BioRestorative Therapies, Inc. 10-Q

Item 1. Financial Statements BIORESTORATIVE THERAPIES, INC. AND SUBSIDIARY CONDENSED Consolidated Balance Sheets September 30, December 31, 2023 2022 (Unaudited) ASSETS Current Assets: Cash and cash equivalents $ 2,436,869 $ 1,676,577 Investments held in marketable securities 9,801,837 13,072,831 Accounts receivable 39,300 16,000 Prepaid expenses and other current assets 325,931 363,082 Total Current Assets 12,603,937 15,128,490 Property and equipment, net 306,310 261,003 Right of use asset 154,726 241,760 Intangible assets, net 736,128 803,438 Total Assets $ 13,801,101 $ 16,434,691 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 227,355 $ 170,902 Accrued expenses and other current liabilities 548,954 130,072 Lease liability, current portion 156,310 139,328 Total Current Liabilities 932,619 440,302 Lease liability, net of current portion 42,414 162,317 Total Liabilities 975,033 602,619 Stockholders’ Equity Preferred stock, $ 0.01 par value; Authorized, 20,000,000 shares; Series B Convertible Preferred Stock, $ 0.01 par value; 1,543,158 designated shares, 1,398,158 and 1,518,158 issued and outstanding at September 30, 2023 and December 31, 2022, respectively 13,982 15,182 Preferred stock, value 13,982 15,182 Common Stock, $ 0.0001 par value; Authorized, 75,000,000 shares; 4,667,641 and 3,677,775 issued and outstanding at September 30, 2023 and December 31, 2022, respectively 468 369 Additional paid in capital 177,042,781 168,457,418 Accumulated deficit ( 164,231,163 ) ( 152,640,897 ) Total Stockholders’ Equity 12,826,068 15,832,072 Total Liabilities and Stockholders’ Equity $ 13,801,101 $ 16,434,691 The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements. 3 BIORESTORATIVE THERAPIES, INC. AND SUBSIDIARY CONDENSED Consolidated STATEMENTS OF OPERATIONS (Unaudited) September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 For the Three Months Ended, For the Nine Months Ended, September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Revenues $ 30,700 $ 29,000 $ 126,500 $ 116,100 Operating expenses: Research and development 874,824 989,170 3,353,960 2,839,731 General and administrative 2,260,319 3,649,530 8,772,632 11,568,490 Total operating expenses 3,135,143 4,638,700 12,126,592 14,408,221 Loss from operations ( 3,104,443 ) ( 4,609,700 ) ( 12,000,092 ) ( 14,292,121 ) Other (income) expense: Interest (income) expense ( 61,667 ) 28,841 ( 176,070 ) 104,465 Gain on PPP loan forgiveness - - - ( 250,000 ) Grant income ( 83,333 ) - ( 83,333 ) ( 16,654 ) Other income, net ( 33,951 ) 17,284 ( 150,423 ) 17,284 Total other (income) expense ( 178,951 ) 46,125 ( 409,826 ) ( 144,905 ) Net loss $ ( 2,925,492 ) $ ( 4,655,825 ) $ ( 11,590,266 ) $ ( 14,147,216 ) Net Loss Per Share - Basic and Diluted $ ( 0.64 ) $ ( 1.28 ) $ ( 2.85 ) $ ( 3.93 ) Weighted Average Number of Common Shares Outstanding - Basic and Diluted 4,570,843 3,642,215 4,061,975 3,602,979 The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements. 4 BIORESTORATIVE THERAPIES, INC. AND SUBSIDIARY C ONDENSED CONSOLIDATED STATEMENTS of CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited) Shares Amount Shares Amount Shares Amount Capital Deficit Equity Series A Series B Convertible Preferred Stock Convertible Preferred Stock Common Stock Additional Paid-in Accumulated Total Stockholders’ Shares Amount Shares Amount Shares Amount Capital Deficit Equity Balance at January 1, 2023 - $ - 1,518,158 $ 15,182 3,677,775 $ 369 $ 168,457,418 $ ( 152,640,897 ) $ 15,832,072 Stock-based compensation: - restricted share units - - - - 89,840 9 1,148,750 - 1,148,759 - options - - - - - - 2,190,428 - 2,190,428 - common stock - - - - - - - - - Net loss - - - - - - - ( 5,684,222 ) ( 5,684,222 ) Balance as of March 31, 2023 - $ - 1,518,158 $ 15,182 3,767,615 $ 378 $ 171,796,596 $ ( 158,325,119 ) $ 13,487,037 Stock-based compensation: - restricted share units - - - - 1,442 - 1,164,135 - 1,164,135 - options - - - - - - 321,534 - 321,534 - common stock - - - - - - - - - Issuance of common stock - - - - 93,551 9 411,701 - 411,710 Conversion of Series B preferred to common stock - - ( 120,000 ) ( 1,200 ) 120,000 12 1,188 - - Net loss - - - - - - - ( 2,980,552 ) ( 2,980,552 ) Balance as of June 30, 2023 - $ - 1,398,158 $ 13,982 3,982,608 $ 399 $ 173,695,154 $ ( 161,305,671 ) $ 12,403,864 Stock-based compensation: - restricted share units - - - - - - 1,164,135 - 1,164,135 - options - - 329,571 329,571 - common stock - - - Issuance of common stock 685,033 69 1,853,921 1,853,990 Net loss - - ( 2,925,492 ) ( 2,925,492 ) Balance as of September 30, 2023 - $ - 1,398,158 $ 13,982 4,667,641 $ 468 $ 177,042,781 $ ( 164,231,163 ) $ 12,826,068 Balance at January 1, 2022 1,543,158 $ 15,432 - $ - 3,520,391 $ 353 $ 155,727,292 $ ( 134,146,128 ) $ 21,596,949 Stock-based compensation: - - restricted share units - - - - 97,828 10 1,164,125 - 1,164,135 - options - - - - - - 2,138,949 - 2,138,949 - common stock - - - - 13,500 1 72,818 - 72,819 Net loss - - - - - - - ( 4,816,150 ) ( 4,816,150 ) Balance at March 31, 2022 1,543,158 $ 15,432 - $ - 3,631,719 $ 364 $ 159,103,184 $ ( 138,962,278 ) $ 20,156,702 Stock-based compensation: - restricted share units - - - - 6,220 # 1 1,190,349 - 1,190,350 - options - - - - - - 1,865,297 - 1,865,297 - common stock - - - - 5,770 - 48,504 - 48,504 Net loss - - - - - - - ( 4,675,241 ) ( 4,675,241 ) Balance as of June 30, 2022 1,543,158 $ 15,432 - $ - 3,643,709 $ 365 $ 162,207,334 $ ( 143,637,519 ) $ 18,585,612 Balance 1,543,158 $ 15,432 - $ - 3,643,709 $ 365 $ 162,207,334 $ ( 143,637,519 ) $ 18,585,612 Issuance of Series B Preferred stock in exchange for Series A Preferred stock ( 1,543,158 ) ( 15,432 ) 1,543,158 15,432 - - - - - Stock-based compensation: - restricted share units - - - - 6,218 - 1,209,231 - 1,209,231 - options - - - - - - 1,865,297 - 1,865,297 - common stock - - - - ( 3,477 ) - - - - Net loss - - - - - - - ( 4,655,825 ) ( 4,655,825 ) Balance as of September 30, 2022 - $ - 1,543,158 $ 15,432 3,646,450 $ 365 $ 165,281,862 $ ( 148,293,344 ) $ 17,004,315 Balance - $ - 1,543,158 $ 15,432 3,646,450 $ 365 $ 165,281,862 $ ( 148,293,344 ) $ 17,004,315 The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements. 5 BIORESTORATIVE THERAPIES, INC. AND SUBSIDIARY CONDENSED Consolidated STATEMENTS OF CASH FLOWS (Unaudited) September 30, 2023 September 30, 2022 Nine Months Ended September 30, 2023 September 30, 2022 (Unaudited) Cash flows from operating activities: Net Loss $ ( 11,590,266 ) $ ( 14,147,216 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 123,022 88,751 Unrealized loss on marketable securities 18,598 19,895 Stock-based compensation 6,318,562 9,554,582 Gain on PPP loan forgiveness - ( 250,000 ) Non-cash lease expense 87,034 87,033 Changes in operating assets and liabilities: Accounts receivable ( 23,300 ) ( 40,000 ) Prepaid assets and other current assets 37,151 80,135 Accounts payable 56,453 417,674 Accrued expenses and other current liabilities 418,882 ( 20,321 ) Lease liability ( 102,921 ) ( 87,945 ) Net cash used in operating activities ( 4,656,785 ) ( 4,297,412 ) Cash flows from investing activities: Sale of marketable securities 3,690,238 - Purchase of marketable securities ( 437,842 ) ( 9,933,562 ) Purchases of equipment ( 101,019 ) ( 222,642 ) Net cash provided by (used in) investing activities 3,151,377 ( 10,156,204 ) Cash flows from financing activities: Net proceeds from issuance of common stock in ATM transactions 411,710 - Net proceeds from issuance of common stock in direct offering 1,853,990 Net cash provided by financing activities 2,265,700 - Net increase (decrease) in cash and cash equivalents 760,292 ( 14,453,616 ) Cash and cash equivalents - beginning of period 1,676,577 21,026,727 Cash and cash equivalents - end of period $ 2,436,869 $ 6,573,111 The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements. 6 BIORESTORATIVE THERAPIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 - NATURE OF THE ORGANIZATION, LIQUIDITY, AND BUSINESS Corporate History BioRestorative Therapies, Inc. has one wholly-owned subsidiary, Stem Pearls, LLC (“Stem Pearls”). BioRestorative Therapies, Inc. and its subsidiary are referred to collectively as “BRT” or the “Company”. On December 29, 2022, the Company reincorporated from Delaware to Nevada. The reincorporation was structured as a statutory merger of BioRestorative Therapies, Inc., a Delaware corporation, with and into its wholly-owned subsidiary, BioRestorative Therapies, Inc., a Nevada corporation. Liquidity The accompanying unaudited condensed consolidated financial statements have been prepared on the basis that the Company will continue as a going concern, which contemplates realization of assets and satisfying liabilities in the normal course of business. For the nine months ended September 30, 2023, the Company had a net loss of $ 11.6 million (of which, $ 6.3 million was attributable to non-cash stock-based compensation) and negative cash flows from operations of $ 4.7 million. The Company’s operating activities consume the majority of its cash resources. The Company anticipates that it will continue to incur net losses as it executes its development plans throughout 2023 and beyond, as well as other potential strategic and business development initiatives. In addition, the Company has had and expects to have negative cash flows from operations, at least into the near future. The Company has previously funded, and plans to continue funding, these losses primarily through current cash on hand, investments in marketable securities and additional infusions of cash from equity and debt financing. On April 14, 2023, the Company entered into a sales agreement with JonesTrading Institutional Services LLC for an at-the-market (“ATM”) offering of the Company’s Common Stock, par value $ 0.0001 per share, at an aggregate offering price of up to $ 3.7 million. During the nine months ended September 30, 2023, net proceeds of $ 411,710 were received from the issuance of 93,551 shares of Common Stock. On July 13, 2023, the Company sold an aggregate of 685,033 shares of Common Stock to several institutional buyers and accredited investors in a registered direct offering at an offering price of $ 3.03 per share. The offering closed on July 13, 2023, with net proceeds of approximately $ 1.9 million. The Company intends to use the net proceeds from the offering in connection with its clinical trials with respect to its lead cell therapy candidate, BRTX-100 , pre-clinical research and development with respect to its metabolic ThermoStem Program and for general corporate purposes and working capital. Based on cash on hand as of September 30, 2023, the Company believes it has sufficient cash to fund operations for the twelve months subsequent to the filing date of this Form 10-Q. Current funds 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. 7 The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the unaudited condensed consolidated financial statements do not necessarily purport to represent realizable or settlement values. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. Business Operations BRT develops therapeutic products and medical therapies using cell and tissue protocols, primarily involving adult stem cells. BRT’s website is at www.biorestorative.com . The information contained in our website is not intended to be incorporated by reference into this Quarterly Report. BRT is currently developing a Disc/Spine Program referred to as “brtxDISC”. Its lead cell therapy candidate, BRTX-100 , is a product formulated from autologous (or a person’s own) cultured mesenchymal stem cells collected from the patient’s bone marrow. The product is intended to be used for the non-surgical treatment of painful lumbosacral disc disorders or as a complimentary therapeutic to a surgical procedure. BRT is investigating the expansion of the clinic application of BRTX-100 to other indications within the body. BRT is also engaging in research efforts with respect to a platform technology utilizing brown adipose (fat) for therapeutic purposes to treat type 2 diabetes, obesity and other metabolic disorders and has labeled this initiative its ThermoStem Program. Further, BRT has a license for a patented curved needle device that is a needle system designed to deliver cells and/or other therapeutic products or material to the spine and discs or other potential sites. In September 2023, BRT announced that it had entered into a supply agreement with a supplier of biologic-based cosmetics pursuant to which BRT will manufacture tissue-based biologics for use in the production of cosmetic and aesthetic applications. NOTE 2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP. The summary of significant accounting policies presented below is designed to assist in understanding the Company’s unaudited condensed consolidated financial statements. The unaudited condensed consolidated financial statements of the Company included herein have been prepared, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 27, 2023 (the “Annual Report”). The summary of significant accounting policies presented below is designed to assist in understanding the Company’s unaudited condensed consolidated financial statements. Such unaudited condensed consolidated financial statements and accompanying notes are the representations of Company’s management, who is responsible for their integrity and objectivity. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the entire year or for any other subsequent interim period. Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All intercompany accounts and transactions have been eliminated upon consolidation. Use of Estimates The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity-based transactions, revenue and expenses and disclosure of contingent liabilities at the date of the unaudited condensed consolidated financial statements. The Company bases its estimates and assumptions on historical experience, known or expected trends and various other assumptions that it believes to be reasonable. As future events and their effects cannot be determined with precision, actual results could differ from these estimates which may cause the Company’s future results to be affected. 8 Concentrations Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution. The Company maintains deposits in its cash account in excess of the Federal Deposit Insurance Corporation coverage of $ 250,000 . As of September 30, 2023, the Company has not experienced losses on this account. The royalties related to the Company’s sublicense comprised all of the Company’s revenue during the three and nine months ended September 30, 2023 and 2022. Summary of Significant Accounting Policies The Company’s significant accounting policies are described in Note 2, Summary of Significant Accounting Policies and Recent Accounting Standards, in the Annual Report. During the three and nine months ended September 30, 2023, the Company did not make any changes to its significant accounting policies, except as described below with respect to recent accounting pronouncements. Fair Value Measurements As 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. These inputs can be readily observable, market corroborated, or generally unobservable. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement). This fair value measurement framework applies at both initial and subsequent measurement. Level 1: Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities. Level 2: Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars. Level 3: Pricing 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. 9 SCHEDULE OF FAIR VALUE RECURRING BASIS Fair value measurements at reporting date using: Fair value Quoted prices in active markets for identical liabilities (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets: Marketable securities as of September 30, 2023 $ 9,801,837 $ 9,801,837 - - Marketable securities as of December 31, 2022 $ 13,072,831 $ 13,072,831 - - Fair Value of Financial Instruments The carrying value of cash, accounts receivable, and accounts payable approximate their fair values based on the short-term maturity of these instruments. Net Loss per Common Share Net loss per share is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding during the year. All outstanding options and warrants are considered potential Common Stock. The dilutive effect, if any, of stock options and warrants are calculated using the treasury stock method. All outstanding convertible preferred stock is considered Common Stock at the beginning of the period or at the time of issuance, if later, pursuant to the if-converted method. Since the effect of Common Stock equivalents is anti-dilutive with respect to losses, options, warrants, and convertible preferred stock have been excluded from the Company’s computation of diluted net loss per common share for the three and nine months ended September 30, 2023 and 2022. The following tables summarize the securities that were excluded from the diluted per share calculation because the effect of including these potential shares was antidilutive due to the Company’s net loss position even though the exercise or conversion price could be less than the average market price of the common shares: SCHEDULE OF WEIGHTED AVERAGE DILUTIVE COMMON SHARES Three Months Ended September 30, 2023 2022 Options 1,466,890 864,609 Warrants 4,791,048 4,739,733 Unvested RSUs 97,827 208,086 Convertible preferred stock 1,398,158 - Total 7,753,923 5,812,428 Nine Months Ended September 30, 2023 2022 Options 1,466,890 864,609 Warrants 4,791,048 4,739,733 Unvested RSUs 97,827 208,086 Convertible preferred stock 1,398,158 - Total 7,753,923 5,812,428 10 Recently Adopted Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which requires entities to estimate all expected credit losses for financial assets measured at amortized cost basis, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The Company adopted this guidance on January 1, 2023. The adoption of this accounting standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements. NOTE 3 - INTANGIBLE ASSETS The Company is a party to a license agreement with a stem cell treatment company (the “SCTC”) (as amended) (the “SCTC Agreement”). Pursuant to the SCTC Agreement, the Company obtained, among other things, a worldwide, exclusive, royalty-bearing license from the SCTC to utilize or sublicense a certain medical device patent for the administration of specific cells and/or cell products to the disc and/or spine (and other parts of the body) and a worldwide (excluding Asia and Argentina), exclusive, royalty-bearing license to utilize or sublicense a certain method for culturing cells. Pursuant to the license agreement with the SCTC, certain performance milestones (or payouts in lieu of performance milestones) had to be satisfied in order for the Company to maintain its exclusive rights with regard to the disc/spine technology. The Company did not timely satisfy the third of these performance milestones (which needed to be satisfied by February 2022). Accordingly, such rights became non-exclusive. However, in November 2022, the Company entered into an amended agreement under which it paid $ 175,000 and issued 51,370 warrants, with a fair value of $ 117,030 , in exchange for renewed exclusivity. The consideration transferred to the SCTC in exchange for exclusivity was capitalized to intangible assets on the Company’s consolidated balance sheet as of December 31, 2022. In February 2017, the Company received authorization from the Food and Drug Administration (the “FDA”) to proceed with a Phase 2 clinical trial. In March 2022, the United States Patent and Trademark Office issued a patent relating to the Company’s BRTX-100 clinical program. Intangible assets consist of the following: SCHEDULE OF INTANGIBLE ASSETS Patents and Trademarks Licenses Accumulated Amortization Total Balance as of January 1, 2023 $ 3,676 $ 1,593,530 $ ( 793,768 ) $ 803,438 Amortization expense - - ( 67,310 ) ( 67,310 ) Balance as of September 30, 2023 $ 3,676 $ 1,593,530 $ ( 861,078 ) $ 736,128 Weighted average remaining amortization period as of September 30, 2023 - 10.58 Accumulated amortization of intangible assets consists of the following: SCHEDULE OF INTANGIBLE ASSETS AMORTIZATION EXPENSES Patents and Trademarks Licenses Accumulated Amortization Balance as of January 1, 2023 $ 3,676 $ 790,092 $ 793,768 Amortization expense - 67,310 67,310 Balance as of September 30, 2023 $ 3,676 $ 857,402 $ 861,078 NOTE 4 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities consist of: SCHEDULE OF ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES September 30, 2023 December 31, 2022 Accrued payroll $ 487,500 $ 26,250 Accrued general and administrative expenses 61,454 103,822 Total accrued expenses $ 548,954 $ 130,072 11 NOTE 5 - STOCKHOLDERS’ EQUITY Series A Preferred Stock On November 8, 2021, in connection with the Company’s public offering, the Company’s Board of Directors adopted a resolution allowing for the designation and issuance of 1,543,158 shares of the Company’s Preferred Stock, $ .01 par value per share, designated as Series A Preferred Stock (“Series A”). The Series A had a liquidation preference of $ 0.001 per share. On September 8, 2022, the Company issued 1,543,158 shares of Series B Preferred Stock (“Series B”) to Auctus Fund, LLC (“Auctus”) in exchange for an equal number of shares of the Company’s outstanding Series A. Simultaneously, the stock certificate representing the Series A shares was being returned to the Company for cancellation. On such date and upon such exchange, the Company’s Board of Directors cancelled the Series A. Series B Preferred Stock Effective September 8, 2022, the Company issued 1,543,158 shares of Series B to Auctus in exchange for an equal number of shares of the Company’s outstanding Series A. The terms of the Series B are substantially identical to those of the Series A, except that, among other things, the limitation on beneficial ownership of Common Stock of the Company upon a conversion of the Series B into Common Stock, and the limitation on the number of votes attributable to the Series B, is 9.99 % of the then outstanding Common Stock of the Company instead of 4.99 % as provided for the Series A. The Company shall, at all times, reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock upon the full conversion of the Series B. The Series B is not subject to redemption by the Company or any Series B holder. Dividends Series B 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 Common Stock based upon the number of shares of Common Stock into which the Series B is then convertible. Voting Rights Series B holders shall be entitled to vote on all matters presented to the stockholders of the Company for a vote at a meeting of stockholders of the Company or a written consent in lieu of a meeting of stockholders of the Company, and shall be entitled to such number of votes for each share of Series B entitled to vote at such meetings or pursuant to such consent, voting together with the holders of shares of Common Stock and other shares of preferred stock who are entitled to vote, and not as a separate class, except as required by law. The number of votes to which the Series B holders shall be entitled to vote for each share of Series B shall equal the number of shares of Common Stock into which such Series B is then convertible; provided, however, that in no event shall a Series B holder be entitled to vote more than 9.99 % of the then outstanding shares of Common Stock. Conversion Optional Conversion - Each share of Series B shall be convertible, at any time and from time to time, at the option of the Series B holder, into one share of Common Stock; provided, however, that in no event shall a Series B holder be entitled to convert any shares of Series B to the extent that such conversion would result in beneficial ownership by such Series B holder of more than 9.99 % of the outstanding shares of Common Stock. Automatic Conversion – From time to time, if an event occurs, including adjustment due to merger, consolidation, etc., subdivision or combination of Common Stock, adjustment due to distribution, purchase rights, and notice of adjustments, which has the effect of reducing a Series B holder’s beneficial ownership of shares of Common Stock to less than 9.5 % of the then publicly disclosed outstanding shares of Common Stock, then, within five (5) business days, the Series B holder shall provide notice to the Company to such effect, which notice shall state the number of shares of Common Stock beneficially owned by the Series B holder and shall provide reasonable detail with regard thereto, including the number of derivative securities compromising a portion of such beneficial share amount. Such notice shall have the effect of a notice of conversion with respect to the conversion of such number of shares of Series B as would increase the Series B holder’s beneficial ownership of Common Stock to 9.99 % of the then publicly disclosed outstanding shares of Common Stock. 12 On April 4, 2023, Auctus converted 120,000 shares of Series B into 120,000 shares of Common Stock. As of September 30, 2023, the number of shares of Series B remaining outstanding after giving effect to such conversion was 1,398,158 . Common Stock On July 13, 2023, the Company sold an aggregate of 685,033 shares of Common Stock to several institutional buyers and accredited investors in a registered direct offering at an offering price of $ 3.03 per share. The offering closed on July 13, 2023, with net proceeds of approximately $ 1.9 million. The Company intends to use the net proceeds from the offering in connection with its clinical trials with respect to its lead cell therapy candidate, BRTX-100 , pre-clinical research and development with respect to its metabolic ThermoStem Program and for general corporate purposes and working capital. As of September 30, 2023, there were 4,667,641 shares of Common Stock outstanding. 2021 Stock Incentive Plan On March 18, 2021, the Company’s Board of Directors adopted the BioRestorative Therapies, Inc. 2021 Stock Incentive Plan (the “2021 Plan”). The 2021 Plan was approved by the Company’s stockholders on August 17, 2021. Pursuant to the 2021 Plan, a total of 1,175,000 shares of common stock were initially authorized to be issued pursuant to the grant of stock options, restricted stock units, restricted stock, stock appreciation rights and other incentive awards. On December 10, 2021, the Company’s Board of Directors approved an amendment to increase the number of shares of Common Stock authorized to be issued from 1,175,000 to 2,500,000 . Such amendment was approved by the Company’s stockholders on November 3, 2022. On July 13, 2023, the Company’s Board of Directors approved an amendment to the 2021 Plan to increase the number of shares of common stock authorized to be issued from 2,500,000 to 3,850,000 . Such amendment was approved by the Company’s stockholders on September 13, 2023. Warrant and Option Valuation The Company has computed the fair value of warrants and options granted using the Black-Scholes option pricing model. The expected term used for warrants and options issued to non-employees is the contractual life and the expected term used for options issued to employees and directors is the estimated period of time that options granted are expected to be outstanding. The Company utilizes the “simplified” method to develop an estimate of the expected term of “plain vanilla” employee option grants. The Company is utilizing an expected volatility figure based on a review of the historical volatilities, over a period of time equivalent to the expected life of the instrument being valued, of similarly positioned public companies within its industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued. Stock Options There were no stock options granted during the three months ended September 30, 2023. The Company granted options for the purchase of 629,017 shares of Common Stock during the nine months ended September 30, 2023. The grant date fair value of options issued during the nine months ended September 30, 2023 was $ 1,745,000 . There were no stock options granted during the three months ended September 30, 2022. The Company granted options for the purchase of 25,000 shares of Common Stock during the nine months ended September 30, 2022. The grant date fair value of options issued during the nine months ended September 30, 2022 was $ 122,117 . In applying the Black-Scholes option pricing model to stock options granted during the nine months ended September 30, 2023 and 2022, the Company used the following assumptions: SCHEDULE OF STOCK OPTION GRANTED ASSUMPTIONS For the Nine Months Ended For the Nine Months Ended September 30, September 30, 2023 2022 Risk free interest rate 4.22 % 2.42 % Expected term (years) 3.50 3.50 Expected volatility 175 % 286 % Expected dividends 0.00 % 0.00 % A summary of the stock option activity during the nine months ended September 30, 2023 is presented below: SCHEDULE OF STOCK OPTION ACTIVITY Number of Options Weighted Average Exercise Price Outstanding, January 1, 2023 864,639 $ 5.08 Granted 629,017 2.91 Expired - - Forfeited ( 26,766 ) 5.08 Outstanding, September 30, 2023 1,466,890 $ 4.17 Exercisable, September 30, 2023 1,122,671 $ 4.69 13 Restricted Stock Units Pursuant to the Company’s 2021 Stock Incentive Plan, the Company may grant restricted stock units (“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 2021 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. A summary of the Company’s unvested RSUs as of September 30, 2023 is as follows: SCHEDULE OF UNVESTED RESTRICTED STOCK UNITS Number of Shares Outstanding, December 31, 2022 201,870 Granted - Forfeited - Vested ( 104,043 ) Outstanding, September 30, 2023 97,827 The following table presents stock compensation by award type: SCHEDULE OF STOCK COMPENSATION BY AWARD TYPE For the Three Months Ended September 30, 2023 2022 Options $ 329,571 $ 1,865,297 RSUs 1,164,135 1,190,349 Shares issued for services - 18,923 $ 1,493,706 $ 3,074,528 For the Nine Months Ended September 30, 2023 2022 Options $ 2,841,533 $ 5,869,543 RSUs 3,477,020 3,544,782 Shares issued for services - 140,245 $ 6,318,553 $ 9,554,570 Stock based compensation is included in General and administrative expenses on the unaudited condensed consolidated statements of operations. As of September 30, 2023, unrecognized stock based compensation expense is $ 872,304 with a weighted average remaining amortization period of 0.87 years. Note 6 - LEASES The Company is a party to a lease for 6,800 square feet of space located in Melville, New York (the “Melville Lease”) with respect to its corporate and laboratory operations. The Melville Lease was scheduled to expire in March 2020 (subject to extension at the option of the Company for a period of five years) and provided for an annual base rental during the initial term ranging between $ 132,600 and $ 149,260 . In June 2019, the Company exercised its option to extend the Melville Lease and entered into a lease amendment with the lessor whereby the five-year extension term commenced on January 1, 2020 with annual base rent ranging between $ 153,748 and $ 173,060 . 14 When measuring lease liabilities for leases that were classified as operating leases, the Company discounted lease payments using its estimated incremental borrowing rate at August 1, 2019. The weighted average incremental borrowing rate applied was 12 %. The following table presents net lease cost and other supplemental lease information: SCHEDULE OF NET LEASE COST AND OTHER SUPPLEMENTAL LEASE INFORMATION 2023 2022 Nine Months Ended September 30, 2023 2022 Lease cost Operating lease cost (cost resulting from lease payments) $ 126,021 $ 122,349 Net lease cost $ 126,021 $ 122,349 Operating lease – operating cash flows (fixed payments) $ 126,021 $ 122,349 Operating lease – operating cash flows (liability reduction) $ 102,921 $ 87,945 Non-current leases – right of use assets $ 154,726 $ 270,772 Current liabilities – operating lease liabilities $ 156,310 $ 134,031 Non-current liabilities – operating lease liabilities $ 42,414 $ 198,724 Future minimum payments under non-cancelable leases for operating leases for the remaining terms of the leases as of September 30, 2023: SCHEDULE OF FUTURE MINIMUM PAYMENTS UNDER NON-CANCELABLE LEASES FOR OPERATING LEASES Fiscal Year Operating Leases Remainder of 2023 $ 42,007 2024 173,060 Total future minimum lease payments 215,067 Amount representing interest ( 16,343 ) Present value of net future minimum lease payments $ 198,724 Note 7 – SUBSEQUENT EVENTS In April 2023, the Company entered into a Capital on Demand Sales Agreement with JonesTrading Institutional Services LLC (the “Sales Agent”) under which the Company currently has the ability to issue and sell shares of its Common Stock, from time to time, through the Sales Agent, up to an aggregate offering price of approximately $ 5,486,000 in what is commonly referred to as an “at-the-market” (“ATM”) program. In October 2023, the Company sold an additional 39,276 shares of its Common Stock at an average price of $ 2.17 per share and raised approximately $ 86,000 in gross proceeds under the ATM program. 15