BioRestorative Therapies, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022; unaudited consolidated results. The company develops adult stem-cell therapies, including BRTX-100 for disc and spine conditions, and conducts preclinical work through its ThermoStem program. Revenue is primarily royalties under a sublicense agreement.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $71,100 | $15,000 | $87,100 | $33,000 |
| Operating expenses | $4.70 million | $3.57 million | $9.77 million | $18.64 million |
| Operating loss | $4.63 million | $3.56 million | $9.68 million | $18.61 million |
| Net loss | $4.68 million | $4.06 million | $9.49 million | $19.72 million |
| Net loss per share, basic and diluted | $1.28 | $5.10 | $2.65 | $25.84 |
| Net cash used in operating activities | Not separately presented by quarter | $2.85 million | $1.56 million |
Revenue remains modest relative to expenses; the filing does not provide a meaningful gross margin measure. Q2 research and development expense rose to $1.08 million from $161,000, while general and administrative expense was $3.59 million versus $3.40 million. For the first half, R&D increased to $1.85 million from $326,000; G&A fell to $7.80 million from $18.30 million, mainly because stock-based compensation was lower than in 2021. Stock-based compensation totaled $6.48 million in the first half of 2022, a substantial noncash expense.
| Liquidity and balance sheet | June 30, 2022 | December 31, 2021 |
|---|---|---|
| Cash | $17.93 million | $21.03 million |
| Working capital | $17.70 million | $21.10 million |
| Total assets | $19.44 million | $22.45 million |
| Total liabilities | $856,000 | $856,000 |
| PPP loan payable | None | $250,000 |
First-half investing cash use was $247,000 for equipment; there were no financing cash flows. Cash declined by $3.09 million over the six months. The PPP loan was forgiven in January 2022, generating a $250,000 gain. Operating lease liabilities totaled approximately $363,000 at June 30, 2022. The company reported an accumulated deficit of $143.6 million.
Changes, outlook and risks
- Management said the higher royalty revenue should not be expected to continue at the same level. The statements report Q2 revenue of $71,100; the MD&A narrative gives $71,000, an inconsistency to verify.
- Management expects elevated R&D spending to continue and G&A to increase as the business expands. It anticipates continuing losses and negative operating cash flows.
- Management believes cash on hand is sufficient to fund operations for the twelve months after the filing date, but not to complete all development activities or reach profitability. Additional equity or debt financing will eventually be needed; failure to obtain it could force the company to curtail or discontinue operations.
- The BRTX-100 Phase 2 trial is underway. A clinical services agreement has a 46-month term and estimated budget of $5.84 million; $1.0 million of related R&D expense was incurred in the first half.
- The company missed a February 2022 milestone under its disc/spine technology license. Its exclusive rights may therefore be non-exclusive; it is negotiating with the licensor, but gives no assurance that exclusivity will be confirmed.
- Management identified ineffective disclosure controls and material weaknesses in financial reporting, including weaknesses in formal procedures, risk assessment, and journal-entry and reconciliation controls. Remediation efforts include external financial consultants and documenting controls.
- Common shares outstanding were 3,643,709 at quarter-end. The company also reported 4,739,733 outstanding warrants and 864,609 options, which may contribute to future dilution. The company stated no material change in risk factors from its 2021 Form 10-K.
Investor verification priorities
- Confirm the Q2 royalty revenue figure: $71,100 in the financial statements versus $71,000 in MD&A.
- Track whether the SCTC license retains exclusivity and whether the company satisfies any negotiated terms or milestones.
- Assess the cash runway against trial spending, ongoing operating losses, and the need for future financing.
- Review Phase 2 trial progress and spending under the clinical services agreement, as well as the development status of ThermoStem.
- Monitor remediation of the disclosed material weaknesses and potential dilution from outstanding warrants, options, and equity awards.