Chapter 11 Filing
As previously disclosed, on March 20, 2020 (the “Petition Date”), BioRestorative Therapies, Inc. (the “Company”) filed a voluntary petition commencing
a case under chapter 11 of title 11 of the U.S. Code (the “Chapter 11 Case”) in the United States Bankruptcy Court for the Eastern District of New York (the
“Bankruptcy Court”).
Effectiveness of Amended Joint Plan of Reorganization
As previously disclosed, on August 7, 2020, the Company and Auctus Fund, LLC (“Auctus”), the Company’s largest unsecured creditor, and a shareholder, as of the Petition Date, filed an Amended Joint Plan of Reorganization of BioRestorative Therapies, Inc. and
Auctus Fund, LLC, dated August 7, 2020 (the “Plan”), and on October 30, 2020, the Bankruptcy Court entered an order (the “Confirmation Order”) confirming the Plan, as amended. Amendments to the Plan are reflected in the Confirmation Order. On November 16, 2020 (the “Effective Date”), the Plan became effective.
Pursuant to the Plan, as amended and confirmed by the Confirmation Order, the following has occurred:
(i) Auctus has provided $3,500,000 in funding to the Company (the “Initial Auctus Funding”) and is to provide, subject to certain conditions, additional funding to the Company in an amount equal to $3,500,000, less the sum of the
debtor-in-possession loans made to the Company by Auctus during the Chapter 11 Case (inclusive of accrued interest) (the “DIP Obligation”) (approximately $1,200,000 as of the Effective Date) and the costs incurred by Auctus as the
debtor-in-possession lender (the “DIP Costs”). In addition, four other persons and
entities (collectively, the “Other Lenders”) who held allowed general
unsecured claims have provided funding to the Company in the aggregate amount of approximately $348,000 (the “Other Funding” and together with the Initial Auctus Funding, the “Funding”). In consideration of the Funding, the Company has issued the following:
(a) secured convertible promissory notes of the Company
(each, a “Secured Convertible Note”) in the principal amount equal to the
Funding (110% of the Funding in the case of Auctus); the payment of the Secured Convertible Notes shall be secured by the grant of a security interest in substantially all of the Company’s assets; the Secured Convertible Notes have the following
features:
(b) warrants (each, a “Class A Warrant”) to purchase a number of shares of Common Stock equal to the amount of the Funding provided divided by
$0.0005 (a total of 7,000,000,000 Class A Warrants in consideration of the Initial Auctus Funding and a total of approximately 697,000,000 Class A Warrants in the aggregate in consideration of the Other Funding), such Class A Warrants having an
exercise price of $0.0005 per share; and
(c) warrants (each, a “Class B Warrant” and together with the Class A Warrants, the “Plan Warrants”) to purchase a number of shares of Common Stock equal to the Funding provided divided by $0.001 (a total of
3,500,000,000 Class B Warrants in consideration of the Initial Auctus Funding and a total of approximately 348,500,000 Class B Warrants in the aggregate in consideration of the Other Funding), such Class B Warrants having an exercise price of
$0.001 per share.
(ii) Auctus’ DIP Obligation has been exchanged for the following:
(a) a Secured Convertible Note in the principal amount of approximately $1,349,591
(110% of the DIP Obligation);
(b) a Class A Warrant to purchase 2,453,802,480 shares of Common Stock; and
(c) a Class B Warrant to purchase 1,226,901,240 shares of Common Stock (as to which 84,344,369 shares of Common Stock have been
exercised on a net exercise basis, pursuant to the terms of the Class B Warrant, with respect to the issuance of 81,796,200 shares of Common Stock).
In addition, Auctus shall be entitled to receive a Secured Convertible Note, a Class A Warrant and a Class
B Warrant in exchange for its allowed DIP Costs and allowed Plan costs in a manner in which the DIP Obligation was treated.
(iii) The claim arising from the secured promissory notes of the Company, dated February 20, 2020 and February 26, 2020, in the original principal amounts
of $320,200.49 and $33,561.50, respectively, issued to John Desmarais (“Desmarais”) (collectively, the “Desmarais Notes”), is being treated as an allowed secured claim in the aggregate amount of
$490,698.81 and is being exchanged for a Secured Convertible Note in such amount.
(iv) The claim arising from the promissory note issued in July 2017 by the Company to Desmarais in the original principal amount of $175,000 is being
treated as an allowed general unsecured claim in the amount of $245,191.78 and is being satisfied and exchanged for 24,519,200 shares of Common Stock.
(v) The claim arising from the promissory note issued in June 2016 by the Company to Tuxis Trust, an entity related to Desmarais, in the original
principal amount of $500,000 is being treated as follows:
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(a)
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$444,534.43 is being treated as an allowed general unsecured claim in such amount and exchanged for 44,453,400 shares of Common Stock; and;
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(b)
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$309,301.19 is being treated as an allowed secured claim in such amount and exchanged for a Secured Convertible Note in such amount.
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(vi) Holders of allowed general unsecured claims (other than Auctus and the Other Lenders) are receiving shares of Common Stock (in book entry form) in
an amount equal to the allowed amount of their respective claims multiplied by 100 (an aggregate 1,049,726,797 shares of Common Stock), with such shares being subject to a leak-out restriction prohibiting each holder from selling, without the
consent of the Company, more than 33% of its shares during each of the three initial 30 day periods following the Effective Date.
(vii) Auctus and the Other Lenders have been issued, in respect of their allowed general unsecured claims ($3,261,819 in the case of Auctus and an
aggregate of approximately $382,400 in the case of the Other Lenders), a convertible promissory note of the Company (each, an “Unsecured Convertible Note”)
in the allowed amount of the claim, which Unsecured Convertible Notes have the following material features:
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(a)
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maturity date of three years from the Effective Date;
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(b)
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interest at the rate of 5% per annum;
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(viii) The issuance of (a) the shares of Common Stock and the Unsecured Convertible Notes to the holders of allowed general unsecured claims and (b) the
Secured Convertible Notes and Plan Warrants to Auctus in exchange for the DIP Obligation and any Common Stock into which those Secured Convertible Notes and those Plan Warrants may be converted is exempt from the registration requirements of the
Securities Act of 1933, as amended, pursuant to Bankruptcy Code Section 1145. Such securities shall be freely transferable subject to Section 1145(b)(i) of the Bankruptcy Code.
The foregoing descriptions of
the Plan, the Confirmation Order, the Secured Convertible Notes, the Unsecured Convertible Notes, the Class A Warrants and the Class B Warrants do not purport to be complete and are qualified in their entirety by reference to the texts of the Plan
and the Confirmation Order, which are filed as Exhibit A to the Amended Disclosure Statement with respect to the Plan (filed as Exhibit 2.2
to the Company’s Current Report on Form 8-K for an event dated October 30, 2020) and Exhibit 2.1 to the Company’s Current Report on Form 8-K for an event dated October 30, 2020, respectively, and are incorporated herein by reference, and the texts of the forms of the Secured Convertible Note, the Unsecured Convertible Note, the Class A Warrant and the Class B Warrant, which are filed as Exhibits A, B, C and D,
respectively, to the Plan Supplement (filed as Exhibit 2.3 to the Company’s Current Report on Form 8-K for an event dated October 30, 2020) and are incorporated herein by reference.
Shares Outstanding
As of the Effective Date, there were 1,639,203,270 shares of Common Stock issued and outstanding. Pursuant
to the Plan, 1,049,726,797 shares of Common Stock are issuable in respect of allowed general unsecured claims. In addition, an aggregate of 15,226,203,720 shares of Common Stock (subject to increase based on the antidilution protection provisions of
the Plan Warrants) are issuable pursuant to the Class A Warrants and Class B Warrants issued as discussed above. Further, an indeterminate number of shares of Common Stock are issuable upon conversion of the Secured Convertible Notes and the
Unsecured Convertible Notes issued as discussed above.
See Item 1.03 above.