Business Context and Reporting Period
This Form 8-K Current Report was filed by BioRestorative Therapies, Inc. on June 18, 2019. The filing discloses material definitive agreements, the creation of direct financial obligations, and unregistered sales of equity securities occurring between June 13, 2019, and June 18, 2019.
Key Financial Metrics and Transactions
- Debt Financing: Issued a convertible promissory note to Auctus Fund, LLC with a principal amount of $1,100,000, receiving net proceeds of $1,001,000.
- Interest Rate: The Auctus Note bears interest at 12% per annum, due December 13, 2019.
- Equity Issuance for Debt: Issued 297,414 shares of common stock to settle $55,193 of outstanding indebtedness (including accrued interest).
- Additional Debt: Issued convertible promissory notes with an aggregate principal of $167,688 for cash proceeds of $158,000.
- Warrants: Issued a five-year warrant to Auctus for 125,000 shares at an exercise price of $0.56 per share.
- Lease Obligation: Extended executive office lease through December 31, 2024. Annual rent increases to $153,748 effective January 1, 2020, rising to $173,060 for the year ended December 31, 2024.
Material Changes and Unusual Items
The filing reports significant changes in the company's capital structure and liabilities:
- Conversion Terms: The Auctus Note is convertible at the option of the holder at a price generally equal to 58% of the market price of the common stock at the time of conversion. Similar 58% discount conversion terms apply to portions of the additional $167,688 in notes issued in mid-June.
- Debt Settlement: The company utilized equity issuance to extinguish approximately $55,000 in existing debt.
- Use of Proceeds: Net proceeds from the Auctus Note are intended to pay off other convertible promissory notes.
Guidance, Outlook, and Risks
The filing does not provide forward-looking financial guidance, revenue projections, or management commentary on future operational performance. The primary risks disclosed relate to the dilutive nature of the convertible notes and warrants, specifically the 58% discount conversion price, and the company's reliance on debt financing to service existing obligations.
Investor Verification Checklist
- Verify the current market price of the common stock to assess the immediate dilution potential of the 58% conversion discount.
- Confirm the total outstanding principal of convertible notes following the June 2019 issuances.
- Review the company's cash position to determine its ability to service the 12% interest on the Auctus Note due in December 2019.
- Examine the full text of the Auctus Note and Warrant (Exhibits 10.1 and 10.2) for specific adjustment mechanisms and redemption rights.