The following management's discussion and analysis should be read in conjunction with the unaudited consolidated financial statements included elsewhere in this Quarterly Report and with our historical consolidated financial statements, and the related notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2021 (the "2021 Annual Report"). The management's discussion and analysis contains forward-looking statements within the meaning of the safe harbor provisions under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements include statements made regarding our commercialization strategy, future operations, cash requirements and liquidity, capital requirements, and other statements on our business plans and strategy, financial position, and market trends. In some cases, you can identify forward-looking statements by terms such as "may," "might," "will," "should," "believe," "plan," "intend," "anticipate," "target," "estimate," "expect," and other similar expressions. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Quarterly Report, including factors such as our ability to raise substantial additional capital to finance our planned operations and to continue as a going concern; our ability to execute our strategy and business plan; our ability to obtain regulatory approvals for our products, including the Neuro-Spinal Scaffold™; our ability to successfully commercialize our current and future product candidates, including the Neuro-Spinal Scaffold; the progress and timing of our development programs; market acceptance of our products; our ability to retain management and other key personnel; our ability to promote, manufacture, and sell our products, either directly or through collaborative and other arrangements with third parties; the impact of the COVID-19 pandemic and our response to it; and other factors detailed under "Risk Factors" in Part II, Item 1A of this Quarterly Report. These forward-looking statements speak only as of the date hereof. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report, except as required by law.

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate such estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

All share amounts presented in this Item 2 give effect to the 1-for-25 reverse stock split of our outstanding shares of common stock, par value $0.00001 per share ("common stock"), that occurred on April 26, 2022.

Overview

We are a research and clinical-stage biomaterials and biotechnology company with a focus on treatment of spinal cord injuries, or SCIs. Our approach to treating acute SCIs is based on our investigational Neuro-Spinal Scaffold™ implant, a bioresorbable polymer scaffold that is designed for implantation at the site of injury within a spinal cord and is intended to treat acute SCI. The Neuro-Spinal Scaffold implant incorporates intellectual property licensed under an exclusive, worldwide license from Boston Children's Hospital, or BCH, and the Massachusetts Institute of Technology, or MIT. We also plan to evaluate other technologies and therapeutics that may be complementary to our development of the Neuro-Spinal Scaffold implant, such as stem cells, therapeutics or electrical stimulation, including in combination with learnings applied from our Neuro-Spinal Scaffold implant or technologies that offer the potential to bring us closer to our goal of redefining the life of the SCI patient.

The current standard of care for acute management of spinal cord injuries focuses on preventing further injury to the spinal cord. However, the current standard of care does not address repair of the spinal cord.



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Our Clinical Program

We currently have one clinical development program for the treatment of acute SCI.

Neuro-Spinal Scaffold Implant for acute SCI

Our Neuro-Spinal Scaffold implant is an investigational bioresorbable polymer scaffold that is designed for implantation at the site of injury within a spinal cord. The Neuro-Spinal Scaffold implant is intended to promote appositional, or side-by-side, healing by supporting the surrounding tissue after injury, minimizing expansion of areas of necrosis, and providing a biomaterial substrate for the body's own healing/repair processes following injury. We believe this form of appositional healing may spare white matter, increase neural sprouting, and diminish post-traumatic cyst formation.

The Neuro-Spinal Scaffold implant is composed of two biocompatible and bioresorbable polymers that are cast to form a highly porous investigational product:

Poly lactic-co-glycolic acid, a polymer that is widely used in resorbable

? sutures and provides the biocompatible support for Neuro-Spinal Scaffold

implant; and

? Poly-L-Lysine, a positively charged polymer commonly used to coat surfaces in

order to promote cellular attachment.

Because of the complexity of SCIs, it is likely that multi-modal therapies will be required to maximize positive outcomes in SCI patients. In the future, we may attempt to further enhance the performance of our Neuro-Spinal Scaffold implant by multiple combination strategies involving electrostimulation devices, additional biomaterials, drugs approved by the U.S. Food and Drug Administration, or FDA, or growth factors. We expect the Neuro-Spinal Scaffold implant to be regulated by the FDA as a Class III medical device.

INSPIRE 2.0 Study

Our Neuro-Spinal Scaffold implant has been approved to be studied under our approved Investigational Device Exemption, or IDE, in the INSPIRE 2.0 Study, which is titled the "Randomized, Controlled, Single-blind Study of Probable Benefit of the Neuro-Spinal Scaffold™ for Safety and Neurologic Recovery in Subjects with Complete Thoracic AIS A Spinal Cord Injury as Compared to Standard of Care." The purpose of the INSPIRE 2.0 Study is to assess the overall safety and probable benefit of the Neuro-Spinal Scaffold for the treatment of neurologically complete thoracic traumatic acute SCI. The INSPIRE 2.0 Study is designed to enroll 10 subjects into each of the two study arms, which we refer to as the Scaffold Arm and the Comparator Arm. Patients in the Comparator Arm will receive the standard of care, which is spinal stabilization without dural opening or myelotomy. The INSPIRE 2.0 Study is a single blind study, meaning that the patients and assessors are blinded to treatment assignments. The FDA approved the enrollment of up to 35 patients in this study so that there would be at least 20 evaluable patients (10 in each study arm) at the primary endpoint analysis, accounting for events such as randomization or screen failures or deaths that would prevent a patient from reaching the primary endpoint visit. On June 2, 2022, we announced that we completed enrollment in the INSPIRE 2.0 Study and expect to present topline data from the INSPIRE 2.0 Study in the first quarter of 2023.

The primary endpoint of the INSPIRE 2.0 Study is defined as the proportion of patients achieving an improvement of at least one American Spinal Injury Association Impairment Scale ("AIS") grade at six months post-implantation. Assessments of AIS grade are at hospital discharge, three months, six months, 12 months and 24 months. The definition of study success for INSPIRE 2.0 is that the difference in the proportion of subjects who demonstrate an improvement of at least one grade on AIS assessment at the 6-month primary endpoint follow-up visit between the Scaffold Arm and the Comparator Arm must be equal to or greater than 20%. In one example, if 50% of subjects in the Scaffold Arm have an improvement of AIS grade at the six-month primary endpoint and 30% of subjects in the Comparator Arm have an improvement, then the difference in the proportion of subjects who demonstrated an improvement is equal to 20% (50% minus 30% equals 20%) and the definition of study success would be met. In another example, if 40% of subjects in the Scaffold Arm have an improvement of AIS grade at the six-month primary endpoint and 30% of subjects in the Comparator Arm have an improvement, then the difference in the proportion of subjects who


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demonstrated an improvement is equal to 10% (40% minus 30% equals 10%) and the definition of study success would not be met. Additional endpoints include measurements of changes in neurological level of injury, sensory levels and motor scores, bladder, bowel and sexual function, pain, Spinal Cord Independence Measure, and quality of life.

Our Neuro-Spinal Scaffold was previously studied in The INSPIRE Study: the "InVivo Study of Probable Benefit of the Neuro- Spinal Scaffold for Safety and Neurologic Recovery in Subjects with Complete Thoracic AIS A Spinal Cord Injury," under an IDE application for the treatment of neurologically complete thoracic traumatic acute SCI. Although The INSPIRE Study was structured with an Objective Performance Criterion, or the OPC as the primary component for demonstrating probable benefit, the OPC is not the only variable that the FDA would evaluate when reviewing a future human device exemption, or HDE, application. Similarly, while our INSPIRE 2.0 Study is structured with a definition of study success requiring a minimum difference between study arms in the proportion of subjects achieving improvement, that success definition is not the only factor that the FDA would evaluate in the future HDE application. Approval is not guaranteed if the OPC is met for The INSPIRE Study or the definition of study success is met for the INSPIRE 2.0 Study, and even if the OPC or definition of study success are not met, the FDA may approve a medical device if probable benefit is supported by a comprehensive review of all clinical endpoints and preclinical results, as demonstrated by the sponsor's body of evidence.

In 2016, the FDA accepted our proposed HDE modular shell submission and review process for the Neuro-Spinal Scaffold implant. The HDE modular shell is comprised of three modules: a preclinical module, a manufacturing module, and a clinical data module. As part of its review process, the FDA reviews each module, which are individual sections of the HDE submission, on a rolling basis. Following the submission of each module, the FDA reviews and provides feedback, typically within 90 days, allowing the applicant to receive feedback and potentially resolve any deficiencies during the review process. Upon receipt of all three modules, which constitutes the complete HDE submission, the FDA makes a filing decision that may trigger the review clock for an approval decision. We submitted the first module (the preclinical module) in March 2017. In July 2021, the FDA informed us that our preclinical module was accepted. In December 2021, we submitted the second module (the manufacturing module) to the FDA. In June 2022, we received feedback from the FDA on the second module (the manufacturing module) and we are actively assessing the FDA's responses and potential timelines for submitting a response for the second module.

Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to make estimates and assumptions and, in connection therewith, adopt certain accounting policies that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

On an ongoing basis, we evaluate our estimates and judgments for all assets and liabilities, stock-based compensation expense, and the fair value determined for stock purchase warrants classified as derivative liabilities. We base our estimates and judgments on historical experience, current economic and industry conditions, and on various other factors that we believe to be reasonable under the circumstances. Such factors form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. There have been no changes in our critical accounting policies and estimates from the disclosure provided in our 2021 Annual Report.

We believe that the consolidated financial statements accurately reflect our best estimate of the results of operations, financial position, and cash flows for the periods presented.

Results of Operations

Comparison of the Three Months Ended June 30, 2022 and 2021

Research and Development Expenses

Research and development expenses consisted primarily of expenses related to contract research organizations and clinical sites, professional services, and payroll. Research and development expenses for the three months ended


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June 30, 2022 were $1.3 million, an increase of $0.4 million compared to the three months ended June 30, 2021. The increase in research and development expenses for the three months ended June 30, 2022 can be attributed an increase in compensation related expense of $0.2 million primarily due to a severance payment made to a former employee, an increase in consulting costs of $0.1 million primarily due to increased quality activities and an increase of $0.1 million in other immaterial balances.

General and Administrative Expenses

General and administrative expenses consisted primarily of payroll, rent, and professional services. General and administrative expenses for the three months ended June 30, 2022 were relatively flat at $1.4 million compared to the three months ended June 30, 2021.

Other Income and Expense

Other income for the three months ended June 30, 2022, was comprised of interest income of $11 thousand. Other income for the three months ended June 30, 2021 was immaterial.

Comparison of the Six Months Ended June 30, 2022 and 2021

Research and Development Expenses

Research and development expenses consisted primarily of expenses related to contract research organizations and clinical sites, professional services, and payroll. Research and development expenses for the six months ended June 30, 2022 were $2.7 million, an increase of $0.8 million compared to the six months ended June 30, 2021. The increase in research and development expenses for the six months ended June 30, 2022 can be attributed an increase in compensation related expense of $0.3 million primarily due to a severance payment made to a former employee, an increase in clinical trial and consulting costs of $0.3 million primarily due to increased clinical trial and quality activities, an increase in scaffold manufacturing costs of $0.1 million primarily as a result of higher clinical demand and an increase of $0.1 million in facilities related costs.

General and Administrative Expenses

General and administrative expenses consisted primarily of payroll, rent, and professional services. General and administrative expenses for the six months ended June 30, 2022 were relatively flat at $2.6 million compared to the six months ended June 30, 2021.

Other Income and Expense

Other income for the six months ended June 30, 2022, was comprised of interest income of $12 thousand and other income of $9 thousand. Other income for the six months ended June 30, 2021 was immaterial.

Liquidity, Capital Resources and Going Concern

Liquidity is a measure of our ability to meet potential cash requirements, including planned capital expenditures. Since inception, we have devoted substantially all of our efforts to business planning, research and development, recruiting management and technical staff, acquiring operating assets, and raising capital. We have historically financed our operations primarily through the sale of equity-related securities. We have not achieved profitability and may not be able to realize sufficient revenue to achieve or sustain profitability in the future. We do not expect to be profitable in the next several years, but rather expects to incur additional operating losses.

As of June 30, 2022, we had approximately $11.2 million in working capital, our accumulated deficit was $243.5 million, we had total assets of $16.1 million, total liabilities of $3.3 million, and total stockholders' equity of $12.8 million. During the six months ended June 30, 2022, we recorded a net loss of $5.4 million. We have not achieved profitability and may not be able to realize sufficient revenue to achieve or sustain profitability in the future. We do not expect to be profitable in the next several years, but rather expect to incur additional operating losses. We believe that our cash and cash equivalents as of June 30, 2022 will provide necessary funding to fund operations through the second



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quarter of 2023. This estimate is based on assumptions that may prove to be wrong; expenses could prove to be significantly higher, leading to a more rapid consumption of our existing resources.

Our consolidated financial statements as of June 30, 2022 were prepared under the assumption that we will continue as a going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal cause of business. However, substantial doubt about our ability to continue as a going concern exists and we will require additional liquidity to continue operations over the next 12 months.

We have limited liquidity and capital resources and must obtain significant additional capital resources in order to fund our operations and sustain our product development efforts, for acquisition of technologies and intellectual property rights, for preclinical and clinical testing of our anticipated products, pursuit of regulatory approvals, acquisition of capital equipment, laboratory and office facilities, establishment of production capabilities, for selling, general and administrative expenses and for other working capital requirements. We will need to raise additional capital through a combination of equity offerings, debt financings, other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. Additionally, the COVID-19 pandemic could have a continued adverse impact on economic and market conditions and extend the period of global economic slowdown, which could impair our ability to raise needed funds. Our liquidity is also impacted by the limited number of authorized shares that remain available under our certificate of incorporation, and the resulting constraints on financing options and alternatives.

We may pursue various other dilutive and non­dilutive funding alternatives depending upon our clinical path forward and the extent to which we require additional capital to proceed with development of some or all of our product candidates on expected timelines. The source, timing and availability of any future financing will depend principally upon market conditions and the status of our clinical development programs. Funding may not be available when needed, at all, or on terms acceptable to us. Lack of necessary funds may require us to, among other things, delay, scale back or eliminate some or all of our research and product development programs, planned clinical trials, and capital expenditures or to license our potential products or technologies to third parties. We may alternatively engage in cost-cutting measures in an attempt to extend our cash resources as long as possible. If we are unable to raise additional capital, we may be forced to cease operations entirely.

Our consolidated financial statements as of June 30, 2022, do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if we were unable to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate its assets and may receive less than the value at which those assets are carried on our financial statements, and it is likely that investors will lose all or part of their investment.

Cashflows

Net cash used in operating activities for the six months ended June 30, 2022, consisted of net loss of $5.4 million, non-cash items of $0.3 million and cash used by working capital of $0.8 million. Adjustments for non-cash items consisted primarily of $0.2 million in amortization of operating lease right-of-use assets and $0.1 million in stock-based compensation expense. The change in cash from working capital included a $0.7 million decrease in accrued expenses, a $0.4 million increase in prepaid expenses and other assets and a $0.2 million decrease in the operating lease liability. These changes were offset by a $0.5 million increase in accounts payable.

Net cash used in operating activities for the six months ended June 30, 2021 consisted of net loss of $4.5 million, non-cash items of $0.3 million and cash used by working capital of $0.7 million. Adjustments for non-cash items consisted primarily of $0.2 million in amortization of operating lease right-of-use assets and $0.1 million in stock-based compensation expense. The change in cash from working capital included a $0.3 million decrease in accrued expenses, a $0.4 million increase in prepaid expenses and other assets and a $0.2 million decrease in the operating lease liability. These changes were offset by a $0.1 million increase in accounts payable.

Net cash used in investing activities for the six months ended June 30, 2022 was $82 thousand related to the purchase of manufacturing and lab equipment. The Company did not generate or use cash in investing activities during the six months ended June 30, 2021.



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The Company did not generate or use cash in financing activities during the six months ended June 30, 2022. Net cash generated by financing activities for the six months ended June 30, 2021 was $8.5 million related to proceeds from the exercise of warrants.

Inflation and Changing Prices

We do not believe that inflation has had, or will have, a material impact on our operating costs and earnings.

Material Cash Requirements from Contractual Obligations

Leases

As of June 30, 2022, we reported current and long-term operating lease liabilities of $0.4 million and $0.8 million, respectively. These balances represent our contractual obligation to make future payments on our Cambridge Sublease (as described in Note 5 in the Notes to Consolidated Financial Statements), discounted to reflect our cost of borrowing. In the event that we were to vacate the Cambridge facility, we may be obliged to continue making payments under the Cambridge Lease (as described in Note 5 in the Notes to Consolidated Financial Statements).

Clinical Trial Commitments

We have engaged and executed contracts with clinical research organizations to assist with the administration of our ongoing INSPIRE 1.0 and INSPIRE 2.0 clinical trials. As of June 30, 2022, approximately $4.5 million remains to be paid on these contracts.

See Note 5, "Commitments and Contingencies," in the Notes to Consolidated Financial Statements for information regarding our commitments.


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