BioRestorative Therapies, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Factors That May Affect Future Results and Financial Condition” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 30, 2022, 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; ● our possible lack of exclusive rights with regard to our licensed technology; ● 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; and ● our ability to navigate through the increasingly complex therapeutic regulatory environment. 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 Delaware 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. 20 Intellectual Property This report includes references to our federally registered trademarks, BioRestorative Therapies and Dragonfly design , BRTX-100 and ThermoStem . We also own an allowed trademark application for 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 March 31, 2022, our accumulated deficit was $138,962,278. 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 (non-embryonic) stem cells. 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 submitted an IND application to the FDA to obtain authorization to commence a Phase 2 clinical trial investigating the use of BRTX-100 , our lead cell therapy candidate, in the treatment of chronic lower back pain arising from degenerative disc disease. We have received such authorization from the FDA and have commenced such clinical trial through the execution of a CRO agreement with PRC Clinical, the commencement of clinical trial site identification, the purchase of manufacturing equipment and the expansion of our laboratory to include capabilities for clinical production. We have obtained a 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 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, and July 2021; 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 and June 2021; a notice of allowance also issued in January 2022 for a separate Japanese application in our ThermoStem Program and is expected to issue in the near future; Israeli patents related to our ThermoStem Program were issued in October 2019 and May 2020; a notice of allowance also issued in September 2021 for a separate Israeli application in our ThermoStem Program and is expected to issue in the near future; and European patents related to the ThermoStem Program were issued in April 2020 and January 2021. We have licensed 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 contemplated Phase 2 clinical trial with regard to BRTX-100 . Revenue We derived all of our revenue pursuant to a license agreement with the SCTC entered into in January 2012, as amended in November 2015. Pursuant to the license agreement, the SCTC granted to us a 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. 21 Results of Operations Comparison of the Three Months Ended March 31, 2022 to the Three Months Ended March 31, 2021 Our financial results for the three months ended March 31, 2022 are summarized as follows in comparison to the three months ended March 31, 2021: For The Three Months Ended March 31, 2022 2021 Revenues $ 16,000 $ 18,000 Operating Expenses: Marketing and promotion 469 2,600 Consulting 86,071 8,389 Research and development 775,337 165,254 General and administrative 4,207,916 14,896,413 Total Operating Expenses 5,069,793 15,072,656 Loss From Operations (5,053,793 ) (15,054,656 ) Other (Income) Expense: Interest expense 29,011 181,514 Gain on PPP loan forgiveness (250,000 ) - Amortization of debt discount - 417,160 Grant income (16,654 ) - Total Other (Income) Expense (237,643 ) 598,674 Net Loss $ (4,816,150 ) $ (15,653,330 ) Revenues For the three months ended March 31, 2022 and 2021, we generated $16,000 and $18,000, respectively, of royalty revenue in connection with our sublicense agreement. Marketing and Promotion Marketing and promotion expenses include advertising and promotion, marketing and seminars, meals, entertainment and travel expenses. For the three months ended March 31, 2022 and 2021, marketing and promotion expenses were insignificant. We expect that marketing and promotion expenses will increase in the future as we increase our marketing activities following full commercialization of our products and services. Consulting Consulting expenses consist of consulting fees and stock-based compensation to consultants. For the three months ended March 31, 2022, consulting expenses increased by $77,862, from $8,389 to $86,071, as compared to the three months ended March 31, 2021, primarily due to stock-based compensation of $72,818 issued to consultants during the three months ended March 31, 2022. 22 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 March 31, 2022, research and development expenses increased by $610,083, or 369%, from $165,254 to $775,337, as compared to the three months ended March 31, 2021, as we recommenced our research and development initiatives following the completion of our public offering of common stock and warrants in November 2021. We expect that our higher level of research and development expenses will continue in subsequent fiscal periods. General and Administrative General and administrative expenses consist primarily of salaries, bonuses, payroll taxes, severance costs and stock-based compensation to employees (excluding any cash or non-cash compensation of our Vice President of Research and Development and our laboratory staff), as well as corporate expenses such as legal and professional fees, investor relations and occupancy-related expenses. For the three months ended March 31, 2022, general and administrative expenses decreased by $10,688,497, or 72%, from $14,896,413 to $4,207,916, as compared to the three months ended March 31, 2021. The decrease is primarily due to a decrease of approximately $10.7 million in stock-based compensation resulting from the effect of the issuances of 586,959 stock options and 293,479 RSUs during the three months ended March 31, 2021. We expect that our general and administrative expenses will increase as we expand our staff, develop our infrastructure and incur additional costs to support the growth of our business. Interest expense For the three months ended March 31, 2022, interest expense decreased $152,503, or 84%, as compared to the three months ended March 31, 2021. The decrease was due to the exchange of our outstanding convertible debt for common and preferred shares and warrants in connection with our public offering in November 2021. Gain on PPP loan forgiveness Under the terms of the U.S. Small Business Administration’s Paycheck Protection Program (“PPP”), our $250,000 PPP loan was forgiven during the three months ended March 31, 2022. Amortization of debt discount Amortization of debt discount of $417,160 for the three months ended March 31, 2021 related to our convertible notes, which were exchanged for common and preferred shares and warrants in connection with our public offering in November 2021, resulting in no comparable expense during the three months ended March 31, 2022. Grant income Grant income of $16,654 during the three months ended March 31, 2022 consists of funding received under a $256,000 National Institutes of Health Small Business Technology Transfer (STTR) Phase 1 grant, which we were awarded in September 2021. 23 Liquidity and Capital Resources Liquidity We measure our liquidity in a number of ways, including the following: March 31, December 31, 2022 2021 Cash $ 19,322,520 $ 21,026,727 Working Capital $ 19,384,971 $ 21,104,086 Notes Payable (Gross) $ - $ 250,000 Availability of Additional Funds Based upon our accumulated deficit of $138,962,278 as of March 31, 2022, along with our forecast for continued operating losses and our need for financing to fund our contemplated clinical trials, we will eventually require additional equity and/or debt financing to continue our operations. 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 three months ended March 31, 2022 and 2021, our sources and uses of cash were as follows: Three Months Ended March 31, 2022 2021 Net cash used in operating activities $ (1,594,634 ) $ (813,701 ) Net cash used in investing activities (109,573 ) - Net cash provided by financing activities - 250,000 Net decrease in cash $ (1,704,207 ) $ (563,701 ) Operating Activities Net cash used in operating activities was $1,594,634 for the three months ended March 31, 2022, primarily due to cash used to fund the net loss of $4,816,150 and a non-cash gain of $250,000 on forgiveness of our PPP loan, which were partially offset by non-cash expenses of $3,430,925 related primarily to stock-based compensation and $40,591 of cash provided by changes in the levels of operating assets and liabilities, which was primarily due to increases in accounts payable and accrued expenses and other current liabilities, partially offset by increases in accounts receivable and prepaid and other current assets and a decrease in the lease liability. Net cash used in operating activities was $813,701 for the three months ended March 31, 2021, primarily due to cash used to fund the net loss of $15,653,330, which was partially offset by non-cash expenses of $14,522,963 primarily related to stock-based compensation expense and amortization of debt discount and $316,666 of cash provided by changes in the levels of operating assets and liabilities, primarily as a result of increases in accounts payable, accrued expenses and other current liabilities and decreases in accounts receivable, prepaid expenses and other current assets. 24 Investing Activities Net cash used in investing activities consisted of $109,573 of equipment purchases during the three months ended March 31, 2022. There were no cash flows from investing activities during the three months ended March 31, 2021. Financing Activities There were no cash flows from financing activities for the three months ended March 31, 2022. Net cash provided by financing activities for the three months ended March 31, 2021 consisted of $250,000 of net proceeds from a loan received under the U.S. Small Business Administration’s Paycheck Protection Program. Effects of Inflation We do not believe that inflation has had a material impact on our business, revenues or operating results during the periods presented. Significant Accounting Policies and Estimates Our significant accounting policies are more fully described in the notes to our unaudited condensed consolidated financial statements included herein for the quarter ended March 31, 2022, and in the notes to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on March 30, 2022. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders. 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.