BioRestorative Therapies, Inc. — 2015 Form 10-K
Reporting period: Fiscal year ended December 31, 2015; comparisons are to fiscal 2014. The company develops adult stem-cell therapies and had not generated significant operating revenue. Its main programs were BRTX-100 for lumbar disc disease and the preclinical ThermoStem program for metabolic disorders.
Financial performance and liquidity
| Metric | 2015 | 2014 |
|---|---|---|
| Revenue | $628,915 | $415,996 |
| Gross profit / margin | $367,411 / 58% | $202,162 / 49% |
| Operating expenses | $7,537,773 | $5,124,668 |
| Operating loss | $(7,170,362) | $(4,922,506) |
| Net loss | $(7,923,480) | $(5,587,612) |
| Cash used in operating activities | $(3,122,063) | $(3,227,851) |
| Cash at year-end | $166,555 | $91,798 |
| Working capital deficiency | $(5,323,179) | $(8,410,686) |
| Gross notes payable | $1,470,083 | $5,851,496 |
Revenue rose approximately 51%, largely from research-and-development agreements and accelerated recognition after completing work for Pfizer. Two pharmaceutical clients generated substantially all revenue. Cosmetic product sales were only $425 in 2015. Gross margin improved, but the company remained deeply unprofitable; R&D expense increased 47% to $2.1 million and general and administrative expense increased 71% to $3.9 million. Net loss widened by approximately $2.3 million.
Total assets were $2.0 million and total liabilities $5.9 million at year-end; stockholders’ deficiency was $3.9 million. Investing activities used $483,069, including $408,069 for equipment and improvements and $75,000 to maintain license exclusivity. Financing activities provided $3,679,889, including $2,297,844 from equity-related financing and $1,382,045 net from debt financing. The filing reports no material off-balance-sheet arrangements.
Material developments, outlook and risks
- During 2015, the company exchanged approximately $5.1 million of debt for common stock and warrants. It also completed a 1-for-20 reverse stock split.
- Management expected available cash to fund operations only through April 2016. Subsequent to year-end and through March 28, 2016, the company reported $1,831,270 of equity financing, $325,000 of debt financing, and $80,156 of R&D fees; it also reported debt repayments, extensions, and conversions. After these actions, $514,518 of notes were past due. The filing separately reports total debt of $1,386,581 as of March 28, 2016.
- The auditor’s report and management disclosures identify substantial doubt about the company’s ability to continue as a going concern. Continued operations depend on raising additional capital and/or obtaining debt extensions or conversions.
- Management estimated that $7.5–$8.5 million would be needed to commence and complete a Phase 2 Disc/Spine trial, with a further $20–$30 million for subsequent Disc/Spine clinical trials. The business section also estimated $40–$50 million over three years for the Disc/Spine program, debt repayment and general operations, assuming no operating revenue. These are estimates, not committed funding.
- The company planned to file an IND for BRTX-100 in Q4 2016 and begin clinical trials by Q1 2017. ThermoStem remained preclinical, with preclinical studies planned for 2016 and an IND filing and Phase I trial targeted for 2017. The company cautioned that regulatory review, trial success and timing were uncertain; it expected BRTX-100 commercialization to be at least five years away.
- Key risks include financing and debt maturities, clinical and regulatory uncertainty, manufacturing readiness, reliance on research agreements and third parties, uncertain reimbursement and market acceptance, competition, and potential dilution from future equity issuance. A $150,000 related-party note was secured by the ThermoStem patent, and warrant exercise prices were reduced in connection with its extension.
Most important facts for investors to verify
- Current cash, burn rate, and subsequent financing and operating runway; the filing’s stated runway ended in April 2016.
- Reconciliation of the $514,518 past-due notes with the reported $1,386,581 total debt as of March 28, 2016, including maturities, interest and any further extensions, repayments or conversions.
- Whether planned financing can be secured on workable terms and how much additional dilution or debt burden it may create.
- Progress and actual costs against BRTX-100 IND and trial milestones, and the regulatory classification and requirements for the product and delivery device.
- Revenue concentration and the extent to which research-agreement revenue is repeatable after completion of the Pfizer and Rohto work.