UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2021~~March 31, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ____________

Commission file number: 001-36763

H-CYTE, INC

(Exact name of registrant as specified in its charter)

Nevada		46-3312262
(State or other jurisdiction of		(IRS Employer
incorporation or organization)		Identification No.)

~~201 East Kennedy~~2202 N. West Shore Blvd,. ~~Suite 425~~Ste 200
Tampa, Florida		~~33602~~33607
(Address of principal executive offices)		(Zip Code)

(844) 633-6839

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Ticker symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001 per share		HCYT		OTC Capital Markets

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes ☐No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)

☒ Yes ☐No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller Reporting Company ☒
	Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☒ No

As of ~~August 11, 2021,~~May 3, 2022, ~~148,596,889~~255,087,503 shares of the registrant’s common stock were outstanding.

H-CYTE, INC AND SUBSIDIARIES

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION

	Special Note Regarding Forward-looking Statements	3
Item 1.	Financial Statements	4
	Consolidated Balance Sheets	4
	Consolidated Statements of Operations	5
	Consolidated Statements of Stockholders’ ~~Deficit~~Equity (Deficit)	6
	Consolidated Statements of Cash Flows	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2217
Item 3.	Quantitative and Qualitative Disclosures About Market Risks	2821
Item 4.	Controls and Procedures	2821

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	2922
Item 1A.	Risk Factors	2922
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2922
Item 3.	Defaults Upon Senior Securities	2922
Item 4.	Mine Safety Disclosures	2922
Item 5.	Other Information	2922
Item 6.	Exhibits	2922

SIGNATURES		3023

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements”, as defined under United States federal securities laws. These statements involve known and unknown risks, uncertainties, and other factors that may cause the Company’s actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

	●	the Company’s ability to market, commercialize, and achieve broader market acceptance for its products;

	●	the Company’s ability to successfully expand and achieve full productivity from its sales, clinical support, and marketing capabilities;

	●	the Company’s ability to successfully complete the development of, and obtain regulatory clearance or approval for its products; and

	●	the estimates regarding the sufficiency of the Company’s cash resources, the ability to obtain additional capital, or the ability to maintain or grow sources of revenue.

In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would,” and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these words. Although the Company believes that it has a reasonable basis for each forward-looking statement contained in this Quarterly Report, we caution you that these statements are based on a combination of facts and factors currently known by the Company and its projections of the future, about which it cannot be certain. As a result of these factors, the Company cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate. Furthermore, if the forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by the Company, or any other person, that it will achieve its objectives and plans in any specified time frame, or at all. The Company does not undertake to update any of the forward-looking statements after the date of this Quarterly Report, except to the extent required by applicable securities laws.

Item 1. Financial Statements

~~H-Cyte, Inc and Subsidiaries~~

~~Consolidated Balance Sheets~~H-CYTE, INC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	(Unaudited)
	June 30, 2021			December 31, 2020			(Unaudited) March 31, 2022			December 31, 2021
Assets

Current Assets
Cash	$	1,516,522		$	1,640,645		$	341,284		$	95,172
Accounts receivable								7,238			13,500
Patient financing receivable, current portion		22,990			-			55,200			43,900
Other receivables		1,809			22,123			3,831			-
Prepaid expenses		156,020			94,434			170,464			44,884
Total Current Assets		1,697,341			1,757,202			578,017			197,456

Right-of-use asset		183,685			278,552
Property and equipment, net		40,644			139,175			35,196			38,374
Patient financing receivable, net of current portion		42,470			-			69,619			67,163
Other assets		18,412			29,239			18,413			18,412
Total assets	$	1,982,552		$	2,204,168		$	701,245		$	321,405

Liabilities and Stockholders’ Deficit

Current Liabilities
Accounts payable	$	955,691		$	1,006,968		$	680,204		$	585,291
Accrued liabilities		208,025			276,415			150,253			164,680
Other current liabilities		212,310			154,812			139,570			28,246
Notes payable, current portion		67,444			67,444			69,455			69,455
Convertible notes payable, related parties		1,554,220			-			1,969,174			1,969,174
Convertible notes payable		1,070,118			-			1,355,826			1,355,826
PPP Loan, current portion		809,082			606,811			26,536			66,275
Deferred revenue		542,198			634,149			60,927			414,025
Lease liability, current portion		90,276			139,189			97,066			94,805
Interest payable, related parties								137,993			98,055
Interest payable		13,610			6,898			109,453			75,048
Total Current Liabilities		5,522,974			2,892,686			4,796,457			4,920,880

Long-term Liabilities
Lease liability, net of current portion		111,096			157,050			37,753			62,768
PPP Loan, net of current portion		-			202,271
Total Long-term Liabilities		111,096			359,321			37,753			62,768

Total Liabilities		5,634,070			3,252,007			4,834,210			4,983,648

Stockholders’ Equity (Deficit)
Preferred Stock - $.001 par value: 1,000,000,000 shares authorized; Series A Preferred Stock - $.001 par value: 800,000,000 shares authorized, 520,305,884 and 538,109,409 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively		520,305			538,109
Common stock - $.001 par value: 1,600,000,000 shares authorized, 144,962,989 and 127,159,464 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively		144,963			127,159
Preferred Stock - $.001 par value: 1,000,000,000 shares authorized; Series A Preferred Stock - $.001 par value: 800,000,000 shares authorized, 498,229,804 and 501,887,534 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively.								498,229			501,887
Common stock - $.001 par value: 1,600,000,000 shares authorized, 251,436,818 and 164,199,792 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively.								251,437			164,199
Additional paid-in capital		43,377,999			42,515,999			48,037,565			43,700,084
Accumulated deficit		(47,324,653	)		(43,858,974	)		(52,920,196	)		(49,028,413	)
Non-controlling interest		(370,132	)		(370,132	)
Total Stockholders’ Deficit		(3,651,518	)		(1,047,839	)		(4,132,965	)		(4,662,243	)

Total Liabilities and Stockholders’ Deficit	$	1,982,552		$	2,204,168		$	701,245		$	321,405

See accompanying notes to the consolidated financial statements

~~H-Cyte, Inc and Subsidiaries~~

~~Consolidated Statements of Operations~~

H-CYTE, INC AND SUBSIDIARIES

2021 2020 2021 2020
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020

Revenues $ 450,456 $ 19,500 $ 826,625 $ 1,036,276
Cost of Sales (216,018 ) (70,011 ) (414,668 ) (446,827 )
Gross Profit 234,438 (50,511 ) 411,957 589,449

Operating Expenses
Salaries and related costs 586,119 594,447 1,247,894 1,818,157
Share based compensation 862,000 - 862,000 643
Loss on disposal of property and equipment 92,804 - 92,804 -
Other general and administrative 609,641 1,034,898 1,439,755 2,265,033
Research and development - 200,000 - 950,000
Advertising 88,000 25,935 165,228 170,553
Depreciation and amortization 1,989 17,244 13,559 39,352
Total Operating Expenses 2,240,553 1,872,524 3,821,240 5,243,738

Operating Loss (2,006,115 ) (1,923,035 ) (3,409,283 ) (4,654,289 )

Other Income (Expense)
Other Income 2,255 6,783 3,534 9,321
Interest expense (54,145 ) (363,023 ) (59,930 ) (419,172 )
Change in fair value of redemption put liability - (18,952 ) - 174,707
Loss on derivative instrument - (2,306,121 ) - (2,306,121 )
Gain on extinguishment of debt - 1,300,088 - 1,300,088
Warrant modification expense - (70,851 ) - (70,851 )
Change in fair value of derivative liability - warrants - (3,057,225 ) - (2,882,247 )
Total Other Income (Expense) (51,890 ) (4,509,301 ) (56,396 ) (4,194,275 )

Net Loss $ (2,058,005 ) $ (6,432,336 ) $ (3,465,679 ) $ (8,848,564 )

Accrued dividends on outstanding Series B Convertible Preferred Stock - 18,300 - 36,600
Deemed dividend on Series D Convertible Preferred Stock - 120,329 - 278,476
Net loss attributable to common stockholders $ (2,058,005 ) $ (6,570,965 ) $ (3,465,679 ) $ (9,163,640 )

Loss per share - Basic and Diluted $ (0.01 ) $ (0.06 ) $ (0.03 ) $ (0.09 )

Weighted average outstanding shares - basic and diluted 138,092,414 103,430,305 135,827,192 101,634,961
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
2022 2021
Three Months Ended March 31,
2022 2021

Revenues $ 379,560 $ 376,168
Cost of Sales (86,505 ) (198,649 )
Gross Profit 293,055 177,519

Operating Expenses
Salaries and related costs 347,219 661,775
Share based compensation 226,079 -
Other general and administrative 509,911 918,912
Total Operating Expenses 1,083,209 1,580,687

Operating Loss (790,154 ) (1,403,168 )

Other Income (Expense)
Inducement Expense
(3,024,872 ) (5,784 )
Interest Expense
(72,352
)
Other (expense) income (4,405 ) 1,278
Total Other Expense (3,101,629 ) (4,506 )

Net Loss $ (3,891,783 ) $ (1,407,674 )

Net Loss attributable to common stockholders $ (3,891,783 ) $ (1,407,674 )

Loss per share - basic and diluted $ (0.02 ) $ (0.01 )

Weighted average outstanding shares - basic and diluted 169,154,701 128,283,919
See accompanying notes to the consolidated financial statements

5

~~H-Cyte, Inc and Subsidiaries~~
~~Consolidated Statements of Stockholders’ Deficit~~H-CYTE, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
For the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 and ~~2021~~
2022
1 Shares Amount Shares Amount Shares Amount Capital Deficit Interest Deficit
Three months ended                                  Preferred Series A Stock Preferred Series B Stock Common Stock Additional Paid-in Accumulated Non-controlling Total Stockholders’
June 30, 2020 and 2021 Shares Amount Shares Amount Shares Amount Capital Deficit Interest Deficit
Balances - March 31, 2020 - $ - 6,100 $ 6 99,878,079 $ 99,878 $ 28,117,978 $ (39,815,966 ) $ (370,132 ) $ (11,968,236 )
Accrued dividends on Series B Convertible Preferred Stock - - - - - - (18,300 ) - - (18,300 )
Deemed dividend on Series D Convertible Preferred Stock - - - - - - (120,329 ) - - (120,329 )
Adjustment of exercise price on certain warrants - - - - - - (438,913 ) - - (438,913 )
Issuance of warrants to extend short-term debt - - - - - - 6,594 - - 6,594
Conversion of Short-term notes, related parties - - - - 4,368,278 4,368 214,046 - - 218,414
Conversion of Series A Preferred Stock to common stock
Deemed dividend on Series D Preferred Stock at issuance
Issuance of warrants in connection with Series D Convertible Preferred Stock
Issuance of common stock in exchange for consulting fees incurred
Issuance of warrants pursuant to extension of maturity date on convertible debt
Stock based compensation
Net loss - - - - - - - (6,432,336 ) - (6,432,336 )
Balances – June 30, 2020 - $ - 6,100 $ 6 104,246,357 $ 104,246 $ 27,761,076 $ (46,248,302 ) $ (370,132 ) $ (18,753,106 )
(Unaudited)

Preferred Series A Stock Common Stock
Additional
Paid-in
Accumulated Stockholders’
Shares Amount Shares Amount Capital Deficit Deficit
Balances - January 1, 2021 538,109,409 $ 538,109 127,159,464 $ 127,159 $ 42,515,999 $ (44,229,106 ) $         (1,047,839 )
Conversion of Series A Preferred Stock to Common Stock (9,679,834 ) (9,680 ) 9,679,834 9,680 - - -
Inducement expense
Conversion of warrants to Common Stock
Conversion of warrants to Common Stock, shares
Share based compensation
Net Loss - - - - - (1,407,674 ) (1,407,674 )
Balances - March 31, 2021 528,429,575 $ 528,429 136,839,298 $ 136,839 $ 42,515,999 $ (45,636,780 ) $ (2,455,513 )

Preferred Series A Stock Preferred Series B Stock Common Stock Additional Paid-in Accumulated Non-controlling Total Stockholders’
                                  Shares Amount Shares Amount Shares Amount Capital Deficit Interest Deficit
Balances - March 31, 2021 528,429,575 $ 528,429 - - 136,839,298 $ 136,839 $ 42,515,999 $ (45,266,648 ) $ (370,132 ) $ (2,455,513 )
Conversion of Series A Preferred Stock to common stock (8,123,691 ) (8,124 ) - - 8,123,691 8,124 - - - -
Share based compensation - - - - - - 862,000 - - 862,000
Net Loss - - - - - - - (2,058,005 ) - (2,058,005 )
Balances – June 30, 2021 520,305,884 $ 520,305 - - 144,962,989 $ 144,963 $ 43,377,999 $ (47,324,653 ) $ (370,132 ) $ (3,651,518 )
Preferred Series A Stock Common Stock
Additional
Paid-in
Accumulated Stockholders’
Shares Amount Shares Amount Capital Deficit Deficit
Balances - January 1, 2022 501,887,534 $ 501,887 164,199,792 $ 164,199 $ 43,700,084 $ (49,028,413 ) $         (4,662,243 )
Beginning balance 501,887,534 $ 501,887 164,199,792 $ 164,199 $ 43,700,084 $ (49,028,413 ) $         (4,662,243 )
Conversion of Series A Preferred Stock to Common Stock (3,657,730 ) (3,658 ) 3,657,730 3,658 - - -
Inducement expense - - - - 3,024,872 - 3,024,872
Conversion of warrants to Common Stock
- - 83,579,296 83,580 1,086,530 - 1,170,110
Share based compensation - - - - 226,079 - 226,079
Net loss - - - - - (3,891,783 ) (3,891,783 )
Balances - March 31, 2022 498,229,804 $ 498,229 251,436,818 $ 251,437 $ 48,037,565 $ (52,920,196 ) $ (4,132,965 )
Ending balance 498,229,804 $ 498,229 251,436,818 $ 251,437 48,037,565 $ (52,920,196 ) $ (4,132,965 )

Six months ended                                   Preferred Series A Stock Preferred Series B Stock Common Stock Additional Paid-in Accumulated Non-controlling Total Stockholders’
June 30, 2020 and 2021 Shares Amount Shares Amount Shares Amount Capital Deficit Interest Deficit
Balances - December 31, 2019             - $ - 6,100 $ 6 99,768,704 $ 99,769 $ 28,172,146 $ (37,362,531 ) $ (370,132 ) $ (9,460,742 )
Deemed dividend on Series D Convertible Preferred Stock at issuance - - - - - - - (37,207 ) - (37,207 )
Deemed dividend on Series D Convertible Preferred Stock - - - - - - (241,269 ) - - (241,269 )
Issuance of warrants in connection with Series D Convertible Preferred Stock - - - - - - 31,902 - - 31,902
Issuance of common stock in exchange for consulting fees incurred - - - - 109,375 $ 109 34,891 - - 35,000
Issuance of warrants pursuant to extension of maturity date on short-term notes, related party - - - - - - 17,636 - - 17,636
Share based compensation - - - - - - 643 - - 643
Accrued dividends on Series B Convertible Preferred Stock - - - - - - (36,600 ) - - (36,600 )
Adjustment of exercise price on certain warrants - - - - - - (438,913 ) - - (438,913 )
Issuance of warrants to extend short-term debt - - - - - - 6,594 - - 6,594
Conversion of short-term notes, related parties - - - - 4,368,278 4,368 214,046 - - 218,414
Net loss - - - - - - - (8,848,564 ) - (8,848,564 )
Balances – June 30, 2020 - $ - 6,100 $ 6 104,246,357 $ 104,246 $ 27,761,076 $ (46,248,302 ) $ (370,132 ) $ (18,753,106 )
Preferred Series A Stock Preferred Series B Stock Common Stock Additional Paid-in Accumulated Non-controlling Total Stockholders’
                                    Shares Amount Shares Amount Shares Amount Capital Deficit Interest Deficit
Balances - December 31, 2020 538,109,409 $ 538,109 - $ - 127,159,464 $ 127,159 $ 42,515,999 $ (43,858,974 ) $ (370,132 ) $ (1,047,839 )
Beginning balance 538,109,409 $ 538,109 - $ - 127,159,464 $ 127,159 $ 42,515,999 $ (43,858,974 ) $ (370,132 ) $ (1,047,839 )
Conversion of Series A Preferred Stock to common stock (17,803,525 ) (17,804 ) - - 17,803,525 17,804 - - - -
Share based compensation - - - - - - 862,000 - - 862,000
Net loss - - - - - - - (3,465,679 ) - (3,465,679 )
Balances – June 30, 2021 520,305,884 $ 520,305 - $ - 144,962,989 $ 144,963 $ 43,377,999 $ (47,324,653 ) $ (370,132 ) $ (3,651,518 )
Ending balance 520,305,884 $ 520,305 - $ - 144,962,989 $ 144,963 $ 43,377,999 $ (47,324,653 ) $ (370,132 ) $ (3,651,518 )
See accompanying notes to the consolidated financial statements

6

~~H-Cyte, Inc and Subsidiaries~~
~~CONDENSED~~ H-CYTE, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

2021 2020
Six Months Ended June 30,
2021 2020
Cash Flows from Operating Activities
Net loss $ (3,465,679 ) $ (8,848,564 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 13,559 39,352
Amortization of debt discount — 242,627
Issuance of warrants pursuant to short-term notes, related party — 17,636
Issuance of warrants to extend short-term debt — 6,594
Share based compensation expense 862,000 643
Common stock issued for consulting services — 35,000
Change in fair value of derivative liability - warrants and redemption put liability — 2,707,541
Change in fair value of derivative liability - loss on derivative instrument — 2,306,121
Warrant modification expense — 70,851
Loss on disposal of property and equipment 92,804 —
Gain on extinguishment of debt — (1,300,088 )
Changes in operating assets and liabilities:
Accounts receivable — 19,667
Patient financing receivable, current portion (22,990 ) —
Other receivables 20,314 14,782
Patient financing receivable, net of current portion (42,470 ) —
Prepaid expenses and other assets (50,759 ) 668,656
Interest payable 6,712 158,113
Accounts Payable (51,277 ) (164,792 )
Accrued liabilities (68,390 ) (72,619 )
Other current liabilities 57,498 62,581
Deferred revenue (91,951 ) (299,125 )

Net Cash Used in Operating Activities (2,740,629 ) (4,335,024 )

Cash Flows from Investing Activities
Purchase of property and equipment (7,832 ) —
Net Cash Used in Investing Activities (7,832 ) —

Cash Flows from Financing Activities
Proceeds from convertible notes payable, related parties 1,554,220 —
Proceeds from convertible notes payable 1,070,118 —
Payments on debt obligations — (10,937 )
Proceeds from paycheck protection program loan — 809,082
Proceeds from warrants, net of issuance costs — 3,842,695
Proceeds from issuance of Series D Convertible Preferred Stock — 100,000
Net Cash Provided by Financing Activities 2,624,338 4,740,840

Net (Decrease)/ Increase in Cash (124,123 ) 405,816

Cash - Beginning of period 1,640,645 1,424,096

Cash - End of period $ 1,516,522 $ 1,829,912

Supplementary Cash Flow Information
Cash paid for interest $ 3,880 $ 18,431

Non-cash investing and financing activities
Adjustment of exercise price on warrants — 438,913
Issuance of warrants to extend short-term debt — 6,594
Conversion of short-term notes, related parties — 218,414
Deemed dividend on Series D Convertible Preferred Stock — 278,476
Issuance of Warrants in connection with Series D Convertible Preferred Stock — 31,902
Dividends accrued on Series B Convertible Preferred Stock — 36,600

Three Months Ended March 31,
2022 2021
Cash Flows from Operating Activities
  Net loss $ (3,891,783 ) $ (1,407,674 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 3,177 11,571
Share based compensation expense 226,079 -
Inducement expense 3,024,872 -
Changes in operating assets and liabilities:
Accounts receivable 6,262 (40,500 )
Patient financing receivable, current portion (11,300 ) -
Other receivables (3,831 ) 20,986
Prepaid expenses and other assets (148,334 ) (115,026 )
Patient financing receivable, net of current portion (2,456 ) -
Accounts payable 94,913 142,629
Accrued liabilities (14,427 ) (39,638 )
Other current liabilities 111,324 169,789
Deferred revenue (353,098 ) (52,890 )
Interest payable, related parties 39,937 -
Interest payable 34,406 3,940
Net Cash Used in Operating Activities (884,259 ) (1,306,813 )

Cash Flows from Investing Activities
Purchase of property and equipment - (1,522 )
Net Cash Used in Investing Activities - (1,522 )

Cash Flows from Financing Activities
Proceeds from warrant exercise related to inducement 1,170,110 -
Payment on PPP Loan (39,739 ) -
Net Cash Provided by Financing Activities 1,130,371 -

Net Change in Cash 246,112 (1,308,335 )

Cash – Beginning of period 95,172 1,640,645

Cash – End of period $ 341,284 $ 332,310

Supplementary Cash Flow Information
Cash paid for interest $ 1,378 $ 1,844

Non-cash financing activities
Conversion of Series A Preferred Stock to Common Stock $ 3,658 $ 9,680
Issuance of warrants pursuant to inducement agreements 2,993,872 -
Issuance of warrants for services rendered 31,000 -

See accompanying notes to the consolidated financial statements

7
H-CYTE, INC
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Description of the Company
DESCRIPTION OF THE COMPANY
H-CYTE, Inc (“the Company”) is a hybrid-biopharmaceutical company dedicated primarily to developing and delivering new treatments for patients with chronic respiratory and pulmonary disorders. During the last ~~two~~three years, the Company has evolved into two separate divisions with its entrance into the biologics and device development space (“~~Biologics~~Biotech Division”). This ~~new~~ division is complementary to the Company’s current Lung Health Institute (LHI) autologous infusion therapy business (“Infusion Division”) and is focused on underserved disease states. On September 8, 2021, the Company announced that its Lung Health Institute facilities changed their names to Centers for Respiratory Health as the clinics continue to deliver treatments for patients with chronic respiratory and pulmonary disorders.

The consolidated results for H-CYTE include the following wholly-owned subsidiaries: H-CYTE Management, LLC, Medovex Corp, Cognitive Health Institute, LLC, and Lung Institute Tampa, LLC and the results include Lung Institute Dallas, ~~PLLC~~LLC (“LI Dallas”), Lung Institute Nashville, ~~PLLC~~LLC (“LI Nashville”), Lung Institute Pittsburgh, ~~PLLC~~LLC (“LI Pittsburgh”), and Lung Institute Scottsdale, LLC (“LI Scottsdale”), as Variable Interest Entities (“VIEs”). Additionally, H-CYTE Management, LLC is the operator and manager of the various Lung Health Institute (LHI) clinics: LI Dallas, LI Nashville, LI Pittsburgh, and LI Scottsdale. The LI Dallas and LI Pittsburgh clinics did not reopen in 2020 after the temporary closure of all LI clinics due to COVID-19. These two clinics will remain permanently closed. During the first quarter of 2022, the Company decided to close the LI Tampa and LI Nashville clinics. The LI Scottsdale clinic will remain open.
Impact of COVID-19
The coronavirus outbreak (“COVID-19”) has adversely affected the Company’s financial condition and results of operations. The impact of the COVID-19 outbreak on businesses and the economy in the United States is expected to continue to be significant. The extent to which the COVID-19 outbreak will continue to impact businesses and the economy is highly uncertain. Accordingly, the Company cannot predict the extent to which its financial condition and results of operation will be affected.

On ~~September 11,~~January 30, 2020, ~~with~~ the ~~closing~~World Health Organization (“WHO”) announced a global health emergency caused by a new strain of the ~~Rights Offering, FWHC, LLC, FWHC Bridge, LLC,~~coronavirus and ~~FWHC Bridge Friends, LLC (collectively known as “FWHC”) gained control~~advised of the ~~Company by subsequently owning approximately~~ ~~61%~~ risks to the international community as the virus spread globally. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in exposure globally. The spread of COVID-19 coronavirus has caused public health officials to recommend precautions to mitigate the spread of the ~~fully diluted shares~~virus, especially as to travel and congregating in large numbers. In addition, certain states and municipalities have enacted quarantining regulations which severely limit the ability of people to move and travel.
In addition, the Company is uncertain of the full effect the pandemic will have on it for the longer term since the scope and duration of the pandemic is unknown, and evolving factors such as the level and timing of the distribution of efficacious vaccines across the world and the extent of any resurgences of the virus or emergence of new variants of the virus, such as the Delta variant and the Omicron variant, will impact the stability of economic recovery and growth. The Company ~~(for further discussion, see Notes 8~~may experience long-term disruptions to its operations resulting from changes in government policy or guidance; quarantines of employees, customers and ~~9-“Equity Transactions”~~suppliers in areas affected by the pandemic; and closures of businesses or manufacturing facilities critical to ~~the consolidated financial statements in the Company’s 2020 Annual Report on Form 10-K).~~its business.
8

Autologous Infusion Therapy (“Infusion Division”)

The Company’s Infusion Division develops and implements innovative treatment options in autologous cellular therapy (PRP-PBMC) to treat chronic lung disorders. Committed to an individualized patient-centric approach, this division consistently provides oversight and management of the highest quality care to the LHI clinics located in Tampa, Nashville, and Scottsdale, while producing positive medical outcomes following the strictest ~~Centers for Disease Control~~CDC guidelines. During the first quarter of 2022, the Company decided to close the clinics in Tampa and ~~Prevention (the “CDC”) guidelines.~~Nashville, the Scottsdale clinic will remain open.

Biotech Development (“~~Biologics~~Biotech Division”)

~~On June 21, 2019, H-CYTE entered into an~~During the year ended December 31, 2021, the Company completed a review of the R&D status regarding the exclusive product supply ~~agreement~~and services agreements with Rion, LLC (“Rion”) to develop and distribute (post U.S. Food & Drug Administration, the “FDA”, approval) a biologic combining its PRP-PBMC (“PRP”) technology with Rion’s exosomes (“EV”) technology for the treatment of chronic obstructive pulmonary disease (“COPD”), the fourth leading cause of death in the U.S. Rion has established a novel EV technology to harness the healing power of the body. Rion’s innovative technology, based on science developed at Mayo Clinic, provides an off-the-shelf platform to enhance healing in soft tissue, musculoskeletal, cardiovascular, and neurological organ systems. This agreement provides for a 10-year exclusive and extendable supply agreement with Rion to enable H-CYTE to develop combined proprietary biologics. The Company is currently evaluating the potential of a combined biologic and the utilization of this agreement.
On October 9, 2019, the Company entered into a services agreement with Rion which provides the Company the benefit of Rion’s resources and expertise for the limited purpose of (i) consulting with and assisting H-CYTE in the further research and development for the generation of a new biologic and (ii) subsequently assisting H-CYTE in seeking and obtaining FDA Phase 1 IND clearance for this biologic as necessary. Rion has also agreed to consult with H-CYTE in its arrangement for services from third parties unaffiliated with Rion to support research, development, regulatory approval, and commercialization of its efforts.
8
After conducting the clinical efficacy trials of this biologic, the Company intends to pursue submission of a Biologics License Application (“BLA”) for review by the FDA for treatment of COPD or similar lung disorders.
On April 2, 2021, the Company entered into a series of agreements with Medovex, LLC to pursue a joint venture regarding the continued development and commercialization of the DenerveX device for business outside of the U.S.. The Company has determined ~~that the transactions resulting~~a single entity biologic from ~~the series of agreements with Medovex, LLC are immaterial.~~an alternative commercial source will be a more viable solution. The Company ~~will assess~~has decided to move away from Rion’s PRP technology and is progressing alternate biologics and therapeutic devices to meet the ~~progress~~needs of the ~~joint venture on a quarterly basis for materiality.~~business.

Note 2 – Basis of presentation
BASIS OF PRESENTATION
The accompanying interim consolidated financial statements have been prepared based upon U.S. Securities and Exchange Commission rules that permit reduced disclosure for interim periods. Therefore, they do not include all information and footnote disclosures necessary for a complete presentation of the Company’s financial position, results of operations and cash flows, in conformity with generally accepted accounting principles. The Company filed audited consolidated financial statements as of and for the fiscal years ended December 31, ~~2020~~2021 and ~~2019,~~2020, which included all information and notes necessary for such complete presentation in conjunction with its ~~2020~~2021 Annual Report on Form 10-K.
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.

The results of operations for the interim period ended ~~June 30, 2021~~March 31, 2022 are not necessarily indicative of the results to be expected for any future period or the entire fiscal year. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, ~~2020,~~2021, which are contained in the Company’s ~~2020~~2021 Annual Report on Form 10-K. For further discussion refer to Note ~~2–“Basis~~2 – “Basis Of Presentation And Summary of Significant Accounting Policies” to the consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations–~~Operations – Critical Accounting Policies and Estimates” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

Note 3 - Liquidity, Going Concern and Management’s Plans
LIQUIDITY, GOING CONCERN AND MANAGEMENT’S PLANS
The Company incurred net losses of approximately $~~2,058~~3,892,000~~,000~~ and $~~3,466~~1,408,000~~,000 and~~ for the three months ended March 31, 2022 and ~~six months ended June 30, 2021.~~2021, respectively. The Company has historically incurred losses from operations and expects to continue to generate negative cash flows as it implements its plan around the Biosciences Division. The ~~interim~~ consolidated financial statements are prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) as applicable to a going concern.

COVID-19 has adversely affected the Company’s financial condition and results of operations. The impact of the outbreak of COVID-19 on the economy in the U.S. and the rest of the world is expected to continue to be significant. The extent to which the COVID-19 outbreak will continue to impact the economy is highly uncertain and cannot be predicted. Accordingly, the Company cannot predict the extent to which its financial condition and results of operations will be affected.

9
~~Convertible Notes Payable~~
On April 1, 2021, the Company, entered into a Secured Convertible Note Purchase Agreement (the “April 2021 Note Purchase Agreement”) with five (5) investors (the “Holders”). Pursuant to the terms of the April 2021 Note Purchase Agreement, the Company sold promissory notes in the aggregate principal amount of $~~2,575,000~~ ~~maturing on~~ ~~March 31, 2022with an annual interest rate of~~ 8%~~. The Notes, plus accrued interest, are convertible into shares of Common Stock at a discount of~~ ~~20%~~ to the price paid for such New Securities in the next round of financing that meets the definition of Qualified Financing as defined in the April 2021 Note Purchase Agreement. The Notes are secured by the assets of the Company under a security agreement with the Holders. The lead investor of the April 2021 Note Purchase Agreement, FWHC Bridge, LLC, advanced $~~1,500,000~~ of the total amount to the Company. FWHC Bridge, LLC is an affiliated entity of FWHC, LLC, which is a principal stockholder and related party of the Company. An additional affiliate of FWHC, LLC provided an additional $~~25,000~~ ~~as part of the April 2021 Note Purchase Agreement. The Company chose early adoption of ASU 2020-06~~ ~~Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity~~ ~~effective January 1, 2021 related to the April 2021 Note Purchase Agreement.~~
The Company had cash on hand of approximately $~~1,516,000~~341,000 as of ~~June 30, 2021~~March 31, 2022 and approximately $~~1,099,000~~92,000, as of ~~August 11, 2021.~~April 29, 2022. The Company’s cash is insufficient to fund its operations over the next year and the Company is currently working to obtain additional debt or equity financing to help support ~~the Biosciences Division’s business model.~~short-term working capital needs.

There can be no assurance that the Company will be able to raise additional funds or that the terms and conditions of any future financings will be workable or acceptable to the Company or its shareholders. If the Company is unable to fund its operations from existing cash on hand, operating cash flows, additional borrowings, or raising equity capital, the Company may be forced to discontinue operations. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

~~Note 4 –~~ In January 2022, the Company offered certain warrant holders the opportunity to receive an additional warrant to purchase the Company’s Common Stock at $~~Right-of-use Asset And Lease Liability~~0.014 per share, for a period of five (5) years from issuance for the exercise of each existing warrant originally issued in April 2020 prior to March 31, 2021. As of March 31, 2022, the Company had eleven warrant holders exercise an aggregate of 83,579,296 warrants at $0.014 per share resulting in cash proceeds of approximately $1,170,000 to the Company.

The ~~components~~Company filed a Registration Statement on Form S-1 registering the resale of ~~lease expense, which are included in other general and administrative expense, for~~ the ~~three months and six months ended June 30, 2021 and 2020, respectively, are as follows:~~
~~SCHEDULE OF COMPONENTS OF LEASE EXPENSE~~

Three Months Ended June 30,
Six Months Ended June 30,
2021 2020 2021 2020
Operating lease expense $ 75,058 $ 151,464 $ 183,650 $ 302,028
~~Cash paid for amounts included~~shares of common stock issuable upon exercise of the warrants issued in the ~~measurement of lease liabilities for the three months and six months ended June 30, 2021 and~~April 2020 ~~respectively, are as follows:~~financing. The registration statement was declared effective on February 14, 2022
~~SCHEDULE OF CASH PAID FOR AMOUNTS INCLUDED THE MEASUREMENT OF LEASE LIABILITIES~~
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Operating cash flows from operating leases $ 75,058 $ 151,464 $ 183,650 $ 302,028
~~Supplemental balance sheet and other information related to operating leases are as follows:~~
~~SCHEDULE OF SUPPLEMENTAL BALANCE SHEET AND OTHER INFORMATION~~
June 30, 2021 December 31, 2020

Operating leases right-of-use assets $ 183,685 $ 278,552
Lease liability, current portion 90,276 139,189
Lease liability, net of current portion 111,096 157,050
Total operating lease liabilities $ 201,372 $ 296,239
Weighted average remaining lease term 2.17 years 2.32 years
Weighted average discount rate 10.73 % 10.31 %

109
~~Future maturities of operating lease liabilities as of June 30, 2021 are as follows:~~
~~SCHEDULE OF MATURITIES OF LEASE LIABILITIES~~
Operating leases

Remainder of 2021 $ 50,752
2022 102,891
2023 69,333
Total lease payments 222,976
Less: Interest (21,604 )
Total lease liability $ 201,372
The Company did not renew its corporate office space lease in Tampa, FL which expired on March 31, 2021. The Company leases medical clinic space in Tampa, FL, Nashville, TN, and Scottsdale, AZ. These clinic locations have various expiration dates through August 31, 2023. The leasing arrangements contain various renewal options that are adjusted for increases in the consumer price index or agreed upon rates. The Company entered into a twelve-month lease for its Tampa location beginning April 1, 2021 totalling $~~71,775. The Dallas, TX lease expired on July 31, 2020 and the Pittsburgh, PA lease expired on October 31, 2020, neither of which were renewed as these clinic locations were permanently closed.The Company decided that its corporate staff will continue working remotely but the Company will have a small corporate meeting room in the Tampa LHI clinic.~~
~~Note 5 -~~ ~~Property And Equipment~~
~~Property and equipment, net, consists of the following:~~
~~SCHEDULE OF PROPERTY AND EQUIPMENT~~
Useful Life June 30, 2021 December 31, 2020
Furniture and fixtures 5-7 years $ 96,185 $ 231,222
Computers and software 3-7 years 213,660 246,323
Leasehold improvements 15 years 40,130 155,583
349,975 633,128
Less: accumulated depreciation (309,331 ) (493,953 )

Total $ 40,644 $ 139,175
~~Depreciation expense was approximately $2,000and $14,000for the three and six months ended June 30, 2021, respectively. Depreciation expense was approximately $17,000~~ ~~and $39,000~~ for the three months and six months ended June 30, 2020, respectively. The Company uses the straight-line depreciation method to calculate depreciation expense. The Company recorded a loss on disposal of approximately $~~93,000for the three and six months ended June 30, 2021.~~
Note 64 – Related Party Transactions
RELATED PARTY TRANSACTIONS
Officers and Board Members ~~and Officers~~ and Related Expenses

~~Effective February 1, 2019, the Company entered into an oral consulting agreement with Mr. Raymond Monteleone, Board Member and Chairman of the Audit Committee in which Mr. Monteleone received $10,000~~ ~~per month for advisory services and $5,000~~ ~~per quarter as Audit Committee Chair in addition to regular quarterly board meeting fees. Effective March 25, 2020, the Company reduced the advisory services to $5,000~~ ~~per month and the fees per quarter as the Audit Committee Chair to $2,500~~ ~~per quarter.~~
On January 12, 2021, Mr. Raymond Monteleone was appointed as Chairman of the Board, Audit Committee Chair, and Compensation Committee Chair. There are understandings between the Company and Mr. Monteleone for him to receive $~~4,167~~ 5,000per month to serve on the Board of Directors and an additional $~~5,000~~ 2,500per quarter to serve as Chairman of the Board, Audit Committee Chair, and Compensation Committee Chair. ~~The Company expensed approximately $17,500~~ ~~and $35,000~~ ~~in compensation to~~Effective January 1, 2022, Mr. Monteleone ~~for the three months and six months ended June 30, 2021, respectively. The Company expensed approximately $17,500~~ ~~and $47,500~~ ~~in compensation to Mr. Monteleone for the three months and six months ended June 30, 2020, respectively.~~
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~~Effective October 1, 2020, the Company entered into an oral agreement with Mr. Michael Yurkowsky in which Mr. Yurkowsky will~~ receive $~~4,167~~7,500 per month to serve on the Board of ~~Directors. The Company expensed approximately~~Directors and an additional $~~12,500~~2,500 per quarter to serve as Chairman of the Board, Audit Committee Chair, and $~~25,000~~ ~~in compensation to Mr. Yurkowsky for the three and six months ended June 30, 2021, respectively.~~Compensation Committee Chair. For the three ~~and six~~ months ended ~~June 30, 2020,~~March 31, 2022 and 2021, the Company expensed $25,000 and $17,500, respectively, for board of director fees to Mr. Monteleone.
Mr. Michael Yurkowsky entered into an oral agreement with the Company on October 1, 2020, in which Mr. Yurkowsky will receive $4,167 per month to serve on the Board of Directors. For the three months ended March 31, 2022 and 2021, the Company expensed $0and $12,500., respectively, for board of director fees to Michael Yurkowsky. On December 1, 2021, the Board of Directors of the Company appointed Michael Yurkowsky to serve as the Company’s Chief Executive Officer. Upon Mr. Yurkowsky’s appointment as CEO in December 2021, the Company terminated his payments for serving on the Board of Directors.

On January 12, 2021, Mr. William Horne stepped down as Chairman of the Board. Mr. Horne will remain a member of the Board. Effective March 1, 2021, the Company entered into an oral agreement with Mr. Horne in which Mr. Horne will receive $4,167per month to serve on the Board of Directors. Mr. Horne agreed to continue to defer the $108,000 in base salary deferred by him in 2018 until such time as there is a positive cash flow to meet the Company’s financial obligations and then the Company and Mr. Horne will work together in good faith to negotiate a payment plan for such deferred salary. Effective December 1, 2021, Mr. Horne will receive $5,000 per month to serve on the Board of Directors. For the three months ended March 31, 2022 and 2021, the Company expensed approximately $20,000 and $4,000, respectively, in compensation and board of director fees to Mr. Horne.
10
Mr. Richard Rosenblum entered into an oral agreement with the Company effective January 17, 2022, in which Mr. Rosenblum will receive $5,000 per month to serve on the Board of Directors. ~~The~~For the three months ended March 31, 2022 and 2021, the Company expensed ~~approximately~~ $12,500 and $~~17,000~~0, ~~in Board fee compensation~~respectively, for board of director fees to Mr. ~~Horne for~~Rosenblum.
Mr. Matthew Anderer entered into an oral agreement with the ~~three and six months ended June 30, 2021.~~Company effective January 17, 2022, in which Mr. Anderer will receive $5,000 per month to serve on the Board of Directors. For the three ~~and six~~ months ended ~~June 30, 2020,~~March 31, 2022 and 2021, the Company expensed $12,500 and $0,. respectively, for board of director fees to Mr. Anderer.
Debt and Other Obligations
~~The short-term notes, related parties and convertible notes payable, related parties are detailed in Note 3-“Liquidity, Going Concern and Management’s Plans” in this Form 10-Q.~~
~~Change in Control~~
On September 11, 2020, with the closing of the Rights Offering, FWHC, LLC, FWHC Bridge, LLC, and FWHC Bridge Friends, LLC (collectively known as “FWHC”) gained control of the Company by subsequently owning approximately ~~61%~~ ~~of the fully diluted shares of the Company. On July 28, 2020, the Company issued an aggregate of~~ ~~15,518,111~~ shares of its common stock to FWHC upon the conversion of its issued Series D Convertible Preferred Stock. The Preferred Stock was converted pursuant to a mandatory conversion triggered by the majority holder of the Series D Convertible Preferred Stock as set forth in the Certificate of Designations for the Series D Convertible Preferred Stock. On September 11, 2020, with the closing of the Rights Offering, FWHC was issued ~~123,031,819~~ ~~shares of Preferred A Stock for conversion of the outstanding promissory notes from April 2020,~~ ~~75,162,429~~ ~~shares of Preferred A Stock for conversion of the April Secured Note,~~ ~~35,860,079~~ ~~shares of Preferred A Stock for conversion of the Hawes Notes, and~~ ~~117,362,143~~ ~~shares of Preferred A Stock issued upon the closing of the Rights Offering. FWHC was also issued~~ ~~273,356,676~~ 10~~-year warrants at $0.014~~ ~~upon the closing of the Rights Offering.~~

Convertible Notes Payable

On April 1, 2021, the Company, entered into a Secured Convertible Note Purchase Agreement (the “April 2021 Note Purchase Agreement”) with five (5) investors (the “Holders”). Pursuant to the terms of the April 2021 Note Purchase Agreement, the Company sold promissory notes in the aggregate principal amount of $2,575,000 maturing on March 31, 2022 with an annual interest rate of 8%. The Notes are convertible into shares of Common Stock at a discount of 20% to the price paid for such New Securities in the next round of financing that meets the definition of Qualified Financing as defined in the April 2021 Note Purchase Agreement. The Notes are secured by the assets of the Company under a security agreement with the Holders. The lead investor of the April 2021 Note Purchase Agreement, FWHC Bridge, LLC, advanced $1,500,000 of the total amount to the Company. FWHC Bridge, LLC is an affiliated entity of FWHC, LLC, which is a principal stockholder and related party of the Company. An additional affiliate of FWHC, LLC provided an additional $25,000 as part of the April 2021 Note Purchase Agreement.
On October 14, 2021, the Company entered into the Second Closing Bring Down Agreement (the “October 2021 Note Purchase Agreement”) whereby the five (5) investors who had entered into the April 2021 Note Purchase Agreement purchased new notes in the Company in the aggregate principal amount of $750,000. The Notes are due and payable on March 31, 2022and bear interest at an annual rate of 8%. The Notes are convertible into shares of Common Stock at a discount of 20% to the price paid for such New Securities in the next financing that meets the definition of a Qualified Financing as defined in the Note Purchase Agreement. The Notes are secured by all of the assets of the Company under a security agreement with the Holders. The lead investor of the October 2021 Note Purchase Agreement, FWHC Bridge, LLC, advanced $437,000 of the total amount to the Company. FWHC Bridge, LLC is an affiliated entity of FWHC, LLC, which is a principal stockholder and related party of the Company. An additional affiliate of FWHC, LLC provided an additional $7,000 as part of the October 2021 Note Purchase Agreement. Management is currently working with the noteholders on the extension of the maturity of the outstanding notes.
The Company chose to early adopt effective January 1, 2021, ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contract in Entity’s Own Equity. Thus, the April 2021 and October 2021 Note Purchase Agreements did not require consideration of a beneficial conversion feature and were accounted for solely as debt on the balance sheets.

Note 75 - Equity Transactions
EQUITY TRANSACTIONS
In January 2022, the Company offered certain warrant holders the opportunity to receive an additional warrant to purchase the Company’s Common Stock ~~Issuance~~
~~In February 2020, the Company issued LilyCon Investments~~at $~~35,000~~ ~~in shares of the Company’s common stock at a weighted average share price of $0.32~~0.014 per share, for a ~~total~~period of five (~~109,375~~5 ~~shares per~~) years from issuance for the ~~terms~~exercise by March 31, 2022 of ~~the consulting agreement executed~~each existing warrant originally issued in ~~February 2019.~~
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On April ~~23, 2020, Horne Management, LLC agreed to convert the related notes plus accrued interest into (i)~~ ~~4,368,278~~ ~~shares~~2020. As of ~~common stock of~~March 31, 2022, the Company ~~and (ii) a~~ ~~ten-year~~had eleven warrant ~~to purchase up to an equivalent number of shares of the Company’s common stock with such conversion to be effective as of April 17, 2020. This warrant will have an~~holders exercise ~~price equal to the price per share at which securities were offered to investors for purchase at the Qualified Financing, which was $0.014, and is exercisable beginning on the day immediately following the closing of the Rights Offering, which occurred on September 11, 2020.~~
~~On July 28, 2020, the Company issued~~ an aggregate of ~~17,893,076~~83,579,296 ~~shares~~warrants at $0.014 per share resulting in cash proceeds of ~~its common stock upon~~approximately $1,170,000 to the conversion of all of its issued and outstanding Series B and Series D Preferred Stock (the “Preferred Stock”) and accumulated dividends. The Preferred Stock was converted pursuant to a mandatory conversion triggered by the majority holder of the Series D Preferred Stock as set forth in the Certificate of Designations for the Series D Preferred Stock.Company.
~~On July 29, 2020, the Company filed its Second Amended and Restated Certificate of Incorporation (the “Amended COI”). The Amended COI provides for the issuance of up to~~ ~~1,600,000,000~~ ~~shares of Common Stock and~~ ~~1,000,000,000~~ ~~shares of Preferred Stock, of which~~ ~~800,000,000~~ ~~shares are designated as Series A Preferred Stock and eliminates the previously authorized classes of preferred stock. The Amended COI also delineates the rights of the Series A Preferred Stock.~~
Series A Preferred Stock
~~On September 11, 2020, the registered Rights Offering (Registration No. 333-239629) of the Company expired. Pursuant to the Rights Offering, on September 24, 2020, the Company issued (i)~~ ~~15,235,381~~ ~~shares of its Series A preferred stock at a price of $0.014~~ ~~per share to holders of its common stock who validly exercised their subscription rights prior to the expiration time and (ii)~~ ~~203,049,643~~ ~~shares of its Series A preferred stock to the standby purchasers as part of the standby commitment. The Rights Offering, including the standby component, resulted in gross proceeds to the Company of $3,055,985~~.
~~Additionally, on September 24, 2020, the Company issued an aggregate of~~ ~~323,844,416~~ ~~shares of its Series A Preferred Stock to the holders of outstanding promissory notes, issued in April 2020, in the aggregate principal amount and accrued interest of $4,483,617~~. The notes were converted pursuant to a mandatory conversion triggered by the completion of the Rights Offering (for further discussion, see Note 9-“Equity Transactions” to the consolidated financial statements in the Company’s 2020 Annual Report on Form 10-K).
During the ~~three and six months~~quarter ended ~~June 30, 2021,~~March 31, 2022, ~~8,123,691~~ 3,657,730~~and~~ ~~17,803,525~~ shares of Series A Preferred Stock were converted to3,657,730 shares of Common Stock at the request of certain Series A Preferred Shareholders.
Voting Rights
Holders of Series A Preferred Stock (“Series A Holders”) have the right to receive notice of any meeting of holders of common stock and to vote upon any matter submitted to a vote of the holders of common stock. Each Series A Holder shall vote on each matter on an as converted basis submitted to them with the holders of common stock.
Conversion
Series A Preferred Stock converts to common stock at a 1:1 ratio immediately upon request of the Series A ~~Holder.~~Holder.
Liquidation
Series A Preferred Stock does not have preferential treatment over common stock shareholders if the Company liquidates or dissolves.
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~~Share~~Share-Based ~~-Based~~ Compensation Plan

The Company utilizes the Black-Scholes valuation method to recognize ~~share-based~~stock-based compensation expense over the vesting period. The expected life represents the period that the stock-based compensation awards are expected to be outstanding.

11
Stock Option Activity

On April 1, 2021, the Board of Directors of the Company approved and granted to certain directors and officers of the Company an aggregate of 54,750,000stock options of which 4,750,000were immediately vested on the date of grant. Each option granted has an exercise price of $0.07per share and an expiration date of ten yearsfrom the date of grant. These options are not included in the Company’s current stock option plan as they were granted outside of the plan.

~~For~~The Board of Directors decided not to renew the ~~six months~~former CEO’s (Robert Greif) employment contract; therefore, the unvested shares were forfeited resulting in a reduction of share-based compensation of approximately $205,000 for the period ended September 30, 2021 that was recognized during the period ended June 30, ~~2020,~~2021.
At March 31, 2021, all outstanding stock options were fully vested, and related compensation expense recognized. ~~For the six months ended June 30, 2021,~~At March 31, 2022, ~~55,135,000~~29,635,000 options were outstanding and ~~5,718,133~~18,218,333 were vested. ~~As of June 30,~~For the three months ended March 31, 2022 and 2021, the Company recognized approximately $~~862,000~~112,000 and $0 in stock-based compensation expense, ~~and~~respectively, which is included in share based compensation. At March 31, 2022, the Company has approximately $~~2,150,000~~340,123 of unrecognized compensation costs related to non-vested stock options, which is expected to be recognized over a weighted average period of approximately ~~3.24~~2.63 years.

Inputs used in the valuation models are as follows:
SCHEDULE OF ASSUMPTIONS USED TO CALCULATE FAIR VALUE OF STOCK OPTIONS
2021 Grants
Option value $ 0.054 to $ 0.056
Risk Free Rate 0.90 % to 1.37 %
Expected Dividend- yield - to -
Expected Volatility 173.99 % to 176.04 %
Expected term (years) 5 to 7

The following is a summary of stock option activity for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2022 and 2021:
SUMMARY OF STOCK OPTION ACTIVITY
Shares
Weighted
Average
Exercise
Price
Weighted Average Remaining Term (Years)
Outstanding at December 31, 2019 425,000 $ 1.38 7.71
Granted — 0 —
Expired/Cancelled (15,000 ) 1.35 —
Outstanding and exercisable at June 30, 2020 410,000 $ 1.39 7.23

Outstanding at December 31, 2020 410,000 $ 1.39 6.72
Granted 54,750,000 0.07 9.75
Expired/Cancelled (25,000 ) 2.16 —
Outstanding at June 30, 2021 55,135,000 $ 0.08 9.73

Exercisable at June 30, 2021

5,718,333
$
0.16

9.52

Shares
Weighted
Average
Exercise
Price
Weighted Average Remaining Term (Years)
Outstanding at December 31, 2020 410,000 $ 1.39 6.72
Granted -
-
-
Expired/Cancelled
-

-
-
Outstanding and exercisable at March 31, 2021
410,000 $ 1.39 6.48

Outstanding at December 31, 2021
29,635,000 0.09 9.20
Granted - - -
Outstanding at March 31, 2022 29,635,000 $ 0.09 8.96

Exercisable at March 31, 2022 18,218,333 $ 0.10 8.93
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The following is a summary of the Company’s non-vested shares for the ~~six~~three months ended ~~June 30, 2021:~~March 31, 2022:
SUMMARY OF STOCK OPTION ACTIVITY NON-VESTED
Shares Weighted Average Grant Date Fair Value
Non-vested at December 31, 2020 - $ -
Granted 54,750,000 0.06
Vested (5,333,333 ) 0.05
Forfeited - -
Non-vested at June 30, 2021 49,416,667 $ 0.06
~~Non-Controlling Interest~~
For the six months ended June 30, 2021 and 2020, the Company consolidated the results for LI Dallas, LI Nashville, LI Pittsburgh, and LI Scottsdale as VIEs. The Company owns no portion of any of these four entities, however, the Company maintains control through their management role for each of the clinics, in accordance with each clinic’s respective management services agreement. Based on these agreements, the Company has the responsibility to run and make decisions on behalf of the clinics, except for medical care and procedures. Beginning in January 2018, the Company adopted the policy, for all of the VIEs, that the management fee charged by the Company would equal the amount of net income from each VIE on a monthly basis, bringing the amount of the net income to $0 each month for the VIEs. Due to this change in policy, there was no change in the non-controlling interest for the six months ended June 30, 2021 or 2020 related to the net income (loss) as it was $0 each month through the management fee charged by the Company. The LI Dallas and LI Pittsburgh clinics did not reopen in 2020 after the temporary closure of all LI clinics due to COVID-19. These two clinics will remain permanently closed.
Shares Weighted
Average Grant
Date Fair Value
Non-vested at December 31, 2021 14,250,000 $ 0.06
Granted - -
Vested (2,833,333 ) 0.05
Forfeited - -
Non-vested at March 31, 2022 11,416,667 $ 0.07

Net Loss Per Share

Basic loss per share is computed on the basis of the weighted average number of shares outstanding for the reporting period. Diluted loss per share is computed on the basis of the weighted average number of common shares plus dilutive potential common shares outstanding using the treasury stock ~~method.~~and if-converted methods, as applicable. Any potentially dilutive securities are antidilutive due to the Company’s net losses.

The Company excluded the following securities from the calculation of basic and diluted net loss per share as the effect would have been antidilutive:
SCHEDULE OF ~~ANTIDILUTIVE~~ANTI-DILUTIVE SECURITIES OF BASIC AND DILUTED NET LOSS PER SHARE
For the Six Months Ended June 30,
2021 2020
Options to purchase common stock (in the money) 4,977,273 410,000
Warrants to purchase common stock (in the money) 386,908,082 404,821,082
Series A Preferred Stock convertible to common stock 520,305,884 -
Series B & D Preferred Stock convertible to common stock - 38,308,600
Total 912,191,239 443,539,682
2022 2021
For the Three Months Ended March 31,
2022 2021
Warrants to purchase common stock (in the money) 384,693,796 389,486,207
Series A Preferred Stock convertible to common stock 498,229,804 528,429,575
Total 882,923,600 917,915,782

Excluded from the above table are ~~23,149,370~~2,196,355 warrants and 29,635,000 stock options for the three months ended March 31, 2022 and 23,937,765 warrants and ~~385,000~~410,000 stock options for the ~~six~~three months ended ~~June 30,~~March 31, 2021 as they are out of the money (exercise price greater than $~~0.08~~the stock price). Inclusion of such would be anti-dilutive.
Note 6 – Commitments & Contingencies
COMMITMENTS & CONTINGENCIES
CEO Compensation Agreement
On December 23, 2021, the Company entered into an employment agreement (the “Employment Agreement”) with Michael Yurkowsky, the Company’s Chief Executive Officer, to continue to serve as the Chief Executive Officer of the Company. Under the Employment Agreement, which commenced on December 1, 2021 (the “Effective Date”) and has a term of one year from the Effective Date (the “Employment Period”), Mr. Yurkowsky will receive a base salary of $180,000 per year. Upon the expiration of the Employment Period, Mr. Yurkowsky’s employment with the Company will be on an at-will basis.
In addition to his base salary, Mr. Yurkowsky may receive an one-time cash bonus in gross amount equal to $100,000 if (i) the Company’s stock is listed and quoted on the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market, or the New York Stock Exchange; or (ii) the Company secures and receives financing of at least $10,000,000.
As additional compensation, Mr. Yurkowsky shall receive shares of common stock of the Company representing 1% of the Company’s fully diluted equity as of the grant date if the Company achieves a market capitalization of at least $250 million for 60 consecutive days during the Employment Period (the “Equity Award”). If the Company achieves a market capitalization of at least $500 million for 60 consecutive days during the Employment Period, the executive shall receive an additional Equity Award of 1%, such that he has in the aggregate received shares of common stock of the Company representing 2% of the Company’s fully diluted equity as of the date of grant. These market conditions were reflected in the grant date fair value of the award as required under ASC 718 Compensation-Stock Compensation.
The Equity Award was measured at fair value on its grant date using a Monte Carlo simulation model. The Monte Carlo simulation model includes assumptions for the expected term, volatility, and dividend yield, each of which are determined in reference to the Company’s historical results. The Company will recognize aggregate stock-based compensation expense of approximately $328,000 related to the Equity Award on a straight-line basis over the derived service period determined by the Monte Carlo simulation model, which was 0.71 years. During the three month period ending March 31, 2022, the Company recognized approximately $114,000 in compensation expense related to the Equity Award. If the market capitalization targets are met sooner than the derived service period, the Company will adjust its stock-based compensation to reflect the cumulative expense associated with the vested Equity Award. The Company will recognize expense if the requisite service is provided, regardless of whether the market conditions are achieved.

1413
~~Note 8 –~~ ~~Commitments & Contingencies~~Consulting Agreements

The Company entered into a consulting agreement with Tanya Rhodes of Rhodes & Associates, Inc, effective June 15, 2020, to serve as the Chief Science Officer of the Company. The agreement has a minimum term of six months with an average fee of $21,000 per month plus expenses which increases 5% per month on January 1 of each calendar year unless an alternative retainer amount is negotiated and agreed upon by both parties. The Company extended the contract on January 1, 2021, resulting in monthly expenses of $22,500 plus expenses for services rendered.
The Company entered into a consulting agreement with Alpha IR Group on March 1, 2022, to provide investor relations to the Company. The agreement is for twelve months with an average service fee of $9,750 per month.
Litigation

From time to time, the Company may be involved in routine legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business. The ultimate amount of liability, if any, for any claims of any type (either alone or in the aggregate) may materially and adversely affect the Company’s financial condition, results of operations, and liquidity. In addition, the ultimate outcome of any litigation is uncertain. Any outcome, whether favorable or unfavorable, may materially and adversely affect the Company due to legal costs and expenses, diversion of management attention, and other factors. The Company expenses legal costs in the period incurred. The Company cannot assure that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against the Company in the future, and these matters could relate to prior, current or future transactions or events. As
The Company is involved in a lawsuit with Sinclair Broadcast Group, Inc. (“Sinclair”) which was filed on September 8, 2020, in the Circuit Court for the Thirteenth Judicial Circuit in and for Hillsborough County, Florida. Sinclair has filed suit alleging breach of ~~June 30,~~contract for advertising services in the amount of approximately $75,000 plus interest and costs. The Company has retained legal counsel for its defense against the suit. The amount is recorded in accounts payable as of March 31, 2022.
The Company is involved in a lawsuit with ITN Networks, LLC (“ITN”) which was filed on July 22, 2021, in the Circuit Court for the Thirteenth Judicial Circuit in and for Hillsborough County, Florida. ITN has filed suit alleging breach of contract for advertising services in the amount of approximately $75,000 plus interest and costs. The Company ~~had no litigation matters which required any accrual or disclosure.~~has retained legal counsel for its defense against the suit. The amount is recorded in accounts payable as of March 31, 2022.

Guarantee

The Company has guaranteed payments based upon the terms found in the management services agreements to affiliated physicians related to LI Dallas, LI Nashville, LI Pittsburgh, and LI Scottsdale. For the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, payments ~~totaling~~totalling approximately $~~26,000~~ ~~and $43,000, respectively, were made to these physicians’ legal entities. For the three and six months ended June 30, 2020, payments totaling approximately $~~014,000 and $~~22,000~~17,000, respectively, were made to these physicians’ legal entities. Due to ~~COVID-19,~~ the Company ~~temporarily ceased~~ceasing operations effective March 23, 2020 in LI Dallas, LI Pittsburgh, and LI Scottsdale, ~~LI Nashville, and LI Tampa, at which time,~~in response to COVID-19, the guaranteed payments for these clinics were ~~suspended. The guaranteed payments did not resume for LI Dallas and LI Pittsburgh due to those clinics being permanently closed.~~suspended in March 2020. The Company resumed these guaranteed payments in January ~~2021 for LI Nashville and LI Scottsdale.~~2021.

~~Rion Agreements~~
On June 21, 2019, H-CYTE entered into an exclusive product supply agreement with Rion, LLC (“Rion”) to develop and distribute (post FDA approval) a biologic for chronic obstructive pulmonary disease (“COPD”), the fourth leading cause of death in the U.S. Rion has established a novel biologics technology to harness the healing power of the body. Rion’s innovative technology, based on science developed at Mayo Clinic, provides an off-the-shelf platform to enhance healing in soft tissue, musculoskeletal, cardiovascular and neurological organ systems. This agreement provides for a 10-year exclusive and extendable supply agreement with Rion to enable H-CYTE to develop proprietary biologics.
On October 9, 2019, the Company entered into a services agreement with Rion which provides the Company the benefit of Rion’s resources and expertise for the limited purpose of (i) consulting with and assisting H-CYTE in the further research and development for the generation of a new biologic and (ii) subsequently assisting H-CYTE in seeking and obtaining FDA Phase 1 IND clearance for this biologic as necessary. Rion also agrees to consult with H-CYTE in its arrangement for services from third parties unaffiliated with Rion to support research, development, regulatory approval, and commercialization of the biologic. An additional $~~350,000~~ in expense is expected to be incurred per the Rion Agreements. At this time, the Company is not able to estimate when this expense will occur. For the three and six months ended June 30, 2021 the Company expensed $0~~. For the three and six months ended June 30, 2020 the Company expensed $200,000~~ ~~and $950,000, respectively.~~
15
Note 97 – ~~Short-term~~ Debt
DEBT
~~Convertible Notes Payable~~
Convertible Notes payable represents a securities purchase agreement with select accredited investors, which was assumed in the Asset Purchase Agreement between Medovex Corp and Regenerative Medicine Solutions, LLC (“Merger”) in 2019 (see Note 1 – “Description of the Company” to the consolidated financial statements in the Company’s 2020 Annual Report on Form 10-K). The debt assumed by the Company, as part of the merger, consisted of $~~750,000~~ ~~of units (the “Units”) with a purchase price of $50,000~~ ~~per Unit.~~ ~~Each Unit consists of (i) a~~ ~~12%~~ ~~senior secured convertible note, initially convertible into shares of the Company’s common stock, par value $0.001~~ ~~per share, at a conversion price equal to the lesser of $0.40~~ or ninety percent (90%) of the per share purchase price of any shares of common stock or common stock equivalents issued in future private placements of equity and/or debt securities completed by the Company following this offering, and (ii) a ~~three~~-year warrant to purchase such number of shares of the Company’s common stock equal to one hundred percent (100%) of the number of shares of common stock issuable upon conversion of the notes at $0.40. ~~The Convertible Notes were secured by all of the assets of the Company.~~
~~In 2019, $100,000~~ ~~of the Convertible Notes were converted into shares of common stock, and $350,000~~ of the Convertible Notes were redeemed by the Company. The Company reached an extension with the remaining noteholder which extended the maturity date of the Hawes Notes for one year, until September 30, 2020. The notes had a principal balance of $~~300,000~~ ~~plus penalties of approximately $85,000~~ ~~and accrued interest of approximately $40,000~~ ~~for a total adjusted principal balance upon renewal of $424,615~~ as of March 31, 2020. In connection with the April Offering, the Company entered into an amendment with the Investor with respect to the outstanding 12% Senior Secured Convertible Note due September 30, 2020, which was originally issued in 2018 and assumed in the Merger and which was purchased by the Investor from its original holder, George Hawes, on March 27, 2020 (see Note 11-”Debt” to the consolidated financial statements in the Company’s 2020 Annual Report on Form 10-K).
On April 1, 2021, the Company, entered into a Secured Convertible Note Purchase Agreement (the “April 2021 Note Purchase Agreement”) with five (5) investors (the “Holders”). Pursuant to the terms of the April 2021 Note Purchase Agreement, the Company sold promissory notes in the aggregate principal amount of $~~2,575,000~~ ~~maturing on~~ ~~March 31, 2022~~ ~~with an annual interest rate of~~ 8~~%. The Notes are convertible into shares of Common Stock at a discount of~~ 20% to the price paid for such New Securities in the next round of financing that meets the definition of Qualified Financing as defined in the April 2021 Note Purchase Agreement. The Notes are secured by the assets of the Company under a security agreement with the Holders. The lead investor of the April 2021 Note Purchase Agreement, FWHC Bridge, LLC, advanced $~~1,500,000~~ of the total amount to the Company. FWHC Bridge, LLC is an affiliated entity of FWHC, LLC, which is a principal stockholder and related party of the Company. An additional affiliate of FWHC, LLC provided an additional $~~25,000~~ ~~as part of the April 2021 Note Purchase Agreement.~~
~~Interest expense is being accreted to the principal balance using the effective interest method. For the three months ended June 30, 2021, the Company recorded interest expense of $29,220~~ ~~and $20,118~~ ~~for related party convertible notes payable and convertible notes payable, respectively.~~
Notes Payable

Notes payable were assumed in the Merger (for further discussion, see Note 1 - “Overview” to the consolidated financial statements in the Company’s 2020 Annual Report on Form 10-K) and are due in aggregate monthly ~~instalments~~installments of approximately $5,800 and carry an interest rate of 5%5%. Each note originally had a maturity date of August 1, 2019. The Company finalized an eighteen-month extension to March 1, ~~2021. The Company is working with the lender for an additional extension of the promissory notes.~~2021. The promissory notes have an aggregate outstanding balance of approximately $~~67,000~~69,000 at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021. The Company has not made payments on ~~this note~~these notes since February 10, 2020, due to ~~COVID-19, resulting in accrued interest~~COVID-19. On April 19, 2022, the Company entered into a promissory note modification agreement with the Lender extending the maturity date of ~~approximately $~~the notes to ~~5,000~~April 1, 2024.
~~On March 27, 2020,~~ The modification agreement also reduces the ~~Company issued~~interest rate from 5% to 3% and requires a ~~demand note in the principal amount~~monthly payment of $~~500,000~~1,000 ~~to FWHC Bridge, LLC (the “Investor”) in exchange for~~per month with a ~~loan made by~~balloon payment at the ~~Investor in such amount to cover~~end of the ~~Company’s working capital needs. Subsequently on April 9, 2020, in exchange for an additional loan of $500,000~~ modified term.~~made by the Investor to the Company, the Company amended and restated the demand note to reflect a new principal amount of $1,000,000, which became the A&R Note (see Note 11-“Debt” to the consolidated financial statements in the Company’s 2020 Annual Report on Form 10-K).~~

1614

Paycheck Protection Program

On April 29, 2020, the Company issued a promissory note in the principal amount of $809,082to the Bank of Tampa in connection with a loan in such amount made under the Paycheck Protection Program (“PPP Loan”). The PPP Loan bears an interest rate of 1%1% per annum and matures on April 29, 2022. The Company elected to use a 24-week Covered Period, per the SBA Paycheck Protection Program guidelines, which ended on October 14, 2020.

The Company ~~can~~could apply for loan forgiveness in an amount equal to the sum of the following costs incurred by the Company:

1) payroll costs;
2) any payment of interest on covered mortgage obligations;
3) any payment on a covered rent obligation; and
4) any covered utility payment

The ~~amount~~Company received notification from the Small Business Administration (“SBA”), dated August 17, 2021, notifying it that $689,974 in principal and $8,847 in interest was forgiven ~~will be calculated (and may be reduced) in accordance with~~under the guidelines of the Paycheck Protection ~~Program criteria set by~~Program. As of March 31, 2022, the ~~SBA. Not more than~~ ~~40%~~ of the amount forgiven can be attributed to non-payroll costs, as listed above. As long as a borrower submits its loan forgiveness application within ten months of the completion of the Covered Period (as defined below), the borrowercurrent balance is not required to make any payments until the forgiveness amount is remitted to the lender by SBA. If the loan is fully forgiven, the borrower is not responsible for any payments. If only a portion of the loan is forgiven, or if the forgiveness application is denied, any remaining balance due on the loan must be repaid by the borrower on or before the maturity date of the loan. Interest accrues during the time between the disbursement of the loan and SBA remittance of the forgiveness amount. The borrower is responsible for paying the accrued interest on any amount of the loan that is not forgiven. The lender is responsible for notifying the borrower of remittance by SBA of the loan forgiveness amount (or that SBA determined that no amount of the loan is eligible for forgiveness) and the date on which the borrower’s first payment is due, if applicable. The Company filed its forgiveness application on April 20, 2021 and is still waiting for the application to be processed and approved.
~~Note 10 –~~ ~~Derivative Liabilities~~
The Company’s derivative liabilities are classified within Level 3 of the fair value hierarchy because certain unobservable inputs were used in the valuation models. These assumptions included estimated future stock prices, potential down-round financings for the Warrants, and potential redemptions for the Redemption Put Liability.
~~The following are rollforwards of the liabilities during the six months ended June 30, 2020:~~
~~SCHEDULE OF FAIR VALUE, LIABILITIES MEASURED ON RECURRING BASIS~~
Derivative Liability - Warrants

Balance at December 31, 2019 $ 315,855
Series D Warrant reclass from equity to liability 509,764
Warrants issued with modification of Horne Note 198,994
Warrants issued with April 17, 2020 financing 6,148,816
Fair value adjustments 2,882,247
Balance at June 30, 2020 $ 10,055,676
17
Redemption Put Liability

Balance at December 31, 2019 $ 267,399
Issuance of Series D Convertible Preferred Stock 5,306
Fair value adjustments (174,707 )
Balance at June 30, 2020 $ 97,998
~~Derivative Liability- Warrants~~
~~Series B Warrants~~
As part of the April Offering, the holders of the Series B Warrants agreed to terminate anti-dilution price protection in their warrants and adjusted the exercise price to equal the price per share at which shares of preferred stock are offered for purchase in a Qualified Financing. The modification resulted in an increase of approximately $~~75,000~~ ~~to the fair value of the derivative liability related to the Series B Warrants.~~
~~Series D Warrants~~
~~In conjunction with their Series D Preferred Financing, the Company originally issued Series D warrants to purchase~~ ~~14,669,757~~ ~~shares of Common Stock with an exercise price of $0.75~~ per share. At inception, the Series D warrants met all the criteria to be classified as equity. As part of the April Offering, the exercise price of the Series D Warrants was reduced to the price per share at which shares of preferred stock are offered for purchase in a Qualified Financing. The modification of the exercise price resulted in the warrants requiring liability classification. The Series D Warrants were measured at fair value before and after the modification, resulting in an increase of approximately $~~510,000~~ ~~which is recorded as a change in the fair value of the derivative liability.~~
~~Horne Warrants~~
~~On April 23, 2020, Horne Management, LLC agreed to convert the related notes plus accrued interest into (i)~~ ~~4,368,278~~ ~~shares of common stock of the Company and (ii) a~~ ~~ten~~-year warrant to purchase up to an equivalent number of shares of the Company’s common stock with such conversion to be effective as of April 17, 2020. The warrant will have an exercise price equal to the price per share at which securities are offered to investors for purchase at the Qualified Financing. The revised exercise price caused the warrants to require liability classification at fair value and the warrants were valued using a Lattice model with the following assumptions: Trading market price- $~~0.05, estimated exercise price- $0.014, volatility-~~ ~~101%, risk free rate-~~ ~~0.65%~~ ~~and an estimated term of 10 years. At inception, the estimated fair value of the Horne Warrants was approximately $199,000~~.
~~April Bridge Loan and Converted Advance Warrants~~
The April Offering entitled the investors to warrants with the right to purchase up to 100% of the aggregate number of shares of Common Stock into which the Purchaser’s Note may ultimately be converted. The Company also received a $1,000,000 advance which was converted into a Converted Advance Note and Converted Advance Warrants in April 2020. The Converted Advance Warrants entitle the holder to purchase up to 200% of the aggregate number of shares of Common Stock into which the Converted Advanced Note may ultimately be converted.
~~The Company received an aggregate of $2,842,695~~26,536 ~~in gross proceeds through the April 2020 Offering and an advance of~~with $~~1,000,000~~ 33which was converted into an Advance Note on April 17, 2020. The Company expected the price per share at which securities would have been offered for purchase in the Qualified Financing to be $0.014 resulting in the assumption there would be approximately ~~203,050,000~~ ~~and~~ ~~142,857,000~~ shares issuable upon exercise of the Purchaser Warrants and the Converted Advance Warrants, respectively. The warrants were valued using a Lattice model with the following assumptions: Trading market price- $~~0.05, estimated exercise price- $0.014, volatility-~~ ~~103%, risk free rate-~~ ~~0.65%~~ ~~and an estimated term of~~ 10 ~~years. At inception, the estimated fair value of the Purchaser Warrants and the Converted Advance Warrants was approximately $3,279,000~~ ~~and $2,869,300, respectively.~~
18
~~The derivative liability has been remeasured to fair value at the end of each reporting period and the change in fair value, of approximately ($3,057,225) and ($2,882,247), has been recorded as a component of other income (expense) in the Company’s consolidated statement of operations for the three months and six months ended June 30, 2020, respectively.~~
~~The Company estimated the fair value of the warrant derivative liability as of June 30, 2020 using the following assumptions:~~
~~SCHEDULE OF ASSUMPTIONS FOR WARRANTS~~
June 30, 2020

Fair value of underlying stock $ 0.05
Exercise price $ 0.014
Risk free rate 0.14% - 0.66 %
Expected term (in years) 0.17- 10.27
Stock price volatility 109% - 312 %
Expected dividend yield 0
~~On April 17, 2020, the holders of the warrants agreed to terminate all anti-dilution price protections in their warrants.~~
~~The fair value of the warrants will be significantly influenced by the fair value of the Company’s stock price, stock price volatility, changes~~ in interest ~~rates and management’s assumptions related to the estimated date and price of a Qualified Financing.~~payable for which forgiveness will not occur.
In conjunction with the Series D Preferred financing (see note 12), the Company offered the Series B warrant holders the option to exchange their warrants on the basis of 1 warrant for 0.40 common shares. ~~Warrant holders chose to exchange~~ ~~1,007,813~~ ~~warrants with a fair value of approximately $75,000~~ ~~for~~ ~~403,125~~ ~~shares of common stock with a fair value of approximately $73,000. On the date of the exchange, the Series B Warrants were first adjusted to fair value with the change in fair value being recorded in earnings.~~
19
~~Redemption Put Liability~~
As described in Note 12, the redemption put provision embedded in the Series D financing required bifurcation and measurement at fair value as a derivative. If the redemption put provision is triggered, it allows either payment in cash or the issuance of “Trigger Event Warrants”. Accordingly, the fair value of the Redemption put liability considered management’s estimate of the probability of cash payment versus payment in Trigger Event Warrants and was valued using a Monte Carlo Simulation which uses randomly generated stock-price paths obtained through a Geometric Brownian Motion stock price simulation. The fair value of the redemption provision will be significantly influenced by the fair value of the Company’s stock price, stock price volatility, changes in interest rates and management’s assumptions related to the redemption factor. The Company estimated the fair value of the Trigger Event Warrant portion of the redemption put liability using the following assumptions on June 30, 2020:
~~SCHEDULE OF ASSUMPTIONS FOR WARRANTS~~
June 30, 2020

Fair value of underlying stock $ 0.05
Exercise price $ 0.20409
Risk free rate 0.66 %
Expected term (in years) 9.5
Stock price volatility 107 %
Expected dividend yield 0
~~The fair market value of the redemption put liability at inception was approximately $614,000~~ ~~which has been recorded as a liability and is remeasured to fair value at the end of each reporting period. The change in fair value of approximately ($19,000) and $175,000~~ ~~has been recorded as a component of other income (expense) in the Company’s consolidated statement of operations for the three and six months ended June 30, 2020, respectively.~~
The Company did not have any assets or liabilities measured at fair value using Level 1 or 2 of the fair value hierarchy as of December 31, 2020 (see Note 12-“Derivative Liability-Warrants and Redemption Put” to the consolidated financial statements in the Company’s 2020 Annual Report on Form 10-K).

Note 118 - Common Stock Warrants
COMMON STOCK WARRANTS
A summary of the Company’s warrant issuance activity and related information for the ~~period~~three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ is as follows:
~~SUMMARY~~
SCHEDULE OF ~~WARRANT ACTIVITY~~ISSUANCE OF WARRANTS
Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life
Outstanding and exercisable at December 31, 2019 44,806,076 $ 0.78 4.59
Issued 5,178,720 0.015 9.79
Outstanding and exercisable at June 30, 2020 49,984,796 $ 0.104 9.16
Issued, not yet exercisable⁽¹⁾ 354,836,286 0.014 9.79
Total outstanding at June 30, 2020 404,821,082 0.104 9.16

Outstanding and exercisable at December 31, 2020 413,423,972 $ 0.015 10.30
Expired (3,366,520 ) $ 0.32 —
Issued 0 0 —
Total outstanding and exercisable at June 30, 2021 410,057,452 $ 0.63 8.63
⁽¹⁾ ~~The Company had estimated on June 30, 2020 that the number of warrants to be granted for the bridge financing would be~~ ~~354,836,286. The bridge financing closed on September 11, 2020 in which an additional~~ ~~9,602,890~~ ~~warrants were issued above the original estimate for a total of~~ ~~364,439,176~~. The fair market value associated with the additional warrants issued was recorded to the change in fair value of derivative liability – warrants prior to being reclassed to equity. Upon closing of the Rights Offering on September 11, 2020, the Company issued warrants to one of the Series B Preferred shareholders of ~~1,292,411~~ ~~due to an antidilution feature embedded in the Series B Warrant.~~
Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life
Outstanding and exercisable at December 31, 2020 413,423,972 $ 0.02 10.30
Expired - - -
Exercised - - -
Outstanding and exercisable at March 31, 2021 413,423,972 $ 0.10 9.24

Outstanding at December 31, 2021
406,301,497
0.04
8.17

Expired

(20,411,346
) 0.33 -
Exercised (83,579,296 ) 0.01 -
Granted 84,579,296 0.01 4.88
Outstanding and exercisable at March 31, 2022 386,890,151 $ 0.02 7.57

2015

The fair value of all warrants issued are determined by using the Black-Scholes valuation ~~technique and were assigned based on the relative fair value of both the common stock and the warrants issued.~~technique. The inputs used in the Black-Scholes valuation technique to value each of the warrants as of their respective issue dates are as follows:
SCHEDULE OF ~~ASSUMPTIONS FOR~~ISSUANCE OF WARRANTS VALUATION TECHNIQUE
Event Description Date Number of Warrants H-CYTE Stock Price Exercise Price of Warrant Grant Date Fair Value Life of Warrant Risk Free Rate of Return (%) Annualized Volatility Rate (%)
Short-term note, related party 1/13/2020 268,571 $ 0.12 $ 0.75 $ 0.07 3 years 1.60 145.76
Private placement of Series D Convertible Preferred Stock 1/17/2020 244,996 $ 0.15 $ 0.75 $ 0.13 10 years 1.84 144.30
Granted for bridge financing 4/8/2020 296,875 $ 0.05 $ 0.40 $ 0.04 3 years 0.34 131.82
Short-term note, related party conversion 4/17/2020 4,368,278 $ 0.05 $ 0.014 $ 0.05 10 years 0.65 100.64
Granted for bridge financing 9/11/2020 364,439,176 $ 0.05 $ 0.014 $ 0.017 10 years 0.65 96.97
Event Description Date Number of Warrants H-CYTE Stock Price Exercise Price of Warrant Grant Date Fair Value Life of Warrant Risk Free Rate of Return (%) Annualized Volatility Rate (%)
Granted for inducement agreement 1/19/2022 3,732,289 $ 0.06 $ 0.014 $ 0.062 5 years 1.62 187.79
Granted for inducement agreement 1/20/2022 372,289 $ 0.07 $ 0.014 $ 0.064 5 years 1.62 187.85
Granted for inducement agreement 1/20/2022 187,201 $ 0.07 $ 0.014 $ 0.064 5 years 1.62 187.85
Granted for inducement agreement 1/24/2022 374,403 $ 0.05 $ 0.014 $ 0.047 5 years 1.53 188.01
Granted for inducement agreement 1/25/2022 3,744,031 $ 0.05 $ 0.014 $ 0.048 5 years 1.56 188.00
Granted for inducement agreement 2/02/2022 3,740,509 $ 0.05 $ 0.014 $ 0.044 5 years 1.60 188.25
Granted for inducement agreement 2/04/2022 6,934,785 $ 0.04 $ 0.014 $ 0.043 5 years 1.78 188.33
Granted for inducement agreement 2/04/2022 13,869,643 $ 0.04 $ 0.014 $ 0.043 5 years 1.78 188.33
Granted for services provided 2/09/2022 1,000,000 $ 0.03 $ 0.014 $ 0.031 5 years 1.82 188.69
Granted for inducement agreement 2/22/2022 41,608,884 $ 0.03 $ 0.014 $ 0.032 5 years 1.85 188.59
Granted for inducement agreement 2/22/2022 693,477 $ 0.03 $ 0.014 $ 0.032 5 years 1.85 188.59
Granted for inducement agreement 3/21/2022 8,321,785 $ 0.03 $ 0.014 $ 0.027 5 years 2.33 194.01

The fair value of warrants issued during the three months ended March 31, 2022 totaled approximately $3,000,000 which is included in inducement expense.The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
~~Note 12 -~~ ~~Series D Convertible Preferred Stock~~
~~On November 15, 2019, the Company entered into a securities purchase agreement with selected accredited investors whereby the Company offered (i) up to~~ ~~238,871~~ ~~shares of Series D Convertible Preferred Stock the (“Series D Shares”) at a price of $40.817~~ ~~per share and (ii) a~~ ~~ten-year~~ ~~warrant (the “Series D Warrant”) to purchase~~ ~~14,669,757~~ ~~shares of common stock. The Series D Warrants are exercisable for a period of~~ 10 ~~years from issuance at an initial exercise price of $0.75~~ ~~per share, subject to adjustment for traditional equity restructurings and reorganizations.~~
~~On November 21, 2019, the Company entered into a securities purchase agreement with FWHC Holdings, LLC (“FWHC”) an accredited investor for the purchase of~~ ~~146,998~~ ~~shares of Series D Convertible Preferred Stock, par value $0.001~~ per share and the Series D Warrant (the “FWHC Investment”; see note 14-“Mezzanine Equity and Series D Convertible Preferred Stock” to the consolidated financial statements in the Company’s 2020 Annual Report on Form 10-K).
~~For the six months ended June 30, 2021 and 2020, the Company recorded $~~0 ~~and $278,476, respectively,~~ ~~in deemed dividends on the Series D Convertible Preferred Stock in accordance with the~~ 8~~% stated dividend resulting in a total balance of Series D Convertible Preferred stock of $6,281,433~~ ~~at June 30, 2020. All outstanding shares of Series D Convertible Preferred Stock were converted into~~ ~~15,773,363~~ shares of Common Stock on July 28, 2020. The conversion was pursuant to a mandatory conversion triggered by the majority holder of the Series D Convertible Preferred Stock as set forth in the Certificate of Designations.
As of December 31, 2020, the Company does not have any Series D Convertible Preferred Stock outstanding (see Note 9-“Equity Transactions” to the consolidated financial statements in the Company’s 2020 Annual Report on Form 10-K).
~~Note 13 –~~ ~~Income Taxes~~
The Company utilizes the liability method of accounting for income taxes as set forth in FASB ASC Topic 740, “Income Taxes”. Under the liability method, deferred taxes are determined based on temporary differences between the financial statement and tax bases of assets and liabilities using tax rates expected to be in effect during the years in which the difference turns around. The Company accounts for interest and penalties on income taxes as income tax expense. A valuation allowance is recorded when it is more likely than not that a tax benefit will not be realized. In determining the need for valuation allowances the Company considers projected future taxable income and the availability of tax planning strategies.
From inception to June 30, 2021, the Company has incurred net losses and, therefore, has no current income tax liability. The net deferred tax asset generated by these losses is fully offset by a valuation allowance as of June 30, 2021 and December 31, 2020. Management of the Company evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets and determined that it is more likely than not that the Company will not recognize the full benefits of the deferred tax assets.
~~The Company’s policy is to record interest and penalties on uncertain tax positions as a component of income tax expense. There are~~ 0 ~~uncertain tax positions at June 30, 2021 and December 31, 2020. The Company has not undergone any tax examinations since inception.~~
Note 149 - Subsequent Events
SUBSEQUENT EVENTS
~~Effective July 13, 2021, Tanya Rhodes, the Company’s Chief Technology Officer, was designated as an Executive Officer of the Company.~~
As of ~~August 11, 2021,~~May 3, 2022, an additional ~~3,633,900~~3,650,685 Series A Preferred Stock was converted into Common Stock at the request of certain Series A Preferred Stockholders.

The Company has evaluated subsequent events through August 13, 2021 and has determined that there have been no events that would require adjustments to or disclosure in the June 30, 2021 interim Consolidated Financial Statements other than those disclosed in this Form 10-Q.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes thereto appearing in Part I, Item 1 of this Quarterly Report. Historical results and trends that might appear in this Quarterly Report should not be interpreted as being indicative of future operations.

Overview

H-CYTE, Inc (“the Company”) is a hybrid-biopharmaceutical company dedicated to developing and delivering new treatments for patients with chronic respiratory and pulmonary disorders. During the last two years, the Company has evolved into two separate divisions with its entrance into the biologics and device development space (“~~Biologics~~Biotech Division”). This ~~new~~ division is complementary to the Company’s current Lung Health Institute (LHI) autologous infusion therapy business (“Infusion Division”) and is focused on underserved disease states. On September 8, 2021, the Company announced that its Lung Health Institute facilities changed their names to Centers for Respiratory Health as the clinics continue to deliver treatments for patients with chronic respiratory and pulmonary disorders.
The consolidated results for H-CYTE include the following ~~wholly owned~~wholly-owned subsidiaries: H-CYTE Management, LLC, Medovex Corp, Cognitive Health Institute, LLC, and Lung Institute Tampa, LLC and the results include Lung Institute Dallas, PLLC (“LI Dallas”), Lung Institute Nashville, PLLC (“LI Nashville”), Lung Institute Pittsburgh, PLLC (“LI Pittsburgh”), and Lung Institute Scottsdale, LLC (“LI Scottsdale”), as Variable Interest Entities (“VIEs”). Additionally, H-CYTE Management, LLC is the operator and manager of the various Lung Health Institute (LHI) clinics: LI Dallas, LI Nashville, LI Pittsburgh, and LI Scottsdale. The LI Dallas and LI Pittsburgh clinics did not reopen in 2020 after the temporary closure of all LI clinics due to COVID-19. These two clinics will remain permanently closed. During the first quarter of 2022, the Company decided to close the LI Tampa and LI Nashville clinics, the LI Scottsdale clinic will remain open.
~~On September 11, 2020, with~~
Impact of COVID-19
COVID-19 has adversely affected the ~~closing~~Company’s financial condition and results of operations. The impact of the ~~Rights Offering, FWHC, LLC, FWHC Bridge, LLC,~~COVID-19 outbreak on businesses and ~~FWHC Bridge Friends, LLC (collectively known as “FWHC”~~the economy in the United States is expected to continue to be significant. The extent to which the COVID-19 outbreak will continue to impact businesses and the economy is highly uncertain. Accordingly, the Company cannot predict the extent to which its financial condition and results of operation will be affected.
On January 30, 2020, the World Health Organization (“WHO”) ~~gained control~~announced a global health emergency caused by a new strain of the ~~Company by subsequently owning approximately 61%~~coronavirus and advised of the ~~fully diluted shares~~risks to the international community as the virus spread globally. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in exposure globally. The spread of COVID-19 coronavirus has caused public health officials to recommend precautions to mitigate the spread of the virus, especially as to travel and congregating in large numbers. In addition, certain states and municipalities have enacted quarantining regulations which severely limit the ability of people to move and travel.
In addition, the Company ~~(for further discussion, see Notes 8 and 9-“Equity Transactions” to the consolidated financial statements in the Company’s 2020 Annual Report on Form 10-K).~~
~~Autologous Infusion Therapy (“Infusion Division”)~~
The Infusion Division develops and implements innovative treatment options in autologous cellular therapy (PRP-PBMC) to treat chronic lung disorders. Committed to an individualized patient-centric approach, this division provides oversight and managementis uncertain of the ~~highest quality~~full effect the pandemic will have on it for the longer term since the scope and duration of the pandemic is unknown, and evolving factors such as the level and timing of the distribution of efficacious vaccines across the world and the extent of any resurgences of the virus or emergence of new variants of the virus, such as the Delta variant and the Omicron variant, will impact the stability of economic recovery and growth. The Company may experience long-term disruptions to its operations resulting from changes in government policy or guidance; quarantines of employees, customers and suppliers in areas affected by the ~~LHI clinics, while producing positive medical outcomes following the strictest Centers for Disease Control~~pandemic; and ~~Prevention (the “CDC”) guidelines.~~closures of businesses or manufacturing facilities critical to its business.
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~~Biotech Development (“Biologics Division”)~~
On June 21, 2019, H-CYTE entered into an exclusive product supply agreement with Rion, LLC (“Rion”) to develop and distribute (post U.S. Food & Drug Administration, the “FDA”, approval) a biologic combining its PRP-PBMC technology with Rion’s exosomes (“EV”) technology for the treatment of chronic obstructive pulmonary disease (“COPD”), the fourth leading cause of death in the U.S. Rion has established a novel EV technology to harness the healing power of the body. Rion’s innovative technology, based on science developed at Mayo Clinic, provides an off-the-shelf platform to enhance healing in soft tissue, musculoskeletal, cardiovascular, and neurological organ systems. This agreement provides for a 10-year exclusive and extendable supply agreement with Rion to enable H-CYTE to develop combined proprietary biologics. The Company is currently evaluating the potential of a combined biologic and the utilization of this agreement.
On October 9, 2019, the Company entered into a services agreement with Rion which provides the Company the benefit of Rion’s resources and expertise for the limited purpose of (i) consulting with and assisting H-CYTE in the further research and development for the generation of a new biologic and (ii) subsequently assisting H-CYTE in seeking and obtaining FDA Phase 1 IND clearance for this biologic as necessary. Rion has also agreed to consult with H-CYTE in its arrangement for services from third parties unaffiliated with Rion to support research, development, regulatory approval, and commercialization of its efforts.
After conducting the clinical efficacy trials of this biologic, the Company intends to pursue submission of a Biologics License Application (“BLA”) for review by the FDA for treatment of COPD or similar lung disorders.
On April 2, 2021, the Company entered into a series of agreements with Medovex, LLC to pursue a joint venture regarding the continued development and commercialization of the DenerveX device for business outside of the U.S. The Company has determined that the transactions resulting from the series of agreements with Medovex, LLC are immaterial. The Company will assess the progress of the joint venture on a quarterly basis for materiality.
Critical Accounting Policies and Estimates

The Company’s discussion and analysis of its financial condition and results of operations are based on its consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of ~~contingent~~ assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. ~~On a continual basis, the Company evaluates its estimates and judgments, including those described in greater detail below.~~

The Company bases our estimates on historical experience and on various other factors that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

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Results of Operations - ~~Six~~Three months ~~ended June 30,~~Ended March 31, 2022 and 2021 ~~and 2020~~

Revenue, Cost of Sales and Gross Profit

The Company recorded revenue of approximately ~~$450,000~~$380,000 and $827,000 for the three and six months ended June 30, 2021, respectively. The Company recorded revenue of approximately $20,000 and $1,036,000, for the three and six months ended June 30, 2020, respectively. The increase in revenue$376,000 for the three months ended ~~June 30,~~March 31, 2022 and 2021, as compared to the prior year is attributable to the economic impact that COVID-19 has had on the Company due to its vulnerable patient base being unable or unwilling to travel due to the virus. The Company suspended operations of the Infusion Vertical due to COVID-19 effective March 23, 2020 and did not reopen until August 2020 with limited capacity.respectively.
The Company recorded cost of sales of approximately $216,000 and $415,000 for the three and six months ended June 30, 2021, respectively. The Company recorded cost of sales of approximately $70,000 and $447,000 for the three and six months ended June 30, 2020, respectively. The increase in cost of sales forFor the three months ended ~~June 30,~~March 31, 2022 and 2021, as compared to the prior year, is attributable to the economic impact that COVID-19 has had on the Company. The Company’s cost of sales is comprised of two main components: medical supplies and personnel costs for the Infusion Vertical. Medical supplies are predominantly variable costs based on the number of treatments provided; personnel expenses are also variable as these are hourly positions. The number of treatments provided, during normal operations, can be handled adequately with the Company’s current level of personnel. The Company possesses the opportunity to increase the number of treatments performed without increasing personnel costs as it can leverage the current personnel’s availability until the Company’s treatment volume reaches critical mass. However, upon an increase in treatment volume beyond that capacity, the Company ~~will need to hire additional personnel.~~
~~The Company~~ generated a gross profit oftotalling approximately ~~$234,000~~$293,000 and ~~$412,000 for the three and six months ended June 30, 2021, respectively. The Company generated gross profit of approximately ($51,000) and $589,000 for the three and six months ended June 30, 2020,~~$178,000, respectively. The increase in gross profit, as compared to the prior ~~year,~~quarter, is attributable to the ~~economic impact that COVID-19 has had~~Company using part-time staff on an as needed basis in the ~~Company.~~Scottsdale and Tampa clinics along with the closing of the Nashville clinic in February 2022.

Operating Expenses

Salaries and Related Costs

~~The~~For the three months ended March 31, 2022 and 2021, the Company incurred approximately $347,000 and $662,000 in salaries and related costs, ~~of approximately $586,000 and $1,248,000 for the three and six months ended June 30, 2021,~~ respectively. The ~~Company incurred~~decrease in salaries and related costs ~~of approximately $594,000 and $1,819,000~~ for the three ~~and six~~ months ended ~~June 30, 2020, respectively.~~March 31, 2022, as compared to the prior year, is due to the adjustments to the Company’s corporate structure by reducing expenses in marketing, sales, and operations due to decreased patient volume.

Other General and Administrative

~~The~~For the three months ended March 31, 2022 and 2021, the Company incurred approximately, $510,000 and $919,000, in other general and administrative costs, of approximately $610,000 and $1,440,000 for the three and six months ended June 30, 2021, respectively. The Company incurred other general and administrative costs of approximately $1,035,000 and $2,265,000 for the three and six months ended June 30, 2020, respectively. The decrease, as compared to the prior year, is attributable to the economic impact that COVID-19 has had on the Company.
Of The decrease is attributable to cost saving measures in response to the total other general and administrative costs, approximately $161,000 and $481,000 were related to professional fees for the three and six months ended June 30, 2021. Professional fees were approximately $510,000 and $826,000 for the three and six months ended June 30, 2020. Professional fees consist primarily of accounting, legal, and public company compliance costs as well as regulatory costs.
~~Research and Development~~
COVID-19 pandemic. The Company ~~incurred research~~made adjustments to its corporate structure by reducing expenses in marketing, sales, and ~~development expenses of $0 for the three and six months ended June 30, 2021.~~operations due to decreased patient volume. The Company ~~incurred research in development expenses of approximately $200,000~~also closed the Dallas and ~~$950,000 for the three and six months ended June 30, 2020, respectively. The $950,000 expense~~Pittsburgh clinics permanently in 2020 ~~was~~and reduced the Tampa and Scottsdale clinics to part-time in ~~connection with the Rion agreements.~~2021.

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~~Advertising~~
The Company incurred advertising costs of approximately $88,000 and $165,000 for the three months and six months ended June 30, 2021, respectively. The Company incurred advertising costs of approximately $26,000 and $171,000 for the three months and six months ended June 30, 2020, respectively. The increase, as compared to the prior year, is attributable to the economic impact that COVID-19 had on the Company in 2020 as the clinics were temporarily closed during the three months ended June 30, 2020, resulting in a reduction in marketing spend during the temporary closure.
~~Departure of Directors and Certain Officers, Election of Directors,~~ Appointment of New Board Members and Officers.

On January ~~12, 2021,~~17, 2022, Mr. ~~William Horne stepped down~~Richard Rosenblum was appointed as ~~Chairman of the Board of directors (the “Board”) of the Company. Mr. Horne will remain~~ a member of the Board.

On January ~~12, 2021,~~17, 2022, Mr. ~~Ray Monteleone~~Matthew Anderer was appointed ~~the new Chairman of the Board. Mr. Monteleone is~~as a ~~current~~ member of the Board.

Funding Requirements

The Company has historically incurred losses from operations and expects to continue to generate negative cash flows as the Company implements its business plan to focus on the Biologics Division. The Company will need to raise cash from debt and equity offerings to continue its operations. There can be no assurance that the Company will be successful in doing so.

Going Concern

The Company ~~reported~~incurred net losses of approximately ~~$2,058,000~~$3,892,000 and ~~$3,466,000~~$1,408,000 for the three months ~~and six months~~ ended ~~June 30,~~March 31, 2022 and 2021, respectively. The Company ~~reported net~~has historically incurred losses from operations and expects to continue to generate negative cash flows as it implements its plan around the Biosciences Division. The consolidated financial statements are prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) as applicable to a going concern.
COVID-19 has adversely affected the Company’s financial condition and results of ~~approximately $6,432,000~~operations. The impact of the outbreak of COVID-19 on the economy in the U.S. and ~~$8,849,000 for~~ the ~~three months~~rest of the world is expected to continue to be significant. The extent to which the COVID-19 outbreak will continue to impact the economy is highly uncertain and ~~six months ended June 30, 2020, respectively.~~cannot be predicted. Accordingly, the Company cannot predict the extent to which its financial condition and results of operations will be affected.

The ~~Company’s independent registered public accounting firm included an explanatory paragraph with respect to the Company’s ability to continue~~Company had cash on hand of approximately $341,000 as ~~a going concern in its report on the~~of March 31, 2022 and approximately $92,000, as of April 25, 2022. The Company’s consolidated financial statements for the year ended December 31, 2020. The presence of the going concern explanatory paragraph suggests that the Company may not have sufficient liquidity or minimum cash levels to operate the business. Since its inception, the Company has incurred losses and anticipates that the Company will continue to incur losses until its products can generate enough revenue to offset its operating expenses. The present level of cash is insufficient to ~~satisfy our current operating requirements~~fund its operations over the next year and ~~Biologics Division business model.~~the Company is currently working to obtain additional debt or equity financing to help support short-term working capital needs.

There can be no assurance that the Company will be able to raise additional funds or that the terms and conditions of any future financings will be workable or acceptable to the Company or its shareholders. If the Company is unable to fund its operations from existing cash on hand, operating cash flows, additional borrowings, or raising equity capital, the Company may be forced to discontinue operations. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

19
In the event the Company is unable to fund its operations from existing cash on hand, operating cash flows, additional borrowings or raising equity capital, the Company may be forced to reduce our expenses, or discontinue operations. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Liquidity and Sources of Liquidity

With the Company historically having experienced losses, the primary source of liquidity has been raising capital through debt and equity offerings, as described below.

25
Debt

~~On April 17, 2020, and in subsequent April closings, the Company entered into a Secured~~ Convertible Note and Warrant Purchase Agreement (the “April SPA”) with thirty three investors (the “Purchasers”) pursuant to which the Company received an aggregate of $2,842,695 in gross proceeds through the sale to the Purchasers of Secured Convertible Promissory Notes (the “April Secured Notes”) and warrants (the “April Warrants”) to purchase shares of common stock of the Company (the “April Offering”). The proceeds of the April Offering will be used for working capital and general corporate purposes. The April Offering resulted in the issuance of April Secured Notes to Purchasers in an aggregate principal amount of $3,842,695. This sum included the issuance by the Company to FWHC Bridge, LLC (the “Investor) of an April Secured Note in the amount of $1,000,000 to amend and supersede the A&R Note (see below “Short-term Notes, Related Parties”) previously issued by the Company to the Investor on April 9, 2020. The Investor is an affiliate of FWHC Holdings, LLC, a pre-existing shareholder of the Company, which served as lead investor in the Company’s recent Series D Convertible Preferred Stock Offering. Additionally, in connection with the April Offering, the Company entered into an amendment with the Investor with respect to the outstanding 12% Senior Secured Convertible Note due September 30, 2020, which was originally issued in 2018 and assumed in the Merger and purchased by the Investor from its original holder, George Hawes, on March 27, 2020 (the “Hawes Note”). The Hawes Notes had a principal amount of $424,615 as of March 31, 2020. The amendment to the Hawes Note eliminated the requirement that the Company make monthly payments of accrued interest.
As part of the April Offering, the holders of certain existing warrants issued by the Company which contained anti-dilution price protection entered into agreements terminating all anti-dilution price protection in their warrants. The Company intends to implement a one-time reduction of the exercise price of such warrants to be equal to the price per share at which shares of preferred stock are offered for purchase at the Qualified Financing once that price has been established.
The short-term notes, related parties, as of March 31, 2020 totaling $2,135,000 is comprised of loans made to the Company during 2019, by Horne Management, LLC, controlled by Chief Executive Officer, William E. Horne aggregating $1,635,000 and a Note in the amount of $500,000 from the Investor. On April 17, 2020, Mr. Horne agreed to convert the notes plus accrued interest owed to Horne Management, LLC, at the time of the Qualified Offering, into 4,368,278 shares of common stock and a ten-year warrant to purchase up to an equivalent number of shares of the Company’s common stock at the Qualified Offering price of $0.014.
On September 11, 2020, the right to participate in the registered rights offering (Registration No. 333-239629) of the Company expired. Pursuant to the rights offering, on September 24, 2020, the Company issued (i) 15,235,381 shares of its Series A preferred stock at a price of $0.014 per share to holders of its common stock who validly exercised their subscription rights prior to the expiration time and (ii) 203,049,643 shares of its Series A preferred stock to the standby purchasers as part of the standby commitment. The rights offering, including the standby component, resulted in gross proceeds to the Company of $3,055,985. While the rights offering expired on September 11, 2020, it was not consummated until September 24, 2020 while logistical closing conditions including the calculation and clearance of funds were being processed.
In addition, on September 24, 2020, the Company issued an aggregate of 323,844,416 shares of its Series A preferred stock to the holders of outstanding promissory notes in the aggregate principal amount and accrued interest of $4,483,617. The notes were converted pursuant to a mandatory conversion triggered by the completion of the rights offering. Such shares were issued under an exemption from registration in reliance on Section 3(a)(9) of the Securities Act. The original notes were issued in reliance on Section 4(a)(2) of the Securities Act.Payable

On April 1, 2021, the Company, entered into a Secured Convertible Note Purchase Agreement (the “April 2021 Note Purchase Agreement”) with five (5) investors (the “Holders”). Pursuant to the terms of the April 2021 Note Purchase Agreement, the Company sold promissory notes in the aggregate principal amount of $2,575,000 maturing on March 31, 2022 with an annual interest rate of 8%. The Notes are convertible into shares of Common Stock at a discount of 20% to the price paid for such New Securities in the next round of financing that meets the definition of Qualified Financing as defined in the April 2021 Note Purchase Agreement. The Notes are secured by the assets of the Company under a security agreement with the Holders. The lead investor of the April 2021 Note Purchase Agreement, FWHC Bridge, LLC, ~~provided~~advanced $1,500,000 of the total amount to the Company. FWHC Bridge, LLC is an affiliated entity of FWHC, LLC, which is a principal stockholder and related party of the Company. An additional affiliate of FWHC, LLC provided an additional $25,000 as part of the April 2021 Note Purchase Agreement.
~~Interest expense is being amortized over the remaining term using the effective interest method. For the three months ended June 30,~~On October 14, 2021, the Company ~~recorded~~entered into the Second Closing Bring Down Agreement (the “October 2021 Note Purchase Agreement”) whereby the five (5) investors who had entered into the April 2021 Note Purchase Agreement purchased new notes in the Company in the aggregate principal amount of $750,000. The Notes are due and payable on March 31, 2022 and bear interest ~~expense~~at an annual rate of ~~$29,220~~8%. The Notes are convertible into shares of Common Stock at a discount of 20% to the price paid for such New Securities in the next financing that meets the definition of a Qualified Financing as defined in the Note Purchase Agreement. The Notes are secured by all of the assets of the Company under a security agreement with the Holders. The lead investor of the October 2021 Note Purchase Agreement, FWHC Bridge, LLC, advanced $437,000 of the total amount to the Company. FWHC Bridge, LLC is an affiliated entity of FWHC, LLC, which is a principal stockholder and ~~$20,118 for convertible notes payable,~~ related ~~parties and convertible notes payable, respectively.~~party of the Company. An additional affiliate of FWHC, LLC provided an additional $7,000 as part of the October 2021 Note Purchase Agreement. Management is currently working with the noteholders on the extension of the maturity of the outstanding notes.
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Equity

~~On September 11, 2020, the right to participate in the registered rights offering (Registration No. 333-239629) of~~In January 2022, the Company ~~expired. Pursuant~~offered certain warrant holders the opportunity to receive an additional warrant to purchase the ~~rights offering, on September 24, 2020, the Company issued (i) 15,235,381 shares of its Series A preferred stock~~Company’s Common Stock at ~~a price of~~ $0.014 per share, ~~to holders~~for a period of ~~its common stock who validly exercised their subscription rights~~five (5) years from issuance for the exercise of each existing warrant originally issued in April 2020 prior to March 31, 2021. As of March 31, 2022, the ~~expiration time and (ii) 203,049,643 shares~~Company had eleven warrant holders exercise an aggregate of ~~its Series A preferred stock~~83,579,296 warrants at $0.014 per share resulting in cash proceeds of $1,170,110 to the standby purchasers as part of the standby commitment. The rights offering, including the standby component, resulted in gross proceeds to the Company of $3,055,985. While the rights offering expired on September 11, 2020, it was not consummated until September 24, 2020 while logistical closing conditions including the calculation and clearance of funds were being processed.Company.

~~On September 24, 2020,~~The Company filed a Registration Statement on Form S-1 registering the ~~Company~~resale of the shares of common stock issuable upon exercise of the warrants issued ~~an aggregate of 323,844,416 Preferred A shares to holders of outstanding promissory notes~~ in the ~~aggregate principal amount, accrued interest,~~April 2020 financing. The registration statement was declared effective on February 14, 2022.
Cash activity for the three months ended March 31, 2022 and conversion of certain warrants totaling $4,483,617. The notes were converted pursuant to mandatory conversion triggered by the completion of the rights offering. Such shares were issued under an exemption from registration in reliance on Section 3(a)(9) of the Securities Act. The original notes were issued in reliance on Section 4(a)(2) of the Securities Act. As a result of their participation in the backstop portion of the rights offering and the conversion of their promissory notes, FWHC Holdings, LLC became beneficial owners of approximately 61% of the Company’s outstanding common stock. This percentage includes that shares owned by FWHC Bridge, LLC and FWHC Bridge Friends, LLC who have indicated that they are part of a group with FWHC Holdings, LLC.December 31, 2021 is summarized as follows:

Working Capital ~~Deficit~~Surplus/ (Deficit)

~~Working capital as of June 30, 2021 and December 31, 2020 is summarized as follows:~~
As Of As Of
June 30, 2021 December 31, 2020 March 31, 2022 December 31, 2021
Current Assets $ 1,697,341 $ 1,757,202 $ 578,017 $ 197,456
Current Liabilities 5,522,974 2,892,686 4,796,457 4,920,880
Working Capital Deficit $ (3,825,633 ) $ (1,135,484 ) $ (4,218,440 ) $ (4,723,424 )

Cash Flows

Cash activity for the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ is summarized as follows:

Six Months Ended June 30, Three months Ended March 31,
2021 2020 2022 2021
Cash used in operating activities $ (2,740,629 ) $ (4,335,204 ) $ (884,259 ) $ (1,306,813 )
Cash used in investing activities (7,832 ) — — (1,522 )
Cash provided by financing activities 2,624,338 4,740,840 1,130,371 —
Net (decrease)/ increase in cash $ (124,123 ) $ 405,816
Net increase (decrease) in cash $ 246,112 $ (1,308,335 )

As of ~~June 30, 2021,~~March 31, 2022, the Company had approximately ~~$1,517,000~~$341,000 of cash on hand.

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Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements as defined in Regulation S-K Item 303(a)(4) during the periods presented, investments in special-purpose entities or undisclosed borrowings or debt. Additionally, we are not a party to any derivative contracts or synthetic leases.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable to smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to our management, including our principal executive officer and principal accounting officer, as appropriate to allow timely decisions regarding disclosure.

The Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of ~~June 30, 2021.~~March 31, 2022. In designing and evaluating the Company’s disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives, and the Company necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.

Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of ~~June 30, 2021,~~March 31, 2022, the Company’s disclosure controls and procedures were not as effective as desired because of the material weakness in ~~its~~our internal control over financial reporting as discussed ~~below.~~below, and as a result, the Company engaged consultants, implemented a number of new entity and process level controls and installed a new accounting software system to help mitigate this material weakness.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of ~~the Company’s~~our annual or interim financial statements will not be prevented or detected on a timely basis. In ~~its~~our assessment of the effectiveness of internal control over financial reporting as of ~~June 30, 2021, the Company~~March 31, 2022, we determined that internal control deficiencies relating to a lack of segregation of duties still exist. Management believes these deficiencies mainly relate to the Company employing a limited number of accounting and finance personnel. The aggregation of these deficiencies is considered to be a material weakness in internal control over financial reporting.

In light of the conclusion that ~~the Company’s internal~~our disclosure controls and procedures were ineffective as of ~~June 30, 2021, it has~~March 31, 2022, we have applied additional procedures and processes as necessary to ensure the reliability of our financial reporting in regard to this quarterly report. Accordingly, the Company believes, based on its knowledge, that: (i) this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading with respect to the period covered by this report; and (ii) the financial statements, and other financial information included in this quarterly report, fairly present in all material respects our financial condition, results of operations and cash flows as of and for the periods presented in this ~~annual~~quarterly report.

28
Changes in Internal Control Over Financial Reporting

During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, the Company has adopted and began to implement a ~~written~~ remediation plan which ~~includes continuing to use external consultants for technical accounting matters, incremental formal education for the accounting and finance group,~~included implementing ~~a number of new entity and process level controls and installing~~ a new accounting software ~~system. Management~~system that management believes ~~these actions~~ will help remediate internal control deficiencies related to the Company’s financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act).

21
PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

The Company is involved in a lawsuit with Sinclair Broadcast Group, Inc. ~~(Sinclair)~~(“Sinclair”) which was filed on ~~March 25, 2021~~September 8, 2020, in the Circuit Court for the Thirteenth Judicial Circuit in and for Hillsborough County, Florida. Sinclair has filed suit alleging breach of contract for advertising services in the amount of approximately $75,000 plus interest and costs. The Company has retained legal counsel for its defense against the suit. The amount is recorded in accounts payable as of March 31, 2022.
The Company is involved in a lawsuit with ITN Networks, LLC (“ITN) which was filed on July 22, 2021, in the Circuit Court for the Thirteenth Judicial Circuit in and for Hillsborough County, Florida. ITN has filed suit alleging breach of contract for advertising services in the amount of approximately $75,000 plus interest and costs. The Company has retained legal counsel for its defense against the suit. The amount is recorded in accounts payable as of March 31, 2022.

ITEM 1A. RISK FACTORS.

We are a smaller reporting company as defined by 17 CFR 229.10(f)(1). Thus, we are not required to provide information under this item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

Not applicable.

ITEM 6. EXHIBITS.

The exhibits listed in the accompanying Exhibit Index are filed, furnished or incorporated by reference as part of this Quarterly Report on Form 10-Q.

2922

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: ~~August 13, 2021~~May 4, 2022

H-CYTE, INC

By: /s/ ~~Robert S. Greif~~Michael Yurkowsky
~~Robert S. Greif~~Michael Yurkowsky

Chief Executive Officer
(Principal Executive Officer)

By: /s/ Jeremy Daniel
Jeremy Daniel

Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)

3023

EXHIBIT INDEX

31.1 Section 302 Certification of Principal Executive Officer*
31.2 Section 302 Certification of Principal Financial Officer*
32.1 Section 906 Certification of Principal Executive Officer and Principal Financial Officer***
101.INS Inline XBRL Instance Document ~~– the instance document does not appear in the Interactive Data File because its XBRL tags are imbedded within the Inline XBRL document~~**
101.SCH Inline XBRL Taxonomy Extension Schema Document **
101.CAL Inline XBRL Taxonomy ~~Extension~~ Calculation Linkbase Document **
101.LAB Inline XBRL Taxonomy ~~Extension~~ Labels Linkbase Document **
101.PRE Inline XBRL Taxonomy ~~Extension~~ Presentation Linkbase Document **
101.DEF Inline XBRL ~~Taxonomy Extension~~ Definition Linkbase Document **
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith.

** Pursuant to Rule 406T of Regulation S-T adopted by the SEC, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise are not subject to liability under these sections.

*** This certification is being furnished solely to accompany this Quarterly Report pursuant to 18 U.S.C. Section 1350, and it is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

3124

	2021			2020			2021			2020
	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020

Revenues	$	450,456		$	19,500		$	826,625		$	1,036,276
Cost of Sales		(216,018	)		(70,011	)		(414,668	)		(446,827	)
Gross Profit		234,438			(50,511	)		411,957			589,449

Operating Expenses
Salaries and related costs		586,119			594,447			1,247,894			1,818,157
Share based compensation		862,000			-			862,000			643
Loss on disposal of property and equipment		92,804			-			92,804			-
Other general and administrative		609,641			1,034,898			1,439,755			2,265,033
Research and development		-			200,000			-			950,000
Advertising		88,000			25,935			165,228			170,553
Depreciation and amortization		1,989			17,244			13,559			39,352
Total Operating Expenses		2,240,553			1,872,524			3,821,240			5,243,738

Operating Loss		(2,006,115	)		(1,923,035	)		(3,409,283	)		(4,654,289	)

Other Income (Expense)
Other Income		2,255			6,783			3,534			9,321
Interest expense		(54,145	)		(363,023	)		(59,930	)		(419,172	)
Change in fair value of redemption put liability		-			(18,952	)		-			174,707
Loss on derivative instrument		-			(2,306,121	)		-			(2,306,121	)
Gain on extinguishment of debt		-			1,300,088			-			1,300,088
Warrant modification expense		-			(70,851	)		-			(70,851	)
Change in fair value of derivative liability - warrants		-			(3,057,225	)		-			(2,882,247	)
Total Other Income (Expense)		(51,890	)		(4,509,301	)		(56,396	)		(4,194,275	)

Net Loss	$	(2,058,005	)	$	(6,432,336	)	$	(3,465,679	)	$	(8,848,564	)

Accrued dividends on outstanding Series B Convertible Preferred Stock		-			18,300			-			36,600
Deemed dividend on Series D Convertible Preferred Stock		-			120,329			-			278,476
Net loss attributable to common stockholders	$	(2,058,005	)	$	(6,570,965	)	$	(3,465,679	)	$	(9,163,640	)

Loss per share - Basic and Diluted	$	(0.01	)	$	(0.06	)	$	(0.03	)	$	(0.09	)

Weighted average outstanding shares - basic and diluted		138,092,414			103,430,305			135,827,192			101,634,961

	2022			2021
	Three Months Ended March 31,
	2022			2021

Revenues	$	379,560		$	376,168
Cost of Sales		(86,505	)		(198,649	)
Gross Profit		293,055			177,519

Operating Expenses
Salaries and related costs		347,219			661,775
Share based compensation		226,079			-
Other general and administrative		509,911			918,912
Total Operating Expenses		1,083,209			1,580,687

Operating Loss		(790,154	)		(1,403,168	)

Other Income (Expense)
Inducement Expense		(3,024,872	)		(5,784	)
Interest Expense		(72,352	)
Other (expense) income		(4,405	)		1,278
Total Other Expense		(3,101,629	)		(4,506	)

Net Loss	$	(3,891,783	)	$	(1,407,674	)

Net Loss attributable to common stockholders	$	(3,891,783	)	$	(1,407,674	)

Loss per share - basic and diluted	$	(0.02	)	$	(0.01	)

Weighted average outstanding shares - basic and diluted		169,154,701			128,283,919

1	Shares		Amount		Shares		Amount		Shares		Amount		Capital			Deficit			Interest			Deficit
Three months ended	Preferred Series A Stock				Preferred Series B Stock				Common Stock				Additional Paid-in			Accumulated			Non-controlling			Total Stockholders’
June 30, 2020 and 2021	Shares		Amount		Shares		Amount		Shares		Amount		Capital			Deficit			Interest			Deficit
Balances - March 31, 2020		-	$	-		6,100	$	6		99,878,079	$	99,878	$	28,117,978		$	(39,815,966	)	$	(370,132	)	$	(11,968,236	)
Accrued dividends on Series B Convertible Preferred Stock		-		-		-		-		-		-		(18,300	)		-			-			(18,300	)
Deemed dividend on Series D Convertible Preferred Stock		-		-		-		-		-		-		(120,329	)		-			-			(120,329	)
Adjustment of exercise price on certain warrants		-		-		-		-		-		-		(438,913	)		-			-			(438,913	)
Issuance of warrants to extend short-term debt		-		-		-		-		-		-		6,594			-			-			6,594
Conversion of Short-term notes, related parties		-		-		-		-		4,368,278		4,368		214,046			-			-			218,414
Conversion of Series A Preferred Stock to common stock
Deemed dividend on Series D Preferred Stock at issuance
Issuance of warrants in connection with Series D Convertible Preferred Stock
Issuance of common stock in exchange for consulting fees incurred
Issuance of warrants pursuant to extension of maturity date on convertible debt
Stock based compensation
Net loss		-		-		-		-		-		-		-			(6,432,336	)		-			(6,432,336	)
Balances – June 30, 2020		-	$	-		6,100	$	6		104,246,357	$	104,246	$	27,761,076		$	(46,248,302	)	$	(370,132	)	$	(18,753,106	)


	Preferred Series A Stock						Common Stock				Additional Paid-in		Accumulated			Stockholders’
	Shares			Amount			Shares		Amount		Capital		Deficit			Deficit
Balances - January 1, 2021		538,109,409		$	538,109			127,159,464	$	127,159	$	42,515,999	$	(44,229,106	)	$	(1,047,839	)
Conversion of Series A Preferred Stock to Common Stock		(9,679,834	)		(9,680	)		9,679,834		9,680		-		-			-
Inducement expense
Conversion of warrants to Common Stock
Conversion of warrants to Common Stock, shares
Share based compensation
Net Loss		-			-			-		-		-		(1,407,674	)		(1,407,674	)
Balances - March 31, 2021		528,429,575		$	528,429			136,839,298	$	136,839	$	42,515,999	$	(45,636,780	)	$	(2,455,513	)

Six months ended	Preferred Series A Stock				Preferred Series B Stock				Common Stock				Additional Paid-in			Accumulated			Non-controlling			Total Stockholders’
June 30, 2020 and 2021	Shares		Amount		Shares		Amount		Shares		Amount		Capital			Deficit			Interest			Deficit
Balances - December 31, 2019		-	$	-		6,100	$	6		99,768,704	$	99,769	$	28,172,146		$	(37,362,531	)	$	(370,132	)	$	(9,460,742	)
Deemed dividend on Series D Convertible Preferred Stock at issuance		-		-		-		-		-		-		-			(37,207	)		-			(37,207	)
Deemed dividend on Series D Convertible Preferred Stock		-		-		-		-		-		-		(241,269	)		-			-			(241,269	)
Issuance of warrants in connection with Series D Convertible Preferred Stock		-		-		-		-		-		-		31,902			-			-			31,902
Issuance of common stock in exchange for consulting fees incurred		-		-		-		-		109,375	$	109		34,891			-			-			35,000
Issuance of warrants pursuant to extension of maturity date on short-term notes, related party		-		-		-		-		-		-		17,636			-			-			17,636
Share based compensation		-		-		-		-		-		-		643			-			-			643
Accrued dividends on Series B Convertible Preferred Stock		-		-		-		-		-		-		(36,600	)		-			-			(36,600	)
Adjustment of exercise price on certain warrants		-		-		-		-		-		-		(438,913	)		-			-			(438,913	)
Issuance of warrants to extend short-term debt		-		-		-		-		-		-		6,594			-			-			6,594
Conversion of short-term notes, related parties		-		-		-		-		4,368,278		4,368		214,046			-			-			218,414
Net loss		-		-		-		-		-		-		-			(8,848,564	)		-			(8,848,564	)
Balances – June 30, 2020		-	$	-		6,100	$	6		104,246,357	$	104,246	$	27,761,076		$	(46,248,302	)	$	(370,132	)	$	(18,753,106	)

	June 30, 2021			December 31, 2020

Operating leases right-of-use assets	$	183,685		$	278,552
Lease liability, current portion		90,276			139,189
Lease liability, net of current portion		111,096			157,050
Total operating lease liabilities	$	201,372		$	296,239
Weighted average remaining lease term		2.17 years			2.32 years
Weighted average discount rate		10.73	%		10.31	%

	Operating leases

Remainder of 2021	$	50,752
2022		102,891
2023		69,333
Total lease payments		222,976
Less: Interest		(21,604	)
Total lease liability	$	201,372

	Useful Life	June 30, 2021			December 31, 2020
Furniture and fixtures	5-7 years	$	96,185		$	231,222
Computers and software	3-7 years		213,660			246,323
Leasehold improvements	15 years		40,130			155,583
			349,975			633,128
Less: accumulated depreciation			(309,331	)		(493,953	)

Total		$	40,644		$	139,175

2021 Grants
Option value	$	0.054		to	$	0.056
Risk Free Rate		0.90	%	to		1.37	%
Expected Dividend- yield		-		to		-
Expected Volatility		173.99	%	to		176.04	%
Expected term (years)		5		to		7

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Term (Years)
Outstanding at December 31, 2019		425,000		$	1.38		7.71
Granted		—			0		—
Expired/Cancelled		(15,000	)		1.35		—
Outstanding and exercisable at June 30, 2020		410,000		$	1.39		7.23

Outstanding at December 31, 2020		410,000		$	1.39		6.72
Granted		54,750,000			0.07		9.75
Expired/Cancelled		(25,000	)		2.16		—
Outstanding at June 30, 2021		55,135,000		$	0.08		9.73

Exercisable at June 30, 2021		5,718,333		$	0.16		9.52

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Term (Years)
Outstanding at December 31, 2020		410,000	$	1.39	6.72
Granted		-		-	-
Expired/Cancelled		-		-	-
Outstanding and exercisable at March 31, 2021		410,000	$	1.39	6.48

Outstanding at December 31, 2021		29,635,000		0.09	9.20
Granted		-		-	-
Outstanding at March 31, 2022		29,635,000	$	0.09	8.96

Exercisable at March 31, 2022		18,218,333	$	0.10	8.93

	Shares			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2020		-		$	-
Granted		54,750,000			0.06
Vested		(5,333,333	)		0.05
Forfeited		-			-
Non-vested at June 30, 2021		49,416,667		$	0.06

	Shares			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2021		14,250,000		$	0.06
Granted		-			-
Vested		(2,833,333	)		0.05
Forfeited		-			-
Non-vested at March 31, 2022		11,416,667		$	0.07

	For the Six Months Ended June 30,
	2021		2020
Options to purchase common stock (in the money)		4,977,273		410,000
Warrants to purchase common stock (in the money)		386,908,082		404,821,082
Series A Preferred Stock convertible to common stock		520,305,884		-
Series B & D Preferred Stock convertible to common stock		-		38,308,600
Total		912,191,239		443,539,682

	2022		2021
	For the Three Months Ended March 31,
	2022		2021
Warrants to purchase common stock (in the money)		384,693,796		389,486,207
Series A Preferred Stock convertible to common stock		498,229,804		528,429,575
Total		882,923,600		917,915,782

Derivative Liability - Warrants

Balance at December 31, 2019	$	315,855
Series D Warrant reclass from equity to liability		509,764
Warrants issued with modification of Horne Note		198,994
Warrants issued with April 17, 2020 financing		6,148,816
Fair value adjustments		2,882,247
Balance at June 30, 2020	$	10,055,676

Redemption Put Liability

Balance at December 31, 2019	$	267,399
Issuance of Series D Convertible Preferred Stock		5,306
Fair value adjustments		(174,707	)
Balance at June 30, 2020	$	97,998

	June 30, 2020

Fair value of underlying stock	$	0.05
Exercise price	$	0.014
Risk free rate		0.14% - 0.66	%
Expected term (in years)		0.17- 10.27
Stock price volatility		109% - 312	%
Expected dividend yield		0

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life
Outstanding and exercisable at December 31, 2019		44,806,076		$	0.78		4.59
Issued		5,178,720			0.015		9.79
Outstanding and exercisable at June 30, 2020		49,984,796		$	0.104		9.16
Issued, not yet exercisable⁽¹⁾		354,836,286			0.014		9.79
Total outstanding at June 30, 2020		404,821,082			0.104		9.16

Outstanding and exercisable at December 31, 2020		413,423,972		$	0.015		10.30
Expired		(3,366,520	)	$	0.32		—
Issued		0			0		—
Total outstanding and exercisable at June 30, 2021		410,057,452		$	0.63		8.63

Event Description	Date	Number of Warrants		H-CYTE Stock Price		Exercise Price of Warrant		Grant Date Fair Value		Life of Warrant		Risk Free Rate of Return (%)		Annualized Volatility Rate (%)
Short-term note, related party	1/13/2020		268,571	$	0.12	$	0.75	$	0.07		3 years		1.60		145.76
Private placement of Series D Convertible Preferred Stock	1/17/2020		244,996	$	0.15	$	0.75	$	0.13		10 years		1.84		144.30
Granted for bridge financing	4/8/2020		296,875	$	0.05	$	0.40	$	0.04		3 years		0.34		131.82
Short-term note, related party conversion	4/17/2020		4,368,278	$	0.05	$	0.014	$	0.05		10 years		0.65		100.64
Granted for bridge financing	9/11/2020		364,439,176	$	0.05	$	0.014	$	0.017		10 years		0.65		96.97

Event Description	Date		Number of Warrants		H-CYTE Stock Price		Exercise Price of Warrant		Grant Date Fair Value		Life of Warrant		Risk Free Rate of Return (%)		Annualized Volatility Rate (%)
Granted for inducement agreement		1/19/2022		3,732,289	$	0.06	$	0.014	$	0.062		5 years		1.62		187.79
Granted for inducement agreement		1/20/2022		372,289	$	0.07	$	0.014	$	0.064		5 years		1.62		187.85
Granted for inducement agreement		1/20/2022		187,201	$	0.07	$	0.014	$	0.064		5 years		1.62		187.85
Granted for inducement agreement		1/24/2022		374,403	$	0.05	$	0.014	$	0.047		5 years		1.53		188.01
Granted for inducement agreement		1/25/2022		3,744,031	$	0.05	$	0.014	$	0.048		5 years		1.56		188.00
Granted for inducement agreement		2/02/2022		3,740,509	$	0.05	$	0.014	$	0.044		5 years		1.60		188.25
Granted for inducement agreement		2/04/2022		6,934,785	$	0.04	$	0.014	$	0.043		5 years		1.78		188.33
Granted for inducement agreement		2/04/2022		13,869,643	$	0.04	$	0.014	$	0.043		5 years		1.78		188.33
Granted for services provided		2/09/2022		1,000,000	$	0.03	$	0.014	$	0.031		5 years		1.82		188.69
Granted for inducement agreement		2/22/2022		41,608,884	$	0.03	$	0.014	$	0.032		5 years		1.85		188.59
Granted for inducement agreement		2/22/2022		693,477	$	0.03	$	0.014	$	0.032		5 years		1.85		188.59
Granted for inducement agreement		3/21/2022		8,321,785	$	0.03	$	0.014	$	0.027		5 years		2.33		194.01

	As Of						As Of
	June 30, 2021			December 31, 2020			March 31, 2022			December 31, 2021
Current Assets	$	1,697,341		$	1,757,202		$	578,017		$	197,456
Current Liabilities		5,522,974			2,892,686			4,796,457			4,920,880
Working Capital Deficit	$	(3,825,633	)	$	(1,135,484	)	$	(4,218,440	)	$	(4,723,424	)

	Six Months Ended June 30,						Three months Ended March 31,
	2021			2020			2022			2021
Cash used in operating activities	$	(2,740,629	)	$	(4,335,204	)	$	(884,259	)	$	(1,306,813	)
Cash used in investing activities		(7,832	)		—			—			(1,522	)
Cash provided by financing activities		2,624,338			4,740,840			1,130,371			—
Net (decrease)/ increase in cash	$	(124,123	)	$	405,816
Net increase (decrease) in cash							$	246,112		$	(1,308,335	)

	H-CYTE, INC

	By:	/s/ ~~Robert S. Greif~~Michael Yurkowsky
		~~Robert S. Greif~~Michael Yurkowsky
		Chief Executive Officer (Principal Executive Officer)

	By:	/s/ Jeremy Daniel
		Jeremy Daniel
		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

31.1		Section 302 Certification of Principal Executive Officer*
31.2		Section 302 Certification of Principal Financial Officer*
32.1		Section 906 Certification of Principal Executive Officer and Principal Financial Officer***
101.INS		Inline XBRL Instance Document ~~– the instance document does not appear in the Interactive Data File because its XBRL tags are imbedded within the Inline XBRL document~~**
101.SCH		Inline XBRL Taxonomy Extension Schema Document **
101.CAL		Inline XBRL Taxonomy ~~Extension~~ Calculation Linkbase Document **
101.LAB		Inline XBRL Taxonomy ~~Extension~~ Labels Linkbase Document **
101.PRE		Inline XBRL Taxonomy ~~Extension~~ Presentation Linkbase Document **
101.DEF		Inline XBRL ~~Taxonomy Extension~~ Definition Linkbase Document **
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

*	Filed herewith.

**	Pursuant to Rule 406T of Regulation S-T adopted by the SEC, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise are not subject to liability under these sections.

***	This certification is being furnished solely to accompany this Quarterly Report pursuant to 18 U.S.C. Section 1350, and it is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.