Miromatrix Medical Inc. [MIRO] Filings

10-Q 1 miro-20230630x10q.htm 10-Q

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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, 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

27-1285782

(State or other jurisdiction of

incorporation)

(I.R.S. Employer

Identification Number)

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, 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 9, 2023, there were 27,310,553 shares of the registrant’s common stock outstanding.

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TABLE OF CONTENTS

		Page

Part I	Financial Information

Item 1.	Financial Statements	3

	Condensed Balance Sheets	3

	Condensed Statements of Operations	4

	Condensed Statements of Changes in Shareholders’ Equity	5

	Condensed Statements of Cash Flows	6

	Notes to Condensed Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	24

Item 4.	Controls and Procedures	24

Part II	Other Information

Item 1.	Legal Proceedings	25

Item 1A.	Risk Factors	25

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26

Item 3.	Defaults Upon Senior Securities	26

Item 4.	Mine Safety Disclosures	26

Item 5.	Other Information	26

Item 6.	Exhibits	27

Signatures

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PART I —FINANCIAL INFORMATION

Item 1. Financial Statements

MIROMATRIX MEDICAL INC.

Condensed Balance Sheets


	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.

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MIROMATRIX MEDICAL INC.

Condensed Statements of 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.

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MIROMATRIX MEDICAL INC.

Condensed Statements of Shareholders’ Equity

(Unaudited)


				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			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.

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MIROMATRIX MEDICAL INC.

Condensed Statements of Cash Flows

(Unaudited)


	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.

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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 sciences company 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 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 bioengineering other organs including hearts, lungs and 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 Baxter, CareDx and 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 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

In the opinion of management, the accompanying condensed financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, 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 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.

Reclassifications

Certain reclassifications to previously reported financial information on the Condensed Balance Sheets and Condensed Statements of Operations have been made to conform to the current period presentation.

Use of Estimates

The preparation of financial statements in conformity with 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 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.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

The FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments and an updated ASU 2018-19 that clarifies the scope of the standard in the amendments in ASU 2016-13. This guidance introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. Financial instruments impacted are trade and other receivables, held-to-maturity debt securities, loans and other instruments. The Company adopted the standard effective January 1, 2023, using the modified retrospective approach. The adoption did not have an impact on the Company's financial statements.

NOTE 2 — GOING CONCERN

The accompanying condensed financial statements have been prepared on the basis that the Company 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 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, 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.

NOTE 3 — FAIR VALUE MEASUREMENT

The fair value of the Company’s financial instruments 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). The Company uses a three-tier valuation hierarchy based upon observable and non-observable inputs to measure fair value:

Level 1: Inputs that include quoted prices in active markets for identical assets and liabilities.

Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: 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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The 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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NOTE 7 — DEBT

In January 2019, the Company issued the Regents of the University of Minnesota (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 6.0% per annum, compounded annually, and is due on January 31, 2025. As of both June 30, 2023 and December 31, 2022, the balance outstanding on this loan was $385,997. 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, 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, 2023 and December 31, 2022, there were 27,310,553 and 20,944,109 shares of common stock issued and outstanding, respectively.

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock, with a par value of $0.00001. As of June 30, 2023 and December 31, 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 grant date fair value of the award. The Company issues new common shares for stock options exercised.

Stock option activity was 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 $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.

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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

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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 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 expected lease term. The lease provided a tenant improvement allowance of $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

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Information on the Company’s lease costs is as follows:


		Three Months Ended June 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

Additional information related to leases is as follows:


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	%

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NOTE 12 — NET LOSS PER SHARE

Basic net loss per share is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is calculated by dividing the weighted average number of common shares outstanding, after taking into consideration all dilutive potential shares outstanding during the period. Due to the existence of net losses for the three and six months ended June 30, 2023 and 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 for the periods presented:


	Three and Six Months Ended June 30,
	2023	2022
Common stock options outstanding	4,051,186	3,954,756
Restricted stock units	474,271	192,535
Common stock warrants	596,587	599,191
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.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of 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 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the U.S. Securities and Exchange Commission (“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 organs to help save and improve patients’ lives. 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 scalable platform that uses a two-step method of decellularization and recellularization designed to remove the porcine cells from the organs obtained from pigs and replace them with unmodified human cells. Our initial development focus is on bioengineering livers and kidneys, and our technology platform is also applicable to bioengineering other organs including hearts, lungs and pancreases. We have collaborations with the Mayo Clinic, Baxter, CareDx, Mount Sinai and the Texas Heart Institute, and have received strategic investments from Baxter, CareDx and DaVita.

Substantially all of our revenue to date has been generated by sales of and royalties we received from acellular biologic surgical products, which we spun out as Reprise Biomedical, Inc. (“Reprise”) effective June 30, 2019. We subsequently divested our minority ownership stake in Reprise in March 2021. We have continued to receive royalties on the sales of these products by Reprise. Our revenue for the three and six months ended June 30, 2023 was $8,517 and $16,498, respectively, consisting entirely of licensing revenue. Our net loss for the three and six months ended June 30, 2023 was $6,530,420 and $14,010,572, respectively. We have not been profitable since inception and as of June 30, 2023, we had an accumulated deficit of $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 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 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 Loss

Our gross 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 to increase in the future, as we continue the development of our current product candidates. Research and development expenses will be dependent upon such factors including the results of our preclinical and clinical trials, and the number of product 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 product candidates. These expenses include payroll and related expenses and consulting expenses. We expect regulatory and clinical expenses will be dependent on the size and duration of any clinical programs that we 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. These expenses include payroll and related expenses. We expect quality expenses to increase in future years as we continue to develop the process and systems needed to produce our 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.

Interest Income

Interest income consists of interest earned on our cash and cash 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 Months Ended June 30, 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

Miromatrix Medical Inc. [MIRO] Filings
10-Q	[2023-08-14]
10-Q	[2023-05-11]
10-K	[2023-03-31]
10-Q	[2022-11-14]
10-Q	[2022-08-15]
10-Q	[2022-05-16]
10-K	[2022-03-30]
10-Q	[2021-11-15]
10-Q	[2021-08-12]
S-1	[2021-05-28]