| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis
of Presentation The
accompanying unaudited condensed consolidated financial information as of and for the three and six months ended June 30, 2022 and 2021
has been prepared in accordance with GAAP for interim financial information and with the instructions to Quarterly Report on Form 10-Q
and Article 10 of Regulation S-X. In the opinion of management, such financial information includes all adjustments (consisting only
of normal recurring adjustments) considered necessary for a fair presentation of the Company’s financial position at such dates
and the operating results and cash flows for such periods. Operating results for the three and six months ended June 30, 2022 are not
necessarily indicative of the results that may be expected for the entire year or for any other subsequent interim period. Certain
information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant
to the rules of the U.S. Securities and Exchange Commission (the “SEC”). These unaudited condensed consolidated financial
statements and related notes should be read in conjunction with the Company’s audited consolidated financial statements for the
year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 30, 2022. Principles
of Consolidation The
unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All intercompany
accounts and transactions have been eliminated upon consolidation. Use
of Estimates The
preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities, equity-based transactions, revenue and expenses and disclosure
of contingent liabilities at the date of the unaudited condensed consolidated financial statements. The Company bases its estimates and
assumptions on historical experience, known or expected trends and various other assumptions that it believes to be reasonable. As future
events and their effects cannot be determined with precision, actual results could differ from these estimates which may cause the Company’s
future results to be affected. The
Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation
of the accompanying unaudited condensed consolidated financial statements. Significant estimates include the carrying value of intangible
assets, deferred tax asset and valuation allowance, and assumptions used in the Black-Scholes option pricing model, such as expected
volatility, risk-free interest rate, and expected divided rate. Revenue The
Company derives all of its revenue pursuant to a license agreement between the Company and a stem cell treatment company (“SCTC”)
entered into in January 2012 and amended in November 2015. Pursuant to the license agreement, the SCTC granted to the Company a license
to use certain intellectual property related to, among other things, stem cell disc procedures, and the Company has granted to the SCTC
a sublicense to use, and the right to sublicense to third parties the right to use, in certain locations in the United States and the
Cayman Islands, certain of the licensed intellectual property. In consideration of the sublicenses, the SCTC has agreed to pay the Company
royalties on a per disc procedure basis. The
Company’s contracted transaction price is allocated to each distinct performance obligation and recognized as revenue when, or
as, the performance obligation is satisfied. The Company’s contracts have a single performance obligation with a fixed determinable
contract value. The Company’s performance obligation is satisfied upon the transfer of risk of loss to the customer. All sales
have fixed pricing and there are currently no variable components included in the Company’s revenue. The timing of the Company’s
revenue recognition may differ from the timing of receiving royalty payments. A receivable is recorded when revenue is recognized prior
to receipt of a royalty payment and the Company has an unconditional right to the royalty payment. Alternatively, when a royalty payment
precedes the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied.
During the three months ended June 30, 2022 and 2021, the Company recognized $ 71,100 15,000 87,100 33,000 Contract
Modifications There
were no contract modifications during the three and six months ended June 30, 2022. Contract modifications are not routine in the performance
of the Company’s contracts. Cash The
Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.
Cash and cash equivalents held at financial institutions may at times exceed insured amounts. The
Company believes it mitigates such risk by investing in or through, as well as maintaining cash balances with, major financial institutions.
There were no Accounts
Receivable Accounts
receivable are reported at their outstanding unpaid principal balances, net of allowances for doubtful accounts. The Company periodically
assesses its accounts receivable and other receivables for collectability on a specific identification basis. The Company provides for
allowances for doubtful accounts based on management’s estimate of uncollectible amounts considering age, collection history, and
any other factors considered appropriate. Payments are generally due within 30 days of invoice. The Company writes off accounts receivable
against the allowance for doubtful accounts when a balance is determined to be uncollectible. The Company had no balances related to
allowances for doubtful accounts as of June 30, 2022 and December 31, 2021. Property
and Equipment Property
and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the related
assets, generally 3 15 years 3 5 Leasehold
improvements are amortized over the lesser of (i) the useful life of the asset or (ii) the remaining lease term. Maintenance and repairs
are expensed as incurred. The Company capitalizes costs attributable to the betterment of property and equipment when such betterment
enhances the functionality of the asset or extends the useful life of the asset. Should an asset be disposed of before the end of its
useful life, the cost and accumulated depreciation at that date are removed from the consolidated balance sheets, with the resulting
gain or loss, if any, reflected in operations in that period. Impairment
of Long-Lived Assets The
Company reviews long-lived assets, including definite-lived intangible assets, for impairment whenever events or circumstances indicate
that the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the carrying
amount to the forecasted undiscounted net cash flows of the operation to which the assets relate. If the operation is determined to be
unable to recover the carrying amount of its assets, then these assets are written down to fair value first, followed by other long-lived
assets of the operation. Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the
assets. There are no Intangible
Assets The
Company records its intangible assets at cost, for those intangible assets not acquired in a business combination, in accordance with
Accounting Standards Codification (“ASC”) 350, Intangibles – Goodwill and Other Advertising
and Marketing Costs The
Company expenses advertising and marketing costs as they are incurred. Advertising and marketing expenses were $ 245 6,220 714 8,820 Fair
Value Measurements As
defined in ASC 820, Fair Value Measurements and Disclosures
Level
1: Quoted
prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in
which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing
basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed
equities.
Level
2: Pricing
inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as
of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies.
These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities,
time value, volatility factors and current market and contractual prices for the underlying instruments, as well as other relevant
economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument,
can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.
Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options
and collars.
Level
3: Pricing
inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally-developed
methodologies that result in management’s best estimate of fair value. Fair
Value of Financial Instruments The
carrying value of cash, accounts receivable, accounts payable and accrued expenses, and other current liabilities approximate their fair
values based on the short duration of these instruments. Net
Loss per Common Share Net
loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.
All vested outstanding options and warrants are considered potential common stock. The dilutive effect, if any, of stock options, warrants,
and restricted stock units (“RSUs”) are calculated using the treasury stock method. All outstanding convertible notes are
considered common stock at the beginning of the period or at the time of issuance, if later, pursuant to the if-converted method. Since
the effect of common stock equivalents is anti-dilutive with respect to losses, options, warrants, RSUs and convertible notes have been
excluded from the Company’s computation of net loss per common share for the three and six months ended June 30, 2022 and 2021. The
following table summarizes the securities that were excluded from the diluted loss per share calculation: SCHEDULE OF WEIGHTED AVERAGE DILUTIVE COMMON SHARES
Three Months Ended
June 30,
2022 2021
Options 864,609 588,047
Warrants 4,739,733 3,626,847
Unvested RSUs 214,303 293,479
Convertible notes – common stock - 198,949 (1)
Total 5,818,645 4,707,322
Six Months Ended
June 30,
2022 2021
Options 864,609 588,047
Warrants 4,739,733 3,626,847
Unvested RSUs 214,303 293,479
Convertible notes – common stock - 198,949 (1)
Total 5,818,645 4,707,322
(1) As
of June 30, 2021, all of the convertible notes had variable conversion prices and the shares issuable were estimated based on the
market conditions. Pursuant to the note agreements, there were 12,876,003 Stock-based
Compensation The
Company applies the provisions of ASC 718, Compensation—Stock Compensation For
stock options issued to employees and members of the board of directors for their services, the Company estimates the grant date fair
value of each option using the Black-Scholes option pricing model. The use of the Black-Scholes option pricing model requires management
to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the
expected life of the option, risk-free interest rates and expected dividend yields of the common stock. For awards subject to service-based
vesting conditions, including those with a graded vesting schedule, the Company recognizes stock-based compensation expense equal to
the grant date fair value of stock options on a straight-line basis over the requisite service period, which is generally the vesting
term. Forfeitures are recorded as they are incurred as opposed to being estimated at the time of grant and revised. Pursuant
to Accounting Standards Update (“ASU”) 2018-07 Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee
Share-Based Payment Accounting, the Company accounts for stock options issued to non-employees for their services in accordance with
ASC 718. The Company uses valuation methods and assumptions to value the stock options that are consistent with the process for valuing
employee stock options noted above. Grant
income Funding
received under research grants for reimbursement of research and development expenses is recorded as grant income in the other (income)
expense section of the condensed consolidated statements of operations. Income
Taxes The
Company accounts for income taxes pursuant to the asset and liability method which requires the recognition of deferred income tax assets
and liabilities related to the expected future tax consequences arising from temporary differences between the carrying amounts and tax
bases of assets and liabilities based on enacted statutory tax rates applicable to the periods in which the temporary differences are
expected to reverse. Any effects of changes in income tax rates or laws are included in income tax expense in the period of enactment. The
Company records valuation allowances against deferred tax assets when it is more likely than not that all or a portion of a deferred
tax asset will not be realized. The Company routinely evaluates the realizability of deferred tax assets by assessing the likelihood
that deferred tax assets will be recovered based on all available positive and negative evidence, including scheduled reversals of deferred
tax liabilities, estimates of future taxable income, tax planning strategies and results of operations. Estimating future taxable income
is inherently uncertain and requires judgment. In projecting future taxable income, historical results are considered along with certain
assumptions related to future earnings. At June 30, 2022 and December 31, 2021, the Company had a full valuation allowance applied against
its deferred tax assets. From
time to time the Company may recognize an income tax benefit, in its consolidated statements of operations, related to uncertain tax
positions taken. For uncertain tax positions that are “more likely than not” to sustain an income tax audit, the Company
may record an allowance against certain deferred tax assets related to these positions. The Company’s practice is to recognize
interest and penalties, if any, related to uncertain tax positions in income tax expense in the unaudited condensed consolidated statements
of operations. Leases A
lease is defined as an agreement that conveys the right to control the use of identified property, plant or equipment (right of use asset
or “ROU asset”) for a period of time in exchange for consideration. The Company accounts for it leases in accordance with
ASC 842, Leases, which requires that an ROU asset identified in a lease to be recorded as a noncurrent asset with a related liability.
The Company does not record ROU assets for those agreements of a twelve-month duration or less. The Company recognized a ROU asset and
corresponding lease liability on its balance sheets related to its office lease agreement. See Note 8 - Leases for further discussion,
including the impact on the Company’s financial statements and related disclosures. ROU
assets include any initial direct costs and prepaid lease payments and exclude any lease incentives. Lease expense for minimum lease
payments is recognized on a straight-line basis over the lease term. The lease terms may include options to extend or terminate the lease
if it is reasonably certain that the Company will exercise that option. Research
and Development Expenses Research and development
expenses are expensed as incurred and recorded as a component of operating expenses in the Company’s Condensed Consolidated Statements
of Operations. |
