BioRestorative Therapies, Inc. — Q1 2015 Form 10-Q
Reporting period: Three months ended March 31, 2015; balance-sheet comparisons are with December 31, 2014. The company develops adult stem-cell therapies and products, including its brtxDISC spine program, preclinical ThermoStem program, and skincare products.
Financial results and liquidity
| Metric | Q1 2015 | Q1 2014 / comparison |
|---|---|---|
| Revenue | $184,902 | $375 |
| Gross profit (margin) | $108,470 (58.7%) | $315 |
| Operating expenses | $1,734,436 | $1,428,733 |
| Operating loss | $(1,625,966) | $(1,428,418) |
| Net loss | $(1,760,121) | $(1,669,676) |
| Basic and diluted loss per share | $(0.05) | $(0.08) |
| Cash used in operating activities | $(674,778) | $(806,728) |
| Cash at period end | $145,866 | $91,798 at December 31, 2014 |
At March 31, 2015, current assets were $180,231 and current liabilities were $8,922,098, producing a working-capital deficit of $8,741,867. Total assets were $1,858,199, total liabilities $9,253,491, and stockholders’ deficiency $7,395,292. Gross notes payable were reported at approximately $5.831 million, with stated interest rates of 8%–15% and maturities through October 2015; the balance-sheet carrying amount, net of debt discount, was $5.771 million. The company reported no off-balance-sheet arrangements.
Changes versus prior comparable period
- Revenue rose sharply from a very low base, primarily from research and development agreements: $180,702, plus $4,000 of royalty revenue and $200 of skincare sales. Two pharmaceutical clients accounted for substantially all Q1 2015 revenue.
- Net loss increased by $90,445. Operating expenses rose $305,703; general and administrative expense increased $281,574, while R&D expense declined $86,885.
- Operating cash use improved by $131,950 year over year, but remained substantial. Financing activities provided $896,015, including $801,000 from stock and warrant sales; investing activities used $167,169.
- Common shares issued increased from 34,511,800 at year-end to 37,750,173 at March 31. The company also had 16,184,000 options and 9,099,516 warrants outstanding; these potential shares were excluded from diluted loss per share as anti-dilutive.
Outlook, risks, and unusual items
- Going concern: Management said the working-capital and stockholders’ deficits and continuing losses raise substantial doubt about the company’s ability to continue as a going concern. Additional financing is needed; failure to obtain it or to extend or convert debt could force curtailment of development and marketing, or cessation of operations.
- After quarter-end and through May 15, the company reported raising $200,000 in equity and $100,000 in debt, extending the maturity of $410,938 of debt, and exchanging or converting $307,873 of debt and $26,501 of accrued interest into common stock. Management expected available funds to support operations through June 2015 and was negotiating additional financing; success was not assured.
- Subsequent financing included a $100,000 convertible note issued May 8. On May 14, a $282,873 note and $25,296 accrued interest were exchanged for 1,027,231 shares and a warrant. The Bermuda Lender extended a $410,938 note to June 30 and waived defaults, while requiring a $316,297 unpaid amount tied to R&D receipts to be paid at maturity.
- Q1 G&A included approximately $140,000 of increased professional fees related to a contemplated capital raise and approximately $97,000 of legal settlement expense. The company settled a former consultant’s claim on April 27; the settlement amount had been accrued at March 31.
- Management expected R&D, marketing, and G&A costs to increase as programs and operations develop. The lead spine therapy and ThermoStem are in development, and ThermoStem is preclinical; the filing provides no assurance of commercialization or profitability.
- Disclosure controls and procedures were assessed as effective at quarter-end; management reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether additional financing was secured after the filing and whether liquidity extended beyond the expected June 2015 runway.
- Current debt balances, maturity extensions or conversions, lender concentration, and compliance with note terms.
- Revenue concentration and the terms, deliverables, and renewal prospects of the two pharmaceutical research agreements.
- Cash burn, accrued liabilities, and whether operating cash use or expense levels changed after Q1.
- Share-count dilution from subsequent issuances, outstanding warrants and options, and any further equity or debt financing.
- Progress, regulatory requirements, and funding needs for brtxDISC, ThermoStem, and other development programs.