BioRestorative Therapies, Inc. — Q2 2019 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2019. The company develops adult-stem-cell therapies, led by BRTX-100 for degenerative disc disease, and is also pursuing its preclinical ThermoStem metabolic-disease program. The financial statements are unaudited.
Financial performance and liquidity
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | $31,000 | $37,000 | $60,000 | $56,000 |
| Operating expenses | $2.160 million | $2.087 million | $4.517 million | $4.337 million |
| Loss from operations | $2.129 million | $2.050 million | $4.457 million | $4.281 million |
| Net loss | $4.157 million | $3.514 million | $8.040 million | $6.022 million |
| Basic and diluted loss per share | $0.24 | $0.53 | $0.52 | $0.93 |
Revenue was royalty income under a sublicense agreement. The filing does not present a gross margin; revenue was small relative to operating expenses. Cash used in operations was $3.397 million for the first six months, versus $2.199 million a year earlier. Financing activities provided $4.593 million, and cash increased to $1.284 million from $117,523 at year-end.
At June 30, 2019, working capital deficiency was $9.786 million and stockholders’ deficiency was $8.942 million. Gross notes payable were $7.760 million, with stated interest rates of 8%–15%; the balance sheet reports notes payable net of debt discounts. Current liabilities totaled $11.143 million. The company reported substantial doubt about its ability to continue as a going concern and expected available cash to fund operations only through September 2019.
Material changes versus prior period
- For the first half, net loss widened by about $2.018 million, while operating loss increased by about $176,000. Revenue rose $4,000.
- First-half operating cash use increased by about $1.199 million year over year.
- Interest expense and debt-discount amortization increased; the company also recorded $1.001 million of first-half losses on debt extinguishments, compared with $64,000 in 2018. A $203,000 derivative fair-value loss replaced a $58,000 gain in the prior-year period.
- Common shares outstanding increased to 19.793 million from 11.728 million at December 31, 2018, reflecting financing and debt exchanges. The filing also reports substantial potential dilution from options, warrants, and convertible notes.
Outlook, risks, and unusual items
- The company had FDA authorization for a Phase 2 BRTX-100 trial and intended to begin in Q4 2019, assuming necessary funding. Management estimated approximately $20 million to commence and complete that trial and a further $45 million for subsequent clinical trials, assuming no revenue; it cautioned that funding estimates and timelines are uncertain.
- After quarter-end, the company reported $971,500 of new debt proceeds, debt repayments and exchanges, and maturity extensions. It said a $144,000 note remained past due as of the filing date. It was negotiating further financing and debt arrangements.
- A proposed Arena transaction would provide $5.4 million for preferred stock, a warrant, and a $500,000 convertible note. Closing depended on shareholder approval, a concurrent public offering raising at least $7.5 million, and Nasdaq listing approval. The preferred stock carries a 12% cumulative dividend and is convertible on specified terms. These proceeds were not assured at the filing date.
- Management warned that failure to raise capital or obtain debt extensions/conversions could force reductions in development and marketing activity, or discontinuation and liquidation. Convertible financing terms, including variable conversion prices and warrants, create material dilution risk.
- Other notable items included a March repricing of options covering 4.632 million shares to $0.75 and a five-year extension of the Melville lease beginning January 2020. Management reported effective disclosure controls and no material change in internal control over financial reporting; no material litigation was identified.
Important facts for investors to verify
- Whether the Arena transaction, the proposed public offering, and Nasdaq listing approval were completed, and the resulting net proceeds and dilution.
- Actual cash runway, subsequent financing, and the status of the past-due note and other debt maturities.
- Whether BRTX-100’s Phase 2 trial commenced, its funding, enrollment, and regulatory milestones.
- Updated share counts and the effects of convertible-note discounts, warrants, options, and any reverse stock split.
- Progress toward ThermoStem development and any material change in the company’s going-concern assessment.