FibroBiologics, Inc.

Previous wording

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Current wording

Item 2. Management’s Discussion and Anal ysis of Financial Condition and Results of Operations

Previous wording

We have incurred net losses since inception and expect to incur losses in the future as we continue our research and development activities. To date, we have funded our operations primarily through investment from FibroGenesis, the sale of $5.6 million of our convertible promissory notes, which were all subsequently converted to equity, the sale of $18.6 million of preferred stock, $10.4 million in proceeds from the sale of common stock, $0.00001 par value per shares, or the Common Stock, through the share purchase agreement, dated November 12, 2021, or the GEM SPA, with GEM Global Yield LLC SCS, or GEM Global, and GEM Yield Bahamas Limited, or GYBL, and together with GEM Global, GEM, and $9.4 million in proceeds from the issuance of additional convertible promissory notes.

Current wording

We have incurred net losses since inception and expect to incur losses in the future as we continue our research and development activities. To date, we have funded our operations primarily through investment from FibroGenesis, the sale of $15.0 million of our convertible promissory notes, which were all subsequently converted to equity, the sale of $18.6 million of preferred stock, $10.4 million in proceeds from the sale of common stock, $0.00001 par value per shares, or the Common Stock, through the share purchase agreement, dated November 12, 2021, or the GEM SPA, with GEM Global Yield LLC SCS, or GEM Global, and GEM Yield Bahamas Limited, or GYBL, and together with GEM Global, GEM, and $13.1 million in proceeds from the issuance of additional convertible promissory notes.

Previous wording

As of March 31, 2025, we had cash and cash equivalents of approximately $8.7 million. Since our inception, we have incurred significant operating losses. We incurred net losses of approximately $5.0 million and $8.5 million for the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, we had an accumulated deficit of approximately $42.8 million.

Current wording

As of June 30, 2025, we had cash and cash equivalents of $8.8 million. Since our inception, we have incurred significant operating losses. We incurred net losses of $9.6 million and $7.6 million for the six months ended June 30, 2025 and 2024, respectively. As of June 30, 2025, we had an accumulated deficit of $45.1 million.

Previous wording

Based upon our progress to date, we are planning to initiate our twelve-week Phase 1/2 clinical trial utilizing CYWC628 for treatment of diabetic foot ulcersin Australia in the second half of 2025 and to complete the clinical trial in the first quarter of 2026.

Current wording

Based upon our progress to date, we expect to initiate our twelve-week Phase 1/2 clinical trial utilizing CYWC628 for treatment of diabetic foot ulcers in Australia in the first quarter of 2026 and we expect to complete the clinical trial in the third quarter of 2026. These timelines have been extended as we work to resolve process issues with the manufacturing training run and increase the number of test manufacturing runs needed to confirm no sterility issues before we begin the manufacture of CYWC628 for the clinical trial. Please see “Risk Factors – Risks Related to Manufacturing” in our Annual Report and “Item 1A. Risk Factors – Risks Related to Manufacturing” in this Quarterly Report.

Previous wording

We expect to carry out experiments to demonstrate the potential of using the CYWC628 master cell bank for use with the manufacturing of the CybroCell*™* drug product. If successful, we will accordingly amend the IND clearance with the FDA for the planned Phase I clinical trial. A timeline for the trial will be determined in connection with discussions with the FDA.

Current wording

We carried out experiments that demonstrate the ability to use the CYWC628 master cell bank for the manufacturing of the CybroCell™ drug product. We are working to amend the IND clearance with the FDA for the planned Phase I clinical trial. A timeline for the trial will be determined in connection with discussions with the FDA.

Previous wording

Our interest expense consists primarily of accrued interest expense, interest on short-term borrowing to finance D&O insurance premiums, and amortization of discount on our convertible notes.

Current wording

Our interest expense consists primarily of interest on short-term borrowing to finance D&O insurance premiums, and amortization of discount on our convertible notes.

Previous wording

Research and development expenses were $1.8 million and $1.0 million for the three months ended March 31, 2025 and 2024, respectively. The increase of $0.8 million was primarily due to:

Current wording

Research and development expenses were $2.0 million and $1.0 million for the three months ended June 30, 2025 and 2024, respectively. The increase of $1.1 million was primarily due to:

Previous wording

Change in fair value of warrant liability was a loss of $0 and $3.1 million for the three months ended March 31, 2025 and 2024, respectively. The liability instrument to investors under the GEM SPA was comprised of the contingent warrant liability and contingent put option. The $3.1 million loss during the three months ended March 31, 2024 resulted from the mark to market of the warrant liability, which occurred at the end of each reporting period until the warrant liability was derecognized in December 2024.

Current wording

Change in fair value of warrant liability was $0 and a gain of $5.5 million for the three months ended June 30, 2025 and 2024, respectively. The liability instrument to investors under the GEM SPA was comprised of the contingent warrant liability and contingent put option.

Previous wording

On December 20, 2024, we entered into a Standby Equity Purchase Agreement (the “SEPA”) with a certain investor. Pursuant to the SEPA, and subject to certain conditions, we have the right, from time to time, until December 20, 2026, to require the investor to purchase up to an additional $10,000 thousand of shares of Common Stock by delivering written notice to the investor. The SEPA was accounted for as a liability under ASC 815 because it includes an embedded put option and an embedded forward option. The SEPA put option liability was recognized at inception, and its fair value was estimated at $543 thousand and $460 thousand at March 31,2 025 and December 31, 2024, respectively. The change in fair value of the SEPA put option liability was a loss of $0.1 million during the quarter ended March 31, 2025 and resulted primarily from changes in stock price and other assumptions used in the valuation model.

Current wording

On December 20, 2024, we entered into a Standby Equity Purchase Agreement (the “SEPA”) with a certain investor. Pursuant to the SEPA, and subject to certain conditions, we have the right, from time to time, until December 20, 2026, to require the investor to purchase up to $10.0 million of shares of Common Stock by delivering written notice to the investor. The SEPA was accounted for as a liability under ASC 815 because it includes an embedded put option and an embedded forward option. The SEPA put option liability was recognized at inception, and its fair value was estimated at $0.5 million and $0.5 million at June 30, 2025 and December 31, 2024, respectively. The change in fair value of the SEPA put option liability was a gain of $0.1 million during the three months ended June 30, 2025 and resulted primarily from changes in stock price and other assumptions used in the valuation model.

Previous wording

We received advances in the form of convertible notes pursuant to the SEPA in December 2024 and elected to account for the short-term convertible notes under the fair value option. Under the fair value option, all costs associated with raising the funds were expensed immediately. The convertible notes were adjusted to their fair values at March 31, 2025 with a $0.3 million loss resulting from the increase in fair value.

Current wording

We received advances in the form of convertible notes pursuant to the SEPA in December 2024 and June 2025 and elected to account for the short-term convertible notes under the fair value option. Under the fair value option, all costs associated with raising the funds were expensed immediately. The convertible notes were adjusted to their fair values at June 30, 2025 with a $0.3 million gain resulting from the increase in fair value.

Previous wording

The investor converted $3,600 thousand of convertible debt into shares of Common Stock during the three months ended March 31, 2025. We recognized a $180 thousand net loss on these conversions, which results from the difference between the quoted market price per share used to record the issuance of Common Stock and the conversion price per share.

Current wording

The investor converted $2.2 million of convertible debt into shares of Common Stock during the three months ended June 30, 2025. We recognized an approximate $0.2 million net loss on these conversions, which results from the difference between the quoted market price per share used to record the issuance of Common Stock and the conversion price per share.

Previous wording

Interest income was $0.1 million and $0.0 million for the three months ended March 31, 2025 and 2024, respectively. Interest income is comprised of interest income and unrealized gain/losses on cash equivalents.

Current wording

Interest income was $0.1 million and $0.1 million for the three months ended June 30, 2025 and 2024, respectively. Interest income is comprised of interest income and unrealized gain/losses on cash equivalents.

Previous wording

Commitment fee expense was $0 and $1.9 million for the three months ended March 31, 2025 and 2024, respectively. A $2 million commitment fee pursuant to the GEM SPA became payable to GEM upon completion of the Direct Listing in January 2024. The commitment fee is payable to GEM as drawdown notices are issued, with any remaining balance payable one year after public listing. We sold $3.0 million of Common Stock to GEM under the GEM SPA during the three months ended March 31, 2024, which made approximately $0.1 million of the commitment fee payable immediately. This $0.1 million portion of the commitment fee was netted against the proceeds received in additional paid-in capital. The remaining $1.9 million was expensed immediately because we were planning to raise funds through other sources and had no plans to issue further Draw Down Notices to GEM prior to the one-year anniversary of our public listing when this remaining amount would have been due.

Current wording

Commitment fee expense was $0 and $1.9 million for the six months ended June 30, 2025 and 2024, respectively. A $2.0 million commitment fee pursuant to the GEM SPA became payable to GEM upon completion of the Direct Listing in January 2024. The commitment fee was payable to GEM as drawdown notices are issued, with any remaining balance payable one year after public listing. We sold $3.0 million of Common Stock to GEM under the GEM SPA during the six months ended June 30, 2024, which made $0.1 million of the commitment fee payable immediately. This $0.1 million portion of the commitment fee was netted against the proceeds received in additional paid-in capital. The remaining $1.9 million was expensed immediately because we were planning to raise funds through other sources and had no plans to issue further Draw Down Notices to GEM prior to the one-year anniversary of our public listing when this remaining amount would have been due.

Previous wording

Through March 31, 2025, we have financed our operations primarily with investment from FibroGenesis, proceeds from borrowings under our convertible loan agreements, proceeds from the issuance of preferred stock, and proceeds from the sale of Common Stock through the GEM SPA and the SEPA. From inception through March 31, 2025, we have received aggregate proceeds of approximately $15.0 million from sales of our convertible notes, $18.6 million from the sales of preferred stock, and $10.4 million from the issuance of Common Stock. As of March 31, 2025, we had cash and cash equivalents of approximately $8.7 million and an accumulated deficit of approximately $42.8 million. As of March 31, 2025, we had $6.4 million principal balance of outstanding debt with a fair value of $5.8 million.

Current wording

Through June 30, 2025, we have financed our operations primarily with investment from FibroGenesis, proceeds from borrowings under our convertible loan agreements, proceeds from the issuance of preferred stock, and proceeds from the sale of Common Stock through the GEM SPA and the SEPA. From inception through June 30, 2025, we have received aggregate proceeds of $15.0 million from sales of our convertible notes, $18.6 million from the sales of preferred stock, $10.4 million from the issuance of Common Stock and $13.1 million from the issuance of additional convertible promissory notes under the SEPA. As of June 30, 2025, we had cash and cash equivalents of $8.8 million and an accumulated deficit of $45.1 million. As of June 30, 2025, we had $9.2 million principal balance of outstanding debt with a fair value of $8.1 million.

Previous wording

The following table sets forth a summary of our cash flows for the three months ended March 31, 2025 and 2024.

Current wording

The following table sets forth a summary of our cash flows for the six months ended June 30, 2025 and 2024.

Previous wording

Net cash used in operating activities was $5.3 million and $4.3 million for the three months ended March 31, 2025 and 2024, respectively, and consisted primarily of net losses of $5.0 million and $8.5 million, respectively. Noncash expenses consisting of change in fair value of convertible debt of $0.3 million, change in fair value of SEPA put option liability of $0.1 million, net loss on issuance of Common Stock in exchange for convertible debt of $0.2 million, stock-based compensation expense of $0.6 million, and amortization of operating lease right-of-use asset of $0.1 million partially offset the net loss, while an increase in prepaid expenses of $0.4 million, a decrease in accounts payable and accrued expenses of $1.0 million, and a decrease in operating lease liability of $0.1 million added to the cash used in operations in the three months ended March 31, 2025. Noncash expenses consisting of change in fair value of liability instrument of $3.1 million, change in commitment fee payable of $2.0 million, stock-based compensation expense of $0.5 million, and amortization of operating lease right-of-use asset of $0.1 million partially offset the net loss, while an increase in prepaid expenses of $0.7 million, a decrease in accounts payable and accrued expenses of $0.6 million, a decrease in payable to Parent of $0.1 million, and a decrease in operating lease liability of $0.1 million added to the cash used in operations in the three months ended March 31, 2024.

Current wording

Net cash used in operating activities was $9.3 million and $6.2 million for the six months ended June 30, 2025 and 2024, respectively, and consisted primarily of net losses of $9.6 million and $7.6 million, respectively. Noncash expenses consisting of change in fair value of convertible debt of $0.1 million, net loss on issuance of Common Stock in exchange for convertible debt of $0.2 million, stock-based compensation expense of $1.3 million, and amortization of operating lease right-of-use asset of $0.3 million partially offset the net loss, while a decrease in prepaid expenses of $1.1 million, a decrease in accounts payable and accrued expenses of $0.6 million, and a decrease in operating lease liability of $0.3 million added to the cash used in operations in the six months ended June 30, 2025. Noncash losses on change in fair value of forward contract liability of $1.5 million, stock-based compensation expense of $1.1 million, amortization of operating lease right-of-use asset of $0.2 million, and depreciation expense of $0.1 million and change in commitment fee payable of $1.5 million partially offset the net loss, while noncash gain on change in fair value of liability instrument of $2.4 million, an increase in prepaid expenses of $0.5 million, a decrease in accounts payable and accrued expenses of $0.2 million, a decrease in payable to Parent of $0.1 million, and a decrease in operating lease liability of $0.2 million added to the cash used in operations in the six months ended June 30, 2024.

Previous wording

Net cash used in investing activities was approximately $0.0 million and $0.0 million for the three months ended March 31, 2025 and 2024, respectively, and consisted primarily of laboratory equipment purchases.

Current wording

Net cash used in investing activities was $0.3 million and $0.1 million for the six months ended June 30, 2025 and 2024, respectively, and consisted primarily of laboratory equipment purchases.

Previous wording

Net cash provided by financing activities was approximately $0 and $3.3 million for the three months ended March 31, 2025 and 2024, respectively. During the three months ended March 31, 2024, we entered into a $0.6 million short-term borrowing agreement to finance the D&O insurance policy premiums and repaid $0.1 million of the principal borrowed, and we raised $2.8 million of net proceeds from the sale of Common Stock under the GEM SPA.

Current wording

Net cash provided by financing activities was $4.4 million and $3.1 million for the six months ended June 30, 2025 and 2024, respectively. During the six months ended June 30, 2024, we entered into a $0.6 million short-term borrowing agreement to finance the D&O insurance policy premiums and repaid $0.3 million of the principal borrowed, and we raised $2.8 million of net proceeds from the sale of common stock under the GEM SPA.

Previous wording

We have incurred operating losses since our formation and expect such losses to continue in the future as we build infrastructure, develop intellectual property and conduct research and development activities. Moreover, we have incurred, and expect to continue to incur, additional costs associated with operating as a public company. We do not have any products approved for sale, and we have never generated any revenue from product sales. We have primarily relied on a combination of angel investors, private debt placements, convertible debt issuances, and sales of equity to fund our operations. As of March 31, 2025, we had an accumulated deficit of $42.8 million and cash and cash equivalents of $8.7 million. We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval of and commercialize any of our current or future product candidates and we do not know when, or if, that will occur. Unless and until such time that revenue and net income are generated, we will need to continue to raise additional capital. These factors raise substantial doubt about our ability to continue as a going concern for one year from the issuance of the financial statements included in this Quarterly Report. The financial statements have been prepared as though we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business, and do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Current wording

We have incurred operating losses since our formation and expect such losses to continue in the future as we build infrastructure, develop intellectual property and conduct research and development activities. Moreover, we have incurred, and expect to continue to incur, additional costs associated with operating as a public company. We do not have any products approved for sale, and we have never generated any revenue from product sales. We have primarily relied on a combination of angel investors, private debt placements, convertible debt issuances, and sales of equity to fund our operations. As of June 30, 2025, we had an accumulated deficit of $45.1 million and cash and cash equivalents of $8.8 million. We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval of and commercialize any of our current or future product candidates and we do not know when, or if, that will occur. Unless and until such time that revenue and net income are generated, we will need to continue to raise additional capital. These factors raise substantial doubt about our ability to continue as a going concern for one year from the issuance of the financial statements included in this Quarterly Report. The financial statements have been prepared as though we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business, and do not include any adjustments that might be necessary if we are unable to continue as a going concern.