Harvard Apparatus Regenerative Technology Inc

Previous wording

This Quarterly Report on Form 10-Q contains statements that are not statements of historical fact and are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). The forward-looking statements are principally, but not exclusively, contained in “Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements include, but are not limited to, statements about management’s confidence or expectations and our plans, objectives, expectations and intentions that are not historical facts and the potential impact of COVID-19 on our business and operations. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “goal,” “see,” “estimate,” “project,” “predict,” “intend,” “think,” “potential,” “objective,” “optimistic,” “strategy,” and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Factors that may cause our actual results to differ materially from those in the forward-looking statements include our ability to access debt and equity markets and raise additional capital when needed; the success of our collaborations, clinical trials and pre-clinical development efforts and programs, which success may not be achieved on a timely basis or at all; our ability to obtain and maintain regulatory approval for our implant products, bioreactors, scaffolds and other devices we pursue, including for the esophagus or airway, which approvals may not be obtained on a timely basis or at all; the number of patients who can be treated with our products; the amount and timing of costs associated with our development of implant products, bioreactors, scaffolds and other devices; our failure to comply with regulations and any changes in regulations; unpredictable difficulties or delays in the development of new technology; our collaborators or other third parties we contract with, including with respect to conducting any clinical trial or pre-clinical development efforts, not devoting sufficient time and resources to successfully carry out their duties or meet expected deadlines; our ability to attract and retain qualified personnel and key employees and retain senior management; potential liability exposure with respect to our products; the availability and price of acceptable raw materials and components from third-party suppliers; difficulties in obtaining or retaining the management and other human resource competencies that we need to achieve our business objectives; increased competition in the field of regenerative medicine and bioengineering…

Excerpt shortened here; the source contains the full paragraph.

Current wording

This Quarterly Report on Form 10-Q contains statements that are not statements of historical fact and are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). The forward-looking statements are principally, but not exclusively, contained in “Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements include, but are not limited to, statements about management’s confidence or expectations and our plans, objectives, expectations and intentions that are not historical facts and the potential impact of COVID-19 on our business and operations. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “goal,” “see,” “estimate,” “project,” “predict,” “intend,” “think,” “potential,” “objective,” “optimistic,” “strategy,” and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Factors that may cause our actual results to differ materially from those in the forward-looking statements include our ability to access debt and equity markets and raise additional capital when needed; the success of our collaborations, clinical trials and pre-clinical development efforts and programs, which success may not be achieved on a timely basis or at all; our ability to obtain and maintain regulatory approval for our implant products, bioreactors, scaffolds and other devices we pursue, including for the esophagus or airway, which approvals may not be obtained on a timely basis or at all; the number of patients who can be treated with our products; the amount and timing of costs associated with our development of implant products, bioreactors, scaffolds and other devices; our failure to comply with regulations and any changes in regulations; unpredictable difficulties or delays in the development of new technology; our collaborators or other third parties we contract with, including with respect to conducting any clinical trial or pre-clinical development efforts, not devoting sufficient time and resources to successfully carry out their duties or meet expected deadlines; our ability to attract and retain qualified personnel and key employees and retain senior management; potential liability exposure with respect to our products; the availability and price of acceptable raw materials and components from third-party suppliers; difficulties in obtaining or retaining the management and other human resource competencies that we need to achieve our business objectives; increased competition in the field of regenerative medicine and bioengineering…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

In addition to our development of regenerative medicine treatments, we also sell longevity dietary supplements. In the second quarter of 2023, the Company’s subsidiary in Hong Kong, Longevity Products started focusing on longevity products. Longevity Products plans to include a broad range of products focused on personal healthcare including longevity dietary supplements. Longevity Products started selling longevity supplements in the third quarter of 2023. These products are commercially marketed to the general public and initially targeted at consumers in the Great China Region through eCommerce (online sales).

Current wording

In addition to our development of regenerative medicine treatments, we also sell dietary supplements. In the second quarter of 2023, the Company’s subsidiary in Hong Kong, Consumer Health Products started focusing on consumer health products. Consumer Health Products plans to include a broad range of products focused on personal healthcare including dietary supplements. Consumer Health Products started selling consumer health supplements in the third quarter of 2023. These products are commercially marketed to the general public and initially targeted at consumers in the Great China Region through eCommerce (online sales).

Previous wording

The Company has two separate reportable segments. The Company has one segment, Harvard Apparatus Regenerative Technology, Inc., or Regenerative Biotech, focused on the development and commercialization of therapies to cure patients of cancers, injuries, and birth defects of the gastro-intestinal tract and the airways. The other segment, Longevity Products, is focused on personal healthcare including longevity dietary supplements.

Current wording

The Company has two separate reportable segments. The Company has one segment, Harvard Apparatus Regenerative Technology, Inc., or Regenerative Biotech, focused on the development and commercialization of therapies to cure patients of cancers, injuries, and birth defects of the gastro-intestinal tract and the airways. The other segment, Consumer Health Products, is focused on personal healthcare including dietary supplements.

Previous wording

We have incurred substantial operating losses since our inception, and as of June 30, 2024 had an accumulated deficit of approximately $96.5 million and will require additional financing to fund future operations. We expect that our operating cash on-hand as of June 30, 2024 of approximately $0.1 million and equity financing of $0.4 million in gross proceeds received subsequent to June 30, 2024 will enable us to fund our operating expenses and capital expenditure requirements into the third quarter of 2024. We expect to continue to incur operating losses and negative cash flows from operations for 2024 and in future years. Therefore, as disclosed in Note 1 to our unaudited Condensed Consolidated Financial Statements appearing elsewhere in this Quarterly Report on Form 10-Q, these conditions raise substantial doubt about our ability to continue as a going concern.

Current wording

We have incurred substantial operating losses since our inception, and as of September 30, 2024, had an accumulated deficit of approximately $98.3 million and will require additional financing to fund future operations. We expect that our operating cash on-hand as of September 30, 2024 of approximately $3.6 million will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2025. We expect to continue to incur operating losses and negative cash flows from operations for 2024 and in future years. Therefore, as disclosed in Note 1 to our Condensed Consolidated Financial Statements appearing elsewhere in this Quarterly Report on Form 10-Q, these conditions raise substantial doubt about our ability to continue as a going concern.

Previous wording

We will need to raise additional capital to fund our current operations. In the event we do not raise additional capital from outside sources during the third quarter of 2024, we may be forced to curtail or cease our operations.

Current wording

We will need to raise additional capital to fund our current operations. In the event we do not raise additional capital from outside sources during the first quarter of 2025, we may be forced to curtail or cease our operations.

Previous wording

Our operations will be adversely affected if we are unable to raise or obtain needed funding and may materially affect our ability to continue as a going concern. Our unaudited condensed consolidated financial statements have been prepared assuming that we will continue as a going concern and therefore, the unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amount and classifications of liabilities that may result from the outcome of this uncertainty.

Current wording

Our operations will be adversely affected if we are unable to raise or obtain needed funding and may materially affect our ability to continue as a going concern. Our condensed consolidated financial statements have been prepared assuming that we will continue as a going concern and therefore, the condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amount and classifications of liabilities that may result from the outcome of this uncertainty.

Previous wording

Product revenue. Product revenue consists of longevity product sales, launched in the Great China Region in the third quarter of 2023. We had not generated any revenue prior to the launch of our longevity products.

Current wording

Product revenue. Product revenue consists of consumer health product sales, launched in the Great China Region in the third quarter of 2023. We had not generated any revenue prior to the launch of our consumer health products.

Previous wording

While our significant accounting policies are discussed in more detail in Note 2 to our unaudited Condensed Consolidated Financial Statements appearing elsewhere in this Quarterly Report on Form 10-Q, we believe that the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations.

Current wording

While our significant accounting policies are discussed in more detail in Note 2 to our Condensed Consolidated Financial Statements appearing elsewhere in this Quarterly Report on Form 10-Q, we believe that the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations.

Previous wording

The following table summarizes the results of our operations for the three and six months ended June 30, 2024 and 2023 (in thousands):

Current wording

The following table summarizes the results of our operations for the three and nine months ended September 30, 2024 and 2023 (in thousands):

Previous wording

Product revenue was $56,000 and zero for the three months ended June 30, 2024 and 2023, respectively. Product revenue consists of longevity product sales, launched in the Great China Region in the third quarter of 2023. We had not generated any revenue prior to the launch of our longevity products.

Current wording

Product revenue was $59,000 and $40,000 for the three months ended September 30, 2024 and 2023, respectively. Product revenue consists of consumer health product sales, launched in the Great China Region in the third quarter of 2023. We had not generated any revenue prior to the launch of our consumer health products.

Previous wording

Cost of sales was $13,000 and zero for the three months ended June 30, 2024 and 2023, respectively. For the three months ended June 30, 2024, cost of sales consists of the purchase price of consumer products, taxes, inbound and outbound shipping costs.

Current wording

Cost of sales was $70,000 and $13,000 for the three months ended September 30, 2024 and 2023, respectively. For the three months ended September 30, 2024, cost of sales consists of the purchase price of consumer products, taxes, inbound and outbound shipping costs. The gross profit margin on our products decreased primarily due to discounted sales aimed at achieving market penetration for our newly introduced product.

Previous wording

Research and development expense decreased approximately $0.9 million, or 59%, to approximately $0.6 million for the three months ended June 30, 2024 as compared to approximately $1.5 million for the three months ended June 30, 2023. This decrease was primarily due to significant initial clinical trial activities in the prior period resulting in our first site activation in the third quarter of 2023.

Current wording

Research and development expense increased approximately $0.2 million, or 64%, to approximately $0.5 million for the three months ended September 30, 2024 as compared to approximately $0.3 million for the three months ended September 30, 2023. This increase was primarily due to significant initial clinical trial activities in the prior period resulting in our first site activation in the third quarter of 2023.

Previous wording

Selling and marketing expense was $0.2 million for the three months ended June 30, 2024 as compared to $0.06 million for the three months ended June 30, 2023. The increase is from increased headcount-related costs.

Current wording

Selling and marketing expense was $0.2 million for the three months ended September 30, 2024 and 2023. The headcount related costs stayed steady over the prior period.

Previous wording

During the three months ended June 30, 2024, we recorded interest expense of approximately $10,000 on convertible debt and approximately $7,000 on insurance installment payments. During the three months ended June 30, 2023, we recorded interest income of approximately $41,000 earned from our money market account and certificate of deposit offset by approximately $4,000 on insurance installment payments.

Current wording

During the three months ended September 30, 2024, we recorded interest expense of approximately $7,000 on convertible debt and approximately $4,000 on insurance installment payments offset by interest income of approximately $9,000 earned from our money market account. During the three months ended September 30, 2023, we recorded interest income of approximately $18,000 earned from our money market account and certificate of deposit offset by approximately $4,000 on insurance installment payments. In 2023, we refunded $5,000 of a deposit not utilized, which was recorded as sublease income in 2022.

Previous wording

Product revenue was $113,000 and zero for the six months ended June 30, 2024 and 2023, respectively. Product revenue consists of longevity product sales, launched in the Asia region in the third quarter of 2023. We had not generated any revenue prior to the launch of our longevity products.

Current wording

Product revenue was $172,000 and $40,000 for the nine months ended September 30, 2024 and 2023, respectively. Product revenue consists of consumer health product sales, launched in the Asia region in the third quarter of 2023. Sales grew as a result of broadening our distribution channels to access a larger consumer base.

Previous wording

Cost of sales was $25,000 and zero for the six months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024, cost of sales consists of the purchase price of consumer products, taxes, inbound and outbound shipping costs.

Current wording

Cost of sales was $95,000 and $13,000 for the nine months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024, cost of sales consists of the purchase price of consumer products, taxes, inbound and outbound shipping costs. The cost of sales in 2024 reflects nine months of activity, following the product’s launch in the Asia region during the third quarter of 2023.

Previous wording

Research and development expense decreased approximately $0.6 million, or 29%, to approximately $1.5 million for the six months ended June 30, 2024 as compared to approximately $2.1 million for the six months ended June 30, 2023. This decrease was primarily due to significant initial clinical trial activities in the prior period resulting in our first site activation in the third quarter of 2023.

Current wording

Research and development expense decreased approximately $0.4 million, or 15%, to approximately $2.0 million for the nine months ended September 30, 2024 as compared to approximately $2.4 million for the nine months ended September 30, 2023. This decrease was primarily due to significant initial clinical trial activities in the prior period resulting in our first site activation in the third quarter of 2023.

Previous wording

Selling and marketing expense was $0.3 million for the six months ended June 30, 2024 as compared to $0.06 million for the six months ended June 30, 2023.

Current wording

Selling and marketing expense was $0.5 million for the nine months ended September 30, 2024 as compared to $0.02 million for the nine months ended September 30, 2023. The Consumer Health Products business was launched in the Asia region in the third quarter of 2023.

Previous wording

General and administrative expense decreased approximately $0.6 million, or 18%, to approximately $2.8 million for the six months ended June 30, 2024 as compared to approximately $3.4 million for the six months ended June 30, 2023. This decrease was primarily due to share-based compensation expense of $1.3 million from the vesting of performance based awards in the first half of 2023 offset by the recording of expense in the current period of one-time offering costs of $0.5 million relating to the initial registered offering that did not occur in a prior year.

Current wording

General and administrative expense decreased approximately $0.6 million, or 14%, to approximately $3.9 million for the nine months ended September 30, 2024 as compared to approximately $4.6 million for the nine months ended September 30, 2023. This decrease was primarily due to share-based compensation expense of $1.3 million from the vesting of performance based awards in the first half of 2023 offset by the recording of expense in the current period of one-time offering costs of $0.5 million relating to the initial registered offering that did not occur in a prior year.

Previous wording

During the six months ended June 30, 2024, we recorded interest expense of approximately $16,000 on convertible debt and approximately $10,000 on insurance installment payments. During the six months ended June 30, 2023, we recorded interest income of approximately $41,000 earned from our money market account and certificate of deposit offset by approximately $7,000 on insurance installment payments.

Current wording

During the nine months ended September 30, 2024, we recorded interest expense of approximately $23,000 on convertible debt and approximately $13,000 on insurance installment payments offset by interest income of approximately $9,000 earned from our money market account. During the nine months ended September 30, 2023, we recorded interest income of approximately $59,000 earned from our money market account and certificate of deposit offset by approximately $11,000 on insurance installment payments. In 2023, we refunded $5,000 of a deposit not utilized, which was recorded as sublease income in 2022.

Previous wording

Sources of liquidity. We have incurred operating losses since inception, and as of June 30, 2024, we had an accumulated deficit of approximately $96.5 million. We are currently investing significant resources in the development and commercialization of our product candidates for use by clinicians and researchers in the fields of regenerative medicine and bioengineering. As a result, we expect to incur operating losses and negative operating cash flows for the foreseeable future. Therefore, as disclosed in Note 1 to our unaudited Condensed Consolidated Financial Statements, these conditions raise substantial doubt about our ability to continue as a going concern.

Current wording

Sources of liquidity. We have incurred operating losses since inception, and as of September 30, 2024, we had an accumulated deficit of approximately $98.3 million. We are currently investing significant resources in the development and commercialization of our product candidates for use by clinicians and researchers in the fields of regenerative medicine and bioengineering. As a result, we expect to incur operating losses and negative operating cash flows for the foreseeable future. Therefore, as disclosed in Note 1 to our Condensed Consolidated Financial Statements, these conditions raise substantial doubt about our ability to continue as a going concern.

Previous wording

The following table sets forth the primary uses of cash for the six months ended June 30, 2024 and 2023 (in thousands):

Current wording

The following table sets forth the primary uses of cash for the nine months ended September 30, 2024 and 2023 (in thousands):

Previous wording

Operating activities. Net cash used in operating activities of approximately $2.3 million for the six months ended June 30, 2024 was due primarily to our net loss of approximately $4.5 million offset by adjustments for non-cash items of approximately $1.1 million due to non-cash expenses for share-based compensation and depreciation, and an approximately $1.1 million increase to cash from changes in working capital due to the timing of payments for accounts receivable, inventory, prepaid expenses, deferred financing costs, long-term prepaid contracts, accounts payable and accrued expenses.

Current wording

Operating activities. Net cash used in operating activities of approximately $3.7 million for the nine months ended September 30, 2024 was due primarily to our net loss of approximately $6.4 million offset by adjustments for non-cash items of approximately $1.7 million due to non-cash expenses for share-based compensation and depreciation, and an approximately $1.0 million increase to cash from changes in working capital due to the timing of payments for accounts receivable, inventory, prepaid expenses, deferred financing costs, long-term prepaid contracts, accounts payable and accrued expenses.

Previous wording

Net cash used in operating activities of approximately $2.6 million for the six months ended June 30, 2023 was due primarily to our net loss of approximately $5.5 million offset by adjustments for non-cash items of approximately $2.3 million due to non-cash expenses for share-based compensation and depreciation, and an approximately $0.6 million increase to cash from changes in working capital due to the timing of payments for accounts payable, accrued expenses, prepaid expenses, deferred financing costs and other long-term assets.

Current wording

Net cash used in operating activities of approximately $5.7 million for the nine months ended September 30, 2023 was due primarily to our net loss of approximately $7.1 million offset by adjustments for non-cash items of approximately $2.9 million due to non-cash expenses for share-based compensation and depreciation, and an approximately $1.5 million decrease to cash from changes in working capital due to the timing of payments for accounts receivable, inventory, prepaid expenses, deferred financing costs, long-term prepaid contracts, accounts payable and accrued expenses.

Previous wording

Investing activities. Net cash used in investing activities included purchases of property, plant and equipment for the six months ended June 30, 2024 and 2023 representing approximately zero and $11,000, respectively. During the six months ended June 30, 2023, we invested in a certificate of deposit for $2.5 million that earned $23,000 in interest. The certificate of deposit matured in October 2023.

Current wording

Investing activities. Net cash used in investing activities included purchases of property, plant and equipment for the nine months ended September 30, 2024 and 2023 representing approximately zero and $11,000, respectively. During the nine months ended September 30, 2023, we invested in a certificate of deposit for $2.5 million that earned $32,000 in interest. We withdrew $1.3 million from the certificate of deposit prior to the maturity date to pay clinical trial related deposits. The certificate of deposit matured in October 2023 with the remaining $1.2 million released from short-term investments into cash and cash equivalents.

Previous wording

Financing activities. Net cash generated from financing activities during the six months ended June 30, 2024 of approximately $2.0 million consisted of net proceeds of $0.5 million received from debt financing and $1.5 million from private placement transaction that resulted in the issuance of 367,767 shares of our common stock at a purchase price of $4.03 per share to a group of investors. Net cash generated from financing activities during the six months ended June 30, 2023 of approximately $6.0 million consisted of net proceeds received from private placement transactions that resulted in the issuance of 1,000,967 shares of our common stock at a purchase price of $6.00 per share to a group of investors.

Current wording

Financing activities. During the nine months ended September 30, 2024, net cash generated from financing activities totaled approximately $6.9 million. This included net proceeds of $0.5 million from debt financing, $0.4 million from stock warrant exercises, and $6.5 million from private placement transactions, which resulted in the issuance of 1,756,655 shares of our Common Stock to a group of investors. The $0.5 million in debt was repaid in August 2024. In comparison, net cash generated from financing activities during the nine months ended September 30, 2023, was approximately $6.0 million, primarily from private placement transactions that resulted in the issuance of 1,000,967 shares of our Common Stock to a group of investors.