BioRestorative Therapies, Inc. — 2021 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2021, with 2020 as the comparable year. BioRestorative is a pre-revenue-stage regenerative medicine company developing adult stem-cell therapies. Its lead program, BRTX-100, targets chronic lower-back pain associated with degenerative disc disease; ThermoStem is a preclinical program targeting metabolic disorders. The company reported no significant operating revenues and had not commercialized a product.
Key financial metrics
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $46,000 | $77,000 |
| Operating expenses | $26.35 million | $2.83 million |
| Operating loss | $26.31 million | $2.75 million |
| Net loss | $44.30 million | $11.27 million |
| Research and development expense | $729,058 | $876,829 |
| Cash used in operating activities | $3.33 million | $1.96 million |
| Cash at year-end | $21.03 million | $3.06 million |
| Working capital | $21.10 million | $2.14 million |
| Notes payable, gross | $250,000 | $9.64 million |
Revenue was entirely royalty revenue under a sublicense agreement. With only $46,000 of revenue against substantial development and corporate costs, operating margins are not meaningful. The 2021 net loss included a $16.18 million loss on extinguishment of notes and $23.11 million of stock-based compensation; the latter was largely non-cash. Interest expense was $1.82 million. Investing cash outflow was $30,658, mainly for manufacturing equipment; financing provided $21.32 million, principally from the public offering.
At year-end, total assets were $22.45 million and total liabilities were $856,497, including $250,000 of PPP borrowing and $420,700 in present-value operating lease liabilities. The PPP loan and associated interest were forgiven in January 2022. Accumulated deficit was approximately $134.15 million. The company reported no income-tax provision and a full valuation allowance against deferred tax assets.
Material changes versus 2020
- Net loss increased by about $33.03 million. General and administrative expense rose to $25.54 million from $1.79 million, primarily because of stock-based compensation associated with option and RSU awards.
- Revenue declined by $31,000; R&D expense declined by about 17%.
- The company completed a $23 million gross underwritten offering in November 2021, receiving approximately $21.07 million net, and listed its common stock on Nasdaq. It also exchanged approximately $10.05 million of convertible-note principal, plus accrued interest and warrants, for common and preferred shares and warrants.
- Gross notes payable fell from $9.64 million to $250,000, while stockholders’ equity moved from a $1.33 million deficit to $21.60 million. The company effected a 1-for-4,000 reverse stock split in October 2021; reported share and per-share amounts reflect it.
Outlook, commentary, risks and unusual items
- Management said the offering proceeds were sufficient to fund the planned BRTX-100 Phase 2 trial and that cash on hand supported operations for 12 months from the financial-statement issuance date. The filing also says further financing is needed for later development and operations, estimating approximately $35 million to complete a contemplated Phase 3 BRTX-100 trial, assuming no operating revenue. Additional funding needs for ThermoStem and general operations are not quantified.
- The planned Phase 2 trial is described as randomized, double-blind and placebo-controlled, targeting 99 patients, with a 12-month primary efficacy endpoint and follow-up through 24 months. The company engaged PRC Clinical; the disclosed estimated budget for the 46-month services agreement is $5.84 million.
- The filing’s descriptions of trial status are not fully consistent: it says the Phase 2 trial had commenced through site identification and manufacturing preparations, while a risk-factor passage says the trial had not yet commenced. Verify actual site activation, enrollment and dosing status.
- The company cautions that clinical outcomes, regulatory approval, manufacturing readiness, patient enrollment and commercialization are uncertain; it estimated commercialization of BRTX-100 would be at least five years away. COVID-19, supply availability, competition, reimbursement and additional financing are cited as risks.
- Rights to licensed Disc/Spine technology had become non-exclusive after a milestone deadline passed. The company was negotiating possible reinstatement; no assurance was given. The lack of exclusivity was not expected to prevent the Phase 2 trial but could adversely affect the business.
- Management identified ineffective disclosure controls and a material weakness in internal control over financial reporting, including deficiencies in formal procedures, risk assessment and financial-reporting controls. Remediation efforts were underway. The auditor issued an unqualified opinion on the financial statements, but did not attest to internal-control effectiveness.
- The company emerged from Chapter 11 reorganization in November 2020. The 2021 debt exchange generated the large extinguishment loss. No legal proceedings were reported in Item 3.
Important facts for investors to verify
- Current cash, operating cash burn and financing runway, including whether planned development spending remains within the disclosed funding assumptions.
- Actual Phase 2 trial progress and budget against the $5.84 million PRC Clinical estimate, and the precise status of the clinical manufacturing facility.
- Progress and terms of negotiations to restore exclusivity for the licensed Disc/Spine technology.
- Potential dilution from outstanding warrants, options, RSUs and Series A preferred stock, including the terms and exercise prices applicable after the reverse split.
- Whether the material weakness has been remediated and controls have operated effectively for a sufficient period.
- The filing reports cash of $21.03 million at year-end and approximately $19.53 million on March 28, 2022; verify subsequent cash levels and financing activity.