What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-11-15 compared with 2021-08-16 · 141 added, 151 removed, 200 unchanged (59% of the section changed)

75 unchanged sentences

Payable in Part I, Item I of this report for additional information.

develop therapeutic products and medical therapies using cell and tissue protocols, primarily involving adult (non-embryonic) stem cells.

We are currently pursuing our Disc/Spine Program with our initial investigational therapeutic product being called BRTX-100 .

We submitted an IND application to the FDA to obtain authorization to commence a Phase 2 clinical trial investigating the use of BRTX-100 ,

our lead cell therapy candidate, in the treatment of chronic lower back pain arising from degenerative disc disease.

We have received

such authorization from the FDA.

We develop therapeutic products

and medical therapies using cell and tissue protocols, primarily involving adult (non-embryonic) stem cells.

We are currently pursuing

our Disc/Spine Program with our initial investigational therapeutic product being called BRTX-100 .

We submitted an IND

application to the FDA to obtain authorization to commence a Phase 2 clinical trial investigating the use of BRTX-100 , our lead

cell therapy candidate, in the treatment of chronic lower back pain arising from degenerative disc disease.

We have received such authorization

from the FDA.

We intend to commence such clinical trial during 2022 (assuming the receipt of necessary funding).

have obtained a license to use technology for investigational adult stem cell treatment of disc and spine conditions, including protruding

and bulging lumbar discs.

The technology is an advanced stem cell injection procedure that may offer relief from lower back pain, buttock

and leg pain, and numbness and tingling in the leg and foot.

We have obtained a license

to use technology for investigational adult stem cell treatment of disc and spine conditions, including protruding and bulging lumbar

The technology is an advanced stem cell injection procedure that may offer relief from lower back pain, buttock and leg pain,

and numbness and tingling in the leg and foot.

We are also developing our ThermoStem Program .

This pre-clinical

program involves the use of brown adipose (fat) in connection with the cell-based treatment of type 2 diabetes and obesity as well as

hypertension, other metabolic disorders and cardiac deficiencies.

United States patents related to the ThermoStem Program were

issued in September 2015, January 2019, March 2020, March 2021, and July 2021;

Australian patents related to the ThermoStem Program

were issued in April 2017 and October 2019;

Japanese patents related to the ThermoStem Program were issued in December 2017

and May 2021;

This pre-clinical program involves

the use of brown adipose (fat) in connection with the cell-based treatment of type 2 diabetes and obesity as well as hypertension, other

metabolic disorders and cardiac deficiencies.

United States patents related to the ThermoStem Program were issued in September

2015, January 2019, March 2020, March 2021 and July 2021;

Australian patents related to the ThermoStem Program were issued in

April 2017, June and October 2019, and August 2021;

Japanese patents related to the ThermoStem Program were issued

in December 2017 and June 2021;

Israeli patents related to the ThermoStem Program were issued in October 2019 and May 2020;

patents related to the ThermoStem Program were issued in April 2020 and January 2021.

and European patents related to the ThermoStem Program were issued in April 2020 and January 2021.

have licensed a patented curved needle device that is a needle system designed to deliver cells and/or other therapeutic products or

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to BRTX-100 .

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.

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

to use certain intellectual property related to, among other things, stem cell disc procedures and the Company has granted to the SCTC

a sublicense to use, and the right to sublicense to third parties the right to use, in certain locations in the United States and the

Cayman Islands, certain of the licensed intellectual property.

In consideration of the sublicenses, the SCTC has agreed to pay the Company

royalties on a per disc procedure basis.

On October 27, 2021, we effected

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

We have 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.

Our authorized shares of common stock and preferred stock were not affected as a result of

the reverse stock split.

We derived all of our revenue

pursuant to a license agreement with the SCTC entered into in January 2012, as amended in November 2015.

Pursuant to the license agreement,

the SCTC granted to us a license to use certain intellectual property related to, among other things, stem cell disc procedures and we

have granted to the SCTC a sublicense to use, and the right to sublicense to third parties the right to use, in certain locations in

the United States and the Cayman Islands, certain of the licensed intellectual property.

In consideration of the sublicenses, the SCTC

has agreed to pay us royalties on a per disc procedure basis.

of Operations

of the Three Months Ended June 30, 2021 to the Three Months Ended June 30, 2020

financial results for the three months ended June 30, 2021 are summarized as follows in comparison to the three months ended June 30,

of the Three Months Ended September 30, 2021 to the Three Months Ended September 30, 2020

financial results for the three months ended September 30, 2021 are summarized as follows in comparison to the three months ended September

For The Three Months Ended

September 30,

Operating Expenses:

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Loss From Operations

Other Income (Expense):

Other Expense:

Interest expense

Amortization of debt discount

Loss on extinguishment of notes payable, net

Change in fair value of derivative liabilities

Reorganization items, net

Total Other Income (Expense)

Net Income (Loss)

Total Other Expense

$ (4,184,232 )

the three months ended June 30, 2021 and 2020, we generated $15,000 and $19,000, respectively, of royalty revenue in connection with

the three months ended September 30, 2021 and 2020, we generated $8,000 and $15,000, respectively, of royalty revenue in connection with

our sublicense agreement.

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For the three

months ended June 30, 2021 and 2020, marketing and promotion expenses remained consistent.

months ended September 30, 2021 and 2020, marketing and promotion expenses remained consistent.

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 June 30, 2021, consulting

expenses decreased by $31,941, or 95%, from $33,589 to $1,648, as compared to the three months ended June 30, 2020.

The decrease is primarily

due to the Company’s reduced usage of consultants as the Company continues to emerge from its Chapter 11 reorganization.

Consulting expenses consist

of consulting fees and stock-based compensation to consultants.

For the three months ended September 30, 2021, consulting expenses decreased

by $33,594, or 100%, from $33,594 to $0, as compared to the three months ended September 30, 2020.

The decrease is primarily due to our

reduced usage of consultants as we continue to emerge from our Chapter 11 reorganization.

and Development

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expenses are expensed as they are incurred.

For the three months ended June 30, 2021, research and development expenses decreased by

$100,655, or 38%, from $261,553 to $160,898, as compared to the three months ended June 30, 2020.

The decrease is primarily due to (i)

the decrease of approximately $35,000 in stock compensation allocated to the Company’s research and development activities and

(ii) a decrease of approximately $20,000 in depreciation allocated to research and development activities.

For the three months ended September 30, 2021, research and development expenses decreased

by $13,626, or 5%, from $251,036 to $237,410, as compared to the three months ended September 30, 2020.

The decrease is primarily due

to a small decrease in stock compensation expense attributable to research and development.

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.

the quarter ended December 31, 2021 and subsequent fiscal periods.

and Administrative

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For the three months ended

June 30, 2021, general and administrative expenses increased by $3,222,174, or 1,797%, from $179,323 to $3,401,497, as compared to the

three months ended June 30, 2020.

The increase is primarily due to an increase of approximately $2,800,000 in stock-based compensation

resulting from the issuances of 2,347,835,948 stock options and 1,173,917,974 RSUs and (ii) an increase of approximately $300,000 in

legal, accounting and financial services fees.

September 30, 2021, general and administrative expenses increased by $3,118,492, or 916%, from $340,485 to $3,458,977,

as compared to the three months ended September 30, 2020.

The increase is primarily due to an increase of approximately $2,800,000

in stock-based compensation resulting from the issuances of 586,959 stock options and 293,479 RSUs.

expect that our general and administrative expenses will further increase as we expand our staff, develop our infrastructure and incur

additional costs to support the growth of our business.

the three months ended June 30, 2021, interest expense increased $157,790, or 653%, as compared to the three months ended June 30, 2020.

The increase was due to the increase in outstanding notes payable as a result of our restructuring under our Chapter 11 reorganization.

of debt discount

the three months ended June 30, 2021, amortization of debt discount increased $325,374, or 100%, as compared to the three months ended

June 30, 2020.

The increase was due to the increase in outstanding notes payable not accounted for under bankruptcy accounting as a result

of our restructuring under our Chapter 11 reorganization.

the three months ended September 30, 2021, interest expense increased $452,934, or 1,063%, as compared to the three months ended

September 30, 2020.

The increase was due to the increase in both interest and amortization of debt discount on outstanding notes payable

as a result of our restructuring under our Chapter 11 reorganization.

Reorganization

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

For the three months ended June 30, 2021,

we did not record reorganization items, net as compared to reorganization items, net of $3,361,416 for the three months ended June 30,

of the Six Months Ended June 30, 2021 to the Six Months Ended June 30, 2020

financial results for the six months ended June 30, 2021 are summarized as follows in comparison to the six months ended June 30, 2020:

For The Six Months Ended

For the three months ended September 30, 2021,

we did not record reorganization items, net as compared to reorganization items, net of ($183,387) for the three months ended September

of the Nine Months Ended September 30, 2021 to the Nine Months Ended September 30, 2020

financial results for the nine months ended September 30, 2021 are summarized as follows in comparison to the nine months ended September

For The Nine Months Ended

September 30,

Operating Expenses:

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Interest expense

Amortization of debt discount

Loss on extinguishment of notes payable, net

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$ (23,900,157 )

the six months ended June 30, 2021 and 2020, we generated $33,000 and $45,000, respectively, of royalty revenue in connection with our

sublicense agreement.

$ (5,511,375 )

the nine months ended September 30, 2021 and 2020, we generated $41,000 and $60,000, 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.

months ended June 30, 2021, marketing and promotion expenses decreased by $19,311, or 69%, from $28,131 to $8,820, as compared to the

six months ended June 30, 2020.

The decrease is primarily due to the Company’s reduced marketing plan as the Company continues

to emerge from its Chapter 11 reorganization.

months ended September 30, 2021, marketing and promotion expenses decreased by $19,011, or 68%, from $28,131 to $9,120, as compared to

the nine months ended September 30, 2020.

The decrease is primarily due to our reduced marketing plan as we continue to

emerge from our Chapter 11 reorganization.

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

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

For the six months ended June 30, 2021, consulting expenses

decreased by $57,564, or 85%, from $67,601 to $10,037, as compared to the six months ended June 30, 2020.

The decrease is primarily due

to the Company’s reduced usage of consultants as the Company continues to emerge from its Chapter 11 reorganization.

For the nine months ended September 30, 2021, consulting

expenses decreased by $91,158, or 90%, from $101,195 to $10,037, as compared to the nine months ended September 30, 2020.

is primarily due to our reduced usage of consultants as we continue to emerge from our Chapter 11 reorganization.

and Development

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expenses are expensed as they are incurred.

For the six months ended June 30, 2021, research and development expenses decreased by $121,729,

or 27%, from $447,881 to $326,152, as compared to the six months ended June 30, 2020.

The decrease is primarily due to the decrease of

approximately $72,000 in stock compensation allocated to the Company’s research and development activities.

For the nine months ended September 30, 2021, research and development expenses decreased

by $135,355, or 19%, from $698,917 to $563,562, as compared to the nine months ended September 30, 2020.

The decrease is primarily due

to the decrease in stock compensation allocated to our research and development activities.

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

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corporate expenses such as legal and professional fees, investor relations and occupancy related expenses.

For the six months ended June

30, 2021, general and administrative expenses increased by $17,515,946, or 2,240%, from $781,964 to $18,297,910, as compared to the six

months ended June 30, 2020.

The increase is primarily due to an increase of approximately $16,700,000 in stock-based compensation resulting

from the issuances of 2,347,835,948 stock options and 1,173,917,974 RSUs and (ii) an increase of approximately $850,000 in legal, accounting

and financial services fees.

For the nine months ended

September 30, 2021, general and administrative expenses increased by $20,627,669, or 1,827%, from $1,129,218 to $21,765,887,

as compared to the nine months ended September 30, 2020.

The increase is primarily due to an increase of approximately $19,500,000 in

stock-based compensation resulting from the issuances of 586,959 stock options and 293,479 RSUs.

expect that our general and administrative expenses will further increase as we expand our staff, develop our infrastructure and incur

additional costs to support the growth of our business.

the six months ended June 30, 2021, interest expense increased $53,378, or 17%, as compared to the six months ended June 30, 2020.

increase was due to the increase in outstanding notes payable as a result of our restructuring under our Chapter 11 reorganization.

of debt discount

the six months ended June 30, 2021, amortization of debt discount decreased $323,992, or 30%, as compared to the six months ended June

The decrease was due to a decrease in outstanding notes payable containing beneficial conversion features resulting in a debt

the nine months ended September 30, 2021, interest expense increased $189,089, or 13%, as compared to the nine months ended September

The increase was due to the increase in both interest and amortization of debt discount on outstanding notes payable as a result

of our restructuring under our Chapter 11 reorganization.

on extinguishment of notes payable, net

the six months ended June 30, 2021, we did not record a gain (loss) on extinguishment of notes payable, as compared to a loss on extinguishment

of notes payable of $658,152 for the six months ended June 30, 2020.

the nine months ended September 30, 2021, we did not record a gain (loss) on extinguishment of notes payable, as compared to a loss on

extinguishment of notes payable of $658,152 for the nine months ended September 30, 2020.

in fair value of derivative liabilities

the six months ended June 30, 2021, we did not record a gain (loss) related to the change in fair value of derivative liabilities, as

compared to a loss related to the change in fair value of derivative liabilities of $2,141,069 for the six months ended June 30, 2020.

the nine months ended September 30, 2021, we did not record a gain (loss) related to the change in fair value of derivative liabilities,

as compared to a loss related to the change in fair value of derivative liabilities of $2,141,069 for the nine months ended September

Reorganization

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

For the six months ended June 30, 2021, we

did not record reorganization items, net as compared to reorganization items, net of $781,306 for the six months ended June 30, 2020.

For the nine months ended September 30, 2021,

we did not record reorganization items, net as compared to reorganization items, net of $597,919 for the nine months ended September

and Capital Resources

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

September 30,

Working Capital

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of Additional Funds

upon our accumulated deficit and stockholders’ deficit of $109,558,758 and $3,808,941, respectively, as of June 30, 2021, along

with our forecast for continued operating losses and our need for financing to fund our contemplated clinical trials, as of such date,

we required additional equity and/or debt financing to continue our operations.

of June 30, 2021, our outstanding debt of $9,326,037, together with interest at a rate of between 5% and 7% per annum, has a maturity

date of November 16, 2023, except for the PPP loan.

As of June 30, 2021, the outstanding debt amount of $9,326,037 did not include $650,493

of DIP and Plan costs associated with the DIP Funding and the Plan (the “Auctus Costs”).

Of the Auctus Costs, $500,000

and $150,493 are recorded in debt discount and accrued expenses, respectively, on the unaudited condensed consolidated balance sheets.

upon our accumulated deficit and stockholders’ deficit of $113,742,990 and $4,879,304, respectively, as of September

30, 2021, along with our forecast for continued operating losses and our need for financing to fund our contemplated clinical trials,

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

of September 30, 2021, our outstanding debt of $10,041,342, together with interest at a rate of between 5% and 7% per annum, has

a maturity date of November 16, 2023, except for the PPP loan.

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

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may be unable to raise sufficient additional capital when we need it or raise capital on favorable terms.

We have granted a security

interest in all of our assets to certain lenders, including Auctus, in connection with our Chapter 11 plan of reorganization.

impede our ability to raise additional debt financing.

In addition, future financing may require us to pledge certain assets and enter

into covenants that could restrict certain business activities or our ability to incur further indebtedness and may contain other terms

that are not favorable to our stockholders or us.

If we are unable to obtain adequate funds on reasonable terms, we may be required to

significantly curtail or discontinue operations or obtain funds by entering into financing agreements on unattractive terms.

In addition, future financing

may require us to pledge certain assets and enter into covenants that could restrict certain business activities or our ability to incur

further indebtedness and may contain other terms that are not favorable to our stockholders or us.

If we are unable to obtain adequate

funds on reasonable terms, we may be required to significantly curtail or discontinue operations or obtain funds by entering into financing

agreements on unattractive terms.

On November 9, 2021, we 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, we issued and sold 2,300,000 units at a publc 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.

unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report have been prepared in conformity with

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The financial statements do not include any adjustment that might result from the outcome of this uncertainty.

following events have mitigated the above factors with regards to our ability to continue as a going concern:

(i) as part of our 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 with three year terms or (c) new convertible notes with three year terms and warrants to purchase shares of

common stock;

(ii) we secured DIP financing during our Chapter 11 reorganization in the aggregate amount of $1,189,413, and $3,848,548

in debt financing as part of our Chapter 11 reorganization to sustain operations;

and (iii) pursuant to the plan of reorganization, Auctus

is required to loan to us, as needed, an additional $2,100,000.

As a result of the above, we have sufficient cash to fund operations

for the twelve months subsequent to the filing date.

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

the six months ended June 30, 2021 and 2020, our sources and uses of cash were as follows:

Six Months Ended June 30,

The following events have

mitigated the above factors with regards to our ability to continue as a going concern:

(i) on November 9, 2021, we received net proceeds

of approximately $20,772,000 from our public offering, and (ii) in connection with the public offering, we exchanged all of our outstanding

convertible debt to shares of common stock, Series A preferred stock, and warrants.

As a result of the above, we have sufficient cash

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

the nine months ended September 30, 2021 and 2020, our sources and uses of cash were as follows:

Nine Months Ended September 30,

Net cash used in operating activities

$ (2,184,894 )

$ (1,392,145 )

Net cash provided by financing activities

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$ (1,934,894 )

cash used in operating activities was $1,555,530 for the six months ended June 30, 2021, primarily due to the net loss of $19,715,925

which was partially offset by non-cash expenses of $17,849,822 related to amortization of debt discount and stock-based compensation

and $310,573 of cash provided by changes in the levels of operating assets and liabilities, primarily as a result of increases in accrued

interest partially offset by a decrease in prepaid assets and other current assets, accounts payable, and lease liability.

Net cash used

in operating activities was $869,084 for the six months ended June 30, 2020, primarily due to the net loss of $4,675,112, which was partially

offset by non-cash expenses of $2,829,648 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 $976,380 of cash provided by changes

in the levels of operating assets and liabilities, primarily as a result of increases in accounts payable, accrued interest, expenses

and other current liabilities and decreases in prepaid expenses and other current assets.

cash provided by financing activities for the six months ended June 30, 2021 was $250,000, which was due to $250,000 of net proceeds

cash used in operating activities was $2,184,894 for the nine months ended September 30, 2021, primarily due to the net loss of $23,900,157

which was primarily offset by non-cash expenses of $21,182,776 related primarily to amortization of debt discount and stock-based

compensation and $541,414 of cash provided by changes in the levels of operating assets and liabilities, primarily as a result of increases

in accrued interest and accounts payable, decreases in accounts receivable and prepaid and other current assets, all partially offset

by a decrease in lease liability.

Net 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, 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 increases in accounts payable, accrued interest, expenses and other current liabilities and decreases in accounts receivable, prepaid

expenses and other current assets.

cash provided by financing activities for the nine months ended September 30, 2021 was $250,000, which was due to $250,000 of net proceeds

from a loan received under the U.S.

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Net cash provided by financing

activities for the six months ended June 30, 2020 was $1,165,517, which was primarily due to $441,762

of net proceeds from debt financings and $713,755 of proceeds from the DIP financing.

activities for the nine months ended September 30, 2020, was $1,566,475, which was primarily due to $1,114,713

of proceeds from the DIP financing and $441,762 of net proceeds from debt financings.

anticipate that the costs to complete our Phase 2 clinical trials with regard to our Disc/Spine Program will be at least $12,000,000.

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(assuming the receipt of no revenues).

As noted above in “Availability of Additional Funds” we secured additional funding

as part of Chapter 11 reorganization in the aggregate amount of $5,037,961 as well as approximately $14,700,000 in outstanding debt and

other liabilities being exchanged for (a) shares of common stock, (b) new convertible notes with three year terms or (c) new convertible

notes with three year terms and warrants to purchase shares of common stock.

Additionally, pursuant to the plan of reorganization, Auctus

is required to loan to us, as needed, an additional $2,100,000.

As a result of the above, we have sufficient cash to fund operations

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significant accounting policies are more fully described in the notes to our unaudited condensed consolidated financial statements included

herein for the quarter ended June 30, 2021 and in the notes to our consolidated financial statements included in our Annual Report on

Form 10-K for the year ended December 31, 2020, as filed with the SEC on April 30, 2021.

herein for the quarter ended September 30, 2021, and in the notes to our consolidated financial statements included in our Annual Report

on Form 10-K for the year ended December 31, 2020, as filed with the SEC on April 30, 2021.

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 June 30, 2021.

statements herein for the quarter ended September 30, 2021.

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 2. Management’s Discussion and Analysis