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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2021
☐ 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
(State or other jurisdiction of
incorporation or organization)
One Kendall Square, Building 1400 West, 4th Floor,
Suite B14402, Cambridge, Massachusetts
(Address of principal executive offices)
36-4528166
(I.R.S. Employer
Identification No.)
02139
(Zip Code)
(617) 863-5500
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.00001 par value
Trading Symbol(s)
NVIV
Name of exchange on which registered
The Nasdaq Capital Market
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ⌧
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ⌧
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ⌧
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2021, the last
business day of the registrant’s most recently completed second fiscal quarter, was $25,347,671 based on a per share price of $0.74, which was the closing
price of the registrant’s Common Stock on the Nasdaq Capital Market on June 30, 2021.
As of March 4, 2022, the number of shares outstanding of the registrant’s Common Stock, $0.00001 par value per share, was 34,264,856.
None.
DOCUMENTS INCORPORATED BY REFERENCE
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INVIVO THERAPEUTICS HOLDINGS CORP.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2021
TABLE OF CONTENTS
ITEM
Page
1.
1A.
1B.
2.
3.
4.
5.
6.
7.
7A.
8.
9.
9A.
9B.
9C.
10.
11.
12.
13.
14.
15.
16.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART I
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
Form 10-K Summary
PART IV
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PART I
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as
amended, or 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 Form 10-K, 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; and other factors detailed under
“Risk Factors” in Part I, Item 1A of this Form 10-K. These forward looking statements are only predictions, are uncertain,
and involve substantial known and unknown risks, uncertainties, and other factors which may cause our actual results,
levels of activity, or performance to be materially different from any future results, levels of activity, or performance
expressed or implied by these forward looking statements. Such factors include, among others, the following:
● our limited operating history and history of net losses;
● our ability to raise substantial additional capital to finance our planned operations and to continue as a going
concern;
● the length and impact of the ongoing COVID-19 pandemic;
● our ability to complete the INSPIRE 2.0 Study to support our existing Humanitarian Device Exemption, or
HDE, application;
● our ability to execute our strategy and business plan;
● our ability to obtain regulatory approvals for our current and future product candidates, including our Neuro-
Spinal Scaffold implant;
● our ability to successfully commercialize our current and future product candidates, including our Neuro-
Spinal Scaffold implant;
● the progress and timing of our current and future development programs;
● our ability to successfully open, enroll and complete clinical trials and obtain and maintain regulatory
approval of our current and future product candidates;
● our ability to protect and maintain our intellectual property and licensing arrangements;
● our reliance on third parties to conduct testing and clinical trials;
● market acceptance and adoption of our current and future technology and products;
● our ability to promote, manufacture and sell our current and future products, either directly or through
collaborative and other arrangements with third parties; and
● our ability to attract and retain key personnel.
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We cannot guarantee future results, levels of activity, or performance. You should not place undue reliance on
these forward looking statements, which speak only as of the date of this Annual Report on Form 10-K. These cautionary
statements should be considered with any written or oral forward looking statements that we may issue in the future.
Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of
the forward looking statements to conform these statements to reflect actual results, later events or circumstances, or to
reflect the occurrence of unanticipated events.
As used herein, “we,” “us,” “our,” or the “Company” means InVivo Therapeutics Holdings Corp., together with
our wholly owned subsidiary InVivo Therapeutics Corporation, unless otherwise noted.
Risk Factor 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 Annual Report on Form 10-K.
● We have found it difficult and may continue to find it difficult to enroll patients in our clinical studies, which
could delay or prevent clinical studies of our product candidates, and due to such enrollment delays, we may
need to make a determination as to the next steps for our clinical program that could significantly impact our
future operations and financial position.
● The COVID-19 pandemic has delayed and may continue to delay our ability to complete our ongoing
INSPIRE 2.0 clinical trial or may delay the initiation of future clinical trials, disrupt regulatory activities, or
have other adverse effects on our business and operations. In addition, this pandemic has caused substantial
disruption in the financial markets and may adversely impact economies worldwide, both of which could
result in adverse effects on our business and operations.
● 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 complete clinical development and obtain favorable clinical results, we may not be able to
obtain regulatory approval for, or successfully commercialize, our Neuro-Spinal Scaffold implant.
● 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.
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● 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.
Item 1. BUSINESS
Overview
We are a research and clinical-stage biomaterials and biotechnology company with a focus on treatment of spinal
cord injuries, or SCIs. Our mission is to redefine the life of the SCI patient, and we seek to develop treatment options
intended to provide meaningful improvement in patient outcomes following SCI. 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 (BCH)
and the Massachusetts Institute of Technology (MIT). We also plan to evaluate other technologies and therapeutics that
may be complementary to our development of the Neuro-Spinal Scaffold implant or 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.
Market Opportunity
Our clinical program is intended to address the lack of successful treatments for SCIs, which can lead to
permanent paralysis, sensory impairment, and autonomic (bowel, bladder, and sexual) dysfunction. The current
management of acute SCI is a surgical approach consisting of spine stabilization and an external decompression procedure
of uncertain value. We believe the market opportunity for our Neuro-Spinal Scaffold implant is significant. It is estimated
that approximately 285,000 people are currently living in the United States with paralysis due to SCI (chronic SCI), and
approximately 17,000 individuals in the United States will become fully or partially paralyzed each year (acute SCI). We
are pursuing regulatory approval from the U.S. Food and Drug Administration, or FDA, through the Humanitarian Device
Exemption, or HDE, pathway. When this pathway was initiated for the Neuro-Spinal Scaffold implant, it was limited to
populations of 4,000 or less patients per year. We were granted a Humanitarian Use Device, or HUD, designation for the
Neuro-Spinal Scaffold implant, which includes thoracic and cervical patients afflicted with complete (no motor or sensory
function in the lowest sacral segments) SCI, such as paraplegia or tetraplegia, and excludes gunshot or other penetrating
wounds. 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 HUD to include additional SCI patients, i.e., incomplete (partial
sensory or sensory/motor function below the injury site, including the lowest sacral segments) SCI patients. Future
products, which may include use of stem cells or drug ingredients, may enable the treatment of a broader population such
as patients with chronic paralysis and would require separate regulatory approval.
Since 1973, the National Spinal Cord Injury Statistical Center, or NSCISC, at the University of Alabama has been
commissioned by the U.S. government to maintain a national database of SCI statistics. The financial impact of SCIs, as
reported by the NSCISC, is substantial. Direct costs, which include hospital and medical expenses, modification of the
home, and personal assistance, are highest in the first year after injury. According to the fact sheet published in 2017 by
NSCISC titled “Spinal Cord Injury—Facts and Figures at a Glance”, (i) during the first year, average cost of care ranges
from $352,279 to $1,079,412, depending on the severity of the injury, (ii) the net present value, or NPV, to maintain a
quadriplegic injured at age 25 for life is $4,789,384, and (iii) the NPV to maintain a paraplegic injured at age 25 for life is
$2,341,988. These costs place a tremendous financial burden on families, insurance providers, and government agencies.
Moreover, despite such a significant financial investment, the patient often remains disabled for life because current
medical interventions address only the symptoms of SCI rather than the underlying neurological cause. We believe our
approach could represent an important advance in the treatment of SCIs.
The American Spinal Injury Association, or ASIA, in collaboration with the International Spinal Cord Society, or
ISCoS, has developed a neurologic examination tool for assessing SCI known as the International Standards for
Neurological Classification of Spinal Cord Injury, or ISNCSCI. Results of the ISNCSCI examination are used to determine
the ASIA Impairment Scale, or AIS, classification.
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Patients with complete SCI are classified as AIS A. Patients with incomplete SCI, who have partial sensory and/or
motor function below the level of injury, including the lowest sacral segments, are classified as AIS B (partial sensory
function), AIS C (partial sensory and motor function), or AIS D (partial sensory and increased motor function, i.e., can
move at least half of the muscles against gravity). Patients who have a complete return of sensory and motor function are
classified as AIS E.
These classifications are based upon the ISNCSCI examination in which an examiner performs a neurologic
examination to assess sensory function of the entire body and motor function of the upper and lower extremities.
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 through multiple combination strategies involving electrostimulation devices, additional biomaterials, drugs
approved by the 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, screen failures or deaths that would prevent a patient from reaching the
primary endpoint visit. As of March 4, 2022, 17 patients have been enrolled in the INSPIRE 2.0 Study and 16 sites are
activated for enrollment, which is the total number of sites currently activated for enrollment in the study. We have found
the enrollment rates for the INSPIRE 2.0 study to be variable and inconsistent. Given the unpredictable enrollment
patterns, we are unable at this time to estimate when enrollment for the study may be complete. We aim to continue to
provide quarterly updates regarding the number of patients enrolled into the study.
The primary endpoint is defined as the proportion of patients achieving an improvement of at least one AIS
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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 six-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
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 NLI, 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 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. 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.
We cannot be certain what additional information or studies will be required by the FDA to approve our HDE submission.
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 3 modules: a preclinical studies 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 3 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 and have received feedback and provided additional updates to the FDA since that time,
including our latest update which was submitted to the FDA in April 2021. 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. The HDE submission will not be complete until the clinical module is also submitted.
Impact of COVID-19 Pandemic
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. Although all our clinical sites are currently enrolling patients, we are aware that a
significant number of our clinical sites had temporarily suspended enrollment into the INSPIRE 2.0 Study in 2020 at their
institution due to the COVID-19 pandemic. As such, the COVID-19 pandemic has affected and may continue to affect the
potential for enrollment in our INSPIRE 2.0 Study if clinical sites suspend studies in order to manage the pandemic. Aside
from the impact on enrollment in our INSPIRE 2.0 Study, we did not experience any significant impact from the COVID-
19 pandemic on our financial condition, liquidity, other operations, suppliers, industry, and workforce during the year
ended December 31, 2021. As of March 4, 2022, we have 16 clinical sites open for enrollment in the INSPIRE 2.0 Study,
which is the total number of sites we have activated for the INSPIRE 2.0 Study. The full impact of the COVID-19
pandemic continues to evolve as of the date of filing this Annual Report on Form 10-K, and we cannot be certain what
future impact the COVID-19 pandemic may have on our clinical sites and their respective abilities to enroll patients. As the
pandemic continues to evolve, there may be additional government actions or disruptions that could cause our clinical sites
to suspend or alter operations in a manner that would impact
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enrollment in the INSPIRE 2.0 Study. We are actively monitoring the impact of the global situation on our financial
condition, liquidity, operations, suppliers, industry, and workforce, although there remains significant uncertainty related to
the public health situation globally. Given the daily evolution of the COVID-19 pandemic and the global responses to curb
its spread, we are not able to estimate the ultimate effects of the COVID-19 pandemic on our results of operations,
financial condition, or liquidity in the future. However, as the COVID-19 pandemic continues, it may continue to have an
adverse effect on enrollment in our INSPIRE 2.0 Study, and may also have an adverse effect on our results of future
operations, financial position, and liquidity, and even after the COVID-19 pandemic has subsided, we may continue to
experience adverse impacts to our business as a result of any economic recession or depression that has occurred or may
occur in the future.
Intellectual Property
We rely on a combination of patents, licenses, trade secrets, and non-disclosure agreements to develop, protect,
and maintain our intellectual property. Our patent portfolio includes patents and patent applications. We seek to develop or
obtain intellectual property that we believe might be useful or complementary with our products and technologies,
including by way of licenses or acquisitions of other companies or intellectual property from third parties.
We hold an exclusive worldwide license to a broad suite of patents co-owned by BCH and MIT covering the use
of a wide range of polymers to treat SCI, and to promote the survival and proliferation of human stem cells in the spinal
cord, or the BCH License. Issued patents and pending patent applications licensed under the BCH License cover the
technology underlying our Neuro- Spinal Scaffold implant and the use of a wide range of biomaterial scaffolding for
treating SCI by itself or in combination with drugs, growth factors, or human stem cells. The BCH License covers 6 issued
United States patents and 19 issued international patents expiring between 2021 and 2027.
The BCH License has a term of 15 years from the effective date of July 2, 2007, or as long as the life of the last
expiring patent right under the license, whichever is longer, unless terminated earlier by BCH. The last expiring patent
under the BCH License currently expires in 2027. In connection with our acquisition of the BCH License, we submitted to
a 5-year development plan to BCH and MIT that includes certain targets and projections related to the timing of product
development and regulatory approvals. We are required to either meet the stated targets and projections in the plan or notify
BCH and revise the plan. BCH has the right to terminate the BCH License for failure by us to either meet the targets and
projections in the plan or our failure to submit an acceptable revision to the plan within a 60-day cure period after
notification by BCH that we are not in compliance with the plan. We are currently in compliance with the development
plan.
We have the right to sublicense the patents covered by the BCH License and have full control and authority over
the development and commercialization of any products that use the licensed technology, including clinical trial design,
manufacturing, marketing, and regulatory filings. We also own the rights to the data generated pursuant to the BCH
License, whether generated by us or a sublicensee. We have the first right of negotiation with BCH and MIT for a 30 day
period to any improvements to the intellectual property covered by the BCH License.
We are required to pay certain fees and royalties under the BCH License. We paid an initial fee upon execution of
the BCH License and are required to pay an amendment fee if we expand the field of use under the BCH License. We are
also required to make milestone payments upon completing various phases of product development, including upon (i)
filing with the FDA of the first investigational new drug application and IDE application for a product that uses the
licensed technology; (ii) enrollment of the first patient in Phase II testing for a product that uses the licensed technology;
(iii) enrollment of the first patient in Phase III testing for a product that uses the licensed technology; (iv) FDA approval of
the first new drug application or related application for a product that uses the licensed technology; and (v) first market
approval in any country outside the United States for a product that uses the licensed technology. As of December, 2021,
we had paid fees associated with the achievement of milestones (i), (ii) and (iii) described above. Each year prior to the
release of a licensed product, we are also required to pay a maintenance fee for the BCH License. Further, we are required
to make ongoing payments based on any sublicenses we grant to manufacturers and distributors. Following
commercialization, we are required to make ongoing royalty payments equal to a percentage in the low single digits of net
sales of any product that uses the licensed technology.
In addition to the rights we license under the BCH License, we have additional rights relating to the Neuro-Spinal
Scaffold implant. Together with MIT, we co-own U.S. patent No. 10,131,786 (“Poly((lactic-co-glycolic acid)-b-lysine) and
process for synthesizing a block copolymer of PLGA and PLL- (poly-e-cbz-l-lysine)”), which expires in 2033.
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Government Regulation
The testing, manufacturing, and potential labeling, advertising, promotion, distribution, import, and marketing of
our products are and would be subject to extensive regulation by governmental authorities in the United States and in other
countries. In the United States, the FDA, under the Public Health Service Act, the Federal Food, Drug and Cosmetic Act,
or FDCA, and their implementing regulations, regulates biologics and medical device products. In addition, our products
under development are subject to extensive regulation by other U.S. federal and state regulatory bodies and comparable
authorities in other countries. To ensure that medical products distributed domestically are safe and effective for their
intended use, the FDA and comparable authorities in other countries have imposed regulations that govern, among other
things, the following activities that we or our partners perform or will perform:
● product design and development;
● product testing;
● product manufacturing;
● product labeling;
● product storage;
● premarket clearance, approval, or CE marking of products;
● advertising and promotion;
● product marketing, sales, and distribution; and
● post-market surveillance reporting, including reporting of death or serious injuries.
The labeling, advertising, promotion, marketing, and distribution of biopharmaceuticals, or biologics, and medical
devices also must be in compliance with the FDA requirements which include, among others, standards and regulations for
off-label promotion, industry-sponsored scientific and educational activities, promotional activities involving the internet,
and direct-to-consumer advertising. In addition, the Federal Trade Commission, or FTC, also regulates the advertising of
many medical devices. The FDA and the FTC have very broad enforcement authority, and failure to abide by these
regulations can result in penalties, including the issuance of a warning letter directing us to correct deviations from
regulatory standards and enforcement actions that can include seizures, injunctions, and criminal prosecution. In addition,
under the federal Lanham Act and similar state laws, competitors and others can initiate litigation relating to advertising
claims.
The FDA has broad premarket, post-market, and regulatory enforcement powers. As with medical devices,
manufacturers of biologics and combination products are subject to unannounced inspections by the FDA to determine
compliance with applicable regulations, and these inspections may include the manufacturing facilities of some of our
subcontractors. Failure by manufacturers or their suppliers to comply with applicable regulatory requirements can result in
enforcement action by the FDA or other regulatory authorities. Potential FDA enforcement actions include:
● warning letters, fines, injunctions, consent decrees, and civil penalties;
● unanticipated expenditures to address or defend such actions;
● customer notifications for repair, replacement, or refunds;
● recall, detention, or seizure of our products;
● operating restrictions or partial suspension or total shutdown of production;
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● refusing or delaying our requests for 510(k) clearance on HDE or premarket approval applications, or PMA,
of new products or modified products;
● operating restrictions;
● withdrawing 510(k) clearances on HDE or PMA approvals that have already been granted;
● refusal to grant export approval for our products; or
● criminal prosecution.
FDA Regulation—Medical Device Products
FDA’s Premarket Clearance and Approval Requirements
Unless an exemption applies, each medical device commercially distributed in the United States requires one of
the following: (i) approval of a de-novo classification petition; (ii) clearance under a 510(k) premarket notification; (iii)
approval under a PMA application; or (iv) approval under an HDE. During public health emergencies, FDA also may grant
emergency use authorizations to allow commercial distribution of devices intended to address the public health emergency.
Under the FDCA, medical devices are classified into one of three classes—Class I, Class II or Class III—depending on the
degree of risk associated with each medical device and the extent of manufacturing and regulatory control needed to ensure
its safety and effectiveness.
Class I devices include those with the lowest risk to the patient and are those for which safety and effectiveness
can be reasonably assured by adherence to the FDA’s “general controls” for medical devices, which include compliance
with the applicable portions of the FDA’s Quality System Regulation, or QSR, facility registration and product listing,
reporting of adverse medical events and malfunctions through the submission of Medical Device Reports, or MDRs, and
appropriate, truthful and non-misleading labeling, advertising, and promotional materials. Some Class I or low risk devices
also require premarket clearance by the FDA through the 510(k) premarket notification process described below.
Class II devices are moderate risk devices subject to the FDA’s general controls, and any other “special controls”
deemed necessary by the FDA to ensure the safety and effectiveness of the device, such as performance standards, product-
specific guidance documents, special labeling requirements, patient registries or post-market surveillance. Premarket
review and clearance by the FDA for Class II devices is accomplished through the 510(k) premarket notification process,
though certain Class II devices are exempt from this premarket review process. When required, the manufacturer must
submit to the FDA a premarket notification, or 510(k), submission demonstrating that the device is “substantially
equivalent” to a legally marketed predicate device, which in some cases may require submission of clinical data. If the
FDA determines that the device, or its intended use, is not substantially equivalent to a legally marketed device, the FDA
will place the device, or the particular use of the device, into Class III, and the device sponsor must then fulfill more
rigorous premarket approval requirements.
Class III devices include devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-
supporting or implantable devices and devices deemed not substantially equivalent to a predicate device following a 510(k)
submission. The safety and effectiveness of Class III devices cannot be reasonably assured solely by general or special
controls. Submission and FDA approval of a PMA application is required before marketing of a Class III device can
proceed. The PMA process is much more demanding than the 510(k) premarket notification process. A PMA application,
which is intended to demonstrate that the device is reasonably safe and effective for its intended use and must be supported
by extensive data, typically including data from preclinical studies and clinical trials. A Class III device may qualify for
FDA approval to be distributed under an HDE rather than a PMA. HDEs are very similar to PMAs but are not required to
demonstrate a reasonable assurance of effectiveness. Rather HDE applications require demonstration of “probable benefit.”
Devices marketed under an HDE must also first be designated as a Humanitarian Use Device, or HUD. Our Neuro-Spinal
Scaffold implant is a Class III device, and we are initially seeking HDE approval. Following our receipt of HDE approval,
we intend to pursue a PMA for our Neuro-Spinal Scaffold for use in a broader patient population.
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Premarket Approval Pathway
Class III devices that do not qualify as HUDs require a PMA before they can be marketed, although some
pre-amendment Class III devices for which the FDA has not yet required a PMA are cleared through the 510(k) process. In
addition, HDE approved Class III devices require a PMA if the manufacturer desires to expand indications for use or
patient populations, or to otherwise treat more than 8000 patients per year and avoid the other limitations imposed on HDE
approved devices. The PMA process is more demanding than the HDE and 510(k) processes. In a PMA, the manufacturer
must demonstrate that the device is safe and effective, and the PMA must be supported by extensive data, including data
from preclinical studies and human clinical trials. The PMA must also contain a full description of the device and its
components, a full description of the methods, facilities, and controls used for manufacturing, and proposed labeling.
Following receipt of a PMA, the FDA determines whether the application is sufficiently complete to permit a substantive
review. If the FDA accepts the application for review, it has 180 days under the FDCA to complete its review of a PMA,
although in practice, the FDA’s review often takes significantly longer, and can take up to several years. In some cases, an
advisory panel of experts from outside the FDA may be convened to review and evaluate the application and provide
recommendations to the FDA as to the approvability of the device. The FDA may or may not accept the panel’s
recommendation. In addition, the FDA will generally conduct a pre-approval inspection of the applicant or its third-party
manufacturers’ or suppliers’ manufacturing facility or facilities to ensure compliance with the QSR. PMA devices are also
subject to the payment of user fees.
The FDA will approve the new device for commercial distribution if it determines that the data and information in
the PMA constitute valid scientific evidence and that there is reasonable assurance that the device is safe and effective for
its intended use(s). The FDA may approve a PMA with post-approval conditions intended to ensure the safety and
effectiveness of the device, including, among other things, restrictions on labeling, promotion, sale and distribution, and
collection of long-term follow-up data from patients in the clinical study that supported PMA approval or requirements to
conduct additional clinical studies post-approval. The FDA may condition PMA approval on some form of post-market
surveillance when deemed necessary to protect the public health or to provide additional safety and efficacy data for the
device in a larger population or for a longer period of use. In such cases, the manufacturer might be required to follow
certain patient groups for a number of years and to make periodic reports to the FDA on the clinical status of those patients.
Failure to comply with the conditions of approval can result in material adverse enforcement action, including withdrawal
of the approval.
Certain changes to an approved device, such as changes in manufacturing facilities, methods, or quality control
procedures, or changes in the design performance specifications, which may affect the safety or effectiveness of the device,
require submission of a PMA supplement. PMA supplements often require submission of the same type of information as a
PMA, except that the supplement is limited to information needed to support any changes from the device covered by the
original PMA and may not require as extensive clinical data or the convening of an advisory panel. Certain other changes
to an approved device require the submission of a new PMA, such as when the design change causes a different intended
use, mode of operation, and technical basis of operation, or when the design change is so significant that a new generation
of the device will be developed, and the data that were submitted with the original PMA are not applicable for the change
in demonstrating a reasonable assurance of safety and effectiveness.
Humanitarian Device Exemption (HDE)
Alternatively, a Class III device may qualify for FDA approval to be distributed under an HDE rather than a PMA.
For a device to be eligible for an HDE, it must be first designated by the FDA as a HUD intended to benefit patients in the
treatment or diagnosis of a disease or condition that affects fewer than 8,000 individuals in the United States per year
(increased by the 21st Century Cures Act from 4,000 to 8,000). The HDE pathway also requires that there must be no other
comparable device available to provide therapy for this condition. An HDE application is similar in form and content to a
PMA and, although exempt from the effectiveness requirements of a PMA, an HDE does require 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 addition, a HUD may only be used in
facilities that have established a local institutional review board, or IRB, to supervise clinical testing of devices, and after
an IRB has approved the use of the device to treat or diagnose the specific disease.
In addition, 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, a
product is only eligible to be sold for profit after receiving HDE approval if the device (1) is intended for the treatment
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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.
We expect our Neuro-Spinal Scaffold implant may meet the eligibility criteria to be sold for a profit.
Clinical Trials
Clinical trials are almost always required to support a PMA or HDE application. If the device presents a
“significant risk” to human health as defined by the FDA, the FDA requires the device sponsor to submit an IDE to the
FDA and obtain IDE approval prior to commencing the human clinical trials. The IDE must be supported by appropriate
data, such as animal and laboratory testing results, showing that it is safe to test the device in humans and that the testing
protocol is scientifically sound. The IDE must be approved in advance by the FDA for a specified number of patients,
unless the product is deemed a “non-significant risk” device, in which case an IDE approval from the FDA would not be
required, although the clinical trial would need to meet other requirements including IRB approval. Clinical trials for a
significant risk device may begin once an IDE is approved by the FDA and the appropriate IRB at each clinical trial site.
Future clinical trials may require that we obtain an IDE from the FDA prior to commencing any such clinical trial and that
the trial be conducted with the oversight of an IRB at the clinical trial site.
Our clinical trials must be conducted in accordance with FDA regulations and federal and state regulations
concerning human subject protection, including informed consent and healthcare privacy. A clinical trial may be suspended
by the FDA or at a specific site by the relevant IRB at any time for various reasons, including a belief that the risks to the
trial participants outweigh the benefits of participation in the clinical trial. Even if a clinical trial is completed, the results of
our clinical testing may not demonstrate the safety and efficacy of the device, or may be equivocal or otherwise not be
sufficient for us to obtain approval of our product.
Pervasive and Continuing FDA Regulation
After a device is placed on the market, numerous regulatory requirements continue to apply. These include:
● product listing and establishment registration, which helps facilitate FDA inspections and other regulatory
action;
● Quality System Regulation or QSR, which requires manufacturers, including third-party manufacturers, to
follow stringent design, testing, control, documentation, and other quality assurance procedures during all
aspects of the manufacturing process;
● labeling regulations and FDA prohibitions against the promotion of products for uncleared or unapproved
indications or other off-label uses;
● clearance of product modifications that could significantly affect safety or efficacy or that would constitute a
major change in intended use of one of our cleared devices;
● approval of product modifications that affect the safety or effectiveness of one of our approved devices;
● medical device reporting regulations, which require that manufacturers comply with FDA requirements to
report if their device may have caused or contributed to a death or serious injury, or has malfunctioned in a
way that would likely cause or contribute to a death or serious injury if the malfunction of the device or a
similar device were to recur;
● post-approval restrictions or conditions, including post-approval study commitments;
● post-market surveillance regulations, which apply when necessary to protect the public health or to provide
additional safety and effectiveness data for the device;
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● the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to
recall from the market a product that is in violation of governing laws and regulations;
● regulations pertaining to voluntary recalls; and
● notices of corrections or removals.
Class III devices that obtain HDE approval are subject to the additional restrictions discussed above, including:
● the treatment of no more than 8,000 individuals in the United States per year;
● a HUD may only be used if approved by an IRB to supervise clinical testing of devices, and after an IRB has
approved the use of the device to treat or diagnose the specific disease; and
● limitations on whether the device may be sold for a profit, subject to certain exceptions.
We, and any third party manufacturers that we use, must register with the FDA as medical device manufacturers
and must obtain all necessary state permits or licenses to operate our business. As manufacturers, we, and any third party
manufacturers that we use, are subject to announced and unannounced inspections by the FDA to determine our
compliance with quality system regulation and other regulations. We have not yet been inspected by the FDA. We believe
that we are in substantial compliance with quality system regulation and other regulations.
Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which
may include any of the following sanctions:
● untitled letters, warning letters, fines, injunctions, consent decrees, and civil penalties;
● unanticipated expenditures to address or defend such actions;
● customer notifications for repair, replacement, or refunds;
● recall, detention, or seizure of our products;
● operating restrictions or partial suspension or total shutdown of production;
● refusing or delaying our requests for 510(k) clearance on HDE or PMA of new products or modified
products;
● operating restrictions;
● withdrawing 510(k) clearances on HDE or PMA approvals that have already been granted;
● refusal to grant export approval for our products; or
● criminal prosecution.
Regulatory Pathway for the Neuro-Spinal Scaffold Implant
The Neuro-Spinal Scaffold implant will be regulated by the FDA as a Class III medical device. The FDA granted
HUD designation for our Neuro-Spinal Scaffold implant in 2013 for use in complete SCI (defined as less than 4,000
patients per year at the time), thus allowing us to qualify for FDA approval under an HDE. In 2015, we received
conditional approval from the FDA to convert our ongoing pilot study into a pivotal probable benefit study (The INSPIRE
Study). Full approval of such conversion was subsequently granted in January 2016. In early March 2018, we received
FDA approval for a randomized controlled trial (the INSPIRE 2.0 Study) to supplement the existing clinical evidence for
the Neuro-Spinal Scaffold implant that we obtained from The INSPIRE Study.
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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 3 modules: a preclinical studies 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 3 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 and have received feedback and provided additional updates to the FDA since that time,
including our latest update which was submitted to the FDA in April 2021. 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. The HDE submission will not be complete until the clinical data module is also submitted.
In the future, if our Neuro-Spinal Scaffold implant is approved via either the PMA or HDE pathway, modifications
or enhancements that could significantly affect the safety or effectiveness of the device or that constitute a major change to
the intended use of the device will require new PMA or HDE application and approval.
Other changes may require a supplement or other change notification that must be reviewed and approved by the
FDA. Modified devices for which a new PMA or HDE application, supplement, or notification is required cannot be
distributed until the application is approved by the FDA. An adverse determination or a request for additional information
could delay the market introduction of new products, which could have a material adverse effect on our business, financial
condition, and results of operations. We may not be able to obtain PMA or HDE approval in a timely manner, if at all, for
the Neuro-Spinal Scaffold implant or any future devices or modifications to Neuro-Spinal Scaffold implant or such devices
for which we may submit a PMA or HDE application.
European Economic Area or the EEA
Sales of medical devices are subject to foreign government regulations, which vary substantially from country to
country. In order to market our products outside the United States, we must obtain regulatory approvals or Conformité
Européenne (“CE’) Certificates of Conformity and comply with extensive safety and quality regulations. The time required
to obtain approval by a foreign country or to obtain a CE Certificate of Conformity may be longer or shorter than that
required for FDA clearance or approval, and the requirements may differ. In the EEA, we are required to obtain Certificates
of Conformity before drawing up a European Commission, or EC, Declaration of Conformity and affixing the CE mark to
our medical devices. Many other countries, such as Australia, India, New Zealand, Pakistan and Sri Lanka, accept CE
Certificates of Conformity or FDA clearance or approval although others, such as Brazil, Canada and Japan, require
separate regulatory filings. We have not yet applied for a CE Mark for the Neuro-Spinal Scaffold implant.
If any of our products has been CE marked and placed on the market in the EEA, we would need to comply with a
number of regulatory requirements relating to:
● registration/notification of medical devices in individual EEA countries;
● pricing and reimbursement of medical devices;
● establishment of post-marketing surveillance and adverse event reporting procedures;
● Field Safety Corrective Actions, including product recalls and withdrawals;
● marketing and promotion of medical devices; and
● interactions with physicians.
Failure to comply with these requirements at such time could result in enforcement measures being taken against
us by the competent authorities of the EEA countries. These measures can include fines, administrative penalties,
compulsory product withdraws, injunctions, and criminal prosecution. Such enforcement measures would have an adverse
effect on our capacity to market our products in the EEA and, consequently, on our business and financial position. Such
failures could also lead to cancelation, suspension, or variation of our CE Certificates of Conformity by
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the relevant Notified Body, which is an organization designated by the competent authorities of an EEA country to conduct
conformity assessments.
Further, the advertising and promotion of our products in the EEA is subject to regulatory directives concerning
misleading and comparative advertising, and unfair commercial practices, as well as other national legislation in the
individual EEA countries governing the advertising and promotion of medical devices. These laws may limit or restrict the
advertising and promotion of our products to the general public and may impose limitations on our promotional activities
with healthcare professionals.
Financial Information and Research and Development Expenditures
We have incurred net losses each year since our inception, including net losses of $9.9 million for the year ended
December 31, 2021 and $9.1 million for the year ended December 31, 2020. 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 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. Our research and development
expenditures, which include research and development related to our product candidates, were $4.4 million and $3.9
million in 2021 and 2020, respectively.
Competition
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 obtaining regulatory
approval for products, production and manufacturing, and sales and marketing of 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 compete effectively, 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 any of 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.
Manufacturing
We have developed a proprietary manufacturing process to build our Neuro-Spinal Scaffold implant. We
manufacture our implants following FDA regulations for design controls using 2 fully operational manufacturing
cleanrooms located at our facility in Cambridge, Massachusetts. These 2 cleanrooms are validated to ISO 14644 1 Class
ISO 7 (Class 10-K) and Class ISO 8 (Class 100k) cleanroom standards, respectively. In addition, the manufacturing process
contains numerous quality control steps including in process and final inspection. Currently, we are working with 2
vendors for our critical raw materials; however, these materials are also available from other vendors. We are currently
manufacturing our Neuro-Spinal Scaffold implant to support the INSPIRE 2.0 Study. If we are able to move toward
preparing for commercialization, we intend to be compliant with all applicable regulations on a country specific basis.
Sales and Marketing
If we obtain approval from the FDA, or another foreign regulatory body, to commercialize our products, we plan
to establish a direct sales force to sell our products to major markets in the United States, and we may sell direct or through
distributors in major foreign markets. We anticipate the direct sales force, once and if established, would focus its efforts on
maximizing revenue through product training, placement, and support. We would also seek to establish strong relationships
with neurosurgeons, orthopedic spine surgeons, and trauma surgeons, and would expect to provide a high level of service
for any of our approved products including providing on-site assistance and service during
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procedures. In addition, we expect to implement medical education programs intended for outreach to practitioners in
physical medicine and rehabilitation centers and patient advocacy groups. We may also seek corporate partners with
expertise in commercialization.
Compliance with Environmental, Health and Safety Laws
In addition to the FDA regulations discussed above, we are also subject to evolving federal, state, and local
environmental, health, and safety laws and regulations. In the past, compliance with environmental, health, and safety laws
and regulations has not had a material effect on our capital expenditures. We believe that we comply in all material respects
with existing environmental, health, and safety laws and regulations applicable to us.
Employees and Human Capital
As of December 31, 2021, we had seven full-time employees. None of our employees are represented by a labor
union and we consider our employee relations to be good. We also utilize a number of consultants to assist with financial,
research and development, human resources, clinical and regulatory activities. We believe that our future success will
depend in part on our continued ability to attract, hire, and retain qualified personnel.
Corporate Information
We were incorporated on April 2, 2003, under the name of Design Source, Inc. as a Nevada corporation. On
October 26, 2010, we acquired the business of InVivo Therapeutics Corporation, which was founded in 2005 as a Delaware
corporation, and we are continuing the existing business operations of InVivo Therapeutics Corporation as our wholly-
owned subsidiary.
Our principal executive offices are located in leased premises at One Kendall Square, Building 1400 West, 4th
Floor, Suite B14402, Cambridge, Massachusetts 02139. Our telephone number is (617) 863-5500. We maintain a website
at www.invivotherapeutics.com. Information contained on, or accessible through, our website is not a part of, and is not
incorporated by reference into this Annual Report on Form 10-K.
Available Information
We make available free of charge on or through the Investor Relations link on our website,
www.invivotherapeutics.com, all materials that we file electronically with the Securities and Exchange Commission
(“SEC”), including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and
amendments to those reports.
Information appearing on the above websites is not a part of, and is not incorporated in, this Annual Report on
Form 10-K. Further, our references to the URLs for these websites are intended to be inactive textual reference only.
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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 Annual Report on Form 10-K, 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 Business
We have found it difficult and may continue to find it difficult to enroll patients in our clinical studies, which could
delay or prevent clinical studies of our product candidates, and due to such enrollment delays, we may need to make a
determination as to the next steps for our clinical program that could significantly impact our future operations and
financial position. Specifically, if the pace of enrollment in our INSPIRE 2.0 Study does not increase, we may need to
make a determination as to the next steps for the INSPIRE 2.0 Study and our clinical program.
Patient enrollment is affected by a number of factors including:
● widespread emergency orders in response to the COVID-19 pandemic requiring business and residents
to curtail non-essential activities;
● severity of the disease, injury, or condition under investigation;
● design of the study protocol;
● size and nature of the patient population;
● eligibility criteria for and design of the study in question;
● perceived risks and benefits of the product candidate under study;
● proximity and availability of clinical study sites for prospective patients;
● availability of competing therapies and clinical studies;
● efforts to facilitate timely enrollment in clinical studies;
● patient referral practices of physicians; and
● ability to monitor patients adequately during and after treatment.
For a period in 2016, as a result of a U.S. Food and Drug Administration, or FDA pre-specified enrollment hold,
we were unable to enroll patients in The INSPIRE Study pending FDA authorization to proceed with additional enrollment,
which delayed our ability to open new sites and enroll patients at the pace we had anticipated. In addition, in July 2017 we
halted enrollment in the study, and subsequently closed enrollment in the study. We also experienced enrollment delays
with our INSPIRE 2.0 Study as a result of the COVID-19 pandemic when a significant number of our clinical sites
temporarily suspended enrollment into the INSPIRE 2.0 Study at their institution in 2020. As such, the COVID-19
pandemic affected and may continue to affect the potential for enrollment in our INSPIRE 2.0 Study in the event that our
clinical sites may again suspend studies in the future in order to manage the pandemic. We may not be able to initiate or
continue clinical studies if we cannot enroll a sufficient number of eligible patients to participate in the clinical studies
required by regulatory agencies, and as a result, if the pace of enrollment does not increase, we may need to make a
determination as to the next steps for the INSPIRE 2.0 Study and our clinical program.
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For example, if we have difficulty enrolling a sufficient number of patients to conduct or timely complete our
clinical studies as planned, including the INSPIRE 2.0 Study, we may need to delay, limit, or terminate ongoing or planned
clinical studies, any of which would have an adverse effect on our business. We also may consider changes to our current
business strategy and future operations. We are reviewing alternatives with a goal of maximizing the value of our company.
We could determine 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 to continue to operate our business in accordance with our existing business strategy.
The COVID-19 pandemic, which began in late 2019 and has had impacts worldwide, has delayed and may continue to
delay our ability to complete our ongoing INSPIRE 2.0 clinical trial or delay the initiation of future clinical trials,
disrupt regulatory activities, or have other adverse effects on our business and operations. In addition, this pandemic
has caused substantial disruption in the financial markets and may adversely impact economies worldwide, 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 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. As of March 4, 2022, we have 16 clinical sites open for enrollment which is the total number of
sites we currently have activated for the INSPIRE 2.0 Study. The full impact of the COVID-19 pandemic continues to
evolve as of the date of filing this Annual Report on Form 10-K, 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 clinical sites and their respective abilities to enroll patients. As the pandemic continues to evolve, there may be
additional government actions or disruptions that could cause our clinical sites to suspend or alter operations in a manner
that would impact enrollment in the INSPIRE 2.0 Study. 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 enroll, or delay enrollment in, the
INSPIRE 2.0 clinical trial. Additionally, the pandemic has already caused significant disruptions in the financial markets,
and may continue to cause such disruptions, 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 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.
We have experienced delays and may experience further 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 our Neuro-Spinal Scaffold implant, we must complete the
clinical studies that are required. In July 2017, 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. The FDA has approved the INSPIRE 2.0 Study. However, the INSPIRE 2.0
Study may not be successfully completed or 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 to supply to our clinical sites, failure to demonstrate safety and probable benefit of our Neuro-Spinal
Scaffold implant, lack of adequate funding to continue the clinical trial, or unforeseen safety issues. For example,
enrollment in our INSPIRE 2.0 Study has been slower than we initially anticipated. Enrolling patients the
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INSPIRE 2.0 Study and any other clinical trial of our Neuro-Spinal Scaffold implant will continue to require the approval
of the IRBs at each clinical site.
In addition, our 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, 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.
In addition, clinical trials can be delayed or aborted for a variety of reasons, including delay or failure to:
● obtain regulatory approval to commence future clinical trials;
● 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;
● obtain IRB approval at each site;
● recruit, enroll, and retain patients through the completion of clinical trials;
● maintain clinical sites in compliance with trial protocols through the completion of clinical trials;
● address patient safety concerns that arise during the course of the trial;
● initiate or add a sufficient number of clinical trial sites; or
● 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 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 Our Financial Position and Need for Additional Capital
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.
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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 conduct our
INSPIRE 2.0 Study, and as we seek 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:
● the scope, progress, results, and costs of preclinical development, laboratory testing, and clinical trials for our
Neuro-Spinal Scaffold implant and any other product candidates that we may develop or acquire, including
our INSPIRE 2.0 Study;
● future clinical trial results of our Neuro-Spinal Scaffold implant;
● 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;
● 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;
● the revenue, if any, received from commercial sales of our product candidates for which we receive
marketing approval;
● the cost of having our product candidates manufactured for clinical trials in preparation for regulatory
approval and in preparation for commercialization;
● the cost and delays in product development as a result of any changes in regulatory oversight applicable to
our product candidates;
● our ability to establish and maintain strategic collaborations, licensing, or other arrangements and the
financial terms of such agreements;
● the cost and timing of establishing sales, marketing, and distribution capabilities;
● the costs involved in preparing, filing, prosecuting, maintaining, defending, and enforcing our intellectual
property portfolio;
● the efforts and activities of competitors and potential competitors;
● the effect of competing technological and market developments; and
● the extent to which we acquire or invest in businesses, products, and technologies.
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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. 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. 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. 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.
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 $9.9 million for the year ended
December 31, 2021 and $9.1 million for the year ended December 31, 2020. As of December 31, 2021, we had an
accumulated deficit of $238.1 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
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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:
● continue clinical development of our Neuro-Spinal Scaffold implant;
● initiate or restart the research and development of other product candidates;
● have our product candidates manufactured for clinical trials and for commercial sale;
● establish a sales, marketing, and distribution infrastructure to commercialize any products for which we may
obtain marketing approval;
● maintain, protect, and expand our intellectual property portfolio; and
● continue our research and development efforts for new product opportunities.
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, par value $0.00001 per share (the “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
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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 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 December 31, 2021, 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
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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 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. Even if we are
able to complete clinical development and obtain favorable clinical results, 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 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. 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.
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 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.
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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 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 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 will 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. Moreover, there can be no assurance that the
INSPIRE 2.0 Study will be successfully completed.
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, ASIA Impairment Scale (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% 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.
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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.
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
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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.
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, difficulties in obtaining regulatory clearances, recalls,
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enforcement actions, including injunctive relief or consent decrees, or other consequences, which could, in turn, have a
material adverse effect on our financial condition and results of operations.
In addition, we and our suppliers are required to comply with Good Manufacturing Practices and Good Tissue
Practices with respect to any human cells and biologic products we may develop, and International Standards Organization
regulations for the manufacture of our products, and other regulations which cover the methods and documentation of the
design, testing, production, control, quality assurance, labeling, packaging, storage, and shipping of any product for which
we obtain clearance or approval. Manufacturing may also be subject to controls by the FDA for parts of the combination
products that the FDA may find are controlled by the biologics regulations.
The FDA audits compliance with the QSR and other similar regulatory requirements through periodic announced
and unannounced inspections of manufacturing and other facilities. The failure by us or one of our suppliers to comply
with applicable statutes and regulations administered by the FDA, or the failure to timely and adequately respond to any
adverse inspectional observations or product safety issues, could result in any of the following enforcement actions:
● untitled letters, warning letters, fines, injunctions, consent decrees, and civil penalties;
● unanticipated expenditures to address or defend such actions;
● customer notifications or repair, replacement, refunds, recall, detention, or seizure of our products;
● operating restrictions or partial suspension or total shutdown of production;
● refusing or delaying our requests for premarket approval of new products or modified products;
● withdrawing PMA that have already been granted;
● refusal to grant export approval for our products; or
● criminal prosecution.
Any of these sanctions could have a material adverse effect on our reputation, business, results of operations, and
financial condition.
Our products and operations are subject to extensive governmental regulation both in the United States and abroad, and
our failure to comply with applicable requirements could cause our business to suffer.
Our medical device and biologic products and operations are subject to extensive regulation by the FDA and
various other federal, state, and foreign governmental authorities. Government regulation of medical devices and biologic
products is meant to assure their safety and effectiveness, and includes regulation of, among other things:
● design, development, and manufacturing;
● testing, labeling, content, and language of instructions for use and storage;
● clinical trials;
● product safety;
● marketing, sales, and distribution;
● regulatory clearances and approvals including premarket clearance and approval;
● conformity assessment procedures;
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● product traceability and record keeping procedures;
● advertising and promotion;
● product complaints, complaint reporting, recalls, and field safety corrective actions;
● post-market surveillance, including reporting of deaths or serious injuries, and malfunctions that, if they were
to recur, could lead to death or serious injury;
● post-market studies; and
● product import and export.
The regulations to which we are subject are complex and have tended to become more stringent over time.
Regulatory changes could impede our ability to carry on or expand our operations and could result in higher than
anticipated costs or lower than anticipated sales.
Before we can market or sell a new regulated medical device product in the United States, we must obtain
clearance under Section 510(k) of the FDCA, approval of a PMA, or approval of an HDE, unless the device is specifically
exempt from premarket review. Our Neuro-Spinal Scaffold implant is expected to be regulated by the FDA as a Class III
medical device, requiring either PMA or HDE approval. A HUD designation was granted for the Neuro-Spinal Scaffold
implant in 2013, opening the HDE pathway.
In the PMA process, the FDA must determine that a proposed device is safe and effective for its intended use
based, in part, on extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing, and
labeling data.
Modifications to products that are approved through an HDE or PMA generally need FDA approval. The process
of obtaining an HDE or PMA is costly and generally takes from one to three years, or even longer, from the time the
application is submitted to the FDA until an approval is obtained.
An HDE application is similar in form and content to a PMA and, although exempt from the effectiveness
requirements of a PMA, an HDE does require 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. Like a PMA, changes to HDE devices generally need FDA approval.
Biological products must satisfy the requirements of the Public Health Services Act and its implementing
regulations. In order for a biologic product to be legally marketed in the U.S., the product must have a biologics license
applicable approved by the FDA. The testing and approval process requires substantial time, effort, and financial resources,
and each may take several years to complete.
The FDA can delay, limit, or deny clearance or approval of a product for many reasons, including:
● we may not be able to demonstrate to the FDA’s satisfaction that our products are safe and effective for
their intended uses;
● the data from our preclinical studies and clinical trials may be insufficient to support clearance or
approval, where required; and
● the manufacturing process or facilities we use may not meet applicable requirements.
In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise
existing regulations, or take other actions that may prevent or delay approval or clearance of our products under
development or impact our ability to modify our currently approved or cleared products on a timely basis.
Further, even after we have obtained the proper regulatory clearance or approval to market a product, the FDA
may require us to conduct post-marketing studies. Failure to conduct required studies in a timely manner could result in
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the revocation of approval for the product that is subject to such a requirement and could also result in the recall or
withdrawal of the product, which would prevent us from generating sales from that product in the United States.
Failure to comply with applicable laws and regulations could jeopardize our ability to sell our products and result
in enforcement actions such as:
● warning letters;
● fines;
● injunctions;
● civil penalties;
● termination of distribution;
● recalls or seizures of products;
● delays in the introduction of products into the market;
● total or partial suspension of production;
● refusal of the FDA or other regulators to grant future clearances or approvals;
● withdrawals or suspensions of current clearances or approvals, resulting in prohibitions on sales of our
products; and/or
● in the most serious cases, criminal penalties.
Any of these sanctions could result in higher than anticipated costs or lower than anticipated sales and have a
material adverse effect on our reputation, business, results of operations, and financial condition.
If our products, or the malfunction of our products, cause or contribute to a death or a serious injury before or after
approval, we will be subject to medical device reporting regulations, which can result in voluntary corrective actions or
agency enforcement actions.
Under the FDA medical device reporting regulations, medical device manufacturers with approved products are
required to report to the FDA information that a device has or may have caused or contributed to a death or serious injury
or has malfunctioned in a way that would likely cause or contribute to death or serious injury if the malfunction of the
device or one of our similar devices were to recur. Any such serious adverse event involving our products could result in
future voluntary corrective actions, such as recalls or customer notifications, or agency action, such as inspection or
enforcement action. In the context of our ongoing clinical trial, we report adverse events to the FDA in accordance with
IDE regulations and to other relevant regulatory authorities in accordance with applicable national and local regulations.
Any corrective action, whether voluntary or involuntary, and either pre- or post-market, needed to address any serious
adverse events will require the dedication of our time and capital, distract management from operating our business, and
may harm our reputation and financial results.
Our products, once approved, may in the future be subject to product recalls. A recall of our products, either voluntarily
or at the direction of the FDA, or the discovery of serious safety issues with our products, could have a significant
adverse impact on us.
If our products are approved for commercialization, the FDA and similar foreign governmental authorities have
the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or
manufacture. In the case of the FDA, the decision to require a recall must be based on an FDA finding that there is
reasonable probability that the device would cause serious injury or death. A government-mandated or voluntary recall by
us or one of our partners could occur as a result of an unacceptable risk to health, component failures, malfunctions,
manufacturing errors, design or labeling defects, or other deficiencies and issues. Recalls of any of our commercialized
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products would divert managerial and financial resources and have an adverse effect on our reputation, results of
operations, and financial condition, which could impair our ability to manufacture our products in a cost-effective and
timely manner in order to meet our customers’ demands. We may also be subject to liability claims, be required to bear
other costs, or take other actions that may have a negative impact on our future sales and our ability to generate profits.
If we obtain approval for our products, we may be subject to enforcement action if we engage in improper marketing or
promotion of our products.
We are not permitted to promote or market our investigational products. After approval, our promotional materials
and training methods must comply with FDA and other applicable laws and regulations, including the prohibition of the
promotion of unapproved, or off-label, use. Surgeons may use our products off-label, as the FDA does not restrict or
regulate a surgeon’s choice of treatment within the practice of medicine. However, if the FDA determines that our
promotional materials or training constitutes promotion of an off-label use, it could request that we modify our training or
promotional materials or subject us to regulatory or enforcement actions, including the issuance of an untitled letter, a
warning letter, injunction, seizure, civil fine, or criminal penalties. It is also possible that other federal, state, or foreign
enforcement authorities might take action if they consider our promotional or training materials to constitute promotion of
an off-label use, which could result in significant fines or penalties under other statutory authorities, such as laws
prohibiting false claims for reimbursement. In that event, our reputation could be damaged and adoption of the products
could be impaired. In addition, the off-label use of our products may increase the risk of product liability claims. Product
liability claims are expensive to defend and could divert our management’s attention, result in substantial damage awards
against us, and harm our reputation.
If we obtain approval for our products, their commercial success will depend in part upon the level of reimbursement we
receive from third parties for the cost of our products to users.
The commercial success of any product will depend, in part, on the extent to which reimbursement for the costs of
our products and related treatments will be available from third-party payers such as government health administration
authorities, private health insurers, managed care programs, and other organizations. Adequate third-party insurance
coverage may not be available for us to establish and maintain price levels that are sufficient for us to continue our business
or for realization of an appropriate return on investment in product development.
Legislative or regulatory reform of the healthcare systems in which we operate may affect our ability to commercialize
our product candidates and could adversely affect our business.
The government and regulatory authorities in the United States, the European Union, and other markets in which
we plan to commercialize our product candidates may propose and adopt new legislation and regulatory requirements
relating to the approval, Conformité Européenne (CE) or European Union marking, manufacturing, promotion, or
reimbursement of medical device and biologic products. It is impossible to predict whether legislative changes will be
enacted or applicable regulations, guidance, or interpretations changed, and what the impact of such changes, if any, may
be. Such legislation or regulatory requirements, or the failure to comply with such, could adversely impact our operations
and could have a material adverse effect on our business, financial condition, and results of operations.
The FDA’s and other regulatory authorities’ policies may change and additional government regulations may be
promulgated that could prevent, limit or delay regulatory clearance or approval of our product candidates. We cannot
predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative
action, either in the United States or abroad. Certain policies of the current or future administrations may impact our
business and industry. It is difficult to predict how any executive actions will be implemented, and the extent to which they
will impact the FDA’s ability to exercise its regulatory authority. If executive actions impose restrictions on FDA’s ability
to engage in oversight and implementation activities in the normal course, our business may be negatively impacted. If we
are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we
are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we
may not achieve or sustain profitability.
For example, in the United States, legislative changes have been enacted in the past and further changes are
proposed that would impact the Patient Protection and Affordable Care Act, or the Affordable Care Act. These new laws
may result in additional reductions in Medicare and other healthcare funding. Beginning April 1, 2013, Medicare
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payments for all items and services, including drugs and biologics, were reduced by 2% under the sequestration
(i.e., automatic spending reductions) required by the Budget Control Act of 2011, as amended by the American Taxpayer
Relief Act of 2012. Subsequent legislation extended the 2% reduction, on average, to 2025. It is likely that federal and state
legislatures within the United States and foreign governments will continue to consider changes to existing healthcare
legislation. The Affordable Care Act has faced ongoing legal challenges, including litigation seeking to invalidate some of
or all of the law or the manner in which it has been implemented. With the current Presidential administration and
Congress, there have been, and may be additional, legislative changes affecting the Affordable Care Act, including repeal
of certain provisions of the Affordable Care Act. It remains to be seen, however, precisely what impact legislation to date
and any future legislation will have on the availability of healthcare and containing or reducing healthcare costs. We cannot
predict the reform initiatives that may be adopted in the future or whether initiatives that have been adopted will be
repealed or modified. We cannot quantify or predict with any certainty the likely impact of the Affordable Care Act, its
amendment or repeal, or any alternative or related legislation, or any implementation of any such legislation, on our
business model, prospects, financial condition, and results of operations.
These and other legislative and regulatory changes that have been or may be proposed in the future may impact
our ability to successfully commercialize our product candidates.
We have limited experience manufacturing our Neuro-Spinal Scaffold implant for clinical-study scale and no
experience for commercial scale.
To date, we have manufactured our Neuro-Spinal Scaffold implant on a small scale, including sufficient supply
that is needed for our clinical studies. We may encounter unanticipated problems in the scale-up process that will result in
delays in the manufacturing of the Neuro-Spinal Scaffold implant and therefore delay our clinical studies. During our
clinical trials, we are subject to FDA regulations requiring manufacturing of our scaffolds with the FDA requirements for
design controls and subject to inspections by regulatory agencies. Our failure to comply with applicable regulations may
result in delays and interruptions to our product supply while we seek to secure another supplier that meets all regulatory
requirements. If we are unable to scale up our manufacturing to meet requirements for our clinical studies, we may be
required to rely on contract manufacturers. Reliance on third-party manufacturers entails risks to which we would not be
subject if we manufactured the product ourselves, including the possible breach of the manufacturing agreements by the
third parties because of factors beyond our control, and the possibility of termination or nonrenewal of the agreements by
the third parties because of our breach of the manufacturing agreement or based on their own business priorities.
Risks Related to Our Intellectual Property
We license certain technology underlying the development of our Neuro-Spinal Scaffold implant from BCH and MIT,
and the loss of the license would result in a material adverse effect on our business, financial position, and operating
results and cause the market value of our common stock to decline.
We license technology from BCH and MIT that is integrated into our Neuro-Spinal Scaffold implant under an
exclusive license. Under the license agreement, we have agreed to milestone payments and to meet certain reporting
obligations. In the event that we were to breach any of the obligations under the agreement and fail to cure timely, BCH
and MIT would have the right to terminate the agreement upon notice. In addition, BCH and MIT have the right to
terminate our license upon the bankruptcy or receivership of the Company. If we are unable to continue to use or license
this technology on reasonable terms, or if this technology fails to operate properly, we may not be able to secure
alternatives in a timely manner and our ability to develop our products could be harmed.
If we cannot protect, maintain and, if necessary, enforce our intellectual property rights, our ability to develop and
commercialize products will be adversely impacted.
Our success, in large part, depends on our ability to protect and maintain the proprietary nature of our technology.
We and our licensors must prosecute and maintain our existing patents and obtain new patents. Some of our proprietary
information may not be patentable, and there can be no assurance that others will not utilize similar or superior solutions to
compete with us. We cannot guarantee that we will develop proprietary products that are patentable, and that, if issued, any
patent will give a competitive advantage or that such patent will not be challenged by third parties. The process of
obtaining patents can be time consuming with no certainty of success, as a patent may not issue or may not have sufficient
scope or strength to protect the intellectual property it was intended to protect. We cannot
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assure you that our means of protecting our proprietary rights will suffice or that others will not independently develop
competitive technology or design around patents or other intellectual property rights issued to us. Even if a patent is issued,
it does not guarantee that it is valid or enforceable. Any patents that we or our licensors have obtained or obtain in the
future may be challenged, invalidated, or unenforceable. If necessary, we may initiate actions to protect our intellectual
property, which can be costly and time consuming.
If third parties successfully claim that we infringe their intellectual property rights, our ability to continue to develop
and commercialize products could be delayed or prevented.
Third parties may claim that we or our licensors are infringing on or misappropriating their proprietary
information. Other organizations are engaged in research and product development efforts that may overlap with our
products. Such third parties may currently have, or may obtain in the future, legally blocking proprietary rights, including
patent rights, in one or more products or methods under development or consideration by us. These rights may prevent us
from commercializing products, or may require us to obtain a license from the organizations to use the technology. We may
not be able to obtain any such licenses that may be required on reasonable financial terms, if at all, and cannot be sure that
the patents underlying any such licenses will be valid or enforceable. There may be rights that we are not aware of,
including applications that have been filed but not published that, when issued, could be asserted against us. These third
parties could bring claims against us that would cause us to incur substantial expenses and, if successful, could cause us to
pay substantial damages. Further, if a patent infringement suit were brought against us, we could be forced to stop or delay
research and development of the product that is the subject of the suit. Furthermore, because of the substantial amount of
discovery required in connection with intellectual property litigation, there is a risk that some of our trade secrets or other
confidential information could be compromised by disclosure during this type of litigation.
Risks Related to our Dependence on Third Parties
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.
The near and long-term viability of our products will depend, in part, on our ability to successfully establish new
strategic collaborations with biotechnology companies, hospitals, insurance companies, and government agencies.
Establishing strategic collaborations is difficult and time-consuming. Potential collaborators may reject collaborations
based upon their assessment of our financial, regulatory, or intellectual property position. If we fail to establish a sufficient
number of collaborations on acceptable terms, we may not be able to commercialize our products or generate sufficient
revenue to fund further research and development efforts.
Even if we establish new collaborations, these relationships may never result in the successful development or
commercialization of any of our product candidates for reasons both within and outside of our control.
There are a limited number of suppliers that can provide materials to us. Any problems encountered by such suppliers
may detrimentally impact us.
We rely on third-party suppliers and vendors for certain of the materials used in the manufacture of our products
or other of our product candidates. Any significant problem experienced by one of our suppliers could result in a delay or
interruption in the supply of materials to us until such supplier resolves the problem or an alternative source of supply is
located. Any delay or interruption could negatively affect our operations.
If the third parties on which we rely to conduct our laboratory testing, animal, and human clinical trials do not perform
as contractually required or expected, we may not be able to obtain regulatory approval for or commercialize our
products.
We have been, and will continue to be, dependent on third-party CROs, medical institutions, investigators, and
contract laboratories to conduct certain activities related to our laboratory testing and animal and human clinical studies.
We are responsible for confirming that each of our clinical trials is conducted in accordance with our approved plan and
protocol. Moreover, the FDA and foreign regulatory agencies require us to comply with regulations and standards,
commonly referred to as good clinical practices, for conducting, recording, and reporting the results of clinical trials to
assure that data and reported results are credible and accurate and that the trial participants are adequately protected. Our
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reliance on these third parties does not relieve us of these responsibilities and requirements. If these third parties do not
successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, if the third parties need
to be replaced, or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our
clinical protocols or regulatory requirements or for other reasons, our preclinical development activities or clinical trials
may be extended, delayed, suspended, or terminated, and we may not be able to obtain regulatory approval or successfully
commercialize our products on a timely basis, if at all, and our business, operating results, and prospects may be adversely
affected.
Risks Related to Employee Matters and Managing Growth
Our success depends on our ability to retain our management and other key personnel.
We depend on our senior management as well as key scientific personnel. We have implemented restructurings
that have significantly reduced our workforce, leaving only key positions filled. The loss of any members of senior
management or key scientific personnel could harm our business and significantly delay or prevent the achievement of
research, development, or business objectives. Competition for qualified employees is intense among biotechnology
companies, and the loss of qualified employees, or an inability to attract, retain, and motivate additional highly skilled
employees could hinder our ability to successfully develop marketable products.
Our future success also depends on our ability to identify, attract, hire, train, retain, and motivate other highly
skilled scientific, technical, marketing, managerial, and financial personnel. Although we will seek to hire and retain
qualified personnel with experience and abilities commensurate with our needs, there is no assurance that we will succeed
despite our collective efforts. The loss of the services of any of our senior management or other key personnel could hinder
our ability to fulfill our business plan and further develop and commercialize our products and services. Competition for
personnel is intense, and any failure to attract and retain the necessary technical, marketing, managerial, and financial
personnel would have a material adverse effect on our business, prospects, financial condition, and results of operations.
We may be subject to claims that our employees, consultants, or independent contractors have wrongfully used or
disclosed confidential information of third parties.
We have received confidential and proprietary information from collaborators, prospective licensees, and other
third parties. In addition, we employ individuals who were previously employed at other biotechnology or pharmaceutical
companies. We may be subject to claims that we or our employees, consultants, or independent contractors have
inadvertently or otherwise used or disclosed confidential information of these third parties or our employees’ former
employers. We may also be subject to claims that former employees, collaborators, or other third parties have an ownership
interest in our patents or other intellectual property. We may be subject to ownership disputes in the future arising, for
example, from conflicting obligations of consultants or others who are involved in developing our product candidates.
Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying
monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use,
valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are
successful in defending against these claims, litigation could result in substantial cost and be a distraction to our
management and employees.
Risks Related to Litigation and Legal Compliance
We may face, and in the past have faced, lawsuits, which could divert management’s attention and harm our business.
We may face, and in the past have faced, lawsuits, including class action or securities derivative lawsuits. The
amount of time that is required to resolve these lawsuits is unpredictable and any lawsuits may divert management’s
attention from the day-to-day operations of our business, which could adversely affect our business, results of operations,
and cash flows. Any litigation or claim against us, even those without merit, may cause us to incur substantial costs, and
could place a significant strain on our financial resources, divert the attention of management from our core business and
harm our reputation.
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We face potential product liability claims, and, if successful claims are brought against us, we may incur substantial
liability and costs.
We will have exposure to claims for product liability. Product liability coverage for the healthcare industry is
expensive and sometimes difficult to obtain. We may not be able to maintain such insurance on acceptable terms or be able
to secure increased coverage if the commercialization of our products progresses, nor can we be sure that existing or future
claims against us will be covered by our product liability insurance. Moreover, the existing coverage of our insurance
policy or any rights of indemnification and contribution that we may have may not be sufficient to offset existing or future
claims. A successful claim may prevent us from obtaining adequate product liability insurance in the future on
commercially desirable terms, if at all. Even if a claim is not successful, defending such a claim would be time-consuming
and expensive, may damage our reputation in the marketplace, and would likely divert our management’s attention.
We are subject to environmental, health, and safety laws. Failure to comply with such environmental, health, and safety
laws could cause us to become subject to fines or penalties or incur costs that could have a material adverse effect on
the success of our business.
We are subject to various environmental, health, and safety laws and regulations, including those relating to safe
working conditions, laboratory, and manufacturing practices, the experimental use of animals and humans, emissions and
wastewater discharges, and the use and disposal of hazardous or potentially hazardous substances used in connection with
our research. Any of these laws or regulations could cause us to incur additional expense or restrict our operations.
Compliance with environmental laws and regulations may be expensive, and current or future environmental regulations
may impair our research and development efforts.
Our relationships with customers and third party payers will be subject to applicable anti-kickback, fraud and abuse,
and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, program
exclusion, contractual damages, reputational harm, and diminished profits and future earnings.
Healthcare providers, physicians, and third party payers will play a primary role in the recommendation and use of
our products and any other product candidates for which we obtain marketing approval. Our future arrangements with
healthcare providers, physicians, and third party payers may expose us to broadly applicable fraud and abuse and other
healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which
we market, sell, and distribute any products for which we obtain marketing approval. Restrictions under applicable federal
and state healthcare laws and regulations include the following:
● the federal Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully
soliciting, offering, receiving, or providing remuneration, directly or indirectly, in cash or in kind, to induce
or reward, or in return for, either the referral of an individual for, or the purchase, order, or recommendation
or arranging of, any good or service, for which payment may be made under a federal healthcare program
such as Medicare and Medicaid;
● the federal False Claims Act imposes criminal and civil penalties, including through civil whistleblower or
qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to
be presented, false or fraudulent claims for payment by a federal healthcare program or making a false
statement or record material to payment of a false claim or avoiding, decreasing, or concealing an obligation
to pay money to the federal government, with potential liability including mandatory treble damages and
significant per-claim penalties;
● the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), imposes criminal and
civil liability for executing a scheme to defraud any healthcare benefit program or making false statements
relating to healthcare matters;
● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its
implementing regulations, also imposes obligations, including mandatory contractual terms, with respect to
safeguarding the privacy, security, and transmission of individually identifiable health information;
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● the federal Physician Payments Sunshine Act requires applicable manufacturers of covered products to report
payments and other transfers of value to physicians and teaching hospitals; and
● analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws and
transparency statutes, may apply to sales or marketing arrangements and claims involving healthcare items or
services reimbursed by non-governmental third party payers, including private insurers.
Some state laws require device companies to comply with the industry’s voluntary compliance guidelines and the
relevant compliance guidance promulgated by the federal government and may require product manufacturers to report
information related to payments and other transfers of value to physicians and other healthcare providers or marketing
expenditures. State and foreign laws also govern the privacy and security of health information in some circumstances,
many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating
compliance efforts.
If our operations are found to be in violation of any of the laws described above or any governmental regulations
that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, and the curtailment
or restructuring of our operations. Any penalties, damages, fines, curtailment, or restructuring of our operations could
adversely affect our financial results. If any such actions are instituted against us and we are not successful in defending
ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of
significant fines or other sanctions.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws
and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business
practices may not comply with current or future statutes, regulations, or case law involving applicable fraud and abuse or
other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other
governmental regulations that may apply to us, we may be subject to significant civil, criminal, and administrative
penalties, damages, fines, imprisonment, exclusion of products from government funded healthcare programs, such as
Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians or other healthcare
providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may
be subject to criminal, civil, or administrative sanctions, including exclusions from government funded healthcare
programs.
Our operations and reputation may be impaired if our information technology systems fail to perform adequately or if
we are the subject of a data breach or cyber-attack.
Our information technology systems are important to operating our business. We rely on our information
technology systems, some of which are or may be managed or hosted by or out-sourced to third party service providers, to
manage our business data and other business processes. If we do not allocate and effectively manage the resources
necessary to build, sustain, and protect appropriate information technology systems and infrastructure, or we do not
effectively implement system upgrades or oversee third party service providers, our business or financial results could be
negatively impacted. The failure of our information technology systems to perform as we anticipate could disrupt our
business and could result in transaction or reporting errors and processing inefficiencies causing our business and results of
operations to suffer.
Furthermore, our information technology systems may be vulnerable to cyber-attacks or other security incidents,
service disruptions, or other system or process failures. Such incidents could result in unauthorized access to information
including vendor, consumer or other company confidential data as well as disruptions to operations. We have experienced
in the past, and expect to continue to experience, cybersecurity threats and incidents, although to date none has been
material. To address the risks to our information technology systems and data, we maintain an information security
program that includes updating technology, developing security policies and procedures, implementing and assessing the
effectiveness of controls, conducting risk assessments of third-party service providers and designing business processes to
mitigate the risk of such breaches. There can be no assurance that these measures will prevent or limit the impact of a
future incident. Moreover, the development and maintenance of these measures requires continuous monitoring as
technologies change and efforts to overcome security measures evolve. If we are unable to prevent or adequately respond
to and resolve an incident, it may have a material, negative impact on our operations or business reputation, and we may
experience other adverse consequences such as loss of assets, remediation costs, litigation, regulatory investigations, and
the failure by us to retain or attract customers following such an event.
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Additionally, we rely on services provided by third-party vendors for certain information technology processes and
functions, which makes our operations vulnerable to a failure by any one of these vendors to perform adequately or
maintain effective internal controls.
Risks Related to Investment in Our Securities
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.
The trading price of our common stock is likely to be highly volatile and could fluctuate in response to factors
such as:
● the status, completion, and/or results of our clinical trials;
● actual or anticipated variations in our operating results;
● announcement of the commencement or completion of securities offerings by us;
● announcements of developments by us or our competitors;
● regulatory actions regarding our products;
● announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, or
capital commitments;
● adoption of new accounting standards affecting our industry;
● additions or departures of key personnel;
● sales of our common stock or other securities in the open market; and
● other events or factors, many of which are beyond our control.
The stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility
in the market price of a company’s securities, securities class action litigation has often been initiated against such
company. Litigation initiated against us, whether or not successful, could result in substantial costs and diversion of our
management’s attention and resources, which could harm our business and financial condition.
In the foreseeable future, we do not intend to pay cash dividends on shares of our common stock so any investor gains
will be limited to the value of our shares.
We currently anticipate that we will retain future earnings for the development, operation, and expansion of our
business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any gains to stockholders
will therefore be limited to the increase, if any, in our share price.
In the event that we fail to satisfy any of the listing requirements of the Nasdaq Capital Market, our common stock may
be delisted, which could affect our market price and liquidity.
Our common stock is listed on the Nasdaq Capital Market. For continued listing on the Nasdaq Capital Market,
we will be required to comply with the continued listing requirements, including the minimum market capitalization
standard, the corporate governance requirements and the minimum closing bid price requirement, among other
requirements. For example, we have received deficiency letters due to the failure to maintain the minimum bid price and
the failure to meet stockholder equity requirements, including the deficiency letter from the Listings Qualifications
Department of the Nasdaq Stock Market letter we received on May 19, 2021 notifying us that, for the last 30 consecutive
business days, the bid price for our common stock had closed below the minimum $1.00 per share requirement for
continued inclusion on the Nasdaq Capital Market. We were initially provided with a 180-day compliance period, or until
November 15, 2021, in which to regain compliance, which was subsequently extended by Nasdaq on November 16,
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2021, for an additional 180 days, or through May 15, 2022. We are working toward regaining compliance for continued
listing on Nasdaq, and may need to take additional actions in order to regain compliance. For example, as a result of
previous deficiency letters, we needed to implement reverse stock splits and take other actions including transferring to the
Nasdaq Capital Market (from the Nasdaq Global Market) and implementing a warrant amendment. We may need to
implement a further reverse stock split or take alternate actions as a result of the May 2021 deficiency letter.
Even if we are able to regain and remain in compliance with the minimum bid price requirement, we may decide
to implement a reverse stock split to further ensure that we remain in compliance with the minimum bid price requirement.
There can be no assurance that we will maintain compliance with the bid price requirement in the future, or that we will
continue to be in compliance with the other continued listing requirements of the Nasdaq Capital Market.
In the event that we fail to regain compliance, or we fail to obtain a second compliance period from Nasdaq, or
fail to satisfy any of the listing requirements of the Nasdaq Capital Market, our common stock may be delisted. If our
securities are delisted from trading on the Nasdaq Capital Market, and we are not able to list our securities on another
exchange our securities could be quoted on the OTC Bulletin Board or on the “pink sheets.” As a result, we could face
significant adverse consequences including:
● a limited availability of market quotations for our securities;
● a determination that our common stock is a “penny stock,” which would require brokers trading in our
common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in
the secondary trading market for our securities;
● a limited amount of news and analyst coverage;
● a limited ability to raise capital to continue to fund our operations by selling shares; and
● a limited ability to acquire other companies or technologies by using our shares as consideration.
Anti‑takeover effects of certain provisions of our articles of incorporation and Nevada state law may discourage or
prevent a takeover.
Our articles of incorporation divide our Board of Directors into three classes, with three-year staggered terms. The
classified board provision could increase the likelihood that, in the event an outside party acquired a controlling block of
our stock, incumbent directors nevertheless would retain their positions for a substantial period, which may have the effect
of discouraging, delaying, or preventing a change in control. In addition, Nevada has a business combination law, which
prohibits certain business combinations between Nevada publicly traded corporations, or Nevada corporations that elect to
be subject to the law, and “interested stockholders” for two years after the interested stockholder first becomes an interested
stockholder, unless the corporation’s board of directors approves the transaction by which the stockholder becomes an
interested stockholder in advance, or the proposed combination in advance of the stockholder becoming an interested
stockholder.
The proposed combination may be approved after the stockholder becomes an interested stockholder with
preapproval by the board of directors and a vote at a special or annual meeting of stockholders holding at least 60% of the
voting power not owned by the interested stockholder or his/her/ its affiliates or associates. After the two year moratorium
period, additional stockholder approvals or fair value requirements must be met by the interested shareholder up to four
years after the stockholder became an interested stockholder. In addition, we may become subject to Nevada’s control share
laws. A corporation is subject to Nevada’s control share law if it has more than 200 stockholders, at least 100 of whom are
stockholders of record and residents of Nevada, and if the corporation does business in Nevada, including through an
affiliated corporation. This control share law may have the effect of discouraging corporate takeovers. Currently, we
believe that we have less than 100 stockholders of record who are residents of Nevada, and are therefore not subject to the
control share laws.
The provisions of our articles of incorporation and Nevada’s business combination and control share laws make it
more difficult for a third party to acquire us and make a takeover more difficult to complete, even if such a transaction were
in our stockholders’ interest or might result in a premium over the market price for our common stock.
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Failure to maintain an effective system of internal controls could result in material misstatements of our financial
statements or cause us to fail to meet our reporting obligations or fail to prevent fraud in which case, our stockholders
could lose confidence in our financial reporting, which would harm our business and could negatively impact the price
of our stock.
We are required to comply with the internal control evaluation and certification requirements of Section 404 of the
Sarbanes-Oxley Act of 2002 (“SOX”) and management is required to report annually on our internal control over financial
reporting. Our independent registered public accounting firm will not be required to formally attest to the effectiveness of
our internal control over financial reporting pursuant to Section 404 of SOX until the date we have a public float of $75
million or greater and $100 million or greater in revenue.
If we fail to maintain effective internal controls and procedures for financial reporting, it could result in material
misstatements in the annual or interim financial statements that would not be prevented or detected in a timely manner. We
cannot assure you that material weaknesses or significant deficiencies will not occur in the future and that we will be able
to remediate such weaknesses or deficiencies in a timely manner, which could impair our ability to accurately and timely
report our financial position, results of operations or cash flows.
We are a “smaller reporting company,” and the reduced disclosure requirements applicable to smaller reporting
companies may make our common stock less attractive to investors.
We are considered a “smaller reporting company” under Rule 12b-2 of the Exchange Act. We are therefore
entitled to rely on certain reduced disclosure requirements, such as an exemption from providing selected financial data and
executive compensation information. These exemptions and reduced disclosures in our SEC filings due to our status as a
smaller reporting company also mean our auditors are not required to review our internal control over financial reporting
and may make it harder for investors to analyze our results of operations and financial prospects. We cannot predict if
investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our
common stock less attractive as a result, there may be a less active trading market for our common stock and our common
stock prices may be more volatile. We will remain a smaller reporting company until our public float exceeds $250 million
or our annual revenues exceed $100 million with a public float greater than $700 million.
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Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 2. PROPERTIES
We lease 5,104 square feet of space in Cambridge, Massachusetts, which is used primarily for corporate,
manufacturing, and research and development functions. The lease commenced in June 2021, was amended in November
2021, and expires on December 31, 2024.
Item 3. LEGAL PROCEEDINGS
In the ordinary course of business, we may be subject to litigation from time to time. There is no current, pending
or, to our knowledge, threatened litigation or administrative action to which we are a party or of which our property is the
subject (including litigation or actions involving our officers, directors, affiliates, or other key personnel, or holders of
record or beneficially of more than 5% of any class of our voting securities, or any associate of any such party) which in
our opinion has, or is expected to have, a material adverse effect upon our business, prospects financial condition or
operations.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our common stock is currently listed for trading on the Nasdaq Capital Market under the symbol “NVIV.” From
October 29, 2010 through April 16, 2015, our common stock was quoted on the OTCQB under the same symbol.
Dividends
We have never declared or paid cash dividends. We do not intend to pay cash dividends on our common stock for
the foreseeable future, but currently intend to retain any future earnings to fund the development and growth of our
business. The payment of cash dividends, if any, on our common stock, will rest solely within the discretion of our Board
of Directors and will depend, among other things, upon our earnings, capital requirements, financial condition, and other
relevant factors.
Holders
As of March 4, 2022, we had approximately 74 stockholders of record. This figure does not reflect persons or
entities that hold their stock in nominee or “street” name through various brokerage firms.
Recent Sales of Unregistered Securities
None.
Issuer Repurchases of Equity Securities
None.
Performance Graph
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide
the information under this item.
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Item 6. [Reserved]
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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with our consolidated financial statements and related
notes appearing elsewhere in this Annual Report on Form 10-K. The following discussion contains forward-looking
statements that involve risks and uncertainties that could cause actual results or events to differ materially from those
expressed or implied by such forward-looking statements as a result of many important factors, including those set forth in
Part I of this Annual Report on Form 10-K under the caption “Risk Factors”. Please see also the “Special Note Regarding
Forward-Looking Statements” in Part I above. We do not undertake any obligation to update forward-looking statements
to reflect events or circumstances occurring after the date of this Annual Report on Form 10-K.
Introduction
This Management’s Discussion and Analysis of our financial condition and results of operations is based on our
financial statements, which management has prepared in accordance with U.S. generally accepted accounting principles.
The preparation of these financial statements requires management 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 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 management believes 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.
Business 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 BCH and MIT. We also plan to evaluate other technologies and therapeutics that may be
complementary to our development of the Neuro-Spinal Scaffold implant or offer the potential to bring us closer to our goal
of redefining the life of the SCI patient.
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. However, expenditures
on research and development programs are subject to many uncertainties, including whether we develop our products with
a partner or independently, or whether we acquire products from third parties. At this time, due to the uncertainties and
inherent risks involved in our business, we cannot estimate in a meaningful way the duration of, or the costs to complete,
our research and development programs or whether, when or to what extent we will generate revenues or cash inflows from
the commercialization and sale of any of our products. While we are currently focused on advancing our Neuro-Spinal
Scaffold implant, our future research and development expenses will depend on the determinations we make as to the
scientific and clinical prospects of each product candidate, as well as our ongoing assessment of regulatory requirements
and each product’s commercial potential. In addition, we may make acquisitions of businesses, technologies or intellectual
property rights that we believe would be necessary, useful or complementary to our current business. Any investment made
in a potential acquisition could affect our results of operations and reduce our limited capital resources, and any issuance of
equity securities in connection with a potential acquisition could be substantially dilutive to our stockholders.
There can be no assurance that we will be able to successfully develop or acquire any product, or that we will be
able to recover our development or acquisition costs, whether upon commercialization of a developed product or otherwise.
We cannot provide assurance that any of our programs under development or any acquired technologies or products will
result in products that can be marketed or marketed profitably. If our development-stage programs or any acquired products
or technologies do not result in commercially viable products, our results of operations could be materially adversely
affected.
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We were incorporated on April 2, 2003, under the name Design Source, Inc. On October 26, 2010, we acquired
the business of InVivo Therapeutics Corporation, which was founded in 2005, and continued the existing business
operations of InVivo Therapeutics Corporation as our wholly-owned subsidiary.
Critical Accounting Policies and Estimates
Our consolidated financial statements, which appear in Item 8 of this Annual Report on Form 10-K, have been
prepared in accordance with accounting principles generally accepted in the United States, which require that our
management make certain assumptions and estimates and, in connection therewith, adopt certain accounting policies. Our
significant accounting policies are set forth in Note 2, “Significant Accounting Policies”, in the Notes to Consolidated
Financial Statements in Item 8 of this Annual Report on Form 10-K. Of those policies, we believe that the policies
discussed below may involve the highest degree of judgment and may be the most critical to an accurate reflection of our
financial condition and results of operations.
Stock-Based Compensation
Our stock options are granted with an exercise price set at the fair market value of our common stock on the date
of grant. Our stock options generally expire 10 years from the date of grant and vest upon terms determined by our Board
of Directors.
We recognize compensation costs resulting from the issuance of stock-based awards to employees, non-employees
and directors as an expense in our statements of operations over the service period based on a measure of fair value for
each stock-based award. The fair value of each option grant is estimated as of the date of grant using the Black-Scholes
option pricing model and the fair value of each restricted stock award or restricted stock unit, which we refer to collectively
as restricted securities, is determined based on the fair market value of our common stock on the date of grant. The fair
value is amortized as a compensation cost on a straight-line basis over the requisite service period of the award, which is
generally the vesting period. The expected term of any options granted under our stock plans is based on the average of the
contractual term (generally, 10 years) and the vesting period (generally, 48 months). The risk-free rate is based on the yield
of a U.S. Treasury security with a term consistent with the expected term of the option. The restricted securities generally
vest over a three-year period, contingent on the recipient’s continued employment. See Note 9, “Shared-Based
Compensation, Stock Options and Restricted Securities,” in the Notes to Consolidated Financial Statements in Item 8 of
this Annual Report on Form 10-K for more information about the assumptions underlying these estimates.
Research and Development Expense
Our research and development expenses consist primarily of costs incurred for the development of our product
candidates, which include:
● employee related expenses, including salaries, benefits, travel, and stock based compensation expense;
● expenses incurred under agreements with contract research organization (“CROs”), and clinical sites that
conduct our clinical studies;
● facilities, depreciation, and other expenses, which include direct and allocated expenses for rent and
maintenance of facilities, insurance, and other supplies;
● costs associated with our research platform and preclinical activities;
● costs associated with our regulatory, quality assurance, and quality control operations; and
● amortization of intangible assets.
Our research and development costs are expensed as incurred. We are required to estimate our accrued research
and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our
personnel to identify services that have been performed on our behalf and estimating the level of service performed and the
associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual
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costs. We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements
based on facts and circumstances known to us at that time. If the actual timing of the performance of services or the level
of effort varies from our estimate, we adjust the accrued expense accordingly. Although we do not expect our estimates to
be materially different from amounts actually incurred, our understanding of the status and timing of services performed
relative to the actual status and timing of services performed may vary and may result in us reporting amounts that are too
high or too low in any particular period. To date, we have not made any material adjustments to our prior estimates of
accrued research and development expenses.
New Accounting Pronouncements
In May 2021 the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and
Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-
Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of
Freestanding Equity-Classified Written Call Options, a consensus of the Emerging Issues Task Force, which amends the
FASB Accounting Standards Codification (“ASC”) to provide explicit guidance, and, thus, reduce diversity in practice, on
accounting by issuers for modifications or exchanges of freestanding equity-classified written call options that remain
equity classified after the modification or exchange. This amendment provides that for an entity that presents earnings per
share (EPS) in accordance with Topic 260, the effects of a modification or an exchange of a freestanding equity-classified
written call option that is recognized as a dividend should be an adjustment to net income (or net loss) in the basic EPS
calculation. The amended guidance becomes mandatorily effective for all entities for fiscal years beginning after December
15, 2021, including interim periods within those fiscal years, and should be applied prospectively to modifications or
exchanges occurring on or after the effective date. ASU No. 2021- 04 is effective for us beginning in fiscal 2022. We will
adopt ASU 2021-04 effective January 1, 2022, and we do not expect that the adoption will have a material impact on our
consolidated financial statements.
In January 2020, the FASB issued ASU No. 2020-01, Investments—Equity Securities (Topic 321), Investments—
Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). The amendments in this ASU
clarify the interaction between the accounting for investments in equity securities, investment in equity method and certain
derivatives instruments. The ASU is expected to reduce diversity in practice and increase comparability of the accounting
for these interactions. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years,
beginning after December 15, 2021. ASU No. 2020-01 is effective for us beginning in fiscal 2022. We will adopt ASU
2020-01 effective January 1, 2022, and we do not expect that the adoption will have a material impact on our consolidated
financial statements.
Results of Operations
Comparison of the Years Ended December 31, 2021 and 2020
Research and Development Expenses
Research and development expenses increased by $0.5 million to $4.4 million for the year ended
December 31, 2021 from $3.9 million for the year ended December 31, 2020. The increase in research and development
expenses for the year ended December 31, 2021 is primarily due to higher incentive compensation costs in 2021 of $0.3
million, an increase in scaffold manufacturing costs of $0.2 million primarily as a result of higher clinical demand, an
increase in legal costs of $0.1 million primarily due to increased fees associated with the submission of our second module
to the FDA in 2021 and an increase of $0.1 million in other net immaterial accounts. These increases were offset by a
decrease of $0.2 million in consulting costs mainly due to lower costs associated with clinical trial oversight activities.
General and Administrative Expenses
General and administrative expenses increased by $0.3 million to $5.5 million for the year ended
December 31, 2021 from $5.2 million for year ended December 31, 2020. The increase in general and administrative
expenses for the year ended December 31, 2021 is primarily due to higher compensation costs in 2021 of $0.4 million and
higher consulting costs in 2021 of $0.1 million attributable to one time business development initiatives. These increases
were offset by decreases in legal costs of $0.1 million and other net immaterial accounts of $0.1 million mainly due to cost
containment initiatives.
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Interest Income / (Expense), Net
Interest income decreased by $16 thousand to $3 thousand for the year ended December 31, 2021 from $19
thousand for the year ended December 31, 2020. The decrease in interest income was primarily due to lower yields in our
cash and cash equivalents in 2021.
Other Income
Other income for the years ended December 31, 2021 and 2020 was $2 thousand and $4 thousand, respectively.
Liquidity and Capital Resources
Liquidity is a measure of our ability to meet potential cash requirements, including planned capital expenditures.
As of December 31, 2021, the Company had approximately $16.5 million in working capital. 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. At December 31, 2021, our accumulated deficit was $238.1
million.
At December 31, 2021, we had total assets of $21.8 million, total liabilities of $3.7 million, and total stockholders’
equity of $18.1 million. We recorded a net loss of $9.9 million for the year ended December 31, 2021. 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 at December 31, 2021 will provide necessary funding to fund
operations through the second quarter of 2023. We will need additional funding after that date in order to continue our
operations. 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. 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 would impair our ability to raise needed funds. In addition, our
liquidity is impacted by the limited number of shares authorized 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, both of which may be negatively impacted by the
COVID-19 pandemic. 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.
Financing Transactions
In October 2020, we completed a registered public offering (the “October 2020 Offering”) in which we sold an
aggregate of (i) 11,785,000 shares of our common stock, (the “October 2020 Shares”) and Series A Warrants exercisable
for an aggregate of 11,785,000 shares of our common stock (the “October 2020 Series A Warrants”) at a combined public
offering price of $0.80 per share and associated warrant and (ii) pre-funded Series B warrants exercisable for an aggregate
of 6,965,000 shares of common stock (the “October 2020 Series B Pre-funded Warrants”) and Series A Warrants
exercisable for an aggregate of 6,965,000 shares of our common stock (also the “October 2020 Series A
46
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Warrants”) at a combined public offering price of $0.80 per pre-funded warrant and associated warrant. Each October 2020
Series A Warrant has an exercise price of $0.80 per share, is exercisable immediately and expires in October 2025. Each
October 2020 Series B Pre-funded Warrant has an exercise price of $0.00001 per share, is exercisable immediately, and
expires when exercised in full, subject to certain conditions. In connection with the October 2020 Offering, we issued, to
designees of H.C. Wainwright & Co., LLC (“Wainwright”), the placement agent for the October 2020 Offering, warrants
(the “October 2020 Placement Agent Warrants”) to purchase an aggregate of 1,218,750 shares of our common stock, which
represents a number of shares of common stock equal to 6.5% of the aggregate number of shares of common stock and
October 2020 Series B Pre-funded Warrants sold in the October 2020 Offering. The October 2020 Placement Agent
Warrants have an exercise price of $1.00 per share, are immediately exercisable and expire in October 2025. The net
proceeds to us, after deducting Wainwright's placement agent fees and other offering expenses payable by us, were
approximately $13.5 million. There are no outstanding October 2020 Series B Pre-funded Warrants as of December 31,
2021. During the year ended December 31, 2021, we issued an aggregate of 10,620,682 and 12,188 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 year ended December 31, 2020, we issued an aggregate of
6,965,000 shares of our common stock upon the exercise of all of the October 2020 Series B Pre-funded Warrants for an
immaterial amount, as they were substantially pre-funded. During the year ended December 31, 2020, we did not issue any
shares as a result of October 2020 Series A Warrants or October 2020 Placement Agent Warrants exercise activity.
In April 2020, we entered into a securities purchase agreement (the "April 2020 Purchase Agreement") with
certain institutional investors (the "April 2020 Purchasers"), pursuant to which we agreed to sell and issue, in a registered
direct offering, an aggregate of 1,715,240 shares of our common stock, at a purchase price per share of $1.75 (the "April
2020 Shares"). The April 2020 Shares were offered by us pursuant to a shelf registration statement on Form S-3, which was
declared effective by SEC on November 14, 2019 (File No. 333-234353) and a prospectus supplement thereunder. Pursuant
to the April 2020 Purchase Agreement, in a concurrent private placement, we also issued to the April 2020 Purchasers
warrants (the "April 2020 Series C Warrants") to purchase up to 1,715,240 shares of our common stock (the "Private
Placement" and together with the April 2020 Registered Offering, the "April 2020 Offerings"). The April 2020 Series C
Warrants are exercisable immediately at an exercise price of $1.62 per share of common stock, subject to adjustment in
certain circumstances, and expire on October 17, 2025. In connection with the April 2020 Offerings, we also issued to
Wainwright warrants to purchase an aggregate of 111,491 shares of our common stock (the “April 2020 Placement Agent
Warrants”) which represents a number of shares of common stock equal to 6.5% of the aggregate number of April 2020
Shares sold in the April 2020 Registered Offering, at an exercise price of $2.1875 per share with a term expiring on April
15, 2025. The net proceeds to us, after deducting Wainwright's placement agent fees and other offering expenses payable
by us, were approximately $2.6 million. During the year ended December 31, 2021, we did not issue any shares as a result
of April 2020 Series C Warrants exercise activity. During the year ended December 31, 2020, we issued an aggregate of
35,000 shares of our common stock upon the exercise of certain of the April 2020 Series C Warrants for aggregate
proceeds of $57 thousand.
In March 2020, we completed a registered public offering (the “March 2020 Offering”) in which we sold an
aggregate of (i) 955,613 shares of our common stock, (the “March 2020 Shares”) and Series A Warrants exercisable for an
aggregate of 955,613 shares of our common stock (the “March 2020 Series A Warrants”) at a combined public offering
price of $2.75 per share and associated warrant and (ii) pre-funded Series B warrants exercisable for an aggregate of
1,589,842 shares of our common stock (the “March 2020 Series B Warrants”) and Series A Warrants exercisable for an
aggregate of 1,589,842 shares of our common stock (also the “March 2020 Series A Warrants”) at a combined public
offering price of $2.75 per pre-funded warrant and associated warrant. Each March 2020 Series A Warrant has an exercise
price of $2.75 per share, is exercisable immediately and expires in March 2025. Each March 2020 Series B Warrant has an
exercise price of $0.00001 per share, is exercisable immediately, and expires when exercised in full, subject to certain
conditions. In connection with the March 2020 Offering, we issued, to Wainwright, the placement agent for the March
2020 Offering, warrants (the “March 2020 Placement Agent Warrants”) to purchase an aggregate of 165,455 shares of our
common stock, which represents a number of shares of common stock equal to 6.5% of the aggregate number of shares of
common stock and March 2020 Series B Warrants sold in the March 2020 Offering. The March 2020 Placement Agent
Warrants have an exercise price of $3.4375 per share, are immediately exercisable and expire in March 2025. The net
proceeds to us, after deducting Wainwright's placement agent fees and other offering expenses payable by us, were
approximately $6.0 million. During the year ended December 31, 2021, we did not issue any shares as a result of either the
March 2020 Series A Warrant, March 2020 Series B Warrants or March 2020 Placement Agent Warrants exercise activity.
During the year ended December 31, 2020,, we issued an aggregate of
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1,577,114 shares of our common stock upon the exercise of certain of the pre-funded March 2020 Series B warrants for an
immaterial amount, as they were substantially pre-funded.
Cashflows
Net cash used in operating activities for the year ended December 31, 2021, consisted of net loss of $9.9 million,
non-cash items of $0.7 million and cash provided by working capital of $0.4 million. Adjustments for non-cash items
consisted primarily of $0.3 million each in amortization of operating lease right-of-use assets and stock-based
compensation expense, respectively. The change in cash from working capital included a $0.5 million increase in accrued
expenses, and a $0.1 million increase in accounts payable. These increases were offset by a $0.3 million decrease in the
operating lease liability and a $0.1 million decrease in prepaid expenses and other assets.
Net cash used in operating activities for the year ended December 31, 2020, consisted of net loss of $9.1 million,
non-cash items of $0.5 million and cash used in working capital of $1.0 million. Adjustments for non-cash items consisted
primarily of $0.3 million in amortization of operating lease right-of-use assets and $0.2 million in stock-based
compensation expense. The change in cash from working capital included a decrease of $0.5 million in accounts payable, a
decrease of $0.3 million in accrued expenses and a decrease of $0.3 million in the operating lease liability.
Net cash used in investing activities for the years ended December 31, 2021 and 2020, was $77 thousand and $41
thousand, respectively, attributable to purchases of capital equipment.
Net cash provided by financing activities for the year ended December 31, 2021 was $8.5 million related to
proceeds from the exercise of warrants. This compares to net cash provided by financing activities of $22.5 million for the
year ended December 31, 2020 consisting of $22.1 million in proceeds from the issuance of common stock associated with
the offerings in 2020 and $0.3 million in 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 December 31, 2021, we reported current and long-term operating lease liabilities of $0.3 million and $1.0
million, respectively. These balances represent our contractual obligation to make future payments on our Cambridge
Lease, 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.
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 December 31, 2021, approximately $4.3 million remains
to be paid on these contracts. The timelines and related costs necessary to complete these trials may vary depending on a
number of factors, including the rate of patient enrollment into our INSPIRE 2.0 trial. In the event we were to close the
INSPIRE 2.0 trial, certain financial penalties would become payable to the clinical research organizations for costs to wind
down the closed trial.
See Note 12, “Commitments and Contingencies,” in the Notes to Consolidated Financial Statements in Item 8 of
this Annual Report on Form 10-K for information regarding our commitments.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide
the information under this item.
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Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
SPECIAL NOTE
Report of Independent Registered Public Accounting Firm (PCAOB ID 49)
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Changes in Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Page
50
51
52
53
54
55
49
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of InVivo Therapeutics Holdings Corp. and Subsidiary
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of InVivo Therapeutics Holdings Corp. and Subsidiary (the
Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss,
changes in stockholders’ equity and cash flows for the years then ended, and the related notes to the consolidated financial
statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its
cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of
America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the
Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control
over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of
the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated
or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the
financial statements and (2) involved our especially challenging, subjective or complex judgments. We determined that
there are no critical audit matters.
/s/ RSM US LLP
We have served as the Company's auditor since 2015.
Boston, Massachusetts
March 7, 2022
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InVivo Therapeutics Holdings Corp.
Consolidated Balance Sheets
(In thousands, except share and per-share data)
ASSETS:
Current assets:
Cash and cash equivalents
Prepaid expenses and other current assets
Total current assets
Property, equipment and leasehold improvements, net
Restricted cash - non-current
Operating lease right-of-use assets
Prepaid clinical trial expenses
Intangible assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable
Operating lease liabilities
Accrued expenses
Total current liabilities
Other liabilities
Operating lease liabilities - non-current
Total liabilities
Commitments and contingencies (Note 12)
Stockholders’ equity:
Common stock, $0.00001 par value, authorized 50,000,000 shares; 34,264,856
shares issued and outstanding, including 6,302 shares of unvested restricted stock
awards, at December 31, 2021; authorized 50,000,000 shares; 23,631,886 shares
issued and outstanding, including 6,302 shares of unvested restricted stock awards,
at December 31, 2020
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
See notes to the consolidated financial statements.
.
51
December 31,
2021
2020
$
$
$
19,031
111
19,142
127
150
1,229
1,122
—
21,770
605
361
1,646
2,612
94
949
3,655
19,493
163
19,656
85
110
928
1,122
9
21,910
481
327
1,164
1,972
59
693
2,724
3
256,241
(238,129)
18,115
21,770
3
247,417
(228,234)
19,186
21,910
$
$
$
$
$
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InVivo Therapeutics Holdings Corp.
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per-share data)
Operating expenses:
Research and development
General and administrative
Total operating expenses
Operating loss
Other income:
Interest income
Other income
Other income
Net loss
Net loss per share, basic and diluted
Weighted average number of common shares outstanding, basic and diluted
See notes to the consolidated financial statements.
Year Ended December 31,
2021
2020
$
$
$
4,381
5,519
9,900
(9,900)
3
2
5
(9,895)
(0.30)
33,078,659
$
$
$
3,939
5,158
9,097
(9,097)
19
4
23
(9,074)
(1.31)
6,902,693
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InVivo Therapeutics Holdings Corp.
Consolidated Statements of Changes in Stockholders’ Equity
(In thousands, except share and per-share data)
Balance as of December 31, 2019
Share-based compensation expense
Issuance of common stock upon vesting of restricted
stock units
Fractional shares issued due to 1 for 30 reverse stock
split
Forfeiture of restricted stock
Issuance of common stock and warrants in public
offering
Issuance of common stock upon exercise of warrants
Net loss
Balance as of December 31, 2020
Share-based compensation expense
Issuance of common stock upon vesting of restricted
stock units
Issuance of common stock upon exercise of warrants
Net loss
Balance as of December 31, 2021
Additional
Paid-in
Amount Capital
Common Stock
Shares
550,736
—
Total
Stockholders’
Equity
Accumulated
Deficit
(219,160) $
—
2
—
—
—
—
1
—
—
3
—
—
—
—
3
224,741
215
—
—
—
—
—
—
22,118
343
—
247,417
315
—
—
(9,074)
(228,234)
—
—
8,509
—
$ 256,241
—
—
(9,895)
$ (238,129) $
5,583
215
—
—
—
22,119
343
(9,074)
19,186
315
—
8,509
(9,895)
18,115
100
7,692
(584)
14,455,853
8,618,089
—
23,631,886
—
100
10,632,870
—
34,264,856
$
See notes to the consolidated financial statements.
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InVivo Therapeutics Holdings Corp.
Consolidated Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
Amortization of operating lease right-of-use assets
Share-based compensation expense
Changes in operating assets and liabilities:
Prepaid expenses and other current assets
Accounts payable
Operating lease liability
Accrued expenses and other liabilities
Net cash used in operating activities
Cash flows from investing activities:
Purchases of property and equipment
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from exercise of warrants
Proceeds from issuance of common stock and warrants, net of commissions and issuance
costs
Net cash provided by financing activities
(Decrease) Increase in cash and cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Supplemental disclosure of cash flow information and non-cash investing and financing
activities:
Fair value of warrants issued in connection with financing activities
Cash paid for taxes
Increase in operating right-of-use assets and liabilities related to lease modifications
Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance
sheets
Cash and cash equivalents
Restricted cash included in other non-current assets
Total cash, cash equivalents and restricted cash shown in the statement of cash flows
See notes to the consolidated financial statements.
Year Ended December 31,
2021
2020
$
(9,895)
$ (9,074)
44
328
315
52
124
(339)
517
(8,854)
(77)
(77)
8,509
—
8,509
(422)
19,603
19,181
46
283
215
14
(461)
(294)
(263)
(9,534)
(41)
(41)
343
22,119
22,462
12,887
6,716
$ 19,603
— $ 15,194
—
—
—
629
$
19,031
150
19,181
$ 19,493
110
$ 19,603
$
$
$
$
$
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InVivo Therapeutics Holdings Corp.
Notes to Consolidated Financial Statements
(In thousands, except share and per-share data)
1. NATURE OF OPERATIONS AND GOING CONCERN
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. At December 31, 2021, the
Company had consolidated cash and cash equivalents of $19.0 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 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. The Company may raise 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. The Company believes that it can be successful in obtaining additional capital if it is successful in
increasing its authorized shares available; 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 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 Company is aware that a significant number of its clinical sites had temporarily
suspended enrollment into the INSPIRE 2.0 Study in 2020 at their institution due to the COVID-19 pandemic, and as such,
the COVID-19 pandemic has affected and may continue to affect the potential for enrollment in the Company’s INSPIRE
2.0 Study if clinical sites suspend studies in order to manage the pandemic. As of, March 4, 2022, the Company has 16
clinical sites open for enrollment, which is the total number of sites currently activated for enrollment in the study. The full
impact of the COVID-19 pandemic continues to evolve as of the date of filing this Annual Report on Form 10-K, and we
cannot be certain what future impact the COVID-19 pandemic may have on our clinical sites and their respective abilities
to enroll patients. As the pandemic continues to evolve, there may be additional government actions or disruptions that
could cause our clinical sites to suspend or alter operations in a manner that would impact enrollment of the INSPIRE 2.0
Study. The Company is actively monitoring the impact of the global situation on its financial condition, liquidity,
operations, suppliers, industry, and workforce, although there remains significant uncertainty related to the public health
situation globally. Given the daily 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 continue to have an
adverse effect on enrollment in the Company’s INSPIRE 2.0 Study, and may also 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 continue to experience adverse impacts to its business as a result of any economic recession or depression
that has occurred or may occur in the future.
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Going Concern
The Company’s consolidated financial statements as of December 31, 2021 were prepared under the assumption
that the Company will continue as a going concern. At December 31, 2021, the Company had cash and cash equivalents of
$19.0 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’s ability to continue as a going concern depends on its ability to obtain additional equity or debt
financing, attain further operating efficiencies, manage expenditures, and, ultimately, to generate revenue. 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 audited financial statements, and it is likely that investors will lose all or part of their
investment.
Authorized Shares
In January 2020, the Company’s stockholders approved an amendment to the Company’s Articles of Incorporation
to increase the number of shares of authorized Common Stock from 25,000,000 to 500,000,000 (without giving effect to
the 2020 Reverse Stock Split). On February 11, 2020, the Company effected the 2020 Reverse Stock Split and the number
of shares of authorized Common Stock was reduced to 16,666,667.
On August 4, 2020, the Company held its 2020 Annual Meeting of Stockholders (the “Annual Meeting”). At the
Annual Meeting, the Company’s stockholders approved an amendment to the Company’s Articles of Incorporation to
increase the number of shares of authorized common stock from 16,666,667 to 50,000,000 shares.
2. SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies followed by the Company in the preparation of the financial
statements is as follows:
Use of estimates
The process of preparing financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of assets and liabilities at the date of the financial statements and the reported amounts
expensed during the reporting period. Actual results could differ from those estimates and changes in estimates may occur.
Basis of presentation and principles of consolidation
The consolidated financial statements include the accounts of InVivo Therapeutics Holdings Corp. and its wholly-
owned subsidiary, InVivo Therapeutics Corporation. All significant intercompany balances and transactions have been
eliminated in consolidation. The accompanying financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America, or U.S. GAAP.
Cash and cash equivalents
The Company considers only those investments that are highly liquid, readily convertible to cash, and that mature
within 3 months from date of purchase to be cash equivalents. As of December 31, 2021, the Company has cash balances
in a financial institution in excess of insured limits. The Company has not experienced any losses related to these balances.
Management believes it is not exposed to significant credit risk. At December 31, 2021 and 2020, cash equivalents were
comprised primarily of money market funds.
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Table of Contents
Cash and cash equivalents consist of the following:
(In thousands)
Cash
Money market funds
Total cash and cash equivalents
Restricted cash
December 31,
2021
5
19,026
19,031
2020
$
(13)
19,506
$ 19,493
$
$
Restricted cash as of December 31, 2021 and 2020 was $150 thousand and $110 thousand, respectively. Restricted
cash as of 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 12).
Restricted cash as of December 31, 2020 included a $50 thousand security deposit related to the Company’s credit
card account, and a $60 thousand standby letter of credit in favor of a landlord (see Note 12).
Fair Value of Financial instruments
The carrying amounts reported in the Company’s consolidated balance sheets for cash, cash equivalents and
accounts payable approximate fair value based on the short-term nature of these instruments.
FASB Accounting Standards Codification (ASC) 820 Fair Value Measurements and Disclosures (ASC 820)
defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in
the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on
the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant
assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s
own assumptions about market participant assumptions developed based on the best information available in the
circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest
priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to
unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
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.
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.
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information
available to management as of December 31, 2021. The respective carrying value of certain on-balance-sheet financial
instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments
include accounts payable and accrued expenses.
Property and equipment
Property and equipment of the Company is stated at cost. In accordance with ASC Topic 360 Property, Plant and
Equipment, expenditure for fixed assets that substantially increase the useful lives of existing assets are capitalized at cost
and depreciated. Routine expenditures for repairs and maintenance are expensed as incurred. Depreciation is provided
principally on the straight-line method over the estimated useful lives of the asset. A summary of the estimated useful lives
is as follows::
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Classification
Computer hardware
Software
Research and lab equipment
Leasehold improvements
Research and development expenses
Estimated Useful Life
3 - 5 years
3 years
5 years
Remaining life of lease
Costs incurred for research and development are expensed as incurred. Certain agreements require the Company
to make pre-payments for clinical research organizations (“CROs”) services. As of December 31, 2021, the Company had
$1.2 million in prepayments for CRO services of which $28 thousand is included in prepaid expense and other current
assets balance on the balance sheet and the remaining $1.1 million is included within the other long term assets section of
the balance sheet. As of December 31, 2020, the Company had $1.2 million in prepayments for CRO services of which
$110 thousand is included in prepaid expense and other current assets balance on the balance sheet and the remaining $1.1
million is included within the other long term assets balance on the balance sheet.
Concentrations of credit risk
Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of
cash and cash equivalents. The Company maintains cash in commercial banks, which may at times exceed Federally
Insured limits. The Company has not experienced any loss in such accounts. The Company believes it is not exposed to any
significant credit risk on cash and cash equivalents.
Segment information
Operating segments are identified as components of an enterprise about which separate discrete financial
information is available for evaluation by the chief operating decision maker, or decision making group, in making
decisions regarding resource allocation and assessing performance. To date, the Company has viewed its operations and
manages its business as principally one operating segment, which is developing and commercializing biopolymer
scaffolding devices for the treatment of spinal cord injuries. As of December 31, 2021 and 2020, all of the Company’s
assets were located in one location in the United States.
Income taxes
For federal and state income taxes, deferred tax assets and liabilities are recognized based upon temporary
differences between the financial statement and the tax basis of assets and liabilities. Deferred income taxes are based upon
prescribed rates and enacted laws applicable to periods in which differences are expected to reverse. A valuation allowance
is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Accordingly, the Company provides a valuation allowance, if necessary, to reduce deferred tax assets to amounts that are
realizable. Tax positions taken or expected to be taken in the course of preparing the Company’s tax returns are required to
be evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax
authority.
Tax positions not deemed to meet a more-likely-than-not threshold would be recorded as a tax expense in 2021.
There were no material uncertain tax positions that required accrual or disclosure to the financial statements as of
December 31, 2021 or 2020. Tax years subsequent to 2018 remain open to examination by U.S. federal and state tax
authorities.
Impairment of long-lived assets
The Company continually monitors events and changes in circumstances that could indicate that carrying amounts
of long-lived assets may not be recoverable. An impairment loss is recognized when expected cash flows are less than an
asset’s carrying value. Accordingly, when indicators of impairment are present, the Company evaluates the carrying value
of such assets in relation to the operating performance and future undiscounted cash flows of the underlying assets. The
Company’s policy is to record an impairment loss when it is determined that the carrying value of the asset may not be
recoverable.
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Share-based payments
The Company accounts for all stock-based payment awards granted to employees and nonemployees using the fair
value method. The Company’s stock-based payments include stock options and grants of common stock, including
common stock subject to vesting. The measurement date for both employee and nonemployee awards is the date of grant,
and stock-based compensation costs are recognized as expense over the employees’ requisite service period, which is the
vesting period, on a straight-line basis. Stock-based compensation costs for nonemployees are recognized as expense over
the vesting period on a straight-line basis. Stock-based compensation is classified in the accompanying consolidated
statements of operations and comprehensive loss based on the department to which the related services are provided.
Derivative instruments
The Company generally does not use derivative instruments to hedge exposures to cash-flow or market risks. In
the past certain of the Company’s issued and outstanding warrants to purchase common stock previously contained anti-
dilution provisions. These warrants did not meet the requirements for classification as equity and were thus recorded as
derivative warrant liabilities. In such instances, net-cash settlement is assumed for financial reporting purposes, even when
the terms of the underlying contracts do not provide for a net-cash settlement. Such financial instruments are initially
recorded at fair value, with subsequent changes in fair value recorded to operations in each reporting period. If these
instruments subsequently meet the requirements for classification as equity, the Company reclassifies the fair value to
equity.
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 as follows:
Numerator:
Net Loss (in thousands)
Denominator:
Weighted average shares used in calculating net
loss per share — basic and diluted
Net loss per share — basic and diluted
Year Ended December 31,
2021
2020
$
$
(9,895)
33,078,659
(0.30)
$
$
(9,074)
6,902,693
(1.31)
In a net loss period, options, warrants, unvested restricted stock units and convertible securities are anti-dilutive
and therefore excluded from diluted loss per share calculations.
For the year ended December 31, 2021 and 2020, the following potentially dilutive securities were not included in
the computation of net loss per share because the effect would be anti-dilutive:
Warrants
Stock options
Unvested RSUs
Unvested RSAs
Total potentially dilutive securities
New Accounting Pronouncements
December 31,
2021
14,078,338
364,005
—
6,302
14,448,645
2020
24,714,084
4,169
100
6,302
24,724,655
In May 2021 Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.
2021-04, “Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-
Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40):
Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, a
consensus of the Emerging Issues Task Force”. This ASU amends the FASB Accounting
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Standards Codification (“ASC”) to provide explicit guidance, and, thus, reduce diversity in practice, on accounting by
issuers for modifications or exchanges of freestanding equity-classified written call options that remain equity classified
after the modification or exchange. This amendment provides that for an entity that presents earnings per share (EPS) in
accordance with Topic 260, the effects of a modification or an exchange of a freestanding equity-classified written call
option that is recognized as a dividend should be an adjustment to net income (or net loss) in the basic EPS calculation.
The amended guidance becomes mandatorily effective for all entities for fiscal years beginning after December 15, 2021,
including interim periods within those fiscal years, and should be applied prospectively to modifications or exchanges
occurring on or after the effective date. ASU No. 2021- 04 is effective for the Company beginning in fiscal 2022. The
Company will adopt ASU 2021-04 effective January 1, 2022, and it is expected that the adoption will not have a material
impact to the Company's consolidated financial statements.
In January 2020, the FASB issued ASU No. 2020-01 “Investments—Equity Securities (Topic 321), Investments—
Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) —clarifying the interactions
between Topic 321, Topic 323 and Topic 815 (a consensus of the emerging issues task force)”. The amendments in this
ASU clarify the interaction between the accounting for investments in equity securities, investment in equity method and
certain derivatives instruments. The ASU is expected to reduce diversity in practice and increase comparability of the
accounting for these interactions. The pronouncement is effective for fiscal years, and for interim periods within those
fiscal years, beginning after December 15, 2021. ASU No. 2020- 01 is effective for the Company beginning in fiscal 2022.
The Company will adopt ASU 2021-01 effective January 1, 2022, and it is expected that the adoption will not have a
material impact to the Company's consolidated financial statements.
No other accounting standards known by the Company to be applicable to it that have been issued by the 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.
3. PROPERTY AND EQUIPMENT
Property and equipment, net consisted of the following:
(In thousands)
Computer hardware
Computer Software
Research and lab equipment
Leasehold improvements
Property and equipment
Less accumulated depreciation
Property and equipment, net
December 31, December 31,
2021
2020
$
$
52
5
580
66
703
(576)
127
$
$
35
5
520
66
626
(541)
85
Depreciation expense for the years ended December 31, 2021 and 2020, was $35 thousand, and $29 thousand,
respectively. Maintenance and repairs are charged to expense as incurred and any additions or improvements are
capitalized.
The Company did not write off any assets during the year ended December 31, 2021. During the year ended
December 31, 2020, the Company wrote off $132 thousand of fully depreciated computer software and hardware assets
that were no longer in use.
4. INTANGIBLE ASSETS
Intangible assets consisted of patent licensing fees paid to license intellectual property. In July 2007, the Company
entered into a worldwide exclusive license (the “BCH License”) for patents co-owned by BCH and MIT initially covering
the use of biopolymers to treat spinal cord injuries, and to promote the survival and proliferation of human stem cells in the
spinal cord. During 2011, the BCH License was amended, and the Company obtained additional rights for use in the field
of peripheral nerve injuries. The BCH License, as amended, has a 15 year term, or as long as the life of the last expiring
patent right thereunder, whichever is longer, unless terminated earlier by the licensor, under certain conditions as defined in
the related license agreement. The last expiring patent under the BCH License currently expires in 2027. In connection
with the BCH License, the Company paid an initial $75 thousand licensing fee and is
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required to pay certain annual maintenance fees, milestone payments and royalties. License fees are capitalized and the
gross total at December 31, 2021 and 2020 was $200 thousand. The Company accounts for milestone payments,
maintenance fees and royalties when they become due and payable. The Company paid $10 thousand in maintenance fees
during each of the years ended December 31, 2021 and 2020. The Company is amortizing the license fee as a research and
development expense over the 15– year term of the license.
(In thousands)
Patent licensing fee
Accumulated amortization
Intangible assets
December 31, December 31,
2021
2020
$
$
$
200
(200)
— $
200
(191)
9
For the years ended December 31, 2021 and 2020, amortization expense was $9 thousand and $13 thousand
respectively. As of December 31, 2021 the license fee had been fully amortized.
5. ACCRUED EXPENSES
Accrued expenses consisted of the following:
(In thousands)
Compensation
Clinical
Other accrued expenses
Total accrued expenses
December 31,
2021
2020
1,287
218
141
1,646
$
$
996
5
163
1,164
$
$
6. FAIR VALUES OF ASSETS AND LIABILITIES
The Company groups its assets and liabilities generally measured at fair value in 3 levels, based on the markets in
which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. Refer to Note
2, "Significant Accounting Policies," for additional information on the accounting policies related to fair value.
Assets and liabilities measured at fair value on a recurring basis are summarized below:
(In thousands)
Cash equivalents
(In thousands)
Cash equivalents
As of December 31, 2021
Level 1 Level 2 Level 3 Fair Value
$ — $ — $ 19,026
$ 19,026
As of December 31, 2020
Level 1 Level 2 Level 3 Fair Value
$ — $ — $ 19,506
$ 19,506
During the years ended December 31, 2021 and 2020, 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.
7. INCOME TAXES
No provision or benefit for federal or state income taxes has been recorded as the Company has incurred a net loss
for all of the periods presented and the Company has provided a full valuation allowance against its deferred tax assets.
At December 31, 2021, the Company had U.S. federal and Massachusetts net operating loss carryforwards of
$158.5 million and $140.8 million, respectively, of which $117.3 million of federal carryforwards will expire in varying
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amounts beginning in 2026 and $41.3 million carry forward indefinitely. State net operating losses begin to expire in 2029.
Utilization of net operating losses and tax credit carryforwards may be subject to substantial annual limitations due to the
“change in ownership” provisions of the Internal Revenue Code, and similar state provisions. The annual limitations may
result in the expiration of net operating losses before utilization. The Company has completed several financings since its
inception, which may have resulted in a change in ownership, or could result in a change in ownership in the future but has
not yet completed a Section 382 analysis of whether an ownership change limitation exists. The Company will complete an
appropriate analysis before its tax attributes are utilized. The Company also had federal and state research and development
tax credits of $1.5 million and $0.2 million respectively, at December 31, 2021, which will begin to expire in 2026 and
2030, respectively, unless previously utilized.
Significant components of the Company’s net deferred tax assets are as follows:
December 31,
(In thousands)
Net operating loss carryforward
Research and development credit carryforward
Stock-based compensation
Depreciation and amortization
Accrued expenses
Lease liability
Right of use asset
Subtotal
Valuation allowance
Net deferred taxes
2021
$ 42,696
1,663
431
17
—
344
(323)
44,828
(44,828)
$
2020
$ 40,175
1,608
421
16
7
279
(253)
42,253
(42,253)
—
— $
The Company has maintained a full valuation allowance against its deferred tax assets in all periods presented. A
valuation allowance is required to be recorded when it is more likely than not that some portion or all of the net deferred
tax assets will not be realized. Since the Company cannot be assured of generating taxable income and thereby realizing the
net deferred tax assets, a full valuation allowance has been provided. In the years ended December 31, 2021 and 2020, the
valuation allowance increased by $2.6 million and $0.6 million, respectively.
The Company has no uncertain tax positions at December 31, 2021 and 2020 that would affect its effective tax
rate. The Company does not anticipate a significant change in the amount of uncertain tax positions over the next
12 months. Since the Company is in a loss carryforward position, the Company is generally subject to U.S. federal and
state income tax examinations by tax authorities for all years for which a loss carryforward is available.
Income tax benefits computed using the federal statutory income tax rate differ from the same benefits computed
using the Company’s effective tax rate primarily due to the following:
Statutory rate
State taxes, net of benefit
Permanent differences
Research and development tax credit
Stock-based compensation
Increase in valuation reserve
Effective tax rate
December 31,
2021
2020
(21.0)% (21.0)%
(5.8)%
(4.7)%
0.4 %
0.3 %
(0.9)%
(1.1)%
0.2 % 21.2 %
6.4 %
26.0 %
0.0 %
0.0 %
The Company is subject to U.S. Federal and Massachusetts state income taxes. The statute of limitations for
assessment by the Internal Revenue Service or state tax authority is generally open for the tax years ending December 31,
2018 through December 31, 2021, however federal and state tax attributes that were generated prior to the tax year ending
December 31, 2017 may still be adjusted upon examination by the Internal Revenue Service or stat tax authority if the
attributes either have been, or will be, used in a future period.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law
making several changes to the Internal Revenue Code. The changes include, but are not limited to: increasing the
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limitation on the amount of deductible interest expense, allowing companies to carryback certain net operating losses, and
increasing the amount of net operating loss carryforwards that corporations can use to offset taxable income. The tax law
changes in the Act did not have a material impact on the Company’s income tax provision.
8. COMMON STOCK
On January 21, 2020, the Company held its 2019 Annual Meeting of Stockholders (the “2019 Annual Meeting”).
At the 2019 Annual Meeting, the Company’s stockholders approved an amendment to the Company’s Articles of
Incorporation to increase the number of shares of authorized common stock from 25,000,000 to 500,000,000 (without
giving effect to the 2020 Reverse Stock Split). On February 11, 2020, the Company effected the 2020 Reverse Stock Split
and the number of shares of authorized common stock was reduced to 16,666,667. On August 4, 2020, the Company held
its 2020 Annual Meeting of Stockholders (the “2020 Annual Meeting”). At the 2020 Annual Meeting, the Company’s
stockholders approved an amendment to the Company’s Articles of Incorporation to increase the number of shares of
authorized common stock from 16,666,667 to 50,000,000 shares. As of December 31, 2021 and 2020, 34,264,856 and
23,631,886 shares were issued and outstanding respectively.
In October 2020, the Company completed a registered public offering (the “October 2020 Offering”) in which it
sold an aggregate of (i) 11,785,000 shares of common stock, (the “October 2020 Shares”) and Series A Warrants
exercisable for an aggregate of 11,785,000 shares of the Company’s common stock (the “October 2020 Series A
Warrants”) at a combined public offering price of $0.80 per share and associated warrant and (ii) pre-funded Series B
warrants exercisable for an aggregate of 6,965,000 shares of common stock (the “October 2020 Series B Pre-funded
Warrants”) and Series A Warrants exercisable for an aggregate of 6,965,000 shares of the Company’s common stock (also
the “October 2020 Series A Warrants”) at a combined public offering price of $0.80 per pre-funded warrant and associated
warrant. Each October 2020 Series A Warrant has an exercise price of $0.80 per share, is exercisable immediately and
expires in October 2025. Each October 2020 Series B Pre-funded Warrant has an exercise price of $0.00001 per share, is
exercisable immediately, and expires when exercised in full, subject to certain conditions. In connection with the October
2020 Offering, the Company issued, to designees of H.C. Wainwright & Co., LLC (“Wainwright”) the placement agent for
the October 2020 Offering, warrants (the “October 2020 Placement Agent Warrants”) to purchase an aggregate of
1,218,750 shares of the Company’s common stock, which represents a number of shares of common stock equal to 6.5% of
the aggregate number of shares of common stock and October 2020 Series B Pre-funded Warrants sold in the October 2020
Offering. The October 2020 Placement Agent Warrants have an exercise price of $1.00 per share, are immediately
exercisable and expire in October 2025. The net proceeds to the Company, after deducting Wainwright's placement agent
fees and other offering expenses payable by the Company, were approximately $13.5 million. The Company assessed
whether the October 2020 Series A Warrants, October 2020 Series B Pre-funded Warrants and the October 2020 Placement
Agent Warrants required accounting as derivatives and determined that they were (1) indexed to the Company’s own stock
and (2) classified in stockholders’ equity in accordance with ASC Topic 815, Derivatives and Hedging. As such, the
Company concluded that the October 2020 Series A Warrants, October 2020 Series B Pre-funded Warrants and the October
2020 Placement Agent Warrants meet the scope exception for determining whether the instruments require accounting as
derivatives and accordingly are classified in stockholders’ equity. The fair value of the October 2020 Series A Warrants and
October 2020 Placement Agent Warrants was estimated at $8.7 million and $551.3 thousand, respectively, using a Black-
Scholes model with the following assumptions: expected volatility of 119.13%, risk free interest rate of 0.35%, expected
life of five years and no dividends. The October 2020 Series B Pre-funded Warrants had an intrinsic value of
approximately $5.6 million. There are no outstanding October 2020 Series B Pre-funded Warrants as of December 31,
2021. During the year ended December 31, 2021, the Company issued an aggregate of 10,620,682 and 12,188 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 year ended December 31, 2020, the Company
issued an aggregate of 6,965,000 shares of common stock upon the exercise of all of the October 2020 Series B Pre-funded
Warrants for an immaterial amount, as they were substantially pre-funded. The Company did not issue any shares as a
result of October 2020 Series A Warrants or October 2020 Placement Agent Warrants exercise activity during the year
ended December 31, 2020.
In April 2020, the Company entered into a securities purchase agreement (the "April 2020 Purchase Agreement")
with certain institutional investors (the "April 2020 Purchasers"), pursuant to which the Company agreed to sell and issue,
in a registered direct offering, an aggregate of 1,715,240 of common stock, at a purchase price per share of $1.75 (the
"April 2020 Shares"; the offering, the “April 2020 Registered Offering”). The April 2020 Shares were offered by the
Company pursuant to a shelf registration statement on Form S-3, which was declared effective by the SEC
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on November 14, 2019 (File No. 333-234353) and a prospectus supplement thereunder. Pursuant to the April 2020
Purchase Agreement, in a concurrent private placement, the Company also issued to the April 2020 Purchasers warrants
(the "April 2020 Series C Warrants") to purchase up to 1,715,240 shares of common stock (the "Private Placement" and
together with the April 2020 Registered Offering, the "April 2020 Offerings"). The April 2020 Series C Warrants are
exercisable immediately at an exercise price of $1.62 per share of common stock, subject to adjustment in certain
circumstances, and expire on October 17, 2025. In connection with the April 2020 Offerings, the Company also issued to
Wainwright warrants to purchase an aggregate of 111,491 shares of the Company’s common stock (“April 2020 Placement
Agent Warrants”) which represents a number of shares of common stock equal to 6.5% of the aggregate number of April
2020 Shares sold in the April 2020 Registered Offering, at an exercise price of $2.1875 per share with a term expiring on
April 15, 2025. The net proceeds to the Company, after deducting Wainwright's placement agent fees and other offering
expenses payable by the Company, were approximately $2.6 million. The Company assessed whether the April 2020 Series
C Warrants, and the April 2020 Placement Agent Warrants required accounting as derivatives and determined that they
were (1) indexed to the Company’s own stock and (2) classified in stockholders’ equity in accordance with ASC Topic 815,
Derivatives and Hedging. As such, the Company concluded that the April 2020 Series C Warrants and the April 2020
Placement Agent Warrants meet the scope exception for determining whether the instruments require accounting as
derivatives and accordingly are classified in stockholders’ equity. The fair value of the April 2020 Series C Warrants was
estimated at $2.1 million, using a Black-Scholes model with the following assumptions: expected volatility of 115.84%,
risk free interest rate of 0.40%, expected life of five and a half years and no dividends. The fair value of the April 2020
Placement Agent Warrants was estimated at $128 thousand, using a Black-Scholes model with the following assumptions:
expected volatility of 116.14%, risk free interest rate of 0.36%, expected life of five years and no dividends. The Company
did not issue any shares as a result of either the April 2020 Series C Warrants or April 2020 Placement Agent Warrants
exercise activity during the year ended December 31, 2021. During the year ended December 31, 2020, the Company
issued an aggregate of 35,000 shares of common stock upon the exercise of certain of the April 2020 Series C warrants for
aggregate proceeds of $57 thousand. During the year ended December 31, 2020, the Company did not issue any shares as a
result of April 2020 Placement Agent Warrants exercise activity.
In March 2020, the Company completed a registered public offering (the “March 2020 Offering”) in which it sold
an aggregate of (i) 955,613 shares of common stock (the “March 2020 Shares”) and Series A Warrants exercisable for an
aggregate of 955,613 shares of the Company’s common stock (the “March 2020 Series A Warrants”) at a combined public
offering price of $2.75 per share and associated warrant and (ii) pre-funded Series B warrants exercisable for an aggregate
of 1,589,842 shares of common stock (the “March 2020 Series B Warrants”) and Series A Warrants exercisable for an
aggregate of 1,589,842 shares of the Company’s common stock (also the “March 2020 Series A Warrants”) at a combined
public offering price of $2.75 per pre-funded warrant and associated warrant. Each March 2020 Series A Warrant has an
exercise price of $2.75 per share, is exercisable immediately and expires in March 2025. Each March 2020 Series B
Warrant has an exercise price of $0.00001 per share, is exercisable immediately, and expires when exercised in full, subject
to certain conditions. In connection with the March 2020 Offering, the Company issued, to Wainwright the placement agent
for the March 2020 Offering, warrants to purchase an aggregate of 165,455 shares of the Company’s common stock (the
“March 2020 Placement Agent Warrants”), which represents a number of shares of common stock equal to 6.5% of the
aggregate number of shares of common stock and March 2020 Series B Warrants sold in the March 2020 Offering. The
March 2020 Placement Agent Warrants have an exercise price of $3.4375 per share, are immediately exercisable and
expire in March 2025. The net proceeds to the Company, after deducting Wainwright's placement agent fees and other
offering expenses payable by the Company, were approximately $6.0 million. The Company assessed whether the March
2020 Series A Warrants, March 2020 Series B Warrants and the March 2020 Placement Agent Warrants required
accounting as derivatives and determined that they were (1) indexed to the Company’s own stock and (2) classified in
stockholders’ equity in accordance with ASC Topic 815, Derivatives and Hedging. As such, the Company concluded that
the March 2020 Series A Warrants, March 2020 Series B Warrants and the March 2020 Placement Agent Warrants meet
the scope exception for determining whether the instruments require accounting as derivatives and accordingly are
classified in stockholders’ equity. The fair value of the March 2020 Series A warrants and March 2020 Placement Agent
Warrants was estimated at $3.5 million and $218 thousand, respectively, using a Black-Scholes model with the following
assumptions: expected volatility of 115.22%, risk free interest rate of 0.63%, expected life of five years and no dividends.
The March 2020 Series B Warrants had an intrinsic value of approximately $4.4 million. The Company did not issue any
shares as a result of either the March 2020 Series A Warrant, March 2020 Series B Warrants or March 2020 Placement
Agent Warrants exercise activity during the year ended December 31, 2021. During the year ended December 31, 2020, the
Company issued an aggregate of 1,577,114 shares of common stock upon the exercise of certain of the pre-funded March
2020 Series B Warrants for an immaterial
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amount, as they were substantially pre-funded. During the year ended December 31, 2020, the Company did not issue any
shares as a result of the March 2020 Placement Agent Warrants or March 2020 Series A Warrants exercise activity.
During the year ended December 31, 2021, there was no exercise activity related to any of the warrants that were
issued in 2018 and 2019. During the year ended December 31, 2020, the Company issued an aggregate of 40,975 shares of
common stock upon the exercise of certain warrants issued in 2018 for aggregate proceeds of $286 thousand.
During each of the years ended December 31, 2021 and 2020, the Company issued an aggregate of 100 shares of
common stock upon vesting of restricted stock units.
During the year ended December 31, 2019, the Company issued an aggregate 6,886 restricted stock awards
(“RSAs”) to its employees under the 2015 Equity Incentive Plan. These awards are considered issued and outstanding
based on the dividend payment rights and the conveyance of voting rights that was granted to the grant holders. During
year ended December 31, 2020, 584 restricted stock awards that were considered issued and outstanding as of December
31, 2019 were forfeited.
During the year ended December 31, 2020, as part of the adjustment to reflect the 2020 Reverse Stock Split, the
Company issued an aggregate of 7,692 shares of common stock to account for the fractional roundup of shareholders.
Common Stock Reserves
As of December 31, 2021, the Company had the following reserves established for the future issuance of common
stock as follows:
Reserves for the exercise of warrants
Reserves for the exercise of stock options
Total Reserves
As of December 31, 2021
14,078,338
364,005
14,442,343
9. SHARE-BASED COMPENSATION, STOCK OPTIONS, AND RESTRICTED SECURITIES
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’ 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, restricted common stock, restricted stock units and stock appreciation rights to
employees, consultants, and directors of the Company.
As of December 31, 2021, the total number of shares available to be issued under the 2015 Plan was 2,767,436
shares, consisting of, (i) 5,333 shares initially authorized under the 2015 Plan shares plus (ii) the shares that remained
available for grant under the 2010 Plan at the time of its termination adjusted for cumulative cancellations, forfeitures and
issuances from the 2010 Plan and 2015 Plan, (iii) the 26,667 shares approved for increase during the January 2020
shareholders meeting (iv) the 400,000 shares approved for increase during the August 2020 shareholders meeting and, the
2,700,000 shares approved for increase during the Company’s 2021 Annual Meeting of Stockholders. While 2,767,436
shares are available to be issued under the 2015 Plan as of December 31, 2021, only 1,292,801 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.
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Share-based compensation
For the years ended December 31, 2021 and 2020, Stock-based compensation recognized was classified in the
consolidated statements of operations as follows:
(In thousands)
Research and development
General and administrative
Total
Year Ended December 31,
2021
2020
$
$
22
293
315
$
$
40
175
215
The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing
model, which uses the assumptions noted in the following table. 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 security with a term consistent with the
option. The impact of forfeitures on compensation expense is recorded as they occur.
The Company did not grant any awards during year ended December 31, 2020. The assumptions used principally
in determining the fair value of options granted during the year ended December 31, 2021, were as follows:
Risk-free interest rate
Expected dividend yield
Expected term (employee grants)
Expected volatility
December 31,
2021
1.03%
0%
5.70
117.34%
The Company grants restricted stock units, or RSUs, and 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.
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Stock Options
A summary of option activity as of December 31, 2021 and changes for the year then ended are presented below:
Options
Outstanding as of
December 31, 2020
Granted
Cancelled/Forfeited
Expired
Outstanding as of December 31,
2021
Vested and Exercisable as of
December 31, 2021
Vested and expected to vest as of
December 31, 2021
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term in Years
Aggregate
Intrinsic
Value
Shares
4,169
360,000
$
$
(147) $
(17) $
1,054.01
1.10
6,324.03
5,940.00
364,005
3,005
364,005
$
$
$
10.33
1,104.04
10.33
7.18
$
—
9.18
6.17
9.18
$
$
$
—
—
—
The Company did not grant any awards during the year ended December 31, 2020. The Company granted 360,000
stock options during the year ended December 31, 2021. The weighted average grant-date fair value of options granted
during the year ended December 31, 2021 was $0.93 per share. The total fair value of options that vested in years ended
December 31, 2021 and 2020, was $67 thousand and $117 thousand, respectively. For the years ended December 31, 2021
and 2020, the Company recorded stock-based compensation expense of $219 thousand and $117 thousand, respectively,
related to stock options. As of December 31, 2021, there was $176 thousand of total unrecognized compensation expense
related to non-vested share-based option compensation arrangements. The unrecognized compensation expense is
estimated to be recognized over a remaining weighted-average period of 1.12 years at December 31, 2021.
Restricted Securities
A summary of restricted securities activity as of December 31, 2021 and changes for the year then ended are
presented below:
Restricted Securities
Unvested balance as of December 31, 2020
Vested
Unvested balance as of December 31, 2021
Number of Grants
6,402
(100)
6,302
Weighted-Average
Grant Date Fair Value
25.67
660.00
15.60
$
$
$
For years ended December 31, 2021 and 2020, the Company recorded stock-based compensation expense of $96
thousand and $98 thousand respectively, related to the time-based restricted securities. As of December 31, 2021, total
unrecognized compensation expense related to non-vested restricted securities amounted to $24 thousand which the
Company expects to recognize over a remaining weighted-average period of 0.73 years. All the restricted securities that
remain unvested and outstanding at December 31, 2021 are subject to time-based vesting.
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10. WARRANTS
The following table presents information about warrants to purchase common stock issued and outstanding at
December 31, 2021:
Year Issued
2018
2019
2020
2020
2020
2020
2020
2020
Defined Name
2018 Series A Warrants
2019 Placement Agent
Warrants
March 2020 Series A
Warrants
March 2020 Placement
Agent Warrants
March 2020 Series B
Warrants
April 2020 Series C
Warrants
April 2020 Placement
Agent Warrants
October 2020 Placement
Agent Warrants
October 2020 Series A
Warrants
2020
Total
Weighted average exercise price
Weighted average life in years
Classification
Equity
Number of
Warrants
211,921
Equity
15,168
Equity
2,545,455
Equity
Equity
165,455
12,728
Equity
1,680,240
Equity
111,491
Equity
1,206,562
Equity
8,129,318
14,078,338
$
$
$
$
$
$
$
$
$
$
Exercise Price as of
September 30, 2021
6.98
4.50
2.75
Date of Expiration
6/25/2023
11/21/2024
3/10/2025
3.4375
3/5/2025
0.00001
Until Fully Exercised
1.62
10/17/2025
2.1875
4/15/2025
1.00
0.80
1.41
10/22/2025
10/27/2025
3.66
11. EMPLOYEE BENEFIT PLAN
In November 2006, the Company adopted a 401(k) plan (the “Plan”) covering all employees. Employees must be
21 years of age in order to participate in the Plan. Under the Plan, the Company has the option to make matching
contributions. During the years ended December 31, 2021 and 2020, the Company contributed $69 thousand and $60
thousand, respectively, in cash matching contributions to employee 401(k) accounts.
12. 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 Lease”). The Cambridge Lease 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 originally scheduled to expire
on December 31, 2023. The Cambridge Lease contained 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
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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.
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:
Lease cost (In thousands)
Operating lease cost
Short-term lease cost
Variable lease cost
Total lease cost
Other information (In thousands)
Increase in operating right-of-use assets and liabilities related to lease
modifications
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from short term leases
Operating cash flows from operating leases
Total cash paid for leases
Weighted-average remaining lease term - operating leases
Weighted-average discount rate - operating leases
$
$
$
$
$
Year Ended December 31,
2021
2020
$
$
$
$
$
392
3
95
490
629
3
403
406
3
6.0%
364
21
139
524
—
21
375
396
2.83 Years
7.0%
Maturities of lease liabilities due under the Company’s Cambridge Lease as of December 31, 2021 is as follows:
Leases (In thousands)
2022
2023
2024
Total lease payments
Less: imputed interest
Present value of lease liabilities
As of December 31, 2021
427
440
568
1,435
(125)
1,310
$
$
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Leases (In thousands)
Assets
Lease asset, net
Total lease assets
Liabilities
Current
Non-current
Total lease liabilities
Clinical Trial Commitments
Classification December 31, 2021 December 31, 2020
Operating
Operating
Operating
$
$
$
$
1,229 $
1,229 $
361 $
949
1,310 $
928
928
327
693
1,020
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 December 31, 2021, approximately $4.3
million remains to be paid on these contracts. The timelines and related costs necessary to complete these trials may vary
depending on a number of factors including the rate of patient enrollment into our INSPIRE 2.0 trial. In the event the
Company were to close the INSPIRE 2.0 trial, certain financial penalties would become payable to the CROs for costs to
wind down the closed trial.
13. RELATED PARTY TRANSACTIONS
In our October 2020 Offering, the Company sold shares of our common stock and warrants to three investors that,
based on Schedule 13-G filings with the SEC, owned more than 5% of our outstanding shares at the time of our October
2020 Offering: Sabby Volatility Warrant Master Fund, Ltd., which acquired 535,000 shares of the Company’s common
stock and warrants to purchase 3,215,000 shares of the Company’s common stock; Intracoastal Capital, LLC, which
acquired 500,000 shares of the Company’s common stock and warrants to purchase 2,000,000 shares of the Company’s
common stock; and CVI Investments, Inc., which acquired 500,000 shares of the Company’s common stock and warrants
to purchase 500,000 shares of the Company’s common stock.
In addition, in the March 2020 Offering, Dr. Toselli, Mr. Christopher, and Ms. Merrifield participated as
purchasers of the Company’s common stock and warrants to purchase the Company’s common stock. Each of Dr. Toselli,
Mr. Christopher and Ms. Merrifield acquired 3,636 shares of the Company’s common stock and warrants to purchase 3,636
shares of the Company’s common stock.
During the year ended December 31, 2021, the Company did not identify any related party transactions requiring
disclosure.
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Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of our disclosure controls and procedures as of December 31, 2021. 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 SEC. 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 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 our disclosure controls and procedures as of December 31, 2021, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at a reasonable
assurance level as of the end of the period covered by this report.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting
(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) for the Company. Our internal control over financial
reporting is designed to provide reasonable assurances regarding the reliability of financial reporting and the preparation of
our consolidated financial statements in accordance with U.S. generally accepted accounting principles, or GAAP, and
includes those policies and procedures that:
● Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and
dispositions of the assets of the Company;
● Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of management and directors of the Company;
and
● Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may
deteriorate.
Our management, with the participation of its Chief Executive Officer and Chief Financial Officer, assessed our
internal control over financial reporting as of December 31, 2021, the end of our fiscal year. Management based its
assessment on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission and concluded that our internal control over financial reporting
was effective as of December 31, 2021.
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Attestation Report of Registered Public Accounting Firm
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, and therefore are not required
to provide an attestation report of our registered public accounting firm with respect to our internal control over financial
reporting.
Changes in Internal Control Over Financial Reporting
There were no changes in our system of internal control over financial reporting (as defined in Exchange Act Rule
13a-15(f)) during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
Item 9B. OTHER INFORMATION
None.
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not applicable.
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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information about our Executive Officers and Directors
PART III
The following table sets forth the name, age, and position of each of our executive officers and directors as of
February 12, 2022.
NAME
Executive Officers
Richard Toselli, M.D.
Richard Christopher
Non-Employee Directors
C. Ann Merrifield (2) (3)
Daniel R. Marshak, Ph.D. (1) (3)
Christina Morrison (1) (2)
Richard J. Roberts, Ph.D. (2) (3)
Robert J. Rosenthal, Ph.D. (1) (3)
AGE
CURRENT POSITION
64 President, Chief Executive Officer, and Director
52
Chief Financial Officer
70
64
55
78
65
Director, Chair of the Board
Director
Director
Director
Director
(1) Member of audit committee
(2) Member of compensation committee
(3) Member of nominating and corporate governance committee
Biographical and certain other information concerning our executive officers and directors is set forth below.
Executive Officers
Richard Toselli, M.D. 64, has served as our President and Chief Executive Officer and a director since
February 2018. Prior to being appointed President and Chief Executive Officer and a director, Dr. Toselli served as our
Acting Chief Executive Officer from December 2017 to February 2018. Since July 2017, Dr. Toselli has also served as our
Chief Medical Officer. Before joining the company, Dr. Toselli served as the Chief Medical Officer for Cochlear Limited, a
medical device company, from June 2016 until March 2017. Prior to that, Dr. Toselli served at Sanofi, a pharmaceutical
company, from July 2012 to June 2016 in various levels of increasing responsibility, including Vice President of Global
Medical Affairs — Immunology and Inflammation, Biologics Division; Vice President of Global Medical Affairs and Head
of the Biosurgery Discovery Performance Unit; and Vice President of Global Medical Affairs, Biosurgery. Before his time
at Sanofi, he served as Chief Medical/Technology Officer for Covidien Public Limited Company (now Medtronic Public
Limited Company), a medical device company, and earlier held the position of Vice President of Evidence-Based Medicine
for the device sector at Johnson & Johnson, a medical device, pharmaceutical and consumer packaged goods
manufacturing company. Prior to that, Dr. Toselli held various roles at DePuy Synthes Spine, Inc., a medical device
company, including Director of Medical Affairs, Worldwide Vice President of Research and Development, and Worldwide
Vice President of Clinical Evidence and External Relations. Dr. Toselli holds a Bachelor of Arts from Providence College,
his medical degree from Brown University, and a Master of Business Administration from the UNC’s Kenan-Flagler
Business School. Dr. Toselli is a board-certified neurological surgeon.
Richard Christopher, 52, was appointed as our Chief Financial Officer in January 2019. Previously,
Mr. Christopher was the Chief Financial Officer of iCAD, Inc. from December 2016 through January 2019. iCAD, Inc. is
a Nasdaq-listed company with a focus on therapies and solutions for the early identification and treatment of cancer. Prior
to iCAD, Inc., Mr. Christopher was Chief Financial Officer from March 2014 through December 2016 and Chief Operating
Officer from October 2015 through December 2016 of Caliber Imaging & Diagnostics, Inc., a medical technology
company focused on cancer detection imaging solutions, with primary applications in dermatology. Prior to Caliber and
starting in 2000, Mr. Christopher held various positions of increasing responsibility at DUSA Pharmaceuticals, Inc., a
Nasdaq-listed dermatology company focused on the treatment of precancerous skin lesions, where he ultimately served as
Chief Financial Officer from January 2005 through its acquisition and integration into Sun
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Pharmaceuticals Industries Ltd in April 2013. Mr. Christopher holds a Master of Science in Accounting from Suffolk
University and a Bachelor of Science in Finance from Bentley University.
Non-Employee Directors
C. Ann Merrifield, 70, has been a director of our company since November 2014. She currently serves as a board
director for a number of public and private companies which include Lyra Therapeutics, a public biotechnology company;
and MassMutual Premier, Select, MML and MMLII Funds, a portfolio of mutual funds. Ms. Merrifield also serves as
trustee and director on several other boards including Partners Continuing Care, the post-acute care services division of
Partners HealthCare; Huntington Theatre Company, a non-profit organization; and the YMCA of Greater Boston. She also
served on the Board of Directors of Flexion Therapeutics, a public biotechnology company, from 2014 through 2021 when
it was acquired by Pacira Biosciences; and the Board of Directors of Juniper Pharmaceuticals, a specialty pharmaceuticals
company, from 2015 to 2018 when it was acquired by Catalent, and Ms. Merrifield served on the Board of Veritas
Genetics, a private genomics company, from 2015 through 2018. Previously, Ms. Merrifield served as President, Chief
Executive Officer and a director of PathoGenetix, a genomics company focused on developing an automated system for
rapid bacterial identification from 2012 until July 2014 when the company filed for Chapter 7 bankruptcy. Prior to then,
she spent 18 years at Genzyme Corporation, serving in a number of leadership roles including President of Genzyme
Biosurgery, President of Genzyme Genetics and Senior Vice President Business Excellence. She holds a B.A. in zoology
and a Master of Education from the University of Maine and an M.B.A. from the Tuck School of Business at Dartmouth
College. Ms. Merrifield brings to our Board an invaluable amount of experience and expertise over her long career in the
life sciences industry.
Daniel R. Marshak, Ph.D., 64, has been a director of our company since September 2014. He has served as part-
time Chief Technology Officer to Phase Scientific International Ltd., a medical device and clinical diagnostics company,
since 2017, and an Advisory Board member of Catalent Pharma Solutions Inc., a biologics manufacturer, since 2015. He
most recently served in a full-time role as Senior Vice President and Chief Scientific Officer for PerkinElmer, Inc., a
human and environmental health company, until September 2014. Prior to joining PerkinElmer in 2006, Dr. Marshak was
Vice President and Chief Technology Officer, Biotechnology, for Cambrex Corporation (NYSE:CBM) and earlier, Chief
Scientific Officer at Osiris Therapeutics Inc. Dr. Marshak has received numerous awards for scientific and academic
achievements and is named as inventor on six issued U.S. patents. Dr. Marshak has served on the Board of Directors of
Tecan Group (Swiss:TECN), a leading global provider of laboratory instruments and solutions in biopharmaceuticals,
forensics and clinical diagnostics, since 2018. He also serves on the Board of Directors LifeVault Bio in Massachusetts,
USA, OTORO Energy Inc., a private renewable energy company located in Boulder, CO, a private, early-stage company,
as well as Elevian, Inc., a private biotechnology company located in Massachusetts, USA, and RareCyte, Inc., a private
biotechnology company located in Washington, USA. Dr. Marshak is the author of more than 100 scientific publications,
including one textbook, and has been the editor of five monographs. He held an appointment as Adjunct Associate
Professor at the Johns Hopkins University School of Medicine, served as Senior Staff Investigator at Cold Spring Harbor
Laboratory, and previously taught graduate biochemistry as an Assistant Professor at the State University of New York,
now Stony Brook University. Dr. Marshak received his B.A. degree in biochemistry and molecular biology from Harvard
University, and he holds a Ph.D. in biochemistry and cell biology from The Rockefeller University. Dr. Marshak brings to
our Board extensive industry experience and a deep understanding of the science and technology behind our business.
Christina Morrison, 55, has served as a director of our company since June 2016. Ms. Morrison has served as
Chief Financial Officer of Physicians Endoscopy, an ambulatory surgical center management company, since April 2018.
Prior to that Ms. Morrison served as the Senior Vice President of Finance of Aramark, a publicly traded foodservice,
facilities and uniform services provider, from June 2013 until July 2016. Prior to joining Aramark, Ms. Morrison was
Senior Vice President of Business and Financial Planning at Merck & Co., Inc., a publicly traded pharmaceutical company,
from November 2009 to June 2013. Before that, Ms. Morrison spent five years at Wyeth Pharmaceuticals, a publicly traded
pharmaceutical company, serving in a number of leadership roles including Senior Vice President and Chief Financial
Officer of the pharmaceutical division. Ms. Morrison holds an M.B.A. from the Tuck School of Business at Dartmouth
College and a B.S. in Economics from the Wharton School at the University of Pennsylvania. Ms. Morrison brings to our
Board significant financial experience and a decade of experience in the pharmaceutical industry.
Richard J. Roberts, Ph.D., 78, has been a director of our company since October 2010 and a director of InVivo
Therapeutics Corporation, our wholly-owned subsidiary, since November 2008. Dr. Roberts initially joined
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InVivo Therapeutics Corporation’s Scientific Advisory Board in June 2007 and continued as a member of our Scientific
Advisory Board. He has served as Chief Scientific Officer at New England Biolabs, a life sciences company, since
February 2007. Dr. Roberts was awarded the 1993 Nobel Prize in Physiology of Medicine along with Phillip Allen Sharp
for the discovery of introns in eukaryotic DNA and the mechanism of gene-splicing. He holds a B.Sc. in Chemistry and a
Ph.D. in Organic Chemistry from the University of Sheffield, U.K. Dr. Roberts brings the Board his significant experience
and understanding of the science and technology involved in our business.
Robert J. Rosenthal, Ph.D., 65, has been a director of our company since November 2019. Dr. Rosenthal
currently serves as Chairman of the Board of Directors of Taconic Biosciences, Inc., a privately-held provider of research
models for the pharmaceutical and biotech industry, where from 2014 to 2019 he also served as Chief Executive Officer.
Dr. Rosenthal also currently serves as a director of the Bruker Corporation, a publicly traded manufacturer of analytic
instruments, since 2015. Dr. Rosenthal has served since 2007 as a director of Safeguard Scientifics, Inc., a publicly-traded
provider of capital for early- and growth-stage companies, and as Chairman of its Board of Directors since May 2016.
Since 2013, he has also served as a director of Galvanic Applied Sciences, Inc., a privately-held Canadian company. Since
1995, Dr. Rosenthal previously served in a variety of senior management positions with companies involved in the
development of diagnostics, therapeutics, medical devices, and life sciences tools, most recently including from 2010
through 2012 as President and Chief Executive Officer of IMI Intelligent Medical Implants, AG, a medical technology
company, and from 2005 through 2009 as President and Chief Executive Officer of Magellan Biosciences, Inc., a provider
of clinical diagnostics and life sciences research tools. Earlier in his career, Dr. Rosenthal served in senior management
positions at Perkin Elmer Inc. and Thermo Fisher Scientific, Inc. Dr. Rosenthal holds a Ph.D. from Emory University and a
Master of Science degree from the State University of New York. Dr. Rosenthal brings to our Board an extensive
understanding of and experience in strategic planning and positioning; corporate, business and product development;
operations management; capital markets transactions; debt and equity financings; fund-raising; merger and acquisition
transactions; corporate finance; and corporate governance.
Family Relationships
There are no family relationships among any of our directors or executive officers.
Delinquent Section 16 Reports
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers
and persons who own more than 10% of a registered class of our equity securities to file reports of beneficial ownership
and changes in beneficial ownership with the Securities and Exchange Commission.
To our knowledge, based solely on a review of copies of such reports furnished to us by our officers and directors,
we believe that, during the fiscal year ended December 31, 2021, no person required to file reports under Section 16(a) of
the Exchange Act failed to file such reports on a timely basis.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics, as amended, that applies to all employees, officers, and
directors of our company, including our principal executive officer, principal financial officer and principal accounting
officer or controller, or persons performing similar functions. Our Code of Business Conduct and Ethics is available on the
“Corporate Governance” page of the “Investor Relations” section of our website at www.invivotherapeutics.com. A copy
of our Code of Business Conduct and Ethics can also be obtained free of charge by contacting our Secretary, c/o InVivo
Therapeutics Holdings Corp., One Kendall Square, Suite B14402, Cambridge, MA 02139. We intend to satisfy the
disclosure requirement under Item 5.05 of Form 8‑K regarding any amendment to, or waiver from, a provision of our Code
of Business Conduct and Ethics by posting such information on our website.
Process for Stockholder Nominations
There have been no material changes to the procedures by which security holders may recommend nominees to
our Board since we last provided disclosure of such procedures.
Audit Committee
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The Board has designated our Audit Committee as a principal standing committee. The members of our Audit
Committee are Ms. Morrison, Dr. Marshak and Dr. Rosenthal. Dr. Rosenthal is the chair of our Audit Committee. Our
Board has determined that each of Ms. Morrison, Dr. Marshak and Dr Rosenthal is independent as defined under
Rule 5605(a)(2) of the Nasdaq Listing Rules. The Board has determined that Dr. Rosenthal is an “audit committee financial
expert,” as defined in Item 407(d)(5) of Regulation S-K. See “Non-Employee Directors – Robert Rosenthal” above for a
description of Dr. Rosenthal’s relevant experience.
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
Set forth below is information regarding the compensation of (i) our Chief Executive Officer and (ii) our Chief
Financial Officer. Such officers are collectively referred to as our “named executive officers.”
2021 Summary Compensation Table
The following table sets forth information regarding the compensation awarded to, earned by, or paid to our
named executive officers.
Name and Principal
Position
Richard Toselli
President and Chief Executive Officer
Year Salary ($)
2021
2020
516,672
499,200
Bonus
($)(1)
409,032
316,160
Stock
Option
Awards Awards
($)(2)
($)(2)
— 139,266 (3)
—
—
Richard Christopher
Chief Financial Officer
2021
2020
355,212
343,200
254,569
196,768
— 69,633 (6)
—
—
Non-Equity
Incentive Plan
Compensation Compensation
All Other
($)
—
—
—
—
($)
Total ($)
14,566 (4) 1,079,536
832,487
17,127 (5)
18,422 (7)
18,375 (8)
697,836
558,343
1. See below, “Narrative to Summary Compensation Table – Bonuses” for a description of the bonuses paid to Dr.
Toselli and Mr. Christopher in 2021.
2. The amounts shown in this column represent the aggregate grant date fair value of the option awards computed in
accordance with ASC 718, not the actual amounts paid to or realized by the individual. The assumptions used in
determining grant date fair value of these awards are set forth in Note 9 to our Consolidated Financial Statements
appearing in this Annual Report on Form 10-K.
3. Dr. Toselli received options to purchase an aggregate of 150,000 shares with an exercise price of $1.10 per share.
The amounts shown in this column represent the aggregate grant date fair value of the option awards computed in
accordance with ASC 718, not the actual amounts paid to or realized by the individual. The assumptions used in
determining grant date fair value of these awards are set forth in Note 9 to the Consolidated Financial Statements
appearing elsewhere in this Annual Report.
4. Represents (i) $66 in vested restricted stock and (ii) $14,500 in 401(k) cash matching contributions under our
401(k) profit sharing plan.
5. Represents (i) $114 in vested restricted stock, (ii) $14,250 in 401(k) cash matching contributions under our 401(k)
profit sharing plan, (iii) $2,313 in accommodation expenses and (iv) $450 in commuting expenses
6. Mr. Christopher received options to purchase an aggregate of 75,000 shares with an exercise price of $1.10 per
share. The amounts shown in this column represent the aggregate grant date fair value of the option awards
computed in accordance with ASC 718, not the actual amounts paid to or realized by the individual. The
assumptions used in determining grant date fair value of these awards are set forth in Note 9 to the Consolidated
Financial Statements appearing elsewhere in this Annual Report.
7. Represents (i) $14,500 in 401(k) cash matching contributions under our 401(k) profit sharing plan and (ii) $3,922
in commuting expenses.
8. Represents (i) $14,250 in 401(k) cash matching contributions under our 401(k) profit sharing plan and (ii) $4,125
in commuting expenses.
Narrative to Summary Compensation Table
Base Salary. We paid Dr. Toselli an annualized base salary of $516,672 and $499,200 in 2021 and 2020,
respectively. We paid Mr. Christopher an annualized base salary of $355,212 and $343,200 in 2021 and 2020,
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respectively. We use base salaries to recognize the experience, skills, knowledge, and responsibilities required of all our
employees, including our named executive officers. Dr. Toselli’s employment agreement provides that his salary will be
reviewed by the Board and adjusted upward no less frequently than annually. Mr. Christopher is not party to an
employment agreement or other arrangement that provides for automatic or scheduled increases in base salary.
Bonuses. Our Board may, in its discretion, award bonuses to our named executive officers from time to time. We
typically establish annual bonus targets based around a set of specified corporate goals for our named executive officers
and conduct an annual performance review to determine the attainment of such goals. Our management may propose bonus
awards to our Board primarily based on such review process. Our Board makes the final determination of the eligibility
requirements for and the amount of such bonus awards. Under the terms of their respective employment agreements, each
of our named executive officers is eligible to receive an annual performance-based bonus, as determined by our Board in
its sole discretion, with a target of a specified percentage of such officer’s annual base salary earned in such particular
calendar year, which percentage shall be subject to adjustment from time to time by our Board in its sole discretion. Our
Board determines the amount of the bonus, if any, based on its assessment of the named executive officer’s performance
and that of the company against appropriate goals established annually by our Board. The current target annual bonus
percentage for each of our named executive officers is 50% and 40% for Dr. Toselli and Mr. Christopher, respectively.
With respect to 2021, we awarded Dr. Toselli a performance bonus of $193,752 based on our achievement of
certain company goals. In 2021, we also awarded Dr. Toselli a special bonus of $215,280, which was contingent upon his
continued service as an active employee of the Company through December 31, 2021. In 2021, we awarded Mr.
Christopher a performance bonus of $106,564 based on our achievement of certain company goals. In 2021, we also
awarded Mr. Christopher a special bonus of $148,005, which was contingent upon his continued service as an active
employee of the Company through December 31, 2021.
With respect to 2020, we awarded Dr. Toselli a performance bonus of $149,760 based on our achievement of
certain company goals. In 2020, we also awarded an additional bonus of $166,400, which was conditioned upon his
continued service as an active employee of the Company through December 31, 2021. In 2020, we awarded Mr.
Christopher a performance bonus of $82,368 based on our achievement of certain company goals. In 2020, we also
awarded Mr. Christopher a special bonus of $114,400, which was conditioned upon his continued service as an active
employee of the Company through December 31, 2020.
On August 11, 2021, our Board adopted a Transaction Incentive Plan (the “Transaction Incentive Plan”) under
which certain employees, including each of Dr. Toselli and Mr. Christopher, is eligible to receive a predefined percentage
of the transaction consideration (as defined in the Transaction Incentive Plan) paid in connection with a company
acquisition (as defined in the Transaction Incentive Plan), minus the value of vested equity held by such participant.
Payments under the Transaction Incentive Plan are payable each participant on the date that is six months following the
closing of the applicable company acquisition (the “Payment Date”), subject to the participant’s continued employment
with the Company, a related entity or the acquiring entity on such date; provided that, in the event that the participant’s
employment with the Company, a related entity or the acquiring entity is terminated without cause or by the participant for
good reason, in either case following the company acquisition but prior to the Payment Date, then the amount payable shall
be paid to the participant within ten days following the participant’s termination of employment. The Transaction Incentive
Plan automatically terminates twelve months from effectiveness, or on August 11, 2022, subject to the right of the
Company’s Board of Directors to extend the effectiveness of the Transaction Incentive Plan at its sole discretion.
Equity Incentives. Although we do not have a formal policy with respect to the grant of equity incentive awards to
our executive officers, or any formal equity ownership guidelines applicable to them, we believe that equity grants provide
our executives with a strong link to our long term performance, create an ownership culture and help to align the interests
of our executives and our stockholders. In addition, we believe that equity grants with a time based vesting feature promote
executive retention because this feature incentivizes our executive officers to remain in our employment during the vesting
period. Accordingly, our Board periodically reviews the equity incentive compensation of our named executive officers and
from time to time may grant equity incentive awards to them in the form of stock options or restricted stock units.
In 2021, we granted options to purchase an aggregate of 150,000 shares and 75,000 shares of Common Stock to
Dr. Toselli and Mr. Christopher, respectively.
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We award our stock options on the date our Board approves the grant. We set the option exercise price equal to the
fair market value of shares of our Common Stock on the date of grant, which is determined by reference to the closing
market price of our Common Stock on the date of grant. For grants in connection with initial employment, vesting typically
begins on the initial date of employment. Time vested equity grants to our executives and other employees typically vest
either (i) 25% on the first anniversary of grant or, if earlier, the initial employment date and in equal monthly installments
thereafter, through the fourth anniversary of the vesting commencement date or (ii) 33.33% on the first anniversary of the
grant date, 33.33% on the second anniversary of the grant date and the remaining 33.33% on the third anniversary of the
grant date, and have a term of ten years from the grant date.
Outstanding Equity Awards at Fiscal Year End
The following table summarizes the option and stock awards made to our named executive officers that were
outstanding on December 31, 2021.
Option Awards
Stock Awards
No. of
Securities
Underlying
Unexercised
Options (#)
No. of
Securities
Underlying
Unexercised
Options (#)
Number of
Shares or
Units of
Option
Stock That
Exercise Expiration Award Grant Have Not
Option
Award
Market
Value of
Shares or
Units of
Stock That
Have Not
Grant Date Exercisable Unexercisable Price ($) Date
Date
Vested (#) Vested ($)(1)
7/5/2017
3/18/2021
434
—
—
150,000 (2)
1,912.50
1.10
7/5/2027
3/17/2031
Name
Richard
Toselli
Richard
Christopher
1/14/2019
3/18/2021
2,000
—
1,000 (4)
75,000 (2)
45.90
1.10
1/14/2029
3/17/2031
9/25/2019
2,300 (3)
1,049
9/25/2019
1,584 (5)
722
(1) The value of the award is based on a price per restricted stock unit award of $0.46, the closing sale price of
our common stock on December 31, 2021.
(2) 50% of the shares underlying the option vest on the first anniversary of the grant date, and the remaining
shares vest on the second anniversary of the grant date, subject to continued service.
(3) Represents2,300 shares of restricted stock, which vest 100% on September 25, 2022, subject to continued
service.
(4) One third (1/3) of the shares underlying the stock option vested on the first anniversary of the grant date, one
third (1/3) of the shares underlying the stock option vested on the second anniversary of the grant date and
the remaining one third (1/3) of the shares underlying the stock option is scheduled to vest on January 14,
2022, subject to continued service.
(5) Represents 1,584 shares of restricted stock, which vest 100% on September 25, 2022, subject to continued
service.
Pension Benefits
We do not offer to our executive officers or employees any pension plan or similar plan that provides for payments
or other benefits at, following or in connection with retirement.
Non-Qualified Deferred Compensation
We do not offer to our executive officers or employees any defined contribution or similar plan that provides for
the deferral of compensation on a basis that is not tax-qualified. We offer a 401(k) profit sharing plan to all of our
employees eligible to participate. We make matching contributions on behalf of participating employees, in the form of
cash-based matching, up to a maximum of 5% of the employee’s annual compensation. Our matching contributions
become 50% vested after the employee has been employed by us for one year, and 100% vested after the employee has
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been employed by us for two years. Any company matching contributions made to our named executive officers are
reflected in the “All Other Compensation” column of the Summary Compensation Table above.
Agreements with our Executive Officers
Richard Toselli, M.D., President and Chief Executive Officer. In connection with his appointment as acting Chief
Executive Officer in December 2017, we entered into an employment agreement with Dr. Toselli. Under the employment
agreement, Dr. Toselli receives an annual base salary, subject to adjustment from time to time, and is eligible to receive an
annual cash bonus equal to 50% of his annual salary, subject to his performance of specified objectives to be established by
the Board (or a designated Board committee) each year. Dr. Toselli is eligible to receive all medical, dental and other
benefits to the same extent as provided to our other senior management employees. Dr. Toselli’s annual bonus target is 50%
of his base salary. In connection with becoming the company’s Chief Executive Officer rather than Acting Chief Executive
Officer, Dr. Toselli became eligible for certain severance benefits under his employment agreement.
Under our employment agreement with Dr. Toselli, if his employment is terminated by us without cause, or by Dr.
Toselli for “good reason,” in the absence of a “change in control” (as defined in our 2015 Equity Incentive Plan) then (i) we
are obligated to pay severance (consisting of base salary in effect at the time of termination) to Dr. Toselli for a period of
18 months, plus continued health insurance benefits for a period of 18 months and (ii) the unvested portion of any stock
options held by him will vest as with respect to an additional 12 months. If Dr. Toselli’ s employment is terminated by us
without cause, or by Dr. Toselli for “good reason” within 12 months following of a “change in control,” then (a) we are
obligated to pay severance (consisting of two times base salary in effect at the time of termination and 100% of his target
annual bonus) to Dr. Toselli, plus continued health insurance benefits for a period of 18 months, (b) pay a pro rata portion
of the annual bonus for the year in which the termination occurs based on a good faith determination of the attainment of
the applicable goals and (c) the unvested portion of any stock options held by him will vest fully. The severance payments
and the accelerated vesting of options are contingent on execution of a general release of claims against our company and
are in addition to any accrued obligations to Dr. Toselli unpaid by us prior to the time of termination.
The employment agreement also contains various restrictive covenants, including covenants relating to non-
solicitation, confidentiality and assignment of inventions.
Richard Christopher, Chief Financial Officer. In connection with his employment with the Company and
pursuant to the terms of an employment agreement dated December 24, 2018, Mr. Christopher receives an annual base
salary as set by the board of directors. Mr. Christopher is also eligible for an annual bonus that targets forty percent (40%)
of his annualized base salary based upon achievement of certain performance goals.
Mr. Christopher is also entitled to severance payments under his employment agreement. If we terminate Mr.
Christopher’s employment without Cause or if he terminates his employment for Good Reason, in each case prior to, or
more than 12 months following, a change in control, then he is entitled (A) to continue to be paid his base salary as in
effect on the termination date for a period of 12 months and (B) to continue to receive his benefits under the company’s
employee group health insurance plan until the earlier of (i) six months following the termination date or (ii) the date he
becomes eligible for coverage under a new employer’s group health plan.
If we terminate Mr. Christopher’s employment without Cause or he terminates his employment for Good Reason,
in each case within 12 months following a Change in Control (as defined in the employment agreement), then he is entitled
(A) to an amount equal to 1.5 times his base salary as in effect on the termination date, plus 100% of his target annual
bonus, in each case at the salary and target annual bonus level in effect on the termination date or, if higher, at any time
within the six month period preceding the Change in Control, (B) to acceleration in full of the vesting on all outstanding,
unvested equity awards held by him and (C) to continue to receive his benefits under the company’s employee group health
insurance plan until the earlier of (i) 12 months following the termination date or (ii) the date he becomes eligible for
coverage under a new employer’s group health plan. The severance payments are contingent upon Mr. Christopher
executing a general release of claims.
The employment agreement also contains various restrictive covenants, including covenants relating to non-
solicitation, confidentiality and assignment of inventions. In addition, under the terms of the employment agreement, Mr.
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Christopher will also be eligible for medical, dental and other fringe benefits available to our other senior management
members or any benefit plans established or adopted by us.
Potential Payments Upon Termination or Change in Control
Certain of our named executive officers are entitled to payments upon a termination of employment or a change in
control.
Richard Toselli, M.D., President, Chief Executive Officer, and Director. Under our employment agreement with
Dr. Toselli, if his employment is terminated by us without cause, or by Dr. Toselli for “good reason,” in the absence of a
“change in control” (as defined in the 2015 Plan) then (i) we are obligated to pay severance (consisting of base salary in
effect at the time of termination) to Dr. Toselli for a period of 18 months, plus continued health insurance benefits for a
period of 18 months and (ii) the unvested portion of any stock options held by him will vest as with respect to an additional
12 months. If Dr. Toselli’s employment is terminated by us without cause, or by Dr. Toselli for “good reason” within 12
months following of a “change in control,” then (a) we are obligated to pay severance (consisting of two times base salary
in effect at the time of termination and 100% of his target annual bonus) to Dr. Toselli, plus continued health insurance
benefits for a period of 18 months, (b) pay a pro rata portion of the annual bonus for the year in which the termination
occurs based on a good faith determination of the attainment of the applicable goals and (c) the unvested portion of any
stock options held by him will vest fully. The severance payments and the accelerated vesting of options are contingent on
execution of a general release of claims against our company and are in addition to any accrued obligations to Dr. Toselli
unpaid by us prior to the time of termination. Had his employment been terminated on December 31, 2017, Dr. Toselli
would not have been entitled to any payment.
Richard Christopher, Chief Financial Officer. Under our employment agreement with Mr. Christopher, if we
terminate Mr. Christopher’s employment without Cause or if he terminates his employment for Good Reason, in each case
prior to, or more than 12 months following, a change in control, then he is entitled (A) to continue to be paid his base
salary as in effect on the termination date for a period of 12 months and (B) to continue to receive his benefits under the
company’s employee group health insurance plan until the earlier of (i) six months following the termination date or (ii) the
date he becomes eligible for coverage under a new employer’s group health plan. If we terminate Mr. Christopher’s
employment without Cause or he terminates his employment for Good Reason, in each case within 12 months following a
Change in Control (as defined in the employment agreement), then he is entitled (A) to an amount equal to 1.5 times his
base salary as in effect on the termination date, plus 100% of his target annual bonus, in each case at the salary and target
annual bonus level in effect on the termination date or, if higher, at any time within the six month period preceding the
Change in Control, (B) to acceleration in full of the vesting on all outstanding, unvested equity awards held by him and (C)
to continue to receive his benefits under the company’s employee group health insurance plan until the earlier of (i) 12
months following the termination date or (ii) the date he becomes eligible for coverage under a new employer’s group
health plan. The severance payments are contingent upon Mr. Christopher executing a general release of claims.
On August 11, 2021, our Board adopted a Transaction Incentive Plan (the “Transaction Incentive Transaction
Incentive Plan”) under which certain employees, including each of Dr. Toselli and Mr. Christopher, is eligible. Under the
Transaction Incentive Plan, eligible participants are entitled to receive a predefined percentage of the transaction
consideration (as defined in the Transaction Incentive Plan) paid in connection with a company acquisition (as defined in
the Transaction Incentive Plan), minus the value of vested equity held by such participant. Payments under the Transaction
Incentive Plan are payable each participant on the date that is six months following the closing of the applicable company
acquisition (the “Payment Date”), subject to the participant’s continued employment with the Company, a related entity or
the acquiring entity on such date; provided that, in the event that the participant’s employment with the Company, a related
entity or the acquiring entity is terminated without cause or by the participant for good reason, in either case following the
company acquisition but prior to the Payment Date, then the amount payable shall be paid to the participant within ten days
following the participant’s termination of employment. The Transaction Incentive Plan automatically terminates twelve
months from effectiveness, or on August 11, 2022, subject to the right of the Company’s Board of Directors to extend the
effectiveness of the Transaction Incentive Plan at its sole discretion.
2021 Director Compensation
The following table sets forth the compensation of our non-employee directors for 2021. For information on the
compensation of Dr. Toselli, our current President and Chief Executive Officer, see “Executive Compensation” above.
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Name
Daniel R. Marshak, Ph.D.
C. Ann Merrifield
Richard J. Roberts, Ph.D.
Christina Morrison
Robert J. Rosenthal, Ph.D.
Fees Earned or
Paid in Cash
($)
53,431
77,500
48,750
55,756
58,750
Non-Equity Nonqualified
Deferred
Deferred
Option Compensation Compensation All Other
Stock Awards Awards
($)(2)
($)(1)
— 13,857
— 13,857
— 13,857
— 13,857
— 13,857
Earnings
($)
—
—
—
—
—
Earnings Compensation
($)
—
—
—
—
—
($)
—
—
—
—
—
Total
($)
67,288
91,357
62,607
69,613
72,607
(1) None of the Company’s directors received stock awards during 2021.
(2) As of December 31, 2021, the aggregate number of options to purchase shares of our common stock outstanding
for each director listed above, including both vested and unvested shares, was as follows: Dr. Marshak, 15,085
shares; Ms. Merrifield, 15,085 shares; Dr. Roberts, 15,119 shares; Ms. Morrison, 15,068 shares; and Dr.
Rosenthal, 15,000 shares.
Our director compensation policy provides for the following compensation to our non-employee directors:
● an annual retainer of $40,000 per year, paid quarterly, to each non-employee director;
● an annual retainer of $15,000, paid quarterly, to the Audit Committee chairperson, and an annual retainer of
$7,500, paid quarterly, to each member of the Audit Committee of the Board;
● an annual retainer of $10,000, paid quarterly, to the Compensation Committee chairperson, and an annual
retainer of $5,000, paid quarterly, to each member of the Compensation Committee of the Board;
● an annual retainer of $7,500, paid quarterly, to the Nominating and Corporate Governance Committee
chairperson, and an annual retainer of $3,750, paid quarterly, to each member of the Nominating and
Corporate Governance Committee of the Board;
● an annual retainer of $25,000, paid quarterly, to the Chair of the Board; and
● when applicable, an annual retainer of $15,000, paid quarterly, to any Lead Director of the Board.
Non-employee directors are reimbursed for reasonable travel expenses in connection with attendance at meetings
of the Board or any of its committees that are conducted in person and other activities directly related to the service to the
company.
At the Board’s discretion, each non-employee director may also receive an annual grant of a stock option to
purchase shares of our common stock at an exercise price equal to the closing price of our common stock on the date of
grant. Any such options vest in 12 equal installments on each monthly anniversary of the date of grant until fully vested on
the first anniversary of the date of grant, provided that such director remains a director of our company on each such
vesting date. Alternatively, the Board may elect to grant restricted stock units or restricted stock awards. In 2021the
Company granted options to purchase an aggregate of 15,000 shares of Common Stock shares at an exercise price of $1.10
per share to each of the non-employee directors. These options shall vest in full on the first anniversary of the date of grant,
subject to continued service.
Pay Ratio
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide
the information under this item.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth certain information as of February 12, 2022 with respect to the beneficial ownership
of our common stock by:
● each of our directors
● each of our named executive officers; and
● all of our current executive officers and directors as a group
Unless otherwise indicated in the footnotes to the following table, each person named in the table has sole voting
and investment power, and his or her address is c/o InVivo Therapeutics Holdings Corp., One Kendall Square, Suite
B14402, Cambridge, MA 02139. Shares of our common stock subject to options or warrants currently exercisable or
exercisable within 60 days of February 12, 2022 are deemed outstanding for computing the share ownership and
percentage of the person holding such options and warrants, but are not deemed outstanding for computing the percentage
of any other person. The percentage ownership of our common stock of each person or entity named in the following table
is based on 34,264,856 shares of our common stock outstanding as of February 12, 2022.
Name of Beneficial Owner
Directors and Named Executive Officers
Richard Toselli, M.D. (1)
Richard Christopher (2)
Daniel R. Marshak, Ph.D. (3)
C. Ann Merrifield (4)
Richard J. Roberts, Ph.D. (5)
Christina Morrison (6)
Robert J. Rosenthal, Ph.D. (7)
All current directors and executive officers as a
group (7 persons) (8)
Percentage of
Number of Shares Common Stock
of Common Stock
Beneficially
Beneficially Owned
Owned
85,271
49,356
15,085
22,360
15,409
15,068
15,000
217,549
* %
*
*
*
*
*
*
* %
*Percentage of shares beneficially owned does not exceed one percent.
(1) Consists of (a) 3,901 shares of common stock owned by Dr. Toselli, (b) 75,434 shares of common stock
underlying options held by Dr. Toselli that are exercisable as of February 12, 2022 or will become
exercisable within 60 days after such date, (c) 3,636 shares of common stock underlying warrants held
by Dr. Toselli that are exercisable as of February 12, 2022 and (d) 2,300 shares of restricted Common
Stock granted to Dr. Toselli.
(2) Consists of (a) 3,636 shares of common stock owned by Mr. Christopher (b) 40,500 shares of common
stock underlying options held by Mr. Christopher that are exercisable as of February 12, 2022 or will
become exercisable within 60 days after such date, (c) 3,636 shares of common stock underlying
warrants held by Mr. Christopher that are exercisable as of February 12, 2022 and (d) 1,584 shares of
restricted Common Stock granted to Mr. Christopher.
(3) Consists solely of shares of common stock underlying options held by Dr. Marshak that are exercisable
as of February 12, 2022 or will become exercisable within 60 days after such date.
(4) Consists of (a) 3,639 shares of common stock owned by Ms. Merrifield, (b) 3,636 shares of common
stock underlying warrants held by Ms. Merrifield that are exercisable as of February 12, 2022 and (c)
15,085 shares of common stock underlying options held by Ms. Merrifield that are exercisable as of
February 12, 2022 or will become exercisable within 60 days after such date.
(5) Consists of (a) 290 shares of common stock owned by Dr. Roberts and (b) 15,119 shares of common
stock underlying options held by Dr. Roberts that are exercisable as of February 12, 2022 or will become
exercisable within 60 days after such date.
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(6) Consists solely of shares of common stock underlying options held by Ms. Morrison that are exercisable
as of February 12, 2022 or will become exercisable within 60 days after such date.
(7) Consists solely of shares of common stock underlying options held by Mr. Rosenthal that are exercisable
as of February 12, 2022 or will become exercisable within 60 days after such date .
(8) Consists of (a) 11,466 shares of common stock owned by all current executive officers and directors as a
group (b) 191,291 shares of common stock underlying options that are exercisable as of February 12,
2022 or will become exercisable within 60 days after such date, (c) 10,908 shares of common stock
underlying warrants that are exercisable as of February 12, 2022 and (c) 3,884 shares of restricted
Common stock.
Stockholders Known by Us to Own 5% or More of Our Common Stock
Name of Beneficial Owner
Lind Global Macro Fund, LP (1)
Percentage of
Number of Shares Common Stock
of Common Stock
Beneficially
Beneficially Owned
Owned
3,138,000
9.2 %
(1) The information regarding Lind Global Macro Fund, LP. is based solely on its Schedule 13G/A filed
with the SEC on February 9, 2022, wherein Lind Global Macro Fund, LP declared beneficial ownership
consisting of 3,138,000 common shares underlying warrants that are exercisable within 60 days of
February 12, 2022 (the “Warrants”). Lind Global Partners LLC, the general partner of Lind Global
Macro Fund, LP, may be deemed to have sole voting and dispositive power with respect to the shares
held by Lind Global Macro Fund, LP. Jeff Easton, the managing member of Lind Global Partners LLC,
may be deemed to have sole voting and dispositive power with respect to the shares held by Lind Global
Macro Fund, LP. The principal business address for Lind Global Macro Fund, LP is 444 Madison Ave,
Floor 41, New York, NY 10022.
Securities Authorized for Issuance under Equity Compensation Plans
The following table provides certain information about shares of our common stock that may be issued under our
existing equity compensation plan as of December 31, 2021, which consists of our 2007 Equity Incentive Plan, 2010
Equity Incentive Plan, and 2015 Equity Incentive Plan or other equity compensation plans not approved by security
holders.
Equity Compensation Plan Information
(a)
Number of
securities
(b)
to be issued upon Weighted-average
the exercise of
outstanding
options,
warrants and
rights
exercise price
of outstanding
options,
warrants
and rights
(c)
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column
(a))
367,307
$
9.86
2,767,436
3,000
370,307
$
45.90
10.15
—
2,767,436
Plan Category
Equity compensation plans approved by
security holders
Equity compensation plans not approved
by security holders (1)
Total
(1) Consists of a stock option award approved by our Board as an inducement material to our Chief
Financial Officer’s acceptance of employment with us in accordance with Nasdaq Listing Rule 5635(c)
(4). The inducement award has an exercise price per share equal to $45.90, the closing price of a share of
our common stock on the grant date, and vested as to one-third (1/3) of the shares of the underlying
stock option on January 14, 2020, and will vest as to one third (1/3) of the shares of the underlying stock
option on January 14, 2021 and the remaining one third (1/3) of the shares of the
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underlying stock option on January 14, 2022, provided that if within one year following a change in
control our Chief Financial Officer’s employment is terminated by him for good reason or by us or our
successor without cause, the inducement award will be immediately exercisable in full.
While 2,767,436 shares are available to be issued under the 2015 Plan as of December 31, 2021, only 1,292,801
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.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
Transactions with Related Persons
Indemnification Agreements
Our articles of incorporation require that we indemnify our officers, directors, employees, and agents to the full
extent permitted by the laws of the State of Nevada. Our bylaws include an indemnification provision under which we have
the power to indemnify our directors and officers against all costs, charges and expenses actually and reasonably incurred,
including an amount paid to settle an action or satisfy a judgment to which a director or officer is made a party by reason of
being or having been a director or officer of the company. In addition, we have entered into an indemnification agreement
with each of our officers and directors pursuant to which they will be indemnified by us, subject to certain limitations, for
any liabilities incurred by them in connection with their role as officers or directors of the company.
Related Party Transaction Policy
Our Board has adopted written policies and procedures for the review of related party transactions. The Audit
Committee reviews and oversees all related party transactions on an ongoing basis. A “related party transaction” is a
transaction that meets the minimum threshold for disclosure in the proxy statement under applicable SEC rules (generally,
transactions involving amounts exceeding $120,000 in which a “related person” or entity has a direct or indirect material
interest). “Related persons” include our executive officers, directors, beneficial owners of 5% or more of our common
stock, immediate family members of these persons and entities in which one of these persons has a direct or indirect
material interest. When a potential related party transaction is identified, management presents it to the Audit Committee to
determine whether to approve or ratify it.
The Audit Committee reviews the material facts of any related party transaction and either approves or
disapproves of entering into the transaction. In the course of reviewing the related party transaction, the Audit Committee
considers whether (i) the transaction is fair and reasonable to our company, (ii) the transaction is in, or not inconsistent
with, our company’s best interests under all possible circumstances, and (iii) the transaction will be on terms no less
favorable to our company than we could have obtained in an arm’s-length transaction with an unrelated third party. If
advance approval of a related party transaction is not feasible, then the transaction will be considered and, if the Audit
Committee determines it to be appropriate, ratified by the Audit Committee. No director may participate in the approval of
a transaction for which he or she is a related party. When a related party transaction is ongoing, any amendments or
changes are reviewed, and the transaction is reviewed annually for reasonableness and fairness to our company.
Director Independence
Rule 5605 of the Nasdaq Listing Rules requires a majority of a listed company’s board of directors to be
comprised of independent directors within one year of listing. In addition, the Nasdaq Listing Rules require that, subject to
specified exceptions, each member of a listed company’s audit, compensation, and nominating and corporate governance
committees be independent, that audit committee members also satisfy independence criteria set forth in Rule 10A-3 under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and that compensation committee members also
satisfy heightened independence requirements contained in the Nasdaq Listing Rules as well as Rule 10C-1 under the
Exchange Act. Under Nasdaq Rule 5605(a)(2), a director will only qualify as an “independent director” if, in the opinion of
our Board, that person does not have a relationship that would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director. In order to be considered independent for purposes of Rule 10A-3 under the
Exchange Act, a member of an audit committee of a listed company may not, other than in his or her capacity as a member
of the audit committee, the Board, or any other Board committee, accept, directly or indirectly, any consulting, advisory, or
other compensatory fee from the listed company or any of its subsidiaries or otherwise be an affiliated person of the listed
company or any of its subsidiaries. When determining the independence of the members of our compensation committee
under the heightened independence requirements contained in the Nasdaq Listing Rules and Rule 10C-1 under the
Exchange Act, our Board is required to consider all factors specifically relevant to determining whether a director has a
relationship with us that is material to that director’s ability to be independent from management in connection with the
duties of a compensation committee member, including, but not limited to: (1)
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the source of compensation of that director, including any consulting, advisory, or other compensatory fee paid by us to that
director; and (2) whether that director is affiliated with our company, a subsidiary of our company, or an affiliate of a
subsidiary of our company.
Our Board has reviewed the composition of our Board and its committees and the independence of each director.
Based upon information requested from and provided by each director concerning his or her background, employment, and
affiliations, including family relationships, our Board has determined that each of our directors, other than Dr. Toselli, is an
“independent director” as defined under Rule 5605(a)(2) of the Nasdaq Listing Rules.
Our Board also determined that Ms. Morrison, Dr. Marshak, and Dr. Rosenthal, who comprise our audit
committee, and Ms. Merrifield, Ms. Morrison, and Dr. Roberts, who comprise our compensation committee, satisfy the
independence standards for such committees established by the Securities and Exchange Commission (“SEC”) and the
Nasdaq Listing Rules, as applicable. In making such determinations, our Board considered the relationships that each such
non-employee director has with our company and all other facts and circumstances our Board deemed relevant in
determining independence, including the beneficial ownership of our capital stock by each non-employee director.
Related Party Transactions
In October 2020, we completed a registered public offering (the “October 2020 Offering”) in which we sold an
aggregate of (i) 11,785,000 shares of our common stock, (the “October 2020 Shares”) and Series A Warrants exercisable
for an aggregate of 11,785,000 shares of our common stock (the “October 2020 Series A Warrants”) at a combined public
offering price of $0.80 per share and associated warrant and (ii) pre-funded Series B warrants exercisable for an aggregate
of 6,965,000 shares of common stock (the “October 2020 Series B Pre-funded Warrants”) and Series A Warrants
exercisable for an aggregate of 6,965,000 shares of our common stock (also the “October 2020 Series A Warrants”) at a
combined public offering price of $0.80 per pre-funded warrant and associated warrant. Each October 2020 Series A
Warrant has an exercise price of $0.80 per share, is exercisable immediately and expires in October 2025. Each October
2020 Series B Pre-funded Warrant has an exercise price of $0.00001 per share, is exercisable immediately, and expires
when exercised in full, subject to certain conditions. In our October 2020 Offering, the Company sold shares of our
common stock and warrants to three investors that, based on Schedule 13G filings with the SEC, owned more than 5% of
our outstanding shares at the time of our October 2020 Offering: Sabby Volatility Warrant Master Fund, Ltd., which
acquired 535,000 shares of the Company’s common stock and warrants to purchase 3,215,000 shares of the Company’s
common stock for an aggregate purchase price of $1,500,000; Intracoastal Capital, LLC, which acquired 500,000 shares of
the Company’s common stock and warrants to purchase 2,000,000 shares of the Company’s common stock for an
aggregate purchase price of $1,000,000; and CVI Investments, Inc., which acquired 500,000 shares of the Company’s
common stock and warrants to purchase 500,000 shares of the Company’s common stock for an aggregate purchase price
of $400,000.
In March 2020, we completed a registered public offering (the “March 2020 Offering”) in which we sold an
aggregate of (i) 955,613 shares of our common stock, (the “March 2020 Shares”) and Series A Warrants exercisable for an
aggregate of 955,613 shares of our common stock (the “March 2020 Series A Warrants”) at a combined public offering
price of $2.75 per share and associated warrant and (ii) pre-funded Series B warrants exercisable for an aggregate of
1,589,842 shares of our common stock (the “March 2020 Series B Warrants”) and Series A Warrants exercisable for an
aggregate of 1,589,842 shares of our common stock (also the “March 2020 Series A Warrants”) at a combined public
offering price of $2.75 per pre-funded warrant and associated warrant. Each March 2020 Series A Warrant has an exercise
price of $2.75 per share, is exercisable immediately and expires in March 2025. Each March 2020 Series B Warrant has an
exercise price of $0.00001 per share, is exercisable immediately, and expires when exercised in full, subject to certain
conditions. In the March 2020 Offering, Dr. Toselli, our Chief Executive Officer and a member of our Board of Directors,
Mr. Christopher, our Chief Financial Officer, and Ms. Merrifield, a member of our Board of Directors, participated as
purchasers of the Company’s common stock and warrants to purchase the Company’s common stock. Each of Dr. Toselli,
Mr. Christopher and Ms. Merrifield acquired 3,636 shares of the Company’s common stock and warrants to purchase 3,636
shares of the Company’s common stock, for an aggregate purchase price of $9,999 each.
During the year ended December 31, 2021, the Company did not identify any related party transactions requiring
disclosure.
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Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Independent Registered Public Accounting Firm Fees.
Audit Fees
Firm
RSM US LLP
Year
2021
2020
Fees ($)(1)
220,185
212,588
(1) Audit fees in each of 2021 and 2020 consisted of fees incurred for professional services rendered for the
audit of consolidated financial statements and for reviews of our interim consolidated financial
statements included in our quarterly reports on Form 10‑Q.
Audit-Related Fees
Firm
RSM US LLP
Year
2021
2020
Fees ($)(1)
7,875
136,500
(1) Audit-related fees in 2021 and 2020 paid to RSM US LLP or RSM consisted of fees related to the
delivery of comfort letters in conjunction with proposed common stock financings and consents in
conjunction with registration statements.
Tax Fees
There were no fees paid to RSM for any tax-related services in 2021 or 2020.
All Other Fees
There were no other fees paid to RSM in 2021 or 2020.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services
Our Audit Committee is responsible for pre-approving all services provided by our independent registered public
accounting firm. All of the above services and fees were reviewed and approved by the Audit Committee before the
services were rendered. The Audit Committee has considered the nature and amount of fees billed by RSM US LLP and
believes that the provision of services for activities unrelated to the audit is compatible with maintaining RSM US LLP’s
independence.
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Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Financial Statements.
PART IV
The financial statements listed in the Index to Consolidated Financial Statements appearing in Item 8 are filed as
part of this report.
Financial Statement Schedules.
All financial statement schedules have been omitted as they are either not required, not applicable, or the
information is otherwise included.
Exhibits.
The following is a list of exhibits filed as part of this Annual Report on 10-K.
Exhibit
No. Description
2.1 Agreement and Plan of Merger, dated October 4, 2010, by and between Design Source, Inc. and InVivo
Therapeutics Holdings Corp. (incorporated by reference from Exhibit 2.2 to the Company’s Current Report
on Form 8-K, as filed with the SEC on October 6, 2010).
2.2 Agreement and Plan of Merger and Reorganization, dated as of October 26, 2010, by and among InVivo
Therapeutics Holdings Corp. (f/k/a Design Source, Inc.), a Nevada corporation, InVivo Therapeutics
Acquisition Corp., a Delaware corporation and InVivo Therapeutics Corporation, a Delaware corporation
(incorporated by reference from Exhibit 2.1 to the Company’s Current Report on Form 8-K, as filed with the
SEC on November 1, 2010).
3.1 Articles of Incorporation of InVivo Therapeutics Holdings Corp., as amended (incorporated by reference from
Exhibit 3.1 to the Company’s Quarterly Report on Form 10 Q for the quarter ended June 30, 2016, as filed
with the SEC on August 4, 2016).
3.2 Amended and Restated Bylaws of InVivo Therapeutics Holdings Corp. (incorporated by reference from
Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, as filed
with the SEC on May 6, 2016).
3.3 Certificate of Change Pursuant to NRS 78.209 filed with Nevada Secretary of State, dated April 13, 2018
(incorporated by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K, as filed with the
SEC on April 16, 2018).
3.4 Certificate of Amendment to Articles of Incorporation of InVivo Therapeutics Holdings Corp. (incorporated
by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K, as filed with the SEC June 1,
2018.)
3.5 Certificate of Amendment to Articles of Incorporation of InVivo Therapeutics Holdings Corp. (incorporated
by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K, as filed with the SEC January
21, 2020)
3.6 Certificate of Change Pursuant to NRS 78.209 filed with Nevada Secretary of State, dated February 10, 2020
(incorporated by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K, as filed with the
SEC on February 11, 2020)
3.7 Certificate of Amendment to Articles of Incorporation of InVivo Therapeutics Holdings Corp. (incorporated
by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K, as filed with the SEC August 5,
2020).
3.8 Amended and Restated Bylaws of InVivo Therapeutics Holdings Corp, as amended (incorporated by
reference from Exhibit 3.2 to the Company’s Current Report on Form 8-K, as filed with the SEC on June 5,
2020).
4.1 Description of the Registrant’s Securities. (incorporated by reference from Exhibit 4.1 to the Company’s
Current Report on Form 10 K, as filed with the SEC on March 1, 2021)
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4.2 Specimen Common Stock Certificate (incorporated by reference from Exhibit 4.2 to the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2019, as filed with the SEC on February 20,
2020).
4.3 Form of Warrant of InVivo Therapeutics Holdings Corp. (incorporated by reference from Exhibit 4.1 to the
Company’s Current Report on Form 8-K, as filed with the SEC on May 6, 2014).
4.4 Form of Warrant Agreement (incorporated by reference from Exhibit 4.5 to the Company’s Current Report on
Form 8-K, as filed with the SEC on March 3, 2016).
4.5 Form of Series A Warrant (incorporated by reference from Exhibit 10.35 to the Company’s Registration
Statement on Form S-1/A (File No. 333- 224424) as filed with the SEC on June 14, 2018).
4.6 Amendment to Warrant Agency Agreement, by and between InVivo Therapeutics Holdings Corp. and
Continental Stock Transfer & Trust Company, as Warrant Agent, dated September 27, 2018 (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed with the SEC on
September 28, 2018).
4.7 Second Amendment to Warrant Agency Agreement and Warrant, by and between InVivo Therapeutics
Holdings Corp. and Continental Stock Transfer & Trust Company, as Warrant Agent, dated November 20,
2019 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed with
the SEC on November 21, 2019).
4.8 Form of Series A Warrant, as amended (incorporated by reference to Exhibit 10.2 to the Company’s Current
Report on Form 8-K, as filed with the SEC on November 21, 2019).
4.9 Form of Placement Agent Warrant of InVivo Therapeutics Holdings Corp. (incorporated by reference to
Exhibit 4.1 to the Company’s Current Report on Form 8-K, as filed with the SEC on January 24, 2020).
4.10 Form of Series A Warrant (incorporated by reference from Exhibit 4.1 to the Company’s Current Report on
Form 8-K, as filed with the SEC on March 11, 2020).
4.11 Form of Series B Pre-Funded Warrant (incorporated by reference from Exhibit 4.2 to the Company’s Current
Report on Form 8-K, as filed with the SEC on March 11, 2020).
4.12 Form of Placement Agent Warrant (incorporated by reference from Exhibit 4.3 to the Company’s Current
Report on Form 8-K, as filed with the SEC on March 11, 2020).
4.13 Form of Series C Warrant (incorporated by reference from Exhibit 4.1 to the Company’s Current Report on
Form 8-K, as filed with the SEC on April 16, 2020).
4.14 Form of Placement Agent Warrant (incorporated by reference from Exhibit 4.2 to the Company’s Current
Report on Form 8-K, as filed with the SEC on April 16, 2020).
4.15 Form of Series A Warrant (incorporated by reference from Exhibit 4.12 to the Company’s Amendment No. 1
to Registration Statement on Form S-1/A (File No. 333-249353), as filed with the SEC on October 16, 2020)
4.16 Form of Series B Pre-Funded Warrant (incorporated by reference from Exhibit 4.13 to the Company’s
Amendment No. 1 to Registration Statement on Form S-1/A (File No. 333-249353), as filed with the SEC on
October 16, 2020)
4.17 Form of Placement Agent Warrant (incorporated by reference from Exhibit 4.14 to the Company’s
Amendment No. 1 to Registration Statement on Form S-1/A (File No. 333-249353), as filed with the SEC on
October 16, 2020)
10.1* InVivo Therapeutics Corp. 2007 Employee, Director and Consultant Stock Plan (incorporated by reference
from Exhibit 10.9 to the Company’s Current Report on Form 8-K, as filed with the SEC on November 1,
2010).
10.2(i)* Form of Incentive Stock Option Agreement by and between InVivo Therapeutics Corp. and participants
under the 2007 Employee, Director and Consultant Stock Plan (incorporated by reference from
Exhibit 10.11(i) to the Company’s Current Report on Form 8-K, as filed with the SEC on November 1, 2010).
10.2(ii)* Form of Non-Qualified Stock Option Agreement by and between InVivo Therapeutics Corp. and participants
under the 2007 Employee, Director and Consultant Stock Plan (incorporated by reference from
Exhibit 10.11(ii) to the Company’s Current Report on Form 8-K, as filed with the SEC on November 1,
2010).
10.3* InVivo Therapeutics Holdings Corp. 2010 Equity Incentive Plan, as amended (incorporated by reference to
Appendix A to the Company’s Schedule 14A Proxy Statement, as filed with the SEC on April 19, 2013).
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10.4(i)* Form of Incentive Stock Option Agreement by and between InVivo Therapeutics Holdings Corp. and
participants under the 2010 Equity Incentive Plan (incorporated by reference from Exhibit 10.12(i) to the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010, as filed with the SEC
on March 24, 2011).
10.4(ii)* Form of Non-Qualified Stock Option Agreement by and between InVivo Therapeutics Holdings Corp. and
participants under the 2010 Equity Incentive Plan (incorporated by reference from Exhibit 10.12(ii) to the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010, as filed with the SEC
on March 24, 2011).
10.5 Form of Scientific Advisory Board Agreement entered into by InVivo Therapeutics Corp. (incorporated by
reference from Exhibit 10.13 to the Company’s Current Report on Form 8-K, as filed with the SEC on
November 1, 2010).
10.6 Exclusive License Agreement dated July 2007 between InVivo Therapeutics Corporation and Children’s
Medical Center Corporation (incorporated by reference from Exhibit 10.1 to Amendment No. 2 to the
Company’s Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2011, as filed with the SEC on
July 18, 2011).
10.7 Amendment One to the Exclusive License, dated May 12, 2011, by and between Children’s Medical Center
Corporation and InVivo Therapeutics Corporation (incorporated by reference from Exhibit 10.22 to the
Amendment No. 4 to the Company’s Registration Statement on Form S-1/A (File No. 333-171998), as filed
with the SEC on July 19, 2011).
10.8 Amendment Two to the Exclusive License, dated August 29, 2017, by and between Children’s Medical
Center Corporation and InVivo Therapeutics Corporation (incorporated by reference from Exhibit 10.2 to the
Company’s Quarterly Report on Form 10-Q/A for the quarter ended September 30, 2017, as filed with the
SEC on January 3, 2018).
10.9 Form of Indemnification Agreement (for directors and officers) (incorporated by reference from
Exhibit 10.19 to the Company’s Registration Statement on Form S-1 (File No. 333-171998), as filed with the
SEC on February 1, 2011).
10.10* InVivo Therapeutics Holdings Corp. Employee Stock Purchase Plan (incorporated by reference from
Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed with the SEC on June 16, 2015).
10.11* InVivo Therapeutics Holdings Corp. 2015 Equity Incentive Plan, as amended (incorporated by reference to
Appendix C to the Company’s Definitive Proxy Statement, as filed with the SEC on May 18, 2021).
10.12* Employment Agreement, dated December 18, 2017, by and between Richard Toselli and InVivo Therapeutics
Holdings Corp. (incorporated by reference from Exhibit 10.27 to the Company’s Registration Statement on
Form S-1/A (File No. 333-222738) as filed with the SEC on February 9, 2018).
10.13 Form of Exchange Agreement, dated as of August 10, 2017, between InVivo Therapeutics Holdings Corp.
and certain holders of warrants (incorporated by reference from Exhibit 10.1 to the Company’s Current
Report on Form 8-K, as filed with the SEC on August 10, 2017).
10.14* Amendment to Employment Agreement, by and between InVivo Therapeutics Holdings Corp. and Richard
Toselli, dated October 1, 2018 (incorporated by reference from Exhibit 10.1 to the Company’s Current Report
on Form 8-K, as filed with the SEC on October 5, 2018).
10.15* Employment Agreement, dated December 24, 2018, between the Company and Richard Christopher
(incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed with the
SEC on January 14, 2019).
10.16* Nonstatutory Stock Option Agreement, dated January 14, 2019, between the Company and Richard
Christopher (incorporated by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K, as
filed with the SEC on January 14, 2019).
10.17* Form of Restricted Stock Agreement under the Company’s 2015 Equity Incentive Plan (incorporated by
reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed with the SEC on
September 27, 2019).
10.18* Form of Restricted Stock Unit Agreement under the Company’s 2015 Equity Incentive Plan (incorporated by
reference from Exhibit 10.25 to the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2019, as filed with the SEC on February 20, 2020).
10.19 Lease Agreement, dated as of May 28, 2021, by and between the Company and ARE-MA Region No. 59,
LLC. (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed
with the SEC on June 1, 2021).
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10.20 First Amendment to Lease, dated as of November 23, 2021, by and between the Registrant and ARE-MA
10.21
Region No. 59, LLC. (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on
Form 8-K, as filed with the SEC on November 29, 2021).
InVivo Therapeutics Holding Corp. Transaction Incentive Plan ((incorporated by reference from Exhibit 10.3
to the Company’s Quarterly Report on Form 10-Q, as filed with the SEC on August 13, 2021).
21.1 Subsidiaries of InVivo Therapeutics Holdings Corp. (incorporated by reference from Exhibit 21.1 to the
Company’s Current Report on Form 8-K, as filed with the SEC on November 1, 2010).
23.1+ Consent of RSM US LLP.
31.1+ Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
31.2+ Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
32.1+ Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes Oxley Act of 2002.
32.2+ Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes Oxley Act of 2002.
101.INS Inline XBRL Instance Document.
101.SCH Inline XBRL Taxonomy Extension Schema Document.
101.CAL Inline XBRL Taxonomy Calculation Linkbase Document.
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB Inline XBRL Taxonomy Label Linkbase Document.
101.PRE Inline XBRL Taxonomy Presentation Linkbase Document.
104+ Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
*
Management contract or compensatory plan or arrangement filed in response to Item 15(a)(3) of Form 10-K.
+ Filed herewith.
Item 16. FORM 10-K SUMMARY
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 7, 2022
By: /s/ RICHARD TOSELLI, M.D
INVIVO THERAPEUTICS HOLDINGS CORP.
Date: March 7, 2022
Name: Richard Toselli
Title: President, Chief Executive Officer and Director
(Principal Executive Officer)
By: /s/ RICHARD CHRISTOPHER
Name: Richard Christopher
Title:
Chief Financial Officer and Treasurer (Principal
Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ RICHARD TOSELLI M.D
Richard Toselli
President, Chief Executive Officer and
Director (Principal Executive Officer)
Chief Financial Officer and Treasurer
(Principal Financial and Accounting
Officer)
March 7, 2022
March 7, 2022
/s/ RICHARD CHRISTOPHER
Richard Christopher
/s/ C. ANN MERRIFIELD
C. Ann Merrifield
/s/ DANIEL R. MARSHAK
Daniel R. Marshak
/s/ CHRISTINA MORRISON
Christina Morrison
/s/ RICHARD J. ROBERTS
Richard J. Roberts
/s/ ROBERT ROSENTHAL
Robert Rosenthal
Chair of the Board
March 7, 2022
March 7, 2022
March 7, 2022
March 7, 2022
March 7, 2022
Director
Director
Director
Director
92
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements (Nos. 333-205471, 333-205469, 333-183491,
333-176111, 333-176110, 333-173208, 333-230644, 333-234630, 333-236542, 333-249928 and 333-261117) on Form S-8,
Registration Statement (No. 333-234353) on Form S-3, and Registration Statements (Nos. 333-224424, 333-225768, 333-
236572, 333-238635, and 333-249353) on Form S-1 of InVivo Therapeutics Holdings Corp. of our report dated March 7,
2022, relating to the consolidated financial statements of InVivo Therapeutics Holdings Corp. and Subsidiary, appearing in
this Annual Report on Form 10-K of InVivo Therapeutics Holdings corp. for the year ended December 31, 2021.
Exhibit 23.1
/s/RSM US LLP
Boston, Massachusetts
March 7, 2022
Exhibit 31.1
I, Richard Toselli, certify that:
CERTIFICATION
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of InVivo Therapeutics Holdings Corp.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Date: March 7, 2022
/s/ RICHARD TOSELLI
Richard Toselli
Chief Executive Officer
(Principal Executive Officer)
1
Exhibit 31.2
I, Richard Christopher, certify that:
CERTIFICATION
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of InVivo Therapeutics Holdings Corp.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Date: March 7, 2022
/s/ RICHARD CHRISTOPHER
Richard Christopher
Chief Financial Officer
(Principal Financial and Accounting Officer)
1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of InVivo Therapeutics Holdings Corp. (the “Company”) on Form 10-K for
the year ended December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the
“Report”), I, Richard Toselli, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
(2)
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be
retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Dated: March 7, 2022
/s/ RICHARD TOSELLI
Richard Toselli
Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report of InVivo Therapeutics Holdings Corp. (the “Company”) on Form 10-K for
the year ended December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the
“Report”), I, Richard Christopher, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
(2)
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be
retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Dated: March 7, 2022
/s/ RICHARD CHRISTOPHER
Richard Christopher
Chief Financial Officer
(Principal Financial and Accounting Officer)
1