BONE BIOLOGICS CORP Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-K)

Overview

We are a medical device company that is currently focused on bone regeneration
in spinal fusion using the recombinant human protein, known as NELL-1/DBX®. The
NELL-1/DBX® combination product is an osteostimulative recombinant protein that
provides target specific control over bone regeneration. The protein, as part of
the UCB-1 technology platform has been licensed exclusively for worldwide
applications to us through a technology transfer from the UCLA Technology
Development Group on behalf of UC Regents ("UCLA TDG"). UCLA TDG and the Company
received guidance from the FDA that NELL-1/DBX® will be classified as a
combination product with a device lead.

The Company was founded by University of California professors in collaboration
with an Osaka University professor and a University of Southern California
surgeon in 2004 as a privately-held company with proprietary, patented
technology that has been validated in sheep and non-human primate models to
facilitate bone growth. Our platform technology has application in delivering
improved outcomes in the surgical specialties of spinal, orthopedic, general
orthopedic, plastic reconstruction, neurosurgery, interventional radiology, and
sports medicine. Lead product development and clinical studies are targeted on
spinal fusion surgery, one of the larger segments in the orthopedic market.

We are a development stage entity. The production and marketing of our products
and ongoing research and development activities will be subject to extensive
regulation by numerous governmental authorities in the United States. Prior to
marketing in the United States, any combination product developed by us must
undergo rigorous preclinical (animal) and clinical (human) testing and an
extensive regulatory approval process implemented by the FDA under the Food,
Drug and Cosmetic Act. There can be no assurance that we will not encounter
problems in clinical trials that will cause us or the FDA to delay or suspend
the clinical trials.

Our success will depend in part on our ability to obtain patents and product
license rights, maintain trade secrets, and operate without infringing on the
proprietary rights of others, both in the United States and other countries.
There can be no assurance that patents issued to or licensed by us will not be
challenged, invalidated, or circumvented, or that the rights granted thereunder
will provide proprietary protection or competitive advantages to us.

Operating results

Since our inception, we have devoted nearly all of our efforts and funding to developing the NELL-1 protein and raising capital. We have not yet generated revenue from our planned operations.

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                                           Year ended              Year ended
                                        December 31, 2021       December 31, 2020        % Change
Operating expenses
Research and development               $            82,044     $           340,672            (75.92 )%
General and administrative                       1,019,432                 484,342            110.48 %

Total operating expenses                         1,101,476                 825,014             33.51 %

Loss from operations                            (1,101,476 )              (825,014 )           33.51 %

Interest expense                                  (805,109 )              (998,076 )          (19.33 )%

Gain on forgiveness of deferred
compensation                                       297,500                       -            100.00 %

Loss before provision for income
taxes                                           (1,609,085 )            

(1,823,090) (11.74)%

Provision for income taxes                           1,600                 
 1,600                 - %

Net loss                               $        (1,610,685 )   $        (1,824,690 )          (11.73 )%


Research and development

Our research and development decreased from $340,672 during the year ended
December 31, 2020 to $82,044 during the year ended December 31, 2021. The
$258,628 decrease was due to curtailing of operations due to lack of necessary
funds. The lack of capital occurring simultaneously during the COVID-19 pandemic
caused a delay in R&D activities, and a scale back in all operations other than
fund raising. As a result starting in 2020, the company engaged in cost-cutting
measures in an attempt to extend our cash resources as long as possible. As a
result, of the October 2021 Primary Offering we have resumed our research and
development activities. We will continue to incur significant expenses for
development activities for NELL-1 in the future.

General and administrative

Our general and administrative expenses increased from $484,342 during the year
ended December 31, 2020 to $1,019,432 during the year ended December 31, 2021.
The $535,090 increase was primarily due to resuming operations and bringing the
Company's filings current. The increase also includes the fair value, $207,035,
of options granted to our new Directors consistent with our Director's
Compensation Policy.

Interest charges

Our interest expense decreased from $998,076 for the year ended December 31,
2020 to $805,109 during the year ended December 31, 2021. The decrease of
$192,967 resulted from the conversation of the outstanding debt in conjunction
with the October 2021 Primary Offering.

Cash and capital resources

Going concern and liquidity

The Company has no significant operating history and since inception to December
31, 2021 has incurred accumulated losses of approximately $70.5 million. The
Company will continue to incur significant expenses for development activities
for their lead product NELL-1/DBX®. Operating expenditures for the next twelve
months are estimated at $6.5 million. The accompanying consolidated financial
statements for the period ended December 31, 2021 have been prepared assuming
the Company will continue as a going concern. As reflected in the financial
statements, the Company incurred a net loss of $1,610,685, and used net cash in
operating activities of $1,228,586 during the year ended December 31, 2021.
These factors raise substantial doubt about the Company's ability to continue as
a going concern within one year after the date that the financial statements are
issued. In addition, our independent accounting firm, in its audit report to the
financial statements included in our Annual Report for the year ended December
31, 2021, expressed substantial doubt about our ability to continue as a going
concern. The consolidated financial statements do not include any adjustments
related to the recoverability and classification of recorded asset amounts or
the amounts and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.

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The Company will continue to attempt to raise additional debt and/or equity
financing to fund future operations and to provide additional working capital.
However, there is no assurance that such financing will be consummated or
obtained in sufficient amounts necessary to meet the Company's needs. If cash
resources are insufficient to satisfy the Company's on-going cash requirements,
the Company will be required to scale back or discontinue its product
development programs, or obtain funds if available (although there can be no
certainties) through strategic alliances that may require the Company to
relinquish rights to its technology, substantially reduce or discontinue its
operations entirely. No assurance can be given that any future financing will be
available or, if available, that it will be on terms that are satisfactory to
the Company. Even if the Company is able to obtain additional financing, it may
contain undue restrictions on our operations, in the case of debt financing, or
cause substantial dilution for our stockholders, in the case of equity
financing. We note that there is significant uncertainty from the affect that
the novel coronavirus may have on the availability, cost and type of financing.

On October 15, 2021, the Company completed a public offering (the "October 2021
Primary Offering") of 1,510,455 units (the "Units"). Each Unit consists of one
share of common stock of the Company, par value $0.001 per share (the "Common
Stock"), and one warrant (a "Public Warrant") to purchase one share of Common
Stock for $6.30 per share. The Units were sold at a price of $5.25 per Unit,
generating net proceeds to the Company of $6,858,843. The Company granted to
WallachBeth Capital LLC, the underwriter in the Offering a 45-day option to
purchase up to 226,568 additional shares of Common Stock and/or 226,568 Public
Warrants to cover over-allotments, if any. The underwriter has exercised its
option with respect to the Warrants. WallachBeth also received 90,627 warrants
as part of the October 2021 Primary Offering at an exercise price of $6.30 per
common share representing 6% of the raise.

For the past several years, we have depended on our relationship with Hankey
Capital for working capital to fund our operations, which has been raised in the
form of both debt and equity capital. Hankey Capital, directly and indirectly,
controls approximately 70% of our issued and outstanding shares of common stock.
In connection with the October 2021 Primary Offering, Hankey Capital converted
the outstanding convertible notes ($12,767,894 in principal amount and
$2,054,041 of accrued interest) into 5,928,774 shares of our common stock and
call collateral shares were cancelled. Representatives of Hankey Capital also
currently serve as directors of the Company. No assurance can be given that any
future financing will be available or, if available, that it will be on terms
that are satisfactory to the Company. Even if the Company is able to obtain
additional financing, it may contain undue restrictions on our operations, in
the case of debt financing, or cause substantial dilution for our stockholders,
in the case of equity financing.

From December 31, 2021 and 2020, we had liquidity of $6,675,365 and $-0-, respectively.

Cash flow

Here is a summary of our cash flows from operating, investing and financing activities for the years ended December 31, 2021 and 2020:

Operational activities

During the year ended December 31, 2021 and 2020, cash used in operating
activities was $1,228,586 and $426,933 respectively. Cash expenditures for the
year ended December 31, 2021 increased primarily due to resuming operations,
bringing the Company's filings current and costs associated with the October
2021 Primary Offering.

Financing activities

During the year ended December 31, 2021, cash provided by financing activities
of $7,903,951 resulted primarily from draws on our second and third credit
facilities with Hankey Capital and the October 2021 Primary Offering which
provided proceeds from sale of common stock units in public offering, net of
offering costs of $6,858,843. During the year ended December 31, 2020, cash
provided by financing activities of $402,788 primarily resulted from draws on
our second credit facilities with Hankey Capital.

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Application of critical accounting policies

We believe that our significant accounting policies are as follows:

  ? Research and Development Costs;

  ? Stock Based Compensation;

  ? Fair Value of Financial Instruments;



The preparation of the accompanying consolidated financial statements in
conformity with GAAP requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and reported amounts of expenses during the reporting
period. Significant estimates include the assumptions used in the valuation of
stock options and warrants and income tax valuation allowances. Actual results
could differ from those estimates.

Research and development costs

Research and development costs include, but are not limited to, payroll and
other personnel expenses, consultants, expenses incurred under agreements with
contract research and manufacturing organizations and animal clinical
investigative sites and the cost to manufacture clinical trial materials. Costs
related to research, design and development of products are charged to research
and development expense as incurred.

Stock-based compensation

ASC 718, Compensation - Stock Compensation, prescribes accounting and reporting
standards for all share-based payment transactions in which employee services
are acquired. Transactions include incurring liabilities, or issuing or offering
to issue shares, options, and other equity instruments such as employee stock
ownership plans and stock appreciation rights. Share-based payments to
employees, including grants of employee stock options, are recognized as
compensation expense in the consolidated financial statements based on their
fair values. That expense is recognized over the period during which an employee
is required to provide services in exchange for the award, known as the
requisite service period (usually the vesting period).

The Company accounts for stock-based compensation issued to non-employees and
consultants in accordance with the provisions of ASC 505-50, Equity - based
Payments to Non-Employees. Measurement of share-based payment transactions with
non-employees is based on the fair value of whichever is more reliably
measurable: (a) the goods or services received; or (b) the equity instruments
issued. The fair value of the share-based payment transaction is determined at
the earlier of performance commitment date or performance completion date.

Fair value measurements

We use fair value measurements to record fair value adjustments to certain
assets and liabilities and to determine fair value disclosures. We base our fair
values on the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the
measurement date. Additionally, from time to time, we may be required to record
certain assets at fair value on a non-recurring basis, such as certain impaired
loans held for investment and securities held to maturity that are
other-than-temporarily impaired. These non-recurring fair value adjustments
typically involve write-downs of individual assets due to application of
lower-of-cost or market accounting.

We have established and documented a process for determining fair value. We
maximize the use of observable inputs and minimize the use of unobservable
inputs when developing fair value measurements. Whenever there is no readily
available market data, management uses its best estimate and assumptions in
determining fair value, but these estimates involve inherent uncertainties and
the application of management's judgment. As a result, if other assumptions had
been used, our recorded earnings or disclosures could have been materially
different from those reflected in these financial statements. For detailed
information on our use of fair value measurements and our related valuation
methodologies, see Note 2 to the Consolidated Financial Statements of this
report.

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Recently issued accounting standards

See discussion in Note 2 to the consolidated financial statements.

Off-balance sheet arrangements

The Company does not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on the Company's financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
material to investors.

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