewed and regulated by only one FDA center and/or different legal authority, in which case the path to regulatory approval would be different and could be lengthier and more costly. If the FDA does not approve or clear our products in a timely fashion, or at all, our business and financial condition will be adversely affected.

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We may face substantial competition, which may result in others discovering, developing, or commercializing products before or more successfully than we do.

In general, the biotechnology industry is subject to intense competition and rapid and significant technological change. We have many potential competitors, including major drug companies, specialized biotechnology firms, academic institutions, government agencies, and private and public research institutions. Many of these competitors have significantly greater financial and technical resources than us, and superior experience and expertise in research and development, preclinical testing, design and implementation of clinical trials, regulatory processes and approval for products, production and manufacturing, and sales and marketing of approved products. Large and established companies compete in the biotechnology market. In particular, these companies have greater experience and expertise in securing government contracts and grants to support their research and development efforts, conducting testing and clinical trials, obtaining regulatory approvals to market products, manufacturing such products on a broad scale, and marketing approved products. Smaller or early-stage companies and research institutions may also prove to be significant competitors, particularly if they have collaborative arrangements with larger and more established biotechnology companies. We will also face competition from these parties in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites, and registering subjects for clinical trials.

In order to effectively compete, we will have to make substantial investments in development, clinical testing, manufacturing, and sales and marketing, or partner with one or more established companies. There is no assurance that we will be successful in having our products approved or gaining significant market share for any of our products. Our technologies and products also may be rendered obsolete or noncompetitive as a result of products introduced by our competitors.

The results of our clinical trials may not support our product candidate claims or may result in the discovery of adverse side effects.

Our ongoing research and development, preclinical testing, and clinical trial activities are subject to extensive regulation and review by numerous governmental authorities both in the United States and abroad. Clinical studies must be conducted in compliance with FDA regulations or the FDA may take enforcement action. The data collected from these clinical studies may ultimately be used to support market clearance for these products. Even if our clinical trials are completed as planned, we cannot be certain that their results will support our product candidate claims or that the FDA will agree with our conclusions regarding them. Success in preclinical studies and early clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that the later trials will replicate the results of prior trials and preclinical studies. The clinical trial process may fail to demonstrate that our product candidates are safe and effective for the proposed indicated uses, which could cause us to abandon a product candidate and may delay development of others. Any delay or termination of our clinical trials will delay the filing of our product submissions and, ultimately, our ability to commercialize our product candidates and generate revenues. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate’s profile.

If approved, our products will require market acceptance to be successful. Failure to gain market acceptance would impact our revenues and may materially impair our ability to continue our business.

Even if we receive regulatory approvals for the commercial sale of our product candidates, the commercial success of our products will depend on, among other things, their acceptance by physicians, patients, third-party payers such as health insurance companies, and other members of the medical community as a therapeutic and cost-effective alternative to competing products and treatments. Physicians and hospitals will need to establish training and procedures to utilize and implement our Neuro-Spinal Scaffold implant, and there can be no assurance that these parties will adopt the use of our device or develop sufficient training and procedures to properly utilize it. Market acceptance of, and demand for, any product that we may develop and commercialize will depend on many factors, both within and outside of our control. Payers may view new products or products that have only recently been launched or with limited clinical data available, as investigational, unproven, or experimental, and on that basis may deny coverage of procedures involving use of our products. If our product candidates fail to gain market acceptance, we may be unable to earn sufficient revenue to continue our business.

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If we or our suppliers fail to comply with FDA regulatory requirements, or if we experience unanticipated problems with any approved products, these products could be subject to restrictions or withdrawal from the market.

Any product for which we obtain regulatory approval, and the manufacturing processes, reporting requirements, post-approval clinical data, and promotional activities for such product, will be subject to continued regulatory review and oversight by the FDA. In particular, we and our third-party suppliers will be required to comply with the FDA’s Quality System Regulations, or QSRs. These FDA regulations cover the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage, and shipping of products. Compliance with applicable regulatory requirements is subject to continual review and is monitored rigorously through periodic inspections by the FDA. If we, or our manufacturers, fail to adhere to QSR requirements, this could delay production of our product candidates and lead to fines, difficult