What changed in this filing

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Item 1. Financial Statements

2021-11-15 compared with 2021-08-16 · 548 added, 421 removed, 601 unchanged (62% of the section changed)

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Current Assets

Accounts receivable

Prepaid expenses

Total Current Assets

Equipment, net

Right of use asset

Intangible assets, net

LIABILITIES AND STOCKHOLDERS' DEFICIT

AND STOCKHOLDERS’ DEFICIT

expenses and other current liabilities

liability, current portion

loan payable, current portion

Current Liabilities

Accounts payable

Accrued expenses and other current liabilities

Accrued interest

Lease liability

PPP loan payable

Total Current Liabilities

Lease liability, net of current portion

Notes payable, net of debt discount of $ 4,542,205 and $ 5,366,869 , respectively

PPP loan payable, net of current portion

Total Liabilities

Commitments and Contingencies

Stockholders' Deficit:

Preferred stock, $ 0.01 par value;

Authorized, 20,000,000 shares;

none issued and outstanding at June 30, 2021 and December 31, 2020

Common stock, $ 0.0001 par value;

Authorized, 300,000,000,000 shares;

Issued and outstanding 3,347,778,690 and 2,862,174,380 , respectively

Additional paid in capital

Accumulated deficit

liability, net of current portion

payable, net of debt discount of $ 4,399,034

and $ 5,366,869 ,

loan payable, net of current portion

and Contingencies

Stockholders’

stock, $ 0.01 par

Authorized, 20,000,000

A Convertible Preferred stock, $ 0.01

Authorized, 1,543,158

issued and outstanding at September

30, 2021 and December 31, 2020

stock, $ 0.0001 par

Authorized, 300,000,000 ,000

issued and outstanding at September 30, 2021

and December 31, 2020, respectively

paid in capital

( 113,742,990 )

( 89,842,833 )

Total Stockholders' Deficit

Stockholders’ Deficit

( 4,879,304 )

( 1,331,492 )

Total Liabilities and Stockholders' Deficit

Liabilities and Stockholders’ Deficit

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

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Consolidated STATEMENTS OF OPERATIONS

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

For the Three Months Ended

For the Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

For the Nine Months Ended

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

Operating expenses:

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( 3,613,764 )

Net income (loss)

$ ( 4,184,232 )

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$ ( 23,900,157 )

Net Income (Loss) Per Share

$ ( 5,511,375 )

Net Loss Per Share

- Basic and Diluted

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- Basic and Diluted

3,183,506,849

1,594,651,383

3,052,341,760

1,277,364,646

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

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$ ( 1,331,492 )

Shares and warrants issued for cash

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Shares issued in cashless exercise of warrants

Shares issued in litigation settlement

Shares issued in litigation settlement, shares

Fair market value of beneficial conversion feature and warrants issued with convertible notes payable instruments

Stock-based compensation:

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( 2,694,382 )

Shares issued in exchange of notes payable and accrued interest

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( 3,808,941 )

Shares issued in cashless exercise of warrants

Shares issued in litigation settlement

Fair market value of beneficial conversion feature and warrants issued with convertible notes payable instruments

Stock-based compensation:

- restricted share units

( 4,184,232 )

Balance at September 30, 2021

$ 108,863,599

$ ( 113,742,990 )

$ ( 4,879,304 )

Balance at January 1, 2020

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Shares issued in exchange for notes payable and accrued interest

1,515,799,750

Stock-based compensation:

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( 17,536,105 )

Stock-based compensation:

restricted share units

Balance at June 30, 2020

( 83,245,258 )

( 14,441,181 )

( 83,245,258 )

( 14,441,181 )

Stock-based compensation:

Net income (loss)

Balance at June 30, 2020

Balance at September 30, 2020

$ ( 84,081,521 )

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$ ( 84,081,521 )

$ ( 15,092,678 )

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

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Consolidated STATEMENTS OF CASH FLOWS

June 30, 2021

June 30, 2020

Six Months Ended

June 30, 2021

June 30, 2020

Nine Months Ended

September 30, 2021

September 30, 2020

Cash flows from operating activities:

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Stock-based compensation

Shares issued in settlement of litigation

Loss on extinguishment of note payables, net

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( 2,184,894 )

( 1,392,145 )

Cash flows from financing activities:

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Sale of warrants recorded as derivative liabilities

Accrued DIP expenses exchanged for convertible notes

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

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Payable – Chapter 11 Reorganization.

On October 27, 2021, the Company

effected a 1-for-4,000 reverse stock split .

The Company has retroactively applied the reverse stock split made effective on October 27,

2021 to share and per share amounts on the unaudited condensed consolidated financial statements for the three and nine months ended

September 30, 2021 and the year ended December 31, 2020.

The Company’s authorized shares of common stock and preferred stock were

not affected as a result of the reverse stock split.

of the Business

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a going concern, which contemplates realization of assets and satisfying liabilities in the normal course of business.

At June 30, 2021,

At September 30,

2021, the Company had an accumulated deficit of approximately $ 113,743,000 and working capital surplus of approximately $ 296,000 .

months ended June 30, 2021, the Company had a loss from operations of approximately $ 18,610,000 (of which, approximately $ 17,003,000

For the nine months ended September 30, 2021, the Company had a loss from operations of approximately $ 22,299,000 (of which, approximately

$ 19,930,000 was attributable to non-cash stock-based compensation) and negative cash flows from operations of approximately $ 2,185,000 .

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.

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.

As of June 30, 2021, the Company has access to approximately $ 2,100,000 in additional

funding from Auctus, as discussed below.

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

(i) as part of its Chapter 11 reorganization approximately $ 14,700,000 in outstanding debt and other liabilities were exchanged for (a)

shares of common stock, (b) new convertible notes or (c) new convertible notes and warrants to purchase shares of common stock;

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 operations;

and (iii) pursuant

to the plan of reorganization, Auctus is required to loan to the Company, as needed, an additional $ 2,100,000 .

As a result of the above,

and cash on hand of approximately $ 1,586,414 as of August 12, 2021, 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.

funds and Auctus’ funding obligation noted above will not be sufficient to enable the Company to fully complete its development

activities or attain profitable operations.

If the Company is unable to obtain such needed additional financing on a timely basis, the

Company may have to curtail its development, marketing and promotional activities, which would have a material adverse effect on the

Company’s business, financial condition and results of operations, and ultimately the Company could be forced to discontinue its

operations and liquidate.

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.

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.

On November 9, 2021, the Company received net proceeds of approximately

$ 20,772,000 from its public offering (see Note 9 – Subsequent Events).

a result of the above, and cash on hand of approximately $ 22,191,150 as of November 10, 2021, the Company believes it has

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

funds noted above may not be sufficient to enable the Company to fully complete its development activities or attain profitable

If the Company is unable to obtain such needed additional financing on a timely basis, the Company may have to curtail its

development, marketing and promotional activities, which would have a material adverse effect on the Company’s business, financial

condition and results of operations, and ultimately the Company could be forced to discontinue its operations and liquidate.

accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally

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of Presentation

accompanying unaudited condensed consolidated financial information as of and for the three and six months ended June 30, 2021 and 2020

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 the Company’s financial position at such dates

and the operating results and cash flows for such periods.

Operating results for the three and six months ended June 30, 2021 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, 2021

and 2020 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 the Company’s financial position at such

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

Operating results for the three and nine months ended September 30,

2021 are not necessarily indicative of the results that may be expected for the entire year or for any other subsequent interim period.

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

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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 six months ended June

items, net within the accompanying unaudited condensed consolidated statements of operations for the three and nine months ended September

30, 2021 and 2020.

Reorganization items, net for the three and six months ended June 30, 2021 were $ - and for the three and six months

ended June 30, 2020, were $ 3,361,416 and $ 781,306 , respectively, representing cash used in operating activities.

Reorganization items, net for the three and nine months ended September 30, 2021 were $ - and 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 six months ended June 30, 2020, consisted of the following:

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

OF REORGANIZATION ITEMS, NET

Three Months Ended June 30, 2020

Six Months Ended June 30, 2020

Three Months Ended September 30, 2020

Nine Months Ended September 30, 2020

Professional fees

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Total reorganization items, net

$ ( 183,387 )

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

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assets, deferred tax asset and valuation allowance, estimated fair value of derivative liabilities stemming from convertible debt securities,

assumptions used in management’s liquidity analysis, and assumptions used in the Black-Scholes-Merton pricing model, such as expected

assumptions used in management’s liquidity analysis, and assumptions used in the Black-Scholes option pricing model, such as expected

volatility, risk-free interest rate, and expected divided rate.

Company derives all of its revenue pursuant to a license agreement between the Company and a stem cell treatment company (“SCTC”)

entered into in January 2012, as amended in November 2015.

entered into in January 2012 and amended in November 2015.

Pursuant to the license agreement, the SCTC granted to the Company a license

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royalties on a per disc procedure basis.

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

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 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 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

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.

part of ASC 606, Revenue from Contracts with Customers (“ASC 606”), the Company has adopted several practical expedients

● 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 or less.

● Unsatisfied

Performance Obligations – for performance obligations related to contracts with a duration

of less than one year, the Company has elected to apply the optional exemption provided in

ASC 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 the entity has a right

Modifications

were no contract modifications during the three and six months ended June 30, 2021.

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, 2021.

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 June 30, 2021 or December 31, 2020.

There were no cash equivalents as of September 30, 2021 or December 31, 2020.

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

The Company periodically

assesses its accounts and other receivables for collectability on a specific identification basis.

The Company provides for allowances

for doubtful receivables based on management’s estimate of uncollectible amounts considering age, collection history, and any other

factors considered appropriate.

assesses its accounts receivable and other receivables for collectability on a specific identification basis.

The Company provides for

allowances for doubtful accounts based on management’s estimate of uncollectible amounts considering age, collection history, and

any other factors considered appropriate.

Payments are generally due within 30 days of invoice.

The Company writes off accounts receivable against

the allowance for doubtful accounts when a balance is determined to be uncollectible.

The Company did no t record an allowance for doubtful

accounts as of June 30, 2021 and December 31, 2020, respectively.

The Company writes off accounts receivable

against the allowance for doubtful accounts when a balance is determined to be uncollectible.

The Company did no t record an allowance

for doubtful accounts as of September 30, 2021 and December 31, 2020, respectively.

and Equipment

and equipment are recorded at cost.

Depreciation is computed using straight-line method over the estimated useful lives of the related

assets, generally three to fifteen years .

Expenditures that enhance the useful lives of the assets are capitalized and depreciated.

Depreciation is computed using the straight-line method over the estimated useful lives of the related

assets, generally 3 – 15 years.

Expenditures that enhance the useful lives of assets are capitalized and depreciated.

equipment costs are capitalized as incurred and depreciated on a straight-line basis over a range of 3 – 5 years.

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Maintenance and repairs

are charged to expense as incurred.

The Company capitalizes cost attributable to the betterment of property and equipment when such betterment

are expensed as incurred.

The Company capitalizes costs attributable to the betterment of property and equipment when such betterment

extends the useful life of the assets.

At the time of retirement or other disposition of property and equipment, the cost and accumulated

depreciation will be removed from the accounts and the resulting gain or loss, if any, will be reflected in operations.

depreciation are removed from the accounts, and the resulting gain or loss, if any, will be reflected in operations.

of Long-Lived Assets

Company reviews long-lived assets, including finite-lived intangible assets, for impairment whenever events or changes in circumstances

indicate that the carrying amount of such assets may not be recoverable.

Recoverability of these assets is determined by comparing the

forecasted undiscounted net cash flows of the operation to which the assets relate to the carrying amount.

If the operation is determined

to be unable to recover the carrying amount of its assets, then these assets are written down first, followed by other long-lived assets

of the operation to fair value.

Fair value is determined based on discounted cash flows or appraised values, depending on the nature

of the assets.

During the three and six months ended

June 30, 2021 and 2020, the Company determined that there was no impairment charge for intangible assets.

Company reviews long-lived assets, including definite-lived intangible assets, for impairment whenever events or circumstances indicate

that the carrying amount of such assets may not be recoverable.

Recoverability of these assets is determined by comparing the carrying

amount to the forecasted undiscounted net cash flows of the operation to which the assets relate.

If the operation is determined to be

unable to recover the carrying amount of its assets, then these assets are written down to fair value first, followed by other long-lived

assets of the operation.

Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the

During the three and nine months ended September 30, 2021 and 2020, the Company determined that there was no impairment charge

for intangible assets.

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

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

and Marketing Costs

Company expenses advertising and marketing costs as they are incurred.

Advertising and marketing expenses were $ 6,220 and $ 6,123 for

the three months ended June 30, 2021 and 2020, respectively.

Advertising and marketing expenses were $ 8,820 and $ 28,131 for the six months

ended June 30, 2021 and 2020, respectively.

The above advertising and marketing expenses are recorded in marketing and promotion on the

unaudited condensed consolidated statements of operations.

Advertising and marketing expenses were $ 300 and $ 150 for the

three months ended September 30, 2021 and 2020, respectively.

Advertising and marketing expenses were $ 9,120 and $ 28,281 for the nine

months ended September 30, 2021 and 2020, respectively.

Advertising and marketing expenses are recorded in marketing and promotion on

the unaudited condensed consolidated statements of operations.

Value Measurements

defined in ASC 820, “Fair Value Measurements and Disclosures,” fair value is the price that would be received to sell an

asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions

defined in ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), fair value is the price that would be received

for an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions

about risk and the risks inherent in the inputs to the valuation technique.

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inputs include significant inputs that are generally less observable from objective sources.

These inputs may be used with internally

developed methodologies that result in management’s best estimate of fair value.

These inputs may be used with internally-developed

methodologies that result in management’s best estimate of fair value.

Loss per Common Share

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Since the effect of common stock equivalents is anti-dilutive with respect to losses, options, warrants, RSUs and convertible notes have

been excluded from the Company’s computation of net loss per common share for the three and six months ended June 30, 2021 and

been excluded from the Company’s computation of net loss per common share for the three and nine months ended September 30, 2021

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

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Three Months Ended

2,352,191,115

14,507,388,226

September 30,

Unvested RSUs

1,173,917,974

Convertible notes – common stock

795,797,190 (1)

18,829,294,505

Six Months Ended

2,352,191,115

14,507,388,226

Nine Months Ended

September 30,

Unvested RSUs

1,173,917,974

Convertible notes – common stock

795,797,190 (1)

18,829,294,505

of June 30, 2021 all 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 51,504,015,462 shares of common stock reserved for future note conversions

as of June 30, 2021.

of September 30, 2021, all 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 12,876,004 shares of common stock reserved for future note conversions as of September

30, 2021 (see Note 9 – Subsequent Events).

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

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the grant date fair value of stock options on a straight-line basis over the requisite service period, which is generally the vesting

Forfeitures are recorded as they are incurred as opposed to being estimated at the time of grant and revised.

Forfeitures are recorded as they are incurred.

to Accounting Standards Update (“ASU”) 2018-07 Compensation – Stock Compensation (Topic 718):

Improvements to Nonemployee

Share-Based Payment Accounting, the Company accounts for stock options issued to non-employees for their services in accordance ASC 718.

The Company uses valuation methods and assumptions to value the stock options that are in line with the process for valuing employee

stock options noted above.

Share-Based Payment Accounting , the Company accounts for stock options issued to non-employees for their services in accordance with

The Company uses valuation methods and assumptions to value the stock options that are in line with the process for valuing

employee stock options noted above.

the shares underlying the Company’s 2010 Equity Participation Plan and the 2021 Stock Incentive Plan (the “Plans”)

are registered, the Company estimates the fair value of the awards granted under the Plans based on the market value of its freely tradable

common stock as reported on the OTC Markets.

On February 3, 2020, the Company was advised by OTC Markets Group that, based upon the closing

bid price of the Company’s common stock being less than $ 0.001 per share for five consecutive trading days, the Company’s

common stock was moved from the OTCQB Market to the Pink Market effective at market open on February 10, 2020.

The fair value of the

Company’s restricted equity instruments was estimated by management based on observations of the cash sales prices of both restricted

shares and freely tradable shares.

Awards granted to directors are treated on the same basis as awards granted to employees.

exercise of an option or warrant, the Company issues new shares of common stock out of its authorized shares.

common stock as reported on the Nasdaq Capital Market.

On February 3, 2020, the Company was advised by OTC Markets Group that,

based upon the closing bid price of the Company’s common stock being less than $0.001 per share for five consecutive trading days,

the Company’s common stock was moved from the OTCQB Market to the Pink Market effective at market open on February 10, 2020.

fair value of the Company’s restricted equity instruments was estimated by management based on observations of the cash sales prices

of both restricted shares and freely tradable shares.

Awards granted to directors are treated on the same basis as awards granted to

Upon the exercise of an option or warrant, the Company issues new shares of common stock out of its authorized shares.

tax assets and liabilities are recognized for the future tax consequences attributable to differences between the unaudited condensed

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likely than not” that a deferred tax asset will not be realized.

At June 30, 2021 and December 31, 2020, the Company’s net

deferred tax asset has been fully reserved.

At September 30, 2021 and December 31, 2020, the Company’s

net deferred tax asset has been fully reserved.

uncertain tax positions that meet a “more likely than not” threshold, the Company recognizes the benefit of uncertain tax

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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, warrants,

and stock options that are classified as derivative liabilities on the unaudited condensed 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.

Multinomial Lattice Model and Black-Scholes option pricing model were used to estimate the fair value of the ECOs of convertible notes

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

These 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.

ASC 815-40-35 (“ASC 815”), the Company has adopted a sequencing policy whereby, in the event that reclassification of contracts

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2016-02, Leases (“ASU 2016-02”)).

The standard requires all leases that have a term

of over 12 months to be recognized on the balance sheet with the liability for lease payments and the corresponding right-of-use (“ROU”)

asset initially measured at the present value of amounts expected to be paid over the term.

Recognition of the costs of these leases

on the income statement will be dependent upon their classification as either an operating or a financing lease.

Costs of an operating

lease will continue to be recognized as a single operating expense on a straight-line basis over the lease term.

Costs for a financing

lease will be disaggregated and recognized as both an operating expense (for the amortization of the ROU asset) and interest expense

(for interest on the lease liability).

The standard requires all leases that have

a term greater than 12 months to be recognized on the balance sheet with a liability for the lease payments and a corresponding right-of-use

(“ROU”) asset initially measured at the present value of amounts expected to be paid over the term.

Recognition of the costs

of these leases on the income statement will be dependent upon their classification as either an operating or financing lease.

of an operating lease will continue to be recognized as a single operating expense on a straight-line basis over the lease term.

for a financing lease will be disaggregated and recognized as both an operating expense (for the amortization of the ROU asset) and interest

expense (for interest on the lease liability).

lease is defined as a contract that conveys the right to control the use of identified property, plant or equipment for a period of time

in exchange for consideration.

accordance with ASC 842, Leases , the Company recognized an ROU asset and corresponding lease liability on its balance sheets for

its office space lease agreement.

See Note 8 - Leases for further discussion, including the impact on the Company’s unaudited condensed

consolidated financial statements and related disclosures.

accordance with ASC 842, Leases (“ASC 842”), the Company recognized an ROU asset and corresponding lease liability

on its balance sheets for its office space lease agreement.

See Note 8- Leases for further discussion, including the impact on

the Company’s unaudited condensed consolidated financial statements and related disclosures.

assets include any prepaid lease payments and exclude any lease incentives and initial direct costs incurred.

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lease payments is recognized on a straight-line basis over the lease term.

The lease terms may include options to extend or terminate

the lease if it is reasonably certain that the Company will exercise that option.

in which the Company is the lessee are comprised of office rental.

The lease terms used in measuring ROU assets and lease liabilities

may include or exclude periods covered by options to extend or terminate a lease, respectively, if it is reasonably certain that the

Company will exercise the option(s).

in which the Company is the lessee are comprised of rented office space.

All of the leases are classified as operating leases.

has a lease agreement for office space with a remaining term of 3.5 years as of June 30, 2021.

has a lease agreement for office space with a remaining term of 3.25 years as of September 30, 2021.

Issued Accounting Standards

May 2021, the FASB issued ASU 2021-04, Earnings Per Share ( Topic 260), Debt—Modifications and Extinguishments (Subtopic

Compensation— Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic

815- 40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options”

which clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified

written call options (for example, warrants) that remain equity classified after modification or exchange.

An entity should measure the

effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after

modification or exchange as follows:

i) for a modification or an exchange that is a part of or directly related to a modification or

an exchange of an existing debt instrument or line-of-credit or revolving-debt arrangements (hereinafter, referred to as a “debt”

or “debt instrument”), as the difference between the fair value of the modified or exchanged written call option and the

fair value of that written call option immediately before it is modified or exchanged;

ii) for all other modifications or exchanges,

as the excess, if any, of the fair value of the modified or exchanged written call option over the fair value of that written call option

immediately before it is modified or exchanged.

The amendments in this Update are effective for all entities for fiscal years beginning

after December 15, 2021, including interim periods within those fiscal years.

An entity should apply the amendments prospectively to

modifications or exchanges occurring on or after the effective date of the amendments.

470-50), Compensation— Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity

(Subtopic 815- 40) (“ASU 2021-04”), which clarifies and reduces diversity in an issuer’s accounting for modifications

or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity-classified after a modification

An entity should measure the effect of a modification or exchange of a freestanding equity-classified written call option

that remains equity-classified after a modification or exchange as follows:

i) for a modification or exchange that is a part of or directly

related to a modification or exchange of an existing debt instrument or line-of-credit or revolving-debt arrangements (hereinafter, referred

to as “debt” or a “debt instrument”), as the difference between the fair value of the modified or exchanged written

call option and the fair value of that written call option immediately before it is modified or exchanged;

ii) for all other modifications

or exchanges, as the excess, if any, of the fair value of the modified or exchanged written call option over the fair value of that written

call option immediately before it is modified or exchanged.

The amendments in ASU 2021-04 are effective for all entities for fiscal years

beginning after December 15, 2021, including interim periods within those fiscal years.

An entity should apply the amendments prospectively

to modifications or exchanges occurring on or after the effective date of the amendments.

The Company is currently evaluating the impact

of this standard on its unaudited condensed consolidated financial statements.

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

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

3 – INTANGIBLE ASSETS

25 unchanged sentences

Amortization expense

Balance as of June 30, 2021

Balance as of September 30, 2021

$ ( 696,804 )

Weighted average remaining amortization period at June 30, 2021 (in years)

Weighted average remaining amortization period at September 30, 2021 (in years)

of intangible assets consists of the following:

6 unchanged sentences

Amortization expense

Balance as of June 30, 2021

Balance as of September 30, 2021

4 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

1 unchanged sentence

OF ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

June 30, 2021

September 30,

Accrued payroll

5 unchanged sentences

5 – NOTES PAYABLE

summary of the notes payable activity during the six months ended June 30, 2021 is presented below:

summary of the notes payable activity during the nine months ended September 30, 2021 is presented below:

OF NOTES PAYABLE ACTIVITY

5 unchanged sentences

Amortization of debt discount

Outstanding, June 30, 2021

Outstanding, September 30, 2021

$ ( 4,399,034 )

16 unchanged sentences

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”).

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

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

of the Effective Date) and the costs incurred by Auctus as the debtor-in-possession lender

(the “DIP Costs”).

and the additional Plan costs in the aggregate totaled $ 650,493 , of which $ 500,000 and $ 150,493 were recorded in debt discount and

accrued expenses, respectively, on the consolidated balance sheets (See Note 9).

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”).

The DIP Costs and the additional Plan costs in the aggregate

totaled $ 650,493 ,

of which $ 500,000

recorded in debt discount and accrued expenses, respectively, on the consolidated balance

On September 27, 2021, these amounts were converted into secured convertible promissory

notes totaling an aggregate principal amount of $ 715,303 .

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

“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;

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:

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 assets;

Secured Convertible Notes have the following features:

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.

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 $ 2.00 (a total of 1,750,000 Class

A Warrants in consideration of the Initial Auctus Funding and a total of approximately 174,250

Class A Warrants in the aggregate in consideration of the Other Funding), such Class A Warrants

having an exercise price of $ 2.00 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 $ 4.00 (a total of 875,000 Class B Warrants in consideration of the Initial

Auctus Funding and a total of approximately 87,125 Class B Warrants in the aggregate in consideration

of the Other Funding), such Class B Warrants having an exercise price of $ 4.00 per

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 % of the DIP Funding) with a maturity date of November

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

DIP Funding) with a maturity date of November 16, 2023;

Class A Warrant to purchase 613,451 shares of common stock;

Class B Warrant to purchase 1,226,901,240 shares of common stock (as to which 726,282,680 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 671,124,200 shares of common

stock, of which 217,796,200 and 453,328,000 were issued during 2020 and 2021, respectively).

addition, Auctus shall be entitled to receive a Secured Convertible Note in exchange for its allowed DIP Costs of $ 166,403 and allowed

Plan costs of $ 484,090 , in a manner in which the DIP Funding was treated and shall be entitled to a Class A Warrant and a Class B Warrant

in consideration of its allowed DIP costs.

Class B Warrant to purchase 306,725 shares of common stock (as to which 181,571 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 167,781 shares of common stock, of which 54,449

and 113,332 were issued during 2020 and 2021, respectively).

claim arising from the secured promissory notes of the Company, dated February 20, 2020, and February 26, 2020, in the original principal

2 unchanged sentences

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 $ 245,192 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 where were valued at the fair market value of the stock at issuance date of $ 14,381,259 with an associated loss of $ 3,883,991

recognized in Reorganization Items, net on the accompanying consolidated statement of operations in exchange for approximately $ 10,497,268

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 6,130 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 11,113

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 262,432 shares of common stock where were valued at the fair market value of

the stock at issuance date of $ 14,381,259 with an associated loss of $ 3,883,991 recognized

in Reorganization Items, net on the accompanying consolidated statement of operations in

exchange for approximately $ 10,497,268 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

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

2 unchanged sentences

Company recorded $ 152,499 and $ - of interest expense related to notes payable and convertible note payable for the three months ended

June 30, 2021 and 2020, respectively.

The Company recorded $ 286,414 and $ 368,810 of interest expense related to notes payable and convertible

note payable for the six months ended June 30, 2021 and 2020, respectively.

September 30, 2021 and 2020, respectively.

The Company recorded $ 438,913 and $ 368,810 of interest expense related to notes payable and

convertible note payable for the nine months ended September 30, 2021 and 2020, respectively (see Note 9 – Subsequent Events).

Exchanges and Other

the six months ended June 30, 2021, certain lenders converted unsecured convertible notes with an aggregate amount of $ 317,894 (including

$ 6,314 of accrued interest) for an aggregate of 32,276,310 shares of the Company’s common stock at a conversion price of $ 0.01

the nine months ended September 30, 2021, certain lenders converted unsecured convertible notes with an aggregate amount of $ 317,894

(including $ 6,314 of accrued interest) for an aggregate of 8,069 shares of the Company’s common stock at a conversion price of

$ 40 per share.

Debtor-in-Possession

6 unchanged sentences

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

to the Plan, the obligation to Auctus with respect to the DIP Funding has been exchanged for two Secured Convertible Notes (See Note

5 – Notes Payable – Chapter 11 Reorganization) for an aggregate principal amount of $ 1,349,591 which bear interest at 7 %

to the Plan, the obligation to Auctus with respect to the DIP Funding has been exchanged for two Secured Convertible Notes (see

Note 5 – Notes Payable – Chapter 11 Reorganization) for an aggregate principal amount of $ 1,349,591

which bear interest at 7 %

per annum with a maturity date of November

In connection with the Secured Convertible Notes, Auctus received warrants to purchase

an aggregate of 3,680,703,720 shares of Company’s commons stock with exercise prices ranging between $ 0.0005 and $ 0.001 per share.

expense for the two Secured Convertible Notes was $ 23,553 and $ 46,847 for the three and six months ended June 30, 2021, respectively.

Interest expense during the three and six months ended June 30, 2020 was $ 6,769 .

In connection with the Secured Convertible

Notes, Auctus received warrants to purchase an aggregate of 920,176

shares of Company’s common stock with exercise

prices ranging between $ 2.00

September 27, 2021, pursuant to the Plan, for 110 % of the DIP Costs, the Company issued to Auctus secured two convertible promissory

notes in the aggregate principal amount of $ 183,043 , with a maturity date of November 16, 2023 .

The notes bear interest at 7 % per annum

which is payable on maturity.

Amounts due under the notes may be converted into shares of the Company’s common stock, at $ 0.0001

par value, at a conversion price equal to the average five daily volume weighted average price on the latest day prior to the conversion

In connection with the notes, the Company granted to Auctus Class A Warrants to purchase up to 83,201 shares of the Company’s

common stock at an exercise price of $ 2.00 per share.

The Class A Warrants expire on November 16, 2025 .

In addition, in connection

with the notes, the Company granted to Auctus Class B Warrants to purchase up to 41,601 shares of the Company’s common stock at

an exercise price of $ 4.00 per share.

The Class B Warrants expire on November 16, 2025 .

The warrants had an aggregate grant date

fair value of $ 152,300 which was recorded as a debt discount and is being amortized over the term of the note.

In addition, the note

contains a beneficial conversion feature with a relative fair value of $ 14,103 which was recorded as a debt discount and is being amortized

over the term of the note.

As of September 30, 2021, $ 183,043 was outstanding.

September 27, 2021, pursuant to the Plan, for 110 % of the Plan Costs, the Company issued to Auctus a secured convertible promissory note

in the principal amount of $ 532,499 , with a maturity date of November 16, 2023 .

The note bears interest at 7 % per annum which is payable

Amounts due under the note may be converted into shares of the Company’s common stock, at $ 0.0001 par value, at a

conversion price equal to the average five daily volume weighted average price on the latest day prior to the conversion date.

September 30, 2021, $ 532,499 was outstanding.

expense for the five Secured Convertible Notes was $ 24,214 and $ 71,062 for the three and nine months ended September 30, 2021,

respectively.

Interest expense during the three and nine months ended September 30, 2020 was $ 6,769 .

Offering Exchange

Subsequent to September

30, 2021, in connection with the public offering, see Note 9 – Subsequent Events, all of the above outstanding convertible

notes, associated accrued interest and warrants held by Auctus, as well as outstanding convertible notes in the aggregate principal

amount of $ 1,219,945 , associated accrued interest and warrants for the purchase of an aggregate of 236,411 shares of common stock,

were exchanged for an aggregate amount of 1,856,938

units of common stock and warrants (of the type issued pursuant to the Company’s public offering) (except that Auctus received

shares of Series A preferred stock in lieu of common stock with regard to a portion of the exchanged amount, as described in Note

9 – Subsequent Events), ultimately resulting in approximately 1,543,000

newly issued shares of Series A Convertible Preferred Stock, approximately 314,000

shares of common stock and approximately 1,857,000

warrants being issued (see Note 9 – Subsequent Events).

March 14, 2021, under the U.S.

Small Business Administration’s Paycheck Protection Program, the Company entered into a note payable

with a financial institution for $ 250,000 at an interest rate of 1 % per annum and a maturity date of March 14, 2026.

Pursuant to the

note, principal and interest payments are deferred for ten months, which, at that time the Company may apply for loan forgiveness.

the Company does not apply for loan forgiveness, or if the loan forgiveness is denied, the Company will be required to make monthly payments

of $ 5,100 starting on January 14, 2022.

As of June 30, 2021, the Company has not applied for loan forgiveness.

All remaining unpaid principal

and interest is due and payable at the maturity date.

At June 30, 2021, $ 250,000 was outstanding.

minimum payments under the above notes payable following the six months ended June 30, 2021 are as follows:

Small Business Administration’s Paycheck Protection Program, the Company entered into a note

payable with a financial institution for $ 250,000 at an interest rate of 1 % per annum and a maturity date of March 14, 2026.

Pursuant to the note, principal and interest payments are deferred for ten months.

At that time the Company may apply for

loan forgiveness.

If the Company does not apply for loan forgiveness, or if the loan forgiveness is denied, the Company will be

required to make monthly payments of $ 5,100 starting on January 14, 2022.

As of September 30, 2021, the Company has not

applied for loan forgiveness.

All remaining unpaid principal and interest is due and payable at the maturity date.

30, 2021, $ 250,000 was outstanding .

minimum payments under the above notes payable following the nine months ended September 30, 2021 are as follows:

OF FUTURE MINIMUM PAYMENTS OF NOTES PAYABLE

Remainder of 2021

Total future minimum payments

( 4,399,034 )

payable, non-current

Notes payable, non-current

6 – STOCKHOLDERS’ DEFICIT

Series A Preferred

to September 30, 2021, concurrent with the Company’s public offering, see Note 9 – Subsequent Events, the Company’s

Board of Directors adopted a resolution allowing for the authorization of and issuance of 1,543,458 shares of the Company’s Preferred

Stock, $ .01 par value per share, designated as Series A Preferred Stock (“Series A”).

A holders shall be entitled to receive, when and as declared by the Board of Directors, dividends on a pari passu basis with the

holders of the shares of the Company’s common stock based upon the number of shares of common stock into which the Series A is

then convertible.

A holders shall be entitled to vote on all matter presented to the stockholders of the Company and shall be entitled to such number of

votes that equal the number of shares of common stock that each share of Series A held may be converted into;

provided, however, that

in no event shall a Series A holder be entitled to vote more than 4.99 % of the then outstanding shares of common stock.

Conversion - Each share of Series A shall be convertible, at any time, at the option of the Series A holder, into one share of common

provided, however, that in no event shall a Series A holder be entitled to convert any shares of Series A to the extent that such

conversion would result in beneficial ownership by the Series A holder of more than 4.99% of the outstanding shares of common stock.

Conversion – In the event that an event occurs which has the effect of reducing a Series A holder’s beneficial ownership

of shares of common stock to less than 4.5 % of the then publicly disclosed outstanding shares of common stock, then within five business

days thereafter, the Series A holder shall provide notice to the Company to such effect.

Such notice shall have the effect of a notice

of conversion such that the Series A holder’s post-conversion ownership of common stock will be 4.99% of the then publicly disclosed

outstanding shares of common stock.

Incentive Plan

1 unchanged sentence

2021 Stock Incentive Plan (the “2021

Pursuant to the 2021 Plan, a total of 4,700,000,000 shares of common stock are authorized to be issued pursuant to the

grant of stock options, restricted stock units, restricted stock, stock appreciation rights and other incentive awards.

Pursuant to the 2021 Plan, a total of 1,175,000 shares of common stock are authorized to be issued pursuant to the grant

of stock options, restricted stock units, restricted stock, stock appreciation rights and other incentive awards.

and Option Valuation

14 unchanged sentences

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

OF WARRANTS GRANTED ASSUMPTION

For the Six Months Ended

OF WARRANTS GRANTED ASSUMPTIONS

September 30, 2021

September 30, 2020

Risk free interest rate

1 unchanged sentence

Expected volatility

weighted average estimated fair value of warrants granted during the six months ended June 30, 2020 was $ 0.01 per share.

the six months ended June 30, 2021, the Company issued an aggregate of 453,328,000 shares of the Company’ common stock, as a result

of the cashless exercise of 494,604,977 warrants to Auctus.

summary of the warrant activity during the six months ended June 30, 2021 is presented below:

weighted average estimated fair value of warrants granted during the nine months ended September 30, 2021 and 2020 was $ 14.40

and $ 40 per share, respectively.

the nine months ended September 30, 2021, the Company issued an aggregate of 147,832 shares of the Company’ common stock, as a

result of the cashless exercise of 170,495 warrants to Auctus.

summary of the warrant activity during the nine months ended September 30, 2021, is presented below:

OF WARRANT ACTIVITY

Outstanding, January 1, 2021

15,002,388,203

( 494,604,977 )

Outstanding, June 30, 2021

14,507,388,226

Exercisable, June 30, 2021

14,507,388,226

following table presents information related to stock warrants at June 30, 2021:

Outstanding, September 30, 2021

Exercisable, September 30, 2021

following table presents information related to stock warrants at September 30, 2021:

OF STOCK WARRANTS

9 unchanged sentences

$ 20,000 - $ 23,960

$ 5.00 - $ 5.99

14,507,388,226

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

OF STOCK OPTION GRANTED ASSUMPTIONS

For the Six Months Ended

For the Nine Months Ended

September 30,

Risk free interest rate

2 unchanged sentences

Expected dividends

Company granted options for the purchase of 2,347,835,948 shares of common stock during the six months ended June 30, 2021.

Company did not issue stock options during the six months ended June 30, 2020.

grant date fair value of options issued during the six months ended June 30, 2021 was $ 27,736,052 .

summary of the option activity during the six months ended June 30, 2021 is presented below:

Company granted options for the purchase of 586,959 shares of common stock during the nine months ended September 30, 2021.

Company did no t issue stock options during the nine months ended September 30, 2020.

grant date fair value of options issued during the nine months ended September 30, 2021 was $ 27,736,052 .

summary of the option activity during the nine months ended September 30, 2021 is presented below:

OF STOCK OPTION ACTIVITY

Outstanding, January 1, 2021

2,347,835,948

Outstanding, June 30, 2021

2,352,191,115

Exercisable, June 30, 2021

1,178,631,812

following table presents information related to stock options at June 30, 2021:

OF OPTION BY EXERCISE PRICE

Outstanding, September 30, 2021

Exercisable, September 30, 2021

following table presents information related to stock options at September 30, 2021:

OF STOCK OPTION BY EXERCISE PRICE

Options Outstanding

7 unchanged sentences

$ 80,000 - $ 120,000

$ 6.00 - $ 19.99

$ 20.00 - $ 30.00

2,352,191,115

1,178,131,812

March 18, 2021, the Company, pursuant to two employment agreements, granted to its Chief Executive Officer and Chairman of the Board

and its Vice President, Research and Development options to purchase an aggregate of 2,347,835,948 shares of the Company’s common

stock (See Note 7 – Commitments and Contingencies).

and its Vice President, Research and Development options to purchase an aggregate of 586,959 shares of the Company’s common stock

(see Note 7 – Commitments and Contingencies).

The options have an exercise price of $ 47.60 per share and vest to the extent

of 50% on the date of grant, 25% on the one-year anniversary of the grant date and 25% on the two-year anniversary of the grant date .

Subsequent to September 30, 2021, the Company reduced the exercise price of these options from $ 47.60 per share to $ 13.50 per share

and revised the vesting period (see Note 9 – Subsequent Events).

to the 2021 Plan, the Company grants RSUs to employees, consultants or non-employee directors (“Eligible Individuals”).

The number, terms, and conditions of the RSUs that are granted to Eligible Individuals are determined on an individual basis by the plan

administrator.

On the distribution date, the Company shall issue to the Eligible Individual one unrestricted, fully transferable share

of the Company’s common stock (or the fair market value of one such share in cash) for each vested and nonforfeitable RSU.

March 18, 2021, the Company, pursuant to two employment agreements, granted an aggregate of 1,173,917,974 RSUs to its Chief Executive

Officer and Chairman of the Board and its Vice President, Research and Development (See Note 7 – Commitments and Contingencies)

number, terms and conditions of the RSUs that are granted to Eligible Individuals are determined on an individual basis by the plan administrator.

On the distribution date, the Company shall issue to the Eligible Individual one unrestricted, fully transferable share of the Company’s

common stock (or the fair market value of one such share in cash) for each vested and nonforfeitable RSU.

March 18, 2021, the Company, pursuant to two employment agreements, granted an aggregate of 293,479 RSUs to its Chief Executive Officer

and Chairman of the Board and its Vice President, Research and Development (see Note 7 – Commitments and Contingencies)

with a fair value of $ 47.60 per share.

1 unchanged sentence

on the two-year anniversary of the grant date, and one-third on the three-year anniversary of the grant date .

summary of our unvested RSUs as of June 30, 2021 is as follows:

summary of our unvested RSUs as of September 30, 2021, is as follows:

OF UNVESTED RESTRICTED STOCK UNITS

Outstanding, January 1, 2021

1,173,917,974

Outstanding, June 30, 2021

1,173,917,974

Outstanding, September 30, 2021

following table presents information related to stock compensation expense:

OF STOCK OPTION EXPENSE

For the Three Months Ended

For the Six Months Ended

For the Three

Unrecognized at

September 30,

Research and development

20 unchanged sentences

approve the foregoing items, including the 1,000 to 1 reverse split, subject to the Company having available funds to effectuate such

As discussed above in Note 5 – Notes Payable – Chapter 11 Reorganization on March 20, 2020, the Company filed a petition

commencing its Chapter 11 Case.

As of the date of this report, the Company has not effected the reverse split.

As discussed above in Note 5 – Notes Payable – Chapter 11 Reorganization, on March 20, 2020, the Company filed

a petition commencing its Chapter 11 Case.

As of the date of this report, the Company has not effected the 1,000 to 1 reverse

however, on October 27, 2021, the Company effected a 1-for-4,000 reverse split of its common stock.

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

or Departure of Directors and Certain Officers

March 18, 2021, the Company and Lance Alstodt, its President, Chief Executive Officer and Chairman of the Board, entered into an employment

agreement (the “Alstodt Employment Agreement”) which provides for a term ending on March 18, 2026.

Pursuant to the Alstodt

Employment Agreement, Mr.

March 18, 2021, the Company and Lance Alstodt, its President, Chief Executive Officer and Chairman of the Board, entered into an

employment agreement (the “Alstodt Employment Agreement”) which provides for a term ending on March 18, 2026.

to the Alstodt Employment Agreement, Mr.

Alstodt is entitled to receive initially an annual salary of $ 250,000 .

Alstodt’s annual salary will

increase by $ 50,000 per year.

Alstodt’s annual salary will increase by $ 50,000

In addition, in the event certain performance goals are met, Mr.

1 unchanged sentence

The Alstodt Employment Agreement also provides for the grant to Mr.

Alstodt pursuant to the Plan of (i) a ten year option for

the purchase of 1,173,917,974 shares of common stock of the Company and (ii) 5 86,958,987 RSUs of the Company (See Note 6 – Stockholders’

Deficit) for additional information.

Alstodt pursuant to the 2021 Plan of (i) a ten

year option for the purchase of 293,479

shares of common stock of the Company and (ii) 1 46,740

RSUs of the Company (see Note 6 – Stockholders’ Deficit) for additional information.

Subsequent to

September 30, 2021, the Company reduced the exercise price of these options from $ 47.60

per share to $ 13.50

per share and revised the vesting period (see Note 9 – Subsequent Events).

March 18, 2021, the Company and Francisco Silva, its Vice President, Research and Development, entered into an employment agreement (the

7 unchanged sentences

Agreement also provides for the grant to Mr.

Silva pursuant to the Plan of (i) a ten year option for the purchase of 1,173,917,974 shares

of common stock of the Company and (ii) 586,958,987 RSUs of the Company (See Note 6 – Stockholders’ Deficit) for additional

Silva pursuant to the 2021 Plan of (i) a ten year option for the purchase of 293,479

shares of common stock of the Company and (ii) 146,740 RSUs of the Company (see Note 6 – Stockholders’ Deficit) for

additional information.

Subsequent to September 30, 2021, the Company reduced the exercise price of these options from $ 47.60

per share to $ 13.50 per share and revised the vesting period (see Note 9 – Subsequent Events).

of Convertible Notes

8 unchanged sentences

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

June 24, 2021, the Company entered into a Settlement Agreement with one of the abovemention lenders, whereby the Company agreed to

issue 3,000,000 shares of the Company’s common stock in lieu of cash for an additional $ 30,000 of approved

unsecured claims related to the Plan.

The Company issued the 3,000,000 shares on July 16, 2021 (See Note 9).

June 24, 2021, the Company entered into a Settlement Agreement with one of the abovementioned lenders whereby the Company agreed to issue

750 shares of the Company’s common stock in lieu of cash for an additional $ 30,000 of approved unsecured claims related to the

On July 16, 2021, the Company issued the 750 shares with a fair value of $ 28 per share.

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

11 unchanged sentences

OF NET LEASE COST AND OTHER SUPPLEMENTAL LEASE INFORMATION

Six Months Ended June 30, 2021

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2021

Nine Months Ended September 30, 2020

Operating lease cost (cost resulting from lease payments)

5 unchanged sentences

Non-current liabilities – operating lease liabilities

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

June 30, 2021:

OF FUTURE MINIMUM PAYMENTS UNDER NON-CANCELABLE LEASE FOR OPERATING LEASES

minimum payments under non-cancelable leases for operating leases for the remaining terms of the leases as of September 30, 2021:

OF FUTURE MINIMUM PAYMENTS UNDER NON-CANCELABLE LEASES FOR OPERATING LEASES

Operating Leases

2021 (excluding the six months ended June 30, 2021)

Remainder of 2021

Total future minimum lease payments

2 unchanged sentences

9 – SUBSEQUENT EVENTS

to June 30, 2021, pursuant to the Plan, for 110 %

of the DIP Costs, the Company agreed to issue to Auctus secured convertible promissory notes in the aggregate principal amount

of $ 183,043 , with a maturity date of November 16, 2023 .

The notes bear interest at 7 % per annum which is payable on maturity.

due under the notes may be converted into shares of the Company’s common stock, at $ 0.0001 par value, at a conversion price

equal to the average five daily volume weighted average price on the latest day prior to the conversion date.

In connection with the

notes, the Company has agreed to grant to Auctus Class A Warrants to purchase up to 332,805,400 shares of the Company’s

common stock at an exercise price of $ 0.0005 per share.

The Class A Warrants expire on November 16, 2025 .

In addition, in connection

with the notes, the Company has agreed to grant to Auctus Class B Warrants to purchase up to 166,402,700 shares of the

Company’s common stock at an exercise price of $ 0.001 per share.

The Class B Warrants expire on November 16, 2025 .

to June 30, 2021, pursuant to the Plan, for 110 %

of the Plan Costs, the Company agreed to issue Auctus a secured convertible promissory note in the principal amount of $ 532,499 ,

with a maturity date of November 16, 2023 .

The note bears interest at 7 % per annum which is payable on maturity.

Amounts due under

the note may be converted into shares of the Company’s common stock, at $ 0.0001 par value, at a conversion price equal to the average

five daily volume weighted average price on the latest day prior to the conversion date.

Company entered into a Settlement Agreement with a prior note holder, in connection with the conversion of a note prior to the

Petition Date (See Note 7).

Pursuant to the Settlement Agreement, subsequent to June 30, 2021, the Company issued 3,000,000 shares

of the Company’s common stock to the note holder with a fair value of $ 0.007 per share.

of Certain Officers and Election of Directors

November 4, 2021, the Company appointed Robert E.

Kristal as its Chief Financial Officer.

Concurrently with his appointment, Mr.

was granted an option to purchase 10,490 shares of the Company’s common stock at an exercise price of $ 13.50 per share.

is exercisable for a ten year period and vests on a quarterly basis over a two year period commencing upon the date of grant.

November 4, 2021, Patrick F.

Williams was elected a director of the Company.

Williams was appointed to the Audit Committee (Chair),

Compensation Committee, and Nominating Committee of the Board of Directors of the Company.

Concurrently with his election, Mr.

was granted an option for the purchase of 10,490 shares of the Company’s common stock at an exercise price of $ 13.50 per share.

Such option is exercisable for a ten year period and vests on a quarterly basis over a two year period commencing upon the date of grant.

November 4, 2021, David Rosa was elected a director of the Company.

Rosa was appointed to the Nominating Committee (Chair), Compensation

Committee, and Audit Committee of the Board of Directors of the Company.

Concurrently with his election, Mr.

Rosa was granted an option

for the purchase of 10,490 shares of the Company’s common stock at an exercise price of $ 13.50 per share.

Such option is exercisable

for a ten year period and vests on a quarterly basis over a two year period commencing upon the date of grant.

November 4, 2021, the Company granted options to purchase an aggregate of 140,824

shares of its common stock, including the options to purchase 10,490

shares each granted to Mr.

Williams, and Mr.

Rosa, as noted above, to its officers and directors at an

exercise price of $ 13.50

Included within the 140,824

share option grants were grants to each of Mr.

Alstodt and Mr.

Silva for the purchase of 42,059

shares of common stock and to Dr.

Nickolay Kukekov, a director of the Company, for the purchase of 25,236

shares of common stock.

The option grants to Mr.

Silva, and Dr.

Kukekov have a ten

year term and an exercise price of $ 13.50

options are exercisable to the extent of 50% on the date of grant and 50% quarterly over a period of two years commencing one year

from the date of grant.

In addition, on November 4, 2021, the Company reduced the exercise price of options held by Mr.

Alstodt and Mr.

Silva, each for the purchase of 293,479

shares of the Company’s common stock, from $ 47.60

per share to $ 13.50

per share and revised the vesting period.

November 4, 2021, the Company granted options to purchase an aggregate of 110,767 shares of the Company’s common stock to members

of its Scientific Advisory Board and various employees and consultants at an exercise price of $ 13.50 per share.

October 2021, the Company entered into an Exchange Agreement (the “Auctus Agreement”) with Auctus to exchange outstanding

convertible promissory notes in the aggregate principal amount of $ 8,826,952 , $ 596,446 in accrued interest, and outstanding warrants

for the purchase of an aggregate of 3,441,586 shares of the Company’s common stock for units of common stock and warrants that

were issued by the Company in its underwritten public offering (the “Public Offering”), except that, to the extent the issuance

of common stock pursuant to the Auctus Agreement would result in Auctus being the beneficial owner of more than 4.99% of the Company’s

outstanding common stock, the Company will instead issue to Auctus shares of Series A preferred stock.

On November 9, 2021, in connection

with the Public Offering, the Company issued to Auctus 133,422 shares of the Company’s common stock, 1,543,158 shares of Series

A preferred stock, and warrants for the purchase of 1,676,580 shares of common stock.

addition, during October 2021, the Company entered into Exchange Agreements with four other holders of convertible promissory notes and

warrants (collectively, the “Other Holders”) with regard to the exchange by the Other Holders of outstanding convertible

promissory notes in the aggregate principal amount of $ 419,945 , $ 25,115 in accrued interest, and warrants to purchase of an aggregate

of 236,411 shares of the Company’s common stock for the units that are issued in the Public Offering.

On November 9, 2021, in connection

with the Public Offering, the Company issued the Other Holders an aggregate of 94,942 shares of the Company’s common stock and

warrants for the purchase of an aggregate of 94,942 shares of common stock.

November 9, 2021, pursuant to the terms of their convertible notes, the Company issued to two noteholders an aggregate of 85,416 shares

of common stock, with a fair value of $ 10.00 per share, and warrants for the purchase of an aggregate of 85,416 shares of common stock,

upon the conversion of an aggregate principal and accrued interest amount of $ 800,000 and $ 54,159 , respectively, upon the Company’s

listing on the Nasdaq Capital Market.

October 2021, the Company received an exercise notice to issue an aggregate of 22,917 shares of common stock to a warrant holder, with

a fair value of $ 240 per share, pursuant to a warrant associated with the Plan.

As of the date of this report the shares have yet to

October 27, 2021, the Company effected a 1-for-4,000 reverse stock split .

The Company has retroactively

applied the reverse stock split, including the rounding up of 6,858

fractional shares , effective on

October 27, 2021 to share and per share amounts on the unaudited condensed consolidated financial statements for the three and nine months

ended September 30, 2021 and the year ended December 31, 2020.

The Company’s authorized shares of common stock and preferred stock

were not affected as a result of the reverse stock split.

November 9, 2021, the Company completed a public offering of units, each consisting of one share of common stock and a warrant for

the purchase of one share of common stock.

Pursuant to the public offering, the Company issued and sold 2,300,000

units at a public offering price of $ 10.00

per unit, and, pursuant to the exercise of an option granted to the underwriters, warrants for the purchase of 345,000

shares of common stock at a public offering price of $ 0.01

per warrant, less underwriting discounts and commissions.

The Company received net proceeds of approximately $ 20,772,000

from the public offering, after deducting underwriting discounts and commissions of $ 1,610,000

and estimated offering costs of $ 600,000 .

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