BioRestorative Therapies, Inc. 10-Q

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 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 U.S. Securities and Exchange Commission (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; ● 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. 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. 15 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 March 31, 2024, our accumulated deficit was $148,922,589. 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. 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 . 16 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 all of our revenue pursuant to a license agreement with 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. Results of Operations Comparison of the Three Months Ended March 31, 2024 to the Three Months Ended March 31, 2023 Our financial results for the three months ended March 31, 2024 are summarized as follows in comparison to the three months ended March 31, 2023: For the Three Months Ended March 31 2024 2023 (As Restated) Revenues $ 35,000 $ 31,300 Operating Expenses: Research and development 1,058,131 1,231,745 General and administrative 3,086,121 4,578,653 Total Operating Expenses 4,144,252 5,810,398 Loss From Operations (4,109,252 ) (5,779,098 ) Other (Income) Expense: Interest income (162,597 ) (18,216 ) Other income (149,021 ) (76,660 ) Gain on exchange of warrants (1,711,698 ) - Change in fair value of derivative liabilities 137,319 1,488,350 Total Other (Income) Expense (1,885,997 ) 1,393,474 Net Loss $ (2,223,255 ) $ (7,172,572 ) Revenues For the three months ended March 31, 2024 and 2023, we generated $35,000 and $31,300, respectively, of royalty revenue in connection with our sublicense agreement. 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, 2024, research and development expenses decreased by $173,614, or 14%, compared to the three months ended March 31, 2023. The decrease was primarily the result of a decrease in compensation costs of $237,383 related to a discretionary bonus during the 2023 period partially offset by an increase in laboratory expenses related to our Phase II clinical trial of $74,005. We expect that our research and development expenses will increase in subsequent fiscal periods. 17 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 March 31, 2024, general and administrative expenses decreased by $1,492,532, or 33%, as compared to the three months ended March 31, 2023, primarily driven by a decrease in stock-based compensation expense of $1,350,121 due to options granted in 2021 and 2022 that became fully vested in 2023 and a decrease in headcount costs of $243,171, partially offset by an increase in legal and professional fees expense of $64,628 primarily related to our warrant exercise program. Interest Income For the three months ended March 31, 2024, interest income was $162,597, compared to interest income of $18,216 for the three months ended March 31, 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 March 31, 2024, other income primarily related to gains from settlements of certain accrued expenses and realized and unrealized gain on investments. For the three months ended March 31, 2023, other income primarily related to gains from settlements of certain accrued expenses and unrealized gain on investments. Gain on Exchange of Warrants For the three months ended March 31, 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 three months ended March 31, 2024 and 2023, we recognized a loss on the change in fair value of derivative liabilities of $137,319 and $1,488,350, 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: March 31, December 31, 2024 2023 (As Restated) Cash and cash equivalents $ 1,157,080 $ 884,377 Investments held in marketable securities $ 15,261,220 $ 10,181,618 Working capital $ 13,322,124 $ 8,783,181 Working capital increased by $4,538,943 primarily due to the $7,518,489 of cash provided by financing activities which was partially offset by $2,317,780 of cash used to fund our operations. Availability of Additional Funds Based upon our accumulated deficit of $148,922,589 as of March 31, 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. 18 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, 2024 and 2023, our sources and uses of cash were as follows: Three months Ended March 31, 2024 2023 (As Restated) Net cash used in operating activities $ (2,317,780 ) $ (2,379,277 ) Net cash (used in) provided by investing activities (4,928,006 ) 2,539,169 Net cash provided by financing activities 7,518,489 - Net increase in cash $ 272,703 $ 159,892 Operating Activities Net cash used in operating activities was $2,317,780 for the three months ended March 31, 2024, primarily due to cash used to fund the net loss of $2,223,255, adjusted for net non-cash expenses of $381,174, and $475,699 of cash used in changes in operating assets and liabilities. Net cash used in operating activities was $2,379,277 for the three months ended March 31, 2023, primarily due to cash used to fund the net loss of $7,172,572, adjusted for net non-cash expenses of $4,871,267, and $77,972 of cash used in changes in operating assets and liabilities. Investing Activities Net cash used in investing activities was $4,928,006 for the three months ended March 31, 2024 compared to net cash provided by investing activities of $2,539,169 for the three months ended March 31, 2023, primarily due to a sale of marketable securities, which provided $5,800,00 of cash and a purchase of marketable securities which used $10,728,006 of cash. Financing Activities Net cash provided by financing activities was $7,518,489 for the three months ended March 31, 2024 compared to no cash provided by financing activities for the three months ended March 31, 2023, due to net proceeds received in connection with the exercise and issuance of warrants. Effects of Inflation We do not believe that inflation had a material impact on our business, revenues or operating results during the periods presented. 19 Critical Accounting Estimates We prepare our 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.