Miromatrix(MIRO) - 2022 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION This section presents the company's unaudited financial information, including statements, management analysis, and internal controls Item 1. Financial Statements (Unaudited) This section presents Miromatrix Medical Inc.'s unaudited condensed financial statements and comprehensive notes on accounting policies and financial details Condensed Balance Sheets (Unaudited) This section provides a snapshot of the company's financial position at specific points in time, detailing assets, liabilities, and equity Condensed Balance Sheet Highlights (March 31, 2022 vs. December 31, 2021) | Metric | March 31, 2022 ($) | December 31, 2021 ($) | Change (Absolute) ($) | Change (%) | | :--------------------------- | :------------- | :---------------- | :---------------- | :--------- | | Total Assets | $53,956,908 | $60,928,999 | $(6,972,091) | -11.44% | | Cash and cash equivalents | $44,684,677 | $52,811,531 | $(8,126,854) | -15.39% | | Total Current Liabilities | $2,489,028 | $4,564,192 | $(2,075,164) | -45.47% | | Total Liabilities | $6,499,619 | $6,803,115 | $(303,496) | -4.46% | | Total Shareholders' Equity | $47,457,289 | $54,125,884 | $(6,668,595) | -12.32% | | Accumulated Deficit | $(81,255,663) | $(74,051,914) | $(7,203,749) | +9.73% | Condensed Statements of Operations (Unaudited) This section outlines the company's financial performance over a period, detailing revenues, expenses, and net loss Condensed Statements of Operations Highlights (Three Months Ended March 31, 2022 vs. 2021) | Metric | 3 Months Ended Mar 31, 2022 ($) | 3 Months Ended Mar 31, 2021 ($) | Change (Absolute) ($) | Change (%) | | :--------------------------- | :-------------------------- | :-------------------------- | :---------------- | :--------- | | Licensing revenue | $6,768 | $6,108 | $660 | 10.8% | | Cost of goods sold | $125,000 | $125,000 | $0 | 0.0% | | Gross loss | $(118,232) | $(118,892) | $660 | -0.6% | | Total operating expenses | $7,074,638 | $2,600,367 | $4,474,271 | 172.1% | | Operating loss | $(7,192,870) | $(2,719,259) | $(4,473,611) | 164.5% | | Net loss | $(7,203,749) | $(434,342) | $(6,769,407) | 1558.5% | | Net loss per share (basic & diluted) | $(0.35) | $(0.19) | $(0.16) | 84.2% | Condensed Statements of Changes in Shareholders' Equity (Deficit) (Unaudited) This section details the changes in the company's equity over a period, including stock transactions and net loss impact Changes in Shareholders' Equity (Deficit) (Three Months Ended March 31, 2022) | Item | Balance at Dec 31, 2021 | Stock-based Compensation | Exercise of Stock Options | Net Loss | Balance at Mar 31, 2022 | | :------------------------- | :---------------------- | :----------------------- | :------------------------ | :-------------- | :---------------------- | | Common Stock (Shares) | 20,385,645 | — | 160,938 | — | 20,546,583 | | Common Stock (Amounts) ($) | $204 | — | $2 | — | $206 | | Additional Paid-In Capital ($) | $128,177,594 | $333,981 | $201,171 | — | $128,712,746 | | Accumulated Deficit ($) | $(74,051,914) | — | — | $(7,203,749) | $(81,255,663) | | Total Shareholders' Equity ($) | $54,125,884 | $333,981 | $201,173 | $(7,203,749) | $47,457,289 | Condensed Statements of Cash Flows (Unaudited) This section summarizes the cash inflows and outflows from operating, investing, and financing activities over a period Condensed Statements of Cash Flows Highlights (Three Months Ended March 31, 2022 vs. 2021) | Cash Flow Activity | 3 Months Ended Mar 31, 2022 ($) | 3 Months Ended Mar 31, 2021 ($) | | :--------------------------- | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(7,428,039) | $(2,177,127) | | Net cash (used in) provided by investing activities | $(613,641) | $1,994,070 | | Net cash (used in) provided by financing activities | $(85,174) | $2,190 | | Net decrease in cash and cash equivalents | $(8,126,854) | $(180,867) | | Cash, cash equivalents and restricted cash at end of period | $45,484,777 | $4,263,528 | Notes to Condensed Financial Statements (Unaudited) This section provides detailed explanations and disclosures supporting the condensed financial statements, clarifying accounting policies and specific financial items - The company is an emerging growth company and has elected to use the extended transition period for new accounting standards, which may affect comparability[22] - The company adopted ASC 842 (Leases) effective January 1, 2022, recognizing right-of-use assets of $1,882,696 and lease liabilities of $2,020,839, with no material impact on income or cash flows[23][26] NOTE 1 — DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES This note describes the company's core business, its innovative organ bioengineering technology, and key accounting policies - Miromatrix Medical Inc. is a life sciences company pioneering a novel technology for bioengineering fully transplantable organs, focusing on livers and kidneys, using a two-step decellularization and recellularization method[18] - The company is an emerging growth company and has elected to use the extended transition period for new or revised accounting standards, which may impact comparability with other public companies[22] - The company adopted ASC 842 (Leases) effective January 1, 2022, recognizing right of use assets of $1,882,696 and lease liabilities of $2,020,839, and reclassified certain prior year amounts for presentation, with no material impact on income or cash flows[23][26] NOTE 2 — PROPERTY AND EQUIPMENT This note details the company's property and equipment, including categories, gross values, accumulated depreciation, and net book values Property and Equipment, Net (March 31, 2022 vs. December 31, 2021) | Category | March 31, 2022 ($) | December 31, 2021 ($) | Change (Absolute) ($) | Change (%) | | :--------------------------- | :------------- | :---------------- | :---------------- | :--------- | | Lab equipment | $1,632,929 | $1,549,416 | $83,513 | 5.39% | | Leasehold improvements | $3,366,458 | $3,239,307 | $127,151 | 3.93% | | Furniture, fixtures & computers | $1,994,172 | $1,671,793 | $322,379 | 19.28% | | Total Gross | $6,993,559 | $6,460,516 | $533,043 | 8.25% | | Less accumulated depreciation & amortization | $(1,001,322) | $(868,790) | $(132,532) | 15.25% | | Net Property and Equipment | $5,992,237 | $5,591,726 | $400,511 | 7.16% | - Depreciation and amortization expense significantly increased to $262,897 for the three months ended March 31, 2022, from $30,029 in the prior year period[28] NOTE 3 — EQUITY METHOD INVESTMENT This note explains the company's past equity method investment in Reprise Biomedical, Inc. and its subsequent divestment - The Company previously spun out its Acellular Business to Reprise Biomedical, Inc. in June 2019 and fully divested its ownership interest in Reprise by March 2021[29] - For the period ended March 15, 2021, the Company recorded an equity method share of net loss from Reprise of $223,633[30] NOTE 4 — ACCRUED EXPENSES This note provides a breakdown of the company's accrued expenses, including wages, legal, taxes, and other operational costs Accrued Expenses (March 31, 2022 vs. December 31, 2021) | Category | March 31, 2022 ($) | December 31, 2021 ($) | Change (Absolute) ($) | Change (%) | | :----------------------- | :------------- | :---------------- | :---------------- | :--------- | | Wages | $627,354 | $704,502 | $(77,148) | -10.95% | | Legal | $62,000 | $37,000 | $25,000 | 67.57% | | Taxes | $50,000 | $101,221 | $(51,221) | -50.60% | | Key opinion leader compensation | $12,625 | $25,500 | $(12,875) | -50.49% | | Royalties | $1,692 | $2,000 | $(308) | -15.40% | | Facility costs | — | $242,892 | $(242,892) | -100.00% | | Supplies | — | $127,505 | $(127,505) | -100.00% | | Other | $242,229 | $188,002 | $54,227 | 28.84% | | Total Accrued Expenses | $995,900 | $1,428,622 | $(432,722) | -30.29% | NOTE 5 — FAIR VALUE MEASUREMENT This note describes the company's methodology for fair value measurements, utilizing a three-tier valuation hierarchy - The Company uses a three-tier valuation hierarchy (Level 1, 2, 3) for fair value measurements, classifying cash and cash equivalents, as well as restricted cash, as Level 1[32][33][34] NOTE 6 — DEBT This note details the company's outstanding debt obligations, including promissory notes and their maturity schedules - The Company has a promissory note with the University of Minnesota, with an outstanding principal of $61,209 as of March 31, 2022, maturing December 31, 2022[35] - A $250,000 loan from the Minnesota Department of Employment & Economic Development was fully repaid as of March 31, 2022[36] - Another promissory note to the University for $385,997, related to minimum royalty obligations, is outstanding as of March 31, 2022, and due January 31, 2025[37] Future Principal Maturities for Debt (as of March 31, 2022) | Fiscal Year Ending | Amount Due ($) | | :----------------- | :--------- | | 2023 | $61,209 | | 2024 | — | | 2025 | $385,997 | | Total | $447,206 | NOTE 7 — CAPITAL STOCK This note outlines the company's capital stock structure, including common stock, equity incentive plans, and stock option activity - As of March 31, 2022, there were 20,546,583 shares of common stock issued and outstanding, an increase from 20,385,645 shares at December 31, 2021[41] - The 2021 Equity Incentive Plan automatically increased by 600,000 shares on January 1, 2022, with 879,602 shares available for issuance as of March 31, 2022[44][45] Stock Option Activity (Three Months Ended March 31, 2022) | Activity | Shares | Weighted Average Exercise Price ($) | | :--------------------------- | :---------- | :------------------------------ | | Options outstanding at beginning | 3,526,138 | $3.99 | | Granted | 655,000 | $4.07 | | Exercised | (160,938) | $1.25 | | Canceled or expired | (14,500) | $6.36 | | Options outstanding at end | 4,005,700 | $4.09 | | Options exercisable | 2,842,151 | $3.52 | - Stock-based compensation expense for stock options increased to $190,816 for Q1 2022 from $133,451 for Q1 2021, and RSU compensation expense was $130,290 for Q1 2022 (none in Q1 2021)[49][51] NOTE 8 — SIGNIFICANT CUSTOMERS This note identifies the company's significant customers and discusses related revenue and receivable considerations - One customer, Reprise Biomedical, Inc., accounted for 100% of total revenue for the three months ended March 31, 2022 and 2021[55] - The Company has fully reserved against long-term receivables from Reprise due to uncertainty regarding collectability of minimum royalties[55] NOTE 9 — COMMITMENTS AND CONTINGENCIES This note details the company's contractual commitments and potential contingent liabilities, including royalty obligations - The Company is required to make minimum annual royalty payments of $500,000 to the University of Minnesota under an Exclusive Patent License Agreement[56] - Reprise Biomedical, Inc. has a corresponding minimum royalty obligation of $500,000 per year to the Company[56] NOTE 10 — LEASES This note provides information on the company's lease arrangements, including operating and financing leases, assets, liabilities, and associated costs - The Company leases its corporate headquarters (operating lease) and equipment (financing leases), with the headquarters lease term ending May 2029 and a tenant improvement allowance of $1,256,950 received in Q1 2022[57][58] Lease Liabilities and Assets (March 31, 2022) | Category | Classification | Amount ($) | | :--------------------------- | :------------------------------------------- | :------------ | | Operating lease assets | Right of use asset | $1,820,900 | | Financing lease assets | Property and equipment, net of depreciation | $109,764 | | Current Operating Lease Liability | Current portion of lease liability | $284,348 | | Current Financing Lease Obligation | Current portion of financing lease obligations | $57,029 | | Noncurrent Operating Lease Liability | Lease liability, net | $3,014,530 | | Noncurrent Financing Lease Obligation | Financing lease obligations, net | $40,069 | Lease Costs (Three Months Ended March 31, 2022) | Lease Cost Category | Classification | Amount ($) | | :-------------------------- | :--------------------------------- | :-------- | | Operating lease cost | Operating expenses: G&A | $80,684 | | Amortization of leased assets | Depreciation and amortization | $9,480 | | Interest on lease liabilities | Interest expense | $1,715 | | Variable lease cost | Operating expenses: G&A | $39,229 | NOTE 11 — RELATED PARTY TRANSACTIONS This note discloses transactions with related parties, specifically royalties and receivables from Reprise Biomedical, Inc - The Company received $6,768 in royalties from Reprise Biomedical, Inc. for the three months ended March 31, 2022, an increase from $6,108 in the prior year[68] - Long-term receivables from Reprise ($1,038,636 as of March 31, 2022) are fully reserved due to collectability uncertainty[68] NOTE 12 — NET LOSS PER SHARE This note explains the calculation of net loss per share, including the treatment of potentially dilutive securities - Basic and diluted net loss per share were the same for the three months ended March 31, 2022 and 2021, due to net losses making potentially dilutive securities anti-dilutive[69] Potentially Dilutive Securities Excluded from EPS Calculation (Three Months Ended March 31) | Security Type | 2022 (Shares) | 2021 (Shares) | | :---------------------------- | :---------- | :------------ | | Convertible preferred stock | — | 8,314,536 | | Common stock options | 4,005,700 | 3,552,505 | | Common stock warrants | 795,379 | 707,669 | | Restricted stock units | 223,565 | — | | Total common stock equivalents | 5,024,644 | 12,574,710 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, operational results, liquidity, and capital resources for the three months ended March 31, 2022 Overview This section provides a high-level summary of the company's business, revenue sources, and recent financial performance - Miromatrix Medical Inc. is a life sciences company pioneering bioengineered transplantable organs (livers, kidneys, hearts, lungs, pancreases) using a two-step decellularization and recellularization technology[74] - The company's revenue primarily comes from royalties on sales of Miromesh and Miroderm by Reprise Biomedical, Inc., following a spin-out in 2019 and full divestment of ownership in March 2021[75] - The company completed an IPO on June 28, 2021, raising approximately $44.5 million, but has incurred significant operating losses since inception, with a net loss of $7.2 million in Q1 2022 and an accumulated deficit of $81.3 million[76][77] Components of Our Results of Operations This section explains the key drivers and expected trends for the company's revenue and various expense categories - Licensing revenue is recognized from a license agreement with Reprise, based on sales after minimum guarantees are met[79] - Cost of goods sold relates to minimum royalty payments owed to the University of Minnesota[80] - Research and development, regulatory and clinical, and quality expenses are expected to increase in absolute dollars as product candidates are developed and regulatory processes are navigated[82][84][85] - General and administrative expenses are expected to increase with headcount expansion to support growth[86] Results of Operations (Comparison of the three months ended March 31, 2022 and 2021) This section provides a detailed comparative analysis of the company's financial performance for the three months ended March 31, 2022 and 2021 Key Financial Performance Comparison (Three Months Ended March 31, 2022 vs. 2021) | Metric | 3 Months Ended Mar 31, 2022 ($) | 3 Months Ended Mar 31, 2021 ($) | Change (Absolute) ($) | Change (%) | | :--------------------------- | :-------------------------- | :-------------------------- | :---------------- | :--------- | | Licensing revenue | $6,768 | $6,108 | $660 | 10.8% | | Gross loss | $(118,232) | $(118,892) | $660 | -0.6% | | Research and development | $4,005,908 | $1,868,001 | $2,137,907 | 114.4% | | Regulatory and clinical | $355,238 | $83,705 | $271,533 | 324.4% | | Quality | $440,935 | $85,787 | $355,148 | 414.0% | | General and administrative | $2,272,557 | $562,874 | $1,709,683 | 303.7% | | Operating loss | $(7,192,870) | $(2,719,259) | $(4,473,611) | 164.5% | | Net loss | $(7,203,749) | $(434,342) | $(6,769,407) | 1558.5% | - The significant increase in operating expenses (172.1%) was driven by higher R&D (114.4% increase due to lab supplies, headcount, pre-clinical costs), regulatory and clinical (324.4% increase due to headcount, consulting), quality (414.0% increase due to headcount, consulting, lab supplies), and general and administrative (303.7% increase due to headcount, insurance, public company costs)[92][93][94][95] - Interest expense decreased by 96.4% due to the conversion of the Cheshire Note to equity in June 2021, eliminating associated interest and derivative fair value changes[97][99][100] - The company recognized a $1,983,912 gain on the sale of its equity investment in Reprise and a $518,050 gain on debt extinguishment (PPP loan forgiveness) in Q1 2021, which did not recur in Q1 2022[104][105] Liquidity and Capital Resources This section discusses the company's ability to meet its short-term and long-term financial obligations and its funding strategies - The company has incurred significant net losses since inception, with an accumulated deficit of $81,255,663 as of March 31, 2022, and expects additional losses due to ongoing development and public company costs[106][107] - Existing cash and cash equivalents of $44,684,677 as of March 31, 2022, are estimated to fund operations and capital expenditures through 2023[109] - Future cash needs are expected to be financed through equity offerings and debt financings, with potential for dilution or restrictive covenants[110] - The company completed an IPO in June 2021, raising $44.5 million in net proceeds, allocated primarily to R&D activities ($34.8M-$40.0M) and new facility construction ($3.0M-$4.0M)[114][135] Cash Flows This section analyzes the company's cash generation and usage across operating, investing, and financing activities Summary of Cash Flows (Three Months Ended March 31, 2022 vs. 2021) | Cash Flow Activity | 3 Months Ended Mar 31, 2022 ($) | 3 Months Ended Mar 31, 2021 ($) | | :--------------------------- | :-------------------------- | :-------------------------- | | Operating activities | $(7,428,039) | $(2,177,127) | | Investing activities | $(613,641) | $1,994,070 | | Financing activities | $(85,174) | $2,190 | | Net decrease in cash and cash equivalents | $(8,126,854) | $(180,867) | | Cash, cash equivalents and restricted cash at end of period | $45,484,777 | $4,263,528 | - Net cash used in operating activities significantly increased to $7.4 million in Q1 2022 from $2.2 million in Q1 2021, primarily due to higher net loss and changes in operating assets and liabilities[118][119] - Investing activities shifted from a net cash inflow of $2.0 million in Q1 2021 (due to sale of Reprise stock) to a net cash outflow of $0.6 million in Q1 2022 (due to property and equipment purchases)[120] - Financing activities resulted in a net cash outflow of $85,174 in Q1 2022, mainly from debt and lease payments, partially offset by stock option exercises[121] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section states that quantitative and qualitative disclosures about market risk are not required for smaller reporting companies - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[123] Item 4. Controls and Procedures This section details the evaluation of the company's disclosure controls and procedures, concluding their effectiveness as of March 31, 2022, and reporting no material changes in internal control over financial reporting - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2022[125] - There were no material changes in internal control over financial reporting during the fiscal quarter ended March 31, 2022[127] PART II — OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings The company is not currently a party to any litigation that would have a material adverse effect on its business, operating results, cash flows, or financial condition - The company is not involved in any legal proceedings that are expected to have a material adverse effect on its business or financial condition[129] Item 1A. Risk Factors This section refers readers to the risk factors disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021, noting no material changes - There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021[130] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states there were no unregistered sales of equity securities and details the use of net proceeds from the June 2021 IPO, primarily for research and development and new facility construction - No unregistered sales of equity securities occurred during the period[131] - Net proceeds of approximately $44.5 million from the June 2021 IPO are being used for research and development activities ($34.8M-$40.0M), new facility construction ($3.0M-$4.0M), and working capital/general corporate purposes[133][135] Item 3. Defaults Upon Senior Securities This section states there were no defaults upon senior securities - The company reported no defaults upon senior securities[133] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the company[134] Item 5. Other Information This section states there is no other information to report - No other information is reported in this section[135] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, encompassing corporate documents, agreements, and certifications - The report includes various exhibits such as the Second Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, an Employment Agreement, a Tenth Amendment to the License Agreement with Mayo Foundation, and CEO/CFO certifications[136]