Biorestorative Therapies, Inc. quarterly report, Q2 FY2023

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BioRestorative Therapies, Inc. — Q2 2023 Form 10-Q

Reporting period: Three and six months ended June 30, 2023; unaudited consolidated results. The company develops cell-based therapies, principally its BRTX-100 Disc/Spine program and preclinical ThermoStem metabolic program. Revenue is royalty income from a sublicense, not product sales.

Financial results and liquidity

  • Revenue: Q2 revenue was $64,500, down from $71,100 in Q2 2022. First-half revenue was $95,800, up from $87,100.
  • Losses and expenses: Q2 operating expenses were $3.18 million and net loss was $2.98 million ($0.77 per share), compared with $4.70 million and $4.68 million ($1.28 per share) a year earlier. First-half operating expenses were $8.99 million and net loss was $8.66 million ($2.28 per share), versus $9.77 million and $9.49 million ($2.65 per share) in 2022. The filing does not report a gross margin; revenue was small relative to operating costs.
  • Cash flow: First-half cash used in operations was $3.48 million, versus $2.85 million in 2022. Cash increased $107,069, as operating outflow was largely offset by $3.17 million of investing cash flow, including sales of marketable securities, and $411,701 of ATM net proceeds.
  • Liquidity and debt: At June 30, cash and cash equivalents were $1.78 million and marketable securities were $9.83 million, totaling $11.62 million; working capital was $11.23 million. Total liabilities were $896,433, including $234,060 of lease liabilities; the balance sheet reports no conventional borrowing debt.
  • Equity compensation: First-half stock-based compensation was approximately $4.82 million, a substantial noncash expense. Accumulated deficit was $161.31 million.

Changes versus the comparable period

  • First-half R&D expense increased 34% to $2.48 million, primarily due to higher salaries, laboratory site fees and consulting, partly offset by lower PRC clinical-service costs. Management expects R&D spending to remain higher.
  • First-half G&A fell $1.41 million to $6.51 million, mainly because stock-based compensation declined $1.66 million; salaries and wages increased. Management expects G&A to rise as the company expands.
  • Net loss improved year over year, but operations continued to consume cash. The company also recognized interest income and other investment/settlement gains in 2023; 2022 included PPP loan forgiveness and grant income.

Outlook, risks and notable developments

  • Management expects continued losses and negative operating cash flow. It believes available funds, including subsequent financing, can fund operations for 12 months after the filing date, but says additional financing will eventually be needed to continue operations and current funds will not complete all development activities or achieve profitability. Failure to raise funds could force curtailment or discontinuation of operations.
  • The Phase 2 BRTX-100 trial is underway; in June 2023 the Data Safety Monitoring Board unanimously recommended continuing without changes. ThermoStem remains preclinical. No quantified revenue or earnings guidance is provided.
  • In July 2023, the company sold 685,033 shares in a registered direct offering for approximately $1.83 million net, intended for BRTX-100 trials, ThermoStem R&D and general corporate purposes. The ATM program generated approximately $412,000 net during Q2 and had remaining capacity at June 30.
  • Management concluded disclosure controls and internal control over financial reporting were ineffective at June 30 due to material weaknesses involving formal procedures, risk assessment, and documented testing and review controls. Remediation is ongoing and has not yet been deemed complete.
  • Key risks include financing needs, clinical and regulatory uncertainty, development and commercialization of the programs, intellectual-property protection, and ability to retain personnel. The company reports cash deposits above FDIC insurance limits.

Important facts for investors to verify

  • Confirm the company’s cash runway assumptions, expected clinical-trial costs and financing needs, including the effect of the July share issuance and potential ATM sales.
  • Review BRTX-100 enrollment, trial milestones and safety updates, and the development plans and funding for ThermoStem.
  • Track dilution and potential share overhang from the ATM, preferred stock, options and warrants; common shares outstanding were 3,982,608 at June 30 and 4,667,641 as of August 8.
  • Assess progress and testing of the stated internal-control remediation plan.
  • Reconcile filing text discrepancies: the ATM is described as having a $3.7 million limit in one section and $4.2 million in another; Q2 2022 revenue is stated as $71,100 in the financial statements but $71,000 in MD&A.