Brooklyn ImmunoTherapeutics, Inc. — Q2 2021 Form 10-Q
Filing identity: The supplied filing is for Brooklyn ImmunoTherapeutics, Inc. (ticker BTX), not Ernexa Therapeutics Inc. The report covers the quarter and six months ended June 30, 2021; financial statements are unaudited.
Business context and reporting period
Following a March 25, 2021 reverse merger, the company operates as a clinical-stage biopharmaceutical business focused on IRX-2, a cytokine-based cancer therapy, and licensed gene-editing and cell-therapy technologies. It sold its former NTN Buzztime assets on March 26, 2021. The merger was accounted for as a reverse acquisition, with Brooklyn LLC treated as the accounting acquirer; this and the business change complicate comparisons with prior periods.
Financial results and liquidity
| Metric | Three months ended June 30, 2021 | Six months ended June 30, 2021 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $5.39 million | $6.91 million |
| General and administrative expense | $4.62 million | $6.26 million |
| Net loss | $10.09 million | $27.79 million |
| Net loss per common share, basic and diluted | $0.24 | $0.79 |
| Cash used in operating activities | Not separately stated | $10.23 million |
At June 30, cash was $50.16 million, total current assets $51.94 million, and total current liabilities $7.68 million. Total liabilities were $29.53 million, including $19.29 million of contingent consideration, $2.91 million of operating lease liabilities, $410,000 of IRX notes, and $309,905 of PPP loan principal. Stockholders’ equity was $35.18 million. Profit margins are not meaningful because the company had no product revenue and reported operating losses.
Changes versus prior comparable periods
- Q2 operating expenses increased to $10.01 million from $2.02 million in Q2 2020; net loss increased to $10.09 million from $2.03 million.
- For the first six months, operating expenses rose to $18.11 million from $3.03 million, and net loss to $27.79 million from $3.05 million. The 2021 period included $5.77 million of noncash merger-related stock issued to the financial advisor and a $9.65 million loss on the sale of NTN assets.
- R&D and G&A expense increases reflected licensed-technology payments, clinical-trial activity, public-company costs, professional fees, and higher stock-based compensation. A $820,000 reduction in the estimated contingent-consideration liability benefited six-month operating results.
- Cash increased from $1.63 million at December 31, 2020, principally reflecting $48.5 million net proceeds from Lincoln Park stock sales and $10.5 million from members’ equity financing; operating activities used $10.23 million.
Outlook, developments, and risks
- Management said available cash was expected to fund the current operating plan for at least 12 months from issuance of the statements. It expects losses and R&D and G&A expenses to rise as development and public-company activities expand; further financing may be needed, with possible dilution or program reductions if funding is unavailable.
- The Phase 2B INSPIRE study in head-and-neck cancer was fully enrolled; top-line data were estimated for the first half of 2022. Other trials may face enrollment and close-out delays related to COVID-19. The filing provides no revenue guidance.
- On July 16, 2021, after quarter-end, the company acquired Novellus and 25% of NoveCite for stated consideration of approximately $124.0 million: $22.8 million cash and 7,022,230 shares valued at $102.0 million. This is a material subsequent event, not a June 30 balance-sheet transaction. The company said the Novellus acquisition relieved certain potential license obligations to Novellus; obligations to Factor remain.
- Disclosure controls and procedures were deemed ineffective at June 30, 2021, citing insufficient accounting staff for segregation of duties and incomplete documentation. Management planned to hire accounting personnel and implement written controls and procedures.
- Risks include clinical and regulatory uncertainty, novel cell-therapy development and manufacturing challenges, COVID-related trial disruption, future financing needs, and potential dilution. The filing also describes litigation and demands, including a consultant’s claim seeking at least $10 million; management could not predict the outcome. The PPP loan forgiveness application was pending, with no assurance of full forgiveness.
Investor verification checklist
- Confirm the registrant identity: the document names Brooklyn ImmunoTherapeutics, Inc., not Ernexa Therapeutics Inc.
- Review the Novellus/NoveCite acquisition’s final accounting, cash impact, share issuance, and continuing Factor license commitments.
- Track cash burn against management’s 12-month liquidity statement and the availability and dilution terms of remaining equity financing.
- Verify INSPIRE trial timing and results, other trial enrollment progress, and any effects from COVID-19.
- Monitor remediation of ineffective disclosure controls, PPP forgiveness, and material developments in litigation.