Brooklyn ImmunoTherapeutics, Inc. — Q1 2021 Form 10-Q
Entity note: The request metadata names Ernexa Therapeutics Inc., but the supplied filing is for Brooklyn ImmunoTherapeutics, Inc. (formerly NTN Buzztime, Inc.; ticker BTX). The filing covers the quarter ended March 31, 2021 and is unaudited.
Business context and reporting period
Brooklyn is a clinical-stage biopharmaceutical company developing IRX-2, a cytokine-based cancer therapy, and pursuing cell-therapy technologies. On March 25, 2021, Brooklyn LLC merged with NTN in a reverse acquisition; the combined company took the Brooklyn ImmunoTherapeutics name. The next day, it sold NTN’s legacy business to eGames.com. Historical results presented are those of Brooklyn LLC, with share and per-share data retrospectively adjusted for the merger and a 1-for-2 reverse stock split.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Revenue | No product revenue | No product revenue |
| Research and development expense | $1.52 million | $(38,971); filing attributes the increase partly to trial activity and stock-compensation modification |
| General and administrative expense | $1.64 million | $1.05 million |
| Merger-related transaction costs | $5.77 million | None |
| Loss on sale of NTN assets | $9.60 million | None |
| Net loss / loss per share | $(17.70) million / $(0.64) | $(1.02) million / $(0.06) |
| Net cash used in operating activities | $3.43 million | $1.87 million |
The reported net loss includes the $9.60 million loss on disposition and $5.77 million of noncash shares issued to the financial advisor, partly offset by an $820,000 gain from a lower fair value of contingent consideration. With no revenue, operating margins are not meaningful.
Cash increased to $8.41 million at March 31, 2021 from $1.63 million at year-end, supported by $10.48 million in proceeds from member-equity sales; operating cash use was $3.43 million. Total assets were $20.70 million and total liabilities were $25.12 million; stockholders’ deficit was $4.42 million. Liabilities included $19.29 million of contingent consideration, $410,000 of IRX notes payable, $309,905 of PPP debt, and $2.11 million of operating lease liabilities. The IRX notes bear 14% interest and mature upon a change of control or by December 31, 2021. The filing reports no interest cash paid during the quarter.
Material changes versus the prior period
- Net loss increased substantially from Q1 2020, primarily reflecting the NTN asset-sale loss, merger transaction costs, and increased operating expenses.
- The merger and subsequent asset sale changed the company from NTN’s former business to Brooklyn’s biopharmaceutical operations.
- Cash rose by $6.78 million during the quarter, while operating cash use increased year over year.
Outlook, commentary, and risks
- Management reported no product-sales revenue to date and expects continuing losses and higher R&D and public-company costs. It said cash and access to the Lincoln Park facility were expected to fund the current operating plan for at least 12 months from issuance; elsewhere, the MD&A says funds were expected to last through Q1 2022. Funding needs depend on clinical progress, costs, licensing and other factors, and additional financing may be needed.
- Under an April 2021 agreement, the company may sell up to $20 million of stock to Lincoln Park over 36 months. By May 14, it had sold 302,358 shares for $6.3 million gross proceeds. Further sales are discretionary and may dilute existing holders.
- The April 2021 Novellus/Factor license covers mRNA cell-reprogramming and gene-editing technology. The agreement requires $4 million upfront (of which $2.5 million had been paid by the filing), with $1.5 million expected in July 2021 and additional stated fees of $5 million in October 2021 and $7 million in October 2022, plus potential milestone and royalty obligations. Development and commercialization are not assured.
- The INSPIRE Phase 2b HNSCC study was fully populated and treatment completed; event-free-survival follow-up continues, with top-line data estimated for the first half of 2022. COVID-19 slowed enrollment in other studies and may delay INSPIRE site closeout and reporting.
- Material uncertainties include clinical, regulatory, financing, and commercialization risks; dependence on a concentrated vendor (29% of purchases in the period stated); and valuation sensitivity in the $19.29 million Level 3 contingent-consideration liability.
- Ten merger-related shareholder actions were dismissed after supplemental disclosures; plaintiffs’ counsel may still seek fees. Other disclosed matters include a former consultant’s lawsuit seeking at least $10 million, an action concerning the annual meeting, a shareholder demand relating to authorized shares, and a shareholder claim concerning delayed paper certificates. Management said it did not expect pending matters to materially harm the company, but outcomes are uncertain.
Important facts for investors to verify
- Confirm the filing entity and ticker: the supplied 10-Q is Brooklyn ImmunoTherapeutics, Inc. (BTX), not Ernexa Therapeutics Inc.
- Track cash burn, Lincoln Park stock sales, dilution, and the stated runway; reconcile the filing’s “at least 12 months” and “through Q1 2022” descriptions.
- Monitor INSPIRE data timing and other trial enrollment or COVID-related delays.
- Review the Novellus license payment schedule, milestone and royalty exposure, and whether the licensed programs advance clinically.
- Assess the $19.29 million contingent-consideration estimate and the status and potential cost of disclosed legal matters.