BioRestorative Therapies(BRTX) - 2019 Q2 - Quarterly Report

markdown Part I - Financial Information [Financial Statements](index=4&type=section&id=ITEM%201.%20Financial%20Statements.) Financial statements for June 30, 2019, show significant deficiencies, increased net losses, and going concern uncertainty [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2019, the company reported a stockholders' deficiency of **$8.94 million**, driven by net loss, partially offset by capital raised Condensed Consolidated Balance Sheet Data (Unaudited) | Balance Sheet Items | June 30, 2019 ($) | December 31, 2018 ($) | | :--- | :--- | :--- | | **Assets** | | | | Cash | 1,283,666 | 117,523 | | Total Current Assets | 1,357,058 | 180,987 | | Total Assets | 2,432,079 | 1,192,381 | | **Liabilities & Stockholders' Deficiency** | | | | Total Current Liabilities | 11,143,202 | 9,254,888 | | Total Liabilities | 11,374,550 | 9,833,419 | | Total Stockholders' Deficiency | (8,942,471) | (8,641,038) | | Total Liabilities and Stockholders' Deficiency | 2,432,079 | 1,192,381 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Net loss increased to **$8.04 million** for the six months ended June 30, 2019, driven by higher operating expenses, interest, and debt extinguishment losses Condensed Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended June 30, 2019 ($) | Three Months Ended June 30, 2018 ($) | Six Months Ended June 30, 2019 ($) | Six Months Ended June 30, 2018 ($) | | :--- | :--- | :--- | :--- | :--- | | Revenues | 31,000 | 37,000 | 60,000 | 56,000 | | Total Operating Expenses | 2,159,804 | 2,087,335 | 4,517,140 | 4,337,073 | | Loss From Operations | (2,128,804) | (2,050,335) | (4,457,140) | (4,281,073) | | Net Loss | (4,157,190) | (3,514,423) | (8,040,362) | (6,022,083) | | Net Loss Per Share | (0.24) | (0.53) | (0.52) | (0.93) | [Condensed Consolidated Statements of Changes in Stockholders' Deficiency](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Deficiency) Stockholders' deficiency increased to **$8.94 million** by June 30, 2019, due to the **$8.04 million** net loss, partially offset by capital raising - For the six months ended June 30, 2019, the company issued **8,065,083 shares** of common stock through various transactions, including for cash, services, and debt exchanges, contributing to an increase in additional paid-in capital[14](index=14&type=chunk) - The net loss of **$8,040,362** for the six months ended June 30, 2019, was the primary driver for the increase in the accumulated deficit and overall stockholders' deficiency[12](index=12&type=chunk)[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operations was **$3.40 million** for the six months ended June 30, 2019, offset by **$4.59 million** from financing, increasing cash by **$1.17 million** Cash Flow Summary for Six Months Ended June 30 (Unaudited) | Cash Flow Activity | 2019 ($) | 2018 ($) | | :--- | :--- | :--- | | Net Cash Used In Operating Activities | (3,397,117) | (2,198,577) | | Net Cash Used In Investing Activities | (29,371) | (12,869) | | Net Cash Provided By Financing Activities | 4,592,631 | 1,763,295 | | **Net Increase (Decrease) In Cash** | **1,166,143** | **(448,151)** | - Non-cash financing activities were significant, including the issuance of **$3.57 million** in shares to exchange for notes payable and accrued interest, and recording **$3.17 million** in derivative liabilities related to convertible notes[20](index=20&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail going concern doubt, extensive notes payable, and crucial subsequent financing events contingent on shareholder approval and Nasdaq listing - The company develops therapeutic products using adult stem cells, with a lead program, brtxDISC (BRTX-100), for treating disc/spine disorders, and a pre-clinical ThermoStem Program for metabolic disorders[21](index=21&type=chunk) - There is substantial doubt about the Company's ability to continue as a going concern due to a working capital deficiency of **$9.8 million**, a stockholders' deficiency of **$8.9 million**, and a net loss of **$8.0 million** for the six months ended June 30, 2019[23](index=23&type=chunk) - Subsequent to June 30, 2019, the company entered into a securities purchase agreement with Arena Investors LP for up to **$5.4 million** in financing through preferred stock, a warrant, and a convertible note. The closing is contingent on a concurrent public offering of at least **$7.5 million** and a Nasdaq listing[112](index=112&type=chunk) - During the first six months of 2019, the company issued **$6.48 million** in new notes payable and exchanged **$1.20 million** of debt for equity, highlighting its reliance on debt financing and restructuring to sustain operations[60](index=60&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management highlights severe liquidity challenges, going concern doubt, widening net losses, and critical dependence on new capital [Overview and Financial Condition](index=27&type=section&id=Overview%20and%20Financial%20Condition) The cell therapy company faces critical financial conditions with a **$72.0 million** accumulated deficit and **$9.8 million** working capital deficiency, raising going concern doubts - The company's lead cell therapy candidate, BRTX-100, has received FDA authorization to commence a Phase 2 clinical trial for treating chronic lower back pain, with plans to start in Q4 2019, assuming necessary funding is secured[127](index=127&type=chunk) - The company anticipates needing approximately **$20 million** to commence and complete the Phase 2 trial for its Disc/Spine Program and an additional **$45 million** to complete all clinical trials for BRTX-100[131](index=131&type=chunk) - A securities purchase agreement was signed with Arena Investors LP for **$5.4 million**, but the deal is contingent on a successful public offering of at least **$7.5 million** and a Nasdaq listing[133](index=133&type=chunk) [Consolidated Results of Operations](index=29&type=section&id=Consolidated%20Results%20of%20Operations) Net losses increased to **$8.0 million** for the six months ended June 30, 2019, driven by higher operating expenses, interest, and substantial debt extinguishment loss Comparison of Results for the Six Months Ended June 30 | Expense Category | 2019 ($) | 2018 ($) | Change (%) | | :--- | :--- | :--- | :--- | | Marketing and promotion | 124,686 | 58,554 | +113% | | Consulting | 1,133,607 | 850,884 | +33% | | Research and development | 896,729 | 779,945 | +15% | | General and administrative | 2,362,118 | 2,647,690 | -11% | | Interest expense | 644,911 | 391,642 | +65% | | Loss on extinguishment of notes | 1,000,595 | 63,788 | +1468% | [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) The company faces severe liquidity constraints with a **$9.8 million** working capital deficiency, requiring significant additional capital beyond September 2019 - The company has a working capital deficiency of **$9,786,144** and stockholders' deficiency of **$8,942,471** as of June 30, 2019, raising substantial doubt about its ability to continue as a going concern[167](index=167&type=chunk) - Management expects current cash to fund operations only through September 2019, after which it will need to raise further capital to support operations and repay debt[171](index=171&type=chunk) Debt Maturity Schedule (as of filing date) | Maturity Date | Principal Amount ($) | | :--- | :--- | | Past Due | 144,000 | | QE 9/30/2019 | 1,060,000 | | QE 12/31/2019 | 3,732,226 | | QE 3/31/2020 | 1,685,250 | | QE 6/30/2020 | 862,138 | | QE 9/30/2020 | 167,688 | | **Total** | **7,651,302** | [Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) This section indicates that the item is not applicable to the company's operations - Not applicable[182](index=182&type=chunk) [Controls and Procedures](index=35&type=section&id=ITEM%204.%20Controls%20and%20Procedures.) Management concluded disclosure controls were effective as of June 30, 2019, with no material changes to internal controls - Based on an evaluation, the Principal Executive and Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[184](index=184&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2019, that have materially affected, or are reasonably likely to materially affect, internal controls[185](index=185&type=chunk) Part II - Other Information [Legal Proceedings](index=36&type=section&id=ITEM%201.%20Legal%20Proceedings.) This section indicates that the item is not applicable to the company's operations - Not applicable[189](index=189&type=chunk) [Risk Factors](index=36&type=section&id=ITEM%201A.%20Risk%20Factors.) This section indicates that the item is not applicable, referring to the Annual Report on Form 10-K for a discussion of risk factors - Not applicable. The report refers to the risk factors discussed in the Annual Report on Form 10-K for the year ended December 31, 2018[190](index=190&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) During Q2 2019, the company issued significant unregistered equity securities for cash, debt exchange, and services, relying on Securities Act exemptions - During Q2 2019, the company issued common stock and warrants in multiple private transactions for cash, exchange of convertible notes, and consulting services, relying on exemptions from registration under the Securities Act[191](index=191&type=chunk) Selected Unregistered Sales in Q2 2019 | Date | Security Type | Consideration | Purpose | | :--- | :--- | :--- | :--- | | 5/7/19 | **1,111,111 Common Shares** & **1,111,111 Warrants** | **$500,000** | Cash | | 6/4/19 | **75,000 Common Shares** | **$30,000** | Consulting Services | | Various | Common Shares | Varies | Exchange of convertible notes | [Defaults Upon Senior Securities](index=37&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities.) This section refers to the MD&A, noting a **$144,000** note payable is past due - The report refers to the MD&A section, which discloses that a note payable for **$144,000** is past due[194](index=194&type=chunk)[168](index=168&type=chunk) [Mine Safety Disclosures](index=37&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures.) This section indicates that the item is not applicable to the company's operations - Not applicable[195](index=195&type=chunk) [Other Information](index=37&type=section&id=ITEM%205.%20Other%20Information.) This section indicates no other information to report for this item - None[197](index=197&type=chunk) [Exhibits](index=37&type=section&id=ITEM%206.%20Exhibits.) This section lists concurrently filed exhibits, including officer certifications and XBRL interactive data files - Exhibits filed include officer certifications and XBRL data files[199](index=199&type=chunk)