Business context and reporting period
This is Brooklyn ImmunoTherapeutics, Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2021—not a filing in the name Ernexa Therapeutics Inc. Brooklyn, formerly NTN Buzztime, is a clinical-stage biopharmaceutical company developing IRX-2 and gene-editing and cell-therapy programs. The March 2021 merger was accounted for as a reverse acquisition; the July 2021 Novellus acquisition was accounted for as an asset acquisition.
Financial performance and condition
| Metric | Q3 2021 | Nine months 2021 | Comparable 2020 |
|---|---|---|---|
| Revenue | None | None | None |
| Research and development expense | $1.47 million | $8.38 million | $0.92 million and $2.30 million, respectively |
| Net loss | $86.06 million | $113.84 million | $2.02 million and $5.07 million, respectively |
| Net loss per share | $1.70 | $2.82 | $0.11 and $0.29, respectively |
| Operating cash used | Not stated for quarter | $16.66 million | $6.46 million |
Gross margin and operating margin are not meaningful because the company had no product revenue. Q3 and nine-month 2021 losses include $80.54 million of acquired in-process R&D expensed in the Novellus acquisition. Nine-month results also include a $9.65 million loss on disposal of the legacy NTN assets and $5.77 million of merger-related stock transaction costs.
At September 30, cash was $24.38 million, total current assets $25.76 million, total current liabilities $4.56 million, and total liabilities $26.35 million. Stockholders’ equity was $13.04 million; accumulated deficit was $151.23 million. Debt included $410,000 of IRX notes, with $194,590 accrued interest; the notes were due at the earlier of a change of control or December 31, 2021. The $19.36 million contingent-consideration liability is based on Level 3 estimates. Operating lease liabilities totaled $2.82 million. Both PPP loans had been repaid or forgiven.
Material changes versus prior comparable period
- Net loss rose sharply, principally because of the $80.54 million acquired IPR&D charge, higher R&D and general and administrative costs, and the legacy-asset disposal loss. Since the merger changed the business and accounting acquirer, historical comparisons are not fully like-for-like.
- Cash increased from $1.63 million at December 31, 2020 to $24.38 million at September 30, 2021. Financing provided $62.00 million in the first nine months, including $52.03 million net proceeds from Lincoln Park stock sales and $10.50 million from members’ equity offerings; investing used $22.59 million.
- The July acquisition added Novellus and a 25% interest in NoveCite. Consideration was described as approximately $124.0 million under the acquisition agreement, while the accounting fair value was $81.54 million, including $80.54 million attributed to IPR&D and expensed and $1.0 million for NoveCite.
Outlook, risks and unusual items
Management stated that available cash was expected to fund the current operating plan for at least 12 months from issuance of the financial statements. It also anticipated rising development and corporate costs and said additional financing may be required. No specific revenue or earnings guidance was provided. The company expected top-line INSPIRE Phase 2B data in the first half of 2022; COVID-19 had slowed enrollment in other trials and could delay INSPIRE site closeout and reporting.
Key risks include clinical and regulatory uncertainty, the ability to develop and commercialize licensed or acquired technologies, future financing needs and shareholder dilution, acquisition integration, and potential delays from COVID-19. Remaining Lincoln Park funding was limited: management reported $5.9 million available as of November 9, 2021. Licensing arrangements include future payments, milestones and potential royalties; $2.5 million due to Factor in October 2021 was reported paid, with a further $3.5 million due in October 2022.
Management concluded disclosure controls and procedures were ineffective as of September 30, citing insufficient accounting staff for segregation of duties and incomplete control documentation after the merger and management turnover. Planned remediation included hiring accounting staff, written procedures, and outside consulting. Legal matters included a former consultant’s claim seeking at least $10 million, for which the company said it could not predict the outcome; several merger- or shareholder-related matters had been dismissed or described as moot, with fee requests still being addressed. Management reported no material subsequent events through the filing date.
Important facts for investors to verify
- Confirm the issuer identity: the supplied filing is Brooklyn ImmunoTherapeutics, Inc., not Ernexa Therapeutics Inc.
- Review the Novellus acquisition accounting and the substantial noncash IPR&D charge, as well as the difference between contractual consideration and recorded fair value.
- Check cash runway against actual subsequent spending, remaining equity-line availability, and the maturity and settlement status of the IRX notes.
- Track INSPIRE data timing, other trial progress, and development and regulatory milestones under the Factor license.
- Monitor remediation of ineffective disclosure controls and developments in the consultant claim and other unresolved fee or litigation matters.