What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-04-12 compared with 2021-03-29 · 690 added, 520 removed, 928 unchanged (57% of the section changed)

7 unchanged sentences

Accounts receivable

Prepaid expenses

Total Current Assets

1 unchanged sentence

Right of use asset

Intangible assets, net

LIABILITIES AND STOCKHOLDERS’

1 unchanged sentence

Accounts payable

Accrued expenses and other current liabilities

Accrued expenses

and other current liabilities

Accrued interest

Lease liability

Notes payable, net of debt discount of $0 and $1,247,422, respectively

Derivative liabilities

Notes payable, net

of debt discount of $0 and $1,247,422, respectively

Debtor-in-possession

Total Current Liabilities

Lease liability, net of current portion

Total Liabilities Subject to Compromise

Lease liability,

net of current portion

subject to compromise

Commitments and Contingencies

Stockholders’

Preferred stock, $0.01 par value;

Preferred stock,

$0.01 par value;

Authorized, 20,000,000 shares;

issued and outstanding at March 31, 2020 and December 31, 2019

Common stock, $0.0001 par value;

none issued and outstanding at September 30, 2020 and December 31, 2019

Common stock, $0.0001

Authorized, 300,000,000,000 shares;

and outstanding 1,594,651,383 and 77,851,633, respectively

Additional paid in capital

Accumulated deficit

Issued and outstanding 1,594,651,383 and 77,851,633, respectively

Additional paid

(84,081,521 )

(78,570,146 )

Total Stockholders’

Stockholders’

(15,092,678 )

(12,776,146 )

Total Liabilities and Stockholders’

Liabilities and Stockholders’

accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

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AND SUBSIDIARY

(debtor-inpossession)

(DEBtor-in-possession)

Consolidated STATEMENTS OF OPERATIONS

Three Months Ended

March 31, 2020

March 31, 2019

the Three Months Ended

Operating expenses:

1 unchanged sentence

Research and development

General and administrative

Total operating expenses

and administrative

Total operating

Loss from operations

1 unchanged sentence

Interest expense

Amortization of debt discount

Loss on extinguishment of notes payable, net

Change in fair value of derivative liabilites

Amortization of

debt discount

Loss on extinguishment

of notes payable, net

Change in fair value

of derivative liabilites

Reorganization

Total other expense

1 unchanged sentence

$ (5,511,375 )

$ (13,097,335 )

Net Loss Per Share

2 unchanged sentences

Basic and Diluted

1,594,651,383

1,383,898,879

accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

2 unchanged sentences

AND SUBSIDIARY

(debtor-in-possession)

(debtor-inpossession)

Consolidated STATEMENTS of CHANGES IN STOCKHOLDERS’

Additional Paid-in

Total Shareholders’

Shareholders’

Balance at January 1, 2020

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Shares and warrants issued for cash

Shares issued in exchange of notes payable and accrued interest

Shares issued in exchange of notes payable

and accrued interest

1,515,799,750

4 unchanged sentences

(17,536,105 )

Stock-based compensation:

Balance as of June 30, 2020

1,594,651,383

(83,245,258 )

(14,441,181 )

Stock-based compensation:

Balance as of

September 30, 2020

1,594,651,383

$ (84,081,521 )

$ (15,092,678 )

Balance at January 1, 2019

2 unchanged sentences

Shares and warrants issued for cash

Shares issued in satisfaction of accrued consulting services

Shares issued in exchange for notes payable and accrued interest

Shares issued and recorded as debt discount in connection with a note payable issuances and

Reclassification of derivative liabilities to equity

Shares issued in satisfaction of accrued

consulting services

Shares issued in exchange for notes

payable and accrued interest

Shares issued and recorded as debt discount

in connection with a note payable issuances and extensions

Reclassification of derivative liabilities

Stock-based compensation:

1 unchanged sentence

(67,805,428 )

Shares and warrants issued for cash

Shares issued in exchange for notes

payable and accrued interest

Shares issued and recorded as debt discount

in connection with a note payable issuances

Reclassification of derivative liabilities

Stock-based compensation:

- common stock

Balance as of June 30, 2019

(71,962,618 )

Shares issued and recorded as debt discount

in connection with a note payable issuances

Reclassification of derivative liabilities

Stock-based compensation:

Balance as of

September 30, 2019

$ (77,019,591 )

$ (12,428,533 )

accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

4 unchanged sentences

Consolidated STATEMENTS OF CASH FLOWS

Three Months Ended

March 31, 2020

March 31, 2019

Cash flows from operating activities:

1 unchanged sentence

$ (13,097,335 )

Adjustments to reconcile net loss to net cash used in operating activities:

Amortization of debt discount

Accretion of interest expense

Depreciation and amortization

Adjustments to reconcile net loss to

net cash used in operating activities:

Amortization of

debt discount

Accretion of interest

Depreciation and

Stock-based compensation

Loss on extinguishment of note payables, net

Gain on settlement of payables

Change in fair value of derivative liabilities

Non-cash effect of right of use asset

Loss on extinguishment

of note payables, net

Gain on settlement

Write-off of derivative

Change in fair value

of derivative liabilities

Non-cash effect

of righ of use asset

Changes in operating assets and liabilities:

Accounts receivable

Prepaid assets and other current assets

Security deposit

Prepaid assets and

other current assets

Accounts payable

Accrued interest, expenses and other current liabilities

Net cash used in operating activities

interest, expenses and other current liabilities

Net cash used

in operating activities

Cash flows from investing activities:

of property and equipment

Net cash used

in investing activities

Cash flows from financing activities:

Proceeds from notes payable

Payments on notes payable

Sales of common stock and warrants for cash

Net cash provided by financing activities

Offering costs incurred

Proceeds from notes

Payments on notes

payable - principal

Payments on notes

payable - prepayment premiums

Proceeds from DIP

of common stock and warrants for cash

Net cash provided

by financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents - beginning of period

Cash and cash equivalents - end of period

Cash and cash

equivalents - beginning of period

Cash and cash

equivalents - end of period

Supplemental cash flow information:

1 unchanged sentence

Non-cash investing and financing activities:

Shares issued and recorded as debt discount in connection with notes payable

issuances and extensions

Shares issued in exchange for notes payable and accrued interest

Shares and warrants issued in satisfaction of accrued consulting services

Reclassification of derivative liabilities to equity

Bifurcated embedded conversion options and warrants recorded as derivative

liability and debt discount

Sale of warrants recorded as derivative liabilities

Warrants and options issued for consulting services recorded as derivative

Accrued interest reclassified to notes payable principal

Shares issued and

recorded as debt discount in connection with notes payable issuances and extensions

Shares issued in

exchange for notes payable and accrured interest

Shares and warrants

issued in satisfaction of accrued consulting services

Reclassification

of derivative liabilities to equity

Bifurcated embedded

conversion options and warrants recorded as derivative liability and debt discount

Sale of warrants

recorded as derivative liabilities

Offering costs in

accounts payable and accrued expenses

Original issue discount

in connection with notes payable

Warrants and options

issued for consulting services recorded as derivative liabilities

Accrued interest

reclassified to notes payable principal

accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

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30, 2020, the Company had an accumulated deficit of approximately $84,082,000 and working capital deficiency of approximately

$18,363,000 For the three months ended March 31, 2020, the Company had a loss from operations of approximately $819,000

and negative cash flows from operations of approximately $449,000.

The Company’s operating activities consume the

majority of its cash resources.

The Company anticipates that it will continue to incur operating losses as it executes its development

plans for 2021, as well as other potential strategic and business development initiatives.

In addition, the Company has had and

expects to have negative cash flows from operations, at least into the near future.

The Company has previously funded, and plans

to continue funding, these losses primarily through current cash on hand received subsequent to quarter end and additional

infusions of cash from equity and debt financing.

$15,860,000, which includes liabilities subject to compromise.

For the nine months ended September 30, 2020, the Company

had a loss from operations of approximately $1,898,000 and negative cash flows from operations of approximately $1,392,000.

The Company’s operating activities consume the majority of its cash resources.

The Company anticipates that it will continue

to incur operating losses as it executes its development plans for 2021, as well as other potential strategic and business development

In addition, the Company has had and expects to have negative cash flows from operations, at least into the near

The Company has previously funded, and plans to continue funding, these losses primarily through current cash on hand

received subsequent to quarter end and additional infusions of cash from equity and debt financing.

Company believes the following has been able to mitigate the above factors with regards to its ability to continue as a going

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of common stock;

(ii) the Company secured DIP financing during its Chapter 11 Case in the amount of $1,189,413 as well as an aggregate

amount of $3,848,548 in debt financing from Auctus and others as part of the Company’s Chapter 11 reorganization, to sustain

and (iii) pursuant to the plan of reorganization, Auctus is required to loan to the Company, as needed and subject

to the Company becoming current in its SEC reporting obligations, an additional amount equal to $3,500,000, less the amount of

Auctus’

DIP financing ($1,226,901, inclusive of accrued interest) and its DIP costs.

As a result of the above, the Company

believes it has sufficient cash to fund operations for the twelve months subsequent to the filing date.

In addition, the Company

is seeking further funding to commence and complete a Phase 2 clinical study of the use of BRTX-100.

(ii) the Company secured DIP financing during its Chapter 11 Case in the amount of $1,189,413, of which $1,114,713

was received prior to September 30, 2020, as well as an aggregate amount of $3,848,548 in debt financing from Auctus and others

as part of the Company’s Chapter 11 reorganization, to sustain operations;

and (iii) pursuant to the plan of reorganization,

Auctus is required to loan to the Company, as needed and subject to the Company becoming current in its SEC reporting obligations,

an additional amount equal to $3,500,000, less the amount of Auctus’

DIP financing ($1,226,901, inclusive of accrued interest)

and its DIP costs.

As a result of the above, the Company believes it has sufficient cash to fund operations for the twelve months

subsequent to the filing date.

In addition, the Company is seeking further funding to commence and complete a Phase 2 clinical

study of the use of BRTX-100.

is no assurance that these funds will be sufficient to enable the Company to fully complete its development activities or attain

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of Presentation

accompanying unaudited condensed consolidated financial information as of and for the three months ended March 31, 2020 and 2019

has been prepared in accordance with GAAP for interim financial information and with the instructions to Quarterly Report on Form

10-Q and Article 10 of Regulation S-X.

In the opinion of management, such financial information includes all adjustments (consisting

only of normal recurring adjustments) considered necessary for a fair presentation of our financial position at such dates and

the operating results and cash flows for such periods.

Operating results for the three months ended March 31, 2020 are not necessarily

indicative of the results that may be expected for the entire year or for any other subsequent interim period.

accompanying unaudited condensed consolidated financial information as of and for the three and nine months ended September 30,

2020 and 2019 has been prepared in accordance with GAAP for interim financial information and with the instructions to Quarterly

Report on Form 10-Q and Article 10 of Regulation S-X.

In the opinion of management, such financial information includes all adjustments

(consisting only of normal recurring adjustments) considered necessary for a fair presentation of our financial position at such

dates and the operating results and cash flows for such periods.

Operating results for the three months and nine ended September

30, 2020 are not necessarily indicative of the results that may be expected for the entire year or for any other subsequent interim

information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted

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Intercompany accounts and transactions have been eliminated upon consolidation.

Reclassifications

the nine months ended September 30, 2020, the Company reclassified $2,580,110 related to the write-off of unamortizaed debt discount

on convertible notes to reorganization items on the unaudited condensed consolidated statements of operations.

This amount was

previously recorded as interest expense in the Company’s Quarterly Report on Form 10-Q filed with the SEC on March 29, 2021.

This reclassification had no effect on net loss or cash flows as previously reported.

11 Accounting

unaudited condensed consolidated financial statements included herein have been prepared as if we were a going concern and in

accordance with Accounting Standards Codification (“ASC”) 852, Reorganizations .

industry conditions in 2019 negatively impacted the Company’s results of operations and cash flows and may continue to do

so in the future.

In order to decrease the Company’s indebtedness and maintain the Company’s liquidity levels suifficient

to meet its commitments, the Company undertook a number of actions, including minimizing capital expendtiures and further reducing

its recurring operating expenses.

The Company believed that even after taking these actions, it would not have sufficient liquidity

to satisfy its debt service obligations and meet its other financial obligations.

On March 20, 2020 (the “Petition Date”),

the Company filed a voluntary petition commencing a case under chapter 11 of title 11 of the U.S.

Code in the United States Bankruptcy

Court for the Eastern District of New York.

On August 7, 2020, the Company and Auctus, the Company’s largest unsecured creditor

and a stockholder as of the Petition Date, filed an Amended Joint Plan of Reorganization (the “Plan”).

Reorganization

Company incurred costs after the Petition Date associated with the reorganization, primarily unamortized debt discount and postpetition

professional fees.

In accordance with applicable guidance, costs associated with the bankruptcy proceedings have been recorded

as reorganization items, net within the accompanying unaudited condensed consolidated statements of operations for the three and

nine months ended September 30, 2020.

Reorganization items, net for the three and nine months ended September 30, 2020, were ($183,387)

and $597,919, respectively, representing cash used in operating activities.

Reorganization

items, net for the three and nine months ended September 30, 2020, consisted of the following:

Months Ended September 30, 2020

Professional fees

Write-off of derivative liability

Default interest and penalties

debt discount on convertible notes

reorganization items, net

Subject To Compromise

unsecured and secured obligation that may be impacted by the Chapter 11 case have been classified as liabilities subject to compromise

on the Company’s unaudited condensed consolidated balance sheets.

These liabilities are reported at the amounts allowed

as claims by the Bankruptcy Court.

subject to compromise as of September 30, 2020 were $14,700,000, which consisted of:

Accounts payable

Accrued expenses and other current

Unsecured notes payable

Accrued interest,

default interest, default principal

liabilities subject to compromise

preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates

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part of ASC Topic 606, the Company has adopted several practical expedients including:

● Significant

Financing Component –

the Company does not adjust the promised amount of consideration

for the effects of a significant financing component since the Company expects, at contract

inception, that the period between when the Company transfers a promised good or service

to the customer and when the customer pays for that good or service will be one year

● Unsatisfied

the Company does not adjust the promised amount of consideration for the effects of a significant

financing component since the Company expects, at contract inception, that the period between when the Company transfers a

promised good or service to the customer and when the customer pays for that good or service will be one year or less.

Performance Obligations –

all performance obligations related to contracts with

a duration for less than one year, the Company has elected to apply the optional exemption

provided in ASC Topic 60 and therefore, is not required to disclose the aggregate amount

of transaction price allocated to performance obligations that are unsatisfied or partially

satisfied at the end of the reporting period.

all performance obligations related to contracts with a duration for less than one year, the

Company has elected to apply the optional exemption provided in ASC Topic 606 and therefore, is not required to disclose the

aggregate amount of transaction price allocated to performance obligations that are unsatisfied or partially satisfied at

the end of the reporting period.

to Invoice –

the Company has a right to consideration from a customer in an amount

that corresponds directly with the value to the customer of the Company’s performance

completed to date.

The Company may recognize revenue in the amount to which the entity

has a right to invoice.

the Company has a right to consideration from a customer in an amount that corresponds directly with the

value to the customer of the Company’s performance completed to date.

The Company may recognize revenue in the amount

to which the entity has a right to invoice.

Modifications

were no contract modifications during the three months ended March 31, 2020.

Contract modifications are not routine in the performance

of the Company’s contracts.

were no contract modifications during the three and nine months ended September 30, 2020.

Contract modifications are not routine

in the performance of the Company’s contracts.

Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.

There were no cash equivalents as of March 31, 2020 or December 31, 2019.

There were no cash equivalents as of September 30, 2020 or December 31, 2019.

receivable are reported at their outstanding unpaid principal balances, net of allowances for doubtful accounts.

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The Company did not record

an allowance for doubtful accounts as of March 31, 2020 and December 31, 2019, respectively.

an allowance for doubtful accounts as of September 30, 2020 and December 31, 2019, respectively.

and Equipment

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depending on the nature of the assets.

the three months ended March 31, 2020 and 2019, the Company did not record a loss on impairment.

Company records its intangible assets at cost in accordance with Accounting Standards Codification (“ASC”) 350, Intangibles

the three and nine months ended September 30, 2020 and 2019, the Company did not record a loss on impairment.

Company records its intangible assets at cost in accordance with ASC 350, Intangibles –

Goodwill and Other.

Definite lived intangible assets are amortized over their estimated useful life using the straight-line

method, which is determined by identifying the period over which the cash flows from the asset are expected to be generated.

Definite lived

intangible assets are amortized over their estimated useful life using the straight-line method, which is determined by identifying

the period over which the cash flows from the asset are expected to be generated.

and Marketing Costs

1 unchanged sentence

Advertising and marketing expenses were $28,281 and $280,865

for the three months ended March 31, 2020 and 2019, respectively, and are recorded in marketing and promotion on the unaudited

condensed consolidated statements of operations.

for the nine months ended September 30, 2020 and 2019, respectively.

Advertising and marketing expenses were $150 and $156,179

for the three months ended September 30, 2020 and 2019, respectively.

The above advertising and marketing expenses are recorded

in marketing and promotion on the unaudited condensed consolidated statements of operations.

Value Measurements

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common stock equivalents is anti-dilutive with respect to losses, options, warrants, and convertible notes have been excluded

from the Company’s computation of net loss per common share for the three months ended March 31, 2020 and 2019.

from the Company’s computation of net loss per common share for the nine months ended September 30, 2020 and 2019.

following table summarizes the securities that were excluded from the diluted per share calculation because the effect of including

these potential shares was antidilutive due to the Company’s net loss position even though the exercise price could be less

than the average market price of the common shares:

Three Months Ended March 31,

Convertible notes

20,614,707,544 (1)

these potential shares was antidilutive:

Convertible notes –

35,373,991 (1)

notes - warrants

Convertible notes –

35,373,991 (1)

As of March 31, 2020 and 2019, many of the convertible notes had variable conversion prices and the shares issuable were estimated

Convertible notes

As of September 30, 2019, many of the convertible notes had variable conversion prices and the shares issuable were estimated

based on the market conditions.

Pursuant to the note agreements, there were 360,796,730 and 56,462,559 shares of common

stock reserved for future note conversions as of March 31, 2020 and 2019, respectively.

Pursuant to the note agreements, there were 110,370,828 shares of common stock reserved

for future note conversions as of September 30, 2019, respectively.

Company applies the provisions of ASC 718, Compensation—Stock Compensation (“ASC 718”), which requires the measurement

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that a deferred tax asset will not be realized.

At March 31, 2020 and December

31, 2019, the Company’s net deferred tax asset has been fully reserved.

At September 30, 2020 and

December 31, 2019, the Company’s net deferred tax asset has been fully reserved.

uncertain tax positions that meet a “more likely than not”

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All of the leases are classified as operating leases.

has a lease agreement for office space with a remaining term of 4.75 years as of March 31, 2020.

has a lease agreement for office space with a remaining term of 4.25 years as of September 30, 2020.

Issued Accounting Standards

January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill

Impairment, which eliminated the calculation of implied goodwill fair value.

Instead, companies will record an impairment charge

based on the excess of a reporting unit’s carrying amount of goodwill over its fair value.

This guidance simplifies the

accounting as compared to prior GAAP.

The guidance is effective for fiscal years beginning after December 15, 2019.

This standard,

adopted as of January 1, 2020, had no material impact on the Company’s unaudited condensed consolidated financial statements.

newly issued but not yet effective accounting pronouncements have been deemed to be not applicable or immaterial to the Company.

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assets consist of the following:

Patents and Trademarks

Accumulated Amortization

and Trademarks

Balance as of January 1, 2019

Amortization expense

Balance as of December 31, 2019

Amortization expense

Balance as of March 31, 2020

Weighted average remaining amortization period at March 31, 2020 (in years)

Balance as of September 30, 2020

Weighted average remaining amortization

period at September 30, 2020 (in years)

of intangible assets consists of the following:

Patents and Trademarks

Accumulated Amortization

and Trademarks

Balance as of January 1, 2019

Amortization expense

Balance as of December 31, 2019

Amortization expense

Balance as of March 31, 2020

Balance as of September 30, 2020

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

expenses and other current liabilities consist of:

Accrued payroll

Accrued research and development expenses

Accrued general and administrative expenses

Accrued director compensation

Total accrued expenses

Accrued research

and development expenses (1)

Accrued general

and administrative expenses (1)

Accrued director

compensation (1)

accrued expenses

to ASC 852, Reorganizations , as of September 30, 2020, the Company reclassified

all allowable prepetition claims to liabilities subject to compromise on the consolidated

balance sheets.

NOTES PAYABLE

summary of the notes payable activity during the three months ended March 31, 2020 is presented below:

Related Party Notes

Convertible Notes

Debt Discount

summary of the notes payable activity during the nine months ended September 30, 2020 is presented below:

Outstanding, January 1, 2020

3 unchanged sentences

Conversions to equity

Extinguishment of notes payable

Recognition of debt discount

Accretion of interest expense

Amortization of debt discount

Outstanding, March 31, 2020

of March 31, 2020 and December 31, 2019, related party notes consisted of notes payable issued to certain directors of the Company,

family members of an officer of the Company, and the Tuxis Trust (the “Trust”).

A former director and principal stockholder

of the Company (the “Director/Principal Stockholder”) serves as a trustee of the Trust, which was established for

the benefit of his immediate family.

the three months ended March 31, 2020, the Company issued to a former board member notes payable in the aggregate principal amount

of $353,762, which bore interest at the rate of 12% per annum and provided for original maturity date of March 10, 2020.

March 31, 2020, these notes are in default.

Subsequent to March 31, 2020, pursuant to the Bankruptcy (See Note 10 - Subsequent

Events), these notes were exchanged for a Secured Convertible Note in a principal amount of $490,698.

the three months ended March 31, 2020, the Company issued to a certain lender a convertible note payable in the principal amount

Extinguishment of

notes payable

Recognition of debt

Accretion of interest

Amortization of

debt discount

Reclassification

to liabilities subject to compromise

Outstanding, September 30, 2020

11 Reorganization

March 20, 2020, the Company filed a voluntary petition commencing a case under chapter 11 of title 11 of the U.S.

United States Bankruptcy Court for the Eastern District of New York.

On August 7, 2020, the Company and Auctus, the Company’s

largest unsecured creditor and a stockholder as of the Petition Date, filed an Amended Joint Plan of Reorganization (the “Plan”).

Pursuant to the Bankruptcy (see Note 10 –

Subsequent Events), for any outstanding principal and interest at the date of

the Company’s Chapter 11 petition (except for creditors who provided additional debt financing in connection with the Bankruptcy),

100 shares of the Company’s common stock were issued for each dollar of allowed claim, with such shares subject to leak-out

restrictions prohibiting the holder from selling, without the consent of the Company, more than 33% of the issued shares during

each of the three initial 30 day periods following the Effective Date.

As a result of the Chapter 11 petition, the conversion

rights for the notes described in this Note 5 –

Notes Payable –

Convertible Notes –

Embedded Conversion options

and Note Provisions were rescinded and were subject to the conversion rights outlined above.

As a result of the chapter 11 reorganization,

pursuant to ASC 852, Reorganizations , the Company has recorded all prepetition liabilities at the expected allowable claim

amounts as of September 30, 2020.

This resulted in the Company amortizing the remaining debt discount of $2,583,107 to interest

expense on the unaudited condensed consolidated statements of operations.

In addition, pursuant to ASC 852, Reorganizations ,

as of September 30, 2020, the Company has reclassified the outstanding prepetition notes payable to liabilities subject to compromise

on the consolidated balance sheets.

of September 30, 2020 and December 31, 2019, related party notes consisted of notes payable issued to certain directors of the

Company, family members of an officer of the Company, and the Tuxis Trust (the “Trust”).

A former director and principal

stockholder of the Company (the “Director/Principal Stockholder”) serves as a trustee of the Trust, which was established

for the benefit of his immediate family.

the nine months ended September 30, 2020, the Company issued to a former board member notes payable in the aggregate principal

amount of $353,762, which bore interest at the rate of 12% per annum and provided for original maturity date of March 10, 2020.

As of September 30, 2020, these notes are in default.

Subsequent to September 30, 2020, pursuant to the Bankruptcy (See

Note 10 - Subsequent Events), these notes were exchanged for a Secured Convertible Note in a principal amount of $490,698.

the nine months ended September 30, 2020, the Company issued to a certain lender a convertible note payable in the principal amount

of $88,000 for aggregate cash proceeds of $85,000 The difference was recorded as a debt discount and will be amortized over the

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The convertible note contained a cross-default

provision and was in default as of March 31, 2020.

As a result, the convertible note bore a default interest of 22% per annum.

Subsequent to March 31, 2020, pursuant to the Bankruptcy (see Note 10 - Subsequent Events), the convertible note, in the aggregate

amount of $155,000 (including principal and accrued interest), was exchanged for 15,500,000 chares of the Company’s common

provision and was in default as of September 30, 2020.

As a result, the convertible note bore a default interest of 22%

Subsequent to September 30, 2020, pursuant to the Bankruptcy (see Note 10 - Subsequent Events), the convertible note,

in the aggregate amount of $155,000 (including principal and accrued interest), was exchanged for 15,500,000 chares of the Company’s

common stock.

See below within Note 7- Derivative Liabilities for additional details regarding the ECO of the convertible note.

Conversion Options and Note Provisions

of March 31, 2020, outstanding convertible notes in the aggregate principal amount of $5,611,168 were convertible into shares

of common stock of the Company as follows:

(i) $911,485 of aggregate principal amount of convertible notes were convertible at

a fixed price ranging from $0.25 to $2.00 per share for the first six months following the respective issue date, and thereafter

at a conversion price generally equal to 58% of the fair value of the Company’s stock, subject to adjustment, until the

respective note had been paid in full, (ii) $4,096,724 of aggregate principal amount of convertible notes were convertible generally

at a range of 58% to 65% of the fair value of the Company’s stock, subject to adjustment, depending on the note, and (iii)

$602,959 of aggregate principal amount of convertible notes were convertible into shares of common stock of the Company at a conversion

price ranging from $0.50 to $0.60 per share, subject to adjustment, and five-year warrants to purchase common stock of the Company

in the same ratio.

The warrants provide for an exercise price ranging from $0.75 to $0.80 per share, subject to adjustment.

notes in the aggregate principal amount of $340,000 provided for a mandatory conversion into common stock of the Company and warrants

to purchase common stock of the Company in the same ratio upon the completion of an underwritten public offering by the Company

of its securities whereby the conversion price was to be equal to the lower of the respective original conversion terms, or 75%

of the offering price for the shares of common stock of the Company, or units of shares of common stock of the Company and warrants,

as the case may be, sold pursuant to the public offering.

The Company analyzes the ECOs of its convertible notes at issuance to

determine whether the ECO should be bifurcated and accounted for as a derivative liability or if the ECO contains a beneficial

conversion feature.

See below within this Note 5 –

Notes Payable –

Convertible Notes –

Embedded Conversion Options

and Note Provisions and Note 7 –

Derivative Liabilities for additional details regarding the ECOs of the convertible notes.

of March 31, 2020, a portion of convertible notes with an aggregate principal balance of $1,386,500, which were not yet convertible,

were to become convertible into shares of the Company’s common stock subsequent to March 31, 2020 at a conversion price

generally equal to 58% of the fair value of the Company’s stock, subject to adjustment, until the respective notes had been

paid in full.

of March 31, 2020, outstanding convertible notes in the aggregate principal amount of $1,263,750 had prepayment premiums, whereby,

in the event that the Company elected to prepay certain notes during the one hundred eighty-day period following the issue date,

the respective holder was entitled to receive a prepayment premium of up to 135%, depending on the note, on the then outstanding

principal balance including accrued interest.

of March 31, 2020, outstanding convertible notes in the aggregate principal amount of $4,324,882 had most favored nation (“MFN”)

provisions, whereby, so long as such respective note was outstanding, upon any issuance by the Company of any security with certain

identified provisions more favorable to the holder of such security, then at the respective holder’s option, those more

favorable terms were to become a part of the transaction documents with the holder.

As of March 31, 2020, notes with applicable

MFN provisions were convertible using MFN conversion prices equal to 58% of the fair market value of the Company’s stock,

the three months ended March 31, 2020, the Company determined that certain ECOs of issued or extended convertible notes were derivative

The aggregate issuance date value of the bifurcated ECOs was $2,493,531, of which $2,377,818 was recorded as a debt

discount and is being amortized over the terms of the respective convertible notes.

As of March 31, 2020, outstanding notes totaling

$4,201,019 were in default.

See Note 7 –

Derivative Liabilities for additional details.

conversion rights discussed above were subject to the Company’s Chapter 11 reorganization discussed below.

Exchanges and Other

the three months ended March 31, 2020, the Company and certain lenders exchanged convertible notes with bifurcated ECOs with an

aggegate net carrying amount of $1,580,587 (including an aggregate of $523,516 of principal less debt discount of $234,301, $126,043

of accrued interest and $1,165,329 related to the separated ECOs accounted for as derivative liabilities) for an aggregate of

1,515,799,750 shares of the Company’s common stock at conversion prices ranging from $0.0001 and $0.01 per share.

prior to the Petition Date, certain lenders intended to exchange outstanding debt (inclusive of accrued interest) for shares of

the Company’s common stock;

however, the Company did not have sufficient shares authorized or reserved to effect the exchanges.

As such, the outstanding debt was exchanged as part of the Plan at a rate of 100 shares for each dollar of the allowable claim

at the Effective Date.

11 Reorganization

March 20, 2020, the Company filed a voluntary petition commencing a case under chapter 11 of title 11 of the U.S.

United States Bankruptcy Court for the Eastern District of New York.

Pursuant to the Bankruptcy (see Note 10 –

Events), for any outstanding principal and interest at the date of the Company’s Chapter 11 petition (except for creditors

who provided additional debt financing in connection with the Bankruptcy), 100 shares of the Company’s common stock

were issued for each dollar of allowed claim, with such shares subject to leak-out restrictions prohibiting the holder

from selling, without the consent of the Company, more than 33% of the issued shares during each of the three initial 30 day periods

following the Effective Date.

As a result of the chapter 11 reorganization, pursuant to ASC 852, Reorganizations , the

Company has recorded all prepetition liabilities at the expected allowable claim amounts as of March 31, 2020.

This resulted in

the Company amortizing the remaining debt discount of $2,583,107 to interest expense on the unaudited condensed consolidated statements

of operations.

the nine months ended September 30, 2020, the Company and certain lenders exchanged convertible notes with bifurcated

ECOs with an aggegate net carrying amount of $1,580,587 (including an aggregate of $523,516 of principal less debt discount of

$234,301, $126,043 of accrued interest and $1,165,329 related to the separated ECOs accounted for as derivative liabilities) for

an aggregate of 1,515,799,750 shares of the Company’s common stock at conversion prices ranging from $0.0001 and $0.01 per

In addition, prior to the Petition Date, certain lenders intended to exchange outstanding debt (inclusive of accrued interest)

for shares of the Company’s common stock;

however, the Company did not have sufficient shares authorized or reserved to

effect the exchanges.

As such, the outstanding debt was exchanged as part of the Plan at a rate of 100 shares for each dollar

of the allowable claim at the Effective Date.

Debtor-in-Possession

the nine months ended September 30, 2020, and subsequent to the Petition Date, in connection with the Chapter 11 Case, the Company

received debtor-in-possession loans of $1,114,713 in the aggregate from Auctus.

proceeds from the DIP Funding were used (a) for working capital and other general purposes of the Company;

(b) United States Trustee

interest, fees, costs and expenses incurred in connection with the DIP Funding, including professional fees.

maturity date of the DIP Funding was to be the earliest to occur of (a) July 6, 2020;

(b) ten days following entry of an order

confirming a chapter 11 plan in the Chapter 11 Case;

or the Company’s assets;

or (d) the occurrence of an event of default under the promissory note evidencing the DIP Funding

(the “DIP Note”) following any applicable grace or cure periods.

on the outstanding principal amount of the DIP Note was to be payable in arrears on the maturity date at the rate of 8% per annum.

Upon the occurrence and during the continuance of an event of default, all obligations under the DIP Note were to bear interest

at a rate equal to the then current rate plus an additional 2% per annum.

expense for the three and nine months ended September 30, 2020, related to the DIP Funding was $19,080 and $25,849, respectively.

to the Plan, the obligation to Auctus with respect to the DIP Funding has been exchanged for a Second Convertible Note (See Note

Subsequent Events).

Stockholders’

to March 31, 2020 and pursuant to the Chapter 11 plan of reorganization (see Note 10 - Subsequent Events), the Company filed a

Certificate of Amendment to its Certificate of Incorporation pursuant to which, among other things, the number of shares of common

stock authorized to be issued by the Company has been increased to 300,000,000,000 and the par value of the shares of its common

stock has been reduced to $0.0001 per share.

The effect of the change in par value has been reflected in the statement of changes

in stockholders’

deficit for the three months ended March 31, 2020 and 2019.

to September 30, 2020 and pursuant to the Chapter 11 plan of reorganization (see Note 10 - Subsequent Events), the Company filed

a Certificate of Amendment to its Certificate of Incorporation pursuant to which, among other things, the number of shares of

common stock authorized to be issued by the Company has been increased to 300,000,000,000 and the par value of the shares of its

common stock has been reduced to $0.0001 per share.

The effect of the change in par value has been reflected in the statement

of changes in stockholders’

deficit for the three and nine months ended September 30, 2020 and 2019.

and Option Valuation

12 unchanged sentences

Stock and Warrant Offering

the three months ended March 31, 2020, the Company issued 1,000,000 shares of the Company’s common stock and a five-year

the nine months ended September 30, 2020, the Company issued 1,000,000 shares of the Company’s common stock and a five-year

immediately vested warrant for the purchase of 1,000,000 shares of the Company’s common stock with an exercise price of

5 unchanged sentences

applying the Black-Scholes option pricing model to warrants granted or issued, the Company used the following assumptions:

For the Three Months Ended

the Three Months Ended

the Nine Months Ended

Risk free interest rate

2.47% - 2.62 %

Contractual term (years)

Expected volatility

Expected dividends

weighted average estimated fair value of the warrants granted during the three months ended March 31, 2020 and 2019 was approximately

weighted average estimated fair value of warrants granted during the three months ended September 30, 2020 and 2019 was

$- and $0.28 per share, respectively.

summary of the warrant activity during the three months ended March 31, 2020 is presented below:

The weighted average estimated fair value of the warrants granted during the nine

months ended September 30, 2020 and 2019 was approximately $0.01 and $0.41 per share, respectively.

summary of the warrant activity during the nine months ended September 30, 2020 is presented below:

Outstanding, January

Outstanding, March 31, 2020

Exercisable, March 31, 2020

following table presents information related to stock warrants at March 31, 2020:

Warrants Outstanding

Warrants Exercisable

Remaining Life

$0.00 - $0.015

September 30, 2020

following table presents information related to stock warrants at September 30, 2020:

$0.00 - $0.015

6 unchanged sentences

applying the Black-Scholes option pricing model to stock options granted, the Company used the following assumptions:

For the Three Months Ended

the Three Months Ended

the Nine Months Ended

Risk free interest rate

2.21% - 2.62 %

Expected term (years)

Contractual term (years)

Expected volatility

Company did not issue stock options during the three months ended March 31, 2020.

weighted average estimated fair value of the stock options granted during the three months ended March 31, 2019 was approximately $44,247

summary of the option activity during the three months ended March 31, 2020 is presented below:

Company did not issue stock options during the nine months ended September 30, 2020.

weighted average estimated fair value of the stock options granted during the nine months ended September 30, 2019 was approximately

summary of the option activity during the nine months ended September 30, 2020 is presented below:

Outstanding, January

Outstanding, March 31, 2020

Exercisable, March 31, 2020

following table presents information related to stock options at March 31, 2020:

Options Outstanding

Options Exercisable

Remaining Life

September 30, 2020

following table presents information related to stock options at September 30, 2020:

$0.26 - $0.74

4 unchanged sentences

following table presents information related to stock option expense:

Weighted Average

For the Three Months Ended

Unrecognized at

the Three Months Ended

the Nine Months Ended

Research and development

General and administrative

administrative

DERIVATIVE LIABILITIES

3 unchanged sentences

Issuance of derivative liabilities

Extinguishment of derivative liabilities in connection with convertible note repayments and exchanges

Extinguishment of derivative liabilities

in connection with convertible note repayments and exchanges

Change in fair value of derivative liabilities

Reclassification of derivative liabilities to equity

Beginning balance as of March 31, 2020

of derivative liabilities pursuant to ASC 852

Ending balance as of September

applying the Multinomial Lattice and Black-Scholes option pricing models to derivatives issued and outstanding during the three

months ended March 31, 2020 and 2019, the Company used the following assumptions:

For the Three Months Ended

and nine months ended September 30, 2020 and 2019, the Company used the following assumptions:

the Three Months Ended

the Nine Months Ended

Risk free interest rate

0.06% - 2.16%

2.21% - 2.62%

Expected term (years)

Contractual term (years)

Expected volatility

Expected dividends

the three months ended March 31, 2020, the Company recorded new derivative liabilities in the aggregate amount of $2,473,532 and

$10,000 related to the ECOs of certain convertible notes payable and warrants subject to sequencing, respectively.

the nine months ended September 30, 2020, the Company recorded new derivative liabilities in the aggregate amount of $2,473,532

and $10,000 related to the ECOs of certain convertible notes payable and warrants subject to sequencing, respectively.

Notes Payable –

4 unchanged sentences

issued and deemed to be derivative liabilities.

the three months ended March 31, 2020, the Company extinguished an aggregate of $1,165,329 of derivative liabilities in connection

the nine months ended September 30, 2020, the Company extinguished an aggregate of $1,165,329 of derivative liabilities in connection

with the exchanges of certain convertible notes payable into shares of the Company’s common stock.

2 unchanged sentences

Conversions, Exchanges and Other for additional details.

March 31, 2020, the Company recomputed the fair value of ECOs recorded as derivative liabilities to be $4,375,231.

recorded a loss on the change in fair value of these derivative liabilities of $2,141,069 for the three months ended March 31,

March 31, 2020, the Company recomputed the fair value of the derivative liabilities related to outstanding warrants to be $-.

These warrants are either redeemable for cash equal to the Black-Scholes value, as defined, at the election of the warrant holder

upon a fundamental transaction pursuant to the warrant terms or were issued subsequent to the commencement of sequencing.

Company did not record a gain or loss on the change in fair value of these derivative liabilities for the three months ended March

the nine months ended September 30, 2020 and prior to the Petition Date, the Company recomputed the fair value of ECOs recorded

as derivative liabilities to be $4,375,231.

The Company recorded a loss on the change in fair value of these derivative liabilities

of $2,141,069.

the nine months ended September 30, 2020 and subsequent to the Petition Date, pursuant to ASC 852, Reorganziations , the

Company wrote-off $4,375,231 of derivative liabilities related to the convertible notes included in the Chapter 11 Reorganization

allowable claims.

The Company recorded the write-off in reorganization items, net on the unaudited condensed consolidated statement

of operations as of September 30, 2020.

8 - COMMITMENTS AND CONTINGENCIES

Company is a party to a lease for 6,800 square feet of space located in Melville, New York (the “Melville Lease”)

with respect to its corporate and laboratory operations.

The Melville Lease was scheduled to expire in March 2020 (subject to

extension at the option of the Company for a period of five years) and provided for an annual base rental during the initial term

ranging between $132,600 and $149,260.

In June 2019, the Company exercised its option to extend the Melville Lease and entered

into a lease amendment with the lessor whereby the five-year extension term commenced on January 1, 2020 with annual base rent

ranging between $153,748 and $173,060.

Rent expense for the Melville office was $- and $30,000 for the three months ended March

31, 2020 and 2019, respectively.

See Note 9 –

Leases for additional detail.

Claims and Assessments

25 unchanged sentences

Company records legal costs associated with loss contingencies as incurred and accrues for all probable and estimable settlements.

of March 31, 2020 and December 31, 2019, the Company had remaining accruals of approximately $0 and $27,000, respectively, for

bonus milestones which were achieved in prior years and remain unpaid.

of September 30, 2020 and December 31, 2019, the Company had remaining accruals of approximately $0 and $39,000, respectively,

for bonus milestones which were achieved in prior years and remain unpaid.

or Departure of Directors and Certain Officers

Company and Mark Weinreb, its former Chief Executive Officer (“

Former CEO”), were parties to an employment agreement

Company and Mark Weinreb, its former Chief Executive Officer (“Former CEO”), were parties to an employment agreement

that, as amended, was to expire on December 31, 2019.

27 unchanged sentences

of Convertible Notes

the three months ended March 31, 2020, certain lenders requested to exchange a portion of their outstanding convertible note principal

and accrued interest for shares of the Company’s common stock.

As of the Petition Date these shares had yet to be issued

to the lenders;

however, the shares of the Company’s common stock issued for unsecured claims as part of the Plan to the

certain lenders represented the aggregate unsecured claims less the principal and accrued interest that was represented in the

uneffected exchanges.

The Company believes that there may be a potential contingency related to the non-issued shares that would

be settled in shares of the Company’s common stock and not monetary compensation.

the nine months ended September 30, 2020, certain lenders requested to exchange a portion of their outstanding convertible note

principal and accrued interest for shares of the Company’s common stock.

As of the Petition Date these shares had yet to

be issued to the lenders;

however, the shares of the Company’s common stock issued for unsecured claims as part of the Plan

to the certain lenders represented the aggregate unsecured claims less the principal and accrued interest that was represented

in the uneffected exchanges.

The Company believes that there may be a potential contingency related to the non-issued shares that

would be settled in shares of the Company’s common stock and not monetary compensation.

the adoption of ASC 842, operating lease agreements are required to be recognized on the balance sheet as ROU assets and corresponding

lease liabilities.

Company is a party to a lease for 6,800 square feet of space located in Melville, New York (the “Melville Lease”)

with respect to its corporate and laboratory operations.

The Melville Lease was scheduled to expire in March 2020 (subject to

extension at the option of the Company for a period of five years) and provided for an annual base rental during the initial term

ranging between $132,600 and $149,260.

In June 2019, the Company exercised its option to extend the Melville Lease and entered

into a lease amendment with the lessor whereby the five-year extension term commenced on January 1, 2020 with annual base rent

ranging between $153,748 and $173,060.

August 1, 2019, the Company recognized ROU assets and lease liabilities of $638,246.

8 unchanged sentences

following table presents net lease cost and other supplemental lease information:

Three Months Ended March 31, 2020

Operating lease cost (cost resulting from lease payments)

Short term lease cost

Sublease income

lease cost (cost resulting from lease payments)

Short term lease

Net lease cost

Operating lease –

operating cash flows (fixed payments)

operating cash

flows (fixed payments)

Operating lease –

operating cash flows (liability reduction)

operating cash

flows (liability reduction)

Non-current leases –

right of use assets

Current liabilities –

operating lease liabilities

lease liabilities

Non-current liabilities –

operating lease liabilities

minimum payments under non-cancelable leases for operating leases for the remaining terms of the leases following the three months

ended March 31, 2020:

Operating Leases

lease liabilities

minimum payments under non-cancelable leases for operating leases for the remaining terms of the leases following the nine months

ended September 30, 2020:

Remainder of 2020

Total future minimum lease payments

Amount representing interest

Present value of net future minimum lease payments

Amount representing

Present value

of net future minimum lease payments

SUBSEQUENT EVENTS

11 Reorganization

August 7, 2020, the Company and Auctus, the Company’s largest unsecured creditor and a stockholder as of the Petition Date,

filed an Amended Joint Plan of Reorganization (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

On November 16, 2020 (the “Effective Date”), the Plan became effective.

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.

material features of the Plan, as amended and confirmed by the Confirmation Order, are as follows:

of the financing to the Company by Auctus of up to $7,000,000 which Auctus has provided

or committed to provide consisting of the debtor-in-possession loans made to the Company

by Auctus during the Chapter 11 Case (the “DIP Funding”) and additional funding

as described below.

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,

as needed, 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) (approximately $1,227,000 as of the Effective Date) and the costs incurred

by Auctus as the debtor-in-possession lender (the “DIP Costs”).

four other persons and entitles (collectively, the “Other Lenders”) who held

allowed general unsecured claims 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:

convertible notes of the Company (each, a “Secured Convertible Note”) in

the principal amount equal to the Funding;

the payment of the Secured Convertible Notes

is secured by the grant of a security interest in substantially all of the Company’s

of the financing to the Company by Auctus of up to $7,000,000 which Auctus has provided or committed to provide consisting

of the debtor-in-possession loans made to the Company by Auctus during the Chapter 11 Case (the “DIP Funding”)

and additional funding as described below.

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, as needed, 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) (approximately $1,227,000 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 entitles (collectively, the “Other Lenders”) who held allowed general unsecured

claims 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:

convertible notes of the Company (each, a “Secured Convertible Note”) in the principal amount equal to the Funding;

the payment of the Secured Convertible Notes is secured by the grant of a security interest in substantially all of the Company’s

the Secured Convertible Notes have the following features:

Maturity date of three years following the

Effective Date;

Interest at the

rate of 7% per annum;

The right of the

holder to convert the indebtedness into shares of common stock of the Company at a price equal to the volume weighted average

price for the common stock over the five trading days immediately preceding the conversion;

Mandatory conversion of all indebtedness

at such time as the common stock is listed on the Nasdaq Capital Market or another senior exchange on the same terms as provided

to investors in connection with a public offering undertaken in connection with such listing;

(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;

date of three years following the Effective Date;

at the rate of 7% per annum;

right of the holder to convert the indebtedness into shares of common stock of the Company at a price equal to the volume

weighted average price for the common stock over the five trading days immediately preceding the conversion;

conversion of all indebtedness at such time as the common stock is listed on the Nasdaq Capital Market or another senior exchange

on the same terms as provided to investors in connection with a public offering undertaken in connection with such listing;

(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;

(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.

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.

obligation to Auctus with respect to the DIP Funding has been exchanged for the following:

Secured Convertible Note in the principal amount of approximately $1,349,591 (110% DIP

Secured Convertible Note in the principal amount of approximately $1,349,591 (110% DIP Funding) with a maturity date of November

Class A Warrant to purchase 2,453,802,480 shares of common stock;

Class B Warrant to purchase 1,226,901,240 shares of common stock (as to which 382,226,703

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 361,176,200 shares of common

Class B Warrant to purchase 1,226,901,240 shares of common stock (as to which 382,226,703 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 361,176,200

shares of common stock).

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 Funding was treated.

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”), was treated as an allowed secured claim in the aggregate amount of $490,698.81 and was exchanged

for a Secured Convertible Note in such amount.

claim arising from the promissory note issued in June 2016 by the Company to Desmarais

in the original principal amount of $175,000 was treated as an allowed general unsecured

claim in the amount of $245,191.78 and was satisfied and exchanged for 24,519,200 shares

of common stock.

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 was treated

was treated as an allowed general unsecured claim in such amount and exchanged for 44,453,400

shares of common stock;

was treated as an allowed secured claim in such amount and exchanged for a Secured Convertible

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

and $33,562, respectively, issued to John Desmarais (“Desmarais”) (collectively, the “Desmarais Notes”),

was treated as an allowed secured claim in the aggregate amount of $490,699 and was exchanged for a Secured Convertible

Note in such amount.

of allowed general unsecured claims (other than Auctus and the Other Lenders) received

an aggregate of 1,049,726,797 shares of common stock (in book entry form) in exchange

for approximately $10,497,268 in outstanding accounts payable and convertible debt (including

accrued interest), with such shares being subject to a leak-out restriction prohibiting

each holder from selling, without consent of the Company, more than 33% of its shares

during each of the three initial 30 day periods following the Effective Date.

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:

claim arising from the promissory note issued in June 2016 by the Company to Desmarais in the original principal amount of

$175,000 was treated as an allowed general unsecured claim in the amount of $245,192 and was satisfied and exchanged

for 24,519,200 shares of common stock.

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 was treated as follows:

was treated as an allowed general unsecured claim in such amount and exchanged for 44,453,400 shares of common stock;

was treated as an allowed secured claim in such amount and exchanged for a Secured Convertible Note in such amount with

a maturity date of November 16, 2023.

of allowed general unsecured claims (other than Auctus and the Other Lenders) received an aggregate of 1,049,726,797 shares

of common stock (in book entry form) in exchange for approximately $10,497,268 in outstanding accounts payable and convertible

debt (including accrued interest), with such shares being subject to a leak-out restriction prohibiting each holder from selling,

without consent of the Company, more than 33% of its shares during each of the three initial 30 day periods following the

Effective Date.

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:

date of three years from the Effective Date;

at the rate of 5% per annum;

right of the holder to convert the indebtedness into shares of common stock at a price

equal to the volume weighted average for the common stock over the five trading days

immediately preceding the conversion;

conversion of all outstanding indebtedness at such time as the common stock listed on

the Nasdaq Capital Market or another senior exchange on the same terms as provided to

investors in connection with a public offering undertaken in connection with such listing;

leak-out restriction prohibiting each holder from selling, without the consent of the

Company, more than 16.6% of the underlying shares received upon conversion during each

of the six initial 30 day periods following the Effective Date.

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 Funding 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

the Bankruptcy Code Section 1145.

Such securities shall be freely transferrable subject

to Section 1145(b)(i) of the Bankruptcy Code.

right of the holder to convert the indebtedness into shares of common stock at a price equal to the volume weighted average

for the common stock over the five trading days immediately preceding the conversion;

conversion of all outstanding indebtedness at such time as the common stock listed on the Nasdaq Capital Market or another

senior exchange on the same terms as provided to investors in connection with a public offering undertaken in connection with

such listing;

leak-out restriction prohibiting each holder from selling, without the consent of the Company, more than 16.6% of the underlying

shares received upon conversion during each of the six initial 30 day periods following the Effective Date.

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 Funding 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 the Bankruptcy Code Section 1145.

Such securities shall be freely transferrable

subject to Section 1145(b)(i) of the Bankruptcy Code.

to the Plan, on the Effective Date, the Company filed a Certificate of Amendment to its Certificate of Incorporation pursuant

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Convertible Note.

During March 2021, the Company issued an aggregate of 159,233,719

shares of common stock to certain investors, with a fair value of $0.01 per share, as a result of the exercise of warrants associated

with the Plan.

or Departure of Directors and Certain Officers

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of Operations

of the Three Months Ended March 31, 2020 to the Three Months Ended March 31, 2019

financial results for the three months ended March 31, 2020 are summarized as follows in comparison to the three months ended

March 31, 2019:

For The Three Months Ended

of the Three Months Ended September 30, 2020 to the Three Months Ended September 30, 2019

financial results for the three months ended September 30, 2020 are summarized as follows in comparison to the three months ended

September 30, 2019:

The Three Months Ended

Operating Expenses:

2 unchanged sentences

General and administrative

Total Operating Expenses

Total Operating

Loss From Operations

2 unchanged sentences

Amortization of debt discount

Loss on extinguishment of notes payable, net

Loss on extinguishment of notes payable,

Change in fair value of derivative liabilities

Reorganization

Total Other Expense

the three months ended September 30, 2020 and 2019, we generated $15,000 and $38,000, respectively, of royalty revenue in connection

with our sublicense agreement.

and Promotion

and promotion expenses include advertising and promotion, marketing and seminars, meals, entertainment and travel expenses.

the three months ended September 30, 2020, marketing and promotion expenses decreased by $156,029, or 99%, from $156,179 to $150

as compared to the three months ended September 30, 2019.

The decrease is primarily due to the Company eliminating its marketing

plan as a result of reduced spending during the Company’s Chapter 11 reorganization.

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.

expenses consist of consulting fees and stock-based compensation to consultants.

For the three months ended September 30, 2020,

consulting expenses decreased by $340,381, or 91%, from $373,975 to $33,594, as compared to the three months ended September 30,

The decrease is primarily due to the Company eliminating the use of consultants as a result of reduced spending during the

Company’s Chapter 11 reorganization.

and development

and development expenses include cash and non-cash compensation of (a) our Vice President of Research and Development;

Scientific Advisory Board members;

and (c) laboratory staff and costs related to our brown fat and disc/spine initiatives.

and development expenses are expensed as they are incurred.

For the three months ended September 30, 2020, research and development

expenses decreased by $158,779, or 39%, from $409,815 to $251,036, as compared to the three months ended September

The decrease is primarily due to the Company eliminating costs as a result of reduced spending during the Company’s

Chapter 11 reorganization.

expect that our research and development expenses will increase with the recommencement of our research and development initiatives

during the year ending December 31, 2021, following our emergence from Chapter 11.

and administrative

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, 2020, general and administrative expenses decreased by $576,542, or 63%, from

$917,027 to $340,485, as compared to the three months ended September 30, 2019.

The decrease is primarily due to the Company

eliminating certain costs as a result of reduced spending during the Company’s Chapter 11 reorganization.

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 during the year ending December 31, 2021, following our emergence from

the three months ended September 30, 2020, interest expense decreased $352,205, or 89%, as compared to the three months ended

September 30, 2019.

The decrease was due to the prepetition outstanding notes payable being reclassified to liabilities subject

to compromise and as a result, pursuant to ASC 852, Reorganizations , and new accrued interest is related to the debtor-in-possession

of debt discount

the three months ended September 30, 2020, amortization of debt discount decreased $1,487,501, or 100%, as compared to the three

months ended September 30, 2019.

The decrease was due to the prepetition outstanding notes payable being reclassified to liabilities

subject to compromise and as a result, pursuant to ASC 852, Reorganizations , the remaining debt discount was written off

to reorganization items on the unaudited condensed consolidated statements of operations.

on extinguishment of notes payable, net

the three months ended September 30, 2020, we did not record a loss on extinguishment of notes payable, net as compared to a loss

on extinguishment of notes payable, net of $1,290,623 for the three months ended September 30, 2019.

The decrease was due to the

prepetition outstanding notes payable being reclassified to liabilities subject to compromise pursuant to ASC 852, Reorganizations .

in fair value of derivative liabilities

the three months ended September 30, 2020, we did not record a gain (loss) related to the change in fair value of derivative liabilities

due to the Company writing off derivative liabilities related to the convertible notes included in the Chapter 11 Reorganization

allowable claims, pursuant to ASC 852, Reorganizations , as compared to a loss related to the change in fair value of derivative

liabilities of $65,037 for the three months ended September 30, 2019.

Reorganization

items, net consists primarily of costs associated the post-petition Chapter 11 bankruptcy.

For the three months ended September

30, 2020, reorganization items, net increased $183,387, or 100%, as compared to the three months ended September 30, 2019.

increase was due to, pursuant to ASC 852, Reorganizations ¸

legal fees associated with the Chapter 11 reorganization

and the write-off of derivative liabilities related to the convertible notes included in the Chapter 11 Reorganization allowable

of the Nine Months Ended September 30, 2020 to the Nine Months Ended September 30, 2019

financial results for the nine months ended September 30, 2020 are summarized as follows in comparison to the nine months ended

September 30, 2019:

The Nine Months Ended

Operating Expenses:

Marketing and promotion

Research and development

General and administrative

Total Operating

Loss From Operations

Other Expense:

Interest expense

Amortization of debt discount

Loss on extinguishment of notes payable,

Change in fair value of derivative liabilities

Reorganization

Total Other Expense

$ (5,511,375 )

the three months ended March 31, 2020 and 2019, we generated $26,000 and $29,000, respectively, of royalty revenue in connection

(13,097,335 )

the nine months ended September 30, 2020 and 2019, we generated $60,000 and $98,000, respectively, of royalty revenue in connection

with our sublicense agreement.

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and promotion expenses include advertising and promotion, marketing and seminars, meals, entertainment and travel expenses.

the three months ended March 31, 2020, marketing and promotion expenses increased by $6,171, or 39%, from $15,837 to $22,008 as

compared to the three months ended March 31, 2019.

the nine months ended September 30, 2020, marketing and promotion expenses decreased by $252,584, or 90%, from $280,865 to $28,281

as compared to the nine months ended September 30, 2019.

The decrease is primarily due to the Company eliminating its marketing

plan as a result of reduced spending prior to and during the Company’s Chapter 11 reorganization.

expect that marketing and promotion expenses will increase in the future as we increase our marketing activities following full

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expenses consist of consulting fees and stock-based compensation to consultants.

For the three months ended March 31, 2020, consulting

expenses decreased by $565,722, or 94%, from $599,734 to $34,012, as compared to the three months ended March 31, 2019.

is primarily due to the Company eliminating the use of consultants as a result of reduced spending as the Company prepared to

enter Chapter 11.

For the nine months ended September 30, 2020,

consulting expenses decreased by $1,406,387, or 93%, from $1,507,582 to $101,195, as compared to the nine months ended September

The decrease is primarily due to the Company eliminating the use of consultants as a result of reduced spending prior

to and during the Company’s Chapter 11 reorganization.

and development

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and development expenses are expensed as they are incurred.

For the three months ended March 31, 2020, research and development

expenses decreased by $268,678, or 59%, from $455,006 to $186,328, as compared to the three months ended March 31, 2019.

is primarily due to the Company eliminating costs as a result of reduced spending as the Company prepared to enter Chapter 11.

For the nine months ended September 30, 2020, research and development

expenses decreased by $607,627, or 47%, from $1,306,544 to $698,917, as compared to the nine months ended September

The decrease is primarily due to the Company eliminating costs as a result of reduced spending prior to and during the

Company’s Chapter 11 reorganization.

expect that our research and development expenses will increase with the recommencement of our research and development initiatives

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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, 2020, general and administrative expenses decreased by $684,118, or 53%, from $1,286,759

to $602,641, as compared to the three months ended March 31, 2019.

The decrease is primarily due to the Company eliminating certain

costs as a result of reduced spending as the Company prepared to enter Chapter 11.

For the nine months ended September 30, 2020, general and administrative expenses decreased by $2,149,927, or 66%, from

$3,279,145 to $1,129,218, as compared to the nine months ended September 30, 2019.

The decrease is primarily due to the

Company eliminating certain costs as a result of reduced spending prior to and during the Company’s Chapter 11 reorganization.

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 during the year ending December 31, 2021, following our emergence from

For the three months ended

March 31, 2020, interest expense increased $2,549,092, or 804%, as compared to the three months ended March 31,

The increase was due to the Company fully amortizing the remaining debt discount at March 31, 2020, of $2,583,1078

as compared to the three months ended March 31, 2019.

the nine months ended September 30, 2020, interest expense decreased $693,791, or 67%, as compared to the nine months ended September

The decrease was primarily due to the prepetition outstanding notes payable being reclassified to liabilities subject

to compromise during and as a result, pursuant to ASC 852, Reorganizations , and new accrued interest is related to the

debtor-in-possession financing.

of debt discount

the three months ended March 31, 2020, amortization of debt discount increased $323,384, or 44%, as compared to the three months

ended March 31, 2019.

The increase was primarily due to increased exchanges of convertible notes and the timing of the recognition

of expense related to the bifurcated embedded conversion options of convertible notes.

the nine months ended September 30, 2020, amortization of debt discount decreased $2,155,378, or 67%, as compared to the nine

months ended September 30, 2019.

The decrease was due to the prepetition outstanding notes payable being reclassified to liabilities

subject to compromise and as a result, pursuant to ASC 852, Reorganizations , the remaining debt discount was written off

to reorganization items on the unaudited condensed consolidated statements of operations.

on extinguishment of notes payable, net

the three months ended March 31, 2020, we recorded a loss on extinguishment of notes payable, net of $658,152, as compared to a loss

on extinguishment of notes payable, net of $448,486 for the three months ended March 31, 2019.

The increase is associated with debtholders’

the nine months ended September 30, 2020, we recorded a loss on extinguishment of notes payable of $658,152 as compared to a loss

on extinguishment of notes payable of $2,291,2185 for the nine months ended September 30, 2019.

The decrease is associated with

debtholders’

exchanges of debt into equity securities.

in fair value of derivative liabilities

the three months ended March 31, 2020, we recorded a loss related to the change in fair value of derivative liabilities of $2,141,069

due to the increase in time value of embedded conversion options within certain convertible notes payable, as compared to a loss

related to the change in fair value of derivative liabilities of $46,264 for the three months ended March 31, 2019.

the nine months ended September 30, 2020, we recorded a loss related to the change in fair value of derivative liabilities of

$2,141,069 due to the decrease in time value of embedded conversion options within certain convertible notes payable, as compared

to a loss related to the change in fair value of derivative liabilities of $268,350 for the nine months ended September

Reorganization

items, net consists primarily of costs associated the post-petition Chapter 11 bankruptcy.

For the nie months ended September

30, 2020, reorganization items, net increased $597,919, or 100%, as compared to the nine months ended September 30, 2019.

increase was due to, pursuant to ASC 852, Reorganizations ¸

legal fees associated with the Chapter 11 reorganization,

the write-off of the outstanding debt discount at the date of the bankruptcy, and the write-off of derivative liabilities related

to the convertible notes included in the Chapter 11 Reorganization allowable claims.

and Capital Resources

measure our liquidity in a number of ways, including the following:

Working Capital Deficiency

Working Capital

$ (15,860,045 ) (1)

$ (13,651,716 )

Notes Payable (Gross)

Notes Payable

and DIP financing (Gross)

capital deficiency at September 30, 2020, includes $14,700,000 of liabilities subject

to compromise.

of Additional Funds

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deficit of $15,860,045 and $15,092,678, respectively,

as of March 31, 2020, as of such date, we required additional equity and/or debt financing to continue our operations.

of March 31, 2020, our outstanding debt of $8,021,695, together with interest at rates ranging between 12% and 15% per annum,

was due on various dates through December 18, 2020.

as of September 30, 2020, as of such date, we required additional equity and/or debt financing to continue our operations.

of September 30, 2020, our outstanding debt of $1,114,713, together with a daily interest rate of 8%, was due on November 16,

operating needs include the planned costs to operate our business, including amounts required to fund working capital and capital

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will need to obtain further funding of at least $12,000,000 to commence and complete a Phase 2 clinical study of the use of BRTX-100 .

the three months ended March 31, 2020 and 2019, our sources and uses of cash were as follows:

Three Months Ended March 31,

Net cash used in operating activities

$ (1,980,162 )

Net cash provided by financing activities

Increase in cash

the nine months ended September 30, 2020 and 2019, our sources and uses of cash were as follows:

Months Ended September 30,

Net cash used in operating

activities was $448,646 for the three months ended March 31, 2020, primarily due to the net loss of $7,550,772 which

was partially offset by non-cash expenses of $6,950,957 related to amortization of debt discount, accretion

of interest expense, stock-based compensation, change in fair value of derivative liabilities, and loss on extinguishment of notes

payable and $151,169 of cash provided by changes in the levels of operating assets and liabilities, primarily as a

result of decreases in accounts payable and increases in prepaid expenses and other current assets, partially offset by an increase

in accrued interest, expenses and other current liabilities.

Net cash used by operating activities was $1,980,162 for the

three months ended March 31, 2019, primarily due to net loss of $3,883,172, which was partially offset by non-cash expenses of

$1,990,038 related to stock-based compensation and $87,028 of cash used by changes in the levels of operating assets and liabilities,

primarily as a result of decreases in accounts payable and increases in prepaid expenses and other current assets, partially offset

by an increase in accrued interest, expenses and other current liabilities.

cash provided by financing activities for the three months ended March 31, 2020 was $451,762, which was primarily due to $441,762

of net proceeds from debt financings and $10,000 of net proceeds from an equity financing.

Net cash provided by financing activities

for the three months ended March 31, 2019 was $2,358,918, which was due to $3,073,918 of net proceeds from debt financings and

$600,000 of net proceeds from equity financing, partially offset by payments on notes payable of $1,315,000.

$ (1,392,145 )

$ (5,107,743 )

Net cash used in investing activities

Net cash provided

by financing activities

Increase (decrease)

cash used in operating activities was $1,392,145 for the nine months ended September 30, 2020, primarily due to the net

loss of $5,511,375 which was partially offset by non-cash expenses of $3,047,219 related to amortization of debt

discount, accretion of interest expense, stock-based compensation, change in fair value of derivative liabilities, write-off of

derivative liabilities related to allowable claims and loss on extinguishment of notes payable and loss on extinguishment of notes

payable and $1,072,011 of cash provided by changes in the levels of operating assets and liabilities, primarily as a result of

decreases in accounts payable and increases in prepaid expenses and other current assets, partially offset by an increase in accrued

interest, expenses and other current liabilities.

Net cash used in operating activities was $5,107,743 for the nine months ended

September 30, 2019, primarily due to net loss of $13,097,335, which was partially offset by non-cash expenses of $7,781,461 related

to amortization of debt discount, accretion of interest expense, stock-based compensation, change in fair value of derivative

liabilities, and loss on extinguishment of notes payable and $208,131 of cash provided by changes in the levels of operating assets

and liabilities, primarily as a result of decreases in accounts payable and increases in prepaid expenses and other current assets,

partially offset by an increase in accrued interest, expenses and other current liabilities.

the nine months ended September 30, 2020 and 2019, net cash used in investing activities was $0 and $35,631, respectively, due

to cash used for the purchase of office and computer equipment.

cash provided by financing activities for the nine months ended September 30, 2020 was $1,566,475, which was due to $441,762 of

net proceeds from debt financings, $1,114,713 of net proceeds from DIP financing, and $10,000 of net proceeds from an equity financing.

Net cash provided by financing activities for the nine months ended September 30, 2019 was $5,123,964, which was primarily due

to $3,982,392 of net proceeds were from debt financings, $1,156,000 of proceeds were from

equity financings and $14,428 was used for incurred offering costs.

anticipate that the costs to commence and complete our Phase 2 clinical trials with regard to our Disc/Spine Program will be at

14 unchanged sentences

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, 2020 and in the notes to our consolidated financial statements

included in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on March 18, 2021.

included herein for the quarter ended September 30, 2020 and in the notes to our consolidated financial statements included in

our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on March 18, 2021.

Value Measurement

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from those estimates.

11 Accounting

unaudited condensed consolidated financial statements included herein have been prepared as if we were a going concern and in

accordance with Accounting Standards Codification (“ASC”) 852, Reorganizations .

industry conditions in 2019 negatively impacted the Company’s results of operations and cash flows and may continue to do

so in the future.

In order to decrease the Company’s indebtedness and maintain the Company’s liquidity levels suifficient

to meet its commitments, the Company undertook a number of actions, including minimizing capital expendtiures and further reducing

its recurring operating expenses.

The Company believed that even after taking these actions, it would not have sufficient liquidity

to satisfy its debt service obligations and meet its other financial obligations.

On March 20, 2020 (the “Petition Date”),

the Company filed a voluntary petition commencing a case under chapter 11 of title 11 of the U.S.

Code in the United States Bankruptcy

Court for the Eastern District of New York.

Reorganization

Company incurred costs after the Petition Date associated with the reorganization, primarily unamortized debt discount and postpetition

professional fees.

In accordance with applicable guidance, costs associated with the bankruptcy proceedings have been recorded

as reorganization items, net within the accompanying unaudited condensed consolidated statements of operations for the three and

nine months ended September 30, 2020.

Subject To Compromise

unsecured and secured obligation that may be impacted by the Chapter 11 case have been classified as liabilities subject to compromise

on the Company’s unaudited condensed consolidated balance sheets.

These liabilities are reported at the amounts allowed

as claims by the Bankruptcy Court.

assets are comprised of trademarks and licenses with original estimated useful lives of 10 and 17.7 years, respectively.

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awards granted to employees.

Financial Instruments

evaluate our convertible instruments to determine if those contracts or embedded components of those contracts qualify as derivative

financial instruments to be separately accounted for in accordance with Topic 815 of the Financial Accounting Standards Board

The accounting treatment of derivative financial instruments requires that we record embedded conversion options (“ECOs”)

and any related freestanding instruments at their fair values as of the inception date of the agreement and at fair value as of

each subsequent balance sheet date.

Any change in fair value is recorded as non-operating, non-cash income or expense for each

reporting period at each balance sheet date.

Conversion options are recorded as a discount to the host instrument and are amortized

as amortization of debt discount on the unaudited condensed consolidated financial statements over the life of the underlying

We reassess the classification of our derivative instruments at each balance sheet date.

If the classification changes

as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.

Multinomial Lattice Model and Black-Scholes Model were used to estimate the fair value of the ECOs of convertible notes payable,

the warrants, and stock options that are classified as derivative liabilities on the consolidated balance sheets.

The models include

subjective input assumptions that can materially affect the fair value estimates.

The expected volatility is estimated based on

the actual volatility during the most recent historical period of time equal to the weighted average life of the instruments.

and Recently Adopted Accounting Pronouncements

new and recently adopted accounting pronouncements are more fully described in Note 2 to our unaudited condensed consolidated

financial statements herein for the quarter ended March 31, 2020.

financial statements herein for the quarter ended September 30, 2020.

Sheet Arrangements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements