Note 8 - Subsequent Events

Notes Payable

Subsequent to March 31, 2017, the Company issued notes payable with an aggregate principal amount of $255,000 for aggregate cash consideration of $225,000 which bears interest at rates ranging from 0% to 10% per annum payable at maturity. The $30,000 difference between the principal amount of the promissory notes and the cash received was recorded as an original issue discount and will be amortized to interest expense over the term of the note. In connection with the issuance of these promissory notes, the Company issued five-year, immediately vested warrants to purchase an aggregate of 20,000 shares of common stock at an exercise price of $4.00 per share.

Subsequent to March 31, 2017, the Company issued a convertible note in the principal amount of $100,000 which bears interest at a rate of 10% per annum. The convertible note is payable as follows: (i) $25,000 of principal and the respective accrued interest on such principal is payable six months from the issuance date (the “First Maturity Date”), (ii) $25,000 of principal and the respective accrued interest on such principal is payable two weeks following the First Maturity Date, (iii) $25,000 of principal and the respective accrued interest on such principal is payable four weeks following the First Maturity Date, and (iv) $25,000 of principal and the respective accrued interest on such principal is payable six weeks following the First Maturity Date. Each payment of principal and the respective accrued interest is convertible into shares of the Company’s common stock at the election of the Company during the period beginning five days prior to maturity and ending on the day immediately prior to maturity at a conversion price equal to 60% of the fair market value of the Company’s stock; however, in no event shall the conversion price be less than $1.00. Should the Company elect to convert any of the note principal and respective accrued interest, the holder will have the right to accelerate the conversion of the remaining outstanding principal and accrued interest of the note at the same conversion price. The Company will recognize the beneficial conversion feature of the note as debt discount at the time the contingently adjustable conversion ratio is resolved. In connection with the issuance of this promissory note, the Company issued the lender 8,000 shares of common stock.

Subsequent to March 31, 2017, the Company elected to convert certain convertible notes with an aggregate principal balance of $68,750 and accrued interest of $3,425 into an aggregate of 27,999 shares of common stock at conversion prices ranging from $2.56 to $2.70 per share.

Subsequent to March 31, 2017, the Company and a certain lender agreed to exchange a certain note payable with a principal balance of $50,000 and accrued interest of $2,712 into 29,280 shares of common stock at an exchange price of $1.80 per share.

BIORESTORATIVE THERAPIES, INC. & SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 8 - Subsequent Events – Continued

Notes Payable – Continued

Subsequent to March 31, 2017, the Company and certain lenders agreed to extend the maturity date of notes payable with an aggregate principal balance of $478,000 from maturity dates ranging between February 2017 to April 2017 to new maturity dates ranging from June 2017 to October 2017. In connection with one of the extensions, the Company issued the lender a five-year, immediately vested warrant to purchase 15,000 shares of common stock at an exercise price of $5.00 per share. Additionally, in connection with one of the extensions, the Company incurred an extension fee in the amount of $8,500 which was added to the principal balance of the note. In consideration of the extension and the cancellation of $21,250 of the principal amount of the note payable, the Company issued to the lender 7,000 shares of its common stock.

Common Stock and Warrant Offerings

Subsequent to March 31, 2017, the Company issued an aggregate of 18,000 shares of common stock and five-year immediately vested warrants to purchase an aggregate of 18,000 shares of common stock at an exercise price of $4.00 per share to investors for aggregate gross proceeds of $54,000

Compensation

Subsequent to March 31, 2017, the Company extended their current agreement with a consultant from January 1, 2017 to June 30, 2017. In connection with this extension, the Company issued five-year immediately vested warrants to purchase 20,000 shares of common stock at an exercise price of $4.50 per share.

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the results of operations and financial condition of BioRestorative Therapies, Inc. (together with its subsidiaries, “BRT”) for the three months ended March 31, 2017 and 2016 should be read in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us,” “we,” “our,” and similar terms refer to BRT. This Quarterly Report contains forward-looking statements as that term is defined in the federal securities laws. The events described in forward-looking statements contained in this Quarterly Report may not occur. Generally these statements relate to business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions to be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results. The words “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “plan,” “intend,” “estimate,” and “continue,” and their opposites and similar expressions, are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. Factors that may affect our results include, but are not limited to, the risks and uncertainties discussed in Item 7 (“Management’s Discussion and Analysis of Financial Condition and Results of Operations – Factors That May Affect Results and Financial Condition”) of our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission (the “SEC”) on March 22, 2017.

Any one or more of these uncertainties, risks and other influences could materially affect our results of operations and whether forward-looking statements made by us ultimately prove to be accurate. Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise.

This Quarterly Report on Form 10-Q includes references to our federally registered trademarks, BioRestorative Therapies, brtxDISC, ThermoStem and Stem Pearls. This Quarterly Report on Form 10-Q may also include references to trademarks, trade names and service marks that are the property of other organizations. Solely for convenience, trademarks and trade names referred to in this Quarterly Report on Form 10-Q appear without the ®, SM or ™ symbols, and copyrighted content appears without the use of the symbol ©, but the absence of use of these symbols does not reflect upon the validity or enforceability of the intellectual property owned by us or third parties.

Overview

We develop therapeutic products and medical therapies using cell and tissue protocols, primarily involving adult (non-embryonic) stem cells. We are currently pursuing our Disc/Spine Program with our initial therapeutic product being called BRTX-100 . We have obtained a license to use technology for adult stem cell treatment of disc and spine conditions, including protruding and bulging lumbar discs. The technology is an advanced stem cell injection procedure that may offer relief from lower back pain, buttock and leg pain, and numbness and tingling in the legs and feet. We are also developing our ThermoStem Program. This pre-clinical program involves the use of brown fat in connection with the cell-based treatment of type 2 diabetes and obesity as well as hypertension, other metabolic disorders and cardiac deficiencies. A United States patent related to the ThermoStem Program was issued in September 2015.

We have licensed a patented curved needle device that is a needle system designed to deliver cells and/ or other therapeutic products or materials to the spine and discs. We also offer stem cell derived cosmetic and skin care products.

Our offices are located in Melville, New York where we have established a laboratory facility in order to increase our capabilities for the further development of possible cellular-based treatments, products and protocols, stem cell-related intellectual property and translational research applications.

As of March 31, 2017, our accumulated deficit was $44,745,552, our stockholders’ deficiency was $4,721,666 and our working capital deficiency was $6,020,915. We have historically only generated a modest amount of revenue, and our losses have principally been operating expenses incurred in research and development, marketing and promotional activities in order to commercialize our products and services, plus costs associated with meeting the requirements of being a public company. We expect to continue to incur substantial costs for these activities over at least the next year.

Based upon our working capital deficiency as of March 31, 2017 and our forecast for continued operating losses, we require equity and/or debt financing to continue our operations. As of March 31, 2017, our outstanding debt of $2,159,565, together with interest at rates ranging between 0% and 15% per annum, was due on various dates through October 2017. Subsequent to March 31, 2017 and through May 12, 2017, we have received aggregate equity proceeds and debt proceeds of $54,000 and $325,000, respectively, debt and accrued interest of $140,000 and $6,137, respectively, has been converted into or exchanged for common stock, and the due date for the repayment of $465,250 of debt has been extended to dates between June 2017 and October 2017. Giving effect to the above actions, we currently have notes payable aggregating $252,500 which are past due. Based upon our working capital deficiency and outstanding debt, we expect to be able to fund our operations through mid-June 2017. We will require additional funding to repay our outstanding debt ($2,159,565 as of March 31, 2017) (assuming that no debt is converted into equity) and fund general operations. We anticipate that we will require between $8,000,000 and $10,000,000 in financing to commence and complete a Phase 2 clinical trial using BRTX-100 . We anticipate that we will require between $20,000,000 and $30,000,000 in further additional funding to complete our clinical trials using BRTX-100 (assuming the receipt of no revenues). We will also require a substantial amount of additional funding if we determine to establish a manufacturing operation with regard to our Disc/Spine Program (as opposed to utilizing a third-party manufacturer) and to implement our other programs, including our metabolic ThermoStem Program. No assurance can be given that the anticipated amounts of required funding are correct or that we will be able to accomplish our goals within the timeframes projected. In addition, no assurance can be given that we will be able to obtain any required financing on commercially reasonable terms or otherwise.

We are currently seeking several different financing alternatives to support our future operations and are currently in the process of negotiating extensions or discussing conversions to equity with respect to our outstanding indebtedness. If we are unable to obtain such additional financing on a timely basis or, notwithstanding any request we may make, our debt holders do not agree to convert their notes into equity or extend the maturity dates of their notes, we may have to curtail our development, marketing and promotional activities, which would have a material adverse effect on our business, financial condition and results of operations, and ultimately we could be forced to discontinue our operations and liquidate. See “Liquidity and Capital Resources” below.

Consolidated Results of Operations

Three Months Ended March 31, 2017 Compared with Three Months Ended March 31, 2016

The following table presents selected items in our unaudited condensed consolidated statements of operations for the three months ended March 31, 2017 and 2016, respectively:

Revenues

For the three months ended March 31, 2017, we generated $7,000 of royalty revenue in connection with our sublicense agreement. For the three months ended March 31, 2016, we generated $9,000 of royalty revenue in connection with our sublicense agreement and $125 of sales of Stem Pearls skincare products.

Cost of sales

For the three months ended March 31, 2017, cost of sales was $0 as compared to $10 for 2016. For the three months ended March 31, 2016, cost of sales consisted of the costs of the underlying Stem Pearls skincare products.

Marketing and promotion

Marketing and promotion expenses include advertising and promotion, marketing and seminars, meals, entertainment and travel expenses. For the three months ended March 31, 2017, marketing and promotion expenses increased by $6,553, or 29%, from $22,517 to $29,070 as compared to the three months ended March 31, 2016.

We expect that marketing and promotion expenses will increase in the future as we increase our marketing activities following full commercialization of our products and services.

Consulting

Consulting expenses consist of consulting fees and stock-based compensation to consultants. For the three months ended March 31, 2017, consulting expenses increased $179,328, or 63%, from $284,807 to $464,135, as compared to the three months ended March 31, 2016. The increase is primarily due to approximately $154,000 of stock-based compensation expense in connection with the repricing of granted options to consultants and directors.

Research and development

Research and development expenses include cash and non-cash compensation of (a) our Vice President of Research and Development; (b) our Scientific Advisory Board members; (c) our President, Disc/Spine Division; and (d) laboratory staff and costs related to our brown fat and disc/spine initiatives. Research and development expenses are expensed as they are incurred. For the three months ended March 31, 2017, research and development expenses decreased by $60,191, or 7%, from $866,044 to $805,853, as compared to the three months ended March 31, 2016. The decrease was primarily as a result of an approximately $236,000 decrease in costs related to a third party laboratory associated with our disc/spine initiative, partially offset by approximately $151,000 of stock-based compensation expense in connection with the repricing of options granted to our Vice President of Research and Development, our Scientific Advisory Board members, our President, Disc/Spine Division and laboratory staff.

We expect that our research and development expenses will increase with the continuation of the aforementioned initiatives.

General and administrative

General and administrative expenses consist primarily of salaries, bonuses, payroll taxes, severance costs and stock-based compensation to employees (excluding any cash or non-cash compensation of (a) our Vice President of Research and Development; (b) our President, Disc/Spine Division; and (c) our laboratory staff) as well as corporate support expenses such as legal and professional fees, investor relations and occupancy related expenses. For the three months ended March 31, 2017, general and administrative expenses increased by $294,432, or 33%, from $902,881 to $1,197,313, as compared to the three months ended March 31, 2016. The increase is primarily due to approximately $187,000 of stock-based compensation expense in connection with the repricing of granted options to employees and approximately $99,000 due to a loss on settlement of payables which is associated with the exchange of accrued director fees and consulting fees into equity securities.

We expect that our general and administrative expenses will increase as we expand our staff, develop our infrastructure and incur additional costs to support the growth of our business.

Interest expense

For the three months ended March 31, 2017, interest expense increased $54,961, or 128%, as compared to the three months ended March 31, 2016. The increase was due to an increase in interest-bearing short-term borrowings as compared to the three months ended March 31, 2016.

Amortization of debt discount

For the three months ended March 31, 2017, amortization of debt discount decreased $204,279, or 61%, as compared to the three months ended March 31, 2016. The decrease was primarily due to the timing of the recognition of expense related to the beneficial conversion features of convertible notes.

Loss on extinguishment of notes payable

For the three months ended March 31, 2017, we recorded a loss on extinguishment of notes payable of $61,340, which is associated with investors’ exchanges of debt into equity securities, as compared to a loss on extinguishment of notes payable of $11,847 for the three months ended March 31, 2016.

Warrant modification expense

During the three months ended March 31, 2017 and 2016, we recorded expense related to the modification of the exercise prices of certain outstanding warrants of $4,500 and $28,486, respectively.

Availability of Additional Funds

Based upon our working capital deficiency and stockholders’ deficiency of $6,020,915 and $4,721,666, respectively, as of March 31, 2017, we require additional equity and/or debt financing to continue our operations. These conditions raise substantial doubt about our ability to continue as a going concern within the next twelve months from the date of this filing.

As of March 31, 2017, our outstanding debt of $2,159,565, together with interest at rates ranging between 0% and 15% per annum, was due on various dates through October 2017. Subsequent to March 31, 2017 and through May 12, 2017, we have received aggregate equity proceeds and debt proceeds of $54,000 and $325,000, respectively, debt and accrued interest of $140,000 and $6,137, respectively, has been converted into or exchanged for common stock, and the due date for the repayment of $462,250 of debt has been extended to dates between June 2017 and October 2017. Giving effect to the above actions, we currently have notes payable aggregating $252,500 which are past due. As of the date of filing, our outstanding debt was as follows:

Based upon our working capital deficiency, outstanding debt and forecast for continued operating losses we expect that the cash we currently have available will fund our operations through mid-June 2017. Thereafter, we will need to raise further capital, through the sale of additional equity or debt securities, to support our future operations and to repay our debt (unless, if requested, the debt holders agree to convert their notes into equity or extend the maturity dates of their notes). Our operating needs include the planned costs to operate our business, including amounts required to fund working capital and capital expenditures. Our future capital requirements and the adequacy of our available funds will depend on many factors, including our ability to successfully commercialize our products and services, competing technological and market developments, and the need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement our product and service offerings.

We may be unable to raise sufficient additional capital when we need it or raise capital on favorable terms. Debt financing may require us to pledge certain assets and enter into covenants that could restrict certain business activities or our ability to incur further indebtedness, and may contain other terms that are not favorable to our stockholders or us. If we are unable to obtain adequate funds on reasonable terms, we may be required to significantly curtail or discontinue operations or obtain funds by entering into financing agreements on unattractive terms.

Our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate our continuation as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The financial statements do not include any adjustment that might result from the outcome of this uncertainty.

During the three months ended March 31, 2017 and 2016, our sources and uses of cash were as follows:

Net Cash Used in Operating Activities

We experienced negative cash flows from operating activities for the three months ended March 31, 2017 and 2016 in the amounts of $1,218,965 and $1,717,835, respectively. The net cash used in operating activities for the three months ended March 31, 2017 was primarily due to cash used to fund a net loss of $2,785,754, adjusted for non-cash expenses in the aggregate amount of $1,358,024, plus $208,765 of cash generated by changes in the levels of operating assets and liabilities, primarily as a result of increase in accrued interest, expenses and other liabilities. The net cash used in operating activities for the three months ended March 31, 2016 was primarily due to cash used to fund a net loss of $2,487,328, adjusted for non-cash expenses in the aggregate amount of $854,280, plus $84,787 of cash used by changes in the levels of operating assets and liabilities, primarily as a result of decrease in accounts payable, partially offset by a decrease in accounts receivables plus an increase accrued interest, expenses and other current liabilities.

Net Cash Used in Investing Activities

During the three months ended March 31, 2017, there was no net cash used in or provided by investing activities. During the three months ended March 31, 2016, net cash used in investing activities was $89,865, due to cash used for the purchase of furniture, computer equipment and medical equipment.

Net Cash Provided by Financing Activities

Net cash provided by financing activities during the three months ended March 31, 2017 and 2016 was $1,196,000 and $1,994,240, respectively. During the three months ended March 31, 2017, $111,000 of net proceeds were from debt financings and other borrowings and $1,085,000 of proceeds were from equity financings (including proceeds received in connection with the exercise of common stock purchase warrants). During the three months ended March 31, 2016, $162,970 of net proceeds were from debt financings and other borrowings and $1,831,270 of proceeds were from equity financings (including proceeds received in connection with the exercise of common stock purchase warrants).

Critical Accounting Policies and Estimates

There are no material changes from the critical accounting policies set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission on March 22, 2017. Please refer to that document for disclosures regarding the critical accounting policies related to our business.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.