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 March 31, 2024.

	or

☐	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: 001-41934

FibroBiologics, Inc.

(Exact name of registrant as specified in its charter)

Delaware		86-3329066
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

455 E. Medical Center Blvd, Suite 300 Houston, TX 77598		77598
(Address of principal executive offices)		(Zip Code)

(281) 651-5150

(Registrant’s telephone number, including area code)

N/A

(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(s)		Name of each exchange on which registered:
Common Stock, $0.00001 par value		FBLG		The Nasdaq Global Market

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 ☒

At May 14, 2024, 32,719,125 shares of FibroBiologics, Inc.’s Common Stock, $0.00001 par value per share were outstanding.

FibroBiologics, Inc.

Quarterly Report on Form 10-Q

For the Quarter Ended March 31, 2024

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	4

	Unaudited Condensed Balance Sheets as of March 31, 2024 and December 31, 2023	4

	Unaudited Condensed Statements of Operations for the three months ended March 31, 2024 and 2023	5

	Unaudited Condensed Statements of Changes in Stockholders’ Equity/(Deficit) for the three months ended March 31, 2024 and 2023	6

	Unaudited Condensed Statements of Cash Flows for the three months ended March 31, 2024 and 2023	7

	Notes to the Unaudited Condensed Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27

Item 4.	Controls and Procedures	28

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 3.	Defaults Upon Senior Securities	29

Item 4.	Mine Safety Disclosures	29

Item 5.	Other Information	29

Item 6.	Exhibits	30

Signatures		31

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q, or Quarterly Report, and the documents incorporated by reference herein, if any, contain forward-looking statements that can involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategy, prospective products, product approvals, research and development costs, future revenue, timing and likelihood of success, plans and objectives of management for future operations, future results of anticipated products and prospects, plans and objectives of management are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. Forward-looking statements contained in this quarterly report include, but are not limited to, statements about:

	●	the timing, progress and results of preclinical studies and clinical trials for our current and future product candidates, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available and our research and development programs;

	●	the timing, scope or likelihood of regulatory submissions, filings, and approvals, including final regulatory approval of our product candidates;

	●	our ability to develop and advance product candidates into, and successfully complete, clinical trials;

	●	our expectations regarding the size of the patient populations for our product candidates, if approved for commercial use;

	●	the implementation of our business model and our strategic plans for our business, product candidates and technology;

	●	our commercialization, marketing and manufacturing capabilities and strategy;

	●	the pricing and reimbursement of our product candidates, if approved;

	●	the rate and degree of market acceptance and clinical utility of our product candidates, in particular, and cell therapy, in general;

	●	our ability to establish or maintain collaborations or strategic relationships or obtain additional funding;

	●	our competitive position;

	●	the scope of protection we and/or our licensors are able to establish and maintain for intellectual property rights covering our product candidates;

	●	developments and projections relating to our competitors and our industry;

	●	our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

	●	the period over which we estimate our existing cash and cash equivalents will be sufficient to fund our future operating expenses and capital expenditure requirements; and

	●	the impact of laws and regulations.

We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations and prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this quarterly report and are subject to a number of risks, uncertainties and assumptions described in the section titled “Risk Factors” and elsewhere in this Quarterly Report. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein until after we distribute this Quarterly Report, whether as a result of any new information, future events or otherwise.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this quarterly report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

FibroBiologics, Inc.

Condensed Balance Sheets

(in thousands, except shares and per share data)

	March 31, 2024			December 31, 2023
		(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	8,158		$	9,163
Prepaid expenses		746			36
Other current assets		18			16
Total current assets		8,922			9,215
Property and equipment, net		770			797
Operating lease right-of-use asset, net		1,707			1,809
Total assets	$	11,399		$	11,821

Liabilities and stockholders’ equity/(deficit)
Current liabilities
Accounts payable and accrued expenses	$	814		$	1,444
Parent company payable		—			141
Operating lease liability, short-term		372			362
GEM commitment fee payable		2,000			—
Liability instrument		10,340			7,236
Short-term note payable		459			—
Total current liabilities		13,985			9,183
Operating lease liability, long-term		1,277			1,385
Total liabilities		15,262			10,568

Stockholders’ equity/(deficit)
Net Parent investment		—			—
Preferred Stock, $0.00001 par value; 8,750,000 Series A Preferred shares authorized; 0 shares and 8,750,000 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		—			—
Preferred Stock, $0.00001 par value; 5,000,000 Series B Preferred shares authorized; 0 shares and 4,171,445 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		—			—
Preferred Stock, $0.00001 par value; 5,000,000 Series B-1 Preferred shares authorized; 0 shares and 89,781 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		—			—
Preferred Stock, $0.00001 par value; 2,500 Series C Preferred shares authorized; 2,500 shares and 0 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		—			—
Preferred Stock,value		—			—
Non-voting Common Stock, $0.00001 par value; 30,000,000 shares authorized; 0 shares and 28,230,842 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		—			1
Voting Common Stock, $0.00001 par value; 100,000,000 shares authorized; 32,719,125 shares and 0 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		—			—
Common Stock,value		—			—
Additional paid-in capital		28,954			25,609
Accumulated deficit		(32,817	)		(24,357	)
Total stockholders’ equity/(deficit)		(3,863	)		1,253
Total liabilities and stockholders’ equity/(deficit)	$	11,399		$	11,821

The accompanying notes are an integral part of these Unaudited Condensed Financial Statements.

FibroBiologics, Inc.

Condensed Statements of Operations

(unaudited, in thousands, except shares and per share data)

	2024			2023
	For the Three Months Ended March 31,
	2024			2023
Operating expenses:
Research and development	$	960		$	478
General, administrative and other		2,490			1,787
Total operating expenses		3,450			2,265
Loss from operations		(3,450	)		(2,265	)
Other income/(expense):
Change in fair value of liability instrument		(3,104	)		—
Commitment fee expense		(1,941	)		—
Other income/(expense)		—			(15	)
Interest income		39			—
Interest expense		(4	)		(135	)
Net loss		(8,460	)		(2,415	)
Deemed dividend		—			(2,573	)
Net loss attributable to common stockholders	$	(8,460	)	$	(4,988	)
Net loss per share, basic and diluted	$	(0.27	)	$	(0.18	)
Weighted-average shares outstanding, basic and diluted		31,133,762			28,230,842

The accompanying notes are an integral part of these Unaudited Condensed Financial Statements.

FibroBiologics, Inc.

Condensed Statements of Changes in Stockholders’ Equity/(Deficit)

For the Three Months Ended March 31, 2024 and 2023

(unaudited, in thousands, except shares)

	Investment		Shares			Amount		Shares			Amount		Shares			Amount		Shares		Amount		Shares			Amount			Shares		Amount		Capital		Deficit			(Deficit)
	Net Parent		Series A Preferred Stock					Series B Preferred Stock					Series B-1 Preferred Stock					Series C Preferred Stock				Non-voting Common Stock						Voting Common Stock				Additional Paid-in		Accumulated			Total Stockholders’ Equity/
	Investment		Shares			Amount		Shares			Amount		Shares			Amount		Shares		Amount		Shares			Amount			Shares		Amount		Capital		Deficit			(Deficit)
Balance – December 31, 2023	$	—		8,750,000		$	—		4,171,445		$	—		89,781		$	—		—	$	—		28,230,842		$	1			—	$	—	$	25,609	$	(24,357	)	$	1,253
Issuance of Series C Preferred Stock		—		—			—		—			—		—			—		2,500		—		—			—			—		—		45		—			45
Conversion to Voting Common Stock		—		—			—		(4,171,445	)		—		(89,781	)		—		—		—		(28,230,842	)		(1	)		32,492,068		—		1		—			—
Cancellation of Series A Preferred Stock upon Direct Listing		—		(8,750,000	)		—		—			—		—			—		—		—		—			—			—		—		—		—			—
Sale of Common Stock		—		—			—		—			—		—			—		—		—		—			—			227,057		—		2,819		—			2,819
Stock-based compensation expense		—		—			—		—			—		—			—		—		—		—			—			—		—		480		—			480
Net loss		—		—			—		—			—		—			—		—		—		—			—			—		—		—		(8,460	)		(8,460	)
Balance (Unaudited) – March 31, 2024	$	—		—		$	—		—		$	—		—		$	—		2,500	$	—		—		$	—			32,719,125	$	—	$	28,954	$	(32,817	)	$	(3,863	)

	Net Parent			Series A Preferred Stock				Series B Preferred Stock				Series B-1 Preferred Stock				Series C Preferred Stock				Non-voting Common Stock				Voting Common Stock				Additional Paid-in			Accumulated			Total Stockholders’ Equity/
	Investment			Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Capital			Deficit			(Deficit)
Balance – December 31, 2022	$	1,461			8,750,000	$	—		381,658	$	—		—	$	—		—	$	—		28,230,842	$	1		—	$	—	$	2,414		$	(7,872	)	$	(3,996	)
Balance	$	1,461			8,750,000	$	—		381,658	$	—		—	$	—		-		-		28,230,842	$	1		—	$	—	$	2,414		$	(7,872	)	$	(3,996	)
Sale of Series B Preferred Stock, net of direct costs		—			—		—		911,379		—		—		—		—		—		—		—		—		—		4,889			—			4,889
Issuance of Series B Preferred Stock for conversion of Notes and accrued interest		—			—		—		799,603		—		—		—		—		—		—		—		—		—		4,286			—			4,286
Deemed dividend related to ROFN Agreement derivative liability		(1,461	)		—		—		—		—		—		—		—		—		—		—		—		—		(1,112	)		—			(2,573	)
Stock-based compensation expense		—			—		—		—		—		—		—		—		—		—		—		—		—		448			—			448
Net loss		—			—		—		—		—		—		—		—		—		—		—		—		—		—			(2,415	)		(2,415	)
Balance (Unaudited) – March 31, 2023	$	—			8,750,000	$	—		2,092,640	$	—		—	$	—		—	$	—		28,230,842	$	1		—	$	—	$	10,925		$	(10,287	)	$	639
Balance	$	—			8,750,000	$	—		2,092,640	$	—		—	$	—		-		-		28,230,842	$	1		—	$	—	$	10,925		$	(10,287	)	$	639

The accompanying notes are an integral part of these Unaudited Condensed Financial Statements.

FibroBiologics, Inc.

Condensed Statements of Cash Flows

(unaudited, in thousands)

	2024			2023
	For the Three Months Ended March 31,
	2024			2023
Cash flows from operating activities
Net loss	$	(8,460	)	$	(2,415	)
Adjustments to reconcile net loss to net cash used in operating activities:
Change in fair value of liability instrument		3,104			—
Stock-based compensation expense		525			448
Other loss on derivative liability		—			15
Amortization of convertible notes debt discount		—			78
Amortization of operating lease right-of-use asset		102			95
Depreciation expense		35			1
Changes in operating assets and liabilities:
Change in receivables		—			(275	)
Change in prepaid expenses		(710	)		(20	)
Change in other current assets		(2	)		(71	)
Change in accounts payable and accrued expenses		(630	)		197
Change in commitment fee payable		2,000			—
Change in payable to Parent		(141	)		—
Change in operating lease liability		(98	)		(89	)
Net cash used in operating activities		(4,275	)		(2,036	)

Cash flows from investing activities
Purchases of property and equipment		(8	)		(56	)
Net cash used in investing activities		(8	)		(56	)

Cash flows from financing activities
ROFN Agreement payments to Parent		—			(323	)
Proceeds from short-term borrowing		574			—
Repayments of short-term borrowing		(115	)		—
Proceeds from stock subscription payable		—			10,000
Proceeds from issuance of Series B Preferred Stock, net of direct costs		—			4,889
Proceeds from issuance of common stock, net of direct costs		2,819			—
Net cash provided by financing activities		3,278			14,566

Net increase/(decrease) in cash and cash equivalents		(1,005	)		12,474
Cash and cash equivalents, beginning of period		9,163			2,266
Cash and cash equivalents, end of period	$	8,158		$	14,740

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	—		$	—
Cash paid for interest	$	4		$	—

Supplemental disclosure of non-cash investing and financing activities:
Issuance of Series B Preferred Stock for conversion of Notes and accrued interest	$	—		$	3,823
Reclassification of derivative liability for conversion of Notes to Series B Preferred Stock	$	—		$	463

The accompanying notes are an integral part of these Unaudited Condensed Financial Statements.

FibroBiologics, Inc.

Notes to the Unaudited Condensed Financial Statements

March 31, 2024

1. Organization, Description of Business, and Liquidity

Organization and Business

FibroBiologics, Inc. (the “Company” or “FibroBiologics”) was originally formed as a limited liability company (“LLC”) under the laws of the State of Texas on April 8, 2021 (“Inception”) and then converted to a Delaware corporation on December 14, 2021. FibroBiologics is an early stage, cell therapy company headquartered in Houston, Texas, developing innovative treatments for chronic diseases using fibroblast cells. The Company’s primary focus is the initiation and progression of preclinical studies and clinical-stage U.S. Food and Drug Administration trials related to fibroblast treatments for Wound Healing, Multiple Sclerosis, Degenerative Disc Disease, Psoriasis, Cancer, and other diseases. Prior to Inception, preclinical research and development related to these disease pathways took place under the parent company, SpinalCyte, LLC (the “Parent” or “FibroGenesis”).

Direct Listing

On January 31, 2024, the Company completed a direct listing of its common stock on Nasdaq (the “Direct Listing”). Upon completion of the Direct Listing, all outstanding shares of the Company’s Non-voting Common Stock, Series B Preferred Stock, and Series B-1 Preferred Stock automatically converted into shares of Voting Common Stock on a one-for-one basis, and all outstanding shares of the Company’s Series A Preferred Stock were canceled for no consideration.

Going Concern and Management’s Plan

The Company has incurred operating losses since Inception and expects such losses to continue in the future as it builds infrastructure, develops intellectual property, and conducts research and development activities. The Company has primarily relied on a combination of angel investors and private debt placements to funds its operations. As of March 31, 2024, the Company had an accumulated deficit of $32,817 thousand and cash and cash equivalents of $8,158 thousand. A transition to profitability will depend on the successful development, approval, and commercialization of product candidates and on the achievement of sufficient revenues to support the Company’s cost structure. The Company currently does not generate revenues and may never achieve profitability. Unless and until such time that revenue and net income are generated, the Company will need to continue to raise additional capital. These factors raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the financial statements. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. As further described in Note 7, management has entered into a Share Purchase Agreement as of November 12, 2021. With the completion of the Company’s Direct Listing, this agreement provides the Company with access to additional liquidity. In February and March 2024, the Company utilized this facility to raise a total of $2,819 thousand, net of costs. The Company may utilize this facility to raise additional capital if needed.

Segments

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker in making decisions regarding resource allocation and assessing performance. The chief executive officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance. The Company operates and manages its business as a single operating segment and therefore has one reportable segment.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying Unaudited Condensed Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the rules and regulations of the SEC. The accompanying Condensed Balance Sheet as of March 31, 2024, Condensed Statements of Operations for the three months ended March 31, 2024 and 2023, Condensed Statements of Stockholders’ Equity/(Deficit) for the three months ended March 31, 2024 and 2023, and Condensed Statements of Cash Flows for the three months ended March 31, 2024 and 2023, are unaudited. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on February 29, 2024, which contains the audited financial statements and notes thereto. The Unaudited Condensed Financial Statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) necessary to state fairly the Company’s financial position as of March 31, 2024, the results of operations for the three months ended March 31, 2024 and 2023, the unaudited condensed statements of stockholders’ equity/(deficit) for the three months ended March 31, 2024 and 2023 and the unaudited condensed statements of cash flows for the three months ended March 31, 2024 and 2023. The December 31, 2023, Condensed Balance Sheet included herein was derived from the audited financial statements, but it does not include all disclosures or notes required by GAAP for complete financial statements.

The financial data and other information disclosed in these notes to the condensed financial statements related to the three months ended March 31, 2024 and 2023, are unaudited. Interim results are not necessarily indicative of results for an entire year or for any future period.

During the period from January 1, 2021, to its formation on April 8, 2021, the Company operated as a line of business of FibroGenesis rather than as a separate stand-alone entity. Consequently, prior to the Company’s formation on April 8, 2021, the financial statements were derived from the historical accounting records of the Parent. All general and administrative expenses and research and development expenses directly associated with the business activity of the Company that were originally incurred by the Parent from January 1, 2021, through the Company’s formation on April 8, 2021, were allocated and included in the Company’s financial statements. The resulting net Parent investment was presented within stockholders’ equity/(deficit) and represented the Parent’s interest in the recorded net assets of the Company and has been eliminated through the ROFN Agreement as further described in Notes 7 and 11.

In October 2023, the Company amended and restated its certificate of incorporation with the State of Delaware to immediately effect a 1-for-4 shares reverse stock split. All share and per share amounts have been adjusted on a retroactive basis to reflect the effect of the reverse stock split.

Use of Estimates

The preparation of the Unaudited Condensed Financial Statements in conformity with 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 Unaudited Condensed Financial Statements and the reported amounts of expenses during the reporting periods. These estimates are based on information available as of the date of the Unaudited Condensed Financial Statements; therefore, actual results could differ from those estimates and assumptions.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company has significant cash balances at financial institutions, which, throughout the year, regularly exceed the federally insured limit of $250,000. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company’s financial condition, results of operations and cash flows.

Risks and Uncertainties

The Company is subject to certain risks and uncertainties, including, but not limited to, changes in any of the following areas that the Company believes could have a material adverse effect on the future financial position or results of operations: the timing of, and the Company’s ability to advance its current and future product candidates into and through clinical development; costs and timelines associated with the manufacture of clinical supplies of the Company’s product candidates; regulatory approval and market acceptance of its product candidates; performance of third-party contract research organizations (“CROs”) and contract manufacturing organizations (“CMOs”); competition from pharmaceutical companies with greater financial resources or expertise; protection of the intellectual property, litigation or claims against the Company based on intellectual property, or other factors; the need to obtain additional funding; and its ability to attract and retain employees necessary to support its growth. Disruption from the operations of CROs, CMOs or suppliers would likely have a negative impact on the Company’s business, financial position and results of operations.

Cash and Cash Equivalents

Cash and cash equivalents consist of unrestricted cash balances and short-term, liquid investments with an original maturity date of three months or less at the time of purchase. The Company had $6,039 thousand and no cash equivalents as of March 31, 2024 and December 31, 2023, respectively.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the respective assets, generally three to five years, and includes laboratory equipment that is recorded at cost and depreciated using the straight-line method over the estimated useful lives of five years. Depreciation expense is classified in either research and development expense or in general and administrative expense, depending upon the nature of the asset, in the accompanying Unaudited Condensed Statements of Operations. When property and equipment assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the balance sheets and the resulting gain or loss is recorded in other income (loss) in the period realized. Maintenance and repairs are expensed as incurred.