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, and its wholly-owned subsidiary, Stem Pearls, LLC, a New York limited liability company. Unless otherwise specified, all dollar amounts are expressed in United States dollars. 19 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 September 30, 2022, our accumulated deficit was $148.3 million. We have historically only generated a modest amount of revenue, and our losses have principally been operating expenses incurred in research and development, non-cash expenses such as stock-based compensation, 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 execution of clinical trial agreements, the enrollment of patients in the clinical trials, the purchase of manufacturing equipment, the expansion of our laboratory to include capabilities for clinical production and the certification of our clinical grade cell therapy manufacturing facility. 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, June 2021, and February 2022; Israeli patents related to our ThermoStem Program were issued in October 2019, May 2020, and March 2022; 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. 20 Results of Operations Comparison of the Three Months Ended September 30, 2022 to the Three Months Ended September 30, 2021 Our financial results for the three months ended September 30, 2022 are summarized as follows in comparison to the three months ended September 30, 2021: For The Three Months Ended September 30, 2022 2021 Revenues $ 29,000 $ 8,000 Operating Expenses: Research and development 989,170 237,410 General and administrative 3,649,530 3,459,277 Total Operating Expenses 4,638,700 3,696,687 Loss From Operations (4,609,700 ) (3,688,687 ) Other Expense: Interest expense 28,841 495,545 Total Other Expense 17,284 - Net Loss $ (4,655,825 ) $ (4,184,232 ) Revenues For the three months ended September 30, 2022 and 2021, we generated $29,000 and $8,000, respectively, of royalty revenue in connection with our sublicense agreement. We do not expect that such increased level of revenues related to this agreement will continue in future periods. 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. For the three months ended September 30, 2022, research and development expenses increased by $751,760, or 317%, from $237,410 to $989,170, as compared to the three months ended September 30, 2021, as we recommenced our research and development initiatives, including the engagement of PRC Clinical to serve as our CRO in connection with our clinical trials, 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 September 30, 2022, general and administrative expenses increased by approximately $0.2 million, or 5%, from approximately $3.5 million to approximately $3.7 million, as compared to the three months ended September 30, 2021. The increase is primarily due to an increase in stock-based compensation related to various consultants and executives during the three months ended September 30, 2022. 21 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 September 30, 2022, interest expense decreased $466,704, or 94%, as compared to the three months ended September 30, 2021. The decrease was due to the exchange of our outstanding interest-bearing convertible debt for common and preferred shares and warrants in connection with our public offering in November 2021. Comparison of the Nine Months Ended September 30, 2022 to the Nine Months Ended September 30, 2021 Our financial results for the nine months ended September 30, 2022 are summarized as follows in comparison to the nine months ended September 30, 2021: For The Nine Months Ended September 30, 2022 2021 Revenues $ 116,100 $ 41,000 Operating Expenses: Research and development 2,839,731 563,562 General and administrative 11,568,490 21,776,044 Total Operating Expenses 14,408,221 22,339,606 Loss From Operations (14,292,121 ) (22,298,606 ) Other (Income) Expense: Interest expense 104,465 1,601,551 Gain on PPP loan forgiveness (250,000 ) - Other expense 17,284 - Grant income (16,654 ) - Total Other (Income) Expense (144,905 ) 1,601,551 Net Loss $ (14,147,216 ) $ (23,900,157 ) Revenues For the nine months ended September 30, 2022 and 2021, we generated $116,100 and $41,000, respectively, of royalty revenue in connection with our sublicense agreement. We do not expect that such increased level of revenues related to this agreement will continue in future periods. 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. For the nine months ended September 30, 2022, research and development expenses increased by $2,276,169, or 404%, from $563,562 to $2,839,731, as compared to the nine months ended September 30, 2021, as we recommenced our research and development initiatives, including the engagement of PRC Clinical to serve as our CRO in connection with our clinical trials, 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. 22 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 nine months ended September 30, 2022, general and administrative expenses decreased by approximately $10.2 million, or 47%, from approximately $21.8 million to approximately $11.6 million, as compared to the nine months ended September 30, 2021. The decrease is primarily due to a decrease of approximately $10.5 million in stock-based compensation during the nine months ended September 30, 2022 as compared to September 30, 2021, which related to grants issued to our executives. 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 nine months ended September 30, 2022, interest expense decreased $1,497,086, or 93%, as compared to the nine months ended September 30, 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 nine months ended September 30, 2022. Grant income Grant income of $16,654 during the nine months ended September 30, 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. Liquidity and Capital Resources Liquidity We measure our liquidity in a number of ways, including the following: September 30, December 31, 2022 2021 Cash and cash equivalents $ 6,573,111 $ 21,026,727 Investments held in marketable securities $ 9,913,667 $ - Working Capital $ 16,170,645 $ 21,104,086 Notes Payable (Gross) $ - $ 250,000 Availability of Additional Funds Based upon our accumulated deficit of $148,293,344 as of September 30, 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. However, we believe we have sufficient liquidity to continue our operations for the next twelve months from the date of this report. 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. 23 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 nine months ended September 30, 2022 and 2021, our sources and uses of cash were as follows: Nine Months Ended September 30, 2022 2021 Net cash used in operating activities $ (4,297,412 ) $ (2,184,894 ) Net cash used in investing activities (10,156,204 ) - Net cash provided by financing activities - 250,000 Net decrease in cash $ (14,453,616 ) $ (1,934,894 ) Operating Activities Net cash used in operating activities was $4,297,412 for the nine months ended September 30, 2022, primarily due to cash used to fund the net loss of $14,147,216, which was partially offset by non-cash expenses of $9,554,582 related primarily to stock-based compensation and $349,543 of cash provided by changes in operating assets and liabilities. Net cash used in operating activities was $2,184,894 for the nine months ended September 30, 2021, primarily due to cash used to fund the net loss of $23,900,157 which was partially offset by non-cash expenses of $19,929,696 related primarily to stock-based compensation and $541,424 of cash provided by changes in operating assets and liabilities. Investing Activities Net cash used in investing activities consisted of $10,156,204 of equipment and marketable securities purchases during the nine months ended September 30, 2022. There were no cash flows from investing activities during the nine months ended September 30, 2021. Financing Activities There were no cash flows from financing activities during the nine months ended September 30, 2022. Net cash provided by financing activities during the nine months ended September 30, 2021 was $250,000, which related entirely to a loan received under the U.S. Small Business Administration’s Paycheck Protection Program. Significant Accounting Policies and Estimates Our significant accounting policies are fully described in the notes to our unaudited condensed consolidated financial statements included herein for the quarter ended September 30, 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 (“Annual Report”). As of September 30, 2022, t here were no changes to our critical accounting policies and estimates as disclosed in the Annual Report. 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. 24 Item 3. Quantitative and Qualitative Disclosures about Market Risk We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and as such are not required to provide the information under this item.