BioRestorative Therapies, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021; financial statements are unaudited. The company develops cell-based therapies, including BRTX-100 for disc and spine disorders and a preclinical brown-fat program. Reported share and per-share amounts reflect the October 27, 2021 1-for-4,000 reverse stock split.
Key financial results
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $8,000 | $15,000 | $41,000 | $60,000 |
| Operating expenses | $3.697 million | $625,000 | $22.340 million | $1.958 million |
| Operating loss | $3.689 million | $610,000 | $22.299 million | $1.898 million |
| Net loss | $4.184 million | $836,000 | $23.900 million | $5.511 million |
| Net loss per share | $4.99 | $2.10 | $30.31 | $15.93 |
Revenue was royalty income under a sublicense agreement; the filing reports no meaningful revenue base or profitability. Nine-month operating expenses included $19.930 million of stock-based compensation, principally associated with equity awards to executives and employees. Interest expense was $1.602 million for the nine months.
At September 30, cash was $1.130 million, working capital was $296,000, total assets were $2.175 million, total liabilities were $7.054 million, and stockholders’ deficit was $4.879 million. Cash used in operating activities was $2.185 million for the first nine months, versus $1.392 million in 2020. Financing provided $250,000, from a Paycheck Protection Program loan; cash declined $1.935 million to $1.130 million.
Gross convertible notes payable were $10.041 million, with a $4.399 million debt discount; the balance-sheet carrying amount was $5.642 million. The company also had a $250,000 PPP loan and $532,000 of accrued interest at quarter-end. Most notes were scheduled to mature in November 2023. Lease liabilities totaled approximately $447,000.
Changes versus the prior period
- Nine-month net loss widened to $23.900 million from $5.511 million, primarily reflecting a $19.930 million stock-compensation expense and higher operating costs.
- General and administrative expense rose to $21.757 million from $1.129 million for the nine-month period; research and development expense declined to $564,000 from $699,000.
- Interest expense increased to $1.602 million from $1.412 million in the financial statements. The filing’s MD&A gives a different 2020 comparison figure, so the comparison is unclear in the narrative.
- Cash fell from $3.065 million at December 31, 2020 to $1.130 million at September 30, 2021; working capital decreased from $2.142 million to $296,000.
Outlook, liquidity, risks and notable events
- Management expected continued operating losses and negative operating cash flows. It said quarter-end resources alone required additional financing and warned that inability to raise funds could force curtailment or discontinuation of operations.
- Management stated that the company had sufficient cash to fund operations for twelve months after the filing date, citing approximately $22.191 million of cash as of November 10, 2021. This included net proceeds of approximately $20.772 million from the November 9 public offering.
- The offering sold 2.3 million units at $10 each, each comprising common stock and a warrant, and included underwriter warrants for 345,000 shares. Subsequent to quarter-end, outstanding convertible debt and related instruments were exchanged for common stock, Series A preferred stock and warrants, reducing the convertible-debt burden but creating potential dilution.
- The company planned to commence a Phase 2 BRTX-100 clinical trial during 2022, subject to funding. Management estimated at least $12 million to complete the Phase 2 clinical trials and approximately $45 million in additional funding to complete BRTX-100 clinical trials, assuming no revenue.
- The company said it believed it had until February 2022 to complete the Phase 2 trial to satisfy a license milestone and retain exclusive disc/spine technology rights without an additional $250,000 payment.
- The company emerged from Chapter 11 reorganization in November 2020. It reported an accumulated deficit of $113.743 million and disclosed material weaknesses in internal control, including inadequate segregation of duties, insufficient formal policies and procedures, and deficient internal risk assessment. Disclosure controls were deemed ineffective.
- Key risks include financing and clinical-trial execution, regulatory approval, commercialization, retaining licensed technology rights, protecting intellectual property, and recruiting and retaining personnel. No material litigation was reported; management said inflation had not materially affected results.
Investor verification checklist
- Confirm the post-offering cash balance, expected cash runway, and whether the stated twelve-month funding estimate remains valid.
- Review the clinical-trial budget, funding requirements and timeline for BRTX-100, including the February 2022 license milestone.
- Assess the terms and dilution implications of the debt exchanges, Series A preferred stock, warrants, options and other potential share issuances.
- Track cash burn, stock-based compensation and the discrepancy in the MD&A’s comparative interest-expense and general-and-administrative figures.
- Monitor remediation of the disclosed internal-control material weaknesses and any subsequent assessment of disclosure controls.