UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

~~Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934~~

☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~September~~June 30, ~~2017~~2023

~~Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934~~

☐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 001-35853

~~BIOSTAGE, INC.~~Harvard Apparatus Regenerative Technology, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

45-5210462

(State or Other Jurisdiction of

(IRS Employer

Incorporation or Organization)

~~(IRS Employer~~

Identification No.)

84 October Hill Road, Suite 11, Holliston, MA		01746
(Address of Principal Executive Offices)		(Zip Code)

(774)233-7300

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
N/A		N/A		N/A

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. x☒ YES¨ ☐ NO

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). x☒ 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¨ ~~(Do not check if a smaller reporting company)~~ ☒	Smaller reporting company x☒

	Emerging growth company x☐

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).¨ ☐ YES x☒ NO

As of ~~December 13, 2017,~~August 7, 2023, there were ~~39,787,615~~13,882,060 shares of common stock, par value $0.01 per share, ~~outstanding~~outstanding.

~~Biostage Inc.,~~

~~(formerly,~~ Harvard Apparatus Regenerative Technology, Inc.)

(formerly Biostage, Inc.)

Form 10-Q

For the Quarter Ended ~~September~~June 30, ~~2017~~2023

INDEX

		Page
PART I-FINANCIAL INFORMATION		3

Item 1.	Condensed Consolidated Financial Statements	~~Financial Statements~~	3

	~~Unaudited~~Condensed Consolidated Balance Sheets	3

	~~Unaudited~~Condensed Consolidated Statements of Operations ~~and Comprehensive Loss~~(Unaudited)	4

	~~Unaudited~~Condensed Consolidated Statements of Stockholders’ Equity (Deficit) (Unaudited)	5

	Condensed Consolidated Statements of Cash Flows (Unaudited)	56

	Notes to Unaudited Condensed Consolidated Financial Statements	67

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1614

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2419

Item 4.	Controls and Procedures	19

~~Item 4.~~PART II-OTHER INFORMATION		~~Controls and Procedures~~	2420

Item 1.	Legal Proceedings	20

Item 1A.	Risk Factors	20

Item 6.	Exhibits	20

~~PART II-OTHER INFORMATION~~SIGNATURES		25

~~Item 1A.~~	~~Risk Factors~~	25

~~Item 6.~~	~~Exhibits~~	26

~~SIGNATURES~~		2721

PART I. FINANCIAL INFORMATION

~~Item 1.~~

~~Financial Statements.~~

~~BIOSTAGE, INC.~~Item 1. Condensed Consolidated Financial Statements.

~~UNAUDITED~~

HARVARD APPARATUS REGENERATIVE TECHNOLOGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(inIn thousands, except share and par value ~~and share~~ data)

September 30,
2017

December 31,
2016

Assets
Current Assets:
Cash $ 1,310 $ 2,941
Accounts receivable - 42
Prepaid expenses 94 291
Other current assets 274 212

Total current assets 1,678 3,486
Property, plant and equipment, net 875 1,065

Total assets $ 2,553 $ 4,551

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 1,208 $ 962
Accrued and other current liabilities 529 1,210
Warrant liabilities 339 605

Total current liabilities 2,076 2,777

Total liabilities $ 2,076 $ 2,777

Stockholders’ equity:
Undesignated Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued and outstanding - -
Series B convertible preferred stock, $0.01 par value; 1,000,000 shares authorized; 695,857 shares issued and none outstanding - -
Common stock, $0.01 par value; 120,000,000 shares and 60,000,000 shares authorized as of September 30, 2017 and December 31, 2016, respectively, and 39,787,615 and 17,108,968 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively 398 171
Additional paid-in capital 47,084 37,921
Accumulated deficit (47,005 ) (36,318 )

Total stockholders’ equity 477 1,774

Total liabilities and stockholders’ equity $ 2,553 $ 4,551

	June 30,			December 31,
	2023			2022
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,140		$	1,241
Short-term investments		2,523			—
Prepaid research and development		259			274
Prepaid expenses and other current assets		79			79
Total current assets		5,001			1,594
Property, plant and equipment, net		39			49
Right-of-use assets, net		135			147
Deferred financing costs		544			610
Other long-term assets		62			—
Total assets	$	5,781		$	2,400

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	372		$	682
Accrued and other current liabilities		1,476			582
Operating lease liability, current		119			99
Total current liabilities		1,967			1,363
Operating lease liability, net of current portion		18			48
Total liabilities		1,985			1,411

Commitments and contingencies (Note 7)		-			-
Series E convertible preferred stock, par value $0.01 per share, 5,000 shares authorized; 0 and 4,180 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively		—			4,180

Stockholders’ equity (deficit):
Common stock, par value $0.01 per share, 60,000,000 shares authorized; 13,882,060 and 12,174,467 issued and outstanding at June 30, 2023 and December 31, 2022, respectively		139			122
Additional paid-in capital		92,172			79,698
Accumulated deficit		(88,515	)		(83,011	)
Total stockholders’ equity (deficit)		3,796			(3,191	)
Total liabilities and stockholders’ equity (deficit)	$	5,781		$	2,400

See accompanying notes to unaudited condensed consolidated financial statements.

~~BIOSTAGE,~~HARVARD APPARATUS REGENERATIVE TECHNOLOGY, INC. AND SUBSIDIARIES

~~UNAUDITED~~

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ~~AND COMPREHENSIVE LOSS~~

(Unaudited)

(In thousands, except share and per share ~~amounts)~~data)

Three Months ended
September 30,

Nine Months ended
September 30,

2017 2016 2017 2016

Revenues $ - $ 26 $ - $ 54
Cost of revenues - 13 - 57
Gross profit (deficit) - 13 - (3 )

Operating expenses:
Research and development 2,364 2,225 7,121 5,279
Selling, general and administrative 888 937 2,906 3,261
Total operating expenses 3,252 3,162 10,027 8,540

Operating loss (3,252 ) (3,149 ) (10,027 ) (8,543 )

Other income (expense):
Change in fair value of liability warrants 9 96 (660 ) 306
Other expense - - - -
9 96 (660 ) 306

Loss before income taxes (3,243 ) (3,053 ) (10,687 ) (8,237 )
Income taxes - - - -

Net loss $ (3,243 ) $ (3,053 ) $ (10,687 ) $ (8,237 )

Basic and diluted net loss per share $ (0.08 ) $ (0.18 ) $ (0.31 ) $ (0.53 )
Weighted average common shares, basic and diluted 38,969 17,107 34,443 15,585

Comprehensive loss:
Net loss $ (3,243 ) $ (3,053 ) $ (10,687 ) $ (8,237 )
Foreign currency translation adjustments - - - -
Total comprehensive loss $ (3,243 ) $ (3,053 ) $ (10,687 ) $ (8237 )

	2023			2022			2023			2022
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
Operating expenses:
Research and development	$	1,566		$	326		$	2,075		$	629
Selling, general and administrative		1,085			1,049			3,463			2,951
Total operating expenses		2,651			1,375			5,538			3,580

Operating loss		(2,651	)		(1,375	)		(5,538	)		(3,580	)

Other income, net:
Sublease income		—			32			—			61
Other income (expense), net		37			(2	)		34			(3	)
Total other income, net		37			30			34			58

Net loss		(2,614	)		(1,345	)		(5,504	)		(3,522	)
Preferred stock dividends		3			(18	)		(77	)		(18	)
Net loss attributable to common stockholders	$	(2,611	)	$	(1,363	)	$	(5,581	)	$	(3,540	)

Basic and diluted net loss per share	$	(0.19	)	$	(0.12	)	$	(0.43	)	$	(0.32	)
Basic net loss per share	$	(0.19	)	$	(0.12	)	$	(0.43	)	$	(0.32	)
Weighted average common shares, basic and diluted		13,785,657			11,230,525			13,000,211			10,996,996
Weighted average common shares, basic		13,785,657			11,230,525			13,000,211			10,996,996

~~See accompanying notes to unaudited consolidated financial statements.~~

~~BIOSTAGE, INC.~~

~~UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(In thousands)~~

Nine Months Ended September 30,
2017 2016
Cash flows from operating activities
Net loss $ (10,687 ) $ (8,237 )
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation expense 591 1,027
Depreciation 334 340
Change in fair value of warrant liability 660 (306 )
Changes in operating assets and liabilities:
Accounts receivable 42 (45 )
Inventories - 34
Prepaid expenses and other current assets 135 234
Accounts payable 246 418
Accrued and other current liabilities (681 ) 465

Net cash used in operating activities (9,360 ) (6,070 )

Cash flows from investing activities
Additions to property and equipment (140 ) (225 )
Net cash used in investing activities (140 ) (225 )

Cash flows from financing activities
Proceeds from issuance of common stock and warrants, net of issuance costs 6,801 4,496
Proceeds from exercise of warrants 1,059 -
Proceeds from issuance of common stock, net of issuance costs 9 349

Net cash provided by financing activities 7,869 4,845

Net decrease in cash (1,631 ) (1,450 )
Cash at beginning of period 2,941 7,456
Cash at end of period $ 1,310 $ 6,006
Supplemental disclosure of cash flow information and non-cash investing and financing activities:

Fair value of warrant liability reclassified to additional paid-in capital $ 4,327 $ -
Fair value of warrants issued in connection with issuance of common stock $ 3,787 $ -
Equipment purchases included in accounts payable $ - $ 28
Fair value of warrants issued to placement agent $ - $ 116

See accompanying notes to unaudited condensed consolidated financial statements.

HARVARD APPARATUS REGENERATIVE TECHNOLOGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

(In thousands, except share data)


		Series E Convertible Preferred			Number of Common Shares		Common		Additional Paid-in		Accumulated			Total Stockholders’ (Deficit)
		Stock			Outstanding		Stock		Capital		Deficit			Equity
Balance at April 1, 2023	-	$	4,051			12,716,534	$	127	$	84,712	$	(85,901	)	$	(1,062	)
Preferred stock dividends			(3	)		—		—		3		—			3
Conversion of preferred stock for common stock			(4,048	)		674,693		7		4,041		—			4,048
Issuance of common stock, net of offering costs			—			490,833		5		2,937		—			2,942
Share-based compensation expense			—			—		—		479		—			479
Net loss			—			—		—		—		(2,614	)		(2,614	)
Balance at June 30, 2023	-	$	—			13,882,060	$	139	$	92,172	$	(88,515	)	$	3,796

		Series E Convertible Preferred		Number of Common Shares		Common		Additional Paid-in			Accumulated			Total Stockholders’
		Stock		Outstanding		Stock		Capital			Deficit			Deficit
Balance at April 1, 2022	-	$	—		10,760,871	$	108	$	74,036		$	(79,115	)	$	(4,971	)
Issuance of series E convertible preferred stock			4,000		—		—		—			—			—
Preferred stock dividends			18		—		—		(18	)		—			(18	)
Issuance of common stock, net of offering costs			—		854,771		8		5,052			—			5,060
Share-based compensation expense			—		—		—		277			—			277
Net loss			—		—		—		—			(1,345	)		(1,345	)
Balance at June 30, 2022	-	$	4,018		11,615,642	$	116	$	79,347		$	(80,460	)	$	(997	)

	Series E Convertible Preferred			Number of Common Shares		Common		Additional Paid-in			Accumulated			Total Stockholders’ (Deficit)
	Stock			Outstanding		Stock		Capital			Deficit			Equity
Balance at January 1, 2023	$	4,180			12,174,467	$	122	$	79,698		$	(83,011	)	$	(3,191	)
Preferred stock dividends		77			—		—		(77	)		—			(77	)
Conversion of preferred stock for common stock		(4,257	)		706,626		7		4,250			—			4,257
Issuance of common stock, net of offering costs		—			1,000,967		10		5,982			—			5,992
Share-based compensation expense		—			—		—		2,319			—			2,319
Net loss		—			—		—		—			(5,504	)		(5,504	)
Balance at June 30, 2023	$	—			13,882,060	$	139	$	92,172		$	(88,515	)	$	3,796

	Series E Convertible Preferred		Number of Common Shares		Common		Additional Paid-in			Accumulated			Total Stockholders’
	Stock		Outstanding		Stock		Capital			Deficit			Deficit
Balance at January 1, 2022	$	—		10,760,871	$	108	$	73,801		$	(76,938	)	$	(3,029	)
Beginning balance, value	$	-		10,760,871	$	108	$	73,801		$	(76,938	)	$	(3,029	)
Issuance of series E convertible preferred stock		4,000		—		—		—			—			—
Preferred stock dividends		18		—		—		(18	)		—			(18	)
Issuance of common stock, net of offering costs		—		854,771		8		5,052			—			5,060
Share-based compensation expense		—		—		—		512			—			512
Net loss		—		—		—		—			(3,522	)		(3,522	)
Balance at June 30, 2022	$	4,018		11,615,642	$	116	$	79,347		$	(80,460	)	$	(997	)
Ending balance, value	$	4,018		11,615,642	$	116	$	79,347		$	(80,460	)	$	(997	)

See accompanying notes to unaudited condensed consolidated financial statements

HARVARD APPARATUS REGENERATIVE TECHNOLOGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	2023			2022
	Six Months Ended
	June 30,
	2023			2022
OPERATING ACTIVITIES
Net loss	$	(5,504	)	$	(3,522	)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation expense		2,319			512
Depreciation		23			27
Change in fair value of warrant liability		—			(2	)
Changes in operating assets and liabilities:
Prepaid research and development		15			—
Prepaid expenses and other current assets		—			198
Deferred financing costs		66			(173	)
Other long-term assets		(62	)		—
Accounts payable		(310	)		823
Accrued and other current liabilities		894			483
Net cash used in operating activities		(2,559	)		(1,654	)

INVESTING ACTIVITIES
Purchases of short-term investments		(2,523	)		—
Purchases of property, plant, and equipment		(11	)		(8	)
Net cash used in investing activities		(2,534	)		(8	)

FINANCING ACTIVITIES
Proceeds from issuance of common stock		5,992			5,060
Net cash provided by financing activities		5,992			5,060
Net increase in cash and cash equivalents		899			3,398
Cash and cash equivalents at the beginning of the year		1,241			1,292
Cash and cash equivalents at the end of the period	$	2,140		$	4,690

Supplemental disclosure of non-cash activities:
Settlement of contingency matter	$	—		$	(3,250	)
Settlement of due to Harvard Bioscience included in accrued and other current liabilities	$	—		$	(750	)
Issuance of Series E convertible preferred stock	$	—		$	4,000
Purchases of property and equipment in accounts payable or accrued expenses	$	5		$	—
Preferred stock dividends	$	77		$	18
Conversion of preferred stock into common stock	$	4,257		$	—

See accompanying notes to unaudited condensed consolidated financial statements.

~~BIOSTAGE,~~HARVARD APPARATUS REGENERATIVE TECHNOLOGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.Overview and Basis of Presentation

Overview

Harvard Apparatus Regenerative Technology, Inc., formerly Biostage, Inc. ~~(“Biostage”~~, (HRGN or the ~~“Company”)~~Company) is a clinical-stage biotechnology company ~~developing bioengineered organ implants~~focused on the development of regenerative medicine treatments for disorders of the gastro-intestinal system and other organs that result from cancer, trauma or birth defects. The Company’s technology is based on our ~~novel Cellframe~~^TM ~~technology. Our Cellframe technology is comprised of~~proprietary cell-therapy platform that uses a ~~biocompatible scaffold that is seeded with the recipient’s~~patient’s own stem ~~cells. We believe~~cells to regenerate and restore function to damaged organs. The Company believes that ~~this~~its technology ~~may prove~~represents a next generation solution for restoring organ function because it allows the patient to ~~be effective~~regenerate their own organ, thus eliminating the need for ~~treating patients across a number~~human donor or animal transplants, the sacrificing of ~~life-threatening medical indications who currently have unmet medical needs. We are currently developing our Cellframe technology to treat life-threatening conditions~~another of the ~~esophagus, bronchus~~patient’s own organs or ~~trachea with the objective of dramatically improving the treatment paradigm for those patients.~~

permanent artificial implants. Since inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, and acquiring operating assets.

~~Basis of Presentation~~

The ~~financial statements reflect the Company’s financial position, results of operations~~Company has two business segments and ~~cash flows in conformity with accounting principles generally accepted in~~does not have significant costs or assets outside the United ~~States (“GAAP”).~~States.

~~Net loss per Share~~

Basic net loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed using the sum of the weighted average number of common shares outstanding during the period and, if dilutive, the weighted average number of potential shares of common stock, including the assumed exercise of stock options, warrants, and the impact of unvested restricted stock.

~~The Company applies the two-class method to calculate basic and diluted net loss per share attributable to common stockholders as~~On October 31, 2013, Harvard Bioscience, Inc., or Harvard Bioscience, contributed its ~~warrants to purchase common stock are participating securities.~~

The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders. However, the two-class method does not impact the net loss per share of common stock as the Company has been in a net loss position and the warrant holders do not participate in losses.

~~Basic and diluted shares outstanding are the same for each period presented as all common stock equivalents would be antidilutive due to the net losses incurred.~~

~~Unaudited Interim Financial Information~~

The accompanying interim consolidated balance sheet as of September 30, 2017 and consolidated interim statements of operations and comprehensive loss and cash flows for the three and nine months ended September 30, 2017 and 2016 are unaudited. The interim unaudited consolidated financial statements have been prepared in accordance with GAAP on the same basis as the annual audited financial statements and, in the opinion of management, reflect all adjustments necessary for a fair statement of the Company’s financial position as of September 30, 2017 and its results of operations and cash flows for the three and nine month periods ended September 30, 2017 and 2016. The financial data and other information disclosed in these notes related to the three and nine month periods ended September 30, 2017 and 2016 are unaudited. The results for the three and nine months ended September 30, 2017 are not necessarily indicative of results to be expected for the year ending December 31, 2017, any other interim periods or any future year or period.

2.~~Summary of Significant Accounting Policies and Recently Issued Accounting Pronouncements~~

~~Summary of Significant Accounting Policies~~

The accounting policies underlying the accompanying unaudited consolidated financial statements are those set forth in Note 2 to the financial statements for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K.

3.~~Capital Stock, Financing and Liquidity~~

~~Capital Stock~~

On February 10, 2017, the Company completed a public offering of 20,000,000 shares of common stock at a purchase price of $0.40 per share and the issuance of warrants to purchase 20,000,000 shares of common stock at an exercise price of $0.40 per warrant for gross proceeds of $8.0 million or approximately $6.8 million net of issuance costs. Additionally, the Company issued to the placement agent warrants to purchase 1,000,000 shares of common stock for the offering at an exercise price of $0.50 per warrant. The warrants are immediately exercisable and remain exercisable for five years from date of grant. During the three and nine months ended September 31, 2017 holders exercised warrants for 2,647,338 shares of common stock for proceeds of $1.1 million.

On May 19, 2016, the Company closed on a Securities Purchase Agreement for the sale by the Company of 2,836,880 shares of the Company’s common stock at a purchase price of $1.7625 per share and the issuance of warrants to purchase 1,418,440 shares of common stock at an exercise price of $1.7625 per warrant for gross proceeds of $5.0 million or $4.6 million, net of issuance costs. Additionally, the Company issued warrants to purchase 141,844 shares of common stock to the placement agent for the offering at an exercise price of $1.7625 per warrant. The warrants are initially exercisable commencing November 19, 2016 through their expiration date of May 19, 2021.

~~On December~~ regenerative medicine business assets, plus $15 2015, the Company entered into a common stock purchase agreement (the “Aspire Capital Purchase Agreement”) with Aspire Capital Fund, LLC, (“Aspire Capital”), under which Aspire Capital was committed to purchase up to an aggregate of $15.0 million of cash into HRGN, or the ~~Company’s common stock over~~Separation. On November 1, 2013, the approximately thirty month term of the Aspire Capital Purchase Agreement. In consideration for entering into the Aspire Capital Purchase Agreement, concurrently with the execution of the Aspire Capital Purchase Agreement, the Company issued Aspire Capital 150,000 shares of common stock as a commitment fee.

Upon execution of the Aspire Capital Purchase Agreement, the Company sold to Aspire Capital 500,000 shares of common stock at $2.00 per share, which resulted in net proceeds of approximately $0.9 million.

On May 12, 2016, the Company issued 150,000 shares of common stock under the Aspire Capital Purchase Agreement in exchange for gross proceeds of $0.37 million, or $0.35 million net of issuance costs. On May 17, 2016, the Company terminated the Aspire Capital Purchase Agreement without any penalty or cost.

~~Capital Commitment~~

On June 26, 2017, the Company entered into a binding Memorandum of Understanding (the “Pecos MOU”) with First Pecos, LLC (“First Pecos”), pursuant to which the Company agreed to issue to First Pecos in a private placement (the “Pecos Placement”) 9,700,000 shares of its common stock at a purchase price of $0.315 per share or, to the extent First Pecos, following the transaction, would own more than 19.9% of the Company’s common stock, shares of a new class of preferred stockspin-off of the Company ~~(the “Preferred Stock”) with a per-share purchase price of $1,000.~~

~~Additionally, First Pecos~~from Harvard Bioscience was to receive warrants (the “Warrants”) to purchase 9,700,000 shares of the Company’s common stock or, to the extent First Pecos would own more than 19.9% of the Company’s common stock, shares of Preferred Stock. The Warrants would have had an exercise price of $0.315 per share and would not have been exercisable until six months after the closing of the Pecos Placement.

Under the Pecos Placement, the Preferred Stock would bear a cumulative annual dividend of 15%, compounding annually, and would be senior to all of the Company’s other common stock, but would generally not have any voting rights. Following approval by the Company’s stockholders, the Preferred Stock would automatically convert into shares of the Company’s common stock. The Company agreed to include a proposal for such stockholder approval in the definitive proxy statement for its 2018 annual meeting of stockholders and, if not approved at such meeting, would seek approval from its stockholders every six months thereafter.

~~In connection with the Pecos Placement, First Pecos agreed to serve as a backstopping party with respect to two pro rata rights offerings with aggregate gross proceeds of up to $14.0 million~~completed. On that date, the Company ~~could elect to conduct within 24 months following~~became an independent company that operates the closing of the Pecos Placement. Additionally, the Company had agreed to grant board representation and nomination rights to First Pecos that would be proportional to the percentage of the Company’s common stockregenerative medicine business previously owned by ~~First Pecos and its affiliates.~~

3.~~Capital Stock, Financing and Liquidity (continued)~~

Harvard Bioscience. The ~~Pecos Placement~~spin-off was ~~conditioned on satisfaction~~completed through the distribution to Harvard Bioscience stockholders of customary closing conditions, including the Company terminating its Shareholder Rights Plan, and was expected to be consummated on or prior to August 15, 2017. The definitive agreements relating to the Pecos Placement were to include customary representations, warranties and covenants. The Company agreed to file a resale registration statement promptly after the closing of the Pecos Placement to register the resale ofall the shares of common stock ~~issued in~~of HRGN, or the ~~Pecos Placement.~~Distribution.

The ~~Pecos MOU was intended~~Company filed an amendment (the “Certificate of Amendment”) to ~~be binding upon both~~its Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) with the Secretary of State for the State of Delaware to change its name from Biostage, Inc. to Harvard Apparatus Regenerative Technology, Inc. The Company also amended and restated its Amended and Restated Bylaws, solely to reflect the name change (as amended, the “Third Amended and Restated Bylaws”). The Certificate of Amendment and the Third Amended and Restated Bylaws each became effective on July 20, 2023.

In connection with the name change, the Company and First Pecos. In the event that the Company failed to perform any of its obligations under the Pecos MOU or otherwise breached the Pecos MOU, subject to certain exceptions, First Pecos could terminate the Pecos MOU, and the Company would have been obligated to pay a termination fee of $0.5 million (the “Termination Fee”).

The Company entered into the Securities Purchase Agreement (the “Purchase Agreement) with First Pecos on August 11, 2017, pursuant to which the Company agreed to sell to First Pecos, and First Pecos agreed to purchase from the Company, 9,700,000 shares of the Company’s common stock at a purchase price of $0.315 per share or, to the extent First Pecos, following the transaction, would own more than 19.99% of the Company’s common stock, shares of a new class of preferred stock of the Company with a per-share purchase price of $1,000. Additionally, First Pecos was to receive a warrant to purchase 9,700,000 shares of the Company’s common stock (or, to the extent First Pecos would own more than 19.99% of the Company’s common stock, shares of Preferred Stock). The aggregate gross proceeds from the private placement of common stock, Preferred Stock and the Warrant would have been $3,055,500 (the “Purchase Price”). The Company did not receive the Purchase Price from First Pecos.

On October 5, 2017, the Company delivered a notice (the “Notice”) to First Pecos and its manager, Leon “Chip” Greenblatt III, stating that First Pecos was in breach of the Purchase Agreement as a result of its failure to deliver the Purchase Price to the Company following satisfaction of all closing conditions in the Purchase Agreement. None of the shares of common stock, shares of Preferred Stock or Warrants were issued to First Pecos.

On October 10, 2017, First Pecos delivered a notice to the Company stating that, as a result of alleged breaches by the Company of its obligations pursuant to the Purchase Agreement, First Pecos terminated the Purchase Agreement and demanded that the Company pay the Termination Fee pursuant to the terms of the Purchase Agreement.

The Company believes that it was not in breach of the Purchase Agreement at any time, and that First Pecos’s notice was unjustified and without any legal merit or factual basis. Accordingly, the Company believes that First Pecos was not entitled to terminate the Purchase Agreement, and is not entitled to the Termination Fee, as the failure to consummate the Pecos Placement resulted from First Pecos’s breach of the Purchase Agreement. The Company is reviewing all of its rights and remedies against First Pecos that may be available to the Company.

~~NASDAQ Compliance and OTCQB Exchange Quotation~~

The Company had been operating under a grace period from November 18, 2016 through May 17, 2017 with respect to non-compliance of the listing requirements on NASDAQ. The Company then requested a hearing with the NASDAQ Hearings Panel (the “Panel”), and on June 29, 2017, presented its plan to regain compliance with the NASDAQ listing requirements, including Listing Rule 5550(a)(2), which requires an issuer to maintain a closing bid price of at least $1.00 per share, and Listing Rule 5550(b)(1), which requires minimum stockholders’ equity of $2.5 million. The Panel accepted the Company’s plan and continued listing was subject to a number of conditions, with the Panel’s decision ultimately requiring that the Company evidence full compliance with all requirements for continued listing on The NASDAQ Capital Market, including the minimum bid price and stockholders’ equity requirements, by no later than November 13, 2017.

The Company determined that as a result of the termination of the Purchase Agreement it could not regain compliance with The NASDAQ Capital Market listing standards by the deadline imposed by NASDAQ, and on October 4, 2017 the Company withdrew its appeal from the Panel.

On October 4, 2017, following the withdrawal by the Company of its appeal to the Panel, the Company received written notification from NASDAQ indicating that the Panel had determined to delist the Company’s common stock from The NASDAQ Capital Market, and suspended it from trading on that marketplace effective with the open of business on October 6, 2017. NASDAQ also informed the Company that it would file a Form 25-NSE with the Securities and Exchange Commission (the “SEC”) to remove the Company’s common stock from listing on NASDAQ, which was filed with the SEC on December 7, 2017..

~~The Company’s common stock began trading~~will trade on the OTCQB ~~marketplace~~under the new ticker symbol “HRGN”. The new ticker symbol was effective at the open of ~~business~~the market on ~~October 6, 2017. The Company’s common stock continues to trade under~~July 20, 2023.

Consumer Health

In the ~~symbol “BSTG”.~~

3.~~Capital Stock, Financing and Liquidity (continued)~~

~~The delisting~~second quarter of 2023, the Company’s ~~common stock from~~ subsidiary in Hong Kong, Harvard Apparatus Regenerative Technology Limited, or HRGN LTD, started a Consumer Health business.

The ~~NASDAQ Capital Market may adversely affect the Company’s ability to raise the significant additional capital that it~~Consumer Health business will ~~require, through public or private sales~~include a broad range of equity securities, which may in turn adversely affect the ability of investors to trade the Company’s securities and may negatively impact the value and liquidity of the Company’s common stock. The delisting could also cause the Company to face significant adverse consequences affecting trading in its common stock, including, among others:

●

because the Company’s common stock falls within the definition of a “penny stock,” brokers trading in its common stock are required to adhere to more stringent rules, which could result in reduced trading activity in the secondary trading market for its securities;

●

~~reduced trading levels could result in limited or no analyst coverage for the Company;~~

●

~~potential limited availability of market quotations for the Company’s common stock could adversely affect liquidity; and~~

●

~~restrictions on the Company’s ability to issue additional securities (including pursuant to short-form registration statements on Form S-3) or obtain additional financing in the future.~~

~~Warrants~~

products focused on anti-aging dietary supplements. The Company ~~has issued warrants~~plans to ~~purchase common stock,~~start selling anti-aging supplements through HRGN LTD in the third quarter of 2023. These products are marketed to the general public and initially targeted at consumers in the ~~warrant activity during the nine months ended September 30, 2017 was as follows:~~Great China Region through eCommerce (online sales).

Warrants
Amount
Weighted-average
exercise price

Outstanding at December 31, 2016 1,560,284 $ 1.76
Granted 21,000,000 0.40
Exercised (2,647,338 ) 0.40
Outstanding at September 30, 2017 19,912,946 $ 0.49

~~Other~~Going Concern

~~On April 26, 2017, the Company’s stockholders approved the following proposals at the Company’s Annual Meeting of Shareholders:~~

~~An amendment of the Company’s 2013 Equity Incentive Plan to increase the number of shares of the Company’s common stock available for issuance pursuant to the 2013 Plan by 4,000,000 shares; and~~

An amendment of the Company’s charter to effect a reverse stock split of the shares of the Company’s common stock at a ratio of not less than 1-for-2 and not greater than 1-for-20, with the exact ratio of, effective time of and decision whether or not to implement a reverse stock split to be determined by the Company’s board of directors. There has been no decision by the Company’s board of directors as to whether to implement a reverse stock split as of September 30, 2017.

~~Liquidity~~

The Company has incurred substantial operating losses since its inception, and as of ~~September~~June 30, ~~2017~~2023 had an accumulated deficit of approximately ~~$47.0 million. The Company is currently investing significant resources in development~~$88.5 million and ~~commercialization of products for use by clinicians in the field of regenerative medicine.~~will require additional financing to fund future operations. The Company expects that its operating cash and short-term investments on-hand as of June 30, 2023 of approximately $4.7 million will enable it to ~~continue to incur~~fund its operating ~~losses~~expenses and ~~negative cash flows from operations for~~capital expenditure requirements into the ~~remainder~~first quarter of 2017 and in future years. As a result of First Pecos's refusal to deliver the Purchase Price, the Company is facing significant capital issues, as its current financial obligations exceed its cash on hand, and is exploring financing and other strategic alternatives. The Company cannot provide any assurance that it will be able to obtain sufficient financing.2024. Therefore, these conditions ~~raise substantial doubt~~present risks about the Company’s ability to continue as a going concern.

The Company will need to raise additional funds ~~in future periods~~ to fund its operations. In the event ~~that~~ the Company ~~does not~~is unable to raise additional capital from outside sources inbefore or during the ~~near future,~~first quarter of 2024, it may be forced to ~~further~~ curtail or cease its operations.

Cash requirements and cash resource needs will vary significantly depending upon the timing ~~and~~of the financial and other resource needs that will be required to complete ongoing development, ~~and~~ pre-clinical and clinical testing of ~~products~~product candidates, as well as regulatory efforts and collaborative arrangements necessary for the Company’s ~~products~~product candidates that are currently under development. The Company is currently seeking and will continue to seek financing from other existing and/or new investors to raise necessary funds through a combination of public or private equity ~~offerings,~~offerings. The Company may also pursue debt financings, other financing mechanisms, research grants, or strategic collaborations and licensing arrangements. The Company may not be able to obtain additional financing on ~~terms~~ favorable ~~to it,~~terms, if at all.

~~3. Capital Stock, Financing and Liquidity (continued)~~

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

4.2. Summary of Significant Accounting Policies and Recently Issued Accounting Pronouncements

Summary of Significant Accounting Policies

The accounting policies underlying the accompanying unaudited condensed consolidated financial statements are those set forth in Note 2 to the consolidated financial statements for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of HRGN and its subsidiaries, Harvard Apparatus Regenerative Technology Limited (Hong Kong), Harvard Apparatus Regenerative Technology (Hangzhou) Limited (China), Harvard Apparatus Regenerative Technology GmbH (Germany) and HRGN Limited (UK). The functional currency for HRGN and these subsidiaries is the U.S dollar. All intercompany balances and transactions have been eliminated in consolidation.

Basis of Presentation

The condensed consolidated financial statements reflect the Company’s financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States, or U.S. GAAP.

Use of Estimates

The process of preparing condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Such estimates include, but are not limited to, share-based compensation, valuation of warrant liability, accrued expenses and the valuation allowance for deferred income taxes. Actual results could differ from those estimates.

Cash Concentrations

The Company maintains its cash balances with a financial institution in federally insured accounts and may periodically have cash balances in excess of insurance limits. The Company maintains its accounts with financial institutions with a high credit rating. The Company has not experienced any losses to date and believes that it is not exposed to any significant credit risk on cash.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents. The Company currently invests available cash in money market funds.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets as follows:

Schedule of Property Plant and Equipment Estimated Useful Lives

Leasehold improvements

Shorter of

expected useful

life or lease term

Furniture, machinery and equipment, computer equipment and software

3-7 years

Maintenance and repairs are charged to expense as incurred, while any additions or improvements are capitalized.

Net Loss Per Share

Basic net loss per share is calculated by dividing net loss applicable to common stockholders by the weighted-average number of shares outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by adjusting the weighted-average number of shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock method. For purposes of the diluted net loss per share calculation, warrants to purchase common stock and stock options are considered to be common stock equivalents, but have been excluded from the calculation of diluted net loss per share, as their effect would be anti-dilutive for all periods presented. Therefore, basic and diluted net loss per share applicable to common stockholders were the same for all periods presented.

Unaudited Interim Financial Information

The accompanying interim condensed consolidated balance sheet as of June 30, 2023, condensed consolidated interim statements of operations and stockholders’ equity (deficit) for the three and six months ended June 30, 2023 and 2022, and cash flows for the six months ended June 30, 2023 and 2022 are unaudited. The interim unaudited condensed consolidated financial statements have been prepared in accordance with GAAP on the same basis as the annual audited consolidated financial statements and, in the opinion of management, reflect all adjustments necessary for a fair statement of the Company’s financial position as of June 30, 2023, its condensed consolidated results of operations and stockholders’ equity (deficit) for the three and six months ended June 30, 2023 and 2022, and cash flows for the six months ended June 30, 2023 and 2022. The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2023 and 2022 are unaudited. The results for the three and six months ended June 30, 2023 are not necessarily indicative of results to be expected for the year ending December 31, 2023, any other interim periods or any future year or period.

Recently Adopted Accounting Pronouncements

Accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s condensed consolidated financial statements upon adoption.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-12). The new standard requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. It also limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases. The Company adopted this standard on January 1, 2023, and the adoption of ASU 2016-13 did not have a material impact on its consolidated financial statements.

3. Fair Value Measurements and Short-term Investments

Fair value is defined 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.

On May 19, 2016 and February 10, 2017, the Company closed on the sale of shares of the Company’s common stock, the issuance of warrants to purchase shares of common stock, and the issuance of warrants to the placement agent for each transaction.

Due to a cash put provision within the warrant agreement, which could be enacted in certain change in control events, a liability associated with those warrants was initially recorded at fair value in the Company’s consolidated balance sheets upon issuance, and subsequently re-measured each fiscal quarter. The changes in the fair value between issuance and the end of each reporting period is recorded as a component of other income (expense), net in the consolidated statement of operations and comprehensive loss.

During the three and nine months ended September 30, 2017, warrant holders of 19,043,696 warrants agreed to the modification of the terms of their warrants, which resulted in placing all situations that would allow the warrant holder to put the warrant for cash fully in control of the Company. As a result of the modification, the warrants are no longer liability classified and do not need to be re-measured. These modifications resulted in the $4.3 million fair value of those warrants being reclassified from Warrant Liabilities to Additional Paid in Capital. The remaining un-modified 1,844,250 warrants will continue to be re-measured at each reporting period as long as they are outstanding and un-modified.

The Company utilizes a valuation hierarchy for disclosure of the inputs to the valuations used to measure fair ~~value. This hierarchy~~value that prioritizes the inputs into three broad ~~levels as follows.~~levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The Company had no assets or liabilities classified as Level 12 or Level 2.3 as of June 30, 2023 and December 31, 2022. The ~~Company has concluded that its warrants meet the definition~~Company’s short-term investments consist of a ~~liability under~~~~ASC 480 Distinguishing Liabilities From Equity~~certificate of deposit account held to maturity and is carried at amortized cost. The carrying value of financial instruments (consisting of cash, accounts payable, accrued compensation and accrued expenses) is considered to be representative of their respective fair values due to the short-term nature of those instruments. The certificate of deposit matures in October 2023.

The company has investments classified as short term and held-to-maturity on the ~~liability~~accompanying condensed consolidated balance sheets. Investment income is included as ~~Level 3.~~other income. Investment income for the three months ended June 30, 2023 and June 30, 2022 consists primarily of interest earned of $41,000 and $0, respectively. Investment income for the six months ended June 30, 2023 and June 30, 2022 consists of interest earned of $41,000 and $0, respectively.

The Company ~~has re-measured the liability~~had approximately $2.1 million in cash equivalents and $2.5 million in short-term investments that consist of a certificate of deposit held to ~~estimated fair value~~maturity and is carried at ~~inception, prior to modification and at each reporting date using the Black-Scholes option pricing model with the following weighted average assumptions:~~

Assumptions for estimating fair value of warrants Assumptions for estimating fair value on reporting
modified during the three months ended dates of
September 30, 2017 June 30, 2017 September 30, 2017 December 31, 2016
Risk-free interest rate 1.89 % 1.77 % 1.93 % 1.93 %
Expected volatility 82.3 % 82.4 % 85.0 % 72.7 %
Expected term (in years) 4.6 4.6 4.4 4.9
Expected dividend yield - - - -
Exercise price $ 0.40 $ 0.50 $ 0.40 $ 1.76
Market value of common stock $ 0.41 $ 0.33 $ 0.31 $ 0.89
Warrants to purchase shares of common stock 2,002,037 16,568,846 1,844,250 1,560,284

4.~~Fair Value Measurements (continued)~~

~~The following fair value hierarchy table presents information about~~amortized cost on the Company’s ~~financial assets~~balance sheet as of June 30, 2023. The Company had $1.2 million in cash equivalents and ~~liabilities~~$0 in short-term investments that were measured and recorded at fair value on ~~a recurring basis as of September 30, 2017:~~

Fair Value Measurement as of September 30, 2017
(In thousands)
Level 1 Level 2 Level 3 Total

Warrant liability $ - $ - $ 339 $ 339
Total $ - $ - $ 339 $ 339

~~The following fair value hierarchy table presents information about~~ the Company’s ~~financial assets and liabilities measured~~balance sheet at ~~fair value on a recurring basis as of~~ December 31, ~~2016:~~2022.

Schedule of Short Term Investment Securities

Fair Value Measurement as of December 31, 2016
(In thousands)
Level 1 Level 2 Level 3 Total

Warrant liability $ - $ - $ 605 $ 605
Total $ - $ - $ 605 $ 605

	June 30, 2023
(In thousands)	Amortized cost
Held-to-maturity
Certificate of deposit	$	2,523
Total investment securities	$	2,523

~~The following table presents a reconciliation~~4. Accrued and Other Current Liabilities

Accrued and other current liabilities consist of the ~~Company’s liabilities measured at fair value~~following:

Schedule of Accrued and Other Current Liabilities

	June 30,		December 31,
	2023		2022
	(in thousands)
Research and development	$	923	$	—
Advisory costs		375		300
Legal costs		—		135
Audit services		70		80
Payroll		82		55
Other liabilities		26		12
Total accrued and other current liabilities	$	1,476	$	582

5. Capital Stock

Private Placement

On April 12, 2023 and on ~~a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30, 2017:~~

Warrant Liability
(in thousands)
Balance at December 31, 2016 $ 605
Issuance of warrants 3,787
Change in fair value upon re-measurement 274
Reclassification of warrant liability to additional paid in capital upon modification (3,746 )
Reclassification of warrant liability to additional paid in capital upon exercise (581 )
Balance at September 30, 2017 $ 339

Issuance costs allocated to the warranty liability issued in the first quarter of 2017 amounted to $385,000 and have been included in the change in fair value of the warranty liability in the accompanying consolidated statements of operations.

~~There were no transfers between Level 1 and Level 2 in any of the periods reported.~~

5.~~Relationship with Harvard Bioscience~~

~~On October~~March 31, 2013, Harvard Bioscience, Inc. (“Harvard Bioscience”) contributed its regenerative medicine business assets, plus $15 million of cash, into Biostage (the “Separation”). On November 1, 2013, the spin-off of2023, the Company ~~from Harvard Bioscience was completed. On that date,~~entered into Securities Purchase Agreements, each a Purchase Agreement, with new and existing investors, the ~~Company became~~Investors, pursuant to which the Investors agreed to purchase in a private placement an ~~independent company that operates the regenerative medicine business previously owned by Harvard Bioscience. The spin-off was completed through the distribution~~aggregate of ~~all the~~1,000,967 shares of common stock for the aggregate purchase price of ~~Biostage~~approximately $6 million with a purchase price per unit of $6.00.

The Company had 1,113,622 warrants to ~~Harvard Bioscience stockholders (the “Distribution”)~~purchase common stock outstanding as of June 30, 2023 with a weighted-average exercise price of $4.69.

~~At the time of the Separation,~~6. Series E Convertible Preferred Stock

On April 28, 2022, the Company entered into a ~~10-year product distribution agreement~~Preferred Issuance Agreement, or PIA, with Harvard Bioscience, ~~under which each company~~Inc., or HBIO, dated as of April 27, 2022. Pursuant to the PIA, the Company and HBIO agreed that once HBIO had paid at least $4.0 million in certain settlement and related legal expenses, to satisfy the Company’s indemnification obligations with respect thereto, in lieu of paying cash, the Company would issue senior convertible preferred stock to HBIO that will ~~become the exclusive distributor for the other party for products such other party develops for sale~~contain terms as described in the ~~markets served by~~PIA.

On June 10, 2022, following the ~~other. In addition, Harvard Bioscience has agreed that except for certain existing activities~~execution of ~~its German subsidiary,~~a subscription agreement and HBIO providing evidence of payment of the requisite $4.0 million amount, the Company issued HBIO 4,000 shares of Series E Convertible Preferred Stock, or Series E Preferred Stock, at a price of $1,000 per share to satisfy the Company’s related indemnification obligations pertaining to the ~~extent that any Harvard Bioscience business desires to resell or distribute any bioreactor that is then manufactured by~~$4.0 million, in lieu of paying cash.

On January 18, 2023, HBIO converted 200 Series E Preferred Shares with accrued dividends of $9,545 into 31,933 shares of common stock.

In connection with the private placement, as of April 12, 2023, the Company had received $6.0 million in aggregate proceeds in such private placement. The private placement resulted in gross proceeds of at least $4,000,000 which triggered the ~~Company will be~~mandatory conversion of all the ~~exclusive manufacturer~~Company’s outstanding Series E Preferred Stock and related accrued dividends into shares of ~~such bioreactors and Harvard Bioscience will purchase such bioreactors from~~common stock at a conversion price of $6.00 per share. The conversion resulted in 674,693 shares of common stock being issued to the ~~Company. Since inception~~holder of the ~~Company, sales to Harvard Bioscience accounted for 100%~~Series E Preferred Stock. Following such conversion, there are no shares of Series E Preferred Stock outstanding.

There were no shares of any of the ~~Company’s revenues~~classes of preferred stock outstanding as of June 30, 2023. Authorized shares for each preferred stock class are as follows:

Schedule of Categories of Preferred Stock

	Authorized
Undesignated preferred stock		979,000
Series B convertible preferred stock		1,000,000
Series C convertible preferred stock		4,000
Series D convertible preferred stock		12,000
Series E convertible preferred stock		5,000

7. Share-Based Compensation

HRGN Amended and ~~receivables.~~

From the time of the Company’s spin-off from Harvard Bioscience through 2016, the Company manufactured research bioreactors. That business represented a small portion of the Company’s operations. In late 2016, the Company ceased the manufacture of research bioreactors to concentrate its efforts solely on development of its clinical product candidates. On November 3, 2017, in exchange for settlement of outstanding rent due to Harvard Bioscience, the Company sold its supply of research bioreactor parts, a royalty free perpetual sublicensable and transferable right and license to use the intellectual property, including certain patents covering research bioreactors, and relinquished exclusive manufacturing or distribution rights with respect to research bioreactors to Harvard Bioscience. This settlement only covers research bioreactors, not to be used for clinical purposes. The Company retains full exclusive rights to all assets and rights associated with the clinical bioreactor used in the development of the Company’s current Cellframe technology.

6.~~Stock-Based Compensation~~

~~Biostage 2013~~Restated Equity Incentive Plan

The Company maintains the ~~2013~~Amended and Restated Equity Incentive Plan (the ~~“Plan”)~~Plan) for the benefit of certain ~~of its~~ officers, employees, non-employee directors, and other key persons (including consultants and advisory board members). All options and awards granted under the Plan consist of the Company’s shares of common stock.

The ~~Company also issued equity~~Company’s policy is to issue stock available from its registered but unissued stock pool through its transfer agent to satisfy stock option exercises and vesting of the restricted stock units. The vesting period for awards is generally four years and the contractual life is ten years. Canceled and forfeited options and awards are available to be reissued under the Plan.

The Company’s Plan ~~at the time of the Distribution~~has 5,098,000 authorized shares to ~~all holders of Harvard Bioscience equity awards as part of an adjustment (the “Adjustment”) to prevent a loss of value due to the Distribution.~~

Compensation expense recognized under the Plan relates to service provided by employees, board members and a non-employee of the Company. There was no required compensation associated with the Adjustment awards to employees who remained at Harvard Bioscience.

~~The Company has granted options to purchase common stock and restricted stock units (RSUs)~~be issued under the Plan. ~~Stock option~~There were 1,293,379 shares available for issuance as of June 30, 2023.

The following table summarizes information concerning options outstanding and ~~restricted~~exercisable:

Schedule of Options Outstanding and Exercisable

Amount Weighted-average exercise price Weighted-average contractual life (years) Aggregate intrinsic value (in thousands)
Outstanding at December 31, 2022 2,516,924 $ 3.95 7.68 $ 6,917
Granted 1,863,309 6.05
Canceled / forfeited (593,333 ) 6.12
Outstanding at June 30, 2023 3,786,900 4.64 8.06 2,756
Options exercisable 1,998,552 4.65 7.44 1,971
Options vested and expected to vest 3,687,482 4.69 8.06 2,653
The Company’s outstanding stock ~~unit activity during~~options include 698,195 performance-based awards that have vesting provisions subject to the ~~nine months ended September~~achievement of certain business milestones. Total unrecognized compensation expense for the remaining performance-based awards is approximately $2.6 million. No expense has been recognized for these awards as of June 30, ~~2017~~2023 given that the milestone achievements for these awards have not yet been deemed probable for accounting purposes.
Aggregate intrinsic value for outstanding options and exercisable options as of June 30, 2023, was approximately $2.8 million and $2.0 million, respectively, based on the Company’s closing stock price of $3.65 per share as ~~follows:~~of June 30, 2023. As of June 30, 2023, unrecognized compensation cost related to unvested non-performance-based awards amounted to $4.4 million, which will be recognized over a weighted-average period of 2.69 years.
Stock Options Restricted Stock Units
Amount
Weighted-average
exercise price
Amount
Weighted -average
grant date fair value

Outstanding at December 31, 2016 3,877,681 $ 2.81 268 $ 6.00
Granted 1,896,500 0.40 404,750 0.38
Vested (RSUs) - - (268 ) 6.00
Canceled (569,865 ) 1.67 - -
Outstanding at September 30, 2017 5,204,316 $ 2.05 404,750 $ 0.38
10
12
6.~~Stock-Based Compensation (continued)~~
The Company uses the Black-Scholes option pricing model to value its stock options. The weighted average assumptions for valuing ~~the~~ options granted during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and 2022 were as follows:
Schedule of Weighted Average Assumptions
~~Expected volatility~~ ~~78.71~~ %
~~Expected dividends~~ ~~0.00~~ %
~~Expected term~~ ~~6.26~~ ~~years~~
~~Risk-free rate~~ ~~2.25~~ %
Six months ended June 30,
2023 2022
Risk-free interest rate 3.76 % 2.59 %
Expected volatility 126.16 % 124.51 %
Expected term (in years) 5.9 years 5.5 years
Expected dividend yield — % — %
The Company recorded ~~equity-based~~share-based compensation expense in the following expense categories of its condensed consolidated statements of operations:
Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(in thousands) (in thousands)

Research and development $ 98 $ 198 $ 281 $ 535
General and administrative 96 164 310 492
Total stock-based compensation $ 194 $ 362 $ 591 $ 1,027
Schedule of Share-based Compensation Expense
Three months ended
June 30, Six months ended
June 30,
2023 2022 2023 2022
(In thousands) (In thousands)
Research and development $ 51 $ 88 $ 113 $ 148
Selling, general and administrative 428 189 2,206 364
Total $ 479 $ 277 $ 2,319 $ 512

~~Included in the above table for 2016 is stock-based compensation related to the Harvard Bioscience Plan, which is described below. There is no expense related to the Harvard Bioscience Plan in 2017.~~
~~Harvard Bioscience Stock Option and Incentive Plan~~
Harvard Bioscience maintains the Third Amended and Restated 2000 Stock Option and Incentive Plan (as amended, the “Harvard Bioscience Plan”) for the benefit of certain of its officers, directors and employees. In connection with the Separation, those employees of Harvard Bioscience who became employees of Biostage were allowed to continue vesting in their stock-based awards of stock options and restricted stock units granted under the Harvard Bioscience Plan. Accordingly, the Company recognized compensation expense as services were provided by those employees through the time of their vesting. All stock-based awards granted to Biostage employees were fully vested as of January 1, 2017.
7.8. Commitments and Contingencies
On April 14, 2017, representatives for the estate of ~~a deceased~~an individual plaintiff filed a ~~civil lawsuit in~~wrongful death complaint with the Suffolk Superior Court, in ~~Boston,~~the County of Suffolk, Massachusetts, against the Company and other defendants, including Harvard Bioscience, ~~and other defendants.~~Inc., or HBIO, the former parent of the Company that spun off the Company in 2013, as well as another third party. The complaint ~~alleges~~sought payment for an unspecified amount of damages and alleged that the ~~decedent was harmed~~plaintiff sustained terminal injuries allegedly caused by ~~two tracheal implants that incorporated synthetic trachea scaffolds~~products provided by certain of the named defendants and ~~a biologic component combined~~utilized in connection with surgeries performed by ~~the implanting surgeon with a bioreactor, and surgically implanted~~third parties in ~~the decedent in two surgeries performed~~Europe in 2012 and ~~2013, which harm caused her injury and death. The civil complaint seeks a non-specific sum of money to compensate the plaintiffs.~~2013. This ~~civil~~ lawsuit ~~relates~~related to the Company’s ~~first generation~~first-generation trachea scaffold technology for which the Company discontinued development in 2014, and not to the Company’s current ~~Cellframe technology nor to its lead development product candidate, the Cellspan esophageal implant. The litigation is at an early stage and~~HRGN Esophageal Implant.
On April 27, 2022, the Company ~~intends to vigorously defend this case. While~~and HBIO executed a settlement with the Company believes that such claim lacks merit, and has filed a motion seeking dismissal of the lawsuit, the Company is unable to predict the ultimate outcome of such litigation. In accordance with a separation and distribution agreement between Harvard Bioscience and the Companyplaintiffs (the “Settlement”), which resolves all claims relating to the ~~Separation,~~litigation. The Settlement resulted in the dismissal with prejudice of the wrongful death claim, and neither the Company ~~would be required to indemnify Harvard Bioscience against losses that Harvard Bioscience may suffer as a result of this litigation.~~nor HBIO admit any fault or liability in connection with the claim. The ~~Company has been informed~~Settlement also resolved any and all claims by ~~its insurance provider that~~and between the ~~case has been accepted as an insurable claim under~~parties and the Company’s product liability insurance ~~policy.~~carriers, which resulted in the dismissal with prejudice of all claims asserted by or against those carriers, the Company and HBIO.
In relation to the litigation, the Company paid approximately $5.9 million of aggregate costs related to the lawsuit, of which 100% has been paid as of December 31, 2022. This aggregate amount included the cost of legal and related costs incurred by the Company, which consisted of attorneys’ fees and advisor and specialist costs as part of its defense in this matter. On March 3, 2022, the Company received a cash payment of approximately $0.1 million from Medmarc, the Company’s insurance carrier. This amount represented a reimbursement of previously incurred legal costs and was recorded as a reduction to selling, general and administrative expenses during the six months ended June 30, 2022.
11
With respect to such $5.9 million of costs described above, the Company was required to either pay such costs directly or indemnify HBIO as to such amounts it incurs. Of such amounts, the Company anticipated that HBIO would pay an aggregate amount of $4.0 million by the end of the second quarter of 2022. With respect to the indemnification obligation of the Company to HBIO pertaining to such costs, the Company and HBIO entered into a Preferred Issuance Agreement dated as of April 27, 2022, or the “PIA”. In connection with the PIA, the Company and HBIO agreed that once HBIO had paid at least $4.0 million in such costs, to satisfy the Company’s indemnification obligations with respect thereto, in lieu of paying cash, the Company would issue senior 8% convertible preferred stock to HBIO that will contain terms as described in the PIA, including the term sheet attached thereto. On June 10, 2022, following the execution of a subscription agreement and HBIO providing evidence of payment of the requisite $4.0 million amount, the Company issued HBIO 4,000 shares of Series E 8% Convertible Preferred Stock at a price of $1,000 per share to satisfy the Company’s related indemnification obligations aggregating $4.0 million, which included the accrual for contingency of $3.3 million and approximately $0.8 million of legal and related costs paid on behalf of the Company by HBIO previously included in accrued expenses.
From time to time, the Company may be involved in various claims and legal proceedings arising in the ordinary course of business. Other than the above matter, there are no such matters pending that the Company expects to be material in relation to its business, financial condition, ~~and~~ results of operations, or cash flows.
9. Leases
The Company leases laboratory and office space and certain equipment with remaining terms ranging from 1 to 2 years.
The laboratory and office space arrangement is under a sublease that was renewed in December of 2022 and currently extends through May 31, 2024. This lease automatically renews annually for one-year periods unless the Company or the counterparty provides a notice of termination within one hundred and eighty days prior to May 31^st of each year.
On January 5, 2022, the Company executed a four-month sublease agreement for certain laboratory and office space at its Holliston, Massachusetts facility. The Company further extended the sublease agreement on a month-to-month basis until August 31, 2022 when the other party vacated the premises. For the six months ended June 30, 2022, the Company recorded sublease income of approximately $61,000 relating to this agreement.
All of the Company’s leases qualify as operating leases. The following table summarizes the presentation of the Company’s operating leases in its condensed consolidated balance sheets:
Schedule of Operating Leases in Consolidated Balance Sheets
Balance Sheet Classification June 30, 2023 December 31, 2022

Assets:
Operating lease assets Right-of-use asset, net $ 135 $ 147
Liabilities:
Current portion of operating lease liabilities Current portion of operating lease liabilities 119 99
Operating lease liabilities, net of current portion Operating lease liabilities, net of current portion 18 48
Total operating lease liabilities $ 137 $ 147
12
13
8. ~~Subsequent Events~~The Company recorded operating lease expense in the following categories in its condensed consolidated statements of operations:
~~NASDAQ Delisting and OTCQB Quotation~~Schedule of Operating Lease Expense Categories in Consolidated Statements of Operations
Three months ended
June 30, Six months ended
June 30,
2023 2022 2023 2022
(In thousands) (In thousands)
Research and development $ 17 $ 19 $ 35 $ 38
General and administrative 11 11 22 22
Total $ 28 $ 30 $ 57 $ 60
~~On October 4, 2017, following~~
Cash paid included in the withdrawal by the Company of its appeal to the NASDAQ Hearings Panel, the Company received written notification from NASDAQ indicating that the Panel had determined to delist the Company’s common stock from The NASDAQ Capital Market, and suspended the stock’s trading on that marketplace effective with the open of business on October 6, 2017. NASDAQ also informed the Company that it would file a Form 25-NSE with the SEC to formally remove the Company’s common stock from listing on NASDAQ, which was filed with the SEC on December 7, 2017.
~~The Company’s common stock began trading on the OTCQB marketplace at the open of business on October 6, 2017. The Company’s common stock continues to trade under the symbol “BSTG”.~~
~~First Pecos Breach Notice~~
~~On October 5, 2017, the Company delivered a notice to First Pecos and its manager, Leon “Chip” Greenblatt III, stating that First Pecos was in breach~~computation of the ~~Purchase Agreement, as described in note 3, as a result of its failure~~operating lease assets and lease liabilities during the three and six months ended June 30, 2023 amounted to ~~deliver the Purchase Price to the Company following satisfaction of all closing conditions~~approximately $28,000 and $57,000, respectively. Cash paid included in the ~~Purchase Agreement. None~~computation of the ~~shares of common stock, shares of Preferred Stock or Warrants were issued to First Pecos.~~
On October 10, 2017, First Pecos delivered a notice to the Company stating that, as a result of alleged breaches by the Company of its obligations pursuant to the Purchase Agreement, First Pecos terminated the Purchase Agreement and demanded that the Company pay a $500,000 termination fee pursuant to the terms of the Purchase Agreement.
The Company believes that it was not in breach of the Purchase Agreement at any time, and that First Pecos’ notice was unjustified and without any legal merit or factual basis. Accordingly, the Company believes that Pecos was not entitled to terminate the Purchase Agreement, and is not entitled to any termination fee thereunder, as the failure to consummate the Pecos Placement resulted from First Pecos’ breach of the Purchase Agreement. The Company is reviewing all of its rights and remedies against First Pecos that may be available to the Company.
~~Headcount Reduction~~
During October and November, 2017, the Company completed a reduction in headcount of 21 of its employees, which represents 78% of its employees prior to such reduction. The reductions were made with the objective of conserving the Company’s remaining cash on hand while the Company explores strategic alternatives with its advisors. The Company estimates that it will incur charges for one-time termination benefits in connection with the headcount reduction of approximately $165,000 for employee severance and related costs, payment of which has been deferred until cash resources become available. At the time of the first reduction the remaining officers reduced their salaries by 50%.
~~Bioreactor Sale to Harvard Bioscience~~
On November 3, 2017, in exchange for settlement of outstanding rent due to Harvard Bioscience, Biostage sold all of its current stock of research bioreactor parts, a royalty free perpetual sublicensable and transferable right and license to use the intellectual property, including but not limited to certain patents covering research bioreactors, and relinquished exclusive manufacturing or distribution rights with respect to research bioreactors to Harvard Bioscience. The Company had ceased the manufacture of research bioreactors in late 2016, to concentrate its efforts solely development of its clinical product candidates. This settlement only covers research bioreactors, not to be used for clinical purposes. The Company retains full exclusive rights to alloperating lease assets and ~~rights associated with~~lease liabilities during the ~~clinical bioreactor used in the development~~three and six months ended June 30, 2022 amounted to approximately $30,000 and $60,000, respectively.
The weighted average remaining lease term and weighted average discount rate of the Company’s ~~current Cellframe technology.~~operating leases are as follows:
Schedule of Weighted Average Lease Term and Discount Rates
As of June 30,
2023 2022
Remaining lease term (in years) 0.88 1.16
Discount rate 12.78 % 9.25 %
The minimum lease payments for the next three years are expected to be as follows:
Schedule of Minimum Lease Payments
June 30, 2023
As of
June 30, 2023
(in thousands)
2023 $ 70
2024 69
2025 5
Total lease payments 144
Less: imputed interest (7 )
Present value of operating lease liabilities $ 137
10. Net Loss Per Share
Schedule of Basic and Diluted Net Loss Per Share
2023 2022 2023 2022
Three months ended June 30, Six months ended June 30,
2023 2022 2023 2022
(in thousands, except shares and per share data) (in thousands, except shares and per share data)
Net loss $ (2,614 ) $ (1,345 ) $ (5,504 ) $ (3,522 )
Preferred stock dividends 3 (18 ) (77 ) (18 )
Net loss attributable to common stockholders $ (2,611 ) $ (1,363 ) $ (5,581 ) $ (3,540 )

Basic and diluted weighted average common shares outstanding 13,785,657 11,230,525 13,000,211 10,996,996

Basic and diluted net loss per share attributable to common stockholders $ (0.19 ) $ (0.12 ) $ (0.43 ) $ (0.32 )
Basic net loss per share attributable to common stockholders $ (0.19 ) $ (0.12 ) $ (0.43 ) $ (0.32 )

~~December 2017 Private Placement MOU~~
~~On December 11, 2017,~~The following potential common shares were excluded from the ~~Company entered into a binding Memorandum~~calculation of Understanding (the “MOU”) with Bin Zhao, pursuant to which the Company will issue to Ms. Zhao and her designees in a private placement (the “Private Placement”) 40,000,000 shares of its common stock at a purchase price of $0.10diluted net loss per share attributable to common stockholders for the six months ended June 30, 2023 and 2022 because including them would have had an anti-dilutive effect:
Schedule of Antidilutive Securities Excluded from Computation of Earnings per Share
Six months ended June 30,
2023 2022
Options to purchase common stock 3,786,900 2,402,603
Warrants to purchase common stock 1,113,622 1,888,622
Series E convertible preferred stock — 686,680
Total 4,900,522 4,977,905
11. Income Taxes
The Company did not record a federal or state income tax provision or benefit for the six months ended June 30, 2023 and 2022, respectively, due to the ~~extent Ms. Zhao~~expected loss before income taxes to be incurred for the years ended December 31, 2023 and ~~her designees, following~~2022, as well as the ~~transaction, would own more than 49.99%~~Company’s continued maintenance of a full valuation allowance against its net deferred tax assets.
12. Subsequent Events
The Company performed a review of events subsequent to the balance sheet through the date the financial statements were issued and determined that there were no such events requiring recognition or disclosure in the financial statements except as disclosed below.
In July 2023, the Company’s shareholders approved the Amended and Restated Equity Incentive Plan to increase of the ~~Company’s common stock, shares~~number of ~~a new class of preferred stock of the Company (the “Preferred Stock”) with a per-share purchase price of $1,000.~~
~~Additionally, Ms. Zhao and her designees will receive warrants (the “Warrants”) to purchase 60,000,000~~ shares of the Company’s common stock ~~(or,~~available for issuance pursuant to the ~~extent Ms. Zhao and her designees would more than 49.99% of~~2013 Equity Incentive Plan by 4,000,000 shares, which increased the ~~Company’s common stock,~~total shares ~~of Preferred Stock)~~authorized to be issued under the Plan to 9,098,000. ~~The Warrants will have an exercise price of $0.10 per share.~~
~~The investor advanced a $300,000 deposit on the private placement proceeds concurrently with the MOU’s execution.~~
13
14
The Preferred Stock will be entitled to vote on any matters to which shares of the Company’s common stock are entitled to vote, on an as-if-converted basis. The Preferred Stock will include an ownership limitation that will limit Ms. Zhao and her affiliates to owning no more than 49.99% of the Company’s common stock. Additionally, the Company has agreed to grant board representation and nomination rights to Ms. Zhao and her affiliates, with two director nominees initially and, to the extent that Ms. Zhao and her affiliates beneficially own more than 50% of the Company’s common stock (assuming conversion of all shares of Preferred Stock held by such persons), enough director nominees such that the director nominees of Ms. Zhao and her affiliates shall constitute a majority of the Company’s board of directors (but no more than is necessary to constitute such a majority).
Pursuant to the MOU, the Company may identify other investors who may participate in the Private Placement on the same financial terms as Ms. Zhao and her designees, for gross proceeds of up to $2.0 million. In the event such other investors participate in the Private Placement, then Ms. Zhao and her designees may elect to purchase additional securities in the Private Placement, on the same terms, to the extent necessary to maintain the same post-transaction percentage of voting power that Ms. Zhao and her designees would have received if no such additional parties participated in the Private Placement.
The Private Placement is conditioned on satisfaction of customary closing conditions and on the Company completing a reverse stock split, as previously approved by its stockholders, such that the Company will have sufficient authorized but unissued shares of common stock to accommodate the issuance of shares of common stock in the Private Placement, along with all shares of common stock issuable upon exercise of the Warrants or conversion of the Preferred Stock. The numbers of securities, purchase price per share of common stock and exercise price of the Warrants will be adjusted to reflect such reverse stock split. The definitive agreements relating to the Private Placement will include customary representations, warranties and covenants.
The MOU is intended to be binding upon both the Company and Ms. Zhao. The shares of common stock, the Warrants (including shares of common stock issuable upon exercise of the Warrants) and the shares of Preferred Stock (including shares of common stock issuable upon conversion of the Preferred Stock) will be sold and issued without registration under the Securities Act of 1933 (the “Securities Act”) in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act as transactions not involving a public offering and Rule 506 promulgated under the Securities Act as sales to accredited investors, and in reliance on similar exemptions under applicable state laws.
15
~~Item 2.~~ ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward Looking Statements
This Quarterly Report on Form 10-Q contains statements that are not statements of historical fact and are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). The forward-looking statements are principally, but not exclusively, contained in “Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements include, but are not limited to, statements about management’s confidence or expectations and our plans, objectives, expectations and intentions that are not historical ~~facts.~~facts and the potential impact of COVID-19 on our business and operations. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “goals,” “sees,” “estimates,” “projects,” “predicts,” “intends,” “think,” “potential,” “objectives,” “optimistic,” “strategy,” and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Factors that may cause our actual results to differ materially from those in the forward-looking statements include our ability to access debt and equity markets and raise additional funds when needed; the success of our collaborations, clinical trials and pre-clinical development efforts and programs, which success may not be achieved on a timely basis or at all; our ability to obtain and maintain regulatory approval for our implant products, bioreactors, scaffolds and other devices we pursue, including for the esophagus or airway, which approvals may not be obtained on a timely basis or at all; ~~our ability to access debt and equity markets and raise additional funds when needed;~~ the number of patients who can be treated with our products; the amount and timing of costs associated with our development of implant products, bioreactors, scaffolds and other devices; our failure to comply with regulations and any changes in regulations; unpredictable difficulties or delays in the development of new technology; our collaborators or other third parties we contract with, including with respect to conducting any clinical trial or pre-clinical development efforts, not devoting sufficient time and resources to successfully carry out their duties or meet expected deadlines; our ability to attract and retain qualified personnel and key employees and retain senior management; potential liability exposure with respect to our products; ~~our inability to operate effectively as a stand-alone, publicly traded company; the actual costs of separation may be higher than expected;~~ the availability and price of acceptable raw materials and components from third-party suppliers; difficulties in obtaining or retaining the management and other human resource competencies that we need to achieve our business objectives; increased competition in the field of regenerative medicine and bioengineering, and the financial resources of our competitors; our ability to obtain and maintain intellectual property protection for our device and product candidates; our inability to implement our growth strategy; the control our principal stockholders can exert based on holding a majority of voting power; plus factors described under the heading “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2022 filed with the Securities and Exchange Commission (the “SEC”) on March ~~17, 2017~~30, 2023 or described in our other public filings. Our results may also be affected by factors of which we are not currently aware. We may not update these forward-looking statements, even though our situation may change in the future, unless we have obligations under the federal securities laws to update and disclose material developments related to previously disclosed information.
~~Overview~~Harvard Apparatus Regenerative Technology, Inc. is referred to herein as “we,” “our,” “us”, and “the Company”.
Business Overview
We are a clinical-stage biotechnology company ~~developing bioengineered organ implants~~focused on the development of regenerative medicine treatments for disorders of the gastro-intestinal system and other organs that result from cancer, trauma or birth defects. Our technology is based on our ~~novel Cellframe technology. Our Cellframe technology is comprised of~~proprietary cell-therapy platform that uses a ~~biocompatible scaffold that is seeded with the recipient’s~~patient’s own stem ~~cells. This technology is being developed~~cells to ~~treat life-threatening conditions of the esophagus, trachea or bronchus with the objective of dramatically improving the treatment paradigm for those patients.~~
regenerate and restore function to damaged organs. We believe that our ~~Cellframe~~ technology ~~will provide surgeons with new ways~~represents a next generation solution for restoring organ function because it allows the patient to ~~address damage to~~regenerate their own organ, thus eliminating the ~~esophagus, bronchus, and trachea due to congenital abnormalities, cancer, infection~~need for human donor or ~~trauma. Products being developed based on our Cellframe technology for those indications are called Cellspan products.~~
~~We announced favorable preliminary pre-clinical results~~animal transplants, the sacrificing of large-animal studies for the esophagus, trachea and bronchus in November 2015. Since then, the Cellspan esophageal implant product candidates have been our lead development product candidates. We are pursuing two development programs that address conditionsanother of the esophagus: esophageal atresia in pediatric patients and esophageal cancer in adult patients. Our Cellspan esophageal product candidates are each intended to provide a surgical solution to stimulate regeneration of a segment of the esophagus missing due to a congenital abnormalitypatient’s own organs or ~~following surgical removal to establish or reestablish the organ’s continuity and integrity.~~permanent artificial implants.
14
16
~~Approximately one in 2,500 babies in~~We conducted the U.S. is born with esophageal atresia, a congenital condition where the child’s esophagus is underdeveloped and does not extend completely from the mouth to the stomach. When a long segment of the esophagus is lacking, the current standard of care is a series of surgical procedures where surgical sutures are applied to both endsworld’s first successful regeneration of the esophagus in ~~an attempt to stretch them together so they can be connected~~a cancer patient in August 2017. This surgery was performed by Dr. Dennis Wigle, Chair of Thoracic Surgery at the Mayo Clinic in a later date. This process can take weeks and the procedure can result in serious complications and may carry high rates of failure. Such approach also requires, in time, at least two separate surgical interventions. Other options include the use of the child’s stomach that would be pulled up, or a piece of the patient’s intestine that would be moved to the gap, to allow a connection to the mouth. We are working to develop a Cellspan esophageal implant product candidate to address newborns’ esophageal atresia, to provide a simpler, more effective and potentially organ-sparing solution.
~~A portion of all patients diagnosed~~patient with esophageal ~~cancer are treated via a surgical~~cancer. The results were published in the Journal of Thoracic Oncology Clinical and Research Reports in August 2021. The procedure ~~known as an esophagectomy. The current standard of care for an esophagectomy requires a complex surgical procedure~~demonstrated that involves moving the patient’s stomach or a portion of their colon into the chest to replace the portion of esophagus resected by the removal of the tumor. These current procedures have high rates of complications, and can lead to a severely diminished quality of life and require costly ongoing care. Our Cellspan esophageal implants aim to simplify the procedure, reduce complications, result in a better quality of life and reduce the overall cost of these patients to the healthcare system.
~~In May 2016,~~using HRGN’s technology, we ~~reported an update of results from pre-clinical large-animal studies. We disclosed that the study had demonstrated in a predictive large-animal model the ability of Biostage Cellspan organ implants~~were able to successfully ~~stimulate~~regenerate esophageal tissue, including the regeneration of sections of esophagus that had been surgically removed for the study. Cellspan esophageal implants, consisting of a proprietary biocompatible synthetic scaffold seeded with the recipient animal’s own stem cells, were surgically implanted in place of the esophagus section that had been removed.
Study animals were returned to a solid diet two weeks after implantation surgery. The scaffolds, which are intended to be in place only temporarily, were later retrieved via the animal’s mouth in a non-surgical endoscopic procedure. After two and a half months post-surgery, a complete epithelium and other specialized esophagus tissue layers were regenerated. Animals in the study demonstrated weight gain and appear healthy and free of any significant side effects, including two that are now more than one year post implantation, and are receiving no specialized care.
~~In November 2016, we were granted Orphan Drug Designation for our Cellspan esophageal implant by the FDA~~mucosal lining, to restore the ~~structure~~integrity, continuity and ~~function~~functionality of the ~~esophagus subsequent~~esophageal tube. This successful first-in-human experience, plus the research we have performed on 45 pigs, led the U.S. Food and Drug Administration (“FDA”) to ~~esophageal damage due to cancer, injury or congenital abnormalities. Orphan drug status provides market exclusivity~~approve our 10-patient combined phase 1 and phase 2 clinical trial. This combination trial will measure both safety and efficacy in the patient population.
We were incorporated and commenced operations on November 1, 2013 as a result of a spin-off from Harvard Bioscience, Inc., or Harvard Bioscience. On that date, we became an independent company that operates the regenerative medicine business previously owned by Harvard Bioscience. The spin-off was completed through the distribution of all the shares of common stock of HRGN to Harvard Bioscience stockholders.
We have also formed a subsidiary in Hong Kong, Harvard Apparatus Regenerative Technology Limited, as we continue to assess the market and regulatory approval pathway in China as to our implant products. We are not certain at this time as to which market, including U.S. or China for ~~seven years~~example, may provide the most viable initial pathway for regulatory approval to a commercial product. This will depend on a number of factors, including the approval and development processes, related costs, ability to raise capital and the terms and conditions thereof, among other factors. Any development and capital raising efforts in China may include a joint venture in relation to our Hong Kong subsidiary, and would also involve a number of commercial variables, including rights and obligations pertaining to licensing, development, and financing, among others. Our failure to receive or obtain such clearances or approvals on a timely basis or at all, whether that be in the U.S., China or otherwise, would have an adverse effect on our results of operations.
We filed an amendment (the “Certificate of Amendment”) to our Amended and Restated Certificate of Incorporation with the Secretary of State for the State of Delaware to change our name from Biostage, Inc. to Harvard Apparatus Regenerative Technology, Inc. We also amended and restated our Amended and Restated Bylaws, solely to reflect the name change (as amended, the “Third Amended and Restated Bylaws”). The Certificate of Amendment and the Third Amended and Restated Bylaws each became effective on July 20, 2023.
Since our incorporation, we have devoted substantially all of our resources to developing our programs, building our intellectual property portfolio, business planning, raising capital and providing selling, general and administrative support for these operations. To date, we have financed our operations with proceeds from the ~~date~~sales of common stock and preferred stock. In December 2017, we sold the ~~product’s approval for marketing. This exclusivity is in addition~~inventory and rights to ~~any exclusivity we may obtain due to our patents. Additionally, orphan designation provides certain incentives, including tax credits~~manufacture and a waiver of the Biologics License Application or BLA fee. We also intend to apply for orphan drug designation for our Cellspan esophageal implant in Europe in the future. Orphan drug status in Europe provides market exclusivity there for ten years from the date of the product’s approval for marketing.
We are conducting Good Laboratory Practice or GLP studies to demonstrate that our technology, personnel, systems and practices are sufficient for advancing into clinical trials. GLP safety studies are required to advance to an Investigational New Drug or IND application with the FDA, which would seek approval to initiate clinical trials for Biostage Cellspan esophageal implants in humans.
~~In October 2016, we announced a regulatory update following our planned pre-Investigational New Drug, or pre-IND, meeting with the FDA, for the advancement~~sell research-only versions of our ~~lead product candidate,~~bioreactors to Harvard Bioscience. We did not recognize any revenues during the six months ended June 30, 2023 and 2022.
We have contracted with IQVIA, a ~~Cellspan Esophageal Implant~~leading global provider of advanced analytics, technology solutions and clinical research services to ~~be used~~the life sciences industry, as the contract research organization (CRO) to ~~stimulate esophageal regeneration following surgery to address esophageal cancer in adults, into human~~manage our first clinical ~~studies.~~trial. We ~~subsequently announced our expectation to file an IND application with~~activated the ~~FDA~~first clinical trial site and are currently screening patients in the third quarter of ~~2017 based on our election to extend the duration of our ongoing GLP animal studies following the feedback provided by the FDA.~~
~~On August 7, 2017, we announced the use of our Cellspan Esophageal Implant~~2023. Our product candidate in a patient at a major U.S. hospital via an FDA-approved single-use expanded access application. The implant was surgically implanted in May 2017 into a 75-year old male patient with a life-threatening cancerous mass in his chest. The portion of the esophagus affected by the cancer was removed and the Cellspan Esophageal Implant was utilized to reconstruct the esophagus. It is the Company’s understanding that this life saving surgery would not have been attempted without the use of the Company’s Cellspan Esophageal Implant product candidate. The patient remains alive seven months after the surgery.
In August 2017, we announced that we are reprioritizing our product development program based on greatest unmet medical need, analysis of existing surgical options, and physician validation. We believe that, of our two current programs, the Cellspan Esophageal Implant program to treat pediatric esophageal atresia provides a shorter time to a commercial product and the greater overall potential value. We also believe that the pediatric esophageal atresia program needs to advance in the first position with the FDA to ensure eligibility for the pediatric rare disease accelerated review voucher program. Receipt of such a voucher, if achieved, could potentially provide significant value to the company in the future. As a result, we are elevating the pediatric program to our lead program. We plan to continue to advance the Cellspan Esophageal Implant adult program, but have not filed an IND for that product candidate at this time. Our current plan for that product candidate is to update the FDA on the progress and status of our preclinical testing, including our GLP studies, for the adult esophagus program in the near future. Based on the FDA’s feedback, we may amend its preclinical testing plan and continue toward the filing of an IND.
17
~~Our products~~candidates are currently in development and have not yet received regulatory approval for sale anywhere in the world.
~~February 2017 Public Offering~~In the second quarter of 2023, the Company’s subsidiary in Hong Kong, Harvard Apparatus Regenerative Technology Limited, or HRGN LTD, started a Consumer Health business.
~~On February 10, 2017, we completed~~The Consumer Health business will include a ~~public offering~~broad range of ~~20,000,000 shares~~products focused on personal healthcare including anti-aging dietary supplements. The Company plans to start selling anti-aging supplements through the Hong Kong subsidiary in the third quarter of common stock at a purchase price of $0.40 per share and the issuance of warrants to purchase 20,000,000 shares of common stock at an exercise price of $0.50 per warrant for gross proceeds of $8.0 million and net proceeds of $6.8 million. Additionally, we issued warrants to purchase 1,000,000 shares of common stock2023. These products are marketed to the ~~placement agent for the offering~~general public and initially targeted at ~~an exercise price of $0.40 per warrant. As of September 30, 2017, 2,647,338 of those warrants had been exercised for proceeds of $1.1 million. If~~consumers in the ~~future the stock’s market price were to increase~~Great China Region through eCommerce (online sales).
Financial Condition and market conditions were such that all of the remaining 18,352,662 warrants were to be exercised, then such exercises could provide approximately $7.4 million of cash proceeds to the Company, net of issuance costs.Need for Additional Funds
~~First Pecos Securities Purchase Agreement and Breach Notice~~
On June 26, 2017, we entered into a binding Memorandum of Understanding (the “Pecos MOU”) with First Pecos, LLC (“First Pecos”), pursuant to which the we agreed to issue to First Pecos in a private placement (the “Pecos Placement”) 9,700,000 shares of its common stock at a purchase price of $0.315 per share or, to the extent First Pecos, following the transaction, would own more than 19.9% of our common stock, shares of a new class of our preferred stock (the “Preferred Stock”) with a per-share purchase price of $1,000.
Additionally, First Pecos was to receive warrants (the “Warrants”) to purchase 9,700,000 shares of our common stock or, to the extent First Pecos would own more than 19.9% of our common stock, shares of Preferred Stock. The Warrants would have had an exercise price of $0.315 per share and would not have been exercisable until six months after the closing of the Pecos Placement.
Under the Pecos Placement, the Preferred Stock would bear a cumulative annual dividend of 15%, compounding annually, and would be senior to all of our other common stock, but would generally not have any voting rights. Following approval by our stockholders, the Preferred Stock would automatically convert into shares of our common stock. We agreed to include a proposal for such stockholder approval in the definitive proxy statement for our 2018 annual meeting of stockholders and, if not approved at such meeting, would seek approval from our stockholders every six months thereafter.
In connection with the Pecos Placement, First Pecos agreed to serve as a backstopping party with respect to two pro rata rights offerings with aggregate gross proceeds of up to $14.0 million that we could elect to conduct within 24 months following the closing of the Pecos Placement. Additionally, we had agreed to grant board representation and nomination rights to First Pecos that would be proportional to the percentage of our common stock owned by First Pecos and its affiliates.
The Pecos Placement was conditioned on satisfaction of customary closing conditions, including us terminating our Shareholder Rights Plan, and was expected to be consummated on or prior to August 15, 2017. The definitive agreements relating to the Pecos Placement were to include customary representations, warranties and covenants. We agreed to file a resale registration statement promptly after the closing of the Pecos Placement to register the resale of the shares of common stock issued in the Pecos Placement.
The Pecos MOU was intended to be binding upon both us and First Pecos. In the event that we failed to perform any of our obligations under the Pecos MOU or otherwise breached the Pecos MOU, subject to certain exceptions, First Pecos could terminate the Pecos MOU, and we would have been obligated to pay a termination fee of $0.5 million (the “Termination Fee”).
We entered into the Securities Purchase Agreement (the “Purchase Agreement) with First Pecos on August 11, 2017, pursuant to which we agreed to sell to First Pecos, and First Pecos agreed to purchase from us, shares of our common stock, shares of our Preferred Stock and Warrants on the terms described above. The aggregate gross proceeds from the private placement of common stock, Preferred Stock and the Warrant would have been $3,055,500 (the “Purchase Price”). We did not receive the Purchase Price from First Pecos.
On October 5, 2017, we delivered a notice (the “Notice”) to First Pecos and its manager, Leon “Chip” Greenblatt III, stating that First Pecos was in breach of the Purchase Agreement as a result of its failure to deliver the Purchase Price to us following satisfaction of all closing conditions in the Purchase Agreement. None of the shares of common stock, shares of Preferred Stock or Warrants have been issued to First Pecos.
On October 10, 2017, First Pecos delivered a notice to us stating that, as a result of alleged breaches by us of our obligations pursuant to the Purchase Agreement, First Pecos has terminated the Purchase Agreement and demanded that we pay the Termination Fee pursuant to the terms of the Purchase Agreement.
We believe that we were not in breach of the Purchase Agreement at any time, and that First Pecos’s notice was unjustified and without any legal merit or factual basis. Accordingly, we believe that First Pecos is not entitled to terminate the Purchase Agreement, and is not entitled to the Termination Fee thereunder, as the failure to consummate the Pecos Placement resulted from First Pecos’s breach of the Purchase Agreement. We are reviewing all of its rights and remedies against First Pecos that may be available to us.
18
~~NASDAQ Delisting and OTCQB Quotation~~
We had been operating under an extension period from November 18, 2016 through May 17, 2017 with respect to non-compliance of the listing requirements on NASDAQ. We then requested a hearing with the NASDAQ Hearings Panel (the “Panel”), and on June 29, 2017, presented its plan to regain compliance with the NASDAQ listing requirements, including Listing Rule 5550(a)(2), which requires an issuer to maintain a closing bid price of at least $1.00 per share, and Listing Rule 5550(b)(1), which requires minimum stockholders’ equity of $2.5 million. The Panel accepted our plan and continued listing was subject to a number of conditions, with the Panel’s decision ultimately requiring that we evidence full compliance with all requirements for continued listing on The NASDAQ Capital Market, including the minimum bid price and stockholders’ equity requirements, by no later than November 13, 2017.
We determined that as a result of the termination of the Purchase Agreement, we could not regain compliance with The NASDAQ Capital Market listing standards by the deadline imposed by NASDAQ, and on October 4, 2017 we withdrew our appeal from the Panel.
On October 4, 2017, following the withdrawal by us of our appeal to the Panel, we received written notification from NASDAQ indicating that the Panel had determined to delist our common stock from The NASDAQ Capital Market, and suspended it from trading on that marketplace effective with the open of business on October 6, 2017. NASDAQ has also informed us that it would file a Form 25-NSE with the Securities and Exchange Commission (the “SEC”) to remove the Company’s common stock from listing on NASDAQ, which was filed with the SEC on December 7, 2017.
~~Our common stock began trading on the OTCQB marketplace at the open of business on October 6, 2017. Our common stock continues to trade under the symbol “BSTG”.~~
~~December 2017 Private Placement MOU~~
On December 11, 2017, we entered into a binding Memorandum of Understanding (the “MOU”) with Bin Zhao, pursuant to which we will issue to Ms. Zhao and her designees in a private placement (the “Private Placement”) 40,000,000 shares of our common stock at a purchase price of $0.10 per share or, to the extent Ms. Zhao and her designees, following the transaction, would own more than 49.99% of our common stock, shares of a new class of our preferred stock (the “Preferred Stock”) with a per-share purchase price of $1,000.
Additionally, Ms. Zhao and her designees will receive warrants (the “Warrants”) to purchase 60,000,000 shares of our common stock (or, to the extent Ms. Zhao and her designees would more than 49.99% of our common stock, shares of Preferred Stock). The Warrants will have an exercise price of $0.10 per share.
~~The investor advanced a $300,000 deposit on the private placement proceeds concurrently with the MOU’s execution.~~
The Preferred Stock will be entitled to vote on any matters to which shares of our common stock are entitled to vote, on an as-if-converted basis. The Preferred Stock will include an ownership limitation that will limit Ms. Zhao and her affiliates to owning no more than 49.99% of our common stock. Additionally, we have agreed to grant board representation and nomination rights to Ms. Zhao and her affiliates, with two director nominees initially and, to the extent that Ms. Zhao and her affiliates beneficially own more than 50% of our common stock (assuming conversion of all shares of Preferred Stock held by such persons), enough director nominees such that the director nominees of Ms. Zhao and her affiliates shall constitute a majority of our board of directors (but no more than is necessary to constitute such a majority).
Pursuant to the MOU, we may identify other investors who may participate in the Private Placement on the same financial terms as Ms. Zhao and her designees, for gross proceeds of up to $2.0 million. In the event such other investors participate in the Private Placement, then Ms. Zhao and her designees may elect to purchase additional securities in the Private Placement, on the same terms, to the extent necessary to maintain the same post-transaction percentage of voting power that Ms. Zhao and her designees would have received if no such additional parties participated in the Private Placement.
The Private Placement is conditioned on satisfaction of customary closing conditions and on us completing a reverse stock split, as previously approved by our stockholders, such that we will have sufficient authorized but unissued shares of common stock to accommodate the issuance of shares of common stock in the Private Placement, along with all shares of common stock issuable upon exercise of the Warrants or conversion of the Preferred Stock. The numbers of securities, purchase price per share of common stock and exercise price of the Warrants will be adjusted to reflect such reverse stock split. The definitive agreements relating to the Private Placement will include customary representations, warranties and covenants.
The MOU is intended to be binding upon both us and Ms. Zhao. The shares of common stock, the Warrants (including shares of common stock issuable upon exercise of the Warrants) and the shares of Preferred Stock (including shares of common stock issuable upon conversion of the Preferred Stock) will be sold and issued without registration under the Securities Act of 1933 (the “Securities Act”) in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act as transactions not involving a public offering and Rule 506 promulgated under the Securities Act as sales to accredited investors, and in reliance on similar exemptions under applicable state laws.
19
~~Operating Losses and Cash Requirements~~
We have incurred substantial operating losses since our inception, and as of September 30, 2017 had an accumulated deficit of approximately $47.0 million. We are currently investing significant resources in development of products for use by clinicians in the field of regenerative medicine. We expect to continue to incur operating losses and negative cash flows from operations for ~~the remainder of 2017~~2023 and in future years. ~~As a result~~
Operating Losses and Cash Requirements
We have incurred substantial operating losses since our inception, and as of ~~First Pecos's refusal~~June 30, 2023 had an accumulated deficit of approximately $88.5 million and will require additional financing to ~~deliver~~fund future operations. We expect that our operating cash and short-term investments on-hand as of June 30, 2023 of approximately $4.7 million will enable us to fund our operating expenses and capital expenditure requirements into the ~~Purchase Price, we are facing significant capital issues,~~first quarter of 2024. We expect to continue to incur operating losses and negative cash flows from operations for 2023 and in future years. Therefore, as disclosed in Note 1 to our ~~current financial obligations exceed our cash~~Condensed Consolidated Financial Statements appearing elsewhere in this Quarterly Report on ~~hand, and are exploring financing and other strategic alternatives, including the Private Placement. We cannot provide any assurance that it will be able to obtain sufficient financing. Therefore,~~Form 10-Q, these conditions raise substantial doubt about our ability to continue as a going concern.
We will need to raise additional funds ~~in future periods~~ to fund our operations. In the event ~~that~~ we do not raise additional capital from outside sources inbefore or during the ~~near future,~~first quarter of 2024, we may be forced to ~~further~~ curtail or cease our operations.
15
Cash requirements and cash resource needs will vary significantly depending upon the timing of ~~clinical and animal studies~~the financial and other resource needs that will be required to complete ongoing development, ~~and~~ pre-clinical and clinical testing of ~~products~~product candidates, as well as regulatory efforts and collaborative arrangements necessary for our ~~products~~product candidates that are currently under development. We are currently seeking and will continue to seek financings from other existing and/or new investors to raise necessary funds through a combination of public or private equity ~~offerings,~~offerings. We may also pursue debt financings, other financing mechanisms, research grants, or strategic collaborations and licensing arrangements. We may not be able to obtain additional financing on ~~terms~~ favorable ~~to us,~~terms, if at all.
20
~~Results~~Our operations will be adversely affected if we are unable to raise or obtain needed funding and may materially affect our ability to continue as a going concern. Our condensed consolidated financial statements have been prepared assuming that we will continue as a going concern and therefore, the condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of ~~Operations~~assets or the amount and classifications of liabilities that may result from the outcome of this uncertainty.
Components of Operating Loss
Research and development expense. Research and development expense consists of salaries and related expenses, including ~~stock-based~~share-based compensation, for personnel and contracted consultants and various materials and other costs to develop our new products, primarily: synthetic ~~organ~~ scaffolds, including investigation and development of materials and investigation and optimization of cellularization, as well as studies of cells and ~~3D organ bioreactors.~~cell behavior. Other research and development expenses include the costs of outside service providers and material costs for prototype and test units and outside laboratories and testing facilities performing cell growth and materials experiments, as well as the costs of all other preclinical research and testing including animal studies and expenses related to potential patents. We expense research and development costs as incurred.
Selling, general and administrative expense. Selling, general and administrative expense consists primarily of salaries and other related expenses, including ~~stock-based compensation, for personnel in executive, accounting, information technology and human resources roles.~~share-based compensation. Other costs include professional fees for legal and accounting services, insurance, investor relations and facility costs.
Sublease income. On January 5, 2022, we executed a four-month sublease agreement for certain laboratory and office space at its Holliston, Massachusetts facility. We ~~expect our sales~~further extended the sublease agreement to a month-to-month basis until August 31, 2022 when the other party vacated the premises. We have no sublease agreements generating sublease income as of June 30, 2023.
Other income, net. Other income, net, consists primarily of interest income and ~~marketing expenses to be immaterial given our focus on research and development and moving toward submission of an IND.~~
~~Changes~~the changes in fair value of our warrant liability ~~net of issuance costs.~~ ~~Changes in fair value of warrant liability, net of issuance costs, represent~~from the change in the fair value of common stock warrants ~~from~~classified as liability awards during the ~~date of issuance to the end of each reporting until the liability is settled.~~six months ended June 30, 2022. We ~~use~~previously used the Black-Scholes pricing model to value the related warrant liability. In February of 2022, the underlying common stock warrants expired unexercised.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States, or. GAAP. The ~~costs associated~~preparation of these financial statements requires us 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 expenses during the reporting periods. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe 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. Our actual results may differ materially from these estimates under different assumptions or conditions.
While our significant accounting policies are discussed in more detail in Note 2 to our Condensed Consolidated Financial Statements appearing elsewhere in this Quarterly Report on Form 10-Q, we believe that the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations.
16
Share-based Compensation
We account for our share-based compensation in accordance with the ~~issuance~~fair value recognition provisions of current authoritative guidance. Share-based awards, including stock options, are measured at fair value as of the grant date and recognized as expense over the requisite service period (generally the vesting period), which we have elected to amortize on a straight-line basis. Expense on share-based awards for which vesting is performance or milestone based is recognized on a straight-line basis from the date when we determine the achievement of the milestone is probable to the vesting/milestone achievement date. Since share-based compensation expense is based on awards ultimately expected to vest, it has been reduced by an estimate for future forfeitures. Until December 31, 2022, we estimated forfeitures at the time of grant and would revise our estimate, if necessary, in subsequent periods. As of January 1, 2023, we account for forfeitures as they occur. We estimate the fair value of options granted using the Black-Scholes option valuation model. Significant judgment is required in determining the proper assumptions used in this model. The assumptions used include the risk-free interest rate, expected term, expected volatility, and expected dividend yield. We base our assumptions on historical data when available or, when not available, on a peer group of companies. However, these assumptions consist of estimates of future market conditions, which are inherently uncertain and subject to our judgment, and therefore any changes in assumptions could significantly impact the future grant date fair value of share-based awards.
Warrant Liability
Most of the warrants to purchase shares of our common stock have been classified on our condensed consolidated balance sheets as equity. We classify warrants as a liability in our condensed consolidated balance sheets if the warrant is a free-standing financial instrument that may require us to transfer cash consideration upon exercise and that cash transfer event would be out of our control. Such a “liability warrant” is initially recorded at fair value on the date of grant using the Black-Scholes model, net of issuance costs, and it is subsequently re-measured to fair value at each subsequent balance sheet date. Changes in fair value of the warrants is recognized as ana component of other expense ~~upon issuance.~~in the condensed consolidated statements of operations. The warrants classified as a liability expired unexercised during the six months ended June 30, 2022 and the remaining liability on the expiration date of approximately $2,000 was recognized as other income.
Results of Operations
The following table summarizes the results of our operations for the three and six months ended June 30, 2023 and 2022 (in thousands):
Three months ended June 30, Change 2023 vs. 2022 Six months ended June 30, Change 2023 vs. 2022
2023 2022 Change % 2023 2022 Change %
Operating expenses
Research and development $ 1,566 $ 326 $ 1,240 380 % $ 2,075 $ 629 $ 1,446 230 %
Selling, general and administrative 1,085 1,049 36 3 % 3,463 2,951 512 17 %
Total operating expenses 2,651 1,375 1,276 93 % 5,538 3,580 1,958 55 %

Other income
Sublease income — 32 (32 ) nm % — 61 (61 ) nm %
Other income (expense), net 37 (2 ) 39 nm % 34 (3 ) 37 nm %
Total other income, net 37 30 7 23 % 34 58 (24 ) (41 )%
Net loss $ (2,614 ) $ (1,345 ) $ (1,269 ) 94 % $ (5,504 ) $ (3,522 ) $ (1,982 ) 56 %
nm = not meaningful
17
21
Comparison of the three months ended ~~September~~June 30, ~~2017 to the three months ended September~~2023 and June 30, ~~2016~~2022
Research and Development Expense
Research and development expense increased by approximately ~~$0.1 million, to $2.4~~$1.2 million, or ~~6.2% for the three months ended September 30, 2017 compared~~380%, to ~~$2.2~~approximately $1.6 million for the three months ended ~~September~~June 30, ~~2016. The increase was primarily due increases of $0.2 million in compensation and related expenses offset by a $0.1 million decrease in stock-based compensation.~~
~~Selling, General and Administrative Expense~~
~~Selling, general and administrative expense remained unchanged at $0.9~~2023 as compared to approximately $0.3 million for the three months ended ~~September~~June 30, ~~2017~~2022. This increase was primarily due to clinical trial activities resulting in our first site activation in the third quarter of 2023.
Selling, General and ~~the three months ended September 30, 2016.~~Administrative Expense
~~Expense~~Selling, general and administrative expense increased approximately $0.1 million, or ~~income from change in fair value of liability warrants, net of issuance costs~~
~~The change in fair value of the warrant liability decreased $0.1~~3%, to approximately $1.1 million for the three months ended ~~September~~June 30, ~~2017~~2023 as compared to approximately $1.0 million for the three months ended June 30, 2022. This increase was primarily due to ~~a decrease~~share-based compensation expense from the vesting of performance based awards in the ~~fair value~~second quarter of 2023, increased headcount related costs of approximately $0.1 million offset by the reduced legal and related costs relating to the completion of litigation for a wrongful death complaint and related matters more fully described in Note 8 to our condensed consolidated financial statements.
Sublease income
On January 5, 2022, we executed a four-month sublease agreement for certain laboratory and office space at our Holliston, Massachusetts facility. We further extended the sublease agreement on a month-to-month basis until August 31, 2022 when the other party vacated the premises. For the three months ended June 30, 2022, we recorded sublease income of approximately $32,000 relating to this agreement. We have no sublease agreements generating sublease income as of June 30, 2023.
Other income, net
During the three months ended June 30, 2023, we recorded interest income of approximately $41,000 earned from our money market account and certificate of deposit offset by approximately $4,000 on insurance installment payments. During the three months ended June 30, 2022, we recorded interest expense of approximately $2,000 on insurance installment payments.
Comparison of the ~~warrants, specifically with respect~~six months ended June 30, 2023 and June 30, 2022
Research and Development Expense
Research and development expense increased approximately $1.5 million, or 230%, to approximately $2.1 million for the ~~value of~~six months ended June 30, 2023 as compared to approximately $0.6 million for the ~~underlying common shares and a decrease~~six months ended June 30, 2022. This increase was primarily due to ~~the exercise or modification of warrants. Holders agreed to the modification of 2,474,850 warrants~~preclinical trial activities and clinical trial activities resulting in our first site activation in the third quarter of 2017 such that the modified warrants now meet the definition of an equity instrument. The exercise of warrants to purchase 2,647,338 shares of common stock in the three months ended September 30, 2017 included 1,672,338 warrants that had not been modified.2023.
~~Comparison of the nine months ended September 30, 2017 to the nine months ended September 30, 2016~~Selling, General and Administrative Expense
~~Research~~Selling, general and ~~Development Expense~~
~~Research and development~~administrative expense increased ~~$1.8 million, to $7.1~~approximately $0.5 million, or ~~34.9% for the nine months ended September 30, 2017 compared~~17%, to ~~$5.3~~approximately $3.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016. The~~2023 as compared to approximately $3.0 million for the six months ended June 30, 2022. This increase was primarily due to ~~increases~~share-based compensation expense of ~~$0.9~~$1.8 million from the vesting of performance based awards in ~~compensation and related expenses, reflecting~~the first half of 2023, increased headcount asrelated costs of ~~September 30, 2017 compared to September 30, 2016, $0.7 million of outsourced research and consulting costs, $0.3 million of costs associated with scientific conferences and related travel and~~approximately $0.2 million and the initial operating costs of ~~other research and development expenses,~~$0.1 million for the Hong Kong subsidiary offset by a decrease ~~in stock-based compensation~~ of approximately $0.3 ~~million.~~
~~Selling, General and Administrative Expense~~
~~Selling, general and administrative expense decreased $0.4 million, or 10.9%, to $2.9~~ million for supporting our ongoing public company requirements and reduced legal and related costs of approximately $1.3 million relating to the ~~nine~~completion of litigation for a wrongful death complaint and related matters more fully described in Note 8 to our condensed consolidated financial statements.
Sublease income
On January 5, 2022, we executed a four-month sublease agreement for certain laboratory and office space at our Holliston, Massachusetts facility. We further extended the sublease agreement on a month-to-month basis until August 31, 2022 when the other party vacated the premises. For the six months ended ~~September~~June 30, ~~2017 compared with $3.3 million for~~2022, we recorded sublease income of approximately $61,000 relating to this agreement. We have no sublease agreements generating sublease income as of June 30, 2023.
Other income, net
During the ~~nine~~six months ended ~~September~~June 30, ~~2016. The decrease was due primarily to $0.2 million~~2023, we recorded interest income of ~~costs related to~~approximately $41,000 earned from our money market account and certificate of deposit offset by approximately $7,000 on insurance installment payments.
During the ~~Company’s name change to Biostage and greater investor communication efforts, which occurred during the nine~~six months ended ~~September~~June 30, ~~2016 as well as~~2022, we recorded a ~~$0.2 million decrease in stock-based compensation primarily due to options previously issued becoming fully vested during the first quarter of 2017.~~
~~Change in fair value of warrant liability, net of issuance costs~~
~~The~~ gain on ~~the change in fair value~~expiration of the ~~warrant liability~~common share warrants of ~~$0.3 million~~approximately $2,000 in ~~the nine months ended September 2016 became a loss~~other expense, net as they expired unexercised in February 2022. We also recorded interest expense of $0.7 million during the nine months ended September 30, 2017. The $1.0 million change primarily due to the addition of 21,000,000 warrants issued in the first quarter of 2017 in connection with the issuance of 20,000,000 shares of common stock, offset by the modification of 19,043,696 warrants and the exercise of 2,647,338 warrants.approximately $5,000 on insurance installment payments.
~~Financial Condition,~~ Liquidity and Capital Resources
Sources of liquidity. We have incurred operating losses since inception, and as of ~~September~~June 30, ~~2017,~~2023, we had an accumulated deficit of approximately ~~$47.0~~$88.5 million. We are currently investing significant resources in the development and commercialization of our ~~products~~product candidates for use by clinicians and researchers in the ~~field~~fields of regenerative ~~medicine.~~medicine and bioengineering. As a result, we expect to incur operating losses and negative operating cash ~~flow~~flows for the foreseeable future.
18
22
~~As a result~~The following table sets forth the primary uses of ~~First Pecos's refusal to deliver~~cash for the ~~Purchase Price pursuant to the Pecos Placement, the we are facing significant capital issues, as its current financial obligations exceed its cash on hand,~~three months ended June 30, 2023 and ~~is exploring financing~~2022 (in thousands):
Six Months Ended June 30,
2023 2022
Net cash used in operating activities $ (2,559 ) $ (1,654 )
Net cash used by investing activities $ (2,534 ) $ (8 )
Net cash provided by financing activities $ 5,992 $ 5,060
Comparison of six months ended June 30, 2023 and other strategic alternatives, including the Private Placement, as described above under “Overview—December 2017 Private Placement MOU”. We cannot provide any assurance we it will be able to obtain sufficient financing. 2022
We need to raise additional funds to fund our operations. In the event that we do not raise additional capital from outside sources in the near future, we may be forced to further curtail or cease our operations. Cash requirements and cash resource needs will vary significantly depending upon the timing of clinical and animal studies and other resource needs that will be required to complete ongoing development and pre-clinical and clinical testing of products as well as regulatory efforts and collaborative arrangements necessary for our products that are currently under development. We seek to raise necessary funds through a combination of public or private equity offerings, debt financings, other financing mechanisms, or strategic collaborations and licensing arrangements. We may not be able to obtain additional financing on terms favorable to us, if at all.
Operating activities. Net cash used in operating activities of ~~$9.4~~approximately $2.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 was due primarily ~~a result of~~to our ~~$10.7 million~~ net loss ~~partially~~of approximately $5.5 million offset by ~~a $1.6~~adjustments for non-cash items of approximately $2.3 million ~~add-back of~~due to non-cash expenses ~~related~~for share-based compensation and depreciation, and an approximately $0.6 million increase to cash from changes in working capital due to the ~~change in the fair value~~timing of ~~warrant liability, stock-based compensation~~payments for accounts payable, accrued expenses, prepaid expenses, deferred financing costs and ~~depreciation.~~other long-term assets.
Net cash used in operating activities of ~~$6.1~~approximately $1.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2022 was due primarily ~~a result of~~to our ~~$8.2 million~~ net loss of approximately $3.5 million and ~~$1.0~~offset by adjustments for non-cash items of approximately $0.5 million ~~of cash provided for working capital and $1.1 million add-back of~~due to non-cash expenses ~~of stock-based~~for share-based compensation and depreciation, ~~partially offset by a favorable change~~and an approximately $1.3 million increase to cash from changes in working capital due to the ~~fair value~~timing of ~~warrant liability.~~payments for accounts payable, accrued expenses, prepaid expenses and deferred financing costs.
Investing ~~activities~~activities.. Net cash used in investing activities ~~during~~included purchases of property, plant and equipment for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022 representing approximately $11,000 and $8,000, respectively. During the six months ended June 30, 2023, we invested in a certificate of ~~$0.1~~deposit for $2.5 million ~~and $0.2 million, respectively, reflects cash used for additions to property and equipment.~~that earned $23,000 in interest. The certificate of deposit matures in October 2023.
Financing ~~activities~~activities. Net cash generated from financing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 of ~~$7.9~~approximately $6.0 million consisted of ~~the~~ net proceeds received from a private placement transaction that resulted in the issuance of ~~20,000,000~~1,000,967 shares of our common stock at a purchase price of ~~$0.40~~$6.00 per share ~~the issuance~~to a group of warrants to purchase 20,000,000 shares of common stock at an exercise price of $0.40 per warrant and warrants issued to placement agents for the offering to purchase 1,000,000 shares of common stock at an exercise price of $0.50 per warrant and $1.1 million from the conversion of warrants for 2,647,338 shares of common stock at $0.40 per share.investors.
Net cash generated from financing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2022 of ~~$5.0~~approximately $5.1 million consisted of ~~the~~ net proceeds received from a private placement transaction that resulted in the ~~amount~~issuance of ~~$4.5 million from the issuance 2,836,880~~854,771 shares of our common stock at a purchase price of ~~$1.7625~~$5.92 per share and ~~the issuance of~~ warrants to purchase ~~1,418,440~~427,390 shares of common stock at an exercise price of ~~$1.7625~~$8.88 per ~~warrant, as well as net proceeds in the amount~~share to a group of ~~$0.4 million from the issuance of 150,000 shares of common stock under the Aspire Capital Purchase Agreement.~~investors.
23
~~Recent Authoritative Accounting Guidance~~Off-Balance Sheet Arrangements
~~In February 2016, the Financial Accounting Standards Board (“FASB”), issued ASU, 2016-02-~~~~Leases (Topic 842)~~ (“ASU 2016-02”). The ASU requires companies to recognize on the balance sheet the assets and liabilities for the rights and obligations created by leased assets. ASU 2016-02 will be effective for the Company in the first quarter of 2019, with early adoption permitted. The Company is currently evaluating the impact that the adoption of ASU 2016-02 will have on the Company’s consolidated financial statements or related disclosures.
~~In March 2016, the FASB issued ASU 2016-09,~~~~Stock Compensation - Improvements to Employee Share-Based Payment Accounting,~~ (“ASU 2016-09”), which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows and policy elections on the impact for forfeitures. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016 and interim periods within those annual periods. The Company has adopted ASU 2016-09 and adoption didWe do not have ~~a significant impact on the Company’s consolidated financial statements or related disclosures.~~any material off-balance sheet arrangements as of June 30, 2023.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15). This amendment addresses eight classification issues related to the statement of cash flows. For public business entities, the amendments in ASU 2016-15 are effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. The Company has not yet selected a transition method and is evaluating the effect the updated standard will have on its consolidated financial statements and related disclosures.Other Information
~~In November 2016, the FASB issued ASU 2016-18~~~~Statement of Cash Flows~~ (“ASU 2016-18”) which requires that amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for fiscal years beginning after December 15, 2018 and should be applied using a retrospective transition method to each period presented. Early adoption is permitted. The Company is in the process of evaluating the impact of ASU 2016-17 on its consolidated financial statements.None.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s financial statements upon adoption.
~~Critical Accounting Policies and Estimates~~
The critical accounting policies and estimates underlying the accompanying unaudited consolidated financial statements are those set forth in Part II, Item 7 included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, which was filed with the SEC on March 17, 2017.
~~Item 3.~~ ~~Quantitative and Qualitative Disclosures About Market Risk.~~

~~We do~~Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company is a smaller reporting company and is not have any material foreign currency exchange risks, we do not enter into derivative agreements, we do not have any off balance-sheet arrangements, and we do not have any interest rate risks. Additionally, we have no debt outstanding.required to provide this information pursuant to Item 305(e), Regulation S-K.
~~Item 4.~~ ~~Controls and Procedures.~~
Item 4. Controls and Procedures.
This Report includes the certifications of our principal executive officer and our principal financial and accounting officer required by Rule 13a-14 of the Exchange Act. See Exhibits 31.1 and 31.2. This Item 4 includes information concerning the controls and control evaluations referred to in those certifications.
Evaluation of Disclosure Controls and Procedures
~~As required by~~Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer, Director, and Chairman, who is our principal executive officer, and our Chief Financial Officer, who is our principal financial and accounting officer, to allow timely decisions regarding required disclosures.
In connection with the preparation of this Quarterly Report on Form 10-Q, our management, under the supervision and with the participation of our ~~Chief Executive Officer~~principal executive officer and ~~Chief Financial Officer,~~our principal financial and accounting officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of ~~September~~June 30, ~~2017.~~2023. Based upon the evaluation described above, our ~~Chief Executive Officer~~principal executive officer and ~~Chief Financial Officer~~our principal financial and accounting officer have concluded that they believe ~~that~~ our disclosure controls and procedures were effective as of the end of the period covered by this ~~Quarterly Report on Form 10-Q.~~report, in providing reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial and accounting officer, to allow timely decisions regarding required disclosures, and is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
Changes in Internal Control over Financial Reporting
Our management, with the participation of our principal executive officer and our principal financial and accounting officer, has evaluated whether any change in our internal control over financial accounting and reporting occurred during the quarter ended June 30, 2023. During the period covered by this report, we have concluded that there were no changes during the fiscal quarter in our internal control over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act, which have materially affected, or are reasonably likely to materially affect, our internal control over financial accounting and reporting.
19
24
PART II. OTHER INFORMATION
~~Item 1.~~ ~~Legal Proceedings.~~
~~On April 14, 2017, representatives for~~Item 1. Legal Proceedings
From time to time, we may be involved in various claims and legal proceedings arising in the ~~estate~~ordinary course of ~~a deceased individual filed a~~business. Other than the civil lawsuit described in Item 3 of Part I of our Annual Report on Form 10-K filed with the ~~Suffolk Superior Court,~~SEC on March 30, 2023 and in ~~Boston, Massachusetts, against~~our Form 8-K filed with the ~~Company, Harvard Bioscience~~SEC on April 27, 2022, there are no such matters pending that we expect to be material in relation to our business, financial condition, and other defendants. The complaint alleges that the decedent was harmed by two tracheal implants that incorporated synthetic trachea scaffolds and a biologic component combined by the implanting surgeon with a bioreactor, and surgically implanted in the decedent in two surgeries performed in 2012 and 2013, which harm caused her injury and death. The civil complaint seeks a non-specific sumresults of money to compensate the plaintiffs. This civil lawsuit relates to the Company’s first generation trachea scaffold technology for which the Company discontinued development in 2014, and not to the Company’s current Cellframe technology nor to its lead development product candidate, the Cellspan esophageal implant. The litigation is at an early stage and the Company intends to vigorously defend this case. While the Company believes that such claim lacks merit, and has filed a motion seeking dismissal of the lawsuit, the Company is unable to predict the ultimate outcome of such litigation. In accordance with a separation and distribution agreement between Harvard Bioscience and the Company relating to the Separation, the Company would be required to indemnify Harvard Bioscience against losses that Harvard Bioscience may suffer as a result of this litigation. The Company has been informed by its insurance provider that the case has been accepted as an insurable claim under the Company’s product liability insurance policy.operations or cash flows.
~~Item 1A.~~ ~~Risk Factors~~
~~In addition~~Item 1A. Risk Factors
To our knowledge and except to the extent additional factual information disclosed in this Quarterly Report on Form 10-Q relates to such risk ~~factor below and~~factors, there have been no material changes in the ~~other risks~~risk factors described ~~herein,~~in Item ~~1A of Part I of~~1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2022, which was filed with the SEC on March 17, 2017, contains risk factors identified by the Company. Except for the risk factor below and the other risks described herein, there have been no material changes to the risk factors we previously disclosed. Our operations could also be affected by additional factors that are not presently known to us or by factors that we currently consider immaterial to our business.30, 2023.
Item 5. Other Information

~~Risks Related to~~In the ~~Ownership~~three months ended June 30, 2023, no directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of ~~Shares of Our Common Stock~~Regulation S-K.
~~Our common stock has been delisted on The NASDAQ Capital Market, which may negatively impact the trading price of our common stock and the levels of liquidity available to our stockholders.~~
Our common stock was suspended from trading on The NASDAQ Capital Market, prior to the opening of the market on October 6, 2017 and began quotation on the OTCQB Venture Market on that date, retaining the symbol “BSTG”. On December 7, 2017, NASDAQ filed a Form 25-NSE with the SEC to complete the delisting process. The trading of our common stock on the OTCQB rather than NASDAQ may negatively impact the trading price of our common stock and the levels of liquidity available to our stockholders.
Upon such delisting, our common stock became subject to the regulations of the SEC relating to the market for pennystocks. A penny stock is any equity security not traded on a national securities exchange that has a market price of less than $5.00 per share. The regulations applicable to penny stocks may severely affect the market liquidity for our common stock and could limit the ability of shareholders to sell securities in the secondary market. Accordingly, investors in our common stock may find it more difficult to dispose of or obtain accurate quotations as to the market value of our common stock, and there can be no assurance that our common stock will be continue to be eligible for trading or quotation on the OTCQB Venture Market or any other alternative exchanges or markets.
The delisting of our common stock from NASDAQ may adversely affect our ability to raise additional financing through public or private sales of equity securities, may significantly affect the ability of investors to trade our securities, and may negatively affect the value and liquidity of our common stock. Such delisting from NASDAQ may also have other negative results, including the potential loss of confidence by employees, the loss of institutional investor interest and fewer business development opportunities. Furthermore, because of the limited market and low volume of trading in our common stock that could occur, the share price of our common stock could more likely be affected by broad market fluctuations, general market conditions, fluctuations in our operating results, changes in the market’s perception of our business, and announcements made by us, our competitors, parties with whom we have business relationships or third parties.
25
Item 6. Exhibits
Exhibit
Index
~~Item 6.~~ ~~Exhibits~~
3.1 Amended and Restated Certificate of Incorporation (previously filed as an exhibit to the Registration Statement on Form 10-12B, filed on July 31, 2012, and incorporated herein by reference).
3.2 Certificate of Amendment to Amended and Restated Certificate of Incorporation (previously filed as exhibit to the Current Report on Form 8-K, filed on March 31, 2016, and incorporated herein by reference.

~~Exhibit~~
~~Index~~
3.3
Certificate of Amendment to Amended and Restated Certificate of Incorporation (previously filed as exhibit to the Annual Report on Form 10-K, filed on March 17, 2017, and incorporated herein by reference).

~~10.1(1)~~3.4 ~~Memorandum~~Certificate of ~~Understanding, dated December 11, 2017, between Biostage, Inc.~~Designations, Preferences and ~~Bin Zhao.~~Rights of Series A Preferred Stock classifying and designating the Series A Junior Participating Cumulative Preferred Stock (previously filed as exhibit to the Registration Statement on Form 8-A, filed on October 31, 2013, and incorporated herein by reference).

~~31.1+~~3.5 Certificate of Designation of Series B Convertible Preferred Stock classifying and designating the Series B Convertible Preferred Stock (previously filed as an exhibit to the Current Report on Form 8-K, filed on February 12, 2015, and incorporated by reference thereto).
3.6 Certificate of Amendment to Amended and Restated Certificate of Incorporation (previously filed as exhibit to the Current Report on Form 8-K, filed on April 27, 2017, and incorporated herein by reference).
3.7 Certificate of Designations, Preferences, Rights and Limitations of Series C Convertible Preferred Stock classifying and designating the Series C Convertible Preferred Stock (previously filed as an exhibit to the Current Report on Form 8-K, filed on August 17, 2017, and incorporated by reference thereto).
3.8 Certificate of Elimination of Series A Junior Participating Cumulative Preferred Stock (previously filed as an exhibit to the Current Report on Form 8-K, filed on August 17, 2017, and incorporated by reference thereto).
3.9 Certificate of Amendment to Amended and Restated Certificate of Incorporation (previously filed as exhibit to the Current Report on Form 8-K, filed on December 22, 2017, and incorporated herein by reference).
3.10
Certificate of Designations, Preferences, Rights and Limitations of Series D Convertible Preferred Stock classifying and designating the Series D Convertible Preferred Stock (previously filed as an exhibit to the Current Report on Form 8-K, filed on January 3, 2018, and incorporated by reference thereto).
3.11 Certificate of Amendment to Amended and Restated Certificate of Incorporation (previously filed as exhibit to the Current Report on Form 8-K, filed on May 28, 2019, and incorporated herein by reference).
3.12 Certificate of Amendment to Amended and Restated Certificate of Incorporation (previously filed as an exhibit to the Current Report on Form 8-K, filed on July 20, 2023, and incorporated herein by reference).
3.13 Third Amended and Restated Bylaws (previously filed as an exhibit to the Current Report on Form 8-K, filed on July 20, 2023, and incorporated herein by reference).
10.1 Form of Securities Purchase Agreement (previously filed as an exhibit to the Current Report on Form 8-K, filed on April 6, 2023, and incorporated herein by reference).
31.1+ Certification of Chief ~~Financial~~Executive Officer, Director, and Chairman of ~~Biostage,~~Harvard Apparatus Regenerative Technology, Inc., pursuant to Rules 13a-14(a) and 15d-14(a), of the Securities Exchange Act, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002.
31.2+ Certification of Chief ~~Executive~~Financial Officer of ~~Biostage,~~Harvard Apparatus Regenerative Technology, Inc., pursuant to Rules 13a-14(a) and 15d-14(a), of the Securities Exchange Act, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002.
32.1* Certification of Chief ~~Financial~~Executive Officer, Director, and Chairman of ~~Biostage,~~Harvard Apparatus Regenerative Technology, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002.
32.2* Certification of Chief ~~Executive~~Financial Officer of ~~Biostage,~~Harvard Apparatus Regenerative Technology, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002.
101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH Inline XBRL Taxonomy Extension Schema ~~Document~~Document.
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase ~~Document~~Document.
~~101.LAB~~101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB Inline XBRL Taxonomy Extension Labels Linkbase ~~Document~~Document.
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase ~~Document~~Document.
~~101.DEF~~Exhibit 104 Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL ~~Taxonomy Extension Definition Linkbase Document~~tags are embedded within the Inline XBRL document.
+Filed herewith.
* ~~(1)~~ ~~Previously filed as an exhibit to the Company’s Current Report on Form 8-K (filed on December 14, 2017) and incorporated by reference thereto.~~
+ ~~Filed herewith.~~
* This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
20
26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by undersigned thereunto duly authorized.
Date: ~~December 15, 2017~~August 10, 2023
~~BIOSTAGE,~~HARVARD APPARATUS REGENERATIVE TECHNOLOGY, INC.
By: /s/ ~~James McGorry~~Junli He
Name: ~~James McGorry~~Junli He
Title: ~~Chief Executive Officer~~
~~By:~~ ~~/s/ Thomas McNaughton~~
~~Thomas McNaughton~~
~~Chief Financial Officer~~
27
~~INDEX TO EXHIBITS~~
~~10.1(1)~~ ~~Memorandum of Understanding, dated December 11, 2017, between Biostage, Inc. and Bin Zhao.~~
~~31.1+~~ ~~Certification of Chief Financial Officer of Biostage, Inc., pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~
~~31.2+~~ ~~Certification of~~
Chief Executive Officer, ~~of Biostage, Inc., pursuant to Rules 13a-14(a)~~Director, and ~~15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~Chairman
(principal executive officer)
32.1* By: ~~Certification of~~ /s/ Joseph L.Damasio Jr.
Name: Joseph L. Damasio Jr.
Title:
Chief Financial Officer ~~of Biostage, Inc., 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 Chief Executive Officer of Biostage, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~
~~101.INS~~ ~~XBRL Instance Document~~
~~101.SCH~~ ~~XBRL Taxonomy Extension Schema Document~~
~~101.CAL~~ ~~XBRL Taxonomy Extension Calculation Linkbase Document~~
~~101.LAB~~ ~~XBRL Taxonomy Extension Labels Linkbase Document~~
~~101.PRE~~ ~~XBRL Taxonomy Extension Presentation Linkbase Document~~
~~101.DEF~~ ~~XBRL Taxonomy Extension Definition Linkbase Document~~
(principal financial officer)
~~(1)~~ ~~Previously filed as an exhibit to the Company’s Current Report on Form 8-K (filed on December 14, 2017) and incorporated by reference thereto.~~
+ ~~Filed herewith.~~
* This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
28 21

	September 30, 2017			December 31, 2016
Assets
Current Assets:
Cash	$	1,310		$	2,941
Accounts receivable		-			42
Prepaid expenses		94			291
Other current assets		274			212

Total current assets		1,678			3,486
Property, plant and equipment, net		875			1,065

Total assets	$	2,553		$	4,551

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,208		$	962
Accrued and other current liabilities		529			1,210
Warrant liabilities		339			605

Total current liabilities		2,076			2,777

Total liabilities	$	2,076		$	2,777

Stockholders’ equity:
Undesignated Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued and outstanding		-			-
Series B convertible preferred stock, $0.01 par value; 1,000,000 shares authorized; 695,857 shares issued and none outstanding		-			-
Common stock, $0.01 par value; 120,000,000 shares and 60,000,000 shares authorized as of September 30, 2017 and December 31, 2016, respectively, and 39,787,615 and 17,108,968 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively		398			171
Additional paid-in capital		47,084			37,921
Accumulated deficit		(47,005	)		(36,318	)

Total stockholders’ equity		477			1,774

Total liabilities and stockholders’ equity	$	2,553		$	4,551

	Three Months ended September 30,						Nine Months ended September 30,
	2017			2016			2017			2016

Revenues	$	-		$	26		$	-		$	54
Cost of revenues		-			13			-			57
Gross profit (deficit)		-			13			-			(3	)

Operating expenses:
Research and development		2,364			2,225			7,121			5,279
Selling, general and administrative		888			937			2,906			3,261
Total operating expenses		3,252			3,162			10,027			8,540

Operating loss		(3,252	)		(3,149	)		(10,027	)		(8,543	)

Other income (expense):
Change in fair value of liability warrants		9			96			(660	)		306
Other expense		-			-			-			-
		9			96			(660	)		306

Loss before income taxes		(3,243	)		(3,053	)		(10,687	)		(8,237	)
Income taxes		-			-			-			-

Net loss	$	(3,243	)	$	(3,053	)	$	(10,687	)	$	(8,237	)

Basic and diluted net loss per share	$	(0.08	)	$	(0.18	)	$	(0.31	)	$	(0.53	)
Weighted average common shares, basic and diluted		38,969			17,107			34,443			15,585

Comprehensive loss:
Net loss	$	(3,243	)	$	(3,053	)	$	(10,687	)	$	(8,237	)
Foreign currency translation adjustments		-			-			-			-
Total comprehensive loss	$	(3,243	)	$	(3,053	)	$	(10,687	)	$	(8237	)

	Nine Months Ended September 30,
	2017			2016
Cash flows from operating activities
Net loss	$	(10,687	)	$	(8,237	)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation expense		591			1,027
Depreciation		334			340
Change in fair value of warrant liability		660			(306	)
Changes in operating assets and liabilities:
Accounts receivable		42			(45	)
Inventories		-			34
Prepaid expenses and other current assets		135			234
Accounts payable		246			418
Accrued and other current liabilities		(681	)		465

Net cash used in operating activities		(9,360	)		(6,070	)

Cash flows from investing activities
Additions to property and equipment		(140	)		(225	)
Net cash used in investing activities		(140	)		(225	)

Cash flows from financing activities
Proceeds from issuance of common stock and warrants, net of issuance costs		6,801			4,496
Proceeds from exercise of warrants		1,059			-
Proceeds from issuance of common stock, net of issuance costs		9			349

Net cash provided by financing activities		7,869			4,845

Net decrease in cash		(1,631	)		(1,450	)
Cash at beginning of period		2,941			7,456
Cash at end of period	$	1,310		$	6,006
Supplemental disclosure of cash flow information and non-cash investing and financing activities:

Fair value of warrant liability reclassified to additional paid-in capital	$	4,327		$	-
Fair value of warrants issued in connection with issuance of common stock	$	3,787		$	-
Equipment purchases included in accounts payable	$	-		$	28
Fair value of warrants issued to placement agent	$	-		$	116

	Warrants
	Amount			Weighted-average exercise price

Outstanding at December 31, 2016		1,560,284		$	1.76
Granted		21,000,000			0.40
Exercised		(2,647,338	)		0.40
Outstanding at September 30, 2017		19,912,946		$	0.49

	Assumptions for estimating fair value of warrants						Assumptions for estimating fair value on reporting
	modified during the three months ended						dates of
	September 30, 2017			June 30, 2017			September 30, 2017			December 31, 2016
Risk-free interest rate		1.89	%		1.77	%		1.93	%		1.93	%
Expected volatility		82.3	%		82.4	%		85.0	%		72.7	%
Expected term (in years)		4.6			4.6			4.4			4.9
Expected dividend yield		-			-			-			-
Exercise price	$	0.40		$	0.50		$	0.40		$	1.76
Market value of common stock	$	0.41		$	0.33		$	0.31		$	0.89
Warrants to purchase shares of common stock		2,002,037			16,568,846			1,844,250			1,560,284

	Fair Value Measurement as of September 30, 2017
	(In thousands)
	Level 1		Level 2		Level 3		Total

Warrant liability	$	-	$	-	$	339	$	339
Total	$	-	$	-	$	339	$	339

	Warrant Liability
	(in thousands)
Balance at December 31, 2016	$	605
Issuance of warrants		3,787
Change in fair value upon re-measurement		274
Reclassification of warrant liability to additional paid in capital upon modification		(3,746	)
Reclassification of warrant liability to additional paid in capital upon exercise		(581	)
Balance at September 30, 2017	$	339

	Amount			Weighted-average exercise price		Weighted-average contractual life (years)		Aggregate intrinsic value (in thousands)
Outstanding at December 31, 2022		2,516,924		$	3.95		7.68	$	6,917
Granted		1,863,309			6.05
Canceled / forfeited		(593,333	)		6.12
Outstanding at June 30, 2023		3,786,900			4.64		8.06		2,756
Options exercisable		1,998,552			4.65		7.44		1,971
Options vested and expected to vest		3,687,482			4.69		8.06		2,653

	Stock Options					Restricted Stock Units
	Amount			Weighted-average exercise price		Amount			Weighted -average grant date fair value

Outstanding at December 31, 2016		3,877,681		$	2.81		268		$	6.00
Granted		1,896,500			0.40		404,750			0.38
Vested (RSUs)		-			-		(268	)		6.00
Canceled		(569,865	)		1.67		-			-
Outstanding at September 30, 2017		5,204,316		$	2.05		404,750		$	0.38

~~Expected volatility~~	~~78.71~~	%
~~Expected dividends~~	~~0.00~~	%
~~Expected term~~	~~6.26~~	~~years~~
~~Risk-free rate~~	~~2.25~~	%

	Six months ended June 30,
	2023			2022
Risk-free interest rate		3.76	%		2.59	%
Expected volatility		126.16	%		124.51	%
Expected term (in years)		5.9 years			5.5 years
Expected dividend yield		—	%		—	%

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
	(in thousands)				(in thousands)

Research and development	$	98	$	198	$	281	$	535
General and administrative		96		164		310		492
Total stock-based compensation	$	194	$	362	$	591	$	1,027

	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
	(In thousands)				(In thousands)
Research and development	$	51	$	88	$	113	$	148
Selling, general and administrative		428		189		2,206		364
Total	$	479	$	277	$	2,319	$	512

	Balance Sheet Classification	June 30, 2023		December 31, 2022

Assets:
Operating lease assets	Right-of-use asset, net	$	135	$	147
Liabilities:
Current portion of operating lease liabilities	Current portion of operating lease liabilities		119		99
Operating lease liabilities, net of current portion	Operating lease liabilities, net of current portion		18		48
Total operating lease liabilities		$	137	$	147

	As of June 30,
	2023			2022
Remaining lease term (in years)		0.88			1.16
Discount rate		12.78	%		9.25	%

	June 30, 2023
	As of
	June 30, 2023
	(in thousands)
2023	$	70
2024		69
2025		5
Total lease payments		144
Less: imputed interest		(7	)
Present value of operating lease liabilities	$	137

	Three months ended June 30,						Change 2023 vs. 2022						Six months ended June 30,						Change 2023 vs. 2022
	2023			2022			Change			%			2023			2022			Change			%
Operating expenses
Research and development	$	1,566		$	326		$	1,240			380	%	$	2,075		$	629		$	1,446			230	%
Selling, general and administrative		1,085			1,049			36			3	%		3,463			2,951			512			17	%
Total operating expenses		2,651			1,375			1,276			93	%		5,538			3,580			1,958			55	%

Other income
Sublease income		—			32			(32	)		nm	%		—			61			(61	)		nm	%
Other income (expense), net		37			(2	)		39			nm	%		34			(3	)		37			nm	%
Total other income, net		37			30			7			23	%		34			58			(24	)		(41	)%
Net loss	$	(2,614	)	$	(1,345	)	$	(1,269	)		94	%	$	(5,504	)	$	(3,522	)	$	(1,982	)		56	%

Exhibit Index	~~Item 6.~~	~~Exhibits~~
3.1		Amended and Restated Certificate of Incorporation (previously filed as an exhibit to the Registration Statement on Form 10-12B, filed on July 31, 2012, and incorporated herein by reference).

3.2		Certificate of Amendment to Amended and Restated Certificate of Incorporation (previously filed as exhibit to the Current Report on Form 8-K, filed on March 31, 2016, and incorporated herein by reference.

~~Exhibit~~ ~~Index~~ 3.3		Certificate of Amendment to Amended and Restated Certificate of Incorporation (previously filed as exhibit to the Annual Report on Form 10-K, filed on March 17, 2017, and incorporated herein by reference).

~~10.1(1)~~3.4		~~Memorandum~~Certificate of ~~Understanding, dated December 11, 2017, between Biostage, Inc.~~Designations, Preferences and ~~Bin Zhao.~~Rights of Series A Preferred Stock classifying and designating the Series A Junior Participating Cumulative Preferred Stock (previously filed as exhibit to the Registration Statement on Form 8-A, filed on October 31, 2013, and incorporated herein by reference).

~~31.1+~~3.5		Certificate of Designation of Series B Convertible Preferred Stock classifying and designating the Series B Convertible Preferred Stock (previously filed as an exhibit to the Current Report on Form 8-K, filed on February 12, 2015, and incorporated by reference thereto).

3.6		Certificate of Amendment to Amended and Restated Certificate of Incorporation (previously filed as exhibit to the Current Report on Form 8-K, filed on April 27, 2017, and incorporated herein by reference).

3.7		Certificate of Designations, Preferences, Rights and Limitations of Series C Convertible Preferred Stock classifying and designating the Series C Convertible Preferred Stock (previously filed as an exhibit to the Current Report on Form 8-K, filed on August 17, 2017, and incorporated by reference thereto).

3.8		Certificate of Elimination of Series A Junior Participating Cumulative Preferred Stock (previously filed as an exhibit to the Current Report on Form 8-K, filed on August 17, 2017, and incorporated by reference thereto).

3.9		Certificate of Amendment to Amended and Restated Certificate of Incorporation (previously filed as exhibit to the Current Report on Form 8-K, filed on December 22, 2017, and incorporated herein by reference).

3.10		Certificate of Designations, Preferences, Rights and Limitations of Series D Convertible Preferred Stock classifying and designating the Series D Convertible Preferred Stock (previously filed as an exhibit to the Current Report on Form 8-K, filed on January 3, 2018, and incorporated by reference thereto).

3.11		Certificate of Amendment to Amended and Restated Certificate of Incorporation (previously filed as exhibit to the Current Report on Form 8-K, filed on May 28, 2019, and incorporated herein by reference).

3.12		Certificate of Amendment to Amended and Restated Certificate of Incorporation (previously filed as an exhibit to the Current Report on Form 8-K, filed on July 20, 2023, and incorporated herein by reference).

3.13		Third Amended and Restated Bylaws (previously filed as an exhibit to the Current Report on Form 8-K, filed on July 20, 2023, and incorporated herein by reference).

10.1		Form of Securities Purchase Agreement (previously filed as an exhibit to the Current Report on Form 8-K, filed on April 6, 2023, and incorporated herein by reference).

31.1+		Certification of Chief ~~Financial~~Executive Officer, Director, and Chairman of ~~Biostage,~~Harvard Apparatus Regenerative Technology, Inc., pursuant to Rules 13a-14(a) and 15d-14(a), of the Securities Exchange Act, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002.

31.2+		Certification of Chief ~~Executive~~Financial Officer of ~~Biostage,~~Harvard Apparatus Regenerative Technology, Inc., pursuant to Rules 13a-14(a) and 15d-14(a), of the Securities Exchange Act, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002.

32.1*		Certification of Chief ~~Financial~~Executive Officer, Director, and Chairman of ~~Biostage,~~Harvard Apparatus Regenerative Technology, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002.

32.2*		Certification of Chief ~~Executive~~Financial Officer of ~~Biostage,~~Harvard Apparatus Regenerative Technology, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002.

101.INS		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema ~~Document~~Document.

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase ~~Document~~Document.

~~101.LAB~~101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB		Inline XBRL Taxonomy Extension Labels Linkbase ~~Document~~Document.

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase ~~Document~~Document.

~~101.DEF~~Exhibit 104		Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL ~~Taxonomy Extension Definition Linkbase Document~~tags are embedded within the Inline XBRL document.

	~~BIOSTAGE,~~HARVARD APPARATUS REGENERATIVE TECHNOLOGY, INC.

	By:	/s/ ~~James McGorry~~Junli He
	Name:	~~James McGorry~~Junli He
	Title:	~~Chief Executive Officer~~

	~~By:~~	~~/s/ Thomas McNaughton~~
		~~Thomas McNaughton~~
		~~Chief Financial Officer~~

~~10.1(1)~~		~~Memorandum of Understanding, dated December 11, 2017, between Biostage, Inc. and Bin Zhao.~~

~~31.1+~~		~~Certification of Chief Financial Officer of Biostage, Inc., pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~31.2+~~		~~Certification of~~ Chief Executive Officer, ~~of Biostage, Inc., pursuant to Rules 13a-14(a)~~Director, and ~~15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~Chairman (principal executive officer)

32.1*	By:	~~Certification of~~ /s/ Joseph L.Damasio Jr.
	Name:	Joseph L. Damasio Jr.
	Title:	Chief Financial Officer ~~of Biostage, Inc., 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 Chief Executive Officer of Biostage, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~101.INS~~		~~XBRL Instance Document~~

~~101.SCH~~		~~XBRL Taxonomy Extension Schema Document~~

~~101.CAL~~		~~XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.LAB~~		~~XBRL Taxonomy Extension Labels Linkbase Document~~

~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document~~

~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase Document~~ (principal financial officer)