Biorestorative Therapies, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2011. The company described itself as a development-stage enterprise focused on regenerative and stem-cell therapies and related products. It had not commenced principal operations or generated revenue. The filing was signed November 21, 2011.
Financial performance and position
| Metric | Q3 2011 | Q3 2010 | Nine months 2011 | Nine months 2010 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Operating expenses | $853,005 | $370,194 | $2,908,841 | $892,927 |
| Loss from operations | $(853,005) | $(370,194) | $(2,908,841) | $(892,927) |
| Interest expense | $(160,380) | $(18,811) | $(422,481) | $(169,932) |
| Net loss | $(1,013,385) | $(388,769) | $(3,331,322) | $(1,051,427) |
- At September 30, 2011, cash was $14,623; current assets were $64,239 and current liabilities were $3,746,777, producing a working-capital deficit of $3,682,538. Total assets were $402,808, total liabilities $3,746,777, and stockholders’ deficiency $3,343,969.
- Notes payable were $2,334,279 net of debt discount on the balance sheet; gross current notes payable were reported as $2,408,041. The filing reports debt bearing interest rates from 6% to 15%.
- For the first nine months, operating cash used was $1,695,321, investing cash provided was $14,228, and financing cash provided was $1,677,642. Cash declined by $3,451 from year-end 2010.
- Research and development expense was zero in the first nine months of 2011, compared with $11,620 in 2010. Basic and diluted loss per share was reported as $0.01 for the 2011 nine-month period and $0.00 for the comparable periods, reflecting rounding.
Material changes versus comparable periods
- Q3 net loss rose to $1.01 million from $389,000; nine-month net loss rose to $3.33 million from $1.05 million. The company attributed the higher losses principally to new payroll costs, higher general and administrative expenses, and increased interest expense.
- Nine-month general and administrative expense increased to $1.15 million from $360,000, mainly due to professional fees for registration and financial-statement work. Payroll and benefits were $1.08 million versus none in 2010, when the company had no employees at September 30.
- Nine-month consulting expense increased to $582,165 from $432,261, primarily due to advisory and marketing services. In Q3, consulting expense fell 41% year over year, largely because of lower consultant stock-based compensation.
- Gross current notes payable increased to $2.41 million from $533,523 at December 31, 2010. Shares outstanding at September 30 were 575.3 million, versus 433.2 million at year-end; shares issued for financing, services, directors, and other arrangements contributed to dilution.
Outlook, risks, contingencies, and unusual items
- Management stated that available cash was expected to fund operations only until January 2012 and that additional financing would be required. The filing identifies substantial doubt about the company’s ability to continue as a going concern. Failure to raise capital or obtain debt extensions or conversions could force curtailment or discontinuation of operations.
- After quarter-end, the company reported $1.075 million in additional debt financing, a $100,000 common-stock sale, $50,000 of debt repayments, and extensions of $200,000 of debt. It also reported settlements of certain obligations for approximately $309,000 in cash, exclusive of non-cash consideration, below carrying value. The board increased its debt-financing program limit from $3.8 million to $7.5 million.
- A $160,000 group of notes matured November 10, 2011; as of the filing date, the company said it had received no default notices. Some note terms allow acceleration following specified additional financing. The filing also describes an equipment-vendor default notice; after quarter-end, the company agreed to settle the remaining $243,036 balance for approximately $48,600 and return the equipment.
- Other post-quarter settlements included $22,500 for the former president’s remaining severance obligation and $50,000 for the founder’s remaining termination obligation. The CEO’s 35 million-share restricted grant was modified so vesting requires at least $2 million of additional financing after November 4, 2011.
- The company reported no material pending legal proceedings in which it was a party. Separately, its VP of Research and Development was subject to a preliminary injunction in litigation brought by a former employer; the company said it was not a party and was monitoring the matter.
- Management expected marketing and general and administrative expenses to increase as activities and infrastructure expanded, and anticipated increased R&D spending subject to obtaining financing. No quantified revenue, profit, or other operating guidance was provided.
- Management concluded disclosure controls were effective as of quarter-end and reported no material changes in internal control over financial reporting during the quarter. The filing reported no off-balance-sheet arrangements.
Most important facts for investors to verify
- Whether the company obtained sufficient financing after the filing date to support operations beyond the stated January 2012 runway, and whether financing-related acceleration provisions were triggered.
- Current cash, cash burn, overdue or extended debt, and the status and terms of all post-quarter financings and settlements.
- Progress toward commercial operations and revenue generation, including the status of planned regenerative-therapy programs, the laboratory, and Stem Pearls products; the filing reported no 2011 year-to-date R&D expense.
- The potential impact of further equity issuance, share-based compensation, and outstanding options and warrants on existing shareholders.
- The outcome of the VP of Research and Development’s former-employer litigation and any other material developments after the filing date.