UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the Quarterly Period Ended
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period from _________ to _________
Commission
file number:
(Exact name of registrant as specified in its charter)
(State or other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
| (Address of Principal Executive Offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of exchange on which registered | ||
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act: ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Indicate
by checkmark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
As of August 12, 2024 there were shares of the registrant’s Common Stock outstanding.
BIORESTORATIVE THERAPIES, INC.
FORM 10-Q
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023
TABLE OF CONTENTS
| 2 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BIORESTORATIVE THERAPIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (unaudited) | (As Restated) | |||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Investments held in marketable securities | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use assets | ||||||||
| Intangible assets, net | ||||||||
| Deferred offering costs | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Deferred revenue | ||||||||
| Lease liability | ||||||||
| Derivative liabilities | ||||||||
| Total Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock, $ par value; shares authorized; Series B Convertible Preferred Stock; shares designated, shares issued and outstanding at June 30, 2024 and December 31, 2023 | ||||||||
| Common stock, $ par value; shares authorized; and shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
BIORESTORATIVE THERAPIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30 | June 30 | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (As Restated) | (As Restated) | |||||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating Expenses: | ||||||||||||||||
| Research and development | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Loss From Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (Income) Expense: | ||||||||||||||||
| Interest income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on exchange of warrants | ( | ) | ||||||||||||||
| Change in fair value of derivative liabilities | ||||||||||||||||
| Total Other Expense (Income) | ( | ) | ||||||||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net Loss Per Share - Basic and Diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted Average Common Shares Outstanding - Basic and Diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
BIORESTORATIVE THERAPIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(unaudited)
| For the Six Months Ended June 30, 2024 | ||||||||||||||||||||||||||||
| Series B Convertible | Additional | |||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-In | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance - January 1, 2024 (as restated) | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Common stock issued in connection with warrant exchange [1] | - | |||||||||||||||||||||||||||
| Return and cancellation of shares in lieu of payroll tax withholding | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
| Stock-based compensation: | ||||||||||||||||||||||||||||
| Restricted share units | - | |||||||||||||||||||||||||||
| Options | - | - | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance - March 31, 2024 | ( | ) | ||||||||||||||||||||||||||
| Common stock issued in connection with abeyance shares | - | ( | ) | |||||||||||||||||||||||||
| Stock-based compensation: | ||||||||||||||||||||||||||||
| Options | - | - | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance - June 30, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| For the Six Months Ended June 30, 2023 | ||||||||||||||||||||||||||||
| Series B Convertible | Additional | |||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-In | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| (As Restated) | (As Restated) | (As Restated) | ||||||||||||||||||||||||||
| Balance - January 1, 2023 (as restated) | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Return and cancellation of shares in lieu of payroll tax withholding | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
| Stock-based compensation: | ||||||||||||||||||||||||||||
| Restricted share units | - | |||||||||||||||||||||||||||
| Options | - | - | ||||||||||||||||||||||||||
| Net loss (as restated) | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance - March 31, 2023 (as restated) | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Stock-based compensation: | ||||||||||||||||||||||||||||
| Restricted share units | - | |||||||||||||||||||||||||||
| Options | - | - | ||||||||||||||||||||||||||
| Issuance of common stock | - | |||||||||||||||||||||||||||
| Conversion of Series B preferred to common stock | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net loss (as restated) | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance - June 30, 2023 (as restated) | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| [1] |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
BIORESTORATIVE THERAPIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| For the Six Months Ended | ||||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| (As Restated) | ||||||||
| Cash Flows From Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Dividend and interest income | ( | ) | ( | ) | ||||
| Stock-based compensation | ||||||||
| Non-cash lease expense | ||||||||
| Gain on exchange of warrants | ( | ) | ||||||
| Change in fair value of derivative liabilities | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable | ||||||||
| Accrued expenses and other current liabilities | ( | ) | ||||||
| Deferred revenue | ||||||||
| Lease liability | ( | ) | ( | ) | ||||
| Net Cash Used In Operating Activities | ( | ) | ( | ) | ||||
| Cash Flows From Investing Activities: | ||||||||
| Sale of marketable securities | ||||||||
| Purchase of marketable securities | ( | ) | ( | ) | ||||
| Purchases of equipment | ( | ) | ( | ) | ||||
| Net Cash (Used In) Provided By Investing Activities | ( | ) | ||||||
| Cash Flows From Financing Activities: | ||||||||
| Net proceeds from issuance of common stock in at-the-market offering | ||||||||
| Proceeds from exchange and issuance of warrants, net [1] | ||||||||
| Deferred offering costs | ( | ) | ||||||
| Net Cash Provided By Financing Activities | ||||||||
| Net Increase In Cash and Cash Equivalents | ||||||||
| Cash and Cash Equivalents - Beginning of the Period | ||||||||
| Cash and Cash Equivalents - End of the Period | $ | $ | ||||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Issuance of common stock held in abeyance | $ | $ | ||||||
| Return and cancellation of shares in lieu of payroll tax withholding | $ | $ | ||||||
| [1] |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
BIORESTORATIVE THERAPIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – BUSINESS ORGANIZATION, NATURE OF OPERATIONS, BASIS OF PRESENTATION AND LIQUIDITY
Corporate History
BioRestorative Therapies, Inc. has one wholly-owned subsidiary, Stem Pearls, LLC (“Stem Pearls”). BioRestorative Therapies, Inc. and its subsidiary are referred to collectively as “BRT” or the “Company”.
On December 23, 2022, the Company reincorporated from Delaware to Nevada by filing Articles of Incorporation with the state of Nevada. The reincorporation was structured as a statutory merger.
Business Operations
BRT develops therapeutic products and medical therapies using cell and tissue protocols, primarily involving adult stem cells. BRT’s website is at www.biorestorative.com. The information contained in the website or connected thereto is not intended to be incorporated by reference into this Quarterly Report. BRT is currently developing a Disc/Spine Program referred to as “brtxDISC”. Its lead cell therapy candidate, BRTX-100, is a product formulated from autologous (or a person’s own) cultured mesenchymal stem cells collected from the patient’s bone marrow. The product is intended to be used for the non-surgical treatment of painful lumbosacral disc disorders or as a complimentary therapeutic to a surgical procedure. BRT is also engaging in research efforts with respect to a platform technology utilizing brown adipose (fat) for therapeutic purposes to treat type 2 diabetes, obesity and other metabolic disorders and has labeled this initiative its ThermoStem Program. In addition, in continuation of BRT’s mission of developing and commercializing cell-based biologics, it is seeking to develop a biologics-based cosmetic products business. Pursuant to such business, BRT would formulate, manufacture and sell products designed for cosmetic and aesthetic uses. Further, BRT has licensed a patented curved needle device that is a needle system designed to deliver cells and/or other therapeutic products or material to the spine and discs or other potential sites.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. The December 31, 2023 consolidated balance sheet data were derived from audited financial statements but do not include all disclosures required by U.S. GAAP. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) that are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of June 30, 2024 and for the three and six months then ended. The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the operating results for the full year ending December 31, 2024 or any other period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related disclosures of the Company as of December 31, 2023 and for the year then ended, which were filed with the Securities and Exchange Commission (“SEC”) on June 11, 2024 as part of the Company’s Amendment No. 1 to the Annual Report on Form 10-K/A (the “Form 10-K/A”), which includes the restatement of the Company’s consolidated financial statements, including periods that are included in this Quarterly Report on Form 10-Q. Refer to Note 2 - Summary of Significant Accounting Policies - Restatement of Previously Issued Consolidated Financial Statements and Note 3 - Restatement of Previously Issued Unaudited Interim Condensed Consolidated Financial Statements in the Form 10-K/A for additional information.
| 7 |
Liquidity
For
the six months ended June 30, 2024, the Company had a net loss of $
Based
on cash on hand and investments as of the date these unaudited condensed consolidated financial statements were issued, which includes
$
However, the Company’s current funds will not be sufficient to enable the Company to fully complete its development activities or attain profitable operations. If the Company is unable to obtain such needed additional financing on a timely basis, the Company may have to curtail its development, marketing and promotional activities, which would have a material adverse effect on the Company’s business, financial condition and results of operations, and ultimately the Company could be forced to discontinue its operations and liquidate.
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the unaudited condensed consolidated financial statements do not necessarily purport to represent realizable or settlement values. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
See Amendment No. 1 to the Annual Report on Form 10-K/A for the year ended December 31, 2023, for a complete listing of the Company’s significant accounting policies.
Reclassifications
Certain prior period statements of operations, changes in stockholders’ equity and cash flows amounts have been reclassified to conform to the Company’s fiscal 2024 presentation. These reclassifications have no impact on the Company’s previously reported net loss.
| 8 |
Cash and Cash Equivalents
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution.
The Company maintains deposits in its accounts that hold cash and cash equivalents in excess of the Federal Depository Insurance Corporation
(“FDIC”) coverage of $
Customer and Revenue Concentrations
All of the Company’s contract service revenue is derived from one customer. Additionally, all of the Company’s product sales revenue is derived from one customer.
Accounts Receivable
Accounts receivable are carried at their contractual amounts, less an estimate for credit losses. As of June 30, 2024 and 2023, no allowances for credit losses were determined to be necessary. Management estimates the allowance for credit losses based on existing economic conditions, the financial conditions of the customers, and the amount and age of past due accounts. Receivables are considered past due if full payment is not received by the contractual due date. Past due accounts are generally written off against the allowance for credit losses only after all collection attempts have been exhausted.
Deferred Revenue
As
of June 30, 2024 and December 31, 2023, the Company had $
Derivative Financial Instruments
The Company evaluates all of its agreements to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a weighted-average Black-Scholes option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.
Fair Value of Financial Instruments
Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and is measured using inputs in one of the following three categories:
Level 1 measurements are based on unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. Valuation of these items does not entail a significant amount of judgment.
| 9 |
Level 2 measurements are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active or market data other than quoted prices that are observable for the assets or liabilities.
Level 3 measurements are based on unobservable data that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.
The Company considers cash and cash equivalents, investments held in marketable securities, accounts receivable, accounts payable and derivative liabilities to meet the definition of financial instruments. As of June 30, 2024 and December 31, 2023, the carrying amount of cash and cash equivalents, investments held in marketable securities, accounts receivable, and accounts payable approximate their fair value due to the relatively short period of time between their origination and their expected realization or payment. The warrants classified as derivative liabilities are measured at fair value (see Note 6 – Fair Value Measurement for additional details).
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” (“ASC 606”). The core principle of ASC 606 requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASC 606 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The Company recognizes revenue primarily from the following different types of contracts:
| ● | Product sales - Revenue is recognized at the point in time the customer obtains control of the goods and the Company satisfies its performance obligation. |
| ● | Royalty revenue - Revenue is recognized as a usage-based royalty from customers’ usage of intellectual property pursuant to a license agreement at the point in time in which the underlying sale occurs. |
The Company recognizes bill-and-hold revenue from its sale of cosmetic vials warehoused at a Company location for a specified period of time in accordance with directions received from the Company’s customer. Even though the vials are held at a Company location, a sale is recognized at the point in time when the customer obtains control of the product. Control is transferred to the customer in a bill-and-hold arrangement when: (i) customer acceptance specifications have been met, (ii) legal title has transferred, (iii) the customer has a present obligation to pay for the product and (iv) the risks and rewards of ownership have transferred to the customer. Additionally, all the following bill-and-hold criteria have to be met in order for control to be transferred to the customer:
| ● | the reason for the bill-and-hold arrangement is substantive | |
| ● | the customer has requested the product be warehoused | |
| ● | the product has been identified as separately belonging to the customer | |
| ● | the product is currently ready for physical transfer to the customer | |
| ● | the Company does not have the ability to use the product or direct it to another customer. |
| 10 |
The following table summarizes the Company’s revenue recognized in its unaudited condensed consolidated statements of operations:
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Product revenue | $ | $ | $ | $ | ||||||||||||
| Royalty revenue | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. All outstanding options and warrants are considered potential common stock. The Company has shares held in abeyance included in basic loss per share given that they are issuable for no additional consideration (see Note 4 – Stockholders’ Equity for additional details). The dilutive effect, if any, of stock options and warrants are calculated using the treasury stock method. All outstanding convertible preferred stock is considered common stock at the beginning of the period or at the time of issuance, if later, pursuant to the if-converted method. Since the effect of common stock equivalents is anti-dilutive with respect to losses, options, warrants, restricted stock units (“RSUs”) and convertible preferred stock have been excluded from the Company’s computation of diluted net loss per common share for the three and six months ended June 30, 2024 and 2023.
| For the Three and Six Months Ended | ||||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| Stock options | ||||||||
| Warrants | ||||||||
| Unvested RSUs | ||||||||
| Convertible Preferred Stock | ||||||||
Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Improvements to Reportable Segments Disclosures (Topic 280), which updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant (“ASU 2023-07”) segment expenses on both an annual and interim basis. The guidance becomes effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. Since this new ASU addresses only disclosures, the Company does not expect the adoption of this ASU to have any material effects on its financial condition, results of operations or cash flows. The Company is currently evaluating any new disclosures that may be required upon adoption of ASU 2023-07.
| 11 |
In December 2023, the FASB issued ASU No. 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” (“ASU 2023-09”). The amendments in ASU 2023-09 are designed to enhance the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation, and income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this update on its consolidated financial statements and related disclosures.
NOTE 3 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of:
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Accrued bonuses | $ | $ | ||||||
| Accrued general and administrative expenses | ||||||||
| Total accrued expenses and other current liabilities | $ | $ | ||||||
NOTE 4 - STOCKHOLDERS’ EQUITY
Warrant Exercise and Issuance
On
February 6, 2024, the Company entered into agreements with certain holders of its existing warrants exercisable for an aggregate of
In
consideration for the immediate exercise of the Existing Warrants for cash and the payment of $
| 12 |
In
connection with the transaction described above, the Company entered into a financial advisory services agreement, dated February 5,
2024, with Roth Capital Partners, LLC (“Roth”), pursuant to which the Company has paid Roth a cash fee of approximately $
Prior to the Warrant Exercise and Issuance, the Existing Warrants were classified as derivative liabilities. Additionally, the Company analyzed the form of the New Warrants and determined that they should be classified as derivative liabilities in accordance with ASC 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity. Under the New Warrants, the Company does not control the occurrence of events, such as a tender offer or exchange, that may trigger cash settlement of the New Warrants and not result in a change of control of the Company. As a result, such New Warrants do not meet the criteria for equity treatment. Additionally, certain New Warrants contain adjustments to the settlement amount based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under ASC 815-40 and, accordingly, such New Warrants are not considered indexed to the Company’s own stock and are not eligible for an exception from derivative accounting. See Note 6 – Fair Value Measurement for details regarding the valuation of the Existing Warrants and New Warrants.
The
Company determined the Warrant Exercise and
Issuance to be an exchange by investors of Existing Warrants with an aggregate fair value of
$
Warrants
See Note 6 – Fair Value of Financial Instruments for details regarding the valuation of the New Warrants.
A summary of the Company’s warrant activity and related information follows:
| Weighted | ||||||||||||
| Weighted | Average | |||||||||||
| Average | Remaining | |||||||||||
| Number of | Exercise | Life | ||||||||||
| Warrants | Price | In Years | ||||||||||
| Outstanding, January 1, 2024 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ( | ) | ||||||||||
| Expired | ( | ) | ||||||||||
| Outstanding, June 30, 2024 | $ | |||||||||||
| Exercisable, June 30, 2024 | $ | |||||||||||
| 13 |
As of June 30, 2024, the warrants exercisable and outstanding had an intrinsic value of $.
Stock Options
On
February 13, 2024, the Company granted options to purchase an aggregate shares of the Company’s Common Stock at an exercise
price of $ per share to employees, the Company’s board of directors and a member of the Company’s Scientific Advisory
Board. The options had an aggregate grant date fair value of $ and vest as follows: (i) options to purchase an aggregate
shares of common stock vest monthly over one year, and (ii) options to purchase an aggregate of shares of common stock vest
to the extent of
| For the Six Months Ended | ||||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| Risk free interest rate | - % | % | ||||||
| Expected term (years) | - | |||||||
| Expected volatility | - % | % | ||||||
| Expected dividends | % | % | ||||||
Options granted during the six months ended June 30, 2024 and 2023 had a weighted average grant date fair value per share of $ and $ per share, respectively. There were stock options granted during the three months ended June 30, 2024 and 2023.
| Weighted | ||||||||||||||||
| Weighted | Average | |||||||||||||||
| Average | Remaining | |||||||||||||||
| Number of | Exercise | Life | Intrinsic | |||||||||||||
| Options | Price | In Years | Value | |||||||||||||
| Outstanding, January 1, 2024 | $ | |||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ||||||||||||||||
| Forfeited | ||||||||||||||||
| Outstanding, June 30, 2024 | $ | $ | ||||||||||||||
| Exercisable, June 30, 2024 | $ | $ | ||||||||||||||
Restricted Stock Units (“RSUs”)
Pursuant to the Company’s 2021 Stock Incentive Plan (the “2021 Plan”), the Company may grant RSUs to employees, consultants or non-employee directors (“Eligible Individuals”). The number, terms and conditions of the RSUs that are granted to Eligible Individuals are determined on an individual basis by the 2021 Plan administrator. On the distribution date, the Company shall issue to the Eligible Individual one unrestricted, fully transferable share of the Company’s common stock (or the fair market value of one such share in cash) for each vested and nonforfeitable RSU.
| 14 |
A summary of the Company’s unvested RSUs as of June 30, 2024 is as follows:
| Number of Shares | ||||
| Non-vested at January 1, 2024 | ||||
| Granted | ||||
| Vested | ( | ) | ||
| Forfeited | ||||
| Non-vested at June 30, 2024 | ||||
Stock-Based Compensation Expense
| Weighted Average | ||||||||||||||||||||||||
For the Three Months Ended June 30, | For the Six Months Ended June 30, | Unrecognized at June 30, | Remaining Amortization Period | |||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | 2024 | (Years) | |||||||||||||||||||
| General and administrative | $ | $ | $ | $ | $ | |||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||||||
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Options | $ | $ | $ | $ | ||||||||||||
| RSUs | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
NOTE 5 - LEASES
The
Company is a party to a lease for
When
measuring lease liabilities for leases that were classified as operating leases, the Company discounted lease payments using its estimated
incremental borrowing rate at August 1, 2019. The weighted average incremental borrowing rate applied was
| 15 |
The following table presents net lease cost and other supplemental lease information:
| For the Six Months Ended | ||||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| Lease Costs | ||||||||
| Operating lease cost (cost resulting from lease payments) | $ | $ | ||||||
| Net lease costs | $ | $ | ||||||
| Operating lease - operating cash flows (fixed payments) | $ | $ | ||||||
| Operating lease - operating cash flows (liability reduction) | $ | $ | ||||||
| Non-current leases - right of use assets | $ | $ | ||||||
| Current liabilities - operating lease liabilities | $ | $ | ||||||
| Non-current liabilities - operating lease liabilities | $ | $ | ||||||
Future minimum payments under non-cancellable leases for operating leases for the remaining terms of the leases as of June 30, 2024:
| Fiscal Year | Operating Leases | |||
| 2024 | $ | |||
| Total future minimum lease payments | ||||
| Amount representing interest | ( | ) | ||
| Present value of net future minimum lease payments | $ | |||
NOTE 6 – FAIR VALUE MEASUREMENT
On
February 8, 2024, in connection with the Warrant Exercise and Issuance, the Company estimated the aggregate fair value of the Existing
Warrants (see Note 4 - Stockholders’ Equity for details) to be $
| February 8, 2024 | ||||
| Risk free interest rate | - % | |||
| Expected term (years) | - | |||
| Expected volatility | % | |||
| Expected dividends | % | |||
On
February 8, 2024, the Company estimated the aggregate issuance date fair value of the derivative liability related to the New Warrants
(see Note 4 - Stockholders’ Equity for details) as $
| 16 |
The following table shows the detail of the valuation assumptions used:
| February 8, 2024 | ||||
| Risk free interest rate | % | |||
| Expected term (years) | ||||
| Expected volatility | % | |||
| Expected dividends | % | |||
On
June 30, 2024, the Company estimated the aggregate fair value of warrants that are accounted for as derivative liabilities to be $
| June 30, 2024 | ||||
| Risk free interest rate | - % | |||
| Expected term (years) | - | |||
| Expected volatility | % - % | |||
| Expected dividends | % | |||
The following table sets forth a summary of the changes in the fair value of Level 3 liabilities that are measured at fair value on a recurring basis during the six months ended June 30, 2024:
| Balance, January 1, 2024 (as restated) | $ | |||
| Issuance of warrants | ||||
| Exercise of warrants | ( | ) | ||
| Change in fair value of derivative liability | ||||
| Balance, June 30, 2024 | $ |
Assets and liabilities measured at fair value on a recurring basis are as follows:
| Fair value measurements at reporting date using: | ||||||||||||||||
| Quoted prices in active markets for identical liabilities (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Total Fair Value | |||||||||||||
| Assets: | ||||||||||||||||
| Marketable securities as of June 30, 2024 | $ | $ | $ | $ | ||||||||||||
| Marketable securities as of December 31, 2023 | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Marketable securities as of June 30, 2024 | $ | $ | $ | $ | ||||||||||||
| Derivative liabilities as of December 31, 2023 (as restated) | $ | $ | $ | $ | ||||||||||||
| 17 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated interim financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Amendment No. 1 to the Annual Report on Form 10-K/A, which was filed with the Securities and Exchange Commission (the “SEC”) on June 11, 2024.
Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes a number of forward-looking statements that reflect management’s current views with respect to future events and financial performance. Forward-looking statements are projections in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements include statements regarding the intent, belief or current expectations of us and members of our management team, as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks set forth in the section entitled “Risk Factors” in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2023, as filed with the SEC on June 11, 2024, any of which may cause our company’s or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied in our forward-looking statements. These risks and factors include, by way of example and without limitation:
| ● | our ability to obtain financing needed to complete our clinical trials and implement our business plan; |
| ● | our ability to successfully develop and commercialize BRTX-100, our lead product candidate for the treatment of chronic lumbar disc disease, as well as our metabolic ThermoStem Program and commercial biocosmeceuticals platform; |
| ● | our ability to protect our proprietary rights; |
| ● | our ability to achieve and sustain profitability of the existing lines of business; |
| ● | our ability to attract and retain world-class research and development talent; |
| ● | our ability to attract and retain key science, technology and management personnel and to expand our management team; |
| ● | the accuracy of estimates regarding expenses, future revenue, capital requirements, profitability, and needs for additional financing; |
| ● | business interruptions resulting from geo-political actions, including war and terrorism or disease outbreaks (such as the recent outbreak of COVID-19); |
| ● | our ability to attract and retain customers; |
| ● | our ability to navigate through the increasingly complex therapeutic regulatory environment; |
| ● | our ability to successfully engage in any new business lines that we pursue; and |
| ● | risks related to the restatement of our previously issued financial statements. |
| 18 |
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the SEC. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time, except as required by law. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions.
As used in this Quarterly Report on Form 10-Q and unless otherwise indicated, the terms “Company,” “we,” “us” and “our” refer to BioRestorative Therapies, Inc., a Nevada corporation (“BRT”), and its wholly-owned subsidiary, Stem Pearls, LLC, a New York limited liability company (“Stem Pearls”). Unless otherwise specified, all dollar amounts are expressed in United States dollars.
Intellectual Property
This report includes references to our federally registered trademarks, BioRestorative Therapies and Dragonfly design, BRTX-100, ThermoStem, and BRTX. The Dragonfly logo is also registered with the U.S. Copyright Office. This report may also include references to trademarks, trade names and service marks that are the property of other organizations. Solely for convenience, trademarks and trade names referred to in this report appear without the ®, SM or ™ symbols, and copyrighted content appears without the use of the symbol ©, but the absence of use of these symbols does not reflect upon the validity or enforceability of the intellectual property owned by us or third parties.
Corporate History
Our offices are located in Melville, New York where we have established a laboratory facility in order to increase our capabilities for the further development of possible cellular-based treatments, products and protocols, stem cell-related intellectual property and translational research applications.
As of June 30, 2024, our accumulated deficit was $152,951,151. We have historically only generated a modest amount of revenue, and our losses have principally been operating expenses incurred in research and development, marketing and promotional activities in order to commercialize our products and services, plus costs associated with meeting the requirements of being a public company. We expect to continue to incur substantial costs for these activities over at least the next year.
Business Overview
We develop therapeutic products and medical therapies using cell and tissue protocols, primarily involving adult stem cells.
| 19 |
We are currently pursuing our Disc/Spine Program with our initial investigational therapeutic product being called BRTX-100. In March 2022, a United States patent issued in our Disc/Spine Program. We have received authorization from the FDA to commence a Phase 2 clinical trial investigating the use of BRTX-100 in the treatment of chronic lower back pain arising from degenerative disc disease. We have commenced such clinical trial through the execution of a CRO agreement with Professional Research Consulting, Inc., d/b/a PRC Clinical, the execution of clinical trial site agreements, patient enrollment, the commencement of patient procedures, the purchase of manufacturing equipment and the expansion of our laboratory to include capabilities for clinical production. We have received a license from the New York State Department of Health to act as a tissue bank for mesenchymal stem cell processing. In June 2023, we received a unanimous recommendation from the Data Safety Monitoring Board to continue our Phase 2 clinical trial without any changes. We have obtained a worldwide (excluding Asia and Argentina) exclusive license to use technology for investigational adult stem cell treatment of disc and spine conditions, including protruding and bulging lumbar discs. The technology is an advanced stem cell injection procedure that may offer relief from lower back pain, buttock and leg pain, and numbness and tingling in the leg and foot. We are investigating the expansion of the clinic application of BRTX-100 to other indications within the body.
We are also developing our ThermoStem Program. This pre-clinical program involves the use of brown adipose (fat) in connection with the cell-based treatment of type 2 diabetes and obesity as well as hypertension, other metabolic disorders and cardiac deficiencies. United States patents related to the ThermoStem Program were issued in September 2015, January 2019, March 2020, March 2021, July 2021, June 2023 and December 2023; Australian patents related to the ThermoStem Program were issued in April 2017, October 2019, and August 2021; Japanese patents related to the ThermoStem Program were issued in December 2017, June 2021, February 2022 and June 2023; Israeli patents related to our ThermoStem Program were issued in October 2019, May 2020, and March 2022; European patents related to the ThermoStem Program were issued in April 2020, January 2021, and July 2023.
We have obtained a license for a patented curved needle device that is a needle system designed to deliver cells and/or other therapeutic products or materials to the spine and discs or other potential sites. We anticipate that FDA approval or clearance will be necessary for this device prior to commercialization. We do not intend to utilize this device in connection with our Phase 2 clinical trial with regard to BRTX-100.
In addition, in continuation of our mission of developing and commercializing cell-based biologics, we are seeking to develop a biologics-based cosmetic products business. Pursuant to such business, we would formulate, manufacture and sell products designed for cosmetic and aesthetic uses. In April 2024, we announced that we have entered into a five-year exclusive supply agreement with Cartessa Aesthetics, LLC (“Cartessa”), a leading North American based aesthetic company, to supply to Cartessa our first commercial product.
Revenue
We derived some of our revenue pursuant to a license agreement with a stem cell treatment company (the “SCTC”) entered into in January 2012, as amended in November 2015 and November 2022. Pursuant to the license agreement, the SCTC granted to us an exclusive license to use certain intellectual property related to, among other things, stem cell disc procedures and we have granted to the SCTC a sublicense to use, and the right to sublicense to third parties the right to use, in certain locations in the United States and the Cayman Islands, certain of the licensed intellectual property. In consideration of the sublicenses, the SCTC has agreed to pay us royalties on a per disc procedure basis.
We also derived our initial product revenue from our five-year exclusive supply agreement with Cartessa entered into in April 2024.
| 20 |
Results of Operations
Comparison of the Three Months Ended June 30, 2024 to the Three Months Ended June 30, 2023
Our financial results for the three months ended June 30, 2024 are summarized as follows in comparison to the three months ended June 30, 2023:
| For the Three Months Ended | ||||||||
| June 30 | ||||||||
| 2024 | 2023 | |||||||
| (As Restated) | ||||||||
| Revenues | $ | 89,100 | $ | 64,500 | ||||
| Cost of goods sold | 6,490 | - | ||||||
| Gross profit | 82,610 | 64,500 | ||||||
| Operating Expenses: | ||||||||
| Research and development | 1,292,182 | 902,891 | ||||||
| General and administrative | 1,259,235 | 2,278,160 | ||||||
| Total Operating Expenses | 2,551,417 | 3,181,051 | ||||||
| Loss From Operations | (2,468,807 | ) | (3,116,551 | ) | ||||
| Other (Income) Expense: | ||||||||
| Interest income | (175,945 | ) | (96,187 | ) | ||||
| Other income | (911 | ) | (39,812 | ) | ||||
| Change in fair value of derivative liabilities | 1,736,611 | 2,728,847 | ||||||
| Total Other Expense | 1,559,755 | 2,592,848 | ||||||
| Net Loss | $ | (4,028,562 | ) | $ | (5,709,399 | ) | ||
Revenues
For the three months ended June 30, 2024 and 2023, we generated $19,800 and $64,500, respectively, of royalty revenue in connection with our sublicense agreement with the SCTC primarily due to a decrease in disc procedures which we expect will increase in future periods.
For the three months ended June 30, 2024 and 2023, we generated $69,300 and $0, respectively, of cosmetic product sales revenue in connection with our exclusive supply agreement with Cartessa. We expect that our product sales revenue will increase in future periods as we execute on our contract with Cartessa.
| 21 |
Research and Development
Research and development expenses include cash and non-cash compensation of (a) our Vice President of Research and Development; (b) our Scientific Advisory Board members; and (c) laboratory staff and costs related to our brown fat and disc/spine initiatives. Research and development expenses are expensed as they are incurred. For the three months ended June 30, 2024, research and development expenses increased by $389,291, or 43%, compared to the three months ended June 30, 2023. The increase was primarily the result of an increase in lab supply expense of $208,374, an increase in payroll expense of $129,348, an increase in consulting expense of $23,482 and an increase in equipment deprecation related to new equipment of $20,319. We expect that our research and development expenses will continue to increase in subsequent fiscal periods.
General and Administrative
General and administrative expenses consist primarily of salaries, bonuses, payroll taxes and stock-based compensation to employees, as well as corporate expenses such as legal and professional fees, investor relations and occupancy-related expenses. For the three months ended June 30, 2024, general and administrative expenses decreased by $1,018,925, or 45%, as compared to the three months ended June 30, 2023, primarily driven by a decrease in stock-based compensation expense of $1,161,346 related to vesting of awards, partially offset by an increase in professional fees of approximately $111,711 primarily related to the recent restatement of our historical financial statements.
Interest Income
For the three months ended June 30, 2024, interest income was $175,945, compared to interest income of $96,187 for the three months ended June 30, 2023. The change was primarily due to interest and dividend income on the investments held in marketable securities.
Other Income
For the three months ended June 30, 2024 and 2023, other income primarily related to gains from settlements of certain accrued expenses and realized and unrealized gain on investments.
Change in Fair Value of Derivative Liabilities
For the three months ended June 30, 2024 and 2023, we recognized a loss on the change in fair value of derivative liabilities of $1,736,611 and $2,728,847, respectively, related to the increase in fair value of warrants that are accounted for as derivative liabilities.
| 22 |
Comparison of the Six Months Ended June 30, 2024 to the Six Months Ended June 30, 2023
Our financial results for the six months ended June 30, 2024 are summarized as follows in comparison to the six months ended June 30, 2023:
| For the Six Months Ended | ||||||||
| June 30 | ||||||||
| 2024 | 2023 | |||||||
| (As Restated) | ||||||||
| Revenues | $ | 124,100 | $ | 95,800 | ||||
| Cost of goods sold | 6,490 | - | ||||||
| Gross profit | 117,610 | 95,800 | ||||||
| Operating Expenses: | ||||||||
| Research and development | 2,350,313 | 2,134,636 | ||||||
| General and administrative | 4,345,356 | 6,856,813 | ||||||
| Total Operating Expenses | 6,695,669 | 8,991,449 | ||||||
| Loss From Operations | (6,578,059 | ) | (8,895,649 | ) | ||||
| Other (Income) Expense: | ||||||||
| Interest income | (338,542 | ) | (114,403 | ) | ||||
| Other income | (149,932 | ) | (116,472 | ) | ||||
| Gain on exchange of warrants | (1,711,698 | ) | - | |||||
| Change in fair value of derivative liabilities | 1,873,930 | 4,217,197 | ||||||
| Total Other (Income) Expense | (326,242 | ) | 3,986,322 | |||||
| Net Loss | $ | (6,251,817 | ) | $ | (12,881,971 | ) | ||
Revenues
For the six months ended June 30, 2024 and 2023, we generated $54,800 and $95,800, respectively, of royalty revenue in connection with our sublicense agreement with the SCTC primarily due to a decrease in disc procedures which we expect will increase in future periods.
For the six months ended June 30, 2024 and 2023, we generated $69,300 and $0, respectively, of cosmetic product sales revenue in connection with our exclusive supply agreement with Cartessa. We expect that our product sales revenue will increase in future periods as we execute on our contract with Cartessa.
Research and Development
Research and development expenses include cash and non-cash compensation of (a) our Vice President of Research and Development; (b) our Scientific Advisory Board members; and (c) laboratory staff and costs related to our brown fat and disc/spine initiatives. Research and development expenses are expensed as they are incurred. For the six months ended June 30, 2024, research and development expenses increased by $215,677, or 10%, compared to the six months ended June 30, 2023. The increase was primarily the result of increased lab supply expense of $285,883 and increased payroll expense of $145,380, all partially offset by a decrease in bonus expense of $210,878. We expect that our research and development expenses will continue to increase in subsequent fiscal periods.
| 23 |
General and Administrative
General and administrative expenses consist primarily of salaries, bonuses, payroll taxes and stock-based compensation to employees, as well as corporate expenses such as legal and professional fees, investor relations and occupancy-related expenses. For the six months ended June 30, 2024, general and administrative expenses decreased by $2,511,457, or 37%, as compared to the six months ended June 30, 2023, primarily driven by a decrease in stock-based compensation expense of $2,511,470 related to the vesting of awards and a decrease in payroll expense of $210,981 all partially offset by an increase in professional fees of $176,339 primarily related to the recent restatement of our historical financial statements.
Interest Income
For the six months ended June 30, 2024, interest income was $338,542, compared to interest income of $114,403 for the six months ended June 30, 2023. The change was primarily due to interest and dividend income on the investments held in marketable securities.
Other (Income) Expense
For the six months ended June 30, 2024 and 2023, other (income) expense was primarily related to gains from settlements of certain accrued expenses and realized and unrealized gain on investments.
Gain on Exchange of Warrants
For the six months ended June 30, 2024, we recognized a gain on exchange of $1,711,698 related to the issuance of warrants and common stock in exchange for the cancellation of existing warrants.
Change in Fair Value of Derivative Liabilities
For the six months ended June 30, 2024 and 2023, we recognized a loss on the change in fair value of derivative liabilities of $1,873,930 and $4,217,197, respectively, related to the increase in fair value of warrants that are accounted for as derivative liabilities.
Liquidity and Capital Resources
Liquidity
We measure our liquidity in a number of ways, including the following:
| June 30, 2024 | December 31, 2023 | |||||||
| (As Restated) | ||||||||
| Cash and cash equivalents | $ | 2,252,247 | $ | 884,377 | ||||
| Investments held in marketable securities | $ | 12,428,218 | $ | 10,181,618 | ||||
| Working capital | $ | 9,683,935 | $ | 8,783,181 | ||||
Working capital increased by $900,754 primarily due to the $7,505,646 of cash provided by financing activities which was partially offset by $4,182,945 of cash used to fund our operations and $1,954,831 of cash used to fund our investments.
| 24 |
Availability of Additional Funds
Based upon our accumulated deficit of $152,951,151 as of June 30, 2024, along with our forecast for continued operating losses and our need for financing to fund our current and contemplated clinical trials, we will eventually require additional equity and/or debt financing to continue our operations. However, based on cash and cash equivalents and investments on hand, we believe we have sufficient cash to fund operations for at least 12 months after the issuance date of these financial statements.
Our operating needs include the planned costs to operate our business, including amounts required to fund our clinical trials, working capital and capital expenditures. Our future capital requirements and the adequacy of our available funds will depend on many factors, including our ability to successfully commercialize our products and services, competing technological and market developments, and the need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement our product and service offerings.
We may be unable to raise sufficient additional capital when we need it or raise capital on favorable terms. Future financing may require us to pledge certain assets and enter into covenants that could restrict certain business activities or our ability to incur further indebtedness and may contain other terms that are not favorable to our stockholders or us. If we are unable to obtain adequate funds on reasonable terms, we may be required to significantly curtail or discontinue operations or obtain funds by entering into financing agreements on unattractive terms.
Cash Flows
During the six months ended June 30, 2024 and 2023, our sources and uses of cash were as follows:
| Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| (As Restated) | ||||||||
| Net Cash Used In Operating Activities | $ | (4,182,945 | ) | $ | (3,662,831 | ) | ||
| Net Cash (Used In) Provided By Investing Activities | $ | (1,954,831 | ) | $ | 3,358,199 | |||
| Net Cash Provided By Financing Activities | $ | 7,505,646 | $ | 411,701 | ||||
Operating Activities
Net cash used in operating activities was $4,182,945 for the six months ended June 30, 2024, primarily due to cash used to fund the net loss of $6,251,817, adjusted for net non-cash expenses of $2,351,582, and $282,710 of cash used in changes in operating assets and liabilities. Net cash used in operating activities was $3,662,831 for the six months ended June 30, 2023, primarily due to cash used to fund the net loss of $12,881,971, adjusted for non-cash expenses of $9,014,104, and $205,036 of cash provided by changes in operating assets and liabilities.
Investing Activities
Net cash used in investing activities was $1,954,831 for the six months ended June 30, 2024 primarily due to a purchase of marketable securities which used $12,784,535 of cash and a sale of marketable securities which provided $10,865,000 of cash. Net cash provided by investing activities was $3,358,199 for the six months ended June 30, 2023 primarily due to a sale of marketable securities which provided $10,982,932 of cash and a purchase of marketable securities which used $7,535,662 of cash.
| 25 |
Financing Activities
Net cash provided by financing activities was $7,505,646 for the six months ended June 30, 2024 due to net proceeds received in connection with the exercise and issuance of warrants, compared to $411,701 net cash provided by financing activities for the six months ended June 30, 2023 due to the net proceeds from the at-the-market offering of our Common Stock.
Effects of Inflation
We do not believe that inflation had a material impact on our business, revenues or operating results during the periods presented.
Critical Accounting Policies and Estimates
We prepare our unaudited condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles, which require our management to make estimates that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on available information. We evaluate these estimates on an ongoing basis.
We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. There are items within our unaudited condensed consolidated financial statements that require estimation but are not deemed critical, as defined above.
For a detailed discussion of our significant accounting policies and related judgments, see Note 2 of the Notes to Unaudited Condensed Consolidated Financial Statements in “Item 1. Financial Statements” of this report.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable. As a smaller reporting company, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“the Exchange Act”), that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives.
| 26 |
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we are required to perform an evaluation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Exchange Act, as of June 30, 2024.
Management has completed such evaluation and has concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is appropriate to allow timely decisions regarding required disclosures. As a result of the material weaknesses in internal controls over financial reporting described below, we concluded that our disclosure controls and procedures as of June 30, 2024 were not effective.
Material Weaknesses in Internal Control over Financial Reporting
A material weakness, as defined in the standards established by Sarbanes-Oxley, is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. The following material weaknesses in our internal control over financial reporting were present as of December 31, 2023 and continued to exist as of June 30, 2024:
| ● | Lack of adherence to formal policies and procedures; |
| ● | Lack of risk assessment procedures on internal controls to detect financial reporting risks in a timely manner; |
| ● | Lack of sufficient formal management testing over documented formal procedures and controls, and time to evaluate continuous effectiveness of controls to achieve complete and accurate financial reporting and disclosures, including documented controls over the preparation and review of journal entries and account reconciliations; and |
| ● | Lack of design and implementation of effective controls over the accounting for warrants issued in connection with equity financings. |
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Management’s Plan to Remediate the Material Weaknesses
Management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the material weaknesses are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions include:
| ● | Management personnel, including our Chief Financial Officer, are overseeing the financial reporting process and implementation of enhanced controls and governance; |
| ● | Engagement of external financial consulting firm with expertise in accounting for significant and complex non-routine transactions to continue to enhance financial reporting, financial operations and internal controls; and |
| ● | Documentation of key procedures and controls using a risk-based approach. |
Management is committed to maintaining a strong internal controls environment and implementing measures designed to help ensure that control deficiencies contributing to the material weaknesses are remediated as soon as possible. We have documented key procedures and controls using a risk-based approach and have, therefore, made progress toward remediation. We continue to implement our remediation plan, which includes continued engagement of an external financial consulting firm to enhance financial reporting and operations as well as design and implementation of controls. We will consider the material weaknesses remediated after the applicable controls operate for a sufficient period of time, and management has concluded, through testing, that the controls are operating effectively.
Management will continue to monitor and evaluate the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
Changes in Internal Control Over Financial Reporting
Other than described above, there have been no changes in our internal control over financial reporting that occurred during our second quarter of 2024 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1A. Risk Factors
An investment in our Common Stock involves a number of very significant risks. You should carefully consider the risk factors included in the “Risk Factors” section of Amendment No. 1 to our Annual Report on Form 10-K/A for the year ended December 31, 2023, as filed with the SEC on June 11, 2024, in addition to other information contained in that report and in this quarterly report in evaluating the Company and its business before purchasing shares of our Common Stock. The Company’s business, operating results and financial condition could be adversely affected due to any of those risks.
Item 2. Unregistered Sales of Equity Securities and Use Of Proceeds
During the three months ended June 30, 2024, we did not have any unregistered sales of equity securities.
Item 6. Exhibits
| Incorporated by Reference | ||||||||
Exhibit Number |
Exhibit Description | Form | Exhibit | Filing Date | ||||
| 3.1 | Amended and Restated Articles of Incorporation | 8-K | 3.3 | 1/5/2023 | ||||
| 3.2 | Certificate of Designations of Preferred Stock (Series B) | 8-K | 3.4 | 1/5/2023 | ||||
| 3.3 | Bylaws | 8-K | 3.5 | 1/5/2023 | ||||
| 31.1* | Certification of Principal Executive Officer | |||||||
| 31.2* | Certification of Principal Financial Officer | |||||||
| 32.1** | Section 1350 Certification of Principal Executive Officer and Principal Financial Officer | |||||||
| 101.INS | Inline XBRL Instance Document | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
| 104 | Cover Page Interactive Date File (embedded within the Inline XBRL document) | |||||||
| * | Filed herewith. |
| ** | In accordance with SEC Release 33-8238, Exhibit 32.1 is being furnished and not filed. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BIORESTORATIVE THERAPIES, INC. | ||
| By: | /s/ Lance Alstodt | |
| Lance Alstodt | ||
| Chief Executive Officer, President, and Chairman of the Board | ||
| (Principal Executive Officer) | ||
| Date: | August 13, 2024 | |
| By: | /s/ Robert E. Kristal | |
| Robert E. Kristal | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) | ||
| Date: | August 13, 2024 | |
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