BioRestorative Therapies, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2015; filed November 23, 2015. Financial statements are unaudited and consolidated. The company develops cell-based therapies and products, including its brtxDISC disc/spine and preclinical ThermoStem brown-fat programs, and sells skincare products.
Financial performance and position
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Revenue | $96,122 | $159,930 | $429,788 | $336,246 |
| Gross profit (margin) | $45,201 (47%) | $93,815 (59%) | $227,790 (53%) | $227,705 (68%) |
| Operating expenses | $1,535,111 | $989,822 | $4,606,470 | $3,833,617 |
| Operating loss | $(1,489,910) | $(896,007) | $(4,378,680) | $(3,605,912) |
| Net loss | $(1,623,835) | $(1,100,454) | $(4,804,254) | $(4,103,269) |
| Basic and diluted loss per share | $(0.57) | $(0.81) | $(2.11) | $(3.51) |
At September 30, 2015, cash was $12,793; working capital deficiency was $5,080,425; total assets were $2,150,865; total liabilities were $5,927,025; and stockholders’ deficiency was $3,776,160. Gross notes payable were $1,740,703. Nine-month operating cash outflow was $2,068,004, investing outflow $435,466, and financing inflow $2,424,465. Cash declined from $91,798 at year-end 2014.
Changes versus comparable periods
- Q3 revenue fell about 40% year over year, while nine-month revenue rose about 28%. Q3 gross margin declined to 47% from 59%; nine-month margin fell to 53% from 68% as research agreement costs increased.
- Q3 operating expenses rose about 55%, notably from higher R&D and consulting costs. Nine-month operating expenses increased about 20%; R&D rose 37% and general and administrative expense rose 31%, while consulting expense declined 20%.
- Net loss widened in both comparisons, despite lower debt-discount amortization and lower total other expense. Q3 loss per share improved year over year, alongside a larger weighted-average share count.
- Gross notes payable declined from $5,851,496 at December 31, 2014, principally after debt exchanges/conversions into equity, including a $4.41 million principal exchange with principal stockholder Westbury. Shares outstanding increased substantially; the company also implemented a 1-for-20 reverse stock split effective July 7, 2015.
Outlook, risks and notable items
- Going concern: Management reported substantial doubt about the company’s ability to continue as a going concern. It expected available cash to fund operations only through December 2015 and said further financing was required. There is no assurance financing or debt extensions/conversions will be obtained; failure could require curtailment or cessation of operations.
- After quarter-end, the company reported $637,500 in private equity proceeds and a $150,000 secured note, and exchanges or conversions of $405,000 of debt and $65,002 of accrued interest. At filing, $646,703 of notes were past due, with extensions or conversions under negotiation. The post-quarter equity investment included investor board-appointment and share-repurchase provisions.
- Two pharmaceutical clients accounted for substantially all revenue in the 2015 periods. Revenue was primarily from research and development agreements; the Japanese pharmaceutical agreement’s final deliverable was completed during the nine-month period. Management expects R&D, marketing and administrative costs to increase as programs and operations develop.
- A U.S. patent related to ThermoStem issued in September 2015. A subsequent license amendment provided for a non-exclusive sublicense concerning U.S. disc procedures in exchange for royalties per procedure.
- Other notable items include a $152,000 value of stock and warrants issued in a legal settlement, and substantial noncash stock-based compensation. Management said disclosure controls were effective and reported no material quarterly changes to internal control over financial reporting. The filing provides no specific revenue or profitability guidance.
Key investor verification points
- Verify current cash runway, subsequent financing, and the status and terms of past-due notes and any extensions or conversions.
- Assess whether research agreement revenue can be replaced or expanded, given customer concentration and completion of the Japanese agreement deliverable.
- Track R&D progress, regulatory and commercialization requirements, and funding needs for brtxDISC and ThermoStem.
- Review potential dilution from debt exchanges, warrants, options, and the post-quarter equity issuances, including the investor’s repurchase rights and board-related conditions.
- Reconcile the filing’s debt and maturity disclosures with subsequent events and the outstanding amounts at the latest available date.