BioRestorative Therapies, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2019; unaudited consolidated results. The company develops stem-cell-based therapies, principally BRTX-100 for disc and spine disorders, and is also pursuing the preclinical ThermoStem program. Reported revenue is royalty revenue from a sublicense agreement, not from commercialized therapies.
Financial performance and position
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $38,000 | $26,000 | $98,000 | $82,000 |
| Operating expenses | $1.857 million | $1.215 million | $6.374 million | $5.552 million |
| Operating loss | $1.819 million | $1.189 million | $6.276 million | $5.470 million |
| Net loss | $5.057 million | $2.925 million | $13.097 million | $8.947 million |
| Basic and diluted loss per share | $0.23 | $0.39 | $0.74 | $1.32 |
| Operating cash used | — | $5.108 million | $3.552 million |
- Revenue increased 46% in Q3 and 20% for the nine-month period, but remained immaterial relative to operating costs. The filing does not provide a clear gross-profit or gross-margin figure.
- At September 30, cash was $98,113, current assets were $200,854, and working capital deficiency was $13.514 million. Stockholders’ deficiency was $12.429 million; accumulated deficit was $77.020 million.
- Gross notes payable were $8.496 million at September 30, with stated interest rates of 8%–15%; notes payable, net of debt discounts, totaled $7.683 million on the balance sheet. Current liabilities were $13.715 million.
- Cash used in investing activities was $35,631; financing activities provided $5.124 million. Cash declined by $19,410 over the nine months.
Changes versus prior comparable periods
- Nine-month net loss rose 46%, while operating loss rose 15%. Q3 net loss increased 73% year over year.
- Nine-month operating expenses increased 15%. Management cited higher consulting costs tied to clinical trials and strategic planning, higher R&D costs, and increased legal expenses. Q3 general and administrative expense rose sharply; management cited a compensation-related item and legal costs, partly offset by lower stock-based compensation and costs deferred for the contemplated offering.
- Financing-related expenses materially affected losses: nine-month amortization of debt discount increased to $3.222 million from $1.884 million, and loss on extinguishment of notes payable rose to $2.291 million from $384,171. These items relate to borrowing, repayment, and exchanges of debt for equity.
- Shares outstanding increased to 23,717,754 at September 30 from 11,728,394 at December 31, 2018. The weighted-average share count also rose substantially year over year. Options, warrants, and convertible notes represented significant additional potential dilution.
Outlook, risks, and notable events
- Going concern: Management states there is substantial doubt about the company’s ability to continue as a going concern. It expected available cash to fund operations only through December 2019 and said further financing was required. The company reported $593,400 of principal past due as of the filing date after subsequent-period transactions.
- Funding needs: Management estimated approximately $20 million would be needed to commence and complete a Phase 2 BRTX-100 trial, and approximately $45 million more to complete BRTX-100 clinical trials, assuming no revenue. These are estimates, not committed financing.
- Clinical outlook: FDA authorization for a Phase 2 trial of BRTX-100 had been received; management intended to start in Q1 2020, subject to obtaining necessary funding. No trial results are reported.
- Financing uncertainty and dilution: A contemplated public offering registration statement had not become effective, and completion was not assured. Subsequent to quarter-end, the company reported $500,000 in equity financing and $1.364 million in debt proceeds, as well as debt exchanges and repayments. Shareholders approved increasing authorized common shares to 300 million and authorized a possible reverse split ranging from 1-for-2 to 1-for-100. The proposed Arena transaction, which contemplated $5.4 million of consideration, was terminated on November 1, 2019.
- Debt terms: Convertible notes include variable conversion prices, prepayment premiums, and other provisions that may lead to substantial dilution and additional expense. Some notes were past due; the filing describes ongoing efforts to obtain extensions or conversions.
- The company extended its Melville lease for five years beginning January 2020, with annual base rent ranging from $153,748 to $173,060. Management reported no legal proceedings expected to materially affect financial position and no material off-balance-sheet arrangements.
Most important facts for investors to verify
- Whether the company obtained financing after the reported runway through December 2019, and whether any public offering was completed on acceptable terms.
- Current cash, operating burn, debt maturities, past-due balances, and the status of lender extensions, repayments, and conversions.
- Actual share count and potential dilution from variable-price notes, warrants, options, and authorized-share changes; also whether a reverse split was effected.
- Whether BRTX-100’s Phase 2 trial began, its funding status, and subsequent regulatory or clinical developments.
- The final status and terms of post-quarter financing transactions, including the terminated Arena agreement.