BAJFF Camrova Resources Inc (CE)

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 1 – Business Organization, Nature of Operations, and Basis of Presentation

BioRestorative Therapies, Inc. (and including its subsidiaries, “BRT” or the “Company”) is a development stage enterprise whose primary activities since inception have been the development of its business plan, negotiating strategic alliances and other agreements, raising capital and the sponsorship of research and development activities. BRT develops medical procedures using cell and tissue protocols, primarily involving adult stem cells (non-embryonic) designed for patients to undergo minimally invasive cellular-based treatments. BRT’s “brtxDISC™ Program” (Disc Implanted Stem Cells) is designed to offer a non-surgical cellular therapy for the treatment and relief of bulging and herniated discs. BRT’s “ThermoStem™ Program” (Brown Fat Stem Cells) focuses on treatments for metabolic disorders, specifically targeting Type 2 Diabetes and obesity by using brown fat stem cells. BRT’s Stem Pearls brand offers plant stem cell-based cosmetic skincare products that are available for purchase online at http://www.stempearls.com .

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and disclosures required by GAAP for annual financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the condensed consolidated financial statements of the Company as of September 30, 2012, for the three and nine months ended September 30, 2012 and 2011 and for the period from December 30, 2008 (inception) to September 30, 2012. The results of operations for the three and nine months ended September 30, 2012 are not necessarily indicative of the operating results for the full year ending December 31, 2012. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related disclosures of the Company as of December 31, 2011 and for the year then ended, and for the period from December 30, 2008 (inception) to December 31, 2011, which were filed with the Securities and Exchange Commission on Form 10-K on April 16, 2012.

Note 2 – Going Concern and Management Plans

As of September 30, 2012, the Company had a working capital deficiency and a stockholders’ deficiency of $6,346,039 and $5,077,852, respectively. The Company has not generated significant revenues and incurred net losses of $12,152,489 during the period from December 30, 2008 (inception) through September 30, 2012. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

The Company's primary source of operating funds since inception has been its stockholders and note financings. The Company intends to continue to raise additional capital through private debt and equity investors. The Company is currently a development stage company and there is no assurance that these funds will be sufficient to enable the Company to fully complete its development activities or attain profitable operations.

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily purport to represent realizable or settlement values. The unaudited condensed consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.

Subsequent to September 30, 2012, the Company raised $575,000 through equity financing and has converted certain notes payable with an aggregate principal balance of $154,500 into equity. As a result, the Company expects that the cash it has available will fund its operations only until November 2012. The Company currently has notes payable aggregating $268,500 which are past their maturity dates. The Company is currently in the process of negotiating extensions or discussing conversions to equity with respect to these notes. However, there can be no assurance that the Company will be successful in extending or converting these notes. See Note 9 – Subsequent Events for additional details.

BIORESTORATIVE THERAPIES, INC. & SUBSIDIARIES

(A COMPANY IN THE DEVELOPMENT STAGE)

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 3 – Summary of Significant Accounting Policies

Principles of Consolidation

The unaudited condensed consolidated financial statements of the Company include the accounts of Stem Cell Cayman Ltd. (“Cayman”), Stem Pearls, LLC and Lipo Rejuvenation Centers, Inc. All significant intercompany transactions have been eliminated in the consolidation. On April 16, 2012, Lipo Rejuvenation Centers, Inc., an inactive entity, was dissolved.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at dates of the financial statements and the reported amounts of revenue and expenses during the periods. The Company’s significant estimates and assumptions include the recoverability and useful lives of long-lived assets, the fair value of the Company’s stock, stock-based compensation, debt discount and the valuation allowance related to the Company’s deferred tax assets. Certain of the Company’s estimates, including the carrying amount of the intangible assets, could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates, and could cause actual results to differ from those estimates.

Concentrations and Credit Risk

The Company maintains deposits in a financial institution which is insured by the Federal Deposit Insurance Corporation (“FDIC”). At various times, the Company has deposits in this financial institution in excess of the amount insured by the FDIC. As of September 30, 2012, the Company had $128 deposited with an offshore financial institution which is not insured by the FDIC.

As of September 30, 2012, 74% of the face value of the Company’s notes payable were sourced from a single entity and the earliest maturity date associated with these notes is November 6, 2012.

Intangible Assets

Intangible assets are comprised of trademarks and licenses with original estimated useful lives of 10 and 17.7 years (20 year life of underlying patent, less 2.3 years elapsed since patent application), respectively. Once placed into service, the Company amortizes the cost of the intangible assets over their estimated useful lives on a straight line basis.

Revenue Recognition

For the three months ended September 30, 2012, the Company’s $5,255 of revenue was entirely attributable to sales of Stem Pearls® skincare products. For the nine months ended September 30, 2012, the Company’s revenue consisted of $10,000 of sublicense fees and $5,255 attributable to sales of Stem Pearls® skincare products. The Company’s policy is to recognize product sales when the risk of loss and title to the product transfers to the customer, after taking into account potential returns. The Company recognizes sublicensing and royalty revenue when all of the following have occurred: (i) persuasive evidence of an arrangement exists, (ii) the service is completed without further obligation, (iii) the sales price to the customer is fixed or determinable, and (iv) collectability is reasonably assured. See Note 4 – Intangible Assets for additional details.

Net Loss Per Common Share

Basic loss per common share is computed by dividing net loss by the weighted average number of vested common shares outstanding during the period. Diluted loss per common share is computed by dividing net loss by the weighted average number of vested common shares outstanding, plus the impact of common shares, if dilutive, resulting from the vesting of restricted stock and the exercise of outstanding stock options and warrants.

BIORESTORATIVE THERAPIES, INC. & SUBSIDIARIES

(A COMPANY IN THE DEVELOPMENT STAGE)

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 3 – Summary of Significant Accounting Policies – Continued

Net Loss Per Common Share - Continued

The Company’s weighted average number of common shares as of September 30, 2012 includes issued and outstanding common shares and the underlying shares issuable upon the exercise of the 22,000,000 and 2,000,000 exercisable options and warrants, respectively, with an exercise price of $0.01 per share or less during the period of time that the restricted stock value exceeded $0.01 per share. See Note 8, Stockholders’ Deficiency. In accordance with Accounting Standards Codification (“ASC”) 260 – Earnings Per Share, the Company has given effect to the issuance of these options and warrants in computing basic and diluted net loss per share.

Potentially dilutive securities realizable from the exercise of options and warrants for the purchase of 135,925,000 and 135,500,000 shares, respectively, as of September 30, 2012 were excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive. As of September 30, 2011, potentially dilutive securities realizable from the vesting of 40,000,000 shares of restricted stock and the exercise of warrants and options for the purchase of 2,000,000 and 27,150,000 shares, respectively, are excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive.

Stock-Based Compensation

The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on interim financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. Since the shares underlying the Company’s 2010 Equity Participation Plan (the “Plan”) are not currently registered, the fair value of the Company’s restricted equity instruments was estimated by management based on observations of the cash sales prices of both restricted shares and freely tradable shares.

Stock-based compensation for non-employees and directors is reflected in consulting expenses in the condensed consolidated statements of operations. Stock-based compensation for employees is reflected in payroll and benefits in the condensed consolidated statements of operations.

Reclassifications

Certain prior period amounts have been reclassified for comparative purposes to conform to the fiscal 2012 presentation. These reclassifications have no impact on previously reported earnings.

Subsequent Events

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements, except as disclosed in Note 9.

BIORESTORATIVE THERAPIES, INC. & SUBSIDIARIES

(A COMPANY IN THE DEVELOPMENT STAGE)

Notes to Condensed Consolidated Financial Statements

(unaudited)

Amortization of intangible assets consists of the following:

On January 27, 2012, the Company entered into a license agreement with a stem cell treatment company (“SCTC”) (as amended on March 21, 2012, the “SCTC Agreement”). On April 6, 2012, the Company and SCTC closed on the SCTC Agreement. Pursuant to the SCTC Agreement, the Company obtained, among other things, a worldwide, exclusive, royalty-bearing license from SCTC to utilize or sublicense a certain medical device for the administration of specific cells and/or cell products to the disc and/or spine (and other parts of the body) and a worldwide (excluding Asia and Argentina), exclusive, royalty-bearing license to utilize or sublicense a certain method for culturing cells. The SCTC Agreement provides that the Company must achieve certain milestones or pay certain minimum amounts in order to maintain the exclusive nature of the licenses. The SCTC Agreement also provides for an exclusive, royalty-bearing sublicense of the technology to SCTC for use for orthopedic purposes and a non-exclusive, royalty-bearing sublicense of the technology to SCTC for use in accordance with protocols established by the Company (1) at a single facility in the Cayman Islands (or, under certain circumstances, at a different non-U.S. facility), and (2) at U.S. facilities, if and only if, upon resolution of an FDA action, SCTC has the legal right to exploit the technology in the U.S. and the Company does not yet have such legal right. Further, the SCTC Agreement provides that SCTC will furnish certain training, assistance and consultation services with regard to the licensed technology. In addition, the Company has agreed to reimburse SCTC for 25% of its legal fees associated with its pending court action with the FDA, subject to a maximum of $4,500 per month and $100,000 in the aggregate.

Pursuant to the SCTC Agreement, on the closing date, the Company made a payment to SCTC consisting of a license fee of $1,000,000, net of a sublicensing fee of $10,000, which SCTC owed to the Company (which was recorded as revenue in the condensed consolidated statements of operations), and issued to SCTC a warrant for the purchase of 50,000,000 shares of common stock of the Company (the “SCTC Warrant”). The vesting of the SCTC Warrant was divided into three tranches. The first tranche to purchase 15,000,000 shares of common stock was immediately exercisable. The exercise of the second and third tranches to purchase 17,500,000 shares of common stock each is subject to specified performance criteria. The exercise price for the initial tranche is $0.03 per share and the exercise price for the second and third tranches is the greater of $0.03 per share or the then fair market value of the common stock, as defined in the SCTC Agreement. The initial tranche had a grant date value of $226,500 using the Black-Scholes model, which was recognized immediately. The Company recorded the $1,000,000 cash payment and the $226,500 value of the first tranche of the warrant as an intangible asset with an original estimated useful life of 17.7 years (20 year life of the underlying pending patent less 2.3 years since patent application).

BIORESTORATIVE THERAPIES, INC. & SUBSIDIARIES

(A COMPANY IN THE DEVELOPMENT STAGE)

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 4 – Intangible Assets - Continued

The Company has not made an accounting entry related to the second and third tranches as it is not currently estimable when the specified performance criteria will be met. When, and if, the second and third tranches of the SCTC Warrant vest (or when the timing of vesting becomes estimable), the grant date value of these tranches will be added to the value of the intangible asset after calculating the grant date values using the Black-Scholes option pricing model using the final exercise prices as inputs to the model.

Amortization expense for the three and nine months ended September 30, 2012 was $17,453 and $34,998, respectively. During the three and nine months ended September 30, 2011, amortization expense was $92 and $276, respectively. Aggregate amortization expense from December 30, 2008 (inception) to September 30, 2012 was $35,366. Based upon the current intangible assets as of September 30, 2012, amortization expense is projected to be approximately $70,000 per annum for each of the next five years and beyond.

During the nine months ended September 30, 2012, the Company received an aggregate of $48,058 in non-interest bearing advances from an officer of the Company and made aggregate repayments of $22,000 of advances, such that the Company has a liability to the officer of $26,058 at September 30, 2012, which is due on demand.

Note 6 – Notes Payable

During the nine months ended September 30, 2012, the Company issued an additional $2,241,685 of notes payable. In connection with the financings, 2,760,000 shares of common stock, with a relative fair value of $23,209, and five-year warrants to purchase 25,500,000 shares of common stock at exercise prices ranging from $0.03 to $0.05 per share, with a relative fair value of $208,981 using the Black-Scholes model, were issued to the lenders and were recorded as a debt discount. These notes were initially payable 3-12 months from the date of issuance and have a weighted average interest rate of 14% per annum payable monthly (except as discussed below).

Included as part of the $2,241,685 of notes payable are two one-year notes with an aggregate principal amount of $600,000. The holders of these note are entitled to, in addition to a warrant, (a) mandatory prepayment of the notes at the rate of 5% to 10.5% of Cosmetic Revenues (as defined in the note; excludes revenues associated with Stem Pearls ® products); and (b) five years of royalty payments associated with Cosmetic Revenues, ranging from 0.5% to 2.8% of Cosmetic Revenues, depending on the holder, the year the Cosmetic Revenues are earned and the status of the principal repayments. The final three years of royalty payments could be subject to annual dollar maximums ranging up to $175,000 per holder, based on criteria specified in the note terms, but not in the event of default for one of the notes. Given that the Company has not yet generated any material Cosmetic Revenues, no royalty payments have been earned.

During the nine months ended September 30, 2012, the maturity dates of certain notes payable with an aggregate principal balance of $1,772,500, that were near or at maturity, were extended to various dates through June 2013 and the investors received an aggregate of 1,375,000 shares of common stock with a relative fair value of $12,372. All of the extended notes bear a 15% interest rate per annum payable monthly.

During the nine months ended September 30, 2012, the Company repaid a note payable with a principal amount of $50,000.

BIORESTORATIVE THERAPIES, INC. & SUBSIDIARIES

(A COMPANY IN THE DEVELOPMENT STAGE)

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 6 – Notes Payable – Continued

During the nine months ended September 30, 2012, the Company and certain investors agreed to exchange certain notes payable with an aggregate principal balance of $600,000 for an aggregate of 30,000,000 shares of common stock and five-year warrants to purchase an aggregate of 12,000,000 shares of common stock at an exercise price of $0.03 per share. The common stock and warrants had an aggregate grant date value of $653,640 and, as a result, the Company recorded a loss on extinguishment of $53,640. The investors received piggyback registration rights related to the stock and the stock issuable pursuant to the warrants.

The Company recorded amortization of debt discount of $99,501 and $254,888 during the three and nine months ended September 30, 2012 , respectively, and $85,426 and $264,272 during the three and nine months ended September 30, 2011 , respectively. Aggregate amortization of debt discount from December 30, 2008 (inception) to September 30, 2012 was $810,984.

The Company currently has notes payable aggregating $281,000 which are past their maturity dates. These notes have maturity dates ranging from May to September 2012. The Company is currently in the process of negotiating extensions or discussing conversions to equity with respect to these notes. However, there can be no assurance that the Company will be successful in extending or converting these notes.

Note 7 – Commitments and Contingencies

Operating Lease

Rent expense amounted to approximately $27,000 and $77,000 for the three and nine months ended September 30, 2012, respectively, and $20,000 and $60,000 for the three and nine months ended September 30, 2011, respectively. Rent expense for the period from December 30, 2008 (inception) to September 30, 2012 was approximately $208,000. Rent expense is reflected in general and administrative expenses in the condensed consolidated statements of operations.

Litigations, Claims and Assessments

In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s condensed consolidated financial position or results of operations.

Patent Assignment and Research Agreement

Effective June 15, 2012, the Company entered into an assignment agreement (the “Assignment Agreement”) with the research foundation of a state university (the “Foundation”), whereby the Foundation assigned all of its right, title and interest in specified patents to the Company in exchange for a cash payment of $15,000. The Company also agreed to pay the Foundation a royalty on Patent Revenue (as defined in the Assignment Agreement).

Effective June 15, 2012, the Company entered into a research agreement (the “Research Agreement”) with the same state university (the “University”). The Research Agreement has a term of three years. Pursuant to the Research Agreement, the University will perform certain research services to be used by the Company. Pursuant to the Research Agreement, the Company will pay the University a fee of $500,000 for each twelve month period of the agreement, payable monthly. In addition, the Company will pay to the University a 5% royalty, over a 20 year period commencing on June 15, 2012, on the net sales of all products and/or methods directly arising from inventions and improvements conceived or reduced to practice by the University in the course of performing research during the term of the Research Agreement. The Research Agreement can be cancelled without penalty upon (a) the second anniversary of the Research Agreement if eventual FDA approval does not appear likely or (b) other conditions specified in the Research Agreement.

During the three and nine months ended September 30, 2012, the Company recorded research and development expense of approximately $161,000 and $197,000, respectively, in connection with the Assignment Agreement and Research Agreement.

BIORESTORATIVE THERAPIES, INC. & SUBSIDIARIES

(A COMPANY IN THE DEVELOPMENT STAGE)

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 7 – Commitments and Contingencies – Continued

Consulting Agreements

Marketing Consulting Services

On January 1, 2012, an agreement for marketing consulting services, dated February 17, 2011, as amended on July 1, 2011 and September 1, 2011, was further extended to December 31, 2012. Pursuant to the extended agreement, the Company will pay a cash fee of $10,000 per month and the Company granted an immediately vested, five-year warrant to purchase 2,000,000 shares of common stock at an exercise price of $0.02 per share. The grant date value of $12,800 was recognized immediately.

On April 18, 2012, the marketing consulting services agreement was further amended. The Company agreed to pay a $20,000 bonus ($10,000 on August 31, 2012 and $10,000 on December 31, 2012), and issue a five-year warrant to purchase 15,000,000 shares of common stock at an exercise price of $0.03 per share. The warrant vests on January 1, 2013 and has a grant date value of $226,500, which will be recognized proportionate to the vesting period.

Business Advisory Services

On April 9, 2012, the Company issued a warrant to a shareholder in lieu of reimbursing certain costs associated with a contemplated financing that did not occur. The immediately vested, five-year warrant entitles the shareholder to purchase 4,000,000 shares of common stock at an exercise price of $0.03 per share. The warrant had a grant date value of $60,400 which was recognized immediately.

On April 18, 2012, a previous agreement for business advisory services, dated February 17, 2011, was extended for nine months until December 31, 2012. Pursuant to the extension, the Company agreed to pay an additional $90,000 fee ($10,000 monthly), a $20,000 bonus ($10,000 on August 31, 2012 and $10,000 on December 31, 2012) and issue a five-year warrant to purchase 12,000,000 shares of common stock at an exercise price of $0.03 per share. The warrant vests on January 1, 2013 and has a grant date value of $181,200, which will be recognized proportionate to the vesting period.

On May 22, 2012, the Company entered into a one year agreement with a consultant to provide business advisory services whereby the consultant (a) was issued 87,500 shares of common stock and the Company recognized the $1,400 fair value immediately and (b) became entitled to 87,500 shares of common stock in the event the Company’s common stock is listed on the OTC Bulletin Board (“OTCBB”). It is not currently probable that the specified performance criteria will be met and, as a result, the Company has not recognized any expense associated with the latter shares.

On June 1, 2012, the Company entered into a three-month agreement with a consultant to provide business advisory services pursuant to which the consultant is entitled to receive an aggregate of 7,500,000 shares of common stock (2,500,000 shares per month). The agreement was subject to termination on June 30, 2012, or July 31, 2012, upon five days prior written notice from the Company to the consultant. The agreement had not been terminated as of the date of this report and the Company recognized the $40,000 fair value of the shares issued in connection with services performed in June.

Investor Relations Services

On April 3, 2012, the Company entered into a six-month agreement with a consultant to provide investor relations services whereby the consultant will be paid $15,000 per month. Unless the agreement is terminated 30 days prior to the end of the six-month period, the agreement will continue, with the consultant being paid $10,000 per month, subject to a 60 day termination notice. Effective July 1, 2012, the parties agreed that the consultant will be paid $5,000 per month for the remainder of the term. During the three and nine months ended September 30, 2012, the Company recorded consulting expense of $15,000 and $60,000, respectively.

BIORESTORATIVE THERAPIES, INC. & SUBSIDIARIES

(A COMPANY IN THE DEVELOPMENT STAGE)

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 7 – Commitments and Contingencies – Continued

Consulting Agreements – Continued

Scientific Advisory Services

On August 16, 2012, the Company entered into a two year agreement with a consultant to serve as Chairman of the Company’s Scientific Advisory Board and provide scientific advisory services whereby the consultant will earn $10,000 per month (monthly payments begin after the Company raises $3,000,000 in financing) and will be entitled to specified expense reimbursements. As of September 30, 2012, the Company had accrued $15,000 related to the agreement.

In addition, the Company granted a five-year option to purchase 10,000,000 shares of common stock at an exercise price of $0.028 per share, pursuant to the Plan. The option vests as follows: (i) 2,000,000 shares immediately on the date of grant, 2,000,000 shares on the first anniversary of the date of grant and 2,000,000 on the second anniversary of the date of grant; and (ii) up to 4,000,000 shares upon receipt of research grants meeting specified criteria. The aggregate grant date value was $151,000, of which approximately $30,000 was recognized immediately, approximately $30,000 will be recognized on each of the first and second anniversaries. It is not currently estimable when the specified performance criteria will be met and, as a result, the Company has not recognized any of the approximately $30,000 expense associated with each of the fourth and fifth tranches.

Employment Agreements

Chief Executive Officer (the “CEO”)

On February 10, 2012, the Board approved (1) the extension of the CEO’s employment agreement for an additional two years (through October 2015) at the same compensation as the third year; (2) an option grant to the CEO, as described below; and (3) the payment of a $70,000 discretionary bonus to the CEO in connection with the signing of the RS Agreement. The employment agreement shall be extended for successive one year periods unless either party provides ninety days written notice to the other party. The discretionary bonus was paid on April 13, 2012. The Company granted a ten-year option to the CEO to purchase an aggregate of 50,000,000 shares of common stock at an exercise price of $0.021 per share. The option vests to the extent of one-third of the shares immediately, one-third on the first anniversary of the date of grant and one-third on the second anniversary of the date of grant. See Note 8 – Stockholders’ Deficiency – Stock Options – Employee Awards for additional details.

Former Chief Financial Officer (the “Former CFO”)

On January 4, 2012, the Company agreed to settle the remaining $46,154 due pursuant to the Former CFO’s termination agreement for $23,077 and the Company recorded a $23,077 gain on settlement of the payable.

Settlement Agreement

On September 12, 2012, the Company issued an immediately vested, five-year warrant to purchase 250,000 shares of common stock at an exercise price of $0.03 per share in order to settle a dispute. The grant date value of $3,775 was recognized immediately.

BIORESTORATIVE THERAPIES, INC. & SUBSIDIARIES

(A COMPANY IN THE DEVELOPMENT STAGE)

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 8 – Stockholders’ Deficiency

Shareholder Actions

On February 10, 2012, the shareholders of the Company approved (a) an increase in the authorized common stock to 1,500,000,000 shares from 800,000,000 shares; and (b) giving the Board the discretion to effect a reverse stock split of the Company’s common stock by a ratio of not less than 1-for-10 and not more than 1-for-150, anytime until February 10, 2013. The Board has not yet approved a reverse stock split.

On July 17, 2012, the Board of Directors of the Company approved an increase in the number of shares of common stock authorized to be issued pursuant to the Plan from 200,000,000 to 300,000,000. The increase is to be submitted for shareholder approval at the next annual meeting of shareholders.

Common Stock Issuances

During the nine months ended September 30, 2012, the Company issued an aggregate of 38,000,000 shares of common stock at prices ranging from $0.020 to $0.025 per unit to investors for aggregate gross proceeds of $925,000. In connection with the purchases, the Company issued warrants for the purchase of an aggregate of 12,750,000 shares of common stock, which are exercisable over a period of five years at exercise prices ranging from $0.030 to $0.080 per share of common stock. The warrants had an aggregate grant date value of $170,451.

See Note 6, Notes Payable for details associated with common stock issued in conjunction with the issuance, extension and exchange of notes payable.

Warrant and Option Valuation

The Company has computed the fair value of warrants and options granted using the Black-Scholes option pricing model. Option forfeitures are estimated at the time of valuation and reduce expense ratably over the vesting period. This estimate will be adjusted periodically based on the extent to which actual option forfeitures differ, or are expected to differ, from the previous estimate, when it is material. The expected term used for warrants and options issued to non-employees is the contractual life and the expected term used for options issued to employees is the estimated period of time that options granted are expected to be outstanding. The Company utilizes the “simplified” method to develop an estimate of the expected term of “plain vanilla” employee option grants. Since the Company’s stock has not been publicly traded for a long period of time, the Company is utilizing an expected volatility figure based on a review of the historical volatilities, over a period of time, equivalent to the expected life of the instrument being valued, of similarly positioned public companies within its industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.

BIORESTORATIVE THERAPIES, INC. & SUBSIDIARIES

(A COMPANY IN THE DEVELOPMENT STAGE)

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 8 – Stockholders’ Deficiency – Continued

Stock Warrants

See Note 6, Notes Payable for details associated with the issuance of warrants in connection with note issuances and the extension of debt maturities. See Note 7, Commitments and Contingencies for details associated with the issuance of warrants as compensation. See Note 8, Stockholders’ Deficiency – Common Stock Issuances for details associated with the issuance of warrants in connection with common stock issuances.

In applying the Black-Scholes option pricing model to warrants granted, the Company used the following weighted average assumptions (excludes the impact of the second and third tranches of the RS Warrant; see Note 4 for additional details):

The weighted average estimated fair value of the warrants granted during the three and nine months ended September 30, 2012 was approximately $0.014 and $0.013 per share, respectively. There were no warrants granted during the three and nine months ended September 30, 2011.

The Company recorded stock–based compensation expense of $147,669 and $340,780 during the three and nine months ended September 30, 2012, respectively, and $393,968 during the period from December 30, 2008 (inception) to September 30, 2012, related to stock warrants issued as compensation, which is reflected as consulting expense in the condensed consolidated statement of operations . As of September 30, 2012, there was $143,894 of unrecognized stock-based compensation expense related to stock warrants that will be amortized over a weighted average period of 0.3 years.

A summary of the warrant activity during the nine months ended September 30, 2012 is presented below:

BIORESTORATIVE THERAPIES, INC. & SUBSIDIARIES

(A COMPANY IN THE DEVELOPMENT STAGE)

Notes to Condensed Consolidated Financial Statements

(unaudited)

[1] – Warrants to purchase 35,000,000 shares of common stock, which have an exercise price which is the greater of $0.03 per share or the fair market value of the common stock on the date certain performance criteria is met, have not been included in the calculation of the weighted average price of options granted. See Note 4 – Intangible Assets.

The weighted average estimated fair value of the stock options granted during the three and nine months ended September 30, 2012 was approximately $0.015 and $0.009 per share, respectively. The weighted average estimated fair value of the stock options granted during the three and nine months ended September 30, 2011 was approximately $0.008 per share.

BIORESTORATIVE THERAPIES, INC. & SUBSIDIARIES

(A COMPANY IN THE DEVELOPMENT STAGE)

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 8 – Stockholders’ Deficiency – Continued

Stock Options – Continued

Employee Awards

On February 10, 2012, the Company granted ten-year options to employees to purchase an aggregate of 54,000,000 shares of common stock at an exercise price of $0.021 per share, pursuant to the Plan. The options vest as follows: (i) an option granted to the CEO to purchase 50,000,000 shares of common stock vests to the extent of one-third of the shares immediately, one-third on the first anniversary of the date of grant and one-third on the second anniversary of the date of grant; and (ii) options to purchase an aggregate of 4,000,000 shares of common stock vest to the extent of one-half of the shares immediately and one-half on the first anniversary of the date of grant. The aggregate grant date value of $421,200 will be recognized proportionate to the vesting periods.

On May 3, 2012, the Company granted ten-year options to two employees to purchase an aggregate of 7,550,000 shares of common stock at an exercise price of $0.028 per share, pursuant to the Plan. Options to purchase 1,550,000 shares vest as follows: (i) 25,000 shares immediately, (ii) 525,000 shares on the first anniversary date, (iii) 500,000 shares on the second anniversary date and (iv) 500,000 shares on the third anniversary date. On June 15, 2012, options to purchase 1,000,000 shares vested as a result of the execution of the Research Agreement. The aggregate grant date value of $117,010 will be recognized proportionate to the vesting period. Options to purchase the remaining 5,000,000 shares vest subject to the satisfaction of certain performance conditions. It is not currently probable that the performance conditions will be met and, as a result, the Company has not recognized any expense associated with the shares.

The Company recorded employee stock–based compensation expense of $38,477 and $262,089 during the three and nine months ended September 30, 2012, respectively, and $4,253 and $26,715 during the three and nine months ended September 30, 2011, respectively. During the period from December 30, 2008 (inception) to September 30, 2012, the Company recorded $726,338 related to employee stock option grants, which is reflected as payroll and benefits expense in the condensed consolidated statement of operations . As of September 30, 2012, there was $280,804 of unrecognized employee stock-based compensation expense related to stock option grants that will be amortized over a weighted average period of 1.8 years.

Non-Employee Director Awards

On February 10, 2012, the Company granted ten-year options to non-employee directors to purchase an aggregate of 60,000,000 shares of common stock at an exercise price of $0.021 per share, pursuant to the Plan. The options vest to the extent of one-half of the shares immediately and one-half on the first anniversary of the date of grant. The aggregate grant date value of $468,000 will be recognized proportionate to the vesting period.

The Company recorded non-employee director stock–based compensation expense of $58,500 and $383,500 during the three and nine months ended September 30, 2012, respectively, and $0 during the three and nine months ended September 30, 2011. During the period from December 30, 2008 (inception) to September 30, 2012, the Company recorded $541,903 related to non-employee director stock option grants . As of September 30, 2012, there was $84,500 of unrecognized non-employee director stock-based compensation expense related to stock option grants that will be amortized over a weighted average period of 0.4 years.

Consultant Awards

On June 11, 2012, the Company granted a five-year, immediately vested option to an advisor on its Scientific Advisory Board to purchase 250,000 shares of common stock at an exercise price of $0.022 per share, pursuant to the Plan. The grant date value of $3,300 will be recognized immediately.

The Company recorded consultant and advisory board stock–based compensation expense of $31,817 and $38,361 during the three and nine months ended September 30, 2012, respectively, and $1,217 and $10,749 during the three and nine months ended September 30, 2011, respectively. During the period from December 30, 2008 (inception) to September 30, 2012, the Company recorded $50,326 related to consultant and advisory board stock option grants, which is reflected as consulting expense in the condensed consolidated statement of operations . As of September 30, 2012, there was $109,844 of unrecognized consultant and advisory board stock-based compensation expense related to stock option grants that will be amortized over a weighted average period of 1.8 years.

BIORESTORATIVE THERAPIES, INC. & SUBSIDIARIES

(A COMPANY IN THE DEVELOPMENT STAGE)

Notes to Condensed Consolidated Financial Statements

(unaudited)

The following table presents information related to stock options at September 30, 2012:

Common Stock Awards

Employee Awards

The Company recorded employee stock–based compensation expense of $0 during the three and nine months ended September 30, 2012 and $0 and $123,900 during the three and nine months ended September 30, 2011, respectively. During the period from December 30, 2008 (inception) to September 30, 2012, the Company recorded $123,900 related to employee stock grants, which is reflected as payroll and benefits expense in the condensed consolidated statement of operations . As of September 30, 2012, there was no unrecognized employee stock-based compensation expense related to stock grants.

BIORESTORATIVE THERAPIES, INC. & SUBSIDIARIES

(A COMPANY IN THE DEVELOPMENT STAGE)

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 8 – Stockholders’ Deficiency – Continued

Common Stock Awards – Continued

Non-Employee Director Awards

The Company recorded non-employee director stock–based compensation expense of $0 and $10,325 during the three and nine months ended September 30, 2012, respectively, and $10,325 and $61,950 during the three and nine months ended September 30, 2011, respectively. During the period from December 30, 2008 (inception) to September 30, 2012, the Company recorded $82,600 related to non-employee director stock grants . As of September 30, 2012, there was no unrecognized non-employee director stock-based compensation expense related to stock grants.

Consultant Awards

During the three and nine months ended September 30, 2012, the Company issued 5,000,000 and 10,010,600 shares of common stock, respectively, valued at $80,000 and $141,415, respectively, in connection with business advisory services agreements.

The Company recorded consultant and advisory board stock–based compensation expense of $80,000 and $141,415 during the three and nine months ended September 30, 2012, respectively, and $53,055 and $189,702 during the three and nine months ended September 30, 2011, respectively. During the period from December 30, 2008 (inception) to September 30, 2012, the Company recorded $1,540,395 related to consultant and advisory board stock grants, which is reflected as consulting expenses in the condensed consolidated statement of operations . As of September 30, 2012, there was no unrecognized consultant and advisory board stock-based compensation expense related to stock grants.

Stock Award Summary

On April 2, 2012, the CEO’s 35,000,000 share stock grant vested as a result of the Company raising in excess of $2,000,000 of financing since November 4, 2011. The Company has agreed to fund the CEO’s tax liability (approximately $115,000) in connection with such vesting. The tax liability is unpaid as of the date of this report and is a component of Accrued Payroll and Payroll Taxes (see Note 5 – Accrued Expenses and Other Current Liabilities) in the condensed consolidated balance sheet as of September 30, 2012.

On April 21, 2012, an aggregate of 5,000,000 shares of common stock related to the two non-employee directors’ stock grants vested.

A summary of common stock award activity for the nine months ended September 30, 2012 is presented below:

BIORESTORATIVE THERAPIES, INC. & SUBSIDIARIES

(A COMPANY IN THE DEVELOPMENT STAGE)

Notes to Condensed Consolidated Financial Statements

(unaudited)