BioRestorative Therapies, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2016; filed March 21, 2017. This is an annual report, not a standalone fourth-quarter report. The company is an early-stage developer of adult stem-cell therapies, with minimal operating revenue.
Business context and development
- Disc/Spine: BRTX-100, an autologous bone-marrow stem-cell candidate for chronic lower-back pain associated with bulging or protruding lumbar discs. The FDA cleared the company’s IND in February 2017 to proceed with a Phase 2 trial; the company planned to begin in fourth-quarter 2017.
- ThermoStem: Preclinical brown-fat stem-cell research aimed at obesity, type 2 diabetes, and other metabolic disorders. The company planned further preclinical studies; this program was not in human trials.
- The company also licenses a curved-needle device and sells Stem Pearls skincare products, which generated negligible sales.
Financial performance and liquidity
| Metric | 2016 | 2015 |
|---|---|---|
| Revenue | $36,355 | $628,915 |
| Gross profit | $36,253 | $367,411 |
| Gross margin | Approximately 100% | Approximately 58% |
| Operating expenses | $7,833,510 | $7,537,773 |
| Loss from operations | $(7,797,257) | $(7,170,362) |
| Net loss | $(8,636,292) | $(7,923,480) |
| Cash used in operations | $(5,002,675) | $(3,122,063) |
| Cash at year-end | $31,822 | $166,555 |
- Research and development expense rose 37% to $2.88 million; general and administrative expense declined 16% to $3.26 million. Debt-discount amortization increased to $542,336 from $339,443.
- Revenue fell primarily because research-and-development agreements ended in 2015. 2016 revenue consisted mainly of $36,000 in sublicense royalties and $355 in skincare sales; no R&D agreement revenue was recognized.
- At December 31, 2016, working-capital deficiency was $5.78 million, stockholders’ deficiency was $5.00 million, and accumulated deficit was $41.96 million. Total liabilities were $6.58 million against total assets of $1.58 million.
- Gross notes payable were reported as $2.34 million at year-end, with interest rates of 0%–15% and maturities through October 2017. The balance sheet presents notes net of debt discounts. The auditor and management stated that substantial doubt existed about the company’s ability to continue as a going concern.
- 2016 financing provided $5.06 million net cash: $3.71 million from equity, including warrant exercises, and $1.35 million from debt. Cash outflow from investing was $188,764.
Material changes, outlook, risks, and unusual items
- Through March 15, 2017, the company reported $945,000 in equity proceeds and $200,000 in debt proceeds; $325,000 of debt and $9,679 of accrued interest were converted or exchanged into stock, $89,000 of debt and short-term advances were repaid, and repayment dates for $322,000 were extended. It still had $427,500 of notes past due and expected available cash to fund operations only through April 2017.
- Management estimated it would need $8 million–$10 million to commence and complete the BRTX-100 Phase 2 trial and a further $20 million–$30 million to complete clinical trials, in addition to funding debt repayment and general operations. It warned that insufficient financing could force significant curtailment or discontinuation of operations.
- The Phase 2 plan described 72 patients in a randomized, double-blind, placebo-controlled study, with the primary efficacy endpoint at six months and follow-up at 12 and 24 months. FDA clearance to conduct the trial is not approval of BRTX-100 for sale; commercialization was not expected for at least five years.
- Key risks include continued access to financing, repayment or restructuring of near-term debt, clinical-trial cost and execution, regulatory approval, manufacturing readiness, competition, reimbursement uncertainty, and protection of licensed intellectual property. The company had not yet produced products in its laboratory or established a third-party manufacturer for BRTX-100.
- Subsequent events included additional stock and warrant sales, debt exchanges and extensions, and repricing of options. These actions support liquidity but may materially dilute existing shareholders. A director and related family trust also provided financing and purchased shares, creating related-party transactions.
- No revenue or earnings guidance was provided. Management’s stated trial timing and funding estimates are forward-looking plans, not assurances.
Important facts for investors to verify
- Current cash, cash runway, past-due debt, and whether lenders agreed to further extensions or conversions after the filing date.
- Whether the company raised the funding needed for the Phase 2 trial and whether enrollment and trial commencement occurred as planned.
- Trial protocol, site readiness, manufacturing and cleanroom certification, and any subsequent FDA communications or safety findings.
- Fully diluted share count and potential dilution from outstanding options, warrants, and convertible notes; 5,276,027 common shares were outstanding on March 15, 2017.
- Progress and funding requirements for ThermoStem, and the company’s ability to retain exclusive rights under its disc/spine license.