BioRestorative Therapies, Inc. — Q1 2023 Form 10-Q
Business context and period: Unaudited results cover the three months ended March 31, 2023, compared with Q1 2022. The company develops cell-based therapies, including BRTX-100 for disc and spine conditions and the preclinical ThermoStem program for metabolic disorders. Revenue was entirely royalties under a sublicense agreement.
Financial performance and position
| Metric | Q1 2023 / March 31, 2023 | Q1 2022 / December 31, 2022 |
|---|---|---|
| Revenue | $31,300 | $16,000 |
| Research and development expense | $1.51 million | $775,337 |
| General and administrative expense | $4.30 million | $4.29 million |
| Total operating expenses | $5.81 million | $5.07 million |
| Operating loss | $5.78 million | $5.05 million |
| Net loss | $5.68 million | $4.82 million |
| Basic and diluted loss per share | $1.53 | $1.37 |
| Operating cash flow | $(2.35) million | $(1.59) million |
| Cash and cash equivalents | $1.84 million | $1.68 million |
| Marketable securities | $10.54 million | $13.07 million |
| Total liabilities | $593,927 | $602,619 |
| Working capital | $12.31 million | $14.69 million |
The company reported no gross profit or margin measure. Cash plus marketable securities totaled $12.37 million at quarter-end. Investing activities provided $2.51 million, mainly from $2.57 million of securities sales; cash increased by $159,892. There was no financing cash flow. Liabilities consisted mainly of operating lease obligations; no conventional borrowing balance was reported on the balance sheet.
Material changes and notable items
- Revenue rose $15,300 year over year, but remained modest relative to operating costs.
- R&D expense increased 94.9%, primarily from higher salaries and wages ($621,673) and laboratory site fees ($70,866). Management expects elevated R&D spending to continue.
- G&A expense was essentially flat. Net loss increased approximately 18% year over year; the prior-year comparison included $250,000 of PPP loan forgiveness income and $16,654 of grant income.
- Q1 2023 other income included $76,660, primarily from settlements of accrued expenses and unrealized investment gains; interest income was $18,216.
- Stock-based compensation was $3.34 million, a significant non-cash expense. Common shares outstanding were 3,767,615 at March 31 and 3,887,615 as of May 12, 2023. The filing reports 7.90 million potential common shares excluded from diluted loss per share as anti-dilutive.
- After quarter-end, on April 4, Auctus converted 120,000 Series B preferred shares into common shares. Series B shares remaining were 1,398,158.
Outlook, risks, and controls
Management expects continued losses and negative operating cash flow while pursuing development plans and stated that quarter-end funds were expected to support operations for the 12 months after the filing date. However, current funds are not expected to complete development activities or achieve profitability; additional equity and/or debt financing will eventually be required. Failure to raise funds could force the company to curtail development and other activities or discontinue operations.
The company had received FDA authorization for a Phase 2 BRTX-100 clinical trial and reported that enrollment and patient procedures had commenced. Key risks include financing, clinical and regulatory execution, successful development and commercialization, intellectual-property protection, and retaining personnel. The filing also identifies material weaknesses in internal controls: inadequate formal procedures and risk assessment, and insufficient documented control testing, including around journal entries and reconciliations. Management described remediation efforts, but had not concluded the weaknesses were remediated.
Facts investors should verify
- Whether cash use and remaining cash and securities support the stated 12-month operating runway, and when additional financing may be needed.
- Clinical-trial progress, enrollment, costs, milestones, and the regulatory path for BRTX-100; the status and funding needs of ThermoStem.
- Whether royalties remain the sole revenue source and what assumptions support future revenue growth.
- The impact of preferred-share conversions, options, warrants, and other potential dilution on common shareholders.
- Progress in remediating material weaknesses and whether controls are independently tested and operating effectively.