UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2021~~2023

☐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: 001-40518

Miromatrix Medical Inc.

(Exact name of registrant as specified in its charter)

Delaware

~~33-0303583~~27-1285782

(State or other jurisdiction of

incorporation)

(I.R.S. Employer

Identification Number)

~~10399 West 70th Street~~6455 Flying Cloud Drive, Suite 107

Eden Prairie, MN 55344

(Address of principal executive offices, including zip code)

(952) 942-6000

(Registrant’s telephone number, including area code)

Not Applicable

(Former Name, or Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol	Name of exchange on which registered
Common Stock, par value $0.00001 per share	MIRO	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐☒ No ☒☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒	Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August ~~11, 2021,~~9, 2023, there were ~~20,050,395~~27,310,553 shares of the registrant’s common stock outstanding.

Table of Contents

PART I —FINANCIAL INFORMATION

Item 1. Financial Statements

MIROMATRIX MEDICAL INC.

Condensed Balance Sheets

June 30,

December 31,

2021

2020

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$
66,525,757

$
4,444,395
Receivable from Reprise Biomedical, Inc.

9,138

15,202
Grant receivable

120,000

100,000
Prepaid expenses and other current assets

115,205

130,576
Total current assets

66,770,100

4,690,173
Lab equipment, furniture and leasehold improvements, net

351,472

324,534
Investment in Reprise Biomedical, Inc

—

239,721
Total assets

$
67,121,572

$
5,254,428
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

Current liabilities:

Current portion of long-term debt

$
400,341

$
6,413,733
Accounts payable

441,582

130,160
Accrued interest expense

536

612,705
Embedded derivative liability

—

246,962
Accrued expenses

1,615,980

760,889
Total current liabilities .

2,458,439

8,164,449
Accrued royalties

734,556

488,368
Long-term debt, less current portion

462,024

928,623
Accrued interest

58,472

45,691
Total liabilities

3,713,491

9,627,131
Commitments and contingencies

Mezzanine equity:

Convertible preferred stock – Series B-2, par value $0.00001; 0 shares authorized, issued and outstanding as of June 30, 2021 and 2,500,000 shares authorized; 2,095,874 issued and outstanding as of December 31, 2020 (Liquidation preference $0 and $15,719,055, respectively)

—

15,670,097
Convertible preferred stock – Series B, par value $0.00001; 0 shares authorized, issued and outstanding as of June 30, 2021and 4,000,000 shares authorized; 3,218,282 issued and outstanding as of December 31, 2020 (Liquidation preference $0 and $24,137,115, respectively)

—

23,865,732
Convertible preferred stock �� Series A, par value $0.00001; 0 shares authorized, issued and outstanding as of June 30, 2021 and 3,300,000 shares authorized; 3,000,380 issued and outstanding as of December 31, 2020 (Liquidation preference $0 and $7,500,950, respectively)

—

7,125,661
Shareholders’ equity (deficit):

Common stock, par value $0.00001; 190,000,000 shares authorized; 20,024,552 issued and outstanding as of June 30, 2021 and 30,000,000 shares authorized; 2,185,822 issued and outstanding as of December 31, 2020

200

22
Additional paid-in capital

126,926,215

8,346,943
Accumulated deficit

(63,518,334)

(59,381,158)
Total shareholders’ equity (deficit)

63,408,081

(51,034,193)
Total Liabilities, Mezzanine Equity and Shareholders’ Equity (Deficit)

$
67,121,572

$
5,254,428

~~The accompanying notes are an integral part of these condensed financial statements.~~

~~Table of Contents~~

~~MIROMATRIX MEDICAL INC.~~

~~Condensed Statements of Operations~~

~~(unaudited)~~

Three Months Ended

Six Months Ended


June 30,

June 30,

2021

2020

2021

2020

Licensing revenue

$
9,139

$
9,394

$
15,247

$
20,482

Cost of goods sold

125,000

125,000

250,000

250,000

Gross margin

(115,861)

(115,606)

(234,753)

(229,518)

Operating expenses:









Research & development

2,480,887

2,078,903

4,348,888

3,880,281

Regulatory and clinical

103,256

71,087

186,961

144,193

Quality

86,257

—

172,044

—

General & administration

786,322

605,147

1,349,196

1,070,810

Total operating expenses

3,456,722

2,755,137

6,057,089

5,095,284

Operating loss from continuing operations

(3,572,583)

(2,870,743)

(6,291,842)

(5,324,802)

Interest income

45

2,726

85

8,589

Interest expense

(280,663)

(117,343)

(586,037)

(154,518)

Amortization of discount on note

(30,052)

(32,586)

(62,638)

(43,448)

Change in fair value of derivative

52,991

—

246,962

—

Research grants

127,428

285,867

277,965

465,867

Loss from continuing operations

(3,702,834)

(2,732,079)

(6,415,505)

(5,048,312)

Equity loss in affiliate

—

(541,000)

(223,633)

(1,181,000)

Gain on sale of equity investment

—

—

1,983,912

—

Gain on debt extinguishment .

—

—

518,050

—

Net loss

$
(3,702,834)

$
(3,273,079)

$
(4,137,176)

$
(6,229,312)

Net loss per share, basic and diluted

$
(1.27)

$
(1.50)

$
(1.60)

$
(2.90)

Weighted average shares used in computing net loss per share, basic and diluted

2,913,938

2,183,322

2,586,477

2,146,152


	June 30,		December 31,
	2023		2022
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	4,571,777	$	5,208,005
Restricted cash		800,100		800,100
Short-term investments		15,828,281		19,989,489
Employee retention credit receivable		527,143		—
Receivable from Reprise Biomedical, Inc.		8,517		930,355
Interest receivable		30,707		107,861
Prepaid expenses and other current assets		114,943		274,952
Total current assets		21,881,468		27,310,762
Deferred offering costs		—		232,899
Right of use asset		1,570,837		1,673,575
Property and equipment, net		4,998,862		5,545,694
Total assets	$	28,451,167	$	34,762,930

Liabilities and Shareholders' Equity
Current liabilities:
Current portion of deferred royalties	$	739,738	$	979,167
Accounts payable		803,571		1,584,929
Current portion of financing lease obligations		22,506		44,157
Current portion of lease liability		405,566		389,649
Accrued expenses		1,916,104		1,948,376
Total current liabilities		3,887,485		4,946,278
Deferred royalties, net		—		491,733
Long-term debt		385,997		385,997
Financing lease obligations, net		3,964		11,689
Lease liability, net		2,512,062		2,720,781
Accrued interest		113,409		99,048
Total liabilities		6,902,917		8,655,526
Commitments and contingencies
Shareholders’ equity:
Common stock, par value $0.00001; 190,000,000 shares authorized; 27,310,553 issued and outstanding as of June 30, 2023 and 20,944,109 issued and outstanding as of December 31, 2022		273		209
Additional paid-in capital		139,570,460		130,119,106
Accumulated deficit		(118,022,483)		(104,011,911)
Total shareholders’ equity		21,548,250		26,107,404
Total liabilities and shareholders’ equity	$	28,451,167	$	34,762,930

The accompanying notes are an integral part of these condensed financial statements.

Table of Contents

MIROMATRIX MEDICAL INC.

Condensed Statements of ~~Shareholders’ Equity (Deficit)~~Operations

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022

Licensing revenue	$	8,517	$	3,952	$	16,498	$	10,720
Cost of goods sold		125,000		125,000		250,000		250,000
Gross loss		(116,483)		(121,048)		(233,502)		(239,280)
Operating expenses:
Research and development		3,621,224		4,988,233		8,013,342		8,994,899
Regulatory and clinical		397,448		419,394		803,763		774,632
Quality		515,575		517,333		1,098,917		958,268
General and administration		2,037,682		2,188,460		4,637,917		4,461,017
Total operating expenses		6,571,929		8,113,420		14,553,939		15,188,816
Operating loss		(6,688,412)		(8,234,468)		(14,787,441)		(15,428,096)
Other income (expense)
Interest income		166,162		61,078		268,139		61,848
Interest expense		(8,170)		(8,799)		(18,413)		(19,690)
Employee retention credit		—		—		527,143		—
Total other income		157,992		52,279		776,869		42,158
Net loss	$	(6,530,420)	$	(8,182,189)	$	(14,010,572)	$	(15,385,938)
Net loss per share, basic and diluted	$	(0.24)	$	(0.40)	$	(0.56)	$	(0.75)
Weighted average shares used in computing net loss per share, basic and diluted		27,250,573		20,615,218		24,897,796		20,547,070

The accompanying notes are an integral part of these condensed financial statements.

Table of Contents

MIROMATRIX MEDICAL INC.

Condensed Statements of Shareholders’ Equity

(Unaudited)

Additional

Total

Common Stock

Pain- In

Accumulated

Shareholders’


Shares

Amounts

Capital

Deficit

Equity (Deficit)
Balance at March 31, 2021

2,290,822

$
23

$
8,509,143

$
(59,815,500)

$
(51,306,334)
Stock-based compensation expense

—

—

105,879

—

105,879
Exercise of stock options

58,750

1

5,874

—

5,875
Exercise of stock warrants

65,909

—

6,250

—

6,250
Conversion of preferred stock to common stock

11,092,314

111

66,553,049

—

66,553,160
Note payable and accrued interest converted to common stock

996,757

10

7,152,389

—

7,152,399
Sales of common stock, net of expenses

5,520,000

55

44,593,631

—

44,593,686
Net loss

—

—

—

(3,702,834)

(3,702,834)
Balance at June 30, 2021

20,024,552

$
200

$
126,926,215

$
(63,518,334)

$
63,408,081

Balance at March 31, 2020

2,183,322

$
22

$
7,858,087

$
(52,027,823)

$
(44,169,714)
Stock-based compensation expense

—

—

157,398

—

157,398
Net loss

—

—

—

(3,273,079)

(3,273,079)
Balance at June 30, 2020

2,183,322

$
22

$
8,015,485

$
(55,300,902)

$
(47,285,395)


				Additional				Total
	Common Stock			Paid-In		Accumulated		Shareholders’
	Shares	Amount		Capital		Deficit		Equity
Balance at March 31, 2023	27,239,938	$	272	$	139,291,810	$	(111,492,063)	$	27,800,019
Stock-based compensation expense	—		—		278,651		—		278,651
Issuance of restricted shares	70,615		1		(1)		—		—
Net loss	—		—		—		(6,530,420)		(6,530,420)
Balance at June 30, 2023	27,310,553	$	273	$	139,570,460	$	(118,022,483)	$	21,548,250

Balance at March 31, 2022	20,546,583	$	206	$	128,712,746	$	(81,255,663)	$	47,457,289
Stock-based compensation expense	—		—		266,390		—		266,390
Exercise of stock options	44,569		—		55,710		—		55,710
Exercise of stock warrants	191,559		2		414,096		—		414,098
Issuance of restricted shares	31,030		—		—		—		—
Net loss	—		—		—		(8,182,189)		(8,182,189)
Balance at June 30, 2022	20,813,741	$	208	$	129,448,942	$	(89,437,852)	$	40,011,298

Additional

Total

Common Stock

Pain- In

Accumulated

Shareholders’


Shares

Amounts

Capital

Deficit

Equity (Deficit)
Balance at December 31, 2020

2,185,822

$
22

$
8,346,943

$
(59,381,158)

$
(51,034,193)
Stock-based compensation expense

—

—

239,330

—

239,330
Exercise of stock options

163,750

2

34,623

—

34,625
Exercise of stock warrants

65,909

—

6,250

—

6,250
Conversion of preferred stock to common stock

11,092,314

111

66,553,049

—

66,553,160
Note payable and accrued interest converted to common stock

996,757

10

7,152,389

—

7,152,399
Sales of common stock, net of expenses

5,520,000

55

44,593,631

—

44,593,686
Net loss

—

—

—

(4,137,176)

(4,137,176)
Balance at June 30, 2021

20,024,552

$
200

$
126,926,215

$
(63,518,334)

$
63,408,081

Balance at December 31, 2019

2,075,822

$
21

$
7,638,190

$
(49,071,590)

$
(41,433,379)
Stock-based compensation expense

—

—

314,796

—

314,796
Exercise of stock options

62,500

1

6,249

—

6,250
Exercise of stock warrants

45,000

—

56,250

—

56,250
Net loss

—

—

—

(6,229,312)

(6,229,312)
Balance at June 30, 2020

2,183,322

$
22

$
8,015,485

$
(55,300,902)

$
(47,285,395)


				Additional				Total
	Common Stock			Paid-In		Accumulated		Shareholders’
	Shares	Amount		Capital		Deficit		Equity
Balance at December 31, 2022	20,944,109	$	209	$	130,119,106	$	(104,011,911)	$	26,107,404
Stock-based compensation expense	—		—		610,610		—		610,610
Issuance of restricted shares	116,444		1		(1)		—		—
Sales of common stock, net of expenses	6,250,000		63		8,855,374		—		8,855,437
Tax withholdings related to net share settlements of stock-based compensation awards	—		—		(14,629)		—		(14,629)
Net loss	—		—		—		(14,010,572)		(14,010,572)
Balance at June 30, 2023	27,310,553	$	273	$	139,570,460	$	(118,022,483)	$	21,548,250

Balance at December 31, 2021	20,385,645	$	204	$	128,177,594	$	(74,051,914)	$	54,125,884
Stock-based compensation expense	—		—		600,371		—		600,371
Exercise of stock options	205,507		2		256,881		—		256,883
Exercise of stock warrants	191,559		2		414,096		—		414,098
Issuance of restricted shares	31,030		—		—		—		—
Net loss	—		—		—		(15,385,938)		(15,385,938)
Balance at June 30, 2022	20,813,741	$	208	$	129,448,942	$	(89,437,852)	$	40,011,298

The accompanying notes are an integral part of these condensed financial statements.

Table of Contents

MIROMATRIX MEDICAL INC.

Condensed Statements of Cash Flows

(Unaudited)

Six months ended

June 30,

2021

2020



(unaudited)

(unaudited)
Cash flows from operating activities:




Net loss

$
(4,137,176)

$
(6,229,312)
Adjustments to reconcile net loss to net cash from operating activities:




Depreciation and amortization

59,174

105,020
Stock-based compensation

239,330

314,796
Reserve for bad debt

—

(5,001)
Amortization of discount on note

62,638

43,448
Change in fair value of derivative

(246,962)

—
Forgiveness of paycheck protection program loan

(518,050)

—
Equity loss in affiliate

223,633

1,181,000
Gain on sale of equity investment

(1,983,912)

—
Changes in operating assets and liabilities:




Accounts receivable

—

47,176
Receivable from Reprise Biomedical, Inc

6,064

218,857
Grant receivable

(20,000)

257,380
Prepaid expenses

15,371

3,699
Accounts payable and accrued expenses

327,276

(134,589)
Accrued interest

581,799

143,468
Net cash used in operating activities

(5,390,815)

(4,054,058)
Cash flows from investing activities:




Proceeds from sale of equity-method investment

2,000,000

—
Purchases of lab equipment, furniture and leasehold improvements

(86,112)

(115,441)
Net cash provided by (used in) investing activities

1,913,888

(115,441)
Cash flows from financing activities:




Payments on long-term debt

(53,367)

(64,554)
Proceeds from long-term debt

—

6,563,397
Proceeds from sale of common stock, net

45,679,111

—
Proceeds from sale of preferred stock, net

19,891,670

—
Proceeds from stock warrants exercise

6,250

56,250
Proceeds from stock options exercise

34,625

6,250
Net cash provided by financing activities

65,558,289

6,561,343
Increase (decrease) in cash and cash equivalents

62,081,362

2,391,844
Cash and cash equivalents at beginning of year

4,444,395

3,250,014
Cash and cash equivalents at end of year

$
66,525,757

$
5,641,858

Supplemental disclosure of cash flow information:




Interest paid

$
8,768

$
32,243

Supplemental disclosure of non-cash activities:




Accrued expenses related to financing

$
1,085,425

$
—


	Six Months Ended June 30,
	2023		2022

Cash flows from operating activities:
Net loss	$	(14,010,572)	$	(15,385,938)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		579,367		536,507
Stock-based compensation		610,610		600,371
Loss on disposal of property and equipment		—		758
Non-cash interest income		77,154		(116,933)
Amortization of premium/discount on investments		(96,058)		6,734
Write-off of deferred offering costs		221,254		—
Employee retention credit		(527,143)		—
Changes in operating assets and liabilities:
Receivable from Reprise Biomedical, Inc.		921,838		13,867
Prepaid expenses		160,009		86,224
Operating lease right of use asset		102,738		(3,169,736)
Tenant improvement receivable reimbursement		—		1,256,950
Accounts payable and accrued expenses		(1,544,792)		(925,314)
Accrued interest		14,361		13,624
Operating lease liability		(192,802)		3,291,908
Net cash used in operating activities		(13,684,036)		(13,790,978)
Cash flows from investing activities:
Purchase of investments		(9,742,734)		(26,026,125)
Proceeds from maturity of investments		14,000,000		—
Purchases of property and equipment		(32,535)		(731,616)
Net cash provided by (used in) investing activities		4,224,731		(26,757,741)
Cash flows from financing activities:
Payments on long-term debt		—		(295,450)
Payments on financing lease obligations		(29,376)		(26,488)
Payments on offering costs		—		(18,540)
Proceeds from sale of common stock, net		8,867,082		—
Employee taxes paid for shares withheld		(14,629)		—
Proceeds from stock warrant exercises		—		414,098
Proceeds from stock option exercises		—		256,883
Net cash provided by financing activities		8,823,077		330,503
Net decrease in cash and cash equivalents		(636,228)		(40,218,216)
Cash, cash equivalents and restricted cash at beginning of period		6,008,105		53,611,631
Cash, cash equivalents and restricted cash at end of period	$	5,371,877	$	13,393,415

Cash and cash equivalents	$	4,571,777	$	12,593,315
Restricted cash		800,100		800,100
Cash, cash equivalents and restricted cash at end of period	$	5,371,877	$	13,393,415

Supplemental disclosure of cash flow information:
Interest paid	$	4,052	$	6,066
Purchases of property and equipment in accounts payable and accrued expenses	$	—	$	6,089
Accrued expenses related to deferred offering costs and financing	$	—	$	172,693
Leased assets obtained in exchange for new operating lease liabilities	$	—	$	1,986,172

The accompanying notes are an integral part of these condensed financial statements.

Table of Contents

MIROMATRIX MEDICAL INC.

Notes to Condensed Financial Statements

(Unaudited)

NOTE 1 — DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Miromatrix Medical Inc. (the “Company”) is a life ~~science~~sciences company ~~that has~~pioneering a novel technology for bioengineering fully transplantable organs to help save and improve patients’ lives. Founded in 2009, the Company is one of a small group of companies at the forefront of developing alternatives to human-donor organ transplants, and within this small group of companies there are important differences between the technologies being developed. The Company’s proprietary technology is a scalable platform that uses a two-step method of decellularization and recellularization designed to remove the porcine cells from ~~or decellularize,~~the organs obtained from pigs and replace them with unmodified human cells. The Company’s initial development focus is on bioengineering livers and kidneys, and the Company’s technology platform is also applicable to ~~recellularize~~bioengineering other organs including hearts, lungs and ~~tissues~~pancreases. The Company has collaborations with Baxter International Inc. (“Baxter”), CareDx, Inc. (“CareDx”), the Mayo Clinic, the Mount Sinai Health System and the Texas Heart Institute, and we have received strategic investments from ~~animal~~Baxter, CareDx and ~~human sources, facilitating the creation of numerous products (the “Medical Device Business”).~~DaVita Inc.

Basis of Preparation

The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules of the United States (“U.S.”) Securities and Exchange Commission ~~(“SEC”)~~ applicable to interim reports of companies filing as a smaller reporting company. These condensed financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s ~~Registration Statement~~Annual Report on Form ~~S-1 (File No. 333-256649), as amended, (the “Form S-1”)~~10-K for the fiscal year ended December 31, 2020 filed with the SEC on June 22, 2021. In the opinion of management, the accompanying condensed interim financial statements include all adjustments necessary in order to make the financial statements not misleading. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year or any other future period. Certain notes to the financial statements that would substantially duplicate disclosures contained in the audited financial statements for the most recent fiscal year as reported in the Company’s Form S-1 have been omitted. The accompanying condensed balance sheet at December 31, 2020 has been derived from the audited balance sheet at December 31, 2020 contained in such Form S-1.2022.

In the opinion of management, the ~~accompaying~~accompanying condensed financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, ~~stockholders'~~stockholders’ equity and cash flows for the interim periods but are not necessarily indicative of the results of operations or cash flows to be anticipated for the full year ~~2021~~2023 or any future period. The Company has evaluated subsequent events occurring after the date of the condensed financial statements for events requiring recording or disclosure in the condensed financial statements.

~~Amended~~Reclassifications

Certain reclassifications to previously reported financial information on the Condensed Balance Sheets and ~~Restated Charter~~

~~On May 20, 2021, The Company’s Board~~Condensed Statements of ~~Directors (the “Board”) and stockholders approved an amendment and restatement of the Company’s then-existing certificate of incorporation (the “Pre-IPO Certificate”)~~Operations have been made to create, among other changes, a Series C Convertible Preferred Stock (“Series C Stock”). The Series C Stock would convert into shares of the Company’s common stock upon the Company’s initial public offering at 80% of the price at which the common stock is being sold in the initial public offering (see Note 8).

~~June 2021 Amended and Restated Charter~~

~~Prior~~conform to the completion of the initial public offering of the Company’s common stock (the “IPO”), The Company's Board and stockholders approved an amendment (the “Charter Amendment”) to the Pre-IPO Certificate and an amended and restated certificate of incorporation (“Post-IPO Certificate”) that became effective on June 23, 2021. The Charter Amendment increased the number of authorized shares of the Company’s common stock from 30,000,000 to 190,000,000 and authorized 10,000,000 shares of undesignated preferred stock. Under the Post-IPO Certificate, the Company is authorized to issue 2 classes of stock, Common Stock and Preferred Stock.

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~~Equity Method Investments~~

Investments in 20% to 50%-owned companies are accounted for under the equity method as the Company can exercise significant influence, but not control, over such investments. The equity method requires that gains (losses) are recognized in other income (expense), net in the statements of operations. The gain on equity investment in Reprise Biomedical, Inc. (“Reprise”) resulted from recording the fair value of the Company’s investment in Reprise upon losing a controlling interest in the Company on June 30, 2019. The Company recorded its equity method share of losses in Reprise from July 1, 2019 through December 31, 2019, from January 1, 2020 to December 31, 2020 and from January 1, 2021 to March 15, 2021 in the statements of operations. Even though the Company’s ownership dropped below 20% on November 15, 2020, the Company still had significant influence over the activities of Reprise due to common board members (See Note 5).

~~Research and Development Costs~~

Research and development expenses consist primarily of engineering, product development, consulting services, materials, depreciation and other costs associated with products and technologies in development. These expenses include employee and non-employee compensation, including stock-based compensation, supplies, materials, consulting, related travel expenses and facility costs. Expenditures for research and development activities are charged to operations as incurred.

~~Stock-Based Compensation~~

The Company is required to determine the fair value of equity incentive awards and recognize compensation expense for all equity incentive awards made to employees and directors, including employee stock options. The Company also determines the fair value of non-statutory stock options issued to consultants based on the fair value of the consultant’s commitment at the date of grant. Such expense is recognized over the requisite service period. In addition, stock-based compensation expense recognized in the statements of operations is based on awards expected to vest and therefore the amount of expense has been reduced for estimated forfeitures. The Company uses the straight-line method for expense attribution, except for awards issued with performance-based conditions which require an accelerated attribution method over the requisite performance and service periods.

Under the applicable accounting guidance for equity incentive awards issued to non-employees, the date at which the fair value of such awards is measured is equal to the earlier of: 1) the date at which a commitment for performance by the counterparty to earn the equity instrument is reached; or ~~2) the date at which the counterparty~~’~~s performance is complete. The Company recognizes stock-based compensation expense for the fair value of the vested portion of the non-employee awards in the statements of operations.~~

The valuation model used for calculating the fair value of awards for stock-based compensation expense is the Black-Scholes option-pricing model (the “Black-Scholes model”). The Black-Scholes model requires the Company to make assumptions and judgments about the variables used in the calculation, including the expected term (weighted averagecurrent period of time that the options granted are expected to be outstanding), the volatility of common stock and an assumed risk-free interest rate. The Company uses the “simplified method” to determine the expected term of the stock option. Volatility is based on an average of the historical volatilities of the common stock of publicly-traded companies with characteristics similar to those of the Company. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected term of the option. The expected dividend assumption is based on the Company’s history of not paying dividends and its expectation that it will not declare dividends for the foreseeable future. Potential forfeitures of awards are estimated based on the Company’s historical forfeiture experience. The estimate of forfeitures will be adjusted over the service period to the extent that actual forfeitures differ, or are expected to differ, from prior estimates.presentation.

~~Concentration of Credit Risk~~

~~Financial instruments that potentially subject the Company to credit risk consist principally of cash, cash equivalents, accounts receivable and accounts payable.~~

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Use of Estimates

The preparation of financial statements in conformity with ~~accounting principles generally accepted in the United States of America~~U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Employee Retention Credit

Under the provisions of the extension of the Coronavirus Aid, Relief, and Economic Security Act, the Company is eligible for a refundable employee retention credit subject to satisfaction of certain eligibility criteria. The Company qualified for the employee retention credit for the first three quarters of 2020 and the second and third quarters of 2021. The Company recognized $527,143 during the six months ended June 30, 2023, consistent with guidance from International Accounting Standards 20, Accounting for Government Grants and Disclosure of Government Assistance, where the Company must have substantially met the program’s eligibility conditions to record revenue. It was reported as an employee retention credit receivable on the Condensed Balance Sheet and employee retention credit other income on the Condensed Statement of Operations for the six months ended June 30, 2023.

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Emerging Growth Company Status

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as to those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these condensed financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

~~Net Loss Per Share~~

Basic net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock and dilutive potential shares of common stock outstanding during the period. Because we have reported a net loss for all periods presented, diluted net loss per share is the same as basic net loss per share for those periods as all potentially dilutive shares consisting of stock options and warrants were antidilutive in those periods.

Recent Accounting Pronouncements

~~During February 2016, the Financial~~Recently Adopted Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842).” ASU No. 2016-02 requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. During 2018, thePronouncements

The FASB ~~also~~ issued ASU No. ~~2018-10, “Codification Improvements to Topic 842, Leases”, which addresses narrow aspects~~2016-13, Measurement of Credit Losses on Financial Instruments and an updated ASU 2018-19 that clarifies the scope of the ~~guidance originally issued~~standard in the amendments in ASU ~~No. 2016-02; ASU 2018-11, “Targeted Improvements”, which provides entities with~~2016-13. This guidance introduces a new model for recognizing credit losses on financial instruments based on an ~~additional (and optional) transition method whereby an entity initially applies the new leases standard at the adoption date~~estimate of current expected credit losses. Financial instruments impacted are trade and ~~recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption~~other receivables, held-to-maturity debt securities, loans and also provides lessors with a practical expedient, by class of underlying asset, to not separate non-lease components from the associated lease component and, instead, to account for those components as a single component. During 2019, the FASB also issued ASU No. 2019-01, which clarified Topic 842’s interim disclosure requirements and amend certain industry-specific guidance related to determining the fair value of leased assets and the cash flow presentation of principal payments received under sales-type and direct finance leases. Topic 842 (as amended) is effective for annual periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted.other instruments. The Company ~~is currently assessing~~adopted the ~~effect that Topic 842 (as amended) will~~standard effective January 1, 2023, using the modified retrospective approach. The adoption did not have an impact on ~~its results of operations,~~the Company's financial ~~position and cash flows.~~

statements.

NOTE 2 — ~~INITIAL PUBLIC OFFERING~~GOING CONCERN

~~In June 2021,~~The accompanying condensed financial statements have been prepared on the basis that the Company ~~completed~~will continue as a going concern. The Company has incurred losses since inception, negative cash flows from operations, and had an accumulated deficit of approximately $118.0 million as of June 30, 2023. The Company does not have adequate liquidity to fund its operations for at least twelve months from the ~~IPO in which~~issuance of these financial statements without raising additional capital and such actions are not solely within the control of the Company. If the Company ~~sold 5,520,000 shares~~is unable to raise additional capital, management believes planned expenditures may need to be reduced in order to extend the time period that existing resources can fund the Company’s operations. To date, the Company has funded its operations through the issuance of equity and debt securities, and the receipt of grants. The Company intends to fund ongoing operations by utilizing its current cash, cash equivalents and short-term investments on hand, and by exploring various dilutive and non-dilutive sources of funding, including equity financings, debt financings, strategic partnerships and collaborations, as well as other sources. If the Company is unable to obtain additional capital, it would have a material adverse effect on the operations of the Company and the development of its ~~common stock at a price~~technology, and the Company may have to cease operations altogether. These factors raise substantial doubt about the ~~public of $9.00 per share, which included the sale of 720,000 shares of common stock~~Company’s ability to continue as a result of the full exercise of the underwriter’s overallotment option. The Company received proceeds of $49.7 million, excluding underwriting discounts and commissions, which was recorded to additional paid-in capital. The Company’s common stock commenced trading on the Nasdaq Capital Market on June 24, 2021 under the trading symbol “MIRO.”going concern.

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Upon the closing of the IPO, all shares of the then-outstanding convertible preferred stock were converted on their respective terms into a total of 12,139,071 shares of common stock. This resulted in a reclassification of $73.7 million to additional paid-in capital.

Offering costs incurred by the Company were approximately $1.6 million, excluding underwriting commissions and discounts, which were recorded to additional paid-in capital. The Company issued the underwriter in the IPO a warrant to purchase up to 276,000 shares of its common stock.

NOTE 3 ~~— LAB EQUIPMENT, FURNITURE AND LEASEHOLD IMPROVEMENTS~~

~~Lab equipment, furniture and leasehold improvements consisted of the following as of:~~

June 30, 2021

December 31, 2020

(unaudited)

Lab equipment

$
1,567,064

$
1,480,952
Leasehold improvements

310,225

310,225
Furniture and fixtures & computers

112,302

112,302

1,989,591

1,903,479
Less accumulated depreciation and amortization

(1,638,119)

(1,578,945)

$
351,472

$
324,534

Depreciation and amortization expense was $29,145 and $37,082 for the three months ended June 30, 2021 and 2020, respectively, and $59,174 and $105,020 for the six months ended June 30, 2021 and 2020, respectively.

~~NOTE 4 — EQUITY METHOD INVESTMENT~~

The Company previously manufactured and sold acellular medical devices in the hernia mesh and wound care markets through a separately identifiable business unit (the “Acellular Business”). On June 30, 2019, the Acellular Business was spun-out to Reprise. At the time of the spin-out the common stock of Reprise was valued at $1 per share and therefore the Company recognized a gain of $4,495,500 on its Reprise common stock holdings. At the time of the spin-out and until November 15, 2020 the Company owned 4,500,000 shares of common stock of Reprise, which represented 45% ownership in Reprise. In November 2020, the Company sold 2,700,000 shares of common stock of Reprise and retained an 18% ownership interest in Reprise. The Company sold its remaining shares of Reprise in March 2021 for $2,000,000.

As of December 31, 2020, the Company had an investment in Reprise that it accounts for under the equity method (See Note 1). The Company considers its investment in Reprise to be significant to its income as of December 31, 2020. Financial information from the financial statements of Reprise are summarized as follows:

June 30, 2021

December 31, 2020


(unaudited)

Current assets

$
—

$
4,309,045
Total assets

—

5,312,350
Current liabilities

—

2,534,673
Non-current liabilities

—

489,785
Shareholders’ equity

—

2,287,892
Miromatrix Medical Inc. share of shareholders’ equity

—

411,821

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For the Three Months Ended June 30,

For the Six Months Ended June 30,


2021

2020

2021

2020

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Net sales

$
—

$
144,530

$
93,985

$
314,790

Gross margin

—

81,619

47,708

198,076

Net loss

—

(1,112,290)

(1,376,522)

(2,534,855)

Miromatrix Medical Inc. share of net loss

—

(500,685)

(223,633)

(1,140,685)

~~NOTE 5 — ACCRUED EXPENSES~~

~~Accrued expenses consisted of the following as of:~~

June 30,

December 31,

2021

2020

(unaudited)

Wages

$
281,595

$
217,825
Legal

92,000

452,778
Royalties

2,285

3,800
Insurance

26,995

—
IPO expenses

1,085,425

—
Key opinion leader compensation

77,500

34,000
Other

50,180

52,486
Accrued expenses

$
1,615,980

$
760,889

~~NOTE 6~~ — FAIR VALUE MEASUREMENT

The fair value of the Company’s financial instruments ~~reflect~~reflects the amount that the Company estimates that it would receive in connection with the sale of an asset or paid in connection with the transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). ~~Accounting Standards Codification (“ASC”) 820~~~~, Fair Value Measurements~~The Company uses a three-tier valuation hierarchy based upon observable and ~~Disclosures~~ ~~establishes a~~non-observable inputs to measure fair ~~value hierarchy~~value:

Level 1: Inputs that ~~prioritizes the inputs used in valuation techniques into the following three levels:~~

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjustedinclude quoted prices in active markets for identical assets ~~or liabilities (Level 1)~~ and ~~the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC 820 are described below:~~liabilities.

Level 2:Inputs other than Level 1 ~~Quoted prices (unadjusted) in active markets~~ that are ~~accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.~~

~~Level 2 Directly~~observable, either directly or indirectly, ~~observable inputs~~such as ~~of the reporting date through correlation with market data, including~~ quoted prices for similar assets ~~and~~or liabilities, ~~in active markets and~~ quoted prices in markets that are not ~~active. Level 2 also includes assets and liabilities~~active; or other inputs that are ~~valued using models~~observable or ~~other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are~~can be corroborated by ~~readily~~ observable market data ~~from actively quoted markets~~ for substantially the full term of the ~~financial instrument.~~assets or liabilities.

Level 3:Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company classifies cash and cash equivalents, as well as restricted cash, as Level 1 in the fair value hierarchy.

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11The Company classifies its investments in U.S. Treasury notes as Level 1 in the fair value hierarchy. While the market for these securities are highly liquid and active, quoted prices for these securities may at times be derived from pricing models which use observable inputs such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and other reference data including market research publications.

NOTE 4 — INVESTMENTS

The Company currently invests its excess cash in U.S. Treasury securities. The Company intends and has the ability to hold these investments to maturity. Securities with original maturity dates of more than three months are reported as held-to-maturity investments and are recorded at amortized cost, which approximates fair value due to the negligible risk of changes in value due to interest rates. All investments held as of June 30, 2023 had contractual maturities of less than one year.

The amortized cost and estimated fair values of the Company’s investments as of June 30, 2023 are as follows:


	Amortized		Unrealized		Unrealized		Fair
	Cost		Holding Gains		Holding Losses		Value
Short-term:
U.S. Treasury notes	$	15,828,281	$	—	$	50,181	$	15,778,100
Total	$	15,828,281	$	—	$	50,181	$	15,778,100

NOTE 5 — PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following as of:


	June 30,		December 31,
	2023		2022
Lab equipment	$	2,009,971	$	1,977,436
Leasehold improvements		3,392,220		3,392,220
Furniture, fixtures and computers		2,022,894		2,022,894
		7,425,085		7,392,550
Less accumulated depreciation and amortization		(2,426,223)		(1,846,856)
	$	4,998,862	$	5,545,694

Depreciation and amortization expense was $289,439 and $273,610 for the three months ended June 30, 2023 and 2022, respectively, and $579,367 and $536,507 for the six months ended June 30, 2023 and 2022, respectively.

NOTE 6 — ACCRUED EXPENSES

Accrued expenses consisted of the following as of:


	June 30,		December 31,
	2023		2022
Wages	$	1,174,792	$	1,434,675
Pre-clinical study costs		393,103		200,000
Research and development consulting		109,200		—
Taxes		75,000		112,974
Legal		25,000		80,794
Key opinion leader compensation		12,650		18,700
Royalties		—		3,422
Other		126,359		97,811
Accrued expenses	$	1,916,104	$	1,948,376

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Level 3 Unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

~~The Company classified its equity method investments as Level 3 securities.~~

The Company determined that a promissory note issued in March 2020 (“March 2020 Note”) contained a change in control provision which is a level 3 embedded derivative and is required to be bifurcated. In accordance with ASC 815, ~~Derivatives and Hedging~~~~, the Company determined the fair value of the derivative liability and recorded it on the balance sheet. At inception, the fair value of the derivative liability was $195,516.~~

~~The table below discloses changes in value of the Company’s embedded derivative liabilities discussed above.~~


~~Derivative liability balance at December 31, 2019~~	$	—
~~Derivative instrument related to March 2020 Note~~		~~195,516~~
~~Gain/Loss recognized to revalue derivative instrument at fair value~~		~~51,446~~
~~Derivative liability balance at December 31, 2020~~		~~246,962~~
~~Gain/Loss recognized to revalue derivative instrument at fair value (unaudited)~~		~~(246,962)~~
~~Derivative liability balance at June 30, 2021 (unaudited)~~	$	—

NOTE 7 — DEBT ~~AND CAPITAL LEASE OBLIGATION~~

In December 2010, the Company entered into a loan and security agreement with the Minnesota Agricultural and Economic Development Board under which the Company borrowed $250,000. The loan had a maturity date of November 1, 2020. Commencing on December 1, 2014, the loan started to bear interest at a rate of 6% per annum. Per the loan agreement, the Company began making monthly principal and interest payments on December 1, 2015 in the amount of $3,000. The Company made 59 monthly payments, plus 1 final payment equal to the then unpaid principal and interest. The loan was secured by the Company’s accounts receivable. As of June 30, 2021 and December 31, 2020, the principal outstanding on this loan was $0 and $168,193, respectively.

In January ~~2012,~~2019, the Company ~~signed a promissory note with~~issued the Regents of the University of Minnesota (the ~~University”~~“University”) a promissory note in the amount of $385,997 in satisfaction of the Company’s minimum royalty obligation for ~~$405,559. Commencing on January 1, 2016~~ the ~~promissory~~year ended December 31, 2018. The note bears interest at 3%6.0% per annum, compounded ~~monthly. On or before~~annually, and is due on January 31, ~~2018, the Company is required to make monthly principal~~2025. As of both June 30, 2023 and ~~interest payments of $7,737 until the note is paid in full. The note has a maturity date of~~ December 31, 2022, ~~and is unsecured.~~the balance outstanding on this loan was $385,997. In ~~association with the promissory note,~~addition, the Company issued the University ~~warrants~~a 10-year warrant to purchase ~~80,000~~20,587 shares of the Company’s common stock at an exercise price of ~~$1.69.~~ $3.75 per share, which remained outstanding through June 30, 2023.

Future principal maturities for debt were as follows:


Amounts Due in the Twelve Months Ending June 30,
2024	$	—
2025		385,997
Total future maturities payments		385,997
Less current portion		—
Long-term debt	$	385,997

NOTE 8 — EQUITY

Common Stock

The Company is authorized to issue 190,000,000 shares of common stock, with a par value of $0.00001. Holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of common stockholders. Subject to preferences that may be applicable to any outstanding preferred shares, each share of common stock is entitled to share pro rata in any distributions. In any distribution of capital assets, holders of common stock are entitled to receive pro rata the assets remaining after payment of liabilities and liquidation preferences on any outstanding preferred stock.

In March 2023, the Company completed a public offering pursuant to which it sold an aggregate of 6,250,000 shares of the Company’s common stock at a public offering price of $1.60 per share, resulting in gross proceeds of $10 million. The offering closed on March 10, 2023, resulting in net proceeds of approximately $8.8 million, after deducting underwriting discounts and commissions and other offering expenses.

The Company previously capitalized $232,899 of deferred offering costs relating to the $200 million shelf registration statement declared effective on July 11, 2022. When the Company completed the public offering in March 2023, $11,645 was reclassified to additional paid-in capital on the Balance Sheet and $221,254 was written-off to general and administrative expenses in the Statement of Operations, on a pro-rata basis.

As of June 30, ~~2021~~2023 and December 31, ~~2020, the principal~~2022, there were 27,310,553 and 20,944,109 shares of common stock issued and outstanding, ~~on this loan was $128,623 and $172,731,~~respectively.

~~In May 2015, the~~Preferred Stock

The Company ~~entered into~~is authorized to issue 10,000,000 shares of preferred stock, with a ~~loan agreement with the Minnesota Department~~par value of Employment & Economic Development under which the Company borrowed $250,000. The loan does not bear interest, is due in a lump sum payment on April 1, 2022 and is uncollateralized. If there is a substantial ownership change in the Company (greater than 50% to one entity), the Company will pay the Minnesota Department of Employment & Economic Development additional compensation of $75,000. As of both June 30, 2021 and December 31, 2020, the balance outstanding on this loan was $250,000.

In October 2018, the Company signed a lease agreement for a piece of equipment that is being accounted for as a capitalized lease. The total cost of the equipment was $102,026. The lease bears interest at 7.2% and the Company will make 60 payments of $2,003 until the lease is paid in full.$0.00001. As of June 30, ~~2021~~2023 and December 31, ~~2020,~~2022, there were no shares of preferred stock issued and outstanding.

Equity Incentive Plans

In May 2021, the Company’s stockholders approved the 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan provides for the issuance of stock options, restricted stock units and other awards to employees, directors and consultants of the Company. Shares of common stock underlying outstanding awards under the 2019 Plan (defined below) and the 2021 Plan that expire, are forfeited, are retained by the Company to satisfy any exercise price or any tax withholding, repurchased by the Company at their original purchase price or settled in cash may be added to the number of shares of common stock available for issuance under the 2021 Plan. The number of shares reserved for issuance under the 2021 Plan

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will automatically increase on the first day of each fiscal year, beginning January 1, 2022, in the amount equal to the lesser of (a) 4.5% of the total number of shares of common stock outstanding as of December 31 of the immediately preceding calendar year, (b) 600,000 shares of common stock, or (c) such lesser number of shares as determined by the Board of Directors. On January 1, 2023, the number of shares reserved for issuance under the 2021 Plan automatically increased by 600,000 shares of common stock.

The Company also maintains its prior stock option plans adopted in 2010 (the “2010 Plan”) and 2019 (the “2019 Plan”). The Company ceased making awards under the 2010 Plan upon adoption of the 2019 Plan and similarly under the 2019 Plan upon stockholder approval of the 2021 Plan.

As of June 30, 2023, there were options to purchase 2,309,853 and 266,500 shares of common stock outstanding under the 2010 Plan and 2019 Plan, respectively.

As of June 30, 2023, there were options to purchase 1,474,833 shares of common stock and restricted stock units eligible to vest and settle into 474,271 shares of common stock outstanding under the 2021 Plan.

As of June 30, 2023, there were 775,410 shares of common stock available for issuance under future awards granted under the 2021 Plan.

Stock Options

The Company recognizes stock option compensation expense based on the ~~lease~~grant date fair value of the award. The Company issues new common shares for stock options exercised.

Stock option activity was ~~$47,868~~as follows:


		Weighted
		Average
		Exercise
	Shares	Price
Options outstanding at December 31, 2022	3,831,686	$	4.12
Granted	462,000	$	2.95
Exercised	—	$	—
Canceled or expired	(242,500)	$	4.60
Options outstanding at June 30, 2023	4,051,186	$	3.96
Options exercisable at June 30, 2023	2,940,311	$	3.89

Stock-based compensation expense related to stock options was $150,849 and ~~$57,127,~~$141,773 for the three months ended June 30, 2023 and 2022, respectively. Stock-based compensation expense related to stock options was $333,055 and $332,589 for the six months ended June 30, 2023 and 2022, respectively.

Included in the stock-based compensation expense numbers above are stock options to be granted to key opinion leaders which are marked to market at each reporting period with the change in the accrued balance expensed through research and development operating expenses. Stock-based compensation related to the key opinion leaders increased by $2,650 and $1,400 for the three months ended June 30, 2023 and 2022, respectively, and decreased by $6,050 and $11,475 for the six months ended June 30, 2023 and 2022, respectively.

The weighted average fair value of options granted during the six months ended June 30, 2023 and 2022 was $2.16 and $1.48 per share, respectively.

Table of Contents

Restricted Stock Units

The Company recognizes restricted stock unit (“RSU”) compensation expense based on the grant date fair value of the award. Each RSU is eligible to vest over time and settle into one newly issued share of Company common stock.

RSU activity was as follows:


		Weighted
		Average Grant
		Date Fair
	Shares	Value
Unvested at December 31, 2022	239,198	$	4.20
Granted	381,005	$	1.60
Vested	(116,444)	$	3.62
Canceled	(29,488)	$	4.59
Unvested at June 30, 2023	474,271	$	2.23

Stock-based compensation expense related to RSUs was $130,452 and $126,017 for the three months ended June 30, 2023 and 2022, respectively. Stock-based compensation expense related to RSUs was $271,505 and $256,307 for the six months ended June 30, 2023 and 2022, respectively.

Employee Stock Purchase Plan

The Company accounts for employee stock purchases made under its 2021 Employee Stock Purchase Plan (“ESPP”) using the estimated grant date fair value in accordance with Accounting Standards Codification, Topic 718, Stock Compensation. The Company values ESPP shares using the Black-Scholes model.

There were 300,000 shares of common stock initially reserved for issuance under the ESPP. In addition, the ESPP contains a provision which provides for an automatic annual share increase on January 1 of each year, in an amount equal to the lesser of (i) 1% of the total number of shares outstanding as of December 31 of the immediately preceding calendar year, (ii) 200,000 shares or (iii) such number of shares as determined by the Board. As of December 31, 2022, there were 500,000 shares of common stock available for issuance under the ESPP. On January 1, 2023, the number of shares reserved for issuance under the ESPP automatically increased by 200,000 shares of common stock.

There were no shares issued under the ESPP during the six months ended June 30, 2023.

Stock Warrants

Stock warrant activity was as follows:


		Weighted
		Average
		Exercise
	Shares	Price
Warrants outstanding December 31, 2022	599,191	$	6.16
Granted	—	$	—
Exercised	—	$	—
Expired	(2,604)	$	2.50
Warrants outstanding June 30, 2023	596,587	$	6.18

Table of Contents

NOTE 9 — SIGNIFICANT CUSTOMERS

The Company had one customer that accounted for 100% of total revenue for the three and six months ended June 30, 2023 and 2022. The current receivable for this customer is included in Receivable from Reprise Biomedical, Inc. (“Reprise”) on the condensed balance sheets. The Company received $8,517 and $3,952 for the three months ended June 30, 2023 and 2022, respectively, and $16,498 and $10,720 for the six months ended June 30, 2023 and 2022, respectively, as royalties related from the spin-out of the Acellular Business to Reprise. As of June 30, 2023 and December 31, 2022, the Company had receivables related to the minimum royalties of $700,436 and $466,934, respectively, from Reprise, but due to the uncertainty regarding collectability the Company fully reserved against the receivable.

NOTE 10 — COMMITMENTS AND CONTINGENCIES

Patent License Agreement

Under an Exclusive Patent License Agreement between the Company and the University, the Company is required to make minimum royalty payments to the University of $500,000 per year. Under the Patent and Know-How License Agreement with Reprise, Reprise has minimum royalty obligations to the Company of $500,000 per year.

NOTE 11 — LEASES

The Company leases its corporate headquarters, which houses its research and development operations and office space. The lease term began in August 2021 and is ~~secured~~scheduled to terminate in May 2029. The Company has one option to extend the term for a period of five years. The depreciable life of assets and leasehold improvements is limited by the ~~piece~~expected lease term. The lease provided a tenant improvement allowance of ~~equipment.~~$1,256,950, which was received by the Company during the first quarter of 2022. The tenant improvement allowance is included in the calculation of the right of use asset and lease liability.

The Company also leases pieces of equipment that are accounted for as financing leases. Financing lease assets are classified as lab equipment within property and equipment on the condensed balance sheets.

Supplemental condensed balance sheet information for the Company is as follows:


		June 30,		December 31,
Leases	Classification	2023		2022
Assets
Operating lease assets	Right of use asset	$	1,570,837	$	1,673,575
Financing lease assets	Property and equipment, net of accumulated depreciation	$	62,366	$	81,325

Liabilities
Current
Operating	Current portion of lease liability	$	405,566	$	389,649
Financing	Current portion of financing lease obligations	$	22,506	$	44,157
Noncurrent
Operating	Lease liability, net	$	2,512,062	$	2,720,781
Financing	Financing lease obligations, net	$	3,964	$	11,689

1213

Table of Contents

In January 2019, Company issued the University a promissory note in the amount of $385,997 in satisfaction of the Company’s minimum royalty obligation for the year ended December 31, 2018. The note bears interest at 6% per annum and is due on January 31, 2025. In addition, the Company issued the University a 10-year warrant to purchase 20,587 shares of the Company’s common stock at an exercise price of $3.75 per share.

In March 2020, the Company entered into a note and warrant purchase agreement (the “Purchase Agreement”) with 1 of the Company’s shareholders under which the Company borrowed $6,000,000. As part of the Purchase Agreement, the Company signed a convertible promissory note (the “Note”) and issued the shareholder a warrant (the “Warrant”). The Note was unsecured and had a maturity date of September 6, 2021. If the Company completed a preferred stock offering of at least $34,000,000 prior to the maturity date, the Note and all accrued interest would have automatically converted into preferred shares of such offering at the offering price. The Note initially bore interest at 5% per annum. If the Note was not converted prior to May 1, 2020, the interest rate increased to 7% on May 1, 2020 and by an additional 2% on the first day of each subsequent month prior to the maturity date starting on June 1, 2020, provided that the interest rate shall not exceed 20%. The 5-year Warrant has a warrant coverage amount of $750,000 with an exercise price equal to the conversion price of the Note. If the Note had not been converted or repaid in accordance with its terms prior to May 1, 2020, the Company will issue an additional warrant on May 1, 2020, and the first day of each additional month the Note remains outstanding, for $75,000 of warrant coverage. In June 2021, the Note and all accrued interest was converted into 956,887 shares of the Company’s Series C Convertible Preferred Stock. As of June 30, 2021 and December 31, 2020, the balance outstanding on the loan was $0 and $6,000,000, respectively.

On April 16, 2020, the Company issued a promissory note for $563,397 under the Paycheck Protection Program (“PPP”) through the U.S. Small Business Administration (SBA). The PPP was authorized in the Coronavirus Aid, Relief and Economic Security (CARES) Act. The promissory note is uncollateralized and is fully guaranteed by the Federal government. The outstanding balance of the promissory note bears interest at 1% per annum and is due on April 16, 2022. Per the PPP’s terms, some or all of the debt may be forgiven based upon the Company’s use of the funds. On March 4, 2021, $513,520 of the principal balance under the promissory note and associated interest of $4,530 were forgiven by the SBA. As of June 30, 2021 and December 31, 2020, the balance outstanding on the promissory note was $49,877 and $563,397 respectively.

~~Principal maturities were as follows as of the periods indicated:~~

As of December 31,

Debt

Capital Lease

Total
2021

$
6,481,774

$
18,855

$
6,500,629
2022

504,354

20,261

524,615
2023

—

18,011

18,011
2024

—

—

—
2025

385,997

—

385,997
Totals

7,372,125

57,127

7,429,252
Less current portion

(6,481,774)

(18,855)

(6,500,629)
Long-term portion

$
890,351

$
38,272

$
928,623

As of June 30,

Debt

Capital Lease

Total
(unaudited)






2022

$
382,479

$
17,862

$
400,341
2023

46,021

20,877

66,898
2024

—

9,129

9,129
2025

385,997

—

385,997
Totals

814,497

47,868

862,365
Less current portion

(382,479)

(17,862)

(400,341)
Long-term portion

$
432,018

$
30,006

$
462,024

~~Table of Contents~~

~~NOTE 8 — CAPITAL STOCK~~

~~Convertible Preferred Stock~~

~~Immediately prior to the IPO, the Company had the following outstanding convertible preferred stock:~~

Aggregate


Shares

Shares

Liquidation

Authorized

Outstanding

Preference

Convertible Preferred Stock - Series C

6,100,000

3,671,554

$ 27,536,655
Convertible Preferred Stock - Series B-2

2,500,000

2,095,874

15,719,055
Convertible Preferred Stock - Series B

4,000,000

3,218,282

24,137,115
Convertible Preferred Stock - Series A

3,300,000

3,000,380

7,500,950

15,900,000

11,986,090

$ 74,893,775

Upon the closing of the IPO, all shares of convertible preferred stock then outstanding were automatically converted into an aggregate of 12,139,071 shares of common stock, resulting in the reclassification of the related convertible preferred stock into $121 of common stock and $73.7 million into additional paid-in capital.

~~As of June 30, 2021, there were 0 shares of convertible preferred stock outstanding.~~

~~Common Stock~~

All of the shares sold by the Company in the IPO were common stock. The Company is authorized to issue 190,000,000 shares of common stock, with a par value of $0.00001 and each outstanding share of common stock is entitled to 1 vote, as provided in the Post-IPO Certificate.

In 2020, the Company issued 64,000 and 1,000 shares of common stock in connection with the exercise of stock option agreements at exercise prices of $0.10 and $1.25 per share, respectively. The Company also issued 45,000 shares of common stock in connection with the exercise of stock warrant agreements at an exercise price of $1.25 per share.

~~In 2019, the Company issued 50,000 shares of common stock in connection with the exercise of stock option agreements at exercise price of $1.25 per share.~~

Holders of common stock are entitled to 1 vote for each share held on all matters submitted to a vote of common shareholders. Subject to preferences that may be applicable to any outstanding preferred shares, each common share is entitled to share pro rata in any distributions. In any distribution of capital assets holders of the common stock are entitled to receive pro rata the assets remaining after payment of liabilities and liquidation preferences of any outstanding preferred stock.

~~At December 31, 2020, there were 2,185,822 shares of common stock issued and~~ ~~outstanding. At June 30, 2021, there were 20,024,552 shares of common stock issued and~~ ~~outstanding~~.

~~Preferred Stock~~

The Company is authorized to issue 10,000,000 shares of preferred stock, with a par value of $0.00001, as provided in the Post-IPO Certificate. As of June 30, 2021, there were 0 shares of preferred stock issued and ~~outstanding~~.

The Company previously classified its Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, Series B-2 Convertible Preferred Stock and Series C Convertible Preferred Stock as mezzanine equity due to their liquidation provisions under a change in control.

~~Table of Contents~~

~~Series C Convertible Preferred Stock~~

~~In May 2021, the Company entered into 2 stock purchase agreements under which it sold an aggregate of 2,666,667 shares of Series C preferred stock at $7.50 per share for gross proceeds of $20,000,003.~~

In June 2021, the $6,000,000 promissory note issue by the Company in March 2020 (See Note 7) and all accrued interest was converted into 956,887 shares of Series C preferred stock. On the same date, the warrant issued in connection with the promissory note was converted into 48,000 shares of Series C preferred stock via a cashless exercise.

~~The Series C preferred stock converted into common stock at a 20% discount to the price to the public in the IPO.~~

~~As of June 30, 2021, all 3,671,554 shares of the Series C preferred stock had been converted into common stock and NaN remained outstanding.~~

~~Stock Options~~

In February 2010, the Company adopted a stock option plan (the “2010 Plan”) which authorized options to acquire 375,000 shares of the Company’s stock. On June 20, 2011, the number of shares authorized to be issued as options under the 2010 Plan was increased to 600,000. On September 30, 2013, the number of shares authorized to be issued as options under the 2010 Plan was increased to 1,300,000. On March 1, 2014, the number of shares authorized to be issued as options under the 2010 Plan was increased to 1,700,000. On July 31, 2015 the number of shares authorized to be issued as options under the 2010 Plan was increased to 2,500,000 shares. On August 12, 2016 the number of shares authorized to be issued as options under the 2010 Plan was increased to 3,250,000 shares. On December 13, 2017 the number of shares authorized to be issued as options under the 2010 Plan was increased to 3,850,000 shares. At June 30, 2021, there were 3,048,255 options outstanding under the 2010 Plan and 0 options available for grant. At December 31, 2020, there were 3,287,230 options outstanding under the 2010 Plan and 0 options available for grant. The Company Ceased making awards under the 2010 Plan upon approval of the 2019 Plan.

In July 2019, the Company adopted a stock option plan (the “2019 Plan”) which authorized options to acquire 1,000,000 shares of the Company’s stock. At June 30, 2021, there were 428,500 options outstanding under the 2019 Plan and 0 options available for grant. At December 31, 2020, there were 481,500 options outstanding under the 2019 Plan and 518,500 options available for grant. The Company ceased making awards under the 2019 Plan upon stockholder approval of the 2021 Plan.

On May 20, 2021, the Company’s stockholders approved the 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan provides for the issuance of stock options, restricted stock units and other awards to employees, directors and consultants of the Company. The number of shares of common stock that may be the subject of awards issued under the 2021 plan is 1,000,000. In addition, shares of common stock that would have otherwise been available under our 2019 Plan will increase the number of shares of common stock available for issuance under our 2021 plan. Shares of common stock subject to outstanding awards under the 2019 Plan that would otherwise return to the share reserve of the 2019 plan upon expiration, forfeiture, retention by the Company to satisfy any exercise price or any tax withholding, repurchase by the Company at their original purchase price or settlement in cash of awards outstanding under the 2019 Plan may be added to the number of shares of common stock available for issuance under the 2021 Plan. The number of shares of common stock reserved for issuance under our 2021 Plan will automatically increase on the first day of each year, beginning on January 1, 2022, in amount equal to the lesser of (a) 4.5% of the total number of shares of common stock outstanding on December 31 of the immediately preceding calendar year, (b) 600,000 shares of common stock, or (c) such lesser number of shares as determined by the board. At June 30, 2021, there were 186,831 awards outstanding and 1,379,669 awards available for grant.

~~Table of Contents~~

~~The following~~Information on the Company’s lease costs is ~~a summary of options to purchase common stock during the six months ended June 30 (unaudited):~~as follows:


	Six months ended				Three Months Ended June 30,
	June 30, 2021
		Weighted
		Average
		Exercise
	Share	Price
Options outstanding at beginning of the period	3,768,730	$	3.15
Granted	153,500	$	9.00
Exercised	(163,750)	$	0.21
Canceled or expired	(128,225)	$	2.79
Options outstanding at end of the period	3,630,255	$	3.54
Options Exercisable	3,267,769	$	3.30
Lease cost				Classification	2023		2022
Operating lease cost				Operating expenses: General and administrative	$	82,885	$	82,885
Financing lease cost
Amortization of leased assets				Depreciation and amortization	$	9,479	$	9,479
Interest on lease liabilities				Interest expense	$	613	$	1,228
Variable lease cost⁽¹⁾				Operating expenses: General and administrative	$	56,145	$	57,090

(1)	Variable lease costs consist primarily of taxes, insurance and common area maintenance costs for the Company’s operating lease.


		Six Months Ended June 30,
Lease cost	Classification	2023		2022
Operating lease cost	Operating expenses: General and administrative	$	165,771	$	163,569
Financing lease cost
Amortization of leased assets	Depreciation and amortization	$	18,959	$	18,959
Interest on lease liabilities	Interest expense	$	1,463	$	2,943
Variable lease cost⁽¹⁾	Operating expenses: General and administrative	$	96,245	$	96,319

(1)	Variable lease costs consist primarily of taxes, insurance and common area maintenance costs for the Company’s operating lease.

Future payments for the Company’s leases are as follows:


Amounts Due in Years Ending	Operating Leases		Financing Leases		Total
2023	$	255,835	$	15,450	$	271,285
2024		527,020		12,030		539,050
2025		542,830		—		542,830
2026		559,115		—		559,115
2027		575,889		—		575,889
Thereafter		847,731		—		847,731
Total lease payments		3,308,420		27,480		3,335,900
Less imputed interest		(390,792)		(1,010)		(391,802)
Present value of lease liabilities	$	2,917,628	$	26,470	$	2,944,098

~~The weighted average fair value of options granted for the thee and six months ended June 30, 2021 and 2020 was $3.84 and $2.03 per share, respectively.~~

~~As of June 30, 2021, there were 3,630,255 common stock options outstanding with a weighted average remaining contractual life of~~ ~~4.98years.~~ ~~As of December 31, 2020, there were 3,768,730 common stock options outstanding with a weighted average remaining contractual life of 5.08 years~~.

~~As of June 30, 2021 there were 3,267,769 common stock options exercisable with a weighted average remaining contractual life of~~ ~~4.53years.~~ ~~As of December 31, 2020, there were 3,426,440 common stock options exercisable with a weighted average remaining contractual life of 4.74 years.~~

The intrinsic value of the outstanding options as of June 30, 2021 and December 31, 2020 was $29,521,965 and $1,906,200, respectively. The intrinsic value of the exercisable options as of June 30, 2021 and December 31, 2020 was $27,385,450 and $1,906,200, respectively. The intrinsic value of options exercised was $183,888 and $496,888 for the three and six months ended June 30, 2021, respectively.

~~The Company recognized $105,879 and $157,398 of stock-based compensation~~Additional information related to option grants during the three months ended June 30, 2021 and 2020, respectively, and $239,330 and $314,796 of stock-based compensation related to option grants during the six months ended June 30, 2021 and 2020, respectively. As of December 31, 2020, there was $562,456 of unrecognized compensation costs related to stock option grants of which $280,269, $182,465, $61,890 and $37,832leases is expected to be recognized during the years ending December 31, 2021, 2022, 2023 and 2024, respectively. As of June 30, 2021, there was $872,353 of unrecognized compensation costs related to stock option grants of which $156,943, $308,954, $192,622, $173,796 and $40,038 is expected to be recognized during the years ending December 31, 2021, 2022, 2023, 2024 and 2025 respectively. The Company issues new common shares for options exercised.

~~Black Scholes Assumptions~~

~~The Company uses the Black Scholes option pricing model to estimate the fair value of stock option grants with the following weighted average assumptions:~~as follows:

Six months ended

June 30,

2021

2020

(unaudited)

(unaudited)

Expected life in years

5.88

5.14

Risk-free interest rate

1.17
%
1.24
%
Expected dividend yield

—

—

Expected volatility

44.02
%
35.00
%

16 ~~Table of Contents~~ ~~Restricted Stock Units~~ During the six months ended June 30, 2021, the Company granted directors restricted stock unit (“RSU”) awards totaling 33,331 shares of common stock under the 2021 Plan in accordance with the Company’s non-employee director compensation policy. Each RSU is eligible to vest and settle into one newly issued share of Company common stock. The weighted average fair value of $9.00 per unit was calculated based upon the IPO stock price. ~~2021 Employee Stock Purchase Plan~~ On May 20, 2021, the Company stockholders adopted the 2021 Employee Stock Purchase Plan (“2021 ESPP”), which became effective in connection with the Company’s IPO. The 2021 ESPP allows eligible employees to purchase shares of the Company’s common stock in an offering on each purchase date no less than 85% of the lower of (i) the closing market price per share of common stock on the first day of the applicable purchase period or (ii) the closing market price per share of common stock on the purchase date at the end of the applicable six-month purchase period. No participant will have the right to purchase shares in an amount that has a fair value of more than $25,000 determined as of the first day of the applicable purchase period, for each calendar year, nor purchase more than 5,000 shares of common stock on any one purchase date. There were 300,000 shares of common stock initially reserved for issuance under the 2021 ESPP. In addition the 2021 ESPP contains a provision which provides for an automatic annual share increase on January 1 of each year, in an amount equal to the lesser of (i) 1% of the total number of shares outstanding as of December 31 of the immediately preceding calendar year, or (ii) 200,000 shares or (iii) such number of shares as determined by the Board. ~~The Company accounts for employee stock purchases made under its 2021 ESPP using the estimate grant date fair value of accounting in accordance with ASC 718,~~ ~~Stock Compensation~~~~. The Company values ESPP shares using the Black-Scholes model.~~ ~~There were 0 shares issued under the 2021 ESPP during the three and six months ended June 30, 2021.~~
Lease term and discount rate	June 30, 2023
Weighted-average remaining term (years)
Operating lease	5.9
Financing leases	0.9
Weighted-average discount rate
Operating lease	4.2	%
Financing leases	6.9	%

Table of Contents

~~Stock Warrants~~

~~Information with respect to warrants is summarized as follows:~~

Series A Preferred

warrants

Common warrants
Warrants outstanding December 31, 2018

40,000

732,082
Granted

—

20,587
Exercised

—

—
Terminated

—

—
Warrants outstanding December 31, 2019

40,000

752,669
Granted

—

—
Exercised

—

(45,000)
Terminated

(40,000)

—
Warrants outstanding December 31, 2020

—

707,669
Granted

—

276,000
Exercised

—

(18,050)
Terminated

—

—
Warrants outstanding June 30, 2021 (unaudited)

—

965,619

Weighted average exercise price:

June 30, 2021 (unaudited)

$
—

$
4.50
December 31, 2020

—

2.34
December 31, 2019

2.88

2.27

Weighted average remaining contractual life in years:

June 30, 2021 (unaudited)

—

2.78
December 31, 2020

—

2.32
December 31, 2019

0.83

3.23

~~NOTE 9 — EMPLOYEE BENEFIT PLANS~~

The Company’s employees are eligible to participate in a defined contribution benefit plan. Employees may contribute a percentage of their wages, subject to limits established by the Internal Revenue Code. The Company may elect to make discretionary contributions to the plan. There were 0 discretionary contributions during the three and six months ended June 30, 2021 and 2020.

~~NOTE 10 — SIGNIFICANT CUSTOMERS~~

The Company had 1 customer that accounted for 100% of total revenue for the three and six months ended June 30, 2021 and 2020. The current receivable for this customer is included in Receivable From Reprise Biomedical, Inc. The long-term receivable related to minimum royalties from this customer has been completely reserved against due to uncertainty regarding collectability.

~~NOTE 11 — COMMITMENTS AND CONTINGENCIES~~

~~Patent License Agreement~~

Under an Exclusive Patent License Agreement between the Company and the University of Minnesota (the “Agreement”) the Company is required to make minimum royalty payments to the University of Minnesota of $500,000 per year. Under the Patent and Know-How License Agreement with Reprise Biomedical, Inc. (“Reprise”), Reprise has minimum royalty obligations to the Company of $500,000 per year. (See Note 12.)

~~Table of Contents~~

~~Leases~~

In February 2015, the Company executed a lease for a facility in Eden Prairie, Minnesota. The Company had leased this facility through March 31, 2020 at a rate of $13,100 per month with yearly rent increases of approximately 3% per year. In November 2019, the lease for the facility was extended to December 31, 2020 at a rate of $15,100 per month starting April 1, 2020. In August 2020, the lease for this facility was extended to December 31, 2021 at a rate of $16,600 per month starting in January 2021.

In May 2020, the Company executed a lease for a second facility in the same Eden Prairie, Minnesota office park as it’s other facility. The Company leased this space through December 31, 2020 at a rate of $2,500 per month starting in May 2020. In August 2020, the lease for this facility was extended to December 31, 2021 at a rate of $3,400 per month starting in January 2021.

~~On August 2, 2021, the Company entered into a lease for a new facility commencing December 31, 2021. (See Note14)~~

Total rent expense under operating leases was $58,280 and $54,261 for the three months ended June 30, 2021 and 2020, respectively, and $123,293 and $95,560 for the six months ended June 30, 2021 and 2020, respectively. The Company has future minimum non-cancelable lease commitments as follows:

At June 30, 2021
2021

$
120,192
Total

$
120,192

~~License Contract~~

On December 1, 2014, the Company entered into a research and development contract with an outside developer. The term of the contract was set to expire on December 31, 2016, but in September 2016 the expiration date was extended to December 31, 2017 and in January 2018 the expiration date was extended to June 30, 2019, in May 2019 it was extended to March 30, 2020 and in February 2020 it was extended to February 28, 2021. In February 2021 the contract was extended to December 31, 2021. As partial consideration for the developer’s services, on January 1, 2015, the Company issued 26,667 shares of Series B preferred stock at a fair value of $7.50 per share. The value of these shares was charged to research & development expenses in the statements of operations.

NOTE 12 ~~— RELATED PARTY TRANSACTIONS~~

A corporation owned by a director of the Company that resigned as a director in June 2021 received payments for providing a consultant to the Company of $2,233 and $1,620 for the three months ended June 30, 2021 and 2020, respectively, and $3,851 and $3,047 for the six months ended June 30, 2021 and 2020, respectively.

The Company received $9,139 and $9,394 for the three months ended June 30, 2021 and 2020, respectively, and $15,247 and $20,482 for the six months ended June 30, 2021 and 2020, respectively, as royalty related to the spin-out of the Acellular Business to Reprise. As of June 30, 2021 and 2020 the Company had long term receivables of $688,223 and $229,518, respectively, but due to the uncertainty regarding collectability the Company fully ~~reserved~~ ~~against the~~ ~~receivables~~. The Company recorded a long-term receivable of $453,470 related to the minimum royalty due from Reprise for the year ended December 31, 2020, but due to the uncertainty regarding collectability the Company fully ~~reserved~~ ~~against the receivable.~~

~~NOTE 13~~ — NET LOSS PER SHARE

~~Under the two-class method, for periods with~~Basic net ~~income, basic net income~~loss per ~~common~~ share is ~~computed~~calculated by dividing ~~the~~ net income ~~attributable to common stockholders~~ by the weighted average number of ~~shares of~~ common ~~stock~~shares outstanding during the period. ~~Net income attributable to common stockholders is computed by subtracting from~~

~~Table of Contents~~

net income the portion of current year earnings that participating securities would have been entitled to receive pursuant to their dividend rights had all of the year’s earnings been distributed. No such adjustment to earnings is made during periods with a net loss as the holders of the participating securities have no obligation to fund losses. Diluted net loss per common share is ~~computed under the two-class method~~calculated by ~~using~~dividing the weighted average number of common shares ~~of common stock~~ outstanding, ~~plus, for periods with net income attributable to common stockholders, the~~after taking into consideration all dilutive potential ~~dilutive effects of stock options and warrants. In addition, the Company analyzes the potential dilutive effect of the~~shares outstanding participating securities under the if-converted method when calculating diluted earnings per share in which it is assumed that the outstanding participating securities convert into common stock at the beginning of the period. The Company reports the more dilutive of the approaches (two-class or if-converted) as its diluted net income per share during the period. Due to the existence of net losses for the three and six months ended June 30, ~~2021~~2023 and ~~2020,~~2022, basic and diluted net loss per share were the same, as the effect of potentially dilutive securities would have been anti-dilutive.

The following potentially dilutive securities outstanding have been excluded from the computations of diluted weighted average shares outstanding because such securities would have had an antidilutive impact due to losses ~~reported:~~reported for the periods presented:


	Three Months Ended June 30,		Six Months Ended June 30,		Three and Six Months Ended June 30,
	2021	2020	2021	2020	2023	2022
	(unaudited)	(unaudited)	(unaudited)	(unaudited)
Convertible preferred stock outstanding	—	8,314,536	—	8,314,536
Convertible preferred stock warrants	—	—	—	40,000
Common stock options outstanding	3,630,255	3,794,250	3,630,255	3,794,250	4,051,186	3,954,756
Restricted stock units					474,271	192,535
Common stock warrants	965,619	707,669	965,619	707,669	596,587	599,191
	4,595,874	12,816,455	4,595,874	12,856,455
Total common stock equivalents					5,122,044	4,746,482

NOTE 13 — SUBSEQUENT EVENTS

On July 31, 2023, the Company received cash payments totaling $457,143 of the $527,143 employee retention receivable.

~~NOTE 14 — SUBSEQUENT EVENTS~~

~~Facility Lease~~

On August 2, 2021, the Company entered into a Multi-Tenant Industrial Triple Net Lease (the “Lease”) with B9 Polar Prairie Oaks Corporate LLC, a Delaware limited liability company (the “Landlord”), for research and development and office space located at 6455 Flying Cloud Drive, Eden Prairie, Minnesota 55344 (the “Building”). Under the terms of the Lease, starting on December 31, 2021 (the “Commencement Date”) the Company will lease approximately 42,278 square feet of the Building (the “Premises”) as the sole tenant at the Premises, which will replace the Company’s current leased premises at 10399 West 70^th ~~Street, Eden Prairie, Minnesota 55344.~~

~~The base rent under the Lease is $41,397.21 per month for the~~ ~~12-month~~ period beginning on the Commencement Date and ending on December 31, 2022, and thereafter is subject to scheduled annual increases of approximately 3% during the term of the Lease. However, under the terms of the Lease, the Company’s monthly base rent will be abated for the period beginning on the Commencement Date and ending on May 31, 2022, provided the Lease is not terminated due to default. In addition to base rent, the Company is obligated under the Lease to pay to the Landlord certain costs, operating expenses and taxes, including approximately 61.08% of the real property taxes of the Building and the land on which it is located and approximately 61.08% of the Landlord’s management fee, which equals an amount of up to 5% of the Landlord’s gross receipts from leases at the Building.

~~The term of the Lease begins on the Commencement Date and ends on May 31, 2029. The Company has 1 option to extend the term for a period of~~ ~~five years beginning on June 1, 2029.~~

The Company plans to deliver a security deposit to the Landlord through an irrevocable, standby letter of credit (“LOC”) issued by Park State Bank in the amount of $800,000.00 (“Security Amount”), which will be retained by the Landlord as security for the Company’s performance and observance of its obligations under the Lease. To secure the LOC, the Company will be required to place the Security Amount in a restricted cash account at Park State Bank, which may be drawn from in limited circumstances.

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

References in this report (the “Quarterly Report”) to “we,” “us,” “our” or the “Company” refer to Miromatrix Medical Inc. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report. Information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this ~~Form 10-Q~~report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s ~~Registration Statement~~Annual Report on Form ~~S-1 (File No. 333-256649), as amended,~~10-K for the fiscal year ended December 31, 2022 filed with the U.S. Securities and Exchange Commission ~~(the “SEC”~~(“SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Overview

We are a life sciences company pioneering a novel technology for bioengineering fully transplantable ~~human~~ organs to help save and improve patients’ lives. ~~Organ disease~~Founded in 2009, we are one of a small group of companies at the forefront of developing alternatives to human-donor organ transplants, and within this small group of companies there are important differences between the technologies being developed. Our proprietary technology is a ~~major public health issue. According~~scalable platform that uses a two-step method of decellularization and recellularization designed to remove the ~~American Transplant Foundation, there are an estimated 114,000 people in~~porcine cells from the ~~U.S. waiting for a lifesaving organ transplant,~~organs obtained from pigs and on average 20 people die daily due to lack of available organs. We have developed a proprietary perfusion technology platform for bioengineering organs that we believe will efficiently scale to address the shortage of availablereplace them with unmodified human ~~organs.~~cells. Our initial development focus is on ~~human~~bioengineering livers and kidneys, and ~~we have demonstrated the ability to bioengineer these organs with functional vasculature and important organ function in preclinical studies. In addition, we believe~~ our technology platform ~~will be able~~is also applicable to ~~develop~~bioengineering other organs including hearts, lungs ~~pancreas,~~ and ~~hearts.~~pancreases. We have collaborations with the Mayo Clinic, Baxter, CareDx, Mount Sinai and the Texas Heart Institute, and ~~our~~have received strategic ~~investors include DaVita,~~investments from Baxter, CareDx and ~~CareDx.~~DaVita.

Substantially all of our revenue to date has been generated by sales of and royalties we received from ~~the sale of our~~acellular biologic surgical products, ~~Miromesh and Miroderm~~ which we spun out as Reprise Biomedical, Inc. (“Reprise”) effective June 30, ~~2019 and~~2019. We subsequently divested our minority ownership stake in Reprise in March 2021. We ~~continue~~have continued to receive ~~a royalty~~royalties on the sales of these products by Reprise. ~~This prior acellular business is accounted for as discontinued operations in our financial statements. See “Related Party Transactions — Reprise.”~~

Our revenue for the three ~~months ended June 30, 2021~~ and ~~2020 was $9,000 and $9,000, respectively, consisting entirely of licensing revenue. Our revenue for the~~ six months ended June 30, ~~2021~~2023 was $8,517 and ~~2020 was $15,000 and $20,000,~~$16,498, respectively, consisting entirely of licensing revenue. Our net loss for the three ~~months ended June 30, 2021~~ and ~~2020 was $3.7 million and $3.3 million, respectively. Our net loss for the~~ six months ended June 30, ~~2021~~2023 was $6,530,420 and ~~2020 was $4.1 million and $6.2 million,~~$14,010,572, respectively. We have not been profitable since inception and as of June 30, ~~2021,~~2023, we had an accumulated deficit of ~~$63.5 million.~~$118,022,483.

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Our product pipeline consists of three active programs, as described below:

●

miroliverELAP_®, our External Liver Assist Product (“ELAP”) designed to provide liver dialysis for acute liver failure patients.

●

miroliver, our fully implantable bioengineered liver intended to treat patients with acute and chronic liver failure.

●

mirokidney, our fully implantable bioengineered kidney intended to treat patients with end-stage renal disease.

Recent Developments

In the fourth quarter of 2022, we filed an IND application for our miroliverELAP to the FDA. In response to the IND application, we received a clinical hold letter from the FDA in January 2023 identifying certain nonclinical and clinical deficiencies and requesting responsive information, including, among other things, new toxicology studies in an appropriate animal model, biocompatibility studies, as well as various validations to be provided in our IND application. We plan to submit our complete response to the clinical hold letter to the FDA in the second half of 2023. If our complete response addresses the deficiencies to the FDA’s satisfaction and does not raise new concerns regarding risks to subjects, we expect the FDA will lift the clinical hold and we then intend to initiate a first-in-human, phase 1 clinical trial shortly thereafter. We have reallocated resources previously intended for miroliver and mirokidney, our fully implantable bioengineered liver and kidney programs, to miroliverELAP, which will likely delay the preclinical development of miroliver and mirokidney.

Components of Our Results of Operations

Licensing Revenue

For the periods presented, all of our revenue consists of licensing revenue pursuant to ~~the~~our license agreement with Reprise. Revenue pursuant to this agreement is recognized at the later of (i) when the related sales occur after the minimum guarantee is satisfied, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). Due to future uncertainty regarding the collectability of the 2021 and 2023 minimum royalties from Reprise, we determined the contract did not meet the requirements of Accounting Standards Codification, Topic 606, Revenue from Contracts with Customers (“ASC 606”); therefore, we did not record revenues or a receivable.

Cost of Goods Sold

Cost of goods sold ~~for continuing operations~~ relates to our license agreement with the University of Minnesota (the “University”), pursuant to which we owe the University royalties on our revenues, which are subject to annual minimum payments.

Gross ~~Margin~~Loss

Our gross ~~margin~~loss is calculated by subtracting our cost of goods sold from our revenue.

Research and Development Expenses

Research and development expenses consist primarily of engineering, product development, consulting services, materials, depreciation and other costs associated with products and technologies in development. These expenses include payroll and related expenses, consulting expenses, laboratory supplies, and amounts incurred under certain collaborative agreements. Expenditures for research and development activities are charged to operations as incurred.

We expect research and development expenses ~~in absolute dollars~~ to increase in the future, as we ~~develop~~continue the development of our ~~lead~~current product ~~candidates and expand into other programs. We expect research~~candidates. Research and development expenses ~~as a percentage~~will be dependent upon such factors including the results of ~~revenue to vary over time depending on~~our preclinical and clinical trials, and the ~~level and timing~~number of ~~new~~ product ~~development initiatives.~~candidates under development.

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Regulatory and Clinical Expenses

Regulatory and clinical expenses include costs for developing our regulatory and clinical study strategies for our ~~products.~~product candidates. These expenses include payroll and related expenses and consulting expenses.

~~Over time we~~ We expect ~~our~~ regulatory and clinical expenses ~~to increase in absolute dollars as~~will be dependent on the size and duration of any clinical programs that we continue to expand our product offerings and move through various regulatory processes. We expect our regulatory and clinical expenses to decrease as a percentage of revenue primarily as, and to the extent, our revenue grows.may initiate.

Quality Expenses

Quality expenses relate to costs of systems and procedures to develop a manufacturing facility that is compliant with Current Good Manufacturing ~~Practices (“cGMPs”).~~Practices. These expenses include payroll and related expenses. We expect ~~our~~ quality expenses to increase in future years as we continue to develop the process and systems ~~need~~needed to produce our ~~products.~~product candidates.

General and Administrative Expenses

General and administrative expenses include costs for our executive, accounting and human resources functions. Costs consist primarily of payroll and related expenses, professional service fees related to accounting, legal and other contract and administrative services and related infrastructure expenses.

We expect that our general and administrative expenses will increase in absolute dollars as we expand our headcount to support our growth and incur additional expenses related to operating as a public company, including

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director and officer insurance coverage, legal costs, accounting costs, costs related to exchange listing and costs related to SEC compliance and investor relations. We expect our general and administrative expenses to decrease as a percentage of revenue primarily as, and to the extent, we generate revenue and our revenue grows.

Interest Income

Interest income consists of interest earned on our cash and cash ~~equivalents.~~equivalents and U.S. Treasury securities.

Interest Expense

Interest expense consists of interest under our loan agreements. See “— Liquidity and Capital Resources.”

Results of Operations

Comparison of the Three ~~and Six~~ Months Ended June 30, ~~2021 and 2020~~2023 to the Three Months Ended June 30, 2022


	Three Months Ended
	June 30,				Change
	2023		2022		Dollar		Percentage
Licensing revenue	$	8,517	$	3,952	$	4,565	115.5	%
Cost of goods sold		125,000		125,000		—	—
Gross loss		(116,483)		(121,048)		4,565	(3.8)
Operating expenses:
Research and development		3,621,224		4,988,233		(1,367,009)	(27.4)
Regulatory and clinical		397,448		419,394		(21,946)	(5.2)
Quality		515,575		517,333		(1,758)	(0.3)
General and administrative		2,037,682		2,188,460		(150,778)	(6.9)
Total operating expenses		6,571,929		8,113,420		(1,541,491)	(19.0)
Operating loss		(6,688,412)		(8,234,468)		1,546,056	(18.8)
Other income (expense)
Interest income		166,162		61,078		105,084	172.0
Interest expense		(8,170)		(8,799)		629	(7.1)
Total other income (expense)		157,992		52,279		105,713	202.2
Net loss	$	(6,530,420)	$	(8,182,189)	$	1,651,769	(20.2)	%

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Three Months Ended


Six Months Ended


June 30,

Change

June 30,

Change


2021

2020

Dollar

Percentage

2021

2020

Dollar

Percentage

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(in thousands) Statement of Operations:


















Licensing revenue

$
9

$
9

$
—

—
%

$
15

$
20

$
(5)

(25.0)
%

Cost of goods sold

125

125

—

—

250

250

—

—

Gross margin

(116)

(116)

—

—

(235)

(230)

(5)

2.2

Operating expenses:













Research and development

2,481

2,079

402

19.3

4,349

3,880

469

12.1

Regulatory and clinical

103

71

32

45.1

187

144

43

29.9

Quality

86

—

86

—

172

—

172

—

General and administrative

787

605

182

30.1

1,349

1,071

278

26.0

Total operating expenses

3,457

2,755

702

25.5

6,057

5,095

962

18.9

Operating loss from continuing operations

(3,573)

(2,871)

(702)

24.5

(6,292)

(5,325)

(967)

18.2

Other income (expense):













Interest income

—

3

(3)

(100.0)

—

9

(9)

(100.0)

Interest expense

(281)

(117)

(164)

140.2

(586)

(155)

(431)

278.1

Amortization of discount on note

(30)

(33)

3

(9.1)

(63)

(43)

(20)

46.5

Change in fair value of derivative

53

—

53

—

247

—

247

—

Research grants

128

286

(158)

(55.2)

278

466

(188)

(40.3)

Loss from continuing operations

(3,703)

(2,732)

(971)

35.5

(6,416)

(5,048)

(1,368)

27.1

Equity loss in affiliate

—

(541)

541

(100.0)

(223)

(1,181)

958

(81.1)

Gain on sale of equity investment

—

—

—

—

1,984

—

1,984

—

Gain on debt extinguishment

—

—

—

—

518

—

518

—

Net loss

$
(3,703)

$
(3,273)

$
(430)

13.1
%

$
(4,137)

$
(6,229)

$
2,092

(33.6)
%

Licensing Revenue

Licensing revenue was ~~$9,000~~$8,517 for ~~both~~ the three months ended June 30, ~~2020~~2023 and $3,952 for the three months ended June 30, ~~2021.~~2022, an increase of $4,565, or 115.5%. The licensing revenue is a result of the ~~licensing~~license agreement with Reprise. The remainder of minimum royalties due from Reprise for ~~2020 and~~2023 are due in January 2024. The remainder of the minimum royalties due from Reprise for 2021 have been deferred to ~~2022 and 2023, respectively.~~2023. Due to the uncertainty regarding the collectability of ~~these~~the 2021 and 2023 minimum royalties from Reprise, we determined the ~~Company has set-up an allowance to offset~~contract did not meet the ~~receivable amount.~~

~~Licensing revenue decreased by $5,000,~~requirements of ASC 606; therefore, we did not record revenues or 25.0%, from $20,000 for the six months ended June 30, 2020, to $15,000 for the six months ended June 30, 2021. The decrease in licensing revenue was due to lower royalties on the licensing agreement with Reprise.a receivable.

Cost of Goods Sold

Cost of goods sold was $125,000 for both the three months ended June 30, ~~2020~~2023 and ~~2021 and was $250,000 for the six months ended June 30, 2020 and 2021.~~2022. Cost of goods sold relates to the minimum royalty due to the University under our ~~licensing~~license agreement.

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~~Gross Margin~~

Gross ~~margin~~Loss

Gross loss was ~~$(116,000) for both the three months ended June 30, 2020 and the three months ended June 30, 2021. The gross margin was negative~~$116,483 for the three months ended June 30, ~~2021~~2023 and ~~2020 due to the uncertainty of collecting the deferred minimum royalty from Reprise which was fully reserved against.~~

~~Gross margin decreased by $5,000 from $(230,000)~~$121,048 for the ~~six~~three months ended June 30, ~~2020, to $(235,000) for the six months ended June 30, 2021. The gross margin was negative for the six months ended June 30, 2021 and 2020 due to the uncertainty~~2022, a decrease of ~~collecting the deferred minimum royalty from Reprise which was fully reserved against.~~$4,565, or 3.8%.

Research and Development

Research and development expenses ~~increased by $402,000, or 19.3%, from $2,079,000~~were $3,621,224 for the three months ended June 30, ~~2020, to $2,481,000~~2023 and $4,988,233 for the three months ended June 30, ~~2021.~~2022, a decrease of $1,367,009, or 27.4%. The ~~increase in research and development expenses~~decrease was primarily due to ~~increases in employee costs~~a lab supply expense decrease of $1,315,041, consulting expense decrease of $234,266 and ~~lab supplies~~office expense decrease of $96,172. The decrease was partially offset by a ~~decrease~~headcount increase which resulted in ~~contract pre-clinical costs.~~

~~Research and development expenses increased by $469,000, or 12.1%, from $3,880,000 for the six months ended June 30, 2020, to $4,349,000 for the six months ended June 30, 2021. The~~an increase in ~~research~~payroll expense of $257,238 and ~~development expenses was primarily due to increases in employee costs and lab supplies partially offset by a decrease in contract pre-clinical costs.~~other expense increase of $21,232.

Regulatory and Clinical

Regulatory and clinical expenses ~~increased by $32,000, or 45.1%, from $71,000~~were $397,448 for the three months ended June 30, ~~2020, to $103,000~~2023 and $419,394 for the three months ended June 30, ~~2021.~~ 2022, a decrease of $21,946, or 5.2%.The ~~increase in regulatory and clinical expenses~~decrease was primarily due to ~~increases in employee costs as well as regulatory~~lower consulting expenses.

Regulatory and clinical expenses increased by $43,000, or 29.9%, from $144,000 for the six months ended June 30, 2020, to $187,000 for the six months ended June 30, 2021. The increase in regulatory and clinical expenses was primarily due to increases in employee costs.

Quality ~~Expenses~~

Quality expenses were ~~$86,000~~$515,575 for the three months ended June 30, ~~2021, compared to none~~2023 and $517,333 for the three months ended June 30, ~~2020. The introduction~~2022, a decrease of ~~quality expenses in the current period was due to the Company hiring of a Vice President of Quality.~~

Quality expenses were $172,000 for the six months ended June 30, 2021, compared to none for the six months ended June 30, 2020. The introduction of quality expenses in the current period was due to the Company hiring a Vice President of Quality.$1,758, or 0.3%.

General and Administrative

General and administrative expenses ~~increased by $182,000, or 30.1%, from $605,000~~were $2,037,682 for the three months ended June 30, ~~2020, to $787,000~~2023 and $2,188,460 for the three months ended June 30, ~~2021.~~2022, a decrease of $150,778, or 6.9%. The ~~increase in general and administrative expenses~~decrease was primarily due to ~~increases in board compensation~~professional service fee decrease of $85,450, office expense decrease of $44,218, travel and ~~expenses relate to the Company’s audit,~~entertainment expense decrease of $34,549, consulting expense decrease of $29,037 and other expense decrease of $2,849. The decrease was partially offset by ~~a decrease in legal expenses.~~taxes and licenses expense increase of $45,325.

~~General and administrative expenses increased by $278,000, or 26.0%, from $1,071,000~~Interest Income

Interest income was $166,162 for the ~~six~~three months ended June 30, ~~2020, to $1,349,000~~2023 and $61,078 for the ~~six~~three months ended June 30, ~~2021.~~2022, an increase of $105,084, or 172.0%. The increase ~~in general and administrative expenses~~ was primarily due to ~~increases~~U.S. Treasury securities purchased during the second quarter of 2022 and the second quarter of 2023 with cash received from our initial public offering and our secondary public offering, which was completed in ~~board compensation expense and expenses relate to~~ the ~~Company’s audit, partially offset by a decrease in legal expenses.~~first quarter of 2023.

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Interest ~~Income~~Expense

Interest ~~income decreased by $3,000, or 100%, from $3,000~~expense was $8,170 for the three months ended June 30, ~~2020, to an immaterial amount of $0~~2023 and $8,799 for the three months ended June 30, ~~2021. The~~2022, a decrease ~~in interest income~~of $629, or 7.1%.

Comparison of the Six Months Ended June 30, 2023 to the Six Months Ended June 30, 2022


	Six Months Ended
	June 30,				Change
	2023		2022		Dollar		Percentage
Licensing revenue	$	16,498	$	10,720	$	5,778	53.9	%
Cost of goods sold		250,000		250,000		—	—
Gross loss		(233,502)		(239,280)		5,778	(2.4)
Operating expenses:
Research and development		8,013,342		8,994,899		(981,557)	(10.9)
Regulatory and clinical		803,763		774,632		29,131	3.8
Quality		1,098,917		958,268		140,649	14.7
General and administrative		4,637,917		4,461,017		176,900	4.0
Total operating expenses		14,553,939		15,188,816		(634,877)	(4.2)
Operating loss		(14,787,441)		(15,428,096)		640,655	(4.2)
Other income (expense)
Interest income		268,139		61,848		206,291	333.5
Interest expense		(18,413)		(19,690)		1,277	(6.5)
Employee retention credit		527,143		—		527,143	100.0
Total other income (expense)		776,869		42,158		734,711	1,742.8
Net loss	$	(14,010,572)	$	(15,385,938)	$	1,375,366	(8.9)	%

Licensing Revenue

Licensing revenue was ~~due to lower interest rates on cash balances in 2021 as compared with 2020.~~

~~Interest income decreased by $9,000, or 100%, from $9,000~~$16,498 for the six months ended June 30, ~~2020, to an immaterial amount of $0~~2023 and $10,720 for the six months ended June 30, ~~2021.~~2022, an increase of $5,778, or 53.9%. The ~~decrease~~licensing revenue is a result of the license agreement with Reprise. The remainder of minimum royalties due from Reprise for 2023 are due in ~~interest income~~January 2024. The remainder of the minimum royalties due from Reprise for 2021 have been deferred to 2023. Due to the uncertainty regarding the collectability of the 2021 and 2023 minimum royalties from Reprise, we determined the contract did not meet the requirements of ASC 606; therefore, we did not record revenues or a receivable.

Cost of Goods Sold

Cost of goods sold was ~~due to lower interest rates on cash balances in 2021 as compared with 2020.~~

~~Interest Expense~~

~~Interest expense increased by $164,000, or 140.2%, from $117,000~~$250,000 for both the ~~three~~six months ended June 30, ~~2020, to $281,000 for the three months ended June 30, 2021. The increase was primarily the result~~2023 and 2022. Cost of ~~interest expense on the Cheshire Note (as defined below).~~

Interest expense increased by $431,000, or 278.1%, from $155,000 for the three months ended June 30, 2020, to $586,000 for the three months ended June 30, 2021. The increase was primarily the result of interest expense on the Cheshire Note.

~~Amortization of Discount on Note~~

~~Amortization expense related~~goods sold relates to the ~~Cheshire Note decreased by $3,000, or 9.1%, from $33,000 for the three months ended June 30, 2020, to $30,000 for the three months ended June 30, 2021. The decrease in amortization expense was~~minimum royalty due to the ~~note being converted to equity in June 2021 and therefore there~~University under our license agreement.

Gross Loss

Gross loss was ~~less amortization expense related to the note in 2021 as compared to 2020.~~

~~Amortization expense related to the Cheshire Note increased by $20,000, or 46.5%, from $43,000~~$233,502 for the six months ended June 30, ~~2020, to $63,000~~2023 and $239,280 for the six months ended June 30, ~~2021. The increase in amortization expense was due to there only being four months~~2022, a decrease of ~~amortization expense in the six months ended June 30, 2020 versus six months in the comparable period in 2021.~~$5,778, or 2.4%.

~~Change in Fair Value of Derivative~~Research and Development

The change in fair value of the embedded derivative related to the Cheshire Note decreased by $53,000, or 100%, from $0 for the three months ended June 30, 2020, to $53,000 for the three months ended June 30, 2021. The decrease in the change in fair value of the embedded derivative was due to the Cheshire Note being converted to equity in June 2021.

~~The change in fair value of the embedded derivative related to the Cheshire Note decreased by $247,000, or 100%, from $0~~Research and development expenses were $8,013,342 for the six months ended June 30, ~~2020, to $247,000~~2023 and $8,994,899 for the six months ended June 30, ~~2021.~~2022, a decrease of $981,557, or 10.9%. The decrease ~~in the change in fair value of the embedded derivative was due to the Cheshire Note being converted to equity in June 2021.~~

~~Research Grants~~

~~Research grants decreased by $158,000, or 55.2%, from $286,000 for the three months ended June 30, 2020, to $128,000 for the three months ended June 30, 2021. The decrease in research grants~~ was primarily due to alab supply expense decrease ~~in the expenditures for pre-clinical contracting, resulting in lower grant funds, during the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.~~

~~Research grants decreased by $188,000, or 40.3%, from $466,000 for the six months ended June 30, 2020, to $278,000 for the six months ended June 30, 2021.~~of $1,512,769, contract services expense decrease of $151,181, consulting expense decrease of $87,436, office expense decrease of $77,418 and travel and entertainment expense decrease of $22,664. The decrease ~~in research grants~~ was ~~primarily due to a decrease in the~~partially offset by payroll expense increase of $806,397 and other expense increase of $63,514.

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~~expenditures for pre-clinical contracting, resulting in lower grant funds, during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020~~Regulatory and Clinical

~~Equity Loss in Affiliate~~

Equity loss in affiliate decreased by $541,000, or 100.0%, from $541,000 for the three months ended June 30, 2020, to $0 for the three months ended June 30, 2021. The decrease in equity loss in affiliate was due to the Company selling all of its ownership in Reprise on March 15, 2021Regulatory and ~~therefore not recording any loss for the three months ending June 30, 2021.~~

~~Equity loss in affiliate decreased by $958,000, or 81.1%, from $1,181,000~~clinical expenses were $803,763 for the six months ended June 30, ~~2020, to $223,000~~2023 and $774,632 for the six months ended June 30, ~~2021.~~2022, an increase of $29,131, or 3.8%. The ~~decrease in equity loss in affiliate~~increase was primarily due to ~~the Company owning~~ a ~~smaller percentage~~headcount increase which resulted in an increase in payroll expense of ~~Reprise in~~$85,199, partially offset by consulting expense decrease of $30,940, office expense decrease of $7,951, contract services expense decrease of $7,658, travel and entertainment expense decrease of $6,087 and other expense decrease of $3,432.

Quality

Quality expenses were $1,098,917 for the six months ended June 30, ~~2021 as compared to the comparable period in the prior year as well as the Company selling all of its ownership in Reprise on March 15, 2021.~~

~~Gain on Debt Extinguishment~~

~~During~~2023 and $958,268 for the six months ended June 30, ~~2021 the Company had~~2022, an increase of $140,649, or 14.7%. The increase was primarily due to an increase in lab supply expense of $341,972 and other expense increase of $22,982. The increase was partially offset by a ~~gain on the extinguishment~~decrease in payroll expense of ~~debt~~$143,708, consulting expense decrease of ~~$518,000 related to the forgiveness~~$70,882, contract services expense decrease of ~~our loan under the Small Business Administration’s Paycheck Protection Program.~~$7,652 and office expense decrease of $2,063.

~~Gain on Sale of Equity Investment~~General and Administrative

~~For~~General and administrative expenses were $4,637,917 for the six months ended June 30, ~~2021, we~~2023 and $4,461,017 for the six months ended June 30, 2022, an increase of $176,900, or 4.0%. The increase was primarily due to deferred offering costs write-off of $221,254, payroll expense increase of $122,278, shareholder expense increase of $7,420 and professional service expense increase of $3,551. The increase was partially offset by travel and entertainment expense decrease of $59,875, office expense decrease of $45,842, insurance expense decrease of $34,059, consulting expense decrease of $31,604 and other expense decrease of $6,223.

Interest Income

Interest income was $268,139 for the six months ended June 30, 2023 and $61,848 for the six months ended June 30, 2022, an increase of $206,291, or 333.5%. The increase was primarily due to U.S. Treasury securities purchased during the second quarter of 2022 and the second quarter of 2023 with cash received from our initial public offering and our secondary public offering, which was completed in the first quarter of 2023.

Interest Expense

Interest expense was $18,413 for the six months ended June 30, 2023 and $19,690 for the six months ended June 30, 2022, a decrease of $1,277, or 6.5%.

Employee Retention Credit

Employee retention credit income was $527,143 for the six months ended June 30, 2023. This is a refundable credit against certain employment taxes recognized ~~a gain~~under the provisions of ~~$2.0 million related to~~ the ~~sale of 1.8 million shares in Reprise.~~Coronavirus Aid, Relief, and Economic Security Act.

Liquidity and Capital Resources

We have incurred net losses since our inception. For the three months ended June 30, ~~2021~~2023 and ~~2020,~~2022, we incurred net losses of ~~$3,703,000~~$6,530,420 and ~~$3,273,000,~~$8,182,189, respectively. For the six months ended June 30, ~~2021~~2023 and ~~2020,~~2022, we incurred net losses of ~~$4,137,000~~$14,010,572 and ~~$6,229,000,~~$15,385,938, respectively. As of June 30, ~~2021,~~2023, we had an accumulated deficit of ~~$63.5 million.~~$118,022,483.

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We expect to incur additional losses in the near future, and we expect our expenses to increase ~~substantially~~ in connection with our ongoing activities, particularly as we continue to develop our bioengineered organs, ~~as we~~ conduct clinical trials and other studies for our bioengineered organs, seek regulatory clearances or approvals for ~~Miroliver~~miroliverELAP, mirokidney and ~~Mirokidney,~~miroliver, continue preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights, ~~and to~~ invest in our infrastructure to support our future manufacturing and other ~~activities. In addition, we expect to~~activities, and incur ~~additional~~ costs associated with operating as a public company in the ~~United States.~~U.S. The timing and amount of our operating expenditures will depend largely on our ability to, among other things:

●

advance clinical development of our product candidates;

●

manufacture, or have manufactured on our behalf, our preclinical and clinical materials and develop processes for commercial manufacturing of any product candidates that may receive regulatory approval;

●

seek regulatory approvals for any product candidates that successfully complete clinical trials;

●

establish a sales, marketing, medical affairs and distribution infrastructure to commercialize any product candidates for which we may obtain marketing approval and intend to commercialize on our own;

●

establish collaborations to commercialize any product candidates for which we may obtain marketing approval but do not intend to commercialize on our own;

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●

expand our operational, financial and management systems and hire additional personnel, including personnel to support our clinical development, quality control, research and development, manufacturing and commercialization efforts, our general and administrative activities and our operations as a public company; and

●

obtain new intellectual property and maintain, expand and protect our intellectual property portfolio.

Sources of Liquidity

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. To date, we have primarily financed our operations through equity and debt financings, including public offerings of our common stock, as well as research grants. We ~~believe that our existing cash and cash equivalents will enable us~~do not have adequate liquidity to fund our ~~operating expenses and capital expenditure requirements~~operations for at least twelve months from the ~~next 12 months.~~issuance of these financial statements without raising additional capital and such actions are not solely within our control. If we are unable to raise additional capital, we believe planned expenditures may need to be reduced in order to extend the time period that existing resources can fund our operations. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. As of June 30, ~~2021,~~2023, we had cash and cash equivalents of ~~$66.5 million, which includes the net proceeds from our IPO.~~$4,571,777 and short-term investments of $15,828,281.

Until such time, if ever, as we can generate substantial revenue from sales of our bioengineered organs, we expect to finance our cash needs through a combination of ~~securities~~equity offerings, debt financings, strategic partnerships and ~~debt financings.~~collaborations, as well as other sources. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our ~~shareholders~~stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our ~~shareholders.~~stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Additional capital may not be available when needed, on reasonable terms, or at all, and our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic.factors not solely within our control. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, curtail or discontinue our product development or future commercialization efforts, or grant rights to develop and market products that we would otherwise prefer to develop and market ourselves.

In January 2012, we signed a promissory note with the University for $405,559. The promissory note bears interest at 3% per annum, compounded monthly. The note is scheduled to mature on December 31, 2022 and is unsecured. We are required to make monthly principal and interest payments of $7,737 until the note is paid in full. In connection with the promissory note, we issued the University warrants to purchase 80,000 shares of our common stock at an exercise price of $1.69. As of June 30 2021 and December 31, the principal outstanding on this loan was $128,623 and $172,731, respectively.

In May 2015, we entered into a loan agreement with the Minnesota Department of Employment & Economic Development under which we borrowed $250,000. The loan is unsecured and does not bear interest. The loan is due in a lump sum payment on April 1, 2022. As of both June 30, 2021 and December 31, 2020, the balance outstanding on this loan was $250,000.

In October 2018, we entered into a lease agreement for certain lab equipment, which is being accounted for as a capitalized lease. The total cost of the equipment was $102,026. The lease bears interest at 7.2% per annum and we will make 60 payments in total of $2,003 until the lease is paid in full. As of June 30, 2021 and December 31, 2020, the amount outstanding on the lease was $47,868 and $57,127, respectively. The lease is secured by the lab equipment.Debt Financing

In January 2019, we issued the University a promissory note in the amount of $385,997 in satisfaction of our minimum royalty obligation under the license agreement with the University ~~License Agreement~~ for the year ended December 31, 2018. The note bears interest at 6% per annum, compounded annually, and is due on January 31, 2025. In addition, we issued the University a 10-year warrant to purchase 20,587 shares of our common stock at an exercise price of $3.75 per share.

~~On March 6, 2020, we entered into a note~~As of both June 30, 2023 and warrant purchase agreement (the “Cheshire Purchase Agreement”) with Cheshire MD Holdings, LLC (“Cheshire”), an affiliate of DaVita Inc., under which we received a bridge financing of $6,000,000. In connection withDecember 31, 2022, the Cheshire Purchase Agreement, we issued a $6,000,000 convertible promissory note (the “Cheshire Note”) to Cheshire and issued Cheshire a warrant to purchase up to $750,000 of shares of our preferred stock. The Cheshire Note is unsecured and had a maturity date of September 6, 2021. The Cheshire Note bore interest at 5% per annum through and until May 1, 2020, at which time the interest rate increased to 7%. The interest rateprincipal outstanding on this loan was $385,997.

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~~increased by~~Registration Statement

We filed a Registration Statement on Form S-3 with the SEC on July 1, 2022, which was declared effective on July 11, 2022 (the “Registration Statement”). The Registration Statement registered the offer and sale of an additional 2% on the first day of each subsequent month (beginning on June 1, 2020) prior to the maturity date, provided that the interest rate would not exceed 20%. As of December 1, 2020, the interest rate reached the maximum of 20%. Under the Cheshire Purchase Agreement, as long as the Cheshire Note remains outstanding, the Company is required to issue to Cheshire additional warrants, on the first date of each month beginning on May 1, 2020, to purchase up to $75,000indeterminate number of shares of ~~our~~common stock and preferred ~~stock. In June 2021,~~stock, an indeterminate principal amount of debt securities and an indeterminate number of warrants to purchase common stock, preferred stock, and various series of debt securities and warrants to purchase any of such securities, having an aggregate initial offering price of $200.0 million.

Equity Distribution Agreement

On July 1, 2022, we entered into an Equity Distribution Agreement with Piper Sandler & Co. (“Piper Sandler”). The Equity Distribution Agreement provides that, upon the ~~Note~~terms and ~~all accrued interest was converted into 956,887~~subject to the conditions set forth therein, we may issue and sell through Piper Sandler, acting as the sales agent, shares of our common stock having an aggregate offering price of up to $50.0 million. We have no obligation to sell any such shares under the ~~Company’s Series C Convertible Preferred Stock. As~~Equity Distribution Agreement. The sale of the shares of our common stock by Piper Sandler, if any, will be effected pursuant to the Registration Statement. We did not issue any shares under the Equity Distribution Agreement in the six months ended June 30, ~~2021~~2023.

Public Offering

In March 2023, we completed a public offering pursuant to which we sold an aggregate of 6,250,000 shares of our common stock at a public offering price of $1.60 per share. The offering closed on March 10, 2023, resulting in net proceeds of approximately $8.8 million, after deducting underwriting discounts and ~~December 31, 2020, the balance outstanding on the loan was $0~~commissions and ~~$6,000,000, respectively.~~other offering expenses.

Employee Retention Credit

On ~~April 16, 2020,~~July 31, 2023, we ~~issued a promissory note for $563,397 under the Paycheck Protection Program (“PPP”) through the U.S. Small Business Administration (“SBA”), as part~~received cash payments totaling $457,143 of the Coronavirus Aid, Relief and Economic Security Act. The promissory note is unsecured and is fully guaranteed by the SBA. The promissory note bears interest at 1% per annum and is due on April 16, 2022. Under the terms of the note, some or all of the debt may be forgiven based upon our use of the funds. We received notification from the bank that held the promissory note in March 2021 that $513,520 had been forgiven and we are working to have the remaining amount forgiven. As of June 30, 2021 and December 31, 2020, the balance outstanding on the loan was $49,877 and $563,397, respectively.$527,143 employee retention receivable.

Cash Flows

The following table summarizes our sources and uses of cash for each of the periods presented:

Six Months Ended

June 30,
(in thousands)

2021

2020
Net cash provided by (used in):

Operating activities

$
(5,391)

$
(4,054)
Investing activities

1,914

(115)
Financing activities

65,558

6,561
Net increase in cash and cash equivalents

$
62,081

$
2,392


	Six Months Ended
	June 30,
	2023		2022
Net cash (used in) provided by:
Operating activities	$	(13,684,036)	$	(13,790,978)
Investing activities		4,224,731		(26,757,741)
Financing activities		8,823,077		330,503
Net decrease in cash and cash equivalents	$	(636,228)	$	(40,218,216)

Operating Activities

Net cash used in operating activities consisted of net losses adjusted for certain non-cash items and changes in operating assets and liabilities.

During the six months ended June 30, ~~2021,~~2023, net cash used in operating activities was ~~$5,391,000~~$13,684,036 and reflected (i) the net loss of ~~$4,137,000,~~$14,010,572, (ii) net non-cash usage items of ~~$2,164,000,~~$865,184, including ~~a gain on sale~~stock-based compensation of ~~equity investment~~$610,610, depreciation and amortization expense of ~~$1,984,000, $518,000 related to the forgiveness~~$579,367, deferred offering costs write-off of ~~the PPP promissory note~~$221,254 and ~~$247,000 related to the change in fair value~~non-cash interest income of ~~embedded derivative,~~$77,154, which was partially offset by ~~$239,000~~employee retention credit of $527,143 and amortization of premium/discount on investments of $96,058, and (iii) a net cash outflow from changes in balances of operating assets and liabilities of $538,648. The most significant items comprising the changes in balances of operating assets and liabilities

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were a cash inflow of the receivable from Reprise Biomedical, Inc. of $921,838 and a cash outflow of accounts payable and accrued expenses of $1,544,792.

During the six months ended June 30, 2022, net cash used in operating activities was $13,790,978 and reflected (i) the net loss of $15,385,938, (ii) net non-cash usage items of $1,027,437, including $600,371 of stock-based compensation, $536,507 of depreciation and ~~$224,000 in equity~~amortization expense, amortization of premium/discount on investments of $6,734 and $758 of loss ~~in affiliate,~~on disposal of property and equipment, partially offset by non-cash interest income of $116,933, and (iii) a net cash inflow from changes in balances of operating assets and liabilities of ~~$911,000.~~

During the six months ended June 30, 2020, net cash used in operating activities was $4,054,000 and reflected (i) the net loss of $6,229,000, (ii) net non-cash items of $1,639,000, including $315,000 of stock-based compensation and $1,181,000 in equity loss in an affiliate, and (iii) net cash inflows from changes in balances of operating assets and liabilities of $536,000. The most significant items comprising the changes in the balance of operating assets and liabilities was a lower balance of receivable from Reprise of $219,000, a lower balance of grant receivable of $257,000 and an increase in accrued interest of $143,000, partially offset by a lower balance of accounts payable and accrued expenses of $135,000.$567,523.

Investing Activities

During the six months ended June 30, ~~2021,~~2023, net cash provided by investing activities was ~~$1,914,000 and reflected $2,000,000~~$4,224,731, driven by proceeds from the ~~sale~~maturity of ~~Reprise stock~~investments of $14,000,000, partially offset by the purchase of investments of $9,742,734 and ~~$86,000 used to~~property and equipment purchase ~~equipment.~~

~~Table~~ of ~~Contents~~$32,535.

During the six months ended June 30, ~~2020,~~2022, net cash used inby investing activities was ~~$115,000 to~~$26,757,741 and reflected the purchase ~~equipment.~~of investments of $26,026,125 and property and equipment purchases of $731,616.

Financing Activities

During the six months ended June 30, ~~2021,~~2023, net cash provided by financing activities was ~~$65,558,000~~$8,823,077 and was primarily the result of ~~net~~ proceeds from the ~~Company’s IPO~~sale of ~~$45,679,000, net proceeds from sales~~common stock of ~~Series C Preferred Stock of $19,892,000 and $41,000 related to proceeds from stock option and warrant exercises,~~$8,867,082, partially offset by payments on ~~long term-debt~~financing lease obligations of ~~$53,000.~~$29,376 and payments on employee taxes for shares withheld of $14,629.

During the six months ended June 30, ~~2020,~~2022, net cash provided by financing activities was ~~$6,561,000 which~~$330,503 and was primarily ~~related to~~the result of proceeds from ~~a promissory note with one~~stock warrant exercises of ~~our shareholders.~~

$414,098 and proceeds from stock option exercises of $256,883, partially offset by payments on long-term debt of $295,450, payments on financing lease obligations of $26,488 and payments on offering costs of $18,540.

Item 3. Quantitative and Qualitative Disclosures About Market ~~Risk.~~Risk

Not required for smaller reporting companies.

Item 4. Controls and ~~Procedures.~~Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended June 30, ~~2021,~~2023, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were not effective as of June 30, ~~2021.~~2023 because of our previously reported material weaknesses in our internal control over financial reporting, which we describe in Part II, Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2022.

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Management is committed to remediating its material weaknesses as promptly as possible and is in the process of implementing its remediation plan. We are in the process of designing, implementing, documenting and testing the effectiveness of our processes, procedures and internal controls over financial reporting. The material weakness cannot be considered completely remediated until the applicable internal controls over financial reporting have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We cannot reasonably assure we will be able to remediate the material weaknesses we have identified or avoid potential future material weaknesses.

Changes in Internal Control over Financial Reporting

~~There was~~As outlined above, due to the identification of the material weaknesses, we continued to design, implement, document and test the effectiveness of our processes, procedures and internal controls over financial reporting. We made no ~~change~~other changes in our internal control over financial reporting that occurred during the fiscal quarter of ~~2021~~2023 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal ~~Proceedings.~~Proceedings

We are not presently a party to any litigation the outcome of which, we believe, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows or financial condition.

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

This Quarterly Report on Form 10-Q should be read in conjunction with the risk factors included in our ~~final prospectus~~Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC ~~pursuant to Rule 424(b) under the Securities Act of 1933,~~on March 31, 2023. Other than as ~~amended, on June 23, 2021 (the “Prospectus”). There~~set forth below, there have been no material changes to the risk factors disclosed under the heading “Risk Factors” in our ~~Prospectus.~~Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

As a result of our limited financial liquidity, we have expressed substantial doubt regarding our ability to continue as a “going concern.”

As a result of our current limited financial liquidity, the notes accompanying our unaudited interim condensed financial statements, which are included as part of this report, contain a statement concerning our ability to continue as a “going concern.” Our limited liquidity could make it more difficult for us to secure additional financing or enter into strategic relationships on terms acceptable to us, if at all, and may materially and adversely affect the terms of any financing that we may obtain and our public stock price generally.

We have incurred losses since inception, negative cash flows from operations, and had an accumulated deficit of approximately $118.0 million as of June 30, 2023. The Company does not have adequate liquidity to fund its operations for at least twelve months from the issuance of these financial statements without raising additional capital and such actions are not solely within the control of the Company. If the Company is unable to raise additional capital, management believes planned expenditures may need to be reduced in order to extend the time period that existing resources can fund the Company’s operations. To date, the Company has funded its operations through the issuance of equity and debt securities, and the receipt of grants. The Company intends to fund ongoing operations by utilizing its current cash, cash equivalents and short-term investments on hand, and by exploring various dilutive and non-dilutive sources of funding, including equity financings, debt financings, strategic partnerships and collaborations, as well as other sources. If the Company is unable to obtain additional capital on commercially reasonable terms, or at all, it would have a material adverse effect on the operations of the Company and the development of its technology, and the Company may have to cease operations altogether. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

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Item 2. Unregistered Sales of Equity Securities and Use of ~~Proceeds.~~Proceeds

Unregistered Sales of Equity Securities

On May 3, 2021, we entered into a stock purchase agreement with certain investors (together, the “Investors”), under which the Company sold an aggregate of 2,666,667 shares of Series C Convertible Preferred Stock to the Investors, at a price per share of $7.50, for an aggregate purchase price, before fees and expenses, of approximately $20 million (the “Private Placement”). As part of the Private Placement, the Company sold 2,000,000 shares of Series C Preferred Stock to Baxter International Inc., for an aggregate purchase price of $15.0 million, and 666,667 shares of Series C Preferred Stock to CareDx, Inc. for an aggregate purchase price of $5.0 million. The Private Placement closed on May 21, 2021. The shares of Series C Preferred Stock automatically converted to shares of our common stock immediately prior to the completion of the Company’s IPO.

The shares were issued in reliance on an exemption from registration set forth in Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) to an “accredited investor,” as defined in Rule 501 of Regulation D of the SEC, without the use of any general solicitations or advertising to market or otherwise offer the securities for sale. None of the shares or shares of common stock issued upon conversion of the shares of preferred stock have been registered under the Securities Act or applicable state securities laws and none may be offered or sold in the United States absent registration under the Securities Act, or an exemption from such registration requirements.

Immediately prior to the completion of the Company’s IPO, all of the Company’s issued and outstanding shares of preferred stock, including the shares of Series C Preferred Stock, automatically converted into 12,139,071 shares of common stock. Immediately prior to the conversion of the shares of the Company’s preferred stock, the Cheshire Note and all accrued interest converted into 956,887 shares of our Series C Preferred Stock and the Cheshire Warrants were converted into 48,000 shares of Series C Preferred Stock.None.

Use of Proceeds ~~from Initial Public Offering of Common Stock~~

On June 28, 2021, we completed our ~~IPO~~initial public offering on common stock (the “IPO”) in which we sold 5,520,000 shares of common stock at a public offering price of $9.00 per share. The offer and sale of all of the shares in the IPO were registered under the Securities Act pursuant to the Company’s registration statement on Form S-1 (File No. 333-256649), as amended, which was declared effective ~~by the SEC on June 23, 2021, and the Company’s registration statement on Form S-1 (File No. 333-257329) filed~~ on June 23, 2021 pursuant to Rule 462(b) under the Securities Act. Craig-Hallum Capital Group acted as sole managing underwriter for the IPO.

We received net proceeds of approximately ~~$44.6~~$44.5 million from the IPO, after paying $342,500 of fees and expenses of Craig-Hallum. We are using the net proceeds from the IPO as follows:

●

between approximately $34.8 million to $40.0 million to fund our research and development activities, including, but not limited to, our Phase I trial for ~~External Liver Assist Product~~the miroliverELAP product and certain pre-clinical trials for our bioengineered organs;

●

between approximately $3.0 million toand $4.0 million to fund the full cost of constructing a new facility; and

●

the remaining funds for working capital and general corporate purposes.

~~Table~~Pending the uses of ~~Contents~~proceeds above, we have invested in a variety of capital preservation instruments, including short-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the United States government.

Item 3. Defaults Upon Senior ~~Securities.~~Securities

None.

Item 4. Mine Safety ~~Disclosures.~~Disclosures

Not applicable.

Item 5. Other ~~Information.~~Information

~~None.~~

During the three months ended June 30, 2023, no director or officer of the Company adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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Item 6. Exhibits

~~The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.~~


Exhibit No.	Description
3.1	Second Amended and Restated Certificate of Incorporation of Miromatrix Medical Inc. ~~(incorporated herein~~	Incorporated by reference to Exhibit 3.1 of the Company’s ~~Current~~Annual Report on Form ~~8-K~~10-K, filed ~~with the SEC on June 28, 2021)~~March 30, 2022.
3.2
~~3.2~~	Amended and Restated Bylaws of Miromatrix Medical Inc. ~~(incorporated herein~~	Incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K, filed ~~with the SEC on~~ June 28, ~~2021).~~2021.
10.1	Twelfth Amendment to the License Agreement, dated May 7, 2023, by and between Miromatrix Medical Inc. and Mayo Foundation for Medical Education and Research	Filed herewith.
~~10.1~~10.2	~~Multi-Tenant Industrial Triple Net Lease,~~Thirteenth Amendment to the License Agreement, dated ~~August 2, 2021,~~July 17, 2023, by and between ~~the Company~~Miromatrix Medical Inc. and ~~B( Polar Prairie Oaks Corporate LLC (incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on August 5, 2021)~~Mayo Foundation for Medical Education and Research	Filed herewith.
31.1
~~31.1†~~	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	Filed herewith.
~~31.2†~~31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	Filed herewith.
~~32.1†~~32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	Furnished herewith.
~~32.2†~~32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith.

~~101.INS†~~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
	Filed herewith.
~~101.SCH†~~101.SCH	Inline XBRL Taxonomy Extension Schema Document
	Filed herewith.
~~101.CAL†~~101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
	Filed herewith.
~~101.DEF†~~101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
	Filed herewith.
~~101.LAB†~~101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
	Filed herewith.
~~101.PRE†~~101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
	Filed herewith.
~~104†~~104	Cover Page Interactive Data File (embedded within the inline XBRL document)

†	Filed herewith.

3227

Table of Contents

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 the undersigned hereto, duly authorized.


	MIROMATRIX MEDICAL INC.

Dated: August ~~12, 2021~~14, 2023	By:	/s/ ~~Jeff~~Jeffrey Ross
	Name:	~~Jeff~~Jeffrey Ross
	Title:	Chief Executive Officer
		(on behalf of Registrant)

Dated: August ~~12, 2021~~14, 2023	By:	/s/ ~~Brian Niebur~~James Douglas
	Name:	~~Brian Niebur~~James Douglas
	Title:	Chief Financial Officer
		(Principal Financial and Accounting Officer)

3328

		Page

Part I	Financial Information

Item 1.	Financial Statements	3

	Condensed Balance Sheets ~~as of June 30, 2021 (Unaudited) and December 31, 2020 (Audited)~~	3

	Condensed Statements of Operations ~~for the three and six months ended June 30, 2021 and 2020 (Unaudited)~~	4

	Condensed Statements of Changes in Shareholders’ Equity ~~(Deficit) for the three and six months ended June 30, 2021 and 2020 (Unaudited)~~	5

	Condensed Statements of Cash Flows ~~for the six months ended June 30, 2021 and 2020 (Unaudited)~~	6

	Notes to Condensed Financial Statements ~~(Unaudited)~~	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2116

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2924

Item 4.	Controls and Procedures	2924

Part II	Other Information

Item 1.	Legal Proceedings	2925

Item 1A.	Risk Factors	3025

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3026

Item 3.	Defaults Upon Senior Securities	3126

Item 4.	Mine Safety Disclosures	3126

Item 5.	Other Information	3126

Item 6.	Exhibits	32

~~Exhibit Index~~		27

Signatures


	June 30, 2021		December 31, 2020
	(unaudited)
Lab equipment	$	1,567,064	$	1,480,952
Leasehold improvements		310,225		310,225
Furniture and fixtures & computers		112,302		112,302
		1,989,591		1,903,479
Less accumulated depreciation and amortization		(1,638,119)		(1,578,945)
	$	351,472	$	324,534



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2021		2020		2021		2020
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Net sales	$	—	$	144,530	$	93,985	$	314,790
Gross margin		—		81,619		47,708		198,076
Net loss		—		(1,112,290)		(1,376,522)		(2,534,855)
Miromatrix Medical Inc. share of net loss		—		(500,685)		(223,633)		(1,140,685)


As of December 31,	Debt		Capital Lease		Total
2021	$	6,481,774	$	18,855	$	6,500,629
2022		504,354		20,261		524,615
2023		—		18,011		18,011
2024		—		—		—
2025		385,997		—		385,997
Totals		7,372,125		57,127		7,429,252
Less current portion		(6,481,774)		(18,855)		(6,500,629)
Long-term portion	$	890,351	$	38,272	$	928,623


As of June 30,	Debt		Capital Lease		Total
(unaudited)
2022	$	382,479	$	17,862	$	400,341
2023		46,021		20,877		66,898
2024		—		9,129		9,129
2025		385,997		—		385,997
Totals		814,497		47,868		862,365
Less current portion		(382,479)		(17,862)		(400,341)
Long-term portion	$	432,018	$	30,006	$	462,024


			Aggregate
	Shares	Shares	Liquidation
	Authorized	Outstanding	Preference

Convertible Preferred Stock - Series C	6,100,000	3,671,554	$ 27,536,655
Convertible Preferred Stock - Series B-2	2,500,000	2,095,874	15,719,055
Convertible Preferred Stock - Series B	4,000,000	3,218,282	24,137,115
Convertible Preferred Stock - Series A	3,300,000	3,000,380	7,500,950
	15,900,000	11,986,090	$ 74,893,775


	Series A Preferred
	warrants		Common warrants
Warrants outstanding December 31, 2018		40,000		732,082
Granted		—		20,587
Exercised		—		—
Terminated		—		—
Warrants outstanding December 31, 2019		40,000		752,669
Granted		—		—
Exercised		—		(45,000)
Terminated		(40,000)		—
Warrants outstanding December 31, 2020		—		707,669
Granted		—		276,000
Exercised		—		(18,050)
Terminated		—		—
Warrants outstanding June 30, 2021 (unaudited)		—		965,619

Weighted average exercise price:
June 30, 2021 (unaudited)	$	—	$	4.50
December 31, 2020		—		2.34
December 31, 2019		2.88		2.27

Weighted average remaining contractual life in years:
June 30, 2021 (unaudited)		—		2.78
December 31, 2020		—		2.32
December 31, 2019		0.83		3.23


	Six Months Ended
	June 30,
(in thousands)	2021		2020
Net cash provided by (used in):
Operating activities	$	(5,391)	$	(4,054)
Investing activities		1,914		(115)
Financing activities		65,558		6,561
Net increase in cash and cash equivalents	$	62,081	$	2,392