BioRestorative Therapies, Inc. — Q2 2018 Form 10-Q
Business context and reporting period. The company develops cell-based therapies, including BRTX-100 for disc and spine disorders and its preclinical ThermoStem program. This unaudited report covers the three and six months ended June 30, 2018; comparisons are with the same periods in 2017.
Financial results and position
| Metric | Q2 2018 | Q2 2017 | Six months 2018 | Six months 2017 |
|---|---|---|---|---|
| Revenue | $37,000 | $20,000 | $56,000 | $27,000 |
| Operating expenses | $2,087,335 | $2,589,015 | $4,337,073 | $5,085,386 |
| Operating loss | $(2,050,335) | $(2,569,015) | $(4,281,073) | $(5,058,386) |
| Net loss | $(3,514,423) | $(2,747,183) | $(6,022,083) | $(5,532,937) |
| Basic and diluted loss per share | $(0.53) | $(0.51) | $(0.93) | $(1.06) |
- Revenue consisted entirely of royalties under one sublicense agreement; the filing reports no meaningful product-sales base or positive operating margin.
- For the six months, operating cash used was $2,198,577, investing cash used was $12,869, and financing cash provided was $1,763,295. Cash fell from $451,680 at year-end 2017 to $3,529 at June 30, 2018.
- At June 30, current assets were $75,624 versus current liabilities of $10,647,745. The company reported a working-capital deficit of $10,572,121, total liabilities of $11,073,779, and stockholders’ deficit of $9,868,013.
- Gross notes payable were $5,158,216, bearing stated interest rates of 0%–15%; the balance sheet presents notes payable net of discounts. Some debt was past due, and variable-price convertible notes create potential dilution.
Changes versus comparable periods
- Q2 revenue rose 85%; first-half revenue more than doubled, though it remained small relative to expenses.
- Operating losses narrowed in both comparisons as operating expenses declined. Consulting and R&D costs fell, while general and administrative costs increased, partly reflecting a new senior vice president.
- Net loss increased in Q2 and for the first half despite lower operating expenses. Higher interest and especially debt-discount amortization drove the deterioration; Q2 debt-discount amortization was $1,081,982 versus $84,167 a year earlier.
- First-half operating cash use increased from $1,984,928 to $2,198,577. The filing attributes this to operating cash requirements, partly offset by noncash expenses and changes in working capital.
Outlook, risks, and notable items
- Going concern: Management said substantial doubt exists about the company’s ability to continue as a going concern. It expected available cash to fund operations only through September 2018 and planned to seek further debt or equity financing. Failure to obtain financing or debt extensions/conversions could force curtailment of development or discontinuation of operations.
- The company expected to begin BRTX-100 Phase 2 clinical-trial activities in Q2 2019, assuming necessary funding. It estimated approximately $20 million to commence and complete Phase 2 and a further approximately $45 million to complete clinical trials, assuming no revenue; these estimates are not assured.
- Subsequent to quarter-end, the company reported $150,000 in equity financing and $210,765 in debt financing, exchanged $448,220 of debt including interest for common stock, repaid $25,000 of debt including interest, and extended $908,113 of debt maturities. It still reported $1,232,295 of principal past due as of the filing date and expected operations to be funded only through September 2018.
- Convertible financing terms include conversion discounts, floors, premiums, and other provisions that may increase dilution or repayment costs. The filing reported 15,771,133 shares reserved for future note conversions as of June 30, 2018. Common shares outstanding were 6,747,501 at quarter-end and 7,252,556 as of August 13, 2018.
- Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter. The filing reported no applicable legal proceedings and no material off-balance-sheet arrangements.
Important facts for investors to verify
- Whether new financing was secured after the filing and whether cash runway extended beyond September 2018.
- Status of past-due notes, maturity extensions, lender negotiations, and any defaults or repayment demands.
- Actual conversion terms and potential dilution from convertible notes, warrants, options, and reserved shares.
- Funding needs, regulatory and operational progress, and whether the anticipated BRTX-100 Phase 2 timeline remains achievable.
- The filing gives differing working-capital-deficit figures: $10,572,121 in the balance-sheet note and liquidity discussion, and $10,610,812 in one MD&A passage; investors should confirm the intended figure.