For the Transition Period from __________________________________to___________________________________

Registrant’s Telephone Number, Including Area Code:~~(732) 225-8910~~(800)560-3983

~~(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)~~

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 ~~[X]~~ ☒ No ~~[ ]~~☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T ~~(232.4.05~~(§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 ~~[X]~~ ☒ No ~~[ ]~~☐

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

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).

As of ~~March 14, 2018,~~August 5, 2022, there were ~~16,457,664~~5,632,798 shares of the Registrant’s common stock outstanding.

As used in this report, the terms “we,” “us,” “our,” “the Company,” and “PolarityTE” mean PolarityTE, Inc., a Delaware corporation, and our present, and as applicable our former, wholly owned Nevada subsidiaries (direct and indirect), PolarityTE, Inc., PolarityTE MD, Inc., Arches Research, Inc., Utah CRO Services, Inc., IBEX Preclinical Research, Inc., and IBEX Property LLC., unless otherwise indicated or required by the context.

POLARITYTE, the PolarityTE Logo, WELCOME TO THE SHIFT, WHERE SELF REGENERATES SELF, COMPLEX SIMPLICITY, ARCHES, and SKINTE are all trademarks or registered trademarks of PolarityTE. Solely for convenience, the trademarks and trade names in this report may be referred to without the ® and ™ symbols, but such references should not be construed as any indicator that we will not assert, to the fullest extent under applicable law, our rights thereto.

~~See~~The accompanying notes toare an integral part of these condensed consolidated financial ~~statements.~~statements

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF ~~CHANGES IN STOCKHOLDERS’ EQUITY~~OPERATIONS AND COMPREHENSIVE LOSS

The accompanying notes toare an integral part of these condensed consolidated financial ~~statements.~~statements

The accompanying notes are an integral part of these condensed consolidated financial statements

~~See~~The accompanying notes toare an integral part of these condensed consolidated financial ~~statements.~~statements

PolarityTE, Inc. (together with its subsidiaries, the “Company”) is a ~~commercial-stage~~clinical stage biotechnology ~~and regenerative biomaterials~~ company ~~focused on transforming the lives of patients by discovering, designing and~~ developing ~~a range of~~ regenerative tissue products and ~~biomaterials~~biomaterials. The Company also operated a laboratory testing and clinical research business until the end of April 2022.

The Company’s first regenerative tissue product is SkinTE. In July 2021, the Company submitted an investigational new drug application (“IND”) for SkinTE to the ~~fields of medicine, biomedical engineering~~United States Food and ~~material sciences.~~

~~Discontinued Operations.~~ OnDrug Administration (the “FDA”) through its subsidiary, PolarityTE MD, Inc. Prior to June ~~23, 2017,~~1, 2021, the Company sold ~~Majesco Entertainment Company, a Nevada corporation and wholly-owned subsidiary~~SkinTE under Section 361 of the Public Health Service Act in 2020 and into 2021 and, after the Company’s decision to file an IND under Section 351 of that Act, under an enforcement discretion position stated by the FDA in a regenerative medicine policy framework to help facilitate regenerative medicine therapies. The FDA’s stated period of enforcement discretion ended May 31, 2021. Consequently, the Company ~~(“Majesco Sub”) to Zift Interactive LLC, a Nevada limited liability company pursuant~~terminated commercial sales of SkinTE on May 31, 2021, ceased its SkinTE commercial operations, and transitioned to a ~~purchase agreement. Pursuant~~clinical stage company pursuing an IND for SkinTE. As a result, there were no product sales from commercial SkinTE after June 2021. The only revenues recognized subsequent to June 2021 for SkinTE were nominal amounts collected on accounts for product shipped prior to the ~~terms~~end of May 2021 that were not previously recognized because of concerns with collectability. No revenue for SkinTE was recognized during the ~~agreement,~~three and six months ended June 30, 2022.

At the ~~Company sold 100%~~beginning of the issued and outstanding shares of common stock of Majesco to Zift, including all of the right, title and interest in and to Majesco Sub’s business of developing, publishing and distributing video game products through mobile and online digital downloading. Pursuant to the terms of the agreement, the Company will receive total cash consideration of approximately $100,000 ($5,000 upon signing the agreement and 19 additional monthly payments of $5,000) plus contingent consideration based on net revenues valued at $0. As of January 31,May 2018, the Company ~~received $40,000 in cash consideration~~acquired a preclinical research and ~~$60,000 remains receivable.~~

~~Segments.~~~~With~~veterinary sciences business, which has been used for preclinical studies on the ~~sale~~Company’s regenerative tissue products and to offer preclinical research services to unrelated third parties on a contract basis. The Company sold the business at the end of ~~Majesco Sub on June 23, 2017,~~April 2022 and ceased to recognize services revenues after the sale. Consequently, the Company is no longer engaged in any revenue generating business activity and its operations are now ~~solely operates in its Regenerative Medicine segment.~~focused on advancing the IND for SkinTE.

The accompanying interim condensed consolidated financial statements of the Company are unaudited, but in the opinion of management, reflect all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results for the interim ~~period.~~periods presented. Accordingly, they do not include all information and notes required by accounting principles generally accepted ~~accounting principles~~in the United States of America (U.S. GAAP) for complete financial statements. ~~The Company’s financial results are impacted by the seasonality of the retail selling season and the timing of the release of new titles.~~ The results of operations for interim periods are not necessarily indicative of results to be expected for the entire fiscal year. The balance sheet at ~~October~~December 31, ~~2017~~2021, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by ~~accounting principles generally accepted in the United States of America~~U.S. GAAP for complete financial statements. These interim condensed consolidated financial statements should be read in conjunction with the ~~Company’s~~audited consolidated financial statements and notes thereto for the year ended ~~October~~December 31, ~~2017~~2021, filed with the Securities and Exchange Commission on Form 10-K on ~~January~~March 30, ~~2018.~~2022.

Principles of ~~Consolidation.~~Consolidation. The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned ~~subsidiaries: Polarity NV and Majesco Sub (through the date sold). Majesco Sub was sold on June 23, 2017.~~subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation.

~~Cash and Cash Equivalents.~~ ~~Cash equivalents consist~~Use of highly liquid investments with original maturities of three months or less at the date of purchase. At various times, the Company has deposits in excess of the Federal Deposit Insurance Corporation limit. The Company has not experienced any losses on these accounts.

~~Accounts Payable and Accrued Expenses.~~ ~~The carrying amounts of accounts payable and accrued expenses approximate fair value as these accounts are largely current and short term in nature.~~

~~Property and Equipment.~~ Property and equipment is stated at cost. Depreciation and amortization is being provided for by the straight-line method over the estimated useful lives of the assets, generally five years. Amortization of leasehold improvements is provided for over the shorter of the term of the lease or the life of the asset.

~~Income Taxes.~~ The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company evaluates the potential for realization of deferred tax assets at each quarterly balance sheet date and records a valuation allowance for assets for which realization is not more likely than not.

~~Stock Based Compensation.~~ The Company measures all stock-based compensation to employees using a fair value method and records such expense in general and administrative and research and development expenses. Compensation expense for stock options with cliff vesting is recognized on a straight-line basis over the vesting period of the award, based on the fair value of the option on the date of grant. For stock options with graded vesting, the Company recognizes compensation expense over the service period for each separately vesting tranche of the award as though the award were in substance, multiple awards.

The fair value for options issued is estimated at the date of grant using a Black-Scholes option-pricing model. The risk-free rate is derived from the U.S. Treasury yield curve in effect at the time of the grant. The volatility factor is determined based on the Company’s historical stock prices.

~~Loss Per Share.~~ Basic loss per share of common stock is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted loss per share excludes the potential impact of common stock options, unvested shares of restricted stock and outstanding common stock purchase warrants because their effect would be anti-dilutive due to our net loss.

~~Commitments and Contingencies.~~ We are subject to claims and litigation in the ordinary course of our business. We record a liability for contingencies when the amount is both probable and reasonably estimable. We record associated legal fees as incurred.

~~Accounting for Warrants~~estimates. The Company accounts for the issuance of common stock purchase warrants issued in connection with the equity offerings in accordance with the provisions of ASC 815, Derivatives and Hedging (“ASC 815”). The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). In addition, under ASC 815, registered common stock warrants that require the issuance of registered shares upon exercise and do not expressly preclude an implied right to cash settlement are accounted for as derivative liabilities. The Company classifies these derivative warrant liabilities on the condensed consolidated balance sheet as a current liability.

~~Change in Fair Value of Derivatives.~~ The Company assessed the classification of common stock purchase warrants as of the date of each offering and determined that certain instruments met the criteria for liability classification. Accordingly, the Company classified the warrants as a liability at their fair value and adjusts the instruments to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until the warrants are exercised or expired, and any change in fair value is recognized as “change in fair value of warrant liability” in the consolidated statements of operations. The fair value of the warrants has as well as other derivatives have been estimated using a Monte-Carlo or Black-Scholes valuation model.

~~Revenue Recognition.~~The Company recognizes revenue upon the shipment of products when each of the following four criteria is met: (i) persuasive evidence of an arrangement exists; (ii) products are delivered; (iii) the sales price is fixed or determinable; and (iv) collectability is reasonably assured.

~~Estimates.~~The preparation of financial statements in conformity with ~~accounting principles generally accepted in the United States of America~~U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities or the disclosure of gain or loss contingencies at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Among the more significant estimates included in these financial statements ~~are~~is the extent of progress toward completion of contracts, stock-based compensation, the valuation allowance for deferred tax assets, the valuation of common stock warrant ~~liability, valuation of derivative liability, stock-based compensation~~liabilities, and the ~~valuation allowances for deferred tax benefits.~~impairment of property and equipment. Actual results could differ from those estimates.

~~In April 2016,~~Cash and cash equivalents. Cash equivalents consist of highly liquid investments with original maturities of three months or less from the ~~FASB issued ASU No. 2016-09,~~~~Share-Based Payment: Simplifying the Accounting for Share-Based Payments~~~~. The standard addresses several aspects~~date of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statementpurchase. As of ~~cash flows. The Company adopted ASU 2016-09 during the first quarter of 2018 and~~June 30, 2022, the Company ~~elected~~did not hold any cash equivalents.

Assets and Liabilities Held for Sale. Assets and liabilities to ~~account~~be disposed (“disposal group”) of by sale are reclassified into assets held for ~~forfeitures as they occur. The amendment was applied using a modified retrospective transition method. The provisions of ASU 2016-09 had no impact~~sale and liabilities held for sale on the Company’s condensed consolidated ~~financial statements.~~balance sheet. The reclassification occurs when an agreement to sell exists, or management has committed to a plan to sell the assets within one year. Disposal groups are measured at the lower of carrying value or fair value less costs to sell and are not depreciated or amortized. The fair value of a disposal group, less any costs to sell, is assessed each reporting period it remains classified as held for sale and any remeasurement to the lower of carrying value or fair value less costs to sell is reported as an adjustment to the carrying value of the disposal group.

~~In February 2016, FASB issued ASU No. 2016-02,~~~~Leases (Topic 842),~~ ~~which supersedes FASB ASC Topic 840,~~~~Leases (Topic 840)~~~~and provides principles~~. The Company determines if an arrangement is a lease at inception. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the ~~recognition, measurement, presentation~~lease term and ~~disclosure~~lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Finance leases are reported in the condensed consolidated balance sheet in property and equipment and other current and long-term liabilities. The current portion of ~~leases for both lessees and lessors.~~operating lease obligations are included in other current liabilities. The ~~new standard requires lessees to apply a dual approach, classifying~~classification of the Company’s leases as ~~either~~operating or finance ~~or operating~~ leases along with the initial measurement and recognition of the associated ROU assets and lease liabilities is performed at the lease commencement date. The measurement of lease liabilities is based on the ~~principle~~present value of ~~whether or not~~future lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future lease payments. The ROU asset is ~~effectively a financed purchase by~~based on the ~~lessee. This classification~~measurement of the lease liability and also includes any lease payments made prior to or on lease commencement and excludes lease incentives and initial direct costs incurred, as applicable. The lease terms may include options to extend or terminate the lease when it is reasonably certain the Company will ~~determine whether lease~~exercise any such options. Rent expense for the Company’s operating leases is recognized ~~based~~ on ~~an effective interest method or~~a straight-line basis over the lease term. Amortization expense for the ROU asset associated with its finance leases is recognized on a straight-line basis over the term of the lease ~~respectively. A lessee~~and interest expense associated with its finance leases is ~~also required to record a right-of-use asset and a~~recognized on the balance of the lease liability using the effective interest method based on the estimated incremental borrowing rate.

The Company has lease agreements with lease and non-lease components. As allowed under ASC 842, the Company has elected not to separate lease and non-lease components for ~~all~~any leases involving real estate and office equipment classes of assets and, as a result, accounts for the lease and non-lease components as a single lease component. The Company has also elected not to apply the recognition requirement of ASC 842 to leases with a term of ~~greater than twelve months regardless of classification. Leases with a term of twelve~~12 months or less ~~will~~for all classes of assets.

Impairment of Long-Lived Assets. The Company reviews long-lived assets, including property and equipment for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be ~~accounted~~fully recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends, and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a long-lived asset for ~~similar~~recoverability, the Company compares forecasts of undiscounted cash flows expected to ~~existing guidance for operating leases.~~result from the use and eventual disposition of the long-lived asset to its carrying value. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset are less than its carrying amount. The ~~standard~~impairment loss would be based on the excess of the carrying value of the impaired asset over its fair value, determined based on discounted cash flows.

Revenue Recognition. Under ASC 606, revenue is ~~effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted upon issuance. When adopted,~~recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration that the Company expects ~~this guidance~~ to ~~have~~receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a ~~material impact on~~customer; (ii) identify the ~~Company’s balance sheet.~~performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

The Company recorded product revenues primarily from the sale of SkinTE, its regenerative tissue product. When the Company marketed its SkinTE product, it was sold to healthcare providers (customers), primarily through direct sales representatives. Product revenues consisted of a single performance obligation that the Company satisfied at a point in time. In general, the Company recognized product revenue upon delivery to the customer.

In ~~May 2017,~~ the ~~FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718): Scope~~contract services segment, the Company recorded service revenues from the sale of ~~Modification Accounting. ASU 2017-09 provides clarity~~its preclinical research services, which included delivery of preclinical studies and ~~reduces both (1) diversity in practice and (2) cost and complexity when applying~~other research services to unrelated third parties. Service revenues generally consisted of a single performance obligation that the ~~guidance in Topic 718,~~Company satisfied over time using an input method based on costs incurred to ~~a change~~date relative to the ~~terms or conditions~~total costs expected to be required to satisfy the performance obligation. The Company believes that this method provides an appropriate measure of the transfer of services over the term of the performance obligation based on the remaining services needed to satisfy the obligation. This required the Company to make reasonable estimates of the extent of progress toward completion of the contract. As a result, unbilled receivables and deferred revenue were recognized based on payment timing and work completed. Generally, a portion of the payment was due upfront and the remainder upon completion of the contract, with most contracts completing in less than a year. Contract services also included research and laboratory testing services to unrelated third parties on a contract basis. Due to the short-term nature of the services, these customer contracts generally consisted of a ~~share-based~~single performance obligation that the Company satisfied at a point in time. The Company satisfied the single performance obligation and recognized revenue upon delivery of testing results to the customer. As of June 30, 2022 and December 31, 2021, the Company had unbilled receivables of 0 and $0.5 million, respectively, and deferred revenue of 0 and $0.1 million, respectively. Revenue of $0.1 million was recognized during the six months ended June 30, 2022 that was included in the deferred revenue balance as of December 31, 2021.

Research and Development Expenses. Costs incurred for research and development are expensed as incurred. Nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities pursuant to executory contractual arrangements with third party research organizations are deferred and recognized as an expense as the related goods are delivered or the related services are performed.

Accruals for Clinical Trials. As part of the process of preparing its financial statements, the Company is required to estimate its expenses resulting from its obligations under contracts with vendors, clinical research organizations and consultants and under clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payment ~~award.~~terms that do not match the periods over which materials or services are provided under such contracts. The ~~amendments~~Company’s objective is to reflect the appropriate expenses in ~~ASU 2017-09 should~~its financial statements by matching those expenses with the period in which services are performed and efforts are expended. The Company accounts for these expenses according to the timing of various aspects of the expenses. The Company determines accrual estimates by taking into account discussion with applicable personnel and outside service providers as to the progress of clinical trials, or the services completed. During the course of a clinical trial, the Company adjusts its clinical expense recognition if actual results differ from its estimates. The Company makes estimates of its accrued expenses as of each balance sheet date based on the facts and circumstances known to it at that time. The Company’s clinical trial accruals are dependent upon the timely and accurate reporting of contract research organizations and other third-party vendors. Although the Company does not expect its estimates to be ~~applied prospectively~~materially different from amounts actually incurred, its understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in it reporting amounts that are too high or too low for any particular period.

Common Stock Warrant Liability. The Company accounts for common stock warrants issued as freestanding instruments in accordance with applicable accounting guidance as either liabilities or as equity instruments depending on the specific terms of the warrant agreement. Under certain change of control provisions, some warrants issued by the Company could require cash settlement which necessitates such warrants to be recorded as liabilities. Warrants classified as liabilities are remeasured at fair value each period until settled or until classified as equity.

Stock-Based Compensation. The Company measures all stock-based compensation to employees and non-employees using a fair value method and records such expense in general and administrative, research and development, and sales and marketing expenses. For stock options with graded vesting, the Company recognizes compensation expense over the service period for each separately vesting tranche of the award as though the award were in substance, multiple awards based on the fair value on the date of grant.

The fair value for options issued is estimated at the date of grant using a Black-Scholes option-pricing model. The risk-free rate is derived from the U.S. Treasury yield curve in effect at the time of the grant commensurate with the expected term of the option. The volatility factor is determined based on the Company’s historical stock prices. Forfeitures are recognized as they occur.

The fair value of restricted stock grants is measured based on the fair market value of the Company’s common stock on the date of grant and recognized as compensation expense over the vesting period of, generally, six months to three years.

Reverse Stock Split. On May 12, 2022, the Company’s Board of Directors approved a reverse stock split in the ratio of 1-for-25 (“Reverse Stock Split”). The Reverse Stock Split became effective as of May 16, 2022. Fractional shares resulting from the reverse stock split were rounded up to the nearest whole share, which resulted in the issuance of a total of 17,024 shares of common stock to implement the reverse stock split.

The Company accounted for the reverse stock split on a retrospective basis pursuant to ASC 260, Earnings Per Share. All issued and outstanding common stock, common stock warrants, stock option awards, exercise prices and per share data have been adjusted in these condensed consolidated financial statements, on a retrospective basis, to reflect the reverse stock split for all periods presented. The number of authorized shares and par value of the preferred stock and common stock were not adjusted because of the reverse stock split.

Net Loss Per Share. Basic net loss per share of common stock is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Gains on warrant liabilities are only considered dilutive when the average market price of the common stock during the period exceeds the exercise price of the warrants. All common stock warrants issued participate on a one-for-one basis with common stock in the distribution of dividends, if and when declared by the Board of Directors, on the Company’s common stock. For purposes of computing earnings per share (EPS), outstanding warrants and preferred stock are considered to participate with common stock in earnings of the Company. Therefore, the Company calculates basic and diluted EPS using the two-class method. Under the two-class method, net loss for the period is allocated between common stockholders and participating securities according to dividends declared and participation rights in undistributed losses. No loss was allocated to the warrants or preferred stock for the three and six months ended June 30, 2022 and 2021 as the Company incurred a loss for each period and the warrant and preferred stockholders are not required to absorb losses. The Company has issued pre-funded warrants from time to time at an ~~award modified on~~exercise price of $0.025 per share. The shares of common stock into which the pre-funded warrants may be exercised are considered outstanding for the purposes of computing basic earnings per share because the shares may be issued for little or no consideration, are fully vested, and are exercisable after the ~~adoption~~original issuance date.

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This ~~ASU~~replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This standard was effective for fiscal ~~years, and interim periods within those~~ years beginning after December 15, ~~2017.~~2019, including interim periods within those fiscal years with early adoption permitted. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842): Effective Dates, which defers the effective date of Topic 326. As a smaller reporting company, Topic 326 will now be effective for the Company beginning January 1, 2023. As such, the Company plans to adopt this ASU beginning January 1, 2023. The Company is currently ~~assessing~~evaluating the ~~potential~~ impact ~~of adopting ASU 2017-09~~that the standard will have on its consolidated financial statements and related disclosures.

In ~~July 2017,~~August 2020, the FASB issued ASU ~~2017-11,~~No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Those instruments that do not have a separately recognized embedded conversion feature will no longer recognize a debt issuance discount related to such a conversion feature and would recognize less interest expense on a periodic basis. It also removes from ASC 815-40-25-10 certain conditions for equity classification and amends certain guidance in ASC Topic 260 on the computation of EPS for convertible instruments and contracts in an entity’s own equity. An entity can use either a full or modified retrospective approach to adopt the ASU’s guidance. The Company early adopted this ASU for the fiscal year beginning January 1, 2022. The adoption of this ASU did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), ~~Distinguishing Liabilities from Equity~~Debt— Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic ~~480)~~718), and Derivatives and ~~Hedging (Topic 815)~~Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40):~~I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement~~, which specifies that the effects of modifications or exchanges of freestanding equity-classified written call options that remain equity after modification or exchange should be recognized depending on the substance of the ~~Indefinite Deferral~~transaction, whether it be a financing transaction to raise equity (topic 340), to raise or modify debt (topic 470 and 835), or other modifications or exchanges. If the modification or exchange does not fall under topics 340, 470, or 835, an entity may be required to account for ~~Mandatorily Redeemable Financial Instruments~~the effects of ~~Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception,~~ (ASU 2017-11). Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instrumentssuch modifications or exchanges as dividends which should adjust net income (or ~~embedded features) that result~~loss) in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018.basic EPS calculation. The Company ~~is currently assessing~~adopted this ASU prospectively for the ~~potential impact of adopting ASU 2017-11 on its financial statements and related disclosures.~~

~~In August 2016, the FASB issued ASU 2016-15,~~~~Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments~~, which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The standard is effective for fiscal ~~years~~year beginning ~~after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period.~~January 1, 2022. The adoption of this ~~update is~~ASU did not ~~expected to~~ have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

~~In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”,~~3. LIQUIDITY AND GOING CONCERN

The Company is a ~~new accounting standard~~clinical stage biotechnology company that requires recognition of revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. The FASB has ~~also issued several updates to ASU 2014-09. The new standard supersedes U.S. GAAP guidance on revenue recognition~~incurred recurring losses and ~~requires the use of more estimates and judgments than the present standards. It also requires additional disclosures regarding the nature, amount, timing and uncertainty of~~negative cash flows ~~arising~~ from ~~contracts with customers. Topic 606 is effective for our fiscal year 2019 beginning on November 1, 2018. We are still evaluating~~operations since commencing its biotechnology business in 2017. As of June 30, 2022, the ~~overall effect that~~Company had an accumulated deficit of $512.2 million. As of June 30, 2022, the ~~standard will have on our consolidated financial statements~~Company had cash and ~~accompanying notes to the consolidated financial statements.~~cash equivalents of $20.5 million. The Company has been funded historically through sales of equity and debt.

~~The accompanying~~These financial statements have been prepared on a going concern basis, which ~~contemplates~~assumes the ~~realization of~~Company will continue to realize its assets and ~~the satisfaction of~~settle its liabilities in the normal course of business. The ~~Company has experienced net~~Company’s significant operating losses and negative cash flows from operations during each of the last two fiscal years. The Company has experienced negative cash flows from continuing operations of approximately $5.1 million for the three months ended January 31, 2018. Given these negative cash flows and forecasted increased spending, the continuation of the Company as a going concern is dependent upon continued financial support from its shareholders, potential collaborations, the ability of the Company to obtain necessary equity and/or debt financing to continue operations, and the attainment of profitable operations. The Company cannot make any assurances that additional financings will be available to it and, if available, completed on a timely basis, on acceptable terms or at all. If the Company is unable to complete a debt or equity offering, execute a collaboration arrangement or otherwise obtain sufficient financing when and if needed, it would negatively impact its business and operations and could also lead to the reduction or suspension of the Company’s operations and ultimately force the Company to cease operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going ~~concern. These~~concern for at least one year from the date of issuance of these consolidated financial statements. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts ~~and classification~~or amounts of liabilities that might ~~be necessary should~~result from the ~~Company be unable to continue as a going concern.~~

~~Prepaid expenses and other current assets consist~~outcome of this uncertainty. Consequently, the ~~following (in thousands):~~

~~Depreciation expense for the three months ended January 31, 2018 and 2017 was approximately $256,000 and $83,000, respectively.~~

~~Accounts payable and accrued expenses consist of the following (in thousands):~~

~~Salaries and other compensation include accrued payroll expense and employer 401K plan contributions.~~

~~Convertible preferred stock as of January 31, 2018 consisted of the following (in thousands, except share amounts):~~

~~Convertible preferred stock as of October 31, 2017 consisted of the following (in thousands, except share amounts):~~

The Series A Convertible Preferred Stock (“Series A Preferred Shares”) is convertible into shares of common stock based on a conversion calculation equal to the stated value of such Series A Preferred Share, plus all accrued and unpaid dividends, if any, on such Series A Preferred Share, as of such date of determination, divided by the conversion price. The stated value of each Series A Preferred Share is $0.68 and the initial conversion price was $4.08 (current conversion price at January 31, 2018 is $3.00) per share, each subject to adjustment for stock splits, stock dividends, recapitalizations, combinations, subdivisions or other similar events. In addition, in the event the Company issues or sells, or is deemed to issue or sell, shares of its common stock at a per share price that is less than the conversion price then in effect, the conversion price shall be reduced to such lower price, subject to certain exceptions. Pursuant to the Certificate of Designations, Preferences and Rights of the 0% Series A Convertible Preferred Stock of PolarityTE, Inc., the Company is prohibited from incurring debt or liens, or entering into new financing transactions without the consent of the lead investor in the Company’s December 2016 private placement as long as any of the Series A Preferred Shares are outstanding. The Series A Preferred Shares bear no dividends.

The holders of Series A Preferred Shares shall vote together with the holders of common stock on all matters on an as if converted basis, subject to certain conversion and ownership limitations, and shall not vote as a separate class. Notwithstanding the foregoing, the conversion price for purposes of calculating voting power shall in no event be lower than $3.54 per share. At no time may all or a portion of the Series A Preferred Shares be converted if the number of shares of common stock to be issued pursuant to such conversion would exceed, when aggregated with all other shares of common stock owned by the holder at such time, the number of shares of common stock which would result in such Holder beneficially owning (as determined in accordance with Section 13(d) of the 1934 Act and the rules thereunder) more than 4.99% of all of the common stock outstanding at such time; provided, however, that the holder may waive the 4.99% limitation at which time he may not own beneficially own more than 9.99% of all the common stock outstanding at such time.

The Series A Preferred Shares do not represent an unconditional obligation to be settled in a variable number of shares of common stock, are not redeemable and do not contain fixed or indexed conversion provisions similar to debt instruments. Accordingly, the Series A Preferred Shares are considered equity hosts and recorded in stockholders’ equity.

The Series B Convertible Preferred Stock (“Series B Preferred Shares”) is convertible into shares of common stock based on a conversion calculation equal to the stated value of such Series B Preferred Shares, plus all accrued and unpaid dividends, if any, on such Series B Preferred Shares, as of such date of determination, divided by the conversion price. The stated value of each Series B Preferred Share is $140.00 and the initial conversion price is $8.40 per share, each subject to adjustment for stock splits, stock dividends, recapitalizations, combinations, subdivisions or other similar events. The Company is prohibited from effecting a conversion of the Series B Preferred Shares to the extent that, as a result of such conversion, such holder would beneficially own more than 4.99% of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the Series B Preferred Shares, which beneficial ownership limitation may be increased by the holder up to, but not exceeding, 9.99%. Subject to such beneficial ownership limitations, each holder is entitled to vote on all matters submitted to stockholdersfuture success of the Company depends on ~~an as converted basis, based~~its ability to attract additional capital and, ultimately, on ~~a conversion price of $8.40 per shares.~~its ability to successfully complete the regulatory approval process for its product, SkinTE, and develop future profitable operations. The Series B Preferred Shares rank junior to the Series A Preferred Shares and bear no dividends. The Series B Preferred Shares do not represent an unconditional obligation to be settled in a variable number of shares, are not redeemable and do not contain fixedCompany will seek additional capital through equity offerings or ~~indexed conversion provisions similar to~~ debt ~~instruments. Accordingly, the Series B Preferred Shares are considered equity hosts and recorded in stockholders’ equity.~~

~~The Series C Convertible Preferred Stock (“Series C Preferred Shares”) is convertible into shares of common stock based on a conversion calculation equal to the stated value of~~financing. However, such Series C Preferred Shares, plus all accrued and unpaid dividends, if any, on such Series C Preferred Shares, as of such date of determination, divided by the conversion price. The stated value of each Series C Preferred Share is $120.00 per share, and the initial conversion price was $7.20 (current conversion price was $5.16) per share, each subject to adjustment for stock splits, stock dividends, recapitalizations, combinations, subdivisions or other similar events. In addition, in the event the Company issues or sells, or is deemed to issue or sell, shares of common stock at a per share price that is less than the conversion price then in effect, the conversion price shall be reduced to such lower price, subject to certain exceptions and provided that the conversion pricefinancing may not be reduced to less than $5.16, unless and until such time as the Company obtains shareholder approval to allow for a lower conversion price. The Company is prohibited from effecting a conversion of the Series C Preferred Shares to the extent that, as a result of such conversion, a holder would beneficially own more than 4.99% of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the Series C Preferred Shares, which beneficial ownership limitation may be increased by the holder up to, but not exceeding, 9.99%. Subject to the beneficial ownership limitations discussed previously, each holder is entitled to vote on all matters submitted to stockholders of the Company and shall have the number of votes equal to the number of shares of common stock issuable upon conversion of such holder’s Series C Preferred Shares, based on a conversion price of $7.80 per share. The Series C Preferred Shares bear no dividends and shall rank junior to the Company’s Series A Preferred Shares but senior to the Company’s Series B Preferred Shares.

~~The Company evaluated the guidance ASC 480-10~~~~Distinguishing Liabilities from Equity~~ ~~and ASC 815-40~~~~Contracts in an Entity’s Own Equity~~ to determine the appropriate classification of the instruments. The Series C Preferred Shares do not represent an unconditional obligation to be settled in a variable number of shares of common stock, are not redeemable and do not contain fixed or indexed conversion provisions similar to debt instruments. Accordingly, the Series C Preferred Shares are considered equity hosts and recorded in stockholders’ equity.

The Series D Convertible Preferred Stock (“Series Preferred D Shares”) is convertible into shares of common stock based on a conversion calculation equal to the stated value of such Series Preferred D Shares, plus all accrued and unpaid dividends, if any, on such Series Preferred D Share, as of such date of determination, divided by the conversion price. The stated value Series Preferred D Shares is $1,000 per share and the initial conversion price is $600 per share, each subject to adjustment for stock splits, stock dividends, recapitalizations, combinations, subdivisions or other similar events. The Company is prohibited from effecting a conversion of the Series Preferred D Shares to the extent that, as a result of such conversion, such investor would beneficially own more than 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of the Series Preferred D Shares. Upon 61 days written notice, the beneficial ownership limitation may be increased by the holder up to, but not exceeding, 9.99%. Except as otherwise required by law, holders of Series D Preferred Shares shall not have any voting rights. Pursuant to the Certificate of Designations, Preferences and Rights of the 0% Series D Convertible Preferred Stock, the Series Preferred D Shares bear no dividends and shall rank senior to the Company’s other classes of capital stock.

On April 7, 2017, the Company issued 7,050 shares of its newly authorized Series E Convertible Preferred Stock (the “Series E Preferred Shares”) convertible into an aggregate of 7,050,000 shares of the Company’s common stock with a fair value of approximately $104.7 million which is equal to 7,050,000 common shares times $14.85 (the closing price of the Company’s common stock as of April 7, 2017) to Dr. Lough for the purchase of the Polarity NV’s assets.

The Preferred E Shares are convertible into shares of common stock based on a conversion calculation equal to the stated value of such Preferred E Shares, plus all accrued and unpaid dividends, if any as of such date of determination, divided by the conversion price. The stated value of each Preferred E Share is $1,000 and the initial conversion price is $1.00 per share, each subject to adjustment for stock splits, stock dividends, recapitalizations, combinations, subdivisions or other similar events. The Preferred E Shares, with respect to dividend rights and rights on liquidation, winding-up and dissolution, in each case will rank senior to the Company’s common stock and all other securities of the Company that do not expressly provide that such securities rank on parity with or senior to the Preferred E Shares. Until converted, each Preferred E Share is entitled to two votes for every share of common stock into which it is convertible on any matter submitted for a vote of stockholders. The Preferred E Shares participate on an “as converted” basis with all dividends declared on the Company’s common stock.

On September 20, 2017, the Company sold an aggregate of $17,750,000 worth of units (the “Units”) of the Company’s securities to accredited investors at a purchase price of $2,750 per Unit with each Unit consisting of (i) one share of the Company’s newly authorized 6% Series F Convertible Preferred Stock, par value $0.001 per share (the “Series F Preferred Shares”), which are convertible into one hundred (100) shares of the Company’s common stock, and (ii) a two-year warrant to purchase 322,727 shares of the Company’s common stock, at an exercise price of $30.00 per share. The Company incurred issuance costs of approximately $356,000 associated with the Unit offering, of which approximately $82,000 was allocated to the Series F Preferred Shares and netted against the proceeds. The remaining amount was allocated to the warrants and other embedded derivative and was expensed.

The Company entered into separate registration rights agreements, and subsequently amended such agreements, with each of the investors, pursuant to which the Company agreed to undertake to file a registration statement to register the resale of the conversion shares and warrant shares within 150 days of the closing of the transaction, to cause such registration statement to be declared effective by the Securities and Exchange Commission within ninety days following its filing and to maintain the effectiveness of the registration statement until all of such conversion shares and warrant shares have been sold or are otherwise able to be sold pursuant to Rule 144 under the Securities Act, without any restrictions. In the event the Company fails to file, or obtain effectiveness of, such registration statement with the specified period of time, the Company will be obligated to pay liquidated damages equal to the product of one 1% percent multiplied by the aggregate subscription amount paid by such investor for every thirty (30) days during which such filing is not made and/or effectiveness obtained, such fee being subject to certain exceptions, up to a maximum of six (6) percent.

Pursuant to the subscription agreements, for as long as the lead investor holds securities, except with certain issuances, the Company shall not incur any senior debt or issue any preferred stock with liquidation rights senior to the securities sold thereunder. During this period, the Company will not, without the consent of the investors holding a majority of the then issued and outstanding shares on the date of such consent (including the lead investor), enter into any equity line of credit or similar agreement, nor issue nor agree to issue any common stock, common stock equivalents, floating or variable priced equity linked instruments nor any of the foregoing or equity with price reset rights (subject to adjustment for stock splits, distributions, dividends, recapitalizations and the like).

The Series F Preferred Shares are convertible into shares of the Company’s common stock based on a conversion calculation equal to the stated value of the Series F Preferred Shares, plus all accrued and unpaid dividends, if any, on such Series F Preferred Shares, as of such date of determination, divided by the conversion price. The stated value of each share of Series F Preferred Shares is $2,750 and the initial conversion price is $27.50 per share, each subject to adjustment for stock splits, stock dividends, recapitalizations, combinations, subdivisions or other similar events.

Each holder of a Series F Preferred Share is entitled to receive dividends, in cash or in shares of the Company’s common stock on the stated value of each share at the dividend rate, which shall be cumulative and shall continue to accrue and compound quarterly whether or not declared and whether or not in any fiscal year there shall be net profits or surplus available for the payment of dividends in such fiscal year. Dividends are payable quarterly in arrears on the fifteenth (15th) day of the next applicable quarter, to the record holders of the Series F Preferred Shares on the last day of the calendar quarter immediately preceding the dividend payment date in shares of common stock, calculated using the VWAP of the common stock on the ninety (90) days immediately preceding the dividend record date; provided, however, that the Company may, at its option, pay dividends in cash or in a combination of common shares and cash.

Upon the liquidation, dissolution or winding up of the business of the Company, whether voluntary or involuntary, each holder of preferred shares shall be entitled to receive, for each share thereof, out of assets of the Company legally available therefor, a preferential amount in cash equal to (and not more than) $2,750.

On the two (2) year anniversary of the initial issuance date, any Series F Preferred Shares outstanding and not otherwise already converted, shall, at the option of the holder, either (i) automatically convert into common stock of the Company at the conversion price then in effect or (ii) be repaid by the Company based on the stated value of such outstanding Series F Preferred Shares. In addition, in the event that the Company’s common stock attains a consolidated bid price of $45 or greater for any four (4) trading days during any eight (8) trading day period, the Series F Preferred Shares shall be automatically converted to common stock, without any further action by the holder (subject to the conversion limitation in the event that such conversion would result in such holder holding in excess of four and ninety-nine one-hundredths (4.99%) percent of the common stock of the Company).future on favorable terms, if at all.

The warrants issued in connection with the Series F Preferred Shares are liabilities pursuant to ASC 815. The warrant agreement provides for an adjustment to the number of common shares issuable under the warrant and/or adjustment to the exercise price, including but not limited to, if: (a) the Company issues shares of common stock as a dividend or distribution to holders of its common stock; (b) the Company subdivides or combines its common stock (i.e., stock split); (c) adjustment of exercise price upon issuance of new securities at less than the exercise price. Under ASC 815, warrants that provide for down-round exercise price protection are recognized as derivative liabilities.

The conversion feature within the Series F Preferred Shares is not clearly and closely related to the identified host instrument and, as such, is recognized as a derivative liability measured at fair value pursuant to ASC 815.

The initial fair value of the warrants and bifurcated embedded conversion feature, estimated to be approximately $4.3 million and $9.3 million, respectively, was deducted from the gross proceeds of the Unit offering to arrive at the initial discounted carrying value of the Series F Preferred Shares. The resulting discount to the aggregate stated value of the Series F Preferred Shares of approximately $13.6 million will be recognized as accretion using the effective interest method similar to preferred stock dividends, over the two-year period prior to optional redemption by the holders. The Company recognized accretion of the discount to the stated value of the Series F Preferred Shares of approximately $904,000 in the three months ended January 31, 2018 as a reduction of additional paid-in capital and an increase in the carrying value of the Series F Preferred Shares. The accretion is presented in the Statement of Operations as a deemed dividend, increasing net loss to arrive at net loss attributable to common stockholders.

During the three months ended January 31, 2018, 1,544,572 Series A Preferred Shares, 2,578 Series C Preferred Shares and 26,667 Series D Preferred Shares were converted into 454,395 shares of common stock.

In accordance with ASC 820, Fair Value Measurements and Disclosures, financial instruments were measured at fair value using a three-level hierarchy which maximizes use of observable inputs and minimizes use of unobservable inputs:

In connection with the offering of Units in September 2017, the Company issued warrants to purchase an aggregate of 322,727 shares of common stock. These warrants are exercisable at $30.00 per share and expire in two years. The warrants are liabilities pursuant to ASC 815. The warrant agreement provides for an adjustment to the number of common shares issuable under the warrant and/or adjustment to the exercise price, including but not limited to, if: (a) the Company issues shares of common stock as a dividend or distribution to holders of its common stock; (b) the Company subdivides or combines its common stock (i.e., stock split); (c) adjustment of exercise price upon issuance of new securities at less than the exercise price. Under ASC 815, warrants that provide for down-round exercise price protection are recognized as derivative liabilities.

The Series F Preferred Shares contain an embedded conversion feature that is not clearly and closely related to the identified host instrument and, as such, is recognized as a derivative liability measured at fair value. The Company classifies these derivatives on the consolidated balance sheet as a current liability.

The fair value of the bifurcated embedded conversion feature was estimated to be approximately $7.4 million and $9.2 million, respectively, at January 31, 2018 and October 31, 2017 as calculated using the Monte Carlo simulation with the following assumptions:

The fair value of the warrant liability was estimated to be approximately $2.8 million and $4.3 million, respectively, at January 31, 2018 and October 31, 2017 as calculated using the Monte Carlo simulation with the following assumptions:

Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. There were no transfers within the hierarchy for any of the periods presented.

The following table sets forth the fair value of the Company’s financial assets and liabilities measured on a recurring basis by level within the fair value hierarchy ~~of financial instruments, measured~~(in thousands):

The Company assesses its assets held for sale, long-lived assets, including property, plant, and equipment and ROU assets at fair value on a ~~recurring~~non-recurring basis. The Company reviews the carrying amounts of such assets when events indicate that their carrying amounts may not be recoverable. Any resulting impairment would require that the asset be recorded at its fair value. During the six months ended June 30, 2022, the Company recognized an impairment charge of $0.1 million related to equipment classified in assets held for sale. During the six months ended June 30, 2021, the Company recognized an impairment charge of $0.4 million related to property and equipment. As of each measurement date, the fair value of assets held for sale and property and equipment was determined utilizing Level 3 inputs and were based on a market approach. See Notes 7 and Note 15 for additional details.

The following table presents the change in fair value of the liability classified common stock warrants for the six months ended June 30, 2022 (in thousands):

The following table presents the change in fair value of the liability classified common stock warrants for the six months ended June 30, 2021 (in thousands):

The Company uses the Monte Carlo simulation model to determine the fair value of the liability classified warrants. Input assumptions used to measure the fair value of these freestanding instruments are as follows:

In November 2021, the Company committed to a plan to sell a variety of lab equipment within the regenerative medicine products reporting segment. The lab equipment has been designated as held for sale and is presented as such within the condensed consolidated balance sheet as of December 31, 2021 and June 30, 2022. During the six months ended June 30, 2022 the Company recorded an impairment of $0.1 million related the lab equipment designated as held for sale within the regenerative medicine products reporting segment.

At the beginning of May 2018, the Company acquired a preclinical research and veterinary sciences business, which has been used for preclinical studies on the Company’s regenerative tissue products and to offer preclinical research services to unrelated third parties on a contract basis. The Company operated this business through its indirect subsidiary, IBEX Preclinical Research, Inc. (“IBEX”). Utah CRO Services, Inc., a Nevada corporation (“Utah CRO”), is a direct subsidiary of the Company and held all the outstanding capital stock of IBEX (the “IBEX Shares”). Utah CRO also holds all the member interest of IBEX Property LLC, a Nevada limited liability company (“IBEX Property”), that owned two unencumbered parcels of real property in Logan, Utah, consisting of approximately 1.75 combined gross acres of land, together with the buildings, structures, fixtures, and personal property (the “Property”), which was leased by IBEX Property to IBEX for IBEX to conduct its preclinical research and veterinary sciences business.

In March 2022, the Company reached a nonbinding understanding with an unrelated third party that contemplated the sale of IBEX, which operates within the contract services reporting segment, along with IBEX Property. The assets and liabilities related to IBEX were designated as held for sale. The Company measured the assets and liabilities held for sale at the lower of their carrying value or fair value less costs to sell. The operating results of IBEX did not qualify for reporting as discontinued operations.

On April 14, 2022, Utah CRO entered into a Stock Purchase Agreement (the “Stock Agreement”) with an unrelated third party (“Buyer”), pursuant to which Utah CRO agreed to sell all the outstanding IBEX Shares to Buyer in exchange for an unsecured promissory note in the principal amount of $0.4 million bearing simple interest at the rate of 10% per annum with interest only payable on a quarterly basis and all principal and remaining accrued interest due on thefive-year anniversary of the closing of the sale of the IBEX Shares to Buyer. Furthermore, on April 14, 2022, IBEX Property entered into a Real Estate Purchase and Sale Agreement (the “Real Estate Agreement”) with another unrelated third party (“Purchaser”) pursuant to which IBEX Property agreed to sell to Purchaser the Property at a gross purchase price of $2.8 million payable in cash at closing of the transaction. The Buyer and Purchaser are affiliates of each other as a result of common ownership. On April 28, 2022, the parties to the Stock Agreement and Real Estate Agreement closed the transactions contemplated thereby and on April 29, 2022, the Company received the promissory note described above in the principal amount of $0.4 million and net cash proceeds of $2.3 million, after deducting closing costs and advisory fees, from sale of the Property under the Real Estate Agreement. As of a result of this transaction, the Company recorded $0.4 million as a long-term note receivable in other assets within the accompanying condensed consolidated balance sheets as of ~~January~~June 30, 2022. As the sale price less cost to sell was greater than the carrying value of these assets the Company recognized an insignificant net gain on sale in the second quarter of fiscal year 2022 in other income, net within the accompanying condensed consolidated statement of operations and comprehensive loss for the three and six months ended June 30, 2022.

The following table presents the major components of prepaid expenses and other current assets (in thousands):

The following table presents the components of property and equipment, net (in thousands):

The Company sold SkinTE under Section 361 of the Public Health Service Act in 2020 and into 2021 and, after the Company’s decision to file an IND under Section 351 of that Act, under an enforcement discretion position stated by the FDA in a regenerative medicine policy framework to help facilitate regenerative medicine therapies. The FDA’s stated period of enforcement discretion ended May 31, ~~2018~~2021. Consequently, the Company terminated commercial sales of SkinTE on May 31, 2021, and ~~October 31, 2017~~ceased its SkinTE commercial operations. As a result, there are no product sales from commercial SkinTE after June 2021 and the Company has eliminated or reduced costs associated with commercial sale of SkinTE.

The Company evaluated the future use of its commercial property and equipment and recorded an impairment charge of approximately $0.4 million during the six months ended June 30, 2021. The impairment charge occurred within the Company’s regenerative medicine products business segment and is included in restructuring and other charges within the accompanying condensed consolidated statement of operations and comprehensive loss for the six months ended June 30, 2021. See Note 15.

Depreciation and amortization expense for property and equipment, including assets acquired under financing leases was as follows (in thousands):

The Company leases facilities and certain equipment under noncancelable leases that expire at various dates through November 2024. These leases require monthly lease payments that may be subject to annual increases throughout the lease term. Certain of these leases may include options to extend or terminate the lease at the election of the Company. These optional periods have not been considered in the determination of the right-of-use-assets or lease liabilities associated with these leases as the Company did not consider it reasonably certain it would exercise the options.

On December 27, 2017, the Company entered into a commercial lease agreement (the “Lease”) with Adcomp LLC (the “Landlord”) pursuant to which the Company leases approximately 178,528 rentable square feet of warehouse, manufacturing, office, and lab space in Salt Lake City, Utah (the “Property”) from the landlord. The initial term of the Lease is five years and it expires on November 30, 2022. The Company has a one-time option to renew for an additional five years and an option to purchase the Property at a purchase price of $17.5 million. The initial base rent under the Lease is $98,190 per month ($0.55 per sq. ft.) for the first year of the initial lease term and increases 3.0% per annum thereafter. Because the rate implicit in the lease is not readily determinable, the Company has used an incremental borrowing rate of 10% to determine the present value of the lease payments.

On December 16, 2021, the Company gave written notice to the Landlord of its election to exercise the option to purchase the Property, and on March 14, 2022, the Company and Landlord entered into a definitive purchase and sale agreement that provides for a closing of the transaction on November 15, 2022 (the “Purchase Agreement”). In connection with exercising the option to purchase the Property, the Company made an earnest money deposit of $150,000 that may be refunded if closing conditions or contingencies running in the Company’s favor are not satisfied or the Landlord defaults in its obligations under the lease or the purchase agreement for the Property. On October 25, 2021, the Company signed a Purchase and Sale Agreement, the terms of which were finalized on December 10, 2021, and subsequently amended by Amendment No. 1 thereto dated March 15, 2022 (the “BCG Agreement”), with BCG Acquisitions LLC (“BCG”). Under the BCG Agreement the Company agreed to sell the Property to BCG or its assigns for $17.5 million after the Company’s purchase of the Property from the Landlord. Under the BCG Agreement, BCG made an initial earnest money deposit totaling $200,000, which the parties subsequently agreed to reduce to $150,000, that will be refunded if the Company is unable to complete the purchase of the Property from the Landlord under the Purchase Agreement on a timely basis, closing conditions or contingencies running in favor of BCG are not satisfied, or the Company defaults in its obligations under the BCG Agreement. Closing of the foregoing transactions are subject to a number of risks and uncertainties including, but not limited to, satisfaction of all closing conditions, including obtaining financing for the purchase, and closing on the purchase of the Property from the Landlord under the Purchase Agreement, and satisfaction of all closing conditions, including obtaining financing for the purchase, and closing on the sale of the Property to BCG under the BCG Agreement.

In April 2019, the Company entered into an operating lease to obtain 6,307 square feet of manufacturing, laboratory, and office space. The lease provided for monthly lease payments subject to annual increases and had an expiration date in April 2024. During 2020, the Company initiated a business analysis to determine the long-term strategy of the remote facility and cost to remain operational. It was determined that the Company would cease operations and vacate the facility. The Company terminated the lease on June 30, 2021.

In November 2021, the Company entered into an operating lease to obtain office equipment with Pacific Office Automation, Inc. The ~~following table sets forth~~initial term of the ~~changes~~lease is three years and it expires on November 2024. The initial base rent under this lease is $3,983 per month for the entire lease term and includes a cash incentive of $0.1 million. Because the rate implicit in the ~~estimated fair~~lease is not readily determinable, the Company has used an incremental borrowing rate of 7.42% to determine the present value ~~for our Level 3 classified derivative warrant liability (in thousands):~~of the lease payments.

In ~~the three months ended January 31,~~November 2018 and ~~2017,~~April 2019, the Company ~~recorded stock-based compensation expense related~~entered into financing leases primarily for laboratory equipment used in research and development activities. The financing leases have remaining terms that range from less than 1 month to ~~restricted stock awards~~22 months as of June 30, 2022 and ~~stock~~include options to purchase equipment at the end of the lease. Because the rate implicit in the lease is not readily determinable, the Company has used an incremental borrowing rate of 10% to determine the present value of the lease payments for these leases.

As of June 30, 2022, the maturities of operating and finance lease liabilities were as follows (in thousands):

~~A summary of the Company’s employee stock option activity in the three months ended January 31, 2018 is presented below:~~

~~A summary of the Company’s non-employee stock option activity in the three months ended January 31, 2018 is presented below:~~

Stock options are generally granted to employees or non-employees at exercise prices equal to the fair market value of the Company’s stock at the dates of grant. Stock options generally vest over one to three years and have a term of five to ten years. The total fair value of employee options granted during the three months ended January 31, 2018 was approximately $17.1 million. The intrinsic value of options outstanding at January 31, 2018 was $54.7 million. The intrinsic value of options exercised during the three months ended January 31, 2018 was $141,000. The weighted average remaining contractual term of outstanding and exercisable options at January 31, 2018 was 9.1 years and 8.9 years, respectively. As of January 31, 2018, there was approximately $18.3 million of unrecognized compensation costSupplemental balance sheet information related to ~~stock options, which is expected to be recognized over a remaining weighted-average vesting period of 0.8 years.~~leases was as follows (in thousands):

SCHEDULE OF SUPPLEMENTAL BALANCE SHEET INFORMATION RELATED TO FINANCE AND OPERATING LEASES

~~NOTES~~Supplemental cash flow information related to leases was as follows (in thousands):

SCHEDULE OF SUPPLEMENTAL CASH FLOW INFORMATION RELATED TO ~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~LEASES

~~The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions for the three months ended January 31, 2018:~~

~~Restricted stock and restricted stock units activity for employees and non-employees in the fiscal year ended October 31, 2017:~~

~~The total fair value of restricted stock and restricted stock units granted during the three months ended January 31, 2018 was approximately $2.5 million.~~

The value of restricted stock and restricted stock unit grants is measured based on the fair market value of the Company’s common stock on the date of grant and amortized over the vesting period of, generally, six months to three years. As of ~~January~~June 30, 2022 and December 31, ~~2018, there~~2021, the weighted average remaining lease term for operating leases was ~~approximately $2.1 million of unrecognized compensation cost related to unvested restricted stock~~0.7 and ~~restricted stock unit awards, which is expected to be recognized over a remaining weighted-average vesting period of 0.5 years.~~

~~The Company calculates its provision~~1.0 years, respectively, and the weighted average discount rate used for ~~federal~~operating leases was 9.63% and ~~state income taxes based on current tax law. The Tax Cuts and Jobs Act (tax reform) was enacted on December 22, 2017 (“Enactment Date”)~~9.96%, and has several key provisions impacting accounting for and reporting of income taxes. The most significant provision reduces the U.S. corporate statutory tax rate from 35% to 21% beginning on January 1, 2018. Although most provisions of tax reform are not effective until 2018, the Company is required to record the effect of a change in tax law as of the Enactment Date on its deferred tax assets. As the Company maintains a full valuation allowance against its deferred tax assets, there is no income tax expense recorded related to this change.respectively. As of June 30, 2022 and December 31, 2021, the ~~Enactment Date,~~weighted average remaining lease term for finance leases was 1.7 and 2.0 years, respectively, and the ~~Company estimates that its deferred tax asset~~weighted average discount rate used for finance leases was 9.63%, respectively.

The following table presents the major components of accounts payable and ~~related valuation allowance were each reduced by approximately $2.2 million.~~accrued expenses (in thousands):

Additionally, the Securities Exchange Commission staff has issued SAB 118, which allows the Company to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. Because the Company is still in the process of analyzing certain provisions of the Tax Act, the Company has determined that the adjustment to its deferred taxes was a provisional amount as permitted under SAB 118.

Due to the Company’s history of losses and uncertainty of future taxable income, a valuation allowance sufficient to fully offset net operating losses and other deferred tax assets has been established. The valuation allowance will be maintained until sufficient positive evidence exists to support a conclusion that a valuation allowance is not necessary. The issuance of Preferred Stock in connection with the Polarity acquisition will likely result in limitations on the utilization of the Company’s net operating loss carryforwards under IRS section 382.

Shares of common stock issuable under convertible preferred stock, warrants and options and shares subject to restricted stock grants were not included in the calculation of diluted earnings per common share for the three months ended January 31, 2018 and 2017, as the effect of their inclusion would be anti-dilutive.

For periods when shares of participating preferred stock (as defined in ASC 260 earnings per share) are outstanding, the two-class method is used to calculate basic and diluted earnings (loss) per common share. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. Under the two-class method, basic earnings (loss) per common share is computed by dividing net earnings (loss) attributable to common share after allocation of earnings to participating securities by the weighted-average number of shares of common stock outstanding during the year. Diluted earnings (loss) per common share, when applicable, is computed using the more dilutive of the two-class method or the if-converted method. In periods of net loss, no effect is given to participating securities since they do not contractually participate in the losses of the Company.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~The following table presents the major components of other current liabilities (in thousands):

The ~~table below~~short-term financing balance is related to a financing arrangement entered into during the six months ended June 30, 2022 to fund an insurance contract. Under the financing arrangement, the amounts will be repaid in nine equal monthly installments, with an interest rate of 3.85%.

On October 25, 2019, the Company’s Board of Directors (the “Board”) approved the Company’s 2020 Stock Option and Incentive Plan (the “2020 Plan”). The 2020 Plan became effective on December 19, 2019, the date approved by the stockholders. The 2020 Plan provides ~~total potential~~for the grant of incentive stock options, nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights, unrestricted stock awards, dividend equivalent rights, and cash-based awards to the Company’s employees, officers, directors, and consultants. The Board designated the Compensation Committee of the Board the administrator of the 2020 Plan, including determining which eligible participants will receive awards, the number of shares ~~outstanding, including those~~of common stock subject to the awards and the terms and conditions of such awards. Up to 419,549 shares of common stock are issuable pursuant to awards under the 2020 Plan. No grants of awards may be made under the 2020 Plan after the later of December 19, 2029, or the tenth anniversary of the latest material amendment of the 2020 Plan and no grants of incentive stock options may be made after October 25, 2029. The 2020 Plan provides that ~~are anti-dilutive,~~effective on January 1 of each year the number of shares of common stock reserved and available for issuance under the 2020 Plan shall be cumulatively increased by the lesser of 4% of the number of shares of common stock issued and outstanding on the immediately preceding December 31 or such lesser number of shares as determined by the 2020 plan administrator. Pursuant to the 2020 Plan, the number of shares of common stock available for issuance increased by 131,872 shares during January 2022. As of June 30, 2022, the Company had 166,878 shares available for future issuances under the 2020 Plan.

On October 5, 2018, the Company’s Board approved the Company’s 2019 Equity Incentive Plan (the “2019 Plan”). The 2019 Plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights and ~~2017:~~other types of stock-based awards to the Company’s employees, officers, directors, and consultants. The Board designated the Compensation Committee of the Board the administrator of the 2019 Plan, including determining which eligible participants will receive awards, the number of shares of common stock subject to the awards and the terms and conditions of such awards. Up to 120,000 shares of common stock are issuable pursuant to awards under the 2019 Plan. Unless earlier terminated by the Board, the 2019 Plan shall terminate at the close of business on October 5, 2028. As of June 30, 2022, the Company had 2,374 shares available for future issuances under the 2019 Plan.

January 31,
2018 2017
Shares issuable upon exercise of warrants 322,727 -
Shares issuable upon conversion of preferred stock 8,853,413 2,357,232
Shares issuable upon exercise of stock options 4,804,069 2,922,020
Non-vested shares under restricted stock grants 232,583 640,184

On December 1, 2016, the Company��s Board approved the Company’s 2017 Equity Incentive Plan (the “2017 Plan”). The purpose of the 2017 Plan is to promote the success of the Company and to increase stockholder value by providing an additional means through the grant of awards to attract, motivate, retain and reward selected employees, consultants and other eligible persons. The 2017 Plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights and other types of stock-based awards to the Company’s employees, officers, directors, and consultants. The Board designated the Compensation Committee of the Board the administrator of the 2017 Plan, including determining which eligible participants will receive awards, the number of shares of common stock subject to the awards and the terms and conditions of such awards. Up to 292,000 shares of common stock are issuable pursuant to awards under the 2017 Plan. Unless earlier terminated by the Board, the 2017 Plan shall terminate at the close of business on December 1, 2026. As of June 30, 2022, the Company had 23,819 shares available for future issuances under the 2017 Plan.

A summary of the Company’s employee and non-employee stock option activity is presented below:

In May 2018, the Company adopted the Employee Stock Purchase Plan (“ESPP”). The Company has initially reserved 20,000 shares of common stock for purchase under the ESPP. The initial offering period began January 1, 2019, and ended on June 30, 2019, with the first purchase date. Subsequent offering periods will automatically commence on each January 1 and July 1 and will have a duration of six months ending with a purchase date June 30 and December 31 of each year. On each purchase date, ESPP participants will purchase shares of common stock at a price per share equal to 85% of the lesser of (1) the fair market value per share of the common stock on the offering date or (2) the fair market value of the common stock on the purchase date.

A summary of the Company’s employee and non-employee restricted stock activity is presented below:

The stock-based compensation expense related to stock options, restricted stock awards, and the employee stock purchase plan was as follows (in thousands):

SCHEDULE OF SHARE-BASED COMPENSATION RELATED TO RESTRICTED STOCK AWARDS AND STOCK OPTIONS

On ~~February 26, 2015,~~September 24, 2021, a class action complaint ~~for patent infringement~~alleging violations of the Federal securities laws was filed in the United States District Court, ~~for the Eastern~~ District of ~~Texas~~Utah, by ~~Richard Baker,~~Marc Richfield against the Company and certain officers of the Company, Case No. 2:21-cv-00561-BSJ. The Court subsequently appointed a Lead Plaintiff and ordered the Lead Plaintiff to file an ~~individual residing~~amended Complaint by February 7, 2022, which was extended to February 21, 2022. The Lead Plaintiff filed an amended complaint on February 21, 2022, against the Company, two current officers of the Company, and three former officers of the Company (the “Complaint”). The Complaint alleges that during the period from January 30, 2018, through November 9, 2021, the defendants made or were responsible for, disseminating information to the public through reports filed with the Securities and Exchange Commission and other channels that contained material misstatements or omissions in ~~Australia, against Microsoft, Nintendo, Majesco Entertainment Company (“Majesco DE”),~~violation of Sections 10(b) and ~~a number~~20(a) of ~~other game publisher defendants. The complaint alleged~~the Securities and Exchange Act of 1934, as amended, and Rule 10b-5 adopted thereunder. Specifically, the Complaint alleges that the ~~Zumba Fitness Kinect game infringed plaintiff’s patents~~defendants misrepresented or failed to disclose that: (i) the Company’s product, SkinTE, was improperly registered as a 361 HCT/P under Section 361 of the Public Health Service Act and that, as a result, the Company’s ability to commercialize SkinTE as a 361 HCT/P was not sustainable because it was inevitable SkinTE would need to be registered under Section 351 of the Public Health Service Act; (ii) the Company characterized itself as a commercial stage company when it knew sales of SkinTE as a 361 HCT/P were unsustainable and that, as a result, it would need to file an IND and become a development stage company; (iii) issues arising from an FDA inspection of the Company’s facility in ~~motion tracking technology. The plaintiff is representing himself pro se~~July 2018, were not resolved even though the Company stated they were resolved; and (iv) the IND for SkinTE was deficient with respect to certain chemistry, manufacturing, and control items, including items identified by the FDA in July 2018, and as a result it was unlikely that the FDA would approve the IND in the ~~litigation~~form it was originally filed. The Company filed a motion to dismiss the complaint for failure to state a claim, on April 22, 2022. The Lead Plaintiff filed its memorandum in opposition to the Company’s motion to dismiss on July 18, 2022. The Company is required to file its reply memorandum to the Lead Plaintiff’s opposition memorandum by August 11, 2022, and oral argument on the motion to dismiss is ~~seeking monetary damages~~scheduled for September 8, 2022. We cannot predict when the Court may issue its decision. The Company believes the allegations in the ~~amount of $1.3 million. The case was subsequently transferred~~Complaint are without merit, and intends to defend the ~~Western District of Washington. On June 16, 2017, final judgment was entered in favor~~litigation, vigorously. At this early stage of the ~~defendants. The plaintiff has appealed that decision~~proceedings, we are unable to the Court of Appeals for the Federal Circuit. The appeal is currently pending. On June 23, 2017, as part of a purchase agreement, liabilities and claims relating to this litigation were assumed by Zift Interactive LLC. The Company cannot be certain aboutmake any prediction regarding the outcome of the ~~appeal,~~litigation.

On October 25, 2021, a stockholder derivative complaint alleging violations of the Federal securities laws was filed in the United States District Court, District of Utah, by Steven Battams against the Company, each member of the Board of directors, and two officers of the Company, Case No. 2:21-cv-00632-DBB (the “Stockholder Derivative Complaint”). The Stockholder Derivative Complaint alleges that the defendants made, or ~~whether litigation~~were responsible for, disseminating information to the public through reports filed with the Securities and Exchange Commission and other channels that contained material misstatements or omissions in violation of Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934, as amended, and Rule 10b-5 adopted thereunder. Specifically, the Stockholder Derivative Complaint alleges that the defendants misrepresented or failed to disclose that: (i) the IND for the Company’s product, SkinTE, filed with the FDA was deficient with respect to certain chemistry, manufacturing, and control items; (ii) as a result, it was unlikely that the FDA would approve the IND in its current form; (iii) accordingly, the Company had materially overstated the likelihood that the SkinTE IND would obtain FDA approval; and (Iv) as a result, the public statements regarding the ~~assumption~~IND were materially false and misleading. The parties have stipulated to stay the Stockholder Derivative Complaint until (1) the dismissal of ~~liabilities by Zift Interactive LLC may occur.~~

~~In addition~~the Complaint described above, (2) denial of a motion to dismiss the Complaint, or (3) notice is given that any party is withdrawing its consent to the ~~item above,~~stipulated stay of the Stockholder Derivative Complaint proceeding. At this early stage of the proceedings the Company ~~at times may be a party~~is unable to ~~claims and suits in~~make any prediction regarding the outcome of the litigation.

In the ordinary course of business. We record a liability when it is both probable that a liability has been incurred and the amount of the loss or range of loss can be reasonably estimated. The Company has not recorded a liability with respect to the matter above. Whilebusiness, the Company ~~believes~~may become involved in lawsuits, claims, investigations, proceedings, and threats of litigation relating to intellectual property, commercial arrangements, employment, regulatory compliance, and other matters. Except as noted above, at June 30, 2022, the Company was not party to any legal or arbitration proceedings that it has valid defenses with respect to the legal matter pending and intends to vigorously defend the matter above, given the uncertainty surrounding litigation and our inability to assess the likelihood of a favorable or unfavorable outcome, it is possible that the resolution of the matter couldmay have ~~a material adverse effect~~significant effects on ~~our consolidated~~its financial position ~~cash flows~~ or results of operations.

No governmental proceedings are pending or, to the Company’s knowledge, contemplated against the Company. The Company ~~leases office space~~is not a party to any material proceedings in ~~Hazlet, New Jersey at~~which any director, member of senior management or affiliate of the Company’s is either a ~~cost of approximately $1,100 per month under a lease agreement that expires on March 31, 2018. This lease has been renewed for another year.~~

~~The Company also leases space in Salt Lake City, Utah at a cost of approximately $24,044 per month under a lease agreement that expires on March 31, 2018.~~

~~On December 27, 2017,~~party adverse to the Company ~~signed~~or its subsidiaries or has a ~~five-year lease with one five-year option~~material interest adverse to ~~renew on approximately 178,528 rentable square feet. The base rent for~~ the ~~first year of the lease is $1,178,285 and escalates at the rate of 3% per annum thereafter.~~Company or its subsidiaries.

~~Rent expense for the three months ended January 31, 2018 and 2017 was approximately $249,000 and $17,000, respectively.~~Commitments

The Company has entered into employment agreements with key executives that contain severance terms and change of control provisions.

On September 2, 2020, Arches Research, Inc., a subsidiary of PolarityTE, Inc. (“Arches”) entered into two agreements with Co-Diagnostics, Inc. (“Co-Diagnostics”). The COVID-19 Laboratory Services Agreement between the parties provided that Arches would perform specimen testing services for customers referred by Co-Diagnostics to Arches. Co-Diagnostics would arrange all logistics for delivering specimens to Arches for COVID-19 testing for those customers of Co-Diagnostics electing to use the service. Arches would bill Co-Diagnostics for the testing services and Co-Diagnostics would manage all customer billing. The Rental Agreement for LGC Genomics Oktopure Extraction Machine between Arches and Co-Diagnostics provided that Co-Diagnostics would make available to Arches the Oktopure high throughput extraction machine that Arches will use to perform COVID-19 testing. The term of the rental agreement was 12 months and required Arches to use Co-Diagnostics tests exclusively in the machine. In ~~January 2015,~~the second quarter of 2021, the rental agreement was amended to remove the minimum monthly purchase obligation of reagents and was replaced by a $3,300 monthly rental fee. The COVID-19 Laboratory Services Agreement could be canceled by the Company ~~entered into an agreement with Equity Stock Transfer LLC for transfer agent services. A former Board member~~at any time by providing 60 days written notice, and the Rental Agreement could be canceled at any time by written notice given within 60 days after termination of the Laboratory Services Agreement. On May 27, 2021, the Company ~~is a co-founder~~gave written notice to Co-Diagnostics of termination of the COVID-19 Laboratory Services Agreement, so the last day of that agreement was July 26, 2021, and ~~chief executive officer~~no longer in effect on July 27, 2021. On July 27, 2021, the Company gave written notice to Co-Diagnostics of ~~Equity Stock Transfer LLC. Fees under~~termination of the Rental Agreement, so the last day of that agreement ~~were approximately $0 and $2,000, in the three months ended January 31, 2018 and 2017, respectively.~~was July 29, 2021.

~~The results~~On June 25, 2021, the Company entered into a statement of ~~operations from~~work with a contract research organization to provide services for a proposed clinical trial described as a multi-center, prospective, randomized controlled trial evaluating the ~~discontinued business~~effects of SkinTE in the treatment of full-thickness diabetic foot ulcers at a cost of approximately $6.5 million consisting of $3.1 million of service fees and $3.4 million of estimated costs. In July 2021 the Company prepaid 10% of the total cost recited in the original work order, or $0.5 million, which will be applied to payment of the final invoice under the work order. Over the approximately three-year term of the clinical trial the service provider shall submit to the Company for payment invoices on a monthly basis for units of work stated in the work order that are completed and billable expenses incurred. During the three and six months ended ~~January 31, 2018~~June 30, 2022, the Company received invoices for work performed and ~~2017 are as follows (in thousands):~~expenses incurred totaling $0.3 and $0.5 million, respectively. Either party may terminate the agreement without cause on 60 days’ notice to the other party.

On August 21, 2019, the Company and Dr. Denver Lough, a principal shareholder and former officer and director, signed a settlement terms agreement that provides, in part, that the Company pay to Dr. Lough $1,500,000 in cash on October 1, 2019 and an additional $1,500,000 in cash in equal monthly installments beginning November 1, 2019 and ending April 1, 2021. In addition, the Company agreed to award to Dr. Lough 200,000 restricted stock units that vest in 18 equal monthly installments beginning October 1, 2019. As of June 30, 2022, the Company has no remaining liability related to future cash payments under the agreement. The ~~cash flows from~~fair value of the ~~discontinued business for the three months ended January 31, 2018~~restricted stock units was $0.8 million and ~~2017 are as follows (in thousands):~~was fully expensed upon Dr. Lough’s termination.

~~On March 2,~~In October 2018, the Company entered into an ~~asset purchase agreement (the “APA”) with~~office lease covering approximately 7,250 square feet of rental space in the building located at 40 West 57^th Street in New York City. The lease is for a Utah limited liability company (“Seller”), along with its related entity (“Seller Corp.”), wherein Seller Corp. agreed to sell the assets and rights to its preclinical research and veterinary sciences business and related real estate (as more fully described below)term of three years. The annual lease rate is $60 per square foot. Initially the Company would occupy and pay for only 3,275 square feet of space, and the Company was not obligated under the lease to pay for the remaining 3,975 square feet covered by the lease unless it elected to occupy that additional space. The Company believes the terms of the lease were very favorable to it, and the Company obtained the favorable terms through the assistance of Peter A. Cohen, a director, which he provided so that the company he owns, Peter A. Cohen, LLC (“Cohen LLC”), could sublease a portion of the office space. The lease expired on October 31, 2021. The Company recognized 0 and $55,000 of sublease income for the three months ended June 30, 2022 and 2021, respectively, and 0 and $109,000 for the six months ended June 30, 2022 and 2021, respectively. The sublease income is included in other income, net in the condensed consolidated statement of operations and comprehensive loss.

Reportable segments are presented in a manner consistent with the internal reporting provided to the chief operating decision maker (CODM), the Chief Executive Officer of the Company. The CODM allocates resources to and assesses the performance of each segment using information about its revenue and operating income (loss). The Company’s operations involve products and services which are managed separately. Accordingly, it operates in two segments: 1) regenerative medicine products and 2) contract services. In April 2022, the Company sold IBEX and IBEX Property, the Company’s subsidiaries which operate within the contract services reporting segment. The remaining contract services business ~~consists of~~is no longer a “~~good laboratory practices~~~~” (GLP) compliant preclinical research facility, including vivarium, operating rooms, preparation rooms, storage facilities, and surgical and imaging equipment. A broad range of veterinary~~reportable segment due to immateriality. Contract services ~~related to orthopedics, soft tissue surgery, neurosurgery, and non-surgical research and development are performed at the facilities and are intended~~ceased to be ~~utilized by the Company to expand its research~~a reportable segment upon disposal of IBEX and ~~development capabilities for development of its skin, bone, muscle, cartilage, fat, and other technologies and derivative products and technologies related~~historical information from prior to the ~~Company’s “TE” technology pipeline. The Company also intends to continue to operate and expand the contract preclinical research business currently operated by the Seller.~~disposal date is reported here. See Note 5 for detail on management’s disposal of IBEX.

Pursuant to the APA, the $1.6 million purchase price is payable as follows: $266,667 payable in cash and a promissory note for approximately $1.3 million. payable in 5 equal installments beginning on the six (6) month anniversary of issuance and continuing on each 6-month anniversary thereafter with interest at the rate of 3.5% per annum.

Concurrently with the execution and delivery of the APA, on March 2, 2018, the Company entered into a purchase and sale agreement with Seller to purchase two parcels of real property in Cache County, Utah, consisting of approximately 1.75 combined gross acres of land including all related rights, real and personal property on the land (collectively, the “Property”).

~~POLARITYTE, INC.~~Certain information concerning the Company’s segments is presented in the following tables (in thousands):

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~SCHEDULE OF SEGMENT INFORMATION

The ~~purchase price~~holder of the pre-funded warrants sold in the registered direct offering that closed on June 8, 2022, exercised pre-funded warrants for the ~~Property is $2.0 million, is payable $25,000 in cash and the remaining will be deposited by the Company into escrow pursuant to a loan to be obtained by the Company from a lender~~purchase of ~~its choice.~~

~~Exchange of 100% of Outstanding Series F Preferred Stock Shares and Warrants~~

On March 6, 2018, the Company entered into separate exchange agreements (the “Exchange Agreements”) with holders (each a “Holder”, and collectively the “Holders”) of 100% of the Company’s outstanding Series F Preferred Shares, and the Company’s warrants to purchase545,000 shares of the Company’s common stock ~~issued in connection with~~at a total purchase price of $545.00 on July 13, 2022, pre-funded warrants for the Series F Preferred Shares (such “Warrants” and Series F Preferred Shares collectively referred to as the “Exchange Securities”) to exchange the Exchange Securities and unpaid dividends on the Series F Preferred Shares, for common stock (the “Exchange”).

~~The Exchange resulted in the following issuances: (A) all outstanding Series F Preferred Shares were converted into 972,067~~purchase of 105,000 shares of ~~restricted~~the Company’s common stock at ~~an effective conversion~~a total purchase price of ~~$18.26 per share~~$105.00 on August 1, 2022, and pre-funded warrants for the purchase of359,159 shares of the Company’s common stock ~~(the closing~~at a total purchase price of ~~Common Stock~~$359.16 on the NASDAQ Capital Market on February 26, 2018); (B) the right to receive 6% dividends underlying Series F Preferred Shares was terminated and in exchange 31,324 shares of restricted common stock was issued; (C) 322,727 Warrants to purchase common stock was exchanged for 151,872 shares of restricted common stock; and (D) the Holders of the Warrants relinquished any and all other rights pursuant to the Warrants, including exercise price adjustments.

As part of the Exchange, the Holders also relinquished any and all other rights related to the issuance of the Exchange Securities, the respective governing agreements and certificates of designation, including any related dividends, adjustment of conversion and exercise price, and repayment option. The existing registration rights agreement with the holders of the Series F Preferred Shares was also terminated and the holders of the Series F Preferred Shares waived the obligation of the Company to register the common shares issuable upon conversion of Series F Preferred Shares or upon exercise of theAugust 10, 2022. Consequently, 4,393,318 pre-funded warrants and ~~waived any damages, penalties and defaults related to the Company failing to file or have declared effective a registration statement covering those shares.~~

~~On February 6, 2018, 15,756 Series B Preferred Shares were converted into 262,606 shares of common stock.~~

On March 6, 2018, the Company received conversion notices from holders of 100% of the outstanding Series A Preferred Shares, Series B Preferred Shares, Series E Preferred Shares and exchanged the Series F Preferred Shares and warrants andinvestment options issued ~~an aggregate of 9,100,515 shares of common stock to such holders.~~

The Series E Preferred Shares were held by Dr. Denver Lough, the Company’s Chief Executive Officer. On March 6, 2018, the Company entered into a new registration rights agreement (the “Lough Registration Rights Agreement”) with Dr. Denver Lough, pursuant to which the Company agreed to file a registration statement to register the resale of 7,050,000 shares of Common Stock issued upon conversion of the Series E Preferred Shares within six months, to cause such registration statement to be declared effective by the Securities and Exchange Commission as promptly as possible following its filing and, with certain exceptions set forth in the Lough Registration Rights Agreement, to maintain the effectiveness of the registration statement until all of such shares have been sold or are otherwise able to be sold pursuant to Rule 144 under the Securities Act without restriction. Any sales of shares under the registration statement are subject to certain limitations as specified with more particularity in the Lough Registration Rights Agreement.June 2022 Offering remain outstanding and unexercised.

On March 7, 2018, the Company filed a Certificate of Elimination with the Secretary of State of the State of Delaware terminating the Company’s Series A, Series B, Series C, Series D, Series E and Series F Preferred Stock and thereafter no shares of Company preferred stock will remain outstanding.

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

~~Statements~~The discussion and analysis below includes certain forward-looking statements that are subject to risks, uncertainties and other factors, as described in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 (“2021 Annual Report”), and in this ~~quarterly report~~Quarterly Report on Form 10-Q that are not historical facts constitute forward-looking statements that are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended, or the “Exchange Act”. Examples of forward-looking statements include statements relating to industry prospects,could cause our ~~future economic performance including anticipated revenues and expenditures,~~actual growth, results of operations, orperformance, financial position and ~~other financial items, our~~ business ~~plans~~prospects and ~~objectives, including our intended product releases,~~opportunities for this fiscal year and ~~may include certain assumptions~~periods that ~~underlie forward-looking statements. Risks and uncertainties that may affect our future results, levels of activity, performance or achievements~~follow to differ materially from those expressed in or implied by ~~these~~those forward-looking statements. Readers are cautioned that forward-looking statements ~~include, among other things, those discussed~~contained in this ~~section~~Quarterly Report on Form 10-Q should be read in conjunction with risk factors disclosed in our reports and disclosure under the heading “Disclosure Regarding Forward-Looking Statements” below.

PolarityTE is a clinical stage biotechnology company developing regenerative tissue products and biomaterials. PolarityTE’s first regenerative tissue product is SkinTE, which is intended for the repair, reconstruction, replacement, and supplementation of skin in patients who have a need for treatment of acute or chronic wounds, burns, surgical reconstruction events, scar revision, or removal of dysfunctional skin grafts.

Since the beginning of 2017, PolarityTE has incurred substantial operating losses and its operations have been financed primarily by public equity financings. The clinical trials for SkinTE and the regulatory process will likely result in an increase in PolarityTE’s expenses. PolarityTE will continue to incur substantial operating losses as ~~well~~we pursue an investigational new drug application (“IND”) and biologics license application (“BLA”), and PolarityTE expects to seek financing from external sources over the foreseeable future to fund its operations.

Our first regenerative tissue product is SkinTE. On July 23, 2021, we submitted an investigational new drug application (“IND”) for SkinTE to the U.S. Food and Drug Administration (the “FDA”) through our subsidiary, PolarityTE MD, Inc. (“PTE-MD”), as ~~factors described~~the first step in ~~Part II, Item 1A—“Risk Factors”.~~ the regulatory process for obtaining licensure for SkinTE under Section 351 of the Public Health Service Act. The FDA subsequently issued clinical hold correspondence to us identifying certain issues that needed to be addressed before the IND could be approved. We provided responses to the FDA, and on January 14, 2022, the FDA notified us that the clinical hold had been removed. Our first planned pivotal study under our IND is a multi-center, randomized controlled trial evaluating SkinTE in the treatment of diabetic foot ulcers (DFUs) classified as Grade 2 in the Wagner classification system entitled “Closure Obtained with Vascularized Epithelial Regeneration for DFUs with SkinTE,” or “COVER DFUs Trial.” We plan to enroll up to 100 subjects at up to 20 sites in the U.S. in the COVER DFUs Trial, which will compare treatment with SkinTE plus the standard-of-care to the standard-of-care alone. We have been enrolling subjects in the COVER DFUs Trial since the end of April 2022. The primary endpoint is the incidence of DFUs closed at 24 weeks. Secondary endpoints include percent area reduction (“PAR”) at 4, 8, 12, 16, and 24 weeks, improved quality of life, and new onset of infection of the DFU being evaluated.

In ~~some cases, you can identify forward-looking statements~~March 2022, we submitted to the FDA a request for a Regenerative Medicine Advanced Therapy (RMAT) designation to SkinTE under our IND. Established under the 21st Century Cures Act, RMAT designation is a dedicated program designed to expedite the drug development and review processes for promising regenerative medicine products, including human cellular and tissue-based therapies. A regenerative medicine therapy is eligible for RMAT designation if it is intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug or therapy has the potential to address unmet medical needs for such disease or condition. RMAT designation provides the benefits of intensive FDA guidance on efficient drug development, including the ability for early interactions with the FDA to discuss potential ways to support accelerated approval and satisfy post-approval requirements, potential priority review of a BLA, and other opportunities to expedite development and review. By letter dated May 11, 2022, we were advised by ~~terminology such~~the FDA that it concluded SkinTE meets the criteria for RMAT designation for the treatment of DFUs and venous leg ulcers (VLUs).

As a result of the RMAT designation we were able to engage in an expedited dialogue with the FDA on the tasks that are likely to be necessary to support a BLA submission for SkinTE as ~~“may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or~~a treatment of DFUs and VLUs, which were identified in the ~~negative~~RMAT designation. Based on that dialogue we plan to run a second multi-center, randomized controlled trial under our current IND to support approval of ~~these terms or~~a broad DFU indication for SkinTE in a BLA, and we plan to engage in discussions with the FDA regarding the design and implementation of the second clinical trial. We believe this strategy will be the fastest and least costly approach to achieving our first BLA submission for SkinTE, with DFUs representing the largest market opportunity within the category of chronic cutaneous ulcers. We plan to further engage with the FDA to fully define our development plan for other ~~comparable terminology. These statements are subject~~wound indications.

We expect to incur significant operating costs in the next three to four years as we pursue the regulatory process for SkinTE with the FDA, conduct clinical trials and studies, and pursue product research, all while operating our business and ~~economic risk~~incurring continuing fixed costs related to the maintenance of our assets and ~~reflect management’s current expectations~~business. We expect to incur significant losses in the future, and ~~involve subjects that are inherently uncertain~~those losses could be more severe as a result of unforeseen expenses, difficulties, complications, delays, and ~~difficult to predict. Actual events or results~~other unknown events. Our net losses may ~~differ materially. Moreover, neither~~fluctuate significantly from quarter-to-quarter and year-to-year, depending upon the timing, progress, and outcomes of our clinical trials and our expenditures for satisfying all the conditions of obtaining FDA licensure for SkinTE.

On June 5, 2022, we ~~nor any other person assumes responsibility~~entered into a securities purchase agreement with a single healthcare-focused institutional investor for the ~~accuracy or completeness~~purchase and sale of ~~these statements. We are under no duty~~shares of our common stock (or pre-funded warrants in lieu thereof) in a registered direct offering. In a concurrent private placement (together with the registered direct offering, the “Offerings”), we entered into a separate securities purchase agreement with the same investor for the unregistered purchase and sale of shares of common stock (or pre-funded warrants in lieu thereof). On June 8, 2022, the Offerings closed, and we sold in the registered direct offering 445,500 shares of our common stock at a purchase price of $2.525 per share and 1,138,659 pre-funded warrants at a purchase price of $2.524 per warrant, and in the private placement offering we sold 1,584,159 pre-funded warrants at a purchase price of $2.524 per warrant. Each pre-funded warrant sold in the registered direct offering and private placement offering is exercisable for one share of common stock at an exercise price of $0.001 per share, is immediately exercisable, and will not expire until fully exercised. Under the securities purchase agreements for the Offerings, we agreed to ~~update any~~issue to the investor in the Offerings unregistered preferred investment options (the “investment options”) to purchase up to an aggregate of 3,168,318 shares of common stock, which we issued at the closing of the ~~forward-looking statements after~~Offerings. The investment options are exercisable immediately upon issuance at an exercise price of $2.40 per share and will expire five years from the date of issuance. As of the date of this report ~~to conform these statements to actual results. References herein to “we,” “us,”~~the holder of the pre-funded warrants sold in the registered direct offering has exercised 1,033,659 of such warrants at a total exercise price of $1,034 leaving 105,000 of such warrants unexercised. None of the pre-funded sold in the private placement offering or investment options issued in the Offerings have been exercised as of the date of this report. We received net proceeds of approximately $7.3 million in the Offerings after deducting placement agent fees and ~~“the Company” are to PolarityTE, Inc. and its consolidated subsidiaries.~~related offering expenses.

~~PolarityTE, Inc. is~~At the beginning of May 2018, we acquired a commercial-stage biotechnology and regenerative biomaterials company focused on transforming the lives of patients by discovering, designing and developing a range of regenerative tissue products and biomaterials for the fields of medicine, biomedical engineering and material sciences.

~~Research and Development Expenses.~~ ~~Research and development expenses primarily represent employee related costs, including stock compensation, for~~preclinical research and ~~development executives~~veterinary sciences business, which we operated through our indirect subsidiary, IBEX Preclinical Research, Inc. (“IBEX”). Utah CRO Services, Inc., a Nevada corporation (“Utah CRO”), is our direct subsidiary and ~~staff, lab~~held all the outstanding capital stock of IBEX (the “IBEX Shares”). Utah CRO also held all the member interest of IBEX Property LLC, a Nevada limited liability company (“IBEX Property”), that owned two unencumbered parcels of real property in Logan, Utah, consisting of approximately 1.75 combined gross acres of land, together with the buildings, structures, fixtures, and ~~office expenses~~personal property (the “Property”), which was leased by IBEX Property to IBEX for IBEX to conduct its preclinical research and ~~other overhead charges.~~veterinary sciences business.

~~General~~On April 14, 2022, Utah CRO entered into a Stock Purchase Agreement (the “Stock Agreement”) with an unrelated third party (the “Buyer”), pursuant to which Utah CRO agreed to sell all the outstanding IBEX Shares to the Buyer in exchange for an unsecured promissory note in the principal amount of $400,000 bearing simple interest at the rate of 10% per annum payable interest only on a quarterly basis and ~~Administrative Expenses.~~ ~~General~~all principal and administrative expenses primarily represent employee related costs, including stock compensation, for corporate executive and support staff, general office expenses, professional fees and various other overhead charges. Professional fees, including legal and accounting expenses, typically represent oneremaining accrued interest due on the five-year anniversary of the ~~largest components~~closing of ~~our general~~the sale of the IBEX Shares to the Buyer. Furthermore, on April 14, 2022, IBEX Property entered into that certain Real Estate Purchase and ~~administrative expenses. These fees~~Sale Agreement (the “Real Estate Agreement”) with another unrelated third party (the “Purchaser”) pursuant to which IBEX Property agreed to sell to the Purchaser the Property at a gross purchase price of $2.8 million payable in cash at closing of the transaction. The Buyer and Purchaser are ~~partially attributable to our required activities~~affiliates as a ~~publicly traded company, such as SEC filings, and corporate- and business-development initiatives.~~

~~Income Taxes.~~ ~~Income taxes consist~~result of our provisions for income taxes, as affected by our net operating loss carryforwards. Future utilization of our net operating loss, or NOL, carryforwards may be subject to a substantial annual limitation duecommon ownership. On April 28, 2022, the parties to the ~~“change~~Stock Agreement and Real Estate Agreement closed the transactions contemplated thereby and on April 29, 2022, we received the promissory note described above in ~~ownership” provisions~~the principal amount of $0.4 million and net cash proceeds of $2.3 million, after deducting closing costs and advisory fees, from sale of the Internal Revenue Code. The annual limitation may result in the expiration of NOL carryforwards before utilization. Due to our history of losses, a valuation allowance sufficient to fully offset our NOL and other deferred tax assets has been established under current accounting pronouncements, and this valuation allowance will be maintained unless sufficient positive evidence develops to support its reversal.

Our discussion and analysis of the financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP.

The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonableProperty under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from these estimates under different assumptions or conditions.Real Estate Agreement. We recognized an insignificant net gain on sale.

We have identified the policies below as critical to our business operations and to the understanding of our financial results. The impact and any associated risks related to these policies on our business operations is discussed throughout management’s discussion and analysis of financial condition and results of operations when such policies affect our reported and expected financial results.

~~Accounting for Stock-Based Compensation.~~ Stock-based compensation expense is measured at the grant date based on the fair value of the award and is recognized as expense over the vesting period. Determining the fair value of stock-based awards at the grant date requires judgment, including, in the case of stock option awards, estimating expected stock volatility.

~~Accounting for Common and Preferred~~Reverse Stock ~~and Warrant transactions.~~ ~~We issued units consisting~~Split

At a special meeting of ~~preferred~~stockholders held on May 12, 2022, the stockholders approved an amendment to our certificate of incorporation to effectuate a reverse stock split of our outstanding shares ~~and warrants and~~of common stock by a ratio of any whole number between 1-for-10 and ~~warrants~~1-for-25, the implementation and ~~subsequently remeasured certain~~timing of ~~those warrants. Determining~~which is subject to the ~~fair value~~discretion of our board of directors. The primary goal of the ~~securities in these transactions requires significant judgment, including adjustments~~reverse stock split was to ~~quoted~~increase the per share market price of our common stock to meet the minimum per share bid price requirements for continued listing on The Nasdaq Capital Market. The board of directors subsequently determined to set the reverse stock split ratio at 1-for-25 (the “Reverse Stock Split”). The Reverse Stock Split become effective as of 4:15 p.m., Eastern Time on May 16, 2022, pursuant to a Certificate of Amendment to our (Third) Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware. All issued and outstanding common stock, common stock warrants, stock option awards, exercise prices, and ~~expected~~per share data presented in this report has been adjusted on a retrospective basis to reflect the reverse stock ~~volatility. Such estimates may significantly impact our results~~split.

Available Capital Resources and Potential Sources of ~~operations~~Liquidity

As of June 30, 2022, we had $20.5 million in cash and ~~losses applicable~~cash equivalents and working capital of approximately $19.4 million. For the six-month period ended June 30, 2022, cash used in operating activities was $14.3 million, or an average of $4.8 million per month, compared to ~~common stockholders.~~

~~Commitments and Contingencies.~~ ~~We record a liability~~$10.7 million of cash used in operating activities, or an average of $3.6 million per month, for ~~contingencies when~~ the ~~amount is both probable and reasonably estimable. We record associated legal fees as incurred.~~

~~Three months~~six-month period ended ~~January 31, 2018 versus three months ended January 31, 2017~~

~~Net Revenues.~~June 30, 2021. For the three-month period ended ~~January 31, 2018, net revenues from product sales were $13,000 which represents the first sale~~June 30, 2022, cash used in operating activities was $8.3 million, or an average of ~~the Company’s core product SkinTE.~~

~~Cost~~$2.8 million per month, compared to $4.1 million of ~~Sales.~~~~For~~cash used in operating activities, or an average of $1.4 million per month, for the three-month period ended ~~January 31, 2018, cost~~June 30, 2021.

As a result of ~~sales was approximately $1,000 and represents~~ the ~~freight charges associated with the $13,000~~sale of IBEX described above, after April 2022 we are not engaged in ~~product sales.~~

~~Research and Development Expenses.~~ For the three-month period ended January 31, 2018, research and development expenses were approximately $6.6 million. Research and development expenses mostly consist of stock-based compensation of approximately $2.2 million, salaries of approximately $1.9 million, medical studies of approximately $0.5 million, bonuses of approximately $0.5 million, medical samples of approximately $0.3 million, medical equipment depreciation of approximately $0.3 million, rent of approximately $0.2 million, and office expense of approximately $0.2 million.

~~General and Administrative Expenses.~~ For the three-month period ended January 31, 2018, general and administrative expenses were approximately $10.9 million compared to $5.2 million for the three months ended January 31, 2017. The increase is primarily due to increased stock-based compensation of $5.0 million.

~~Net loss~~any business activity that will generate cash flows from ~~continuing operations.~~ ~~Net loss for the three months ended January 31, 2018 was approximately $14.1 million, compared to a net loss of approximately $5.2 million~~operations, which in the ~~comparable period in 2017, primarily reflecting the $7.2 million increase in stock-based compensation expenses and research and development offset by the gain from derivative liabilities.~~past contributed to defraying our operating costs.

As of ~~January 31, 2018,~~the date of this quarterly report we do not expect that our cash and cash equivalents ~~balance was approximately $10.0~~of $20.5 million as of June 30, 2022, will be sufficient to fund our current business plan including related operating expenses and ~~our working~~ capital ~~deficit was approximately $2.8 million, compared to cash and equivalents~~expenditure requirements beyond the first calendar quarter of ~~$17.7 million and working capital of $2.5 million at October 31, 2017.~~

As reflected in the condensed consolidated financial statements, we had an accumulated deficit of approximately $273.1 million at January 31, 2018, a net loss of approximately $14.1 million from continuing operations and approximately $5.1 million net cash used in continuing operating activities for the three months ended January 31, 2018. These factors raise2023. Accordingly, there is substantial doubt about ~~the Company’s~~our ability to continue as a going ~~concern.~~

We will continue to pursue fundraising opportunities that meet our long-term objectives, however, our cash position is not sufficient to support our operations for the foreseeable future. The condensed consolidated financial statementsconcern, as we do not include any adjustments related 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.

~~Based upon the current status of our product development and commercialization plans, we~~ believe that our ~~existing~~ cash and cash equivalents ~~and marketable securities~~ will be ~~adequate~~sufficient to ~~satisfy~~fund our ~~capital needs to approximately October 2018. We anticipate needing substantial additional financing to continue clinical deployment and commercialization~~business plan for at least twelve months from the date of issuance of our ~~lead product SkinTE, development of~~quarterly financial statements in this report. We plan to address this condition by raising additional capital to finance our ~~other product candidates, and scaling~~operations.

Although we have been successful in raising capital in the ~~manufacturing capacity for our products and product candidates, and prepare for commercial readiness. Such~~past, financing may not be available on terms favorable to us, if at all, ~~which raises~~so we may not be successful in obtaining additional financing. Therefore, it is not considered probable, as defined in applicable accounting standards, that our plan to raise additional capital will alleviate the substantial doubt ~~about~~regarding our ability to continue as a going ~~concern as~~concern.

As noted above, we are focused primarily on the advancement of our IND and subsequent BLA to attain a license to manufacture and distribute SkinTE. To that end, in June 2021 we engaged a contract research organization (“CRO”) to provide services for the COVER DFUs Trial at a cost of approximately $6.5 million consisting of $3.1 million of service fees and $3.4 million of estimated costs. In 2021 we prepaid $0.5 million, which will be applied to payment of the ~~date~~final invoice under the work order. Over the approximately three-year term of ~~this report. The financial statements do not include any adjustments~~the COVER DFUs Trial the service provider will submit to us for payment monthly invoices for units of work stated in the work order that ~~might result from~~are completed and billable expenses incurred. We began enrolling subjects in our COVER DFUs at the ~~outcome~~end of ~~this uncertainty. If adequate funds are not available,~~April 2022, and we believe we may be ~~required~~able to ~~delay, reduce~~complete enrollment of 100 subjects by the ~~scope~~end of ~~or eliminate one or more~~calendar year 2023. As enrollment increases, we expect our monthly CRO and related costs of conducting the trial will ramp up.

Our expectation is that the second DFU clinical trial under the IND for SkinTE will be similar to the COVER DFUs Trial with respect to size, length of time to complete, and cost. To the extent we decide to pursue additional indications for the application of SkinTE, such as VLUs, we expect we will need to submit separate IND applications for those indications and conduct additional clinical trials to support BLAs for those indications.

Clinical trials are the major expense we see in the near and long term, and while we are pursuing clinical trials, we will continue to incur the costs of maintaining our business. In addition to clinical trials, our most significant uses of cash to maintain our business going forward are expected to be compensation, costs of occupying, operating, and maintaining our facilities, and the costs associated with maintaining our status as a publicly traded company listed on Nasdaq. During the 12-month period following the filing of this report our plan is to preserve the facilities, equipment, and staff we need to advance the COVER DFUs Trial and other work necessary for advancing the process for obtaining regulatory approval of SkinTE.

With the acceptance of our IND for SkinTE and the beginning of the COVER DFUs Trial, we do not expect to have the same need for research and development staff associated with product development ~~programs. We plan~~and, as a result, we reduced research and development staff in April 2022.

During the latter part of 2021 and into February 2022, we engaged in discussions with certain third parties regarding potential M&A transactions and strategic initiatives. In the first quarter of 2022 we recognized $1.2 million of one-time costs for professional services associated with such M&A and strategic initiatives, which is in addition to ~~meet our capital requirements primarily through issuances~~$1.2 million of equity securities, debt financing, revenue from product sales and future collaborations. Failure to generate revenue or raise additional capital would adversely affect our ability to achieve our intended business objectives.such costs recognized in the fourth quarter of 2021.

Our actual capital requirements will depend on many factors, including ~~among other things: our ability to scale~~ the manufacturing for and to commercialize successfully our lead product, SkinTE; the progress and success of clinical evaluation and acceptance of SkinTE; our ability to develop our other product candidates; and the costscost and timing of ~~obtaining any required regulatory registrations or approvals.~~advancing our IND and subsequent BLA for the use of SkinTE on DFUs, the cost and timing of additional INDs and BLAs for other indications where SkinTE may be used, the cost and timing of clinical trials, the cost of establishing and maintaining our facilities in compliance with current good tissue practices and current good manufacturing practice requirements, and the cost and timing of advancing our product development initiatives related to SkinTE. Our ~~forecast~~projection of the period of time ~~through~~for which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. ~~The foregoing factors, along with the other factors described in the section, Item 1A, “Risk Factors” in Part II of this Report on Form 10-Q,~~

We will ~~impact our future capital requirements and the adequacy of our available funds. If we are required~~need to raise additional ~~funds, any~~capital in the future to fund our effort to obtain FDA approval of SkinTE and maintain our operations. Any additional equity financing including financings involving convertible securities, if able to be obtained, may be highly dilutive, on unfavorable terms, or otherwise disadvantageous, to existing stockholders, and debt financing, if available, may involve restrictive ~~covenants. Collaborative~~covenants or require us to grant a security interest in our assets. If we elect to pursue collaborative arrangements, ~~if necessary to raise additional funds,~~the terms of such arrangements may require us to relinquish rights to certain of our technologies, products, or marketing territories. Our failure to raise additional capital when needed, and on acceptable terms, would require us to reduce our operating expenses and would limit our ability to ~~respond to competitive pressures or unanticipated requirements to develop our product candidates and to~~ continue operations, any of which would have a material adverse effect on our business, financial condition, ~~and~~ results of ~~operation.~~operation, and prospects.

There have been significant changes in our operations affecting our results of operations for the six-month period ended June 30, 2022, compared to six-month period ended June 30, 2021.

On July 23, 2021, we ~~identified a material weakness~~submitted an IND for SkinTE to the FDA through our subsidiary, PTE-MD, as the first step in the ~~effectiveness~~regulatory process for obtaining licensure for SkinTE under Section 351 of ~~our internal controls over financial reporting, a factor~~the Public Health Service Act. The FDA subsequently issued clinical hold correspondence to us identifying certain issues that needed to be addressed before the IND could ~~affect our liquidity~~be approved. We provided responses to the FDA, and ~~capital resources. At present, management believes~~on January 14, 2022, the FDA sent correspondence informing us that the ~~recent improvement~~clinical hold had been removed. Acceptance of the ~~processes~~IND by the FDA enables us to commence the first of two expected pivotal studies needed to support a BLA for ~~granting equity awards~~SkinTE. We ceased selling SkinTE at the end of May 2021, when the period of enforcement discretion previously announced by the FDA with respect to ~~certain employees~~its IND and ~~service providers~~premarket approval requirements for regenerative medicine therapies, such as SkinTE, came to an end, and we do not expect to be able to commercialize SkinTE until our BLA is approved, which we believe will ~~ultimately correct the material weakness.~~

~~During the~~take at least three ~~months ended January 31, 2018, 1,544,572 Series A Preferred Shares, 2,578 Series C Preferred Shares and 26,667 Series D Preferred Shares were converted into 454,395 shares of common stock.~~

~~On February 6, 2018, 15,756 Series B Preferred Shares were converted into 262,606 shares of common stock.~~

On March 6, 2018, the Company received conversion notices from holders of 100% of the outstanding Series A Preferred Shares, Series B Preferred Shares, and Series E Preferred Shares, and the Company completed an exchange of the Series F Preferred Shares. In connection with the conversion and exchange, the Company issued an aggregate of 9,100,515 shares of common stock to such holders. The Company filed a Certificate of Elimination with the Secretary of State of the State of Delaware terminating the Company’s Series A, Series B, Series C, Series D, Series E and Series F Preferred Stock and thereafter no shares of Company preferred stock remain outstanding and all rights under the Series F Preferred Shares, among other things, to price adjustmentfour years. Consequently, we recognized products net revenues in the ~~event~~six months of ~~future issuances will be terminated.~~2021, and did not have any such revenues in the first six months of 2022.

During the three months ended January 31, 2018, certain employees exercised their options at a weighted-average exercise price of $5.10 in exchange for the Company’s common stock for an aggregated amount of 10,417 shares.

~~Inflation~~Our subsidiary, Arches Research, Inc. (“Arches”) began offering COVID-19 testing services in May 2020 under 30-day renewable testing agreements with multiple nursing home and pharmacy facilities in the state of New York controlled by a single company, which substantially added to our services net revenues in the first three months of 2021. When the New York nursing homes and pharmacies adopted on-site employee testing at the end of March 2021, our COVID-19 testing revenues declined substantially, and in August 2021, we decided to cease COVID-19 testing. Arches focused its research and development resources on supporting our IND and clinical trial efforts for the remainder of 2021 and continued in that role in the first quarter of 2022. However, going forward we do not expect we will have the same need for research and development staff associated with product development and, as a result, we reduced research and development staff in April 2022, and began to eliminate or sell certain items of equipment that had been leased or purchased for our research and development activity.

~~Our management currently believes that inflation has not had,~~While we were exploring the opportunities for selling IBEX and ~~does not currently have,~~the IBEX Property, IBEX assumed a ~~material impact on continuing operations.~~

~~Cash and cash equivalents and working capital deficit were approximately $10.0 million and $2.8 million, respectively, as~~more passive approach to marketing its services, which resulted in a decline in IBEX services revenues in the first six months of ~~January 31, 2018~~2022 compared to ~~cash~~the first six months of 2021. With the sale of IBEX and ~~cash equivalents~~the IBEX Property completed at the end of April 2022, our services net revenues were nominal in the first six months of 2022 and ~~working capital~~we do not expect any services net revenues in the last six months of ~~approximately $17.7 million~~2022.

As a result of the foregoing developments, we made a number of changes to our operations that impacted our results of operations. These included reductions in our work force and ~~$2.5 million at October 31, 2017, respectively.~~reducing the services and infrastructure needed to support a larger work force and commercial sales effort.

Comparison of the six months ended June 30, 2022, compared to the six months ended June 30, 2021.

Comparison of the three months ended ~~January 31, 2018 amounted to approximately $5.1 million~~June 30, 2022, compared to approximately $756,000 for the 2017 period. The increase in net cash used in continuing operating activities mostly relates to the increase in net loss, partially offset by the increase in share-based compensation.

~~Cash provided by discontinued operating activities in~~ the three months ended ~~January 31, 2018 amounted~~June 30, 2021.

Net Revenues and Gross Profit. We ceased commercial sales of SkinTE in the second calendar quarter of 2021 and sold the IBEX services business at the end of April 2022, so we were not engaged in any revenue generating business activity at June 30, 2022, and do not expect to ~~approximately $0~~generate operating revenues from any business activity for the foreseeable future. The decreases in revenues, cost of revenues, and gross (loss) profit for the six-month and three-month periods ended June 30, 2022, compared to ~~approximately $395,000~~the same periods in 2021 are consistent with our cessation of revenue-generating business activity.

Operating Costs and Expenses. Operating costs and expenses decreased $5.2 million, or 25%, for the ~~2017 period.~~six-month period ended June 30, 2022, compared to the six-month period ended June 30, 2021, and decreased $3.6 million, or 35%, for the three-month period ended June 30, 2022, compared to the three-month period ended June 30, 2021.

Research and development expenses decreased 10% for the six-month period ended June 30, 2022, compared to the six-month period ended June 30, 2021, and decreased 27%, for the three-month period ended June 30, 2022, compared to the three-month period ended June 30, 2021. The decrease is primarily attributable to costs in the ~~three months~~six-month period ended ~~January 31, 2018 amounted~~June 30, 2021, for completing our pre-IND diabetic foot ulcers trial, lab supplies for work on preparing the technical items for our IND, and consulting services for preparing our IND that did not recur in the six-month period ended June 30, 2022, which was partially offset by an increase primarily attributable to ~~approximately $2.7 million~~the SkinTE manufacturing and overhead personnel redirecting their efforts following the cessation of SkinTE sales to research and development activities and increased costs related to quality control supplies and infrastructure implemented for the COVER DFUs Trial.

The amount of general and administrative expenses decreased 14% for the six-month period ended June 30, 2022, compared to ~~$1.5 million~~the six-month period ended June 30, 2021, and decreased 28%, for the ~~2017 period. For both the 2018 and 2017 periods, the activity relates~~three-month period ended June 30, 2022, compared to the ~~purchase~~three-month period ended June 30, 2021. We effectuated a reduction in force for our commercial operations in the second quarter of 2021. Consequently, there were reductions in cash compensation, stock compensation, consulting fees, and travel expense. Furthermore, with the cessation of SkinTE sales we re-allocated manufacturing supplies and compensation from general and administrative expenses to research and development costs. These reductions were offset by professional fees incurred in connection with our pursuit of a strategic transaction that did not materialize and investment banking fees paid in connection with an at-the-market offering we terminated in the first quarter of 2022.

In the first six months of 2021, we incurred sales and marketing costs related to our commercial sales effort that did not recur in the first six months of 2022. In connection with terminating commercial sales of SkinTE, we realized as a restructuring charge a loss on impairment of property and equipment ~~(mostly medical equipment).~~in the amount of $0.4 million and a charge of $0.3 million for employee severance and revaluing of equity awards related to severance, which was offset by a gain of $0.3 from early termination of an office/ laboratory lease in Augusta, Georgia. In the first six months of 2022 we realized a nominal amount of restructuring charges on employee severance.

~~Financing Cash Flows~~Operating Loss and Net Loss. ~~Net cash provided by financing activities~~Operating loss decreased $1.2 million, or 7%, for the ~~three months~~six-month period ended ~~January 31, 2018 amounted to approximately $45,000~~June 30, 2022, compared to ~~approximately $2.3~~the six-month period ended June 30, 2021, and decreased $1.9 million, or 22%, for the three-month period ended June 30, 2022, compared to the three-month period ended June 30, 2021.

Net loss decreased $16.8 million, or 81%, for the six-month period ended June 30, 2022, compared to the six-month period ended June 30, 2021, and decreased $3.1 million, or 98%, for the three-month period ended June 30, 2022, compared to the three-month period ended June 30, 2021. Warrants issued in connection with financings we completed in 2022, 2021 and 2020 are classified as liabilities and remeasured each period until settled, classified as equity, or expiration. As a result of the periodic remeasurement, we recorded a gain for change in fair value of common stock warrant liability of $11.7 million for the ~~2017 period.~~six-month period ended June 30, 2022, compared to a loss of $2.2 million for the six-month period ended June 30, 2021, and a gain for change in fair value of common stock warrant liability of $6.6 million for the three-month period ended June 30, 2022, compared to a gain of $1.8 million for the three-month period ended June 30, 2021. For additional information on the ~~three months ended January 31, 2018, the $45,000 related to proceeds from option exercises. For the three months ended January 31, 2017, the $2.3 million related to equity capital raises.~~

~~Refer to our discussion~~change in fair value of ~~recent accounting pronouncements in~~common stock warrant liability please see Note ~~2 - Summary of Significant Accounting Policies~~4 to the ~~accompanying~~ condensed consolidated financial statements included ~~elsewhere~~in this report. We issued common stock purchase warrants in January 2021, as an inducement to holders of warrants issued in December 2020 to exercise those December warrants. As a result, we recognized an inducement loss of $5.2 million for the six-month period ended June 30, 2021. There was no similar inducement loss in the first six months of 2022.

The table below provides a reconciliation of adjusted net loss, which is a non-GAAP measure that shows net loss before fair value adjustments relating to our common stock warrant liability and warrant inducement loss, to GAAP net loss. We believe adjusted net loss is useful to investors because it eliminates the effect of non-operating items that can significantly fluctuate from period to period due to fair value remeasurements. For purposes of calculating non-GAAP per share metrics, the same denominator is used as that which was used in calculating net loss per share under GAAP. Other companies may calculate adjusted net loss differently than we do. Adjusted net loss has limitations as an analytical tool and you should not consider adjusted net loss in isolation or as a substitute for our financial results prepared in accordance with GAAP.

*Giving retroactive effect to the 1-for-25 reverse stock split effectuated on May 16, 2022

The preparation of financial statements in accordance with GAAP requires both the use of estimates and judgment relative to the application of appropriate accounting policies. We are required to make estimates and assumptions in certain circumstances that affect amounts reported in the Unaudited Condensed Consolidated Financial Statements and related footnotes. We evaluate these estimates and assumptions on an ongoing basis based on historical developments, market conditions, industry trends, and other information that we believe to be reasonable under the circumstances. There can be no assurance that actual results will conform to these estimates and assumptions or that reported results of operations will not be materially and adversely affected by the need to make accounting adjustments to reflect changes in these estimates and assumptions from time to time. Our critical accounting policies are more fully described in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” presented in our 2021 Annual Report. There have been no changes in our critical accounting policies from December 31, 2021.

This Quarterly Report on Form 10-Q contains forward-looking statements. Risks and uncertainties are inherent in forward-looking statements. Furthermore, such statements may be based on assumptions that fail to materialize or prove incorrect. Consequently, our business development, operations, and results could differ materially from those expressed in forward-looking statements made in this Quarterly Report. We make such forward-looking statements pursuant to the safe harbor provisions in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “would,” or the negative of these words or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, without limitation:

Forward-looking statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. Any forward-looking statement in this Quarterly Report on Form ~~10-Q.~~10-Q reflects our current view with respect to future events and is subject to these and other risks, uncertainties, and assumptions relating to our operations, results of operations, industry, and future growth. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

This Quarterly Report on Form 10-Q may also contain estimates, projections, and other information concerning our industry, our business, and the markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research, or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained industry, business, market, and other data from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data, and similar sources.

Our management, with the participation of our ~~Chief Executive Officer~~principal executive and ~~Chief Financial Officer, has~~financial officers, evaluated the effectiveness of our disclosure controls and procedures as(as such term is defined in ~~the Securities Exchange Act of 1934 Rule~~Rules 13a-15(e) and 15d-15(e), under the Exchange Act) as of the end of the period covered by this report.

In designing and evaluating our disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Management assessed the effectiveness of our internal control over financial reporting as of January 31, 2018. In making this assessment, management used the framework set forth in the report entitled Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, or COSO. The COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. Based on this evaluation, management determined that our system of internal control over financial reporting was not effective as of January 31, 2018.

A material weakness is a deficiency, or a combination of deficiencies, within the meaning of Public Company Accounting Oversight Board (“PCOAB”) Audit Standard No. 5, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weakness which has caused management to conclude that as of January 31, 2018 our ICFR were not effective at the reasonable assurance level:

Due to a lack of processes in place to address personnel changes, controls over the Company’s process of accounting for stock-based compensation failed to ensure the completeness of stock options and restricted stock grants in the Company’s calculation of stock-based compensation expense.

~~During the quarter ended January 31, 2018, the Company started the process to mitigate the weakness above, and expect it to be remediated during fiscal year 2018.~~

While we believe our disclosure controls and procedures and our internal control over financial reporting are adequate, no system of controls can prevent errors and fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur. Controls can also be circumvented by individual acts of some people, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with its policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Subject to the limitations above, management believes that the condensed consolidated financial statements and other financial information contained in this report, fairly present in all material respects our financial condition, results of operations, and cash flows for the periods presented.

Based on the evaluation of the effectiveness of our disclosure controls and procedures as of June 30, 2022, our principal executive and ~~the material weakness identified at October 31, 2017 that has not yet been remediated, our Chief Executive Officer and Chief Financial Officer~~financial officers concluded that, as of such date, our disclosure controls and procedures ~~(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))~~ were ~~not effective at a reasonable assurance level at January 31, 2018.~~

~~During the three months ended January 31, 2018, there~~effective. There were no changes in our internal control over financial reporting ~~other than~~during the ~~one described above.~~three-month period ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

~~The Company at times may be~~For a ~~party to claims~~description of our material pending legal proceedings, see Note 16, “Commitments and ~~suits~~Contingencies—Contingencies” in the ordinary course of business. We record a liability when it is both probable that a liability has been incurred and the amount of the loss or range of loss can be reasonably estimated. The Company has not recorded a liability with respect to the matter above. While the Company believes that it has valid defenses with respect to the legal matter pending and intends to vigorously defend the matter above, given the uncertainty surrounding litigation and our inability to assess the likelihood of a favorable or unfavorable outcome, it is possible that the resolution of the matter could have a material adverse effect on ourcondensed consolidated financial ~~position, cash flows or results of operations.~~statements included in this report.

~~Our~~You should carefully consider the factors discussed below and in Part I, “Item 1A. Risk Factors” in our 2021 Annual Report, which could materially affect our business, ~~and operations are subject to a number~~financial position, or future results of operations. The risks ~~and uncertainties as described below. However, the risks and uncertainties~~ described below and in our 2021 Annual Report are not the only ~~ones~~risks we face. Additional risks and uncertainties ~~that we are unaware of,~~not currently known to us or that we ~~may~~ currently deem to be immaterial also may ~~become important factors that could harm~~materially, adversely affect our business, financial ~~condition or results of operations. If any of the following risks actually occur, our financial condition or~~position, future results of operations, ~~could suffer.~~and prospects.

IfWe will need additional funding to pursue the ~~clinical development~~regulatory process for SkinTE and ~~commercialization of our lead product candidate, SkinTE, is not successful, our ability to finance~~sustain our operations, ~~may be adversely affected.~~

Our near-term prospects depend upon our ability to effectively market our lead product candidate, SkinTE, and to demonstrate its safety and effectiveness in humans, as well as its superiority over existing therapies and standards of care. Our ability to finance our company and to generate revenues will depend in part on our ability to obtain favorable results in the planned clinical evaluations of SkinTE and to successfully develop and commercialize SkinTE.

If we are not successful in developing and commercializing SkinTE or are significantly delayed in doing so, our financial condition and future prospects may be adversely affected and we may experience difficulties in raising the substantial additional capital required to fund our business.

~~We are an early stage company. Our limited operating history makes it difficult to evaluate our current business and future prospects, and our profitability in the future is uncertain.~~

Our limited operating history hinders an evaluation of our prospects, which should be considered in light of the risks, expenses and difficulties frequently encountered in the establishment of a business in a new industry, characterized by a number of market entrants and intense competition, and in the shift from development to commercialization of new product candidates based on innovative technologies.

~~We became a publicly traded company through our merger with Majesco Entertainment Company, and we could be liable for unanticipated claims or liabilities as a result thereof.~~

On December 1, 2016, we entered into an Agreement and Plan of Reorganization with Majesco Acquisition Corp., our wholly-owned subsidiary, PolarityTE NV and Dr. Denver Lough, the owner of 100% of the issued and outstanding shares of capital stock of PolarityTE NV pursuant to which, on April 5, 2017, we acquired the intellectual property rights and other assets of PolarityTE NV through the merger of Majesco Acquisition Corp. with and into PolarityTE NV, with PolarityTE NV surviving as our wholly-owned subsidiary.

We face substantial risks of known and unknown liabilities associated with Majesco Entertainment Company, including absence of accurate or adequate public information concerning the former public company; undisclosed liabilities; improper accounting; claims or litigation from former officers, directors, employees or stockholders; contractual obligations; and regulatory requirements. Although management performed due diligence on us, there can be no assurance that such risks will not occur. The occurrence of any such risk could materially adversely affect our financial condition.

Additionally, on February 26, 2015, a complaint for patent infringement was filed in the United States District Court for the Eastern District of Texas by Richard Baker, an individual residing in Australia, against Microsoft, Nintendo, Majesco Entertainment Company (“Majesco DE”), and a number of other game publisher defendants. The complaint alleged that the Zumba Fitness Kinect game infringed plaintiff’s patents in motion tracking technology. The plaintiff is representing himself pro se in the litigation and is seeking monetary damages in the amount of $1.3 million. The case was subsequently transferred to the Western District of Washington. On June 16, 2017, final judgment was entered in favor of the defendants. The plaintiff has appealed that decision to the Court of Appeals for the Federal Circuit. The appeal is currently pending. On June 23, 2017, as part of a purchase agreement, liabilities and claims relating to this litigation were assumed by Zift Interactive LLC. The Company cannot be certain about the outcome of the appeal, or whether litigation regarding the assumption of liabilities by Zift Interactive LLC may occur.

~~We have a history of operating losses and may never achieve or sustain profitability.~~

We have to date incurred, and may continue to incur significant operating losses over the next several years. We have incurred significant net losses in each year since our inceptions, and have a net loss of $130.8 million for the year ended October 31, 2017, and $14.1 million for the quarter ended January 31, 2018. Our ability to achieve profitable operations in the future will depend in large part upon the successful development and commercialization of our product candidates and technologies. Factors impacting our ability to successfully develop and commercialize our product candidates include:

The likelihood of the long-term success of our company must be considered in light of the expenses, difficulties and delays frequently encountered in the development and commercialization of new and innovative medical techniques and technologies, unknown and uncertain regulatory hurdles for a new and novel technology or technique, competitive factors and competition, as well as the uncertain nature of new business development and ongoing capital requirements.

~~We may have inadequate resources to complete the development and commercialization of our product candidates or to continue our development programs.~~

We are a development stage company, and thus we expect to continue to spend a significant amount of cash on the continued research and development of our product candidates. Until we are able to successfully commercialize our product candidates and achieve significant revenue, if any, we will be required to raise additional capital to fund our ongoing operations. We may not be able to raise capital on acceptable terms, or at all.

~~The cost and timing of completion of our preclinical and clinical development programs is uncertain.~~

We expect that a large percentage of our future research and development expenses will be incurred in support of current and future preclinical and clinical development programs. These expenditures are subject to numerous uncertainties in timing and cost of completion. We evaluate our objectives in preclinical models based upon our own development goals, but such evaluation may differ from requirements of regulatory authorities. We may conduct early stage clinical trials, which may differ for each of our targeted markets or markets we may target in the future (i.e., presently, skin, bone, muscle, cartilage, fat, blood vessels and nerves). As we obtain results from investigations, preclinical studies, and/or clinical trials, we may elect to discontinue or delay further evaluations for certain product candidates or programs in order to focus resources on more promising product candidates or programs. Completion of clinical trials may take several years and the length of time generally varies according to the type, complexity, novelty and intended use of a product candidate. The cost of clinical trials is uncertain and may vary significantly over the life of a product or development project as a result of unanticipated differences, regulatory requirements, or other obligations, or challenges arising during clinical development.

~~Our product development programs are based on novel technologies. As result, our product candidates are inherently risky.~~

We cannot guarantee that the results we see in clinical applications will be comparable to the preclinical results we have observed in animals. We also cannot at this stage be certain of the safety of our platform technology in humans.

We are subject to the risks of failure inherent in the development of product candidates based on new technologies. The novel nature of our products creates significant challenges in regard to product development and optimization, manufacturing, government regulation, third-party reimbursement and market acceptance. For example, if regulatory agencies have limited experience or concerns in approving cellular and tissue-based therapies for commercialization, the development and commercialization pathway for our therapies may be subject to increased uncertainty, as compared to the pathway for new conventional drugs.

Further, when manufacturing autologous cell and tissue-based therapies, the number and the composition of the cell population varies from patient to patient, in part due to the age of the patient, since the therapy is dependent on patient-specific physiology. Such variability in the number and composition of these cells could adversely affect our ability to manufacture autologous cell and tissue-based therapies in a cost-effective manner and meet acceptable product release specifications for use in a clinical trial or, if approved and/or registered, for commercial sale. As a consequence, the development and regulatory approval and/or registration process for autologous cell and tissue-based product candidates could be delayed or may never be completed.

Our product candidates represent new classes of therapy that the marketplace may not understand or accept. Furthermore, the success of our product candidates is dependent on wider acceptance by the medical community.

The broader market may not understand or accept our product candidates. Our product candidates represent new treatments or therapies and compete with a number of more conventional products and therapies manufactured and marketed by others. The new nature of our product candidates creates significant challenges in regards to product development and optimization, manufacturing, government regulation, and third-party reimbursement.

As a result, the development pathway for our product candidates and the commercialization of our potential products may be subject to increased scrutiny, as compared to the pathway(s) for more conventional products.

~~The degree of market acceptance of any of our potential products will depend on a number of factors, including:~~

If patients or the medical community do not accept our potential products as safe and effective for any of the foregoing reasons, or for any other reason, it could affect our sales, having a material adverse effect on our business, financial condition and results of operations.

~~Our revenues from our regenerative medicine business will depend upon adequate reimbursement from public and private insurers and health systems.~~

Our success will depend on the extent to which reimbursement for the costs of our treatments will be available from third-party payers, such as public and private insurers and health systems, as well as the amounts that they will agree to reimburse. Government and other third-party payers attempt to contain healthcare costs by limiting both coverage and the level of reimbursement, and the amount of reimbursement of new treatments. Therefore, significant uncertainty usually exists as to the reimbursement status of new healthcare treatments. If we are not successful in obtaining adequate reimbursement for our treatments from these third-party payers, the market’s acceptance of our treatments could be adversely affected. Inadequate reimbursement levels also likely would create downward price pressure on our treatments. Even if we succeed in obtaining widespread reimbursement for our treatments at adequate treatment amounts, future changes in reimbursement policies could have a negative impact on our business, financial condition and results of operations.

Commercial third-party payers and government payers are increasingly attempting to contain healthcare costs by demanding price discounts, including by limiting coverage on which products they will pay for and the amounts that they will pay for new products, and by creating conditions to reimbursement, such as coverage eligibility requirements based upon clinical evidence development involving research studies and the collection of physician decision impact and patient outcomes data. Because of these cost-containment trends, commercial third-party payers and government payers that currently provide or in the future may provide reimbursement for one or more of our product candidates may reduce, suspend, revoke, or discontinue payments or coverage at any time, including those payers that designate one or more of our product candidates as experimental and investigational. Payers may also create conditions to coverage or contract with third-party vendors to manage laboratory benefit coverage, in both cases creating burdens for ordering physicians and patients that may make our product candidates more difficult to sell. The percentage of submitted claims that are ultimately paid, the length of time to receive payment on claims, and the average reimbursement of those paid claims, is likely to vary from period to period. Finally, payers may demand discounts or offer reimbursement that minimizes our ability to sell our products profitably, or simply choose to not cover or reimburse our products at all.

As a result, there is significant uncertainty surrounding whether the use of products that incorporate new technology, such as our product candidates, will be eligible for coverage by commercial third-party payers and government payers or, if eligible for coverage, what the reimbursement rates will be for these product candidates. The fact that a product has been approved for reimbursement in the past, or has received FDA approval, for any particular indication or in any particular jurisdiction, does not guarantee that such product will remain approved for reimbursement or that similar or additional products will be approved in the future. Reimbursement of our existing and future products by commercial third-party payers and government payers may depend on a number of factors, including a payer’s determination that our existing and future products are:

Market acceptance, sales of products based upon our platform technology, and our profitability may depend on reimbursement policies and healthcare reform measures. Several entities conduct technology assessments and provide the results of their assessments for informational purposes to other parties. These assessments may be used by third-party payers and healthcare providers as grounds to deny coverage for a product. The levels at which government authorities and third-party payers, such as private health insurers and health maintenance organizations, may reimburse the price patients pay for such products could affect whether we are able to commercialize our product candidates. Our product candidates may receive negative assessments that may impact our ability to receive reimbursement of the test. Since each payer makes its own decision as to whether to establish a policy to reimburse our test, seeking these approvals may be a time-consuming and costly process. We cannot be sure that reimbursement in the United States or elsewhere will be available for any of our product candidates in the future. If reimbursement is not available or is limited, we may not be able to commercialize our product candidates.

The United States and foreign governments continue to propose and pass legislation designed to reduce the cost of healthcare. We expect that there will continue to be federal and state proposals to implement governmental controls or impose healthcare requirements. In addition, the Medicare program and increasing emphasis on managed or accountable care in the United States will continue to put pressure on product utilization and pricing. Utilization and cost control initiatives could decrease the volume of orders and payment that we would receive for any products in the future, which would limit our revenue and profitability. If we are unable to obtain reimbursement approval from commercial third-party payers and Medicare and Medicaid programs for our product candidates, or if the amount reimbursed is inadequate, our ability to generate revenues could be limited.

We are subject to numerous federal and state healthcare laws regulations, and a failure to comply with such laws and regulations could have an adverse effect on our business and our ability to compete in the marketplace.

There are numerous laws and regulations that govern the means by which companies in the healthcare industry may market their treatments to healthcare professionals and may compete by discounting the prices of their treatments, including for example, the federal Anti-Kickback Statute, the federal False Claims Act (“FCA”), the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), and state law equivalents to these federal laws that are meant to protect against fraud and abuse and analogous laws in foreign countries. Violations of these laws are punishable by criminal and civil sanctions, including, but not limited to, in some instances civil and criminal penalties, damages, fines, and exclusion from participation in federal and state healthcare programs, including Medicare and Medicaid. In addition, federal and state laws are also sometimes open to interpretation. Accordingly, we could potentially face legal risks if our interpretation differs from those of enforcement authorities. Further, from time to time we may find ourselves at a competitive disadvantage if our interpretation differs from that of our competitors.

Specifically, anti-kickback laws and regulations prohibit any knowing and willful offer, payment, solicitation or receipt of any form of remuneration (direct or indirect, in case or in kind) in return for the referral, use, ordering, or recommending of the use of a product or service for which payment may be made by Medicare, Medicaid or other Government-sponsored healthcare programs. We have entered into consulting agreements, research agreements and product development agreements with physicians, including some who may order our products or make decisions to use them. In addition, some of these physicians own our stock, which they purchased in arm’s length transactions on terms identical to those offered to non-physicians, or received stock awards from us as consideration for services performed by them. While these transactions were structured with the intention of complying with all applicable laws, including state anti-referral laws and other applicable anti-kickback laws, it is possible that regulatory or enforcement agencies or courts may in the future view these transactions as prohibited arrangements that must be restructured or for which we would be subject to other significant civil or criminal penalties. There can be no assurance that regulatory or enforcement authorities will view these arrangements as being in compliance with applicable laws or that one or more of our employees or agents will not disregard the rules we have established. Because our strategy relies on the involvement of physicians who consult with us on the design of our potential products, perform clinical research on our behalf or educate the market about the efficacy and uses of our potential products, we could be materially impacted if regulatory or enforcement agencies or courts interpret our financial relationships with physicians who refer or order our potential products to be in violation of applicable laws and determine that we would be unable to achieve compliance with such applicable laws. This could harm our reputation and the reputations of the physicians we engage to provide services on our behalf. In addition, the cost of noncompliance with these laws could be substantial since we could be subject to monetary fines and civil or criminal penalties, and we could also be excluded from federally-funded healthcare programs, including Medicare and Medicaid, for non-compliance. Further, even the costs of defending investigations of noncompliance could be substantial.

Also, the FCA imposes civil liability on any person or entity that submits, or causes the submission of, a false or fraudulent claim to the federal government. Damages under the FCA can be significant and consist of the imposition of fines and penalties. The FCA also allows a private individual or entity (i.e., a whistleblower) with knowledge of past or present fraud against the federal government to sue on behalf of the government and to be paid a portion of the government’s recovery, which can include both civil penalties and up to three times the amount of the government’s damages (usually the amount reimbursed by federal healthcare programs). The U.S. Department of Justice (“DOJ”) on behalf of the government takes the position that the marketing and promotional practices of life sciences product manufacturers, including the off-label promotion of products, the provision of inaccurate or misleading reimbursement guidance, or the payment of prohibited kickbacks to doctors or other referral sources may cause the submission of improper claims to federal and state healthcare entitlement programs such as Medicare and Medicaid, by health care providers that use the manufacturer’s products, which results in a violation of the FCA. In certain cases, manufacturers have entered into criminal and civil settlements with the federal government under which they entered into plea agreements, paid substantial monetary amounts and entered into corporate integrity agreements that require, among other things, substantial reporting and remedial actions going forward.

In addition, there has been a recent trend of increased federal and state regulation of payments made to physicians and other health care providers. In addition to federal laws, some states, such as California, Massachusetts and Vermont, mandate implementation of commercial compliance programs, along with the tracking and reporting of gifts, compensation and other remuneration to physicians. The shifting commercial compliance environment and the need to build and maintain robust and expandable systems to comply with different compliance and/or reporting requirements in multiple jurisdictions increase the possibility that a healthcare company may run afoul of one or more of the requirements.

The scope and enforcement of all of these laws is uncertain and subject to rapid change, especially in light of the lack of applicable precedent and regulations. There can be no assurance that federal or state regulatory or enforcement authorities will not investigate or challenge our current or future activities under these laws. Any investigation or challenge could have a material adverse effect on our business, financial condition and results of operations. Any state or federal regulatory or enforcement review of us, regardless of the outcome, would be costly and time consuming. Additionally, we cannot predict the impact of any changes in these laws, whether these changes are retroactive or will have effect on a going-forward basis only.

We operate in a highly competitive and evolving field and face competition from regenerative medicine, biotech, and pharmaceutical companies, tissue engineering entities, tissue processors and medical device manufacturers, as well as new market entrants.

We operate in a very competitive and continually evolving field. Competition from other regenerative medicine, biotech, and pharmaceutical companies, tissue engineering entities, tissue processors, medical device companies and from research and academic institutions is intense, expected to increase, subject to rapid change, and could be significantly affected by new product introductions. In addition, consolidation in the healthcare industry continues to drive demands for price concessions or to the exclusion of some suppliers from certain of our markets, which could have an adverse effect on our business, results of operations or financial condition. Our failure to compete effectively would have a material and adverse effect on our business, results of operations and financial condition.

Specifically, we face significant competition in both the regenerative medicine and wound care space from multiple products, including Integra Bilayer Wound Matrix, EpiFix, Apligraf, Dermagraft, Grafix, Epicel, and others. Even if we obtain regulatory approval of our product candidates, the availability and price of our competitors’ products could limit the demand and the price we are able to charge for our product candidates. We may not be able to implement our business plan if the acceptance of our product candidates is inhibited by price competition or the reluctance of physicians to switch from existing methods of treatment to our product candidates, or if physicians switch to other new drug or biologic products or choose to reserve our product candidates for use in limited circumstances.

~~Our use of sensitive patient information is subject to complex regulations at multiple levels and we would be adversely affected if we fail to adequately protect this sensitive information.~~

We process, maintain and utilize personal health and other confidential and sensitive data. In particular, we have developed a web and mobile application through which our customers can communicate with physicians and others, which may involve sharing patient identifiable health information. The use and disclosure of such information is regulated at the federal, state and international levels, and these laws, rules and regulations are subject to change and increased enforcement activity, such as the audit program implemented by HHS under HIPAA. International laws, rules and regulations governing the use and disclosure of such information are generally more stringent than in the United States, and they vary from jurisdiction to jurisdiction. Noncompliance with any privacy or security laws or regulations, or any security breach, cyber-attack or cybersecurity breach, and any incident involving the theft, misappropriation, loss or other unauthorized disclosure of, or access to, sensitive or confidential information, whether by us or by another third party, could require us to expend significant resources to remediate any damage, interrupt our operations and damage our brand and reputation, and could also result in investigations, regulatory enforcement actions, material fines and penalties, loss of customers, litigation or other actions which could have a material adverse effect on our business, brand, reputation, cash flows and operating results.

Our business depends on provider and patient willingness to entrust us with health related and other sensitive personal information. Events that negatively affect that trust, including inadequate disclosure of our uses of their information, failing to keep our information technology systems and sensitive information secure from significant attack, theft, damage, loss or unauthorized disclosure or access, whether as a result of our action or inaction or that of third parties, could adversely affect our brand, reputation and revenues and also expose us to mandatory disclosure to the media, litigation (including class action litigation) and other enforcement proceedings, material fines, penalties and/or remediation costs, and compensatory, special, punitive and statutory damages, consent orders and/or injunctive relief, any of which could adversely affect our business, cash flows, operating results or financial position. There can be no assurance that any such failure will not occur, or if any does occur, that we will detect it or that it can be sufficiently remediated.

~~Many of our competitors have substantially greater resources than we do, and we expect that all of our product candidates will face intense competition from existing or future products.~~

All of our product candidates face intense competition from existing and future products marketed by large, well-established companies (including but not limited to Integra LifeSciences, Wright Medical Group, MiMedx, Osiris, Organogenesis, Allosource and Vericel). These competitors may successfully market products that compete with our product candidates, successfully identify product candidates or develop products earlier than we do, or develop products that are more effective or cost less than our products. These competitive factors could require us to conduct substantial new research and development activities to establish new product targets, which would be costly and time consuming. These activities would adversely affect our ability to effectively commercialize products and achieve revenue and profits.

~~We depend heavily on our senior management~~ and we may be unable to ~~replace key executives if they leave.~~

The loss of the services of one or more members of our senior management team or our inability to attract, retain and maintain additional senior management personnel could harm our business, financial condition, results of operations and future prospects. Our operations and prospects depend in large part on the performance of our senior management team, particularly Dr. Denver Lough, our Chief Executive Officer and Chief Scientific Officer. In addition, we may not be able to find qualified replacements if his services are no longer available. We do not presently maintain “key-man” life insurance on any of our executives or key employees.

~~Many executive officers and employees in the regenerative medicine business are subject to strict non-compete or confidentiality agreements with their employers,~~raise capital when needed, which would limit our ability to recruit them to join our company. In addition, some of our existing and future employees are or may be subject to confidentiality agreements with previous employers. Our competitors may allege breaches of and seek to enforce such non-compete agreements or initiate litigation based on such confidentiality agreements. Such litigation, whether or not meritorious, may impede our ability to hire executive officers and other key employees who have been employed by our competitors and may result in intellectual property claims against us.

~~Certain key members of our management team may be subject to conflicts of interest.~~

Certain members of our management team have full or part-time interests outside of our business, including employment at other institutions. Such management team members may face conflicts of interest, including conflicts in allocating time and the ability to present research and business opportunities learned in the scope of other positions. These conflicts could result in unanticipated actions that adversely affect us. Currently, we have no policy in place to address such conflicts of interest. In addition, many universities and medical institutions have policies that apply to faculty members’ activities outside the scope of their employment at the university and medical institution. We do not independently review all of these policies or monitor our executive’s compliance with these types of third party policies and policies of former employers of our executives. Instead, we rely on representations made by the executive and periodic confirmations from the executive that he or she is in compliance with PolarityTE’s employment policies.

If serious adverse or inappropriate side effects are identified during the development of our product candidates or with any procedures with which our product candidates are used, we may need to abandon or limit our development of those product candidates.

None of our product candidates has been proven effective or safe in humans. It is impossible to predict when or if any of our product candidates will prove effective or safe in humans or, to the extent required, will receive marketing approval. If our product candidates are associated with undesirable side effects or have characteristics that are unexpected, we may need to abandon their development or limit development to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. In addition, if any of the procedures with which our product candidates are used is determined to be unsafe, we may be requiredforce us to delay, ~~alter,~~reduce, eliminate, or abandon our product development ~~or commercialization.~~program.

We ~~rely on third parties to assist in the development~~reported an operating loss of ~~our product candidates.~~

Our research and development relies upon the efforts and support of third parties over which we have little or no control. Accordingly, we may be subject to significant delays from third parties on which we rely or may rely, including but not limited to clinical research organizations, academic institutions, and/or other research collaborators, related to a variety of factors including but not limited to contract negotiations, funding, preparing research protocols, and identifying appropriate investigators.

~~We intend to, but may not be successful in, establishing and maintaining strategic partnerships.~~

We intend to enter into strategic partnerships in the future to enhance and accelerate the development and commercialization of our proposed products. We may rely on such partnerships to assist in launching, marketing and developing our product candidates. However, we may face significant competition in seeking appropriate strategic partners and the negotiation process is time-consuming and complex. Moreover, we may not be successful in our efforts to establish a strategic partnership or other alternative arrangements for any future proposed products and programs because our research and development pipeline may be insufficient, our proposed products and programs may be deemed to be at too early of a stage of development for collaborative effort and/or third parties may not view our product candidates and programs as having the requisite potential to demonstrate safety and efficacy (or other requirements or goals that potential strategic partners may seek). Even if we are successful in our efforts to establish strategic partnerships, the terms that we agree upon may not be favorable to us and we may not be able to maintain such strategic partnerships if, for example, development or approval of a product candidate is delayed or sales of an approved and/or registered product are disappointing.

~~Rapid technological change could cause our business to become obsolete.~~

The technologies underlying our product candidates are subject to rapid and profound technological change. Competition intensifies as technical advances in each field are made and become more widely known. We can give no assurance that others will not develop services, products, or processes with significant advantages over the products, services, and processes that we offer or are seeking to develop. Any such occurrence could have a material and adverse effect on our business, results of operations and financial condition.

~~The success of any of our product candidates or enhancements to an existing product will depend on numerous factors, including our ability to:~~

If we do not develop and, when necessary, obtain regulatory clearance, registration, or approval for product candidates or product enhancements in time to meet market demand, or if there is insufficient demand for these products or enhancements, our results of operations will suffer. Our research and development efforts may require a substantial investment of time and resources before we are adequately able to determine the commercial viability of a new product, technology, material or other innovation. In addition, even if we are able to successfully develop enhancements or new generations of our product candidates, these enhancements or new generations of product candidates may not produce sales in excess of the costs of development and they may be quickly rendered obsolete by changing customer preferences or the introduction by our competitors of product candidates embodying new technologies or features.

~~To be commercially successful, we must convince physicians that our treatments are safe and effective alternatives to existing treatments and that our treatments should be accepted and used.~~

We believe physicians will only adopt our treatment if they determine, based on experience, clinical data and published peer reviewed journal articles, that the use of our treatment is a favorable alternative to existing and conventional methods, including but not limited to skin grafting. Physicians may be slow to change their medical treatment practices$15.6 million for the ~~following reasons, among others:~~

In addition, while acceptance by the medical community may be fostered by broad evaluation via peer-reviewed literature, we may not have the resources to facilitate sufficient publication. We also believesix-month period ended June 30, 2022, and on that recommendations for, and support of our treatments by, influential physicians are essential for market acceptance and adoption. If we do not obtain this support or are unable to demonstrate favorable long-term clinical data, physicians and hospitals may not use our treatments, which would have a material and adverse effect on our result of operations and prospects.

~~If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to sell and market our product candidates we may not be successful in commercializing them.~~

We do not have a sales or marketing infrastructure and have no experience in the sale, marketing or distribution of potential products. To achieve commercial success for any product candidate, we must either develop a sales and marketing team or outsource these functions to third parties. We also plan to recruit appropriate sales and marketing resources for countries or regions of countries in which we determine to commercialize our product candidates on our own, if any.

There are risks involved both with establishing our own sales and marketing capabilities and entering into arrangements with third parties to perform these services. For example, recruiting and training a sales force is expensive and time consuming and could delay any product launch. If the commercial launch of SkinTE, OsteoTE or another product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.

If we enter into arrangements with third parties to perform sales, marketing and distribution services, our product revenues or the profitability of these product revenues to us are likely to be lower than if we were to market and sell any products ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell and market our potential products or may be unable to do so on terms that are favorable to us. We likely will have limited control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our potential products effectively and in compliance with applicable laws.

~~Significant disruptions of information technology systems or breaches of information security could adversely affect our business.~~

We rely to a large extent upon sophisticated information technology systems to protect our intellectual property and to operate our business. In the ordinary course of business, we collect, store and transmit large amounts of confidential information (including, but not limited to, our trade secrets and data, personal information, and intellectual property). The size and complexity of our information technology and information security systems make such systems potentially vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees or vendors, or from malicious attacks by third parties. Such attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives (including, but not limited to, industrial espionage and market manipulation) and expertise. There can be no assurance that our efforts to protect our data and related information technology and intellectual property will prevent service interruptions or security breaches. Any interruption or breach in our systems could adversely affect our business operations and/or result in the loss of critical or sensitive confidential information or intellectual property, and could result in financial, legal, business and reputational harm to us or allow third parties to gain material, inside information that they use to trade in our securities.

~~We face the risk of product liability claims and may not be able to obtain or maintain adequate product liability insurance.~~

Our business exposes us to the risk of product liability claims that are inherent in the manufacturing, processing and marketing of human cellular and tissue-based products. We may be subject to such claims if our product candidates cause, or appear to have caused, an injury during clinical trials or after commercialization. Claims may be made by patients, healthcare providers or others selling our product candidates. Defending a lawsuit, regardless of merit, could be costly, divert management attention and result in adverse publicity, which could result in the withdrawal of, or reduced acceptance of, our product candidates in the market.

Although we have obtained product liability insurance, such insurance is subject to deductibles and coverage limitations and we may not be able to maintain this insurance. Also, it is possible that claims could exceed the limits of our coverage. If we are unable to obtain or maintain product liability insurance at an acceptable cost or on acceptable terms with adequate coverage or otherwise protect ourselves against potential product liability claims or we underestimate the amount of insurance we need, we could be exposed to significant liabilities, which may harm our business. A product liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities could result in significant costs and significant harm to our business.

~~We may implement a product recall or voluntary market withdrawal, which could significantly increase our costs, damage our reputation and disrupt our business.~~

The manufacturing, marketing and processing of our product candidates involves an inherent risk that our tissue products or processes do not meet applicable quality standards and requirements. In that event, we may voluntarily implement a recall or market withdrawal or may be required to do so by a regulatory authority. A recall or market withdrawal of one of our product candidates would be costly and would divert management resources. A recall or withdrawal of one of our product candidates, or a similar product processed by another entity, also could impair sales of our product candidates as a result of confusion concerning the scope of the recall or withdrawal, or as a result of the damage to our reputation for quality and safety.

~~Our limited public company experience may adversely impact our ability to comply with the reporting requirements of the U.S. securities laws.~~

We have limited experience operating as a public company. As a public company, we are required to establish and maintain disclosure controls and procedures and internal control over financial reporting. Our limited public company experience could impair our ability to comply with legal and regulatory requirements such as those imposed by Sarbanes-Oxley Act of 2002. Such responsibilities include complying with federal securities laws and making required disclosures on a timely basis. We may not be able to implement programs and policies in an effective and timely manner that adequately respond to such increased legal, regulatory compliance and reporting requirements, including the establishing and maintaining internal controls over financial reporting. Any such deficiencies, weaknesses or lack of compliance could have a materially adverse effect on our ability to comply with SEC reporting requirements, which may be necessary in the future to maintain our public company status. If we were to fail to fulfill those obligations, our ability to continue as a public company would be in jeopardy.

If we fail to maintain proper and effective internal control over financial reporting in the future, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results.

Pursuant to Section 404 of the Sarbanes-Oxley Act, our management is required to report upon the effectiveness of our internal control over financial reporting. When and if we are a “large accelerated filer” or an “accelerated filer” and are no longer a “smaller reporting company,” each as defined in the Exchange Act, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting. However, for so long as we remain a smaller reporting company, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to smaller reporting companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404. Once we are no longer a smaller reporting company or, if prior to such date we ~~opt to no longer take advantage~~had had an accumulated deficit of the applicable exemption, we will be required to include an opinion from our independent registered public accounting firm on the effectiveness of our internal controls over financial reporting. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing, and possible remediation. To comply with the requirements of being a reporting company under the Exchange Act, we need to upgrade our systems including information technology; implement additional financial and management controls, reporting systems, and procedures; and ensure we have hired sufficient accounting and finance staff.

We have identified a material weakness in our internal control over financial reporting. If our remedial measures are insufficient to address the material weakness, or if we otherwise fail to establish and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results, timely file our periodic reports, maintain our reporting status or prevent fraud.

At times we have not had sufficient accounting and supervisory personnel with the appropriate level of technical accounting experience and training necessary or adequate formally documented accounting policies and procedures to support, effective internal controls. As we grow, we will hire additional personnel and engage in external temporary resources and may implement, document and modify policies and procedures to maintain effective internal controls. However, we may identify deficiencies and weaknesses or fail to remediate previously identified deficiencies in our internal controls. If material weaknesses or deficiencies in our internal controls exist and go undetected or un-remediated, our financial statements could contain material misstatements that, when discovered in the future, and our operating results could be material impacted and we could fail to meet our future reporting obligations.

If we discover additional material weaknesses or other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be more difficult.

Our management team has supervised the completion of the first full audit of our financial statements for the year ending October 31, 2017. A material weakness was identified related to a lack of processes in place to address personnel changes and controls over the Company’s process of accounting for stock-based compensation, which resulted in a failure to ensure the completeness of stock options and restricted stock grants in the Company’s calculation of stock-based compensation expense. If we fail to comply with the rules under the Sarbanes-Oxley Act of 2002 related to disclosure controls and procedures, or, if we fail to timely remediate the material weakness or other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be more difficult. Moreover, effective internal controls are necessary for us to produce reliable financial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly. In addition, we cannot be certain that material weaknesses or significant deficiencies in our internal controls will not be discovered in the future.

Our strategy envisions a period of potentially rapid growth. We currently maintain minimal administrative and other personnel due to the startup nature of our business, and our expected growth may impose a significant burden on our future planned administrative and operational resources. The growth of our business may require significant investments of capital and increased demands on our management, workforce and facilities. We will be required to substantially expand our administrative and operational resources and attract, train, manage and retain qualified management and other personnel. Failure to do so or to satisfy such increased demands would interrupt or would have a material adverse effect on our business and results of operations.

~~Our results may fluctuate significantly as a result of a variety of factors, many of which are outside of our control.~~

~~We are subject to the following factors, among others, that may negatively affect our operating results:~~

~~The change in value of our derivative liabilities could have a material effect on our financial results.~~

Included on our balance sheet at October 31, 2017 are derivative liabilities related to embedded features bifurcated from our preferred stock and certain warrant contracts. At each reporting period, we are required to determine the fair value of such derivatives and record the fair value adjustments as non-cash unrealized gains or losses. The share price of our common stock represents the primary underlying variable that impacts the value of the derivative instruments. Additional factors that impact the value of the derivative instruments include the volatility of our stock price, our credit rating, discount rates, and stated interest rates. Due to the volatile nature of our share price, we expect that we will recognize non-cash gains or losses on our derivative instruments each reporting period and that the amount of such gains or losses could be material.

We may increasingly become a target for public scrutiny, including complaints to regulatory agencies, negative media coverage, including social media and malicious reports, all of which could severely damage our reputation and materially and adversely affect our business and prospects.

We focus on the research and development (including through preclinical, animal testing) of therapies used in the regenerative medicine and wound care space, and such therapies may be the subject of regulatory, watchdog and media scrutiny and coverage, which also raise the possibility of heightened attention from the public, the media and our participants. From time to time, these objections or allegations, regardless of their veracity, may result in public protests or negative publicity, which could result in government inquiry or harm our reputation. Corporate transactions we or related parties undertake may also subject us to increased media exposure and public scrutiny. There is no assurance that we would not become a target for public scrutiny in the future or such scrutiny and public exposure would not severely damage our reputation as well as our business and prospects.

We do not currently own any issued patents and our ability to protect our intellectual property and proprietary technology through patents and other means is uncertain and may be inadequate, which could have a material and adverse effect on us.

Our success depends significantly on our ability to protect our proprietary rights in technologies that presently consist of trade secrets and patent applications. We currently have no issued patents relating to any of our product candidates. We intend to expand our patenting activities and rely on patent protection, as well as a combination of copyright, trade secret and trademark laws and nondisclosure, confidentiality and other contractual restrictions to protect our proprietary technology, and there can be no assurance these methods of protection will be effective. These legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage. In addition, our presently pending patent applications include claims to material aspects of our activities that are not currently protected by issued patents. The patent application process can be time consuming and expensive. We cannot ensure that any of the pending patent applications we acquire, have acquired, or may file will result in issued patents. Competitors may be able to design around our patents or develop procedures that provide outcomes that are comparable or even superior to ours. We also cannot assure you that the inventors of the patents and applications that we expect to own or license were the first-to-invent or the first-inventor-to-file on the inventions, or that a third party will not claim ownership in one of our patents or patent applications. We cannot assure you that a third party does not have or will not obtain patents that could preclude us from practicing the patents we own or license now or in the future.

The failure to obtain and maintain patents and/or protect our intellectual property rights could have a material and adverse effect on our business, results of operations, and financial condition. We cannot be certain that, if challenged, any patents we ultimately obtain would be upheld because a determination of the validity and enforceability of a patent involves complex issues of fact and law. If one or more of any patents we obtain is invalidated and/or held unenforceable, such an outcome could reduce or eliminate any competitive advantage we might otherwise have had.

In the event a competitor infringes upon any patent we obtain, or a third party including but not limited to a university or other research institution, makes a claim of ownership over our patents or other intellectual property rights, confirming, defending or enforcing those rights may be costly, uncertain, difficult, and time consuming.

There can be no assurance that a third party, including but not limited to a university or other research institution that our founders were associated with in the past, will not make claims to ownership or other claims related to our technology. We believe we have developed our technology outside of any institutions, but we cannot guarantee such institutions would not assert a claim to the contrary. Even if successful, litigation to enforce or defend our intellectual property rights could be expensive and time consuming, and could divert our management’s attention. Further, bringing litigation to enforce our future patent(s) subjects us to the potential for counterclaims. In the event that one or more of our future patents is challenged in U.S. and/or foreign courts or the United States Patent and Trademark Office (“USPTO”) and/or foreign patent offices, the patent(s) may be found invalid and/or unenforceable, which could harm our competitive position. If any court or any patent office ultimately cancels or narrows the claims in any of our future patents through any pre- or post-grant patent proceedings, such an outcome could prevent or hinder us from being able to enforce the patent against competitors. Such adverse decisions could negatively affect our future, expected revenue.

~~We may be subject to claims that our employees have wrongfully appropriated, used, or disclosed intellectual property of their former employers.~~

We employ individuals who were previously employed by other companies, universities and/or other academic institutions. We may be subject to claims that we or our employees have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of a prior employer. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could adversely impact our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. Any of the foregoing could have an adverse impact on our business, financial condition, results of operations, and cash flows.

We may be subject to claims that former or current employees, collaborators, or other third parties have an interest in our patents or other intellectual property as an inventor or co-inventor. Litigation may be necessary to defend against any claims challenging inventorship. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

If we are unable to protect the confidentiality of our proprietary information and know-how related to any of our product candidates, our competitive position would be impaired and our business, financial condition and results of operations could be adversely affected.

Some of our technology, including our knowledge regarding the processing of our product candidates, is unpatented and is maintained by us as trade secrets. In an effort to protect these trade secrets, the information is restricted to our employees, consultants, collaborators and advisors on a need-to-know basis only. In addition, we require our employees, consultants, collaborators and advisors to execute confidentiality agreements upon the commencement of their relationships with us. These agreements require that all confidential information developed by the individual or made known to the individual by us during the course of the individual’s relationship with us be kept confidential and not disclosed to third parties. These agreements, however, do not ensure protection against improper use or disclosure of confidential information, and these agreements may be breached. A breach of confidentiality could affect our competitive position. In addition, in some situations, these agreements and other obligations of our employees to assign intellectual property to the Company may conflict with, or be subject to, the rights of third parties with whom our employees, consultants, collaborators or advisors have previous employment or consulting relationships. Also, others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets.

Adequate remedies may not exist in the event of unauthorized use or disclosure of our confidential information. The disclosure of our trade secrets would impair our competitive position and could have a material adverse effect on our business, financial condition and results of operations.

We may become subject to claims of infringement of the intellectual property rights of others, which could prohibit us from developing our treatment, require us to obtain licenses from third parties or to develop non-infringing alternatives, and subject us to substantial monetary damages. We have not obtained and do not intend to obtain any legal opinion with regard to our freedom to practice our technology.

Third parties could assert that our processes, product candidates or technology infringe their patents or other intellectual property rights. Whether a process, product or technology infringes a patent or other intellectual property involves complex legal and factual issues, the determination of which is often uncertain. We cannot be certain that we will not be found to have infringed the intellectual property rights of others. Because patent applications may remain unpublished for certain periods of time and may take years to be issued as patents, there may be applications now pending of which we are unaware and/or that do not currently contain claims of concern that may later result in issued patents that our product candidates, procedure or processes will infringe. There may be existing patents that our product candidates, procedures or processes infringe, of which infringement we are not aware. Third parties could also assert ownership over our intellectual property. Such an ownership claim could cause us to incur significant costs to litigate the ownership issues. If an ownership claim by a third party were upheld as valid, we may be unable to obtain a license from the third party on acceptable terms, to continue to make, use, or sell technology free from claims by that third party of infringement of the third party’s intellectual property. We have not obtained and do not intend to obtain any legal opinion with regard to our freedom to practice our technology at this time.

If we are unsuccessful in actions we bring against the patents of other parties, and it is determined that we infringe upon the patents of third parties, we may be subject to injunctions, or otherwise prevented from commercializing potential products and/or services in the relevant jurisdiction, or may be required to obtain licenses to those patents or develop or obtain alternative technologies, any of which could harm our business. Furthermore, if such challenges to our patent rights are not resolved in our favor, we could be delayed or prevented from entering into new collaborations or from commercializing certain product candidates and/or services, which could adversely affect our business and results of operations.

~~If we are successful in obtaining patent protection, we may not be able to enforce those patent rights against third parties.~~

~~Successful challenge of any future patents such as through opposition, reexamination,~~~~inter partes~~ review, interference, or derivation proceedings could result in a loss of patent rights in the relevant jurisdiction. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential or sensitive information could be compromised by disclosure in the event of litigation. In addition, during the course of litigation there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.

~~We may not be able to protect our intellectual property in countries outside of the United States.~~

Intellectual property law outside the United States is uncertain and, in many countries, is currently undergoing review and revisions. The laws of some countries do not protect patent and other intellectual property rights to the same extent as United States laws. Third parties may challenge our patents in foreign countries by initiating proceedings including pre- and post-grant oppositions, and invalidation proceedings. Developments during opposition or invalidation proceedings in one country may directly or indirectly affect a corresponding patent or patent application in another country in an adverse manner. It may be necessary or useful for us to participate in proceedings to determine the validity of our patents or our competitors’ patents that have been issued in countries other than the United States. This could result in substantial costs, divert our efforts and attention from other aspects of our business, and could have a material adverse effect on our results of operations and financial condition.

~~Risks Related to Registration and/or Regulatory Approval of Our Product Candidates and Other Government Regulations~~

Our business is subject to continuing regulatory oversight by the FDA and other authorities, compliance with whose requirements is costly, and our failure to comply could result in negative effects on our business.

The FDA has specific regulations governing human cell, tissue, and cellular and tissue-based products, commonly known as “HCT/Ps”. The FDA has broad post-market and regulatory and enforcement powers. The FDA’s regulation of HCT/Ps includes requirements for registration and listing of products, donor screening and testing, processing and distribution (“Current Good Tissue Practices”), labeling, record keeping, adverse-reaction reporting, and inspection and enforcement.

We believe that our current product candidates are appropriately regulated under Section 361 of the Public Health Service Act (so-called “361 HCT/Ps”) and that as a result no premarket review or approval by the FDA is required. If the FDA does not agree that one or more of our HCT/P products meet its regulatory criteria for regulation solely as 361 HCT/Ps, our product candidates will be regulated as drugs, devices, and/or biological products, and we could be required to withdraw those potential products from the market until the required clinical trials are complete and the applicable premarket regulatory clearances or approvals are obtained.

In addition, other products we may develop may not be 361 HCT/Ps. As result, those product candidates would be subject to additional regulatory requirements, including premarket approval or clearance. Even if pre-market clearance or approval is obtained, the approval or clearance may place substantial restrictions on the indications for which the product(s) may be marketed or to whom the product(s) may be marketed, and may require warnings to accompany the product or impose additional restrictions on the sale and/or use of the product. In addition, regulatory approval is subject to continuing compliance with regulatory standards, including the FDA’s current good manufacturing practice (cGMP) or quality system regulations and adverse event reporting regulations.

~~If we fail to comply with the FDA regulations regarding our products and manufacturing processes, the FDA could take enforcement action, including, without limitation, any of the following sanctions:~~

It is likely that the FDA’s regulation of 361 HCT/Ps and other types of products (e.g., drugs, devices, and/or biologics) will continue to evolve in the future. Complying with any such new regulatory requirements, guidance or statutes may entail significant time delays and expense, which could have a material adverse effect on our business. While the FDA may issue new or revised guidance or regulations for 361 HCT/Ps, we do not know whether or when such revised draft or final guidance or regulations (if any) will be issued, the scope of such guidance, any new rules or regulations, whether they will apply to our technologies or products, or whether they will be advantageous or disadvantageous to us. In addition, even if it does not issue new regulations or guidance, FDA could in the future adopt more restrictive interpretations of existing regulations or increase its enforcement activity, which may adversely affect our business.

$512.2 million. We believe our ~~current product candidates, including the FDA-registered SkinTE product, satisfy applicable criteria for regulation as a 361 HCT/P~~cash and are therefore exempt from FDA requirements for premarket approval or clinical studies. If the FDA disagrees with our interpretation of the relevant laws and regulations as they apply to our product candidates, and requires an Investigational New Drug application (“IND”) or Investigational Device Exemption application (“IDE”) for any of our product candidates, we may need to delay, abandon, or revisecash equivalents at June 30, 2022, will fund our current ~~development plans, discontinue ongoing marketing, and/or recall products. The submission~~business plan including related operating expenses and capital expenditure requirements into the first calendar quarter of an IND, Biologics License Applications (“BLA”), New Drug Application (“NDA”), or other medical device clearance or approval application would require us to compile significant amounts of data related to our regulatory process, as well as data from preclinical and/or clinical testing. We cannot guarantee that we will ever be able to secure such approvals if required. Even if such approvals are obtained, regulation as a drug, biologic, or medical device would subject us to additional FDA postmarketing requirements that are complex and involve substantial expense, such as compliance with drug, biologic, or medical device current Good Manufacturing Practice or quality system requirements.

The FDA regulates HCT/Ps under a two-tiered framework. Certain higher risk HCT/Ps are regulated as new drugs, biologics or medical devices. Manufacturers of new drugs, biologics and some medical devices must complete extensive clinical trials, which must be conducted pursuant to an effective IND or IDE. In addition, the FDA must review and approve a BLA or NDA before a new drug or biologic may be marketed. For most medical devices, including novel or high-risk medical devices, FDA must approve a premarket approval application (“PMA”) or grant clearance to a premarket notification (“510(k)”) application prior to marketing of the device.

By contrast, the FDA exempts 361 HCT/Ps from these requirements if they meet certain specified criteria. We believe that our current product candidates, including SkinTE, meet the criteria for regulation as a 361 HCT/P rather than as a new drug or biologic or medical device and, therefore, we do not currently expect that any of our current product candidates will be subject to the requirement for an IND or IDE or FDA premarket review and approval. Thus, our financial and business plans assume that we will not need to seek or obtain premarket FDA approval or clearance for our product candidates. Rather, we will have to comply with the requirements for 361 HCT/Ps set forth in FDA regulations and develop adequate substantiation to support marketing claims we plan to make.

~~The Tissue Reference Group (“TRG”)~~2023. Accordingly, there is a body within the FDA designed to provide recommendations regarding whether a particular product candidate will be regulated as a 361 HCT/P. The Office of Combination Products (“OCP”) at FDA provides informal and formal opinions regarding the classification of products as 361 HCT/Ps or drugs, biologics, or medical devices. Product manufacturers are not required to consult with the TRG or OCP and instead can market their products based on their own conclusion that the product meets the 361 HCT/P criteria.

~~We have not consulted the OCP or TRG. We continue to believe that our product candidates qualify as 361 HCT/Ps; however, the FDA could disagree with our conclusion.~~

The regulatory pathway for cell and tissue-based products is subject to significant uncertainty. The FDA’s criteria for regulation as a 361 HCT/P are complex, and the FDA has not provided comprehensive guidance on the meaning of certain terms used in the criteria, such as “minimal manipulation,” “homologous,” or “combination of the cells and tissues with another article.” In addition, our product candidates, including SkinTE, use new technology that may present a matter of first impression for the FDA in determining whether to require premarket authorization. Further, our product candidates may receive a high degree of scrutiny from the FDA. The FDA or Congress could change the relevant criteria or interpretations for determining which products qualify as 361 HCT/Ps or the regulatory requirements for HCT/Ps.

Additionally, it may be difficult to convince the courts to overturn any adverse decisions made against us by the FDA. Courts have recognized the longstanding principle that the FDA’s decisions on scientific matters, including the agency’s conclusion that a tissue processing procedure involves more than minimal manipulation, are entitled to substantial deference. This means that if the FDA disagrees with our conclusion that any of our product candidates should be regulated as a 361 HCT/P, and not as a new biologic, drug, or medical device, it may be very difficult to challenge the agency’s position in court.

Even if the FDA regulates our product candidates, including SkinTE, as 361 HCT/Ps, we must still generate adequate substantiation for any claims we will make in our marketing. Failure to establish such adequate substantiation in the opinion of federal or state authorities could substantially impair our ability to generate revenue.

Although as 361 HCT/Ps, we may not need to submit our product candidates to the FDA for premarket approval or be subject to FDA requirements for labeling or promotion of new drugs, biologics, or medical devices, we still must generate adequate substantiation for claims we make in our marketing materials. Both the Federal Trade Commission (“FTC”) and the states retain jurisdiction over the marketing of 361 HCT/Ps (and other) products in commerce and require a reasonable basis for claims made in marketing materials. Through our planned preclinical and clinical studies, as well as other endeavors, we intend to generate such adequate substantiation for any claims we make about our product candidates. If, however, after we commence marketing of any of our product candidates, including SkinTE, the FTC or one or more states conclude that we lack adequate substantiation for our claims, we may be subject to significant penalties and/or may be forced to alter our marketing of our product candidates in one or more jurisdictions. Any of this could materially harm our business. In addition, if our promotion of any of our product candidates suggests that the HCT/P is not intended for homologous use, the FDA might consider the product to be a new drug, biologic, or medical device. We will therefore be limited in the promotional claims that we can make about our product candidates.

~~Any changes in the governmental regulatory classifications of our product candidates could prevent, limit or delay our ability to market or develop our product candidates.~~

The FDA establishes regulatory requirements based on the classification of a product. An HCT/P is a product containing or consisting of human cells or tissue intended for transplantation into a human patient. 361 HCT/Ps are not subject to any premarket clearance or approval requirements and are subject to less extensive post-market regulatory requirements. Because our product development programs are designed to satisfy the standards applicable to 361 HCT/Ps, any change in the regulatory classification or designation of our products would affect our ability to obtain FDA approval or clearance for and marketing of our product candidates.

If a product candidate is deemed not to be a 361 HCT/P, FDA regulations will require premarket clearance or approval requirements that will involve significant time and cost investments by us. Further, there can be no assurance that the FDA will not, at some future point, change its position on current or future products’ 361 HCT/P status, and any regulatory reclassification could have adverse consequences for us and make it substantially more difficult or expensive for us to conduct our business by requiring extensive clinical trials, premarket clearance or approval and compliance with additional post-market regulatory requirements with respect to those product candidates. Moreover, increased regulatory scrutiny within the industry in which we operate could lead to increased regulation of HCT/Ps, including 361 HCT/Ps. We also cannot assure you that the FDA will not impose more stringent interpretations, restrictions, or requirements with respect to products that qualify as 361 HCT/Ps.

Even if we successfully launch any product candidate, it will be subject to ongoing regulation. We could be subject to significant penalties if we fail to comply with these requirements, and we may be unable to commercialize our product candidates.

Even if the FDA does not object to the marketing of any of our product candidates as a 361 HCT/P and, therefore, without an NDA, BLA, PMA, or 510(k), we will still be subject to numerous post-market requirements, including those related to registration and listing, record keeping, labeling, current good tissue practices, or cGTPs, donor eligibility, deviation and adverse event reporting, and other activities. HCT/Ps that do not meet the definition of a 361 HCT/P and, therefore, are required to be approved or cleared via an NDA, BLA, PMA, or 510(k) are also subject to these and/or additional obligations. If we fail to comply with these requirements, we could be subject to, without limitation, warning letters, product seizures, injunctions or civil and criminal penalties. We are currently relying on a third-party cGTP-compliant facility to conduct the various steps involved in our process. In the future, we plan to establish our own processing facility, which will need to be cGTP compliant. Any failure by us or the third-party facility on which we rely to maintain cGTP compliance would require remedial actions, which could potentially include actions such as product recalls or delays in distribution and sales of our product candidates, including SkinTE, as well as enforcement actions.

Moreover, even if the FDA allows any product candidate of ours to be marketed without premarket authorization, the FDA could still seek to withdraw the product from the market for a variety of reasons, including if the agency develops concerns regarding the safety or efficacy of the product or the product’s manufacturing process.

~~We face significant uncertainty in the industry due to government healthcare reform.~~

There have been and continue to be proposals by the federal government, state governments, regulators and third-party payers to control healthcare costs (including but not limited to capitation – the generalized cap on annual fees for a type of service or procedure such as burn or wound care or rehabilitation), and generally, to reform the healthcare system in the United States. There are many programs and requirements for which the details have not yet been fully established or the consequences are not fully understood. These proposals may affect aspects of our business. We also cannot predict what further reform proposals, if any, will be adopted, when they will be adopted, or what impact they may have on us.

Failure by our third-party manufacturers, including Cell Therapy and Regenerative Medicine, to comply with the regulatory guidelines set forth by the FDA with respect to our product candidates could delay or prevent the completion of market entry, clinical trials, the approval and/or registration of any product candidates, or the commercialization of our product candidates.

Third-party manufacturers, such as Cell Therapy and Regenerative Medicine (“CTRM”) at the University of Utah School of Medicine, are subject to regulation and inspection by the FDA for current Good Tissue Practice, or cGTP, and/or current Good Manufacturing Practice, or cGMP, compliance before they can produce commercial product. We may be in competition with other companies for access to these manufacturers’ facilities and may be subject to delays in manufacture if the manufacturers give other clients higher priority than they give to us. If we are unable to secure and maintain third-party manufacturing capacity, the development and sales of our product candidates and our financial performance may be materially affected.

Manufacturers are obligated to operate in accordance with FDA-mandated requirements. A failure of any of our third-party manufacturers to establish and follow cGTP and/or cGMP requirements, if applicable, and to document their adherence to such practices may lead to significant delays in the availability of material for clinical trials, may delay or prevent filing or approval of marketing applications for our product candidates, if applicable, and may cause delays or interruptions in the availability of our product candidates for commercial distribution. This could result in higher costs to us or deprive us of potential product revenues.

Complying with cGTP and/or cGMP and non-U.S. regulatory requirements will require that we expend time, money, and effort in production, recordkeeping, and quality control to assure that the product meets applicable specifications and other requirements. For any products for which we are required to obtain FDA pre-market approval, we, or our contracted manufacturing facility, must also pass a pre-approval inspection prior to FDA approval. Failure to pass a pre-approval inspection may significantly delay FDA approval of our product candidates. If we fail to comply with these requirements, we would be subject to possible regulatory action and may be limited in the jurisdictions in which we are permitted to sell our product candidates. As a result, our business, financial condition, and results of operations may be materially harmed.

The manufacture of cell and tissue-based therapy products is characterized by inherent risks and challenges and has proven to be a costly endeavor relative to manufacturing other therapeutics products. We have limited experience in manufacturing products for commercial purposes and we cannot assure you that we will be able to successfully and efficiently manage the manufacturing of our product candidates, either ourselves or through third-party contractors with whom we may enter into strategic relationships.

The manufacture of cell and tissue-based therapy products, such as our product candidates, is highly complex and is characterized by inherent risks and challenges such as autologous raw material inconsistencies, logistical challenges, significant quality control and assurance requirements, manufacturing complexity, and significant manual processing. Unlike products that rely on chemicals for efficacy, such as most pharmaceuticals, cell and tissue-based therapy products are difficult to characterize due to the inherent variability of biological input materials. Difficulty in characterizing biological materials or their interactions creates greater risk in the manufacturing process. However, there can be no assurance that we will be able to maintain adequate sources of biological materials or that biological materials that we maintain in inventory will yield finished products that satisfy applicable product release criteria. Our inability to obtain necessary biological materials or to successfully manufacture cell and tissue-based therapy products that incorporate such materials could have a material adverse effect on our results of operations.

Additionally, we have limited experience in manufacturing products for commercial purposes and could experience difficulties in the continued manufacturing of our product candidates. Because our experience in manufacturing, sales, marketing and distribution is limited, we may encounter unforeseen difficulties in our efforts to efficiently manage the manufacturing, sale and distribution of our product candidates or have to rely on third-party contractors over which we may not have sole control to manufacture our product candidates. Moreover, there can be no assurance that we or any third-party contractors with whom we enter into strategic relationships will be successful in streamlining manufacturing operations and implementing efficient, low-cost manufacturing capabilities and processes that will enable us to meet the quality, price and production standards or production volumes to achieve profitability. Our failure to develop these manufacturing processes and capabilities in a timely manner could prevent us from achieving our growth and profitability objectives as projected or at all.

We intend to obtain assistance to market our product candidates and some of our future products through collaborative relationships with companies with established sales, marketing and distribution capabilities. Our inability to develop and maintain those relationships would limit our ability to market, sell and distribute our product candidates. Our inability to enter into successful, long-term relationships could require us to develop alternate arrangements at a time when we need sales, marketing or distribution capabilities to meet existing demand. We may market one or more of our product candidates through our own sales force. Our inability to develop and retain a qualified sales force could limit our ability to market, sell and distribute our cell products.

~~We are subject to significant regulation with respect to the manufacturing of our product candidates.~~

All of those involved in the preparation of a cellular therapy for clinical trials or commercial sale, including our existing supply contract manufacturers and clinical trial investigators, are subject to extensive and continuing government regulations by the FDA and comparable agencies in other jurisdictions. Components of a finished therapeutic product approved for commercial sale or used in late-stage clinical trials must be manufactured in accordance with cGTP and/or cGMP. These regulations govern manufacturing processes and procedures and the implementation and operation of quality systems to control and assure the quality of investigational products and products approved for sale. Our facilities and quality systems and the facilities and quality systems of some or all of our third-party contractors and suppliers must pass inspection for compliance with the applicable regulations as a condition of FDA approval of our product candidates (if approval of any such candidates is required). The FDA also may, at any time following approval of a product for sale (if applicable), audit our manufacturing facilities or those of our third-party contractors. In addition, the FDA may, at any time, audit or inspect a manufacturing facility involved with the preparation of our current products or our other potential products or the associated quality systems for compliance with the regulations applicable to the activities being conducted.

Any manufacturing facility we maintain and that of our third-party contract manufacturer(s) is subject to inspections by the FDA. If any such inspection or audit identifies a failure to comply with applicable regulations or if a violation of our product specifications or applicable regulation occurs independent of such an inspection or audit, we or the FDA may require remedial measures that may be costly and/or time consuming for us or a third party to implement and that may include the temporary or permanent suspension of clinical trials, product manufacture, commercial sales or exports, recalls, warning letters, market withdrawals, seizures or the temporary or permanent closure of a facility. Any such remedial measures imposed upon us or third parties with whom we contract could materially harm our business.

We have limited manufacturing capacity and our manufacturing operations in the U.S. depend primarily on one facility. If this facility is destroyed or we experience any manufacturing difficulties, disruptions or delays, this could limit supply of our product candidates or adversely affect our ability to conduct our clinical trials and our business would be adversely impacted.

We have entered into a manufacturing agreement with CTRM, an accredited, FDA-inspected facility at the University of Utah School of Medicine that maintains procedures for cGMP and cGTP compliance, and conduct all of our manufacturing operations at the CTRM facility located in Salt Lake City, Utah. As a result, all of the manufacturing of our product candidates takes place at a single U.S. facility. We will require additional and/or expanded manufacturing facilities to support our growth plans. If regulatory, manufacturing or other problems require us to discontinue production at this facility, we will not be able to supply our product candidates to patients or have supplies for any clinical trials, which would adversely impact our business. If this facility or the equipment in it is significantly damaged or destroyed by fire, flood, power loss or similar events, we may not be able to quickly or inexpensively replace our manufacturing capacity or replace the facility at all. In the event of a temporary or protracted loss of this facility or equipment, we might not be able to transfer manufacturing to another third party. Even if we could transfer manufacturing from one facility to another, the shift would likely be expensive and time-consuming, particularly since an alternative facility would need to comply with the cGTP and/or cGMP (if applicable) regulatory and quality standard requirements and, if applicable, FDA approval would be required before any products manufactured at that facility could be made commercially available.

~~Our financial resources are limited and we will need to raise additional capital in the future to continue our business.~~

As a result of the reorganization transactions, our business focus has changed from a gaming business to regenerative medicine. We do not expect to generate any revenues going forward that we have achieved in prior years, and no longer expect to generate any revenues from other segments of our business which have been terminated or disposed of. We will need additional capital to continue to fund our operations and plans to commercialize and develop our tissue products and product candidates. We cannot ensure that additional funding will be available or, if it is available, that it can be obtained on terms and conditions we will deem acceptable. Any additional funding derived from the sale of equity securities is likely to result in significant dilution to our existing stockholders. These matters involve risks and uncertainties that may prevent us from raising additional capital or may cause the terms upon which we raise additional capital, if additional capital is available, to be less favorable to us than would otherwise be the case. If we reach a point where we are unable to raise needed additional funds to continue as a going concern, we will be forced to cease our business activities and dissolve. In such an event, we will need to satisfy various severances, contract termination, and other dissolution-related obligations.

~~Our financial statements have been prepared on a going concern basis; we must raise additional capital to fund our operations in order to continue as a going concern.~~

~~In its report dated January 29, 2018, EisnerAmper LLP, our independent registered public accounting firm, expressed~~ substantial doubt about our ability to continue as a going concern beyond that time unless we can raise additional capital from external sources.

We expect to incur significant operating costs in the near term as we ~~have suffered recurring~~pursue the regulatory process for SkinTE with the FDA, conduct clinical trials and studies, and pursue product research, all while operating our business and incurring continuing fixed costs related to the maintenance of our assets and business. We expect to incur significant losses in the future, and those losses could be more severe as a result of unforeseen expenses, difficulties, complications, delays, and other unknown events. As a result of the disposition of IBEX in April 2022, we are no longer engaged in any revenue generating activity that would contribute to defraying our operating costs in future periods, which will make us entirely dependent on capital obtained from ~~operations and have insufficient liquidity~~external sources to fund our ~~future~~ operations. IfThe impact of COVID-19, inflation, and other macroeconomic issues have and may continue to adversely affect capital markets and could limit our ability to obtain the capital we ~~are unable~~need to ~~improve~~operate our liquidity position we may not be able to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result if we are unable to continue as a going concern and, therefore, be required to realize our assets and discharge our liabilities other than in the normal course of business which could cause investors to suffer the loss of all or a substantial portion of their investment.business.

As of January 31, 2018, we had $10.0 million of cash. We anticipate that our principal sources of liquidity will only be sufficient to fund our activities through approximately October 2018. In order to have sufficient cash to fund our operations, we will need to raise additional equity or debt capital and we cannot provide any assurance that we will be successful in doing so.

We may not be able to ~~raise the required~~obtain necessary capital ~~to conduct our operations and develop and commercialize our product candidates.~~

~~We incurred net losses of $130.8 million~~ in fiscal 2017, and additional net losses of $14.1 for the quarter ended January 31, 2018. We will require substantial additional capital resources in order to complete our product development programs, complete clinical trials, and market and commercialize our product candidates. In order to grow and expand our business, and to introduce our new product candidates into the marketplace, we will need to raise a significant amount of additional funds. We will also need significant additional funds or a collaborative partner, or both, to finance the research and development activities. Accordingly, we are continuing to pursue additional sources of financing.

We expect to devote substantial capital resources to, among other things, fund operations, continue development programs, and to build out and increase our portfolio of product candidates. If we are unable to secure such additional financing, it will have a material adverse effect on our business and we may have to limit operations in a manner inconsistent with our development and commercialization plans. If additional funds are raised through the issuance of equity securities or convertible debt securities, it will be dilutive to our stockholders and could result in a decrease in our stock price.

We have funded our operations primarily with proceeds from public and private offerings of our common stock. Our history of operating losses and cash uses, our projections of the level of cash that will be required for our operations to reach profitability, the terms of the private placement transactions that we completed in the past, and the restricted availability of credit for emerging industries, may impair our ability to raise capitalsufficient amounts, on terms that we consider reasonable and at the levels that we will require over the coming months. We cannot provide any assurances that we will be able to secure additional funding from public or private offerings on terms acceptablefavorable to us, ifor at all. If adequate funds are not available for our business in the future, we ~~are~~may be required to delay, reduce the scope of, or eliminate the plans for obtaining regulatory licensure or approval for SkinTE or be unable to ~~obtain the requisite amount~~continue operations over a longer term, any of ~~financing needed to fund our planned operations, it~~which would have a material adverse effect on our business, ~~and ability to continue as a going concern.~~

If adequate funds are not available in the future, we may not be able to develop or enhance our product candidates, take advantage of future opportunities, or respond to competitive pressures or unanticipated requirements and we may be required to delay or terminate research and development programs, curtail capital expenditures, and reduce business development and other operating activities. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, the consequences could have a material adverse effect on our business, operating results, financial condition, results of operation, and prospects.

~~Our financial condition may impair our ability to obtain credit terms with our suppliers~~.

Our revenues may be dependent and our reimbursement arrangement may provide us with extended payment terms. However, our financial condition may make it difficult for us to continue to receive payment terms from our suppliers or vendors making demand for adequate assurance, which could include a demand for payment-in-advance. If we are unable to obtain reasonable payment terms or if any of our material vendors or suppliers were to successfully demand payment-in-advance, it could have a material adverse effect on our liquidity.

~~Our Restated Certificate of Incorporation, our Restated Bylaws and Delaware law could deter a change of our management which could discourage or delay offers to acquire us.~~

Certain provisions of Delaware law and of our Restated Certificate of Incorporation, as amended, and by-laws, could discourage or make it more difficult to accomplish a proxy contest or other change in our management or the acquisition of control by a holder of a substantial amount of our voting stock. It is possible that these provisions could make it more difficult to accomplish, or could deter, transactions that stockholders may otherwise consider to be in their best interests or in our best interests. These provisions include:

~~Our executive officers and directors have the ability to control matters submitted to stockholders for approval.~~

~~On March 6, 2018, Dr. Denver Lough converted 7,050 shares of our Series E Preferred Stock into 7,050,000~~ shares of our common stock has declined and ~~received~~may continue to be volatile, which could adversely affect an investment in our stock and our ability to raise capital.

Investors should consider an investment in our securities as risky and invest only if they can withstand a ~~proxy~~significant loss and wide fluctuations in the market value of their investment. Holders of our stock may be unable to ~~vote an additional 797,296~~sell their shares of common stock ~~held by certain of our other shareholders. Dr. Lough holds additional~~at or above the price paid for the shares ~~and/or vested options~~due to purchase shares of our common stock. As of March 14, 2018, there were 16,457,664 shares of common stock issued and outstanding eligible to vote and, accordingly, Dr. Lough currently holds or has the right to vote approximately 53% of the outstanding voting capital of the Company. As a result, Dr. Lough, together with our other executive officers and directors, would be able to control matters submitted to our stockholders for approval, as well as our management and affairs.

~~Substantial future sales of our common stock by us or by our existing stockholders could cause our stock price to fall.~~

~~Additional equity financings or other share issuances by us, including shares issued~~fluctuations in connection with strategic alliances and corporate partnering transactions, could adversely affect the market price of our common stock. Sales by existing stockholders of a large number of shares of our common stock in the public market or the perception that additional sales could occur could cause the market price of our common stock arising. Our stock price has been highly volatile during the 12-month period ended June 30, 2022, with closing stock prices ranging from a high of $24.875 per share to ~~drop.~~a low of $1.45 per share.

The price at which our common stock trades may continue to fluctuate significantly and may be influenced by many factors, including our financial condition; developments generally affecting our industry; general economic, industry and market conditions; the depth and liquidity of the market for our common stock; investor perceptions of our business; reports by industry analysts; announcements by other market participants, including, among others, investors and our competitors; regulatory action affecting our business; and, the impact of other risk factors discussed in our 2021 Annual Report and this Quarterly Report on Form 10-Q. In addition, changes in the trading price of our common stock may be ~~affected by factors different from those affecting the market price for~~inconsistent with our ~~common stock in recent history.~~operating results and outlook.

~~On June 23, 2017, we entered into a purchase agreement with Majesco Entertainment Company, a Nevada corporation~~Declines and our wholly-owned subsidiary, and Zift Interactive LLC, a Nevada limited liability company. Pursuant to the terms of the purchase agreement, we sold to Zift Interactive LLC 100% of the issued and outstanding shares of common stock of Majesco Entertainment Company, including all of the right, title and interest in and to Majesco Entertainment Company’s business of developing, publishing and distributing video game products through both retail distribution and mobile and online digital downloading. As a result of the transactions, we disposed entirely of our gaming business assets and intend to devote its resources and attention to our regenerative medicine efforts.

As result, our business in recent history differs from that of our current business, and accordingly, the results of operations for our company may be affected by factors different from those affecting our results of operation in recent history. As such, the market price for our stock may be impacted differently in the future by those factors than it is currently.

~~We have experienced~~ volatility in the ~~price of our stock and are subject to volatility in the future .~~

The price of our common stock has experienced significant volatility, and to date, a significant percentage of our common stock has been held by affiliates and insiders. The high and low bid quotations for our common stock, as reported by NASDAQ, ranged between a high of $31.68 and a low of $3.86 during the past 12 months. The historic market price of our common stock ~~may be higher or lower than the price paid for our shares~~have and may not be indicative of future market prices, depending on many factors, some of which are beyond our control. In addition, our Chief Executive Officer controls approximately 53% of our voting capital stock and maintains effective majority control over decisions affecting our Company and business. As a result investors may be unwilling to purchase our common stock and our market price may be affected. The price of our stock may change dramatically in response to our success or failure and based upon our relationship and the decisions of our chief executive officer.

~~Our common stock currently trades on NASDAQ. This market has continued listing requirements that we must~~ continue to ~~maintain to avoid delisting. The standards include, among others, a minimum bid price requirement of $1.00 per share~~materially and any of: (i) a minimum stockholders’ equity of $2.5 million; (ii) a market value of listed securities of $35 million; or (iii) net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three fiscal years. Our results of operations and our fluctuating stock price directly impactadversely affect our ability to ~~satisfy these listing standards. In~~fund our business through public or private sales of equity securities and the ~~event~~retentive power of our equity compensation plans, which we rely upon in part to retain key executives and employees.

Unfavorable global economic or political conditions could adversely affect our business or financial condition.

Our business and our ability to raise capital are ~~unable~~susceptible to ~~maintain these listing standards, we~~general conditions in the global economy and in the global financial markets. Further, the impacts of political unrest, including as a result geopolitical tension, such as a deterioration in the relationship between the U.S. and China or escalation in conflict between Russia and Ukraine, including any additional sanctions, export controls, or other restrictive actions that may be ~~subject~~imposed by the U.S. or other countries against governmental or other entities in, for example, Russia, also could lead to ~~delisting.~~

~~On January 6, 2017, we were notified by NASDAQ~~disruption, instability, and volatility in the global markets, which may have an adverse impact on our business or ability to access the capital markets. Inflation rates have increased and may continue to rise. A severe or prolonged economic downturn, including a recession or depression resulting from the ongoing COVID-19 pandemic, political disruption, or inflation could result in a variety of ~~failure~~risks to ~~comply with NASDAQ Listing Rule 5605(b)(1) which requires that a majority~~our business and our ability to raise additional capital when needed on acceptable terms, if at all. Any of the ~~directors comprising~~foregoing could materially and adversely affect our ~~Board~~business, financial condition, results of ~~Directors be considered “independent”, as defined under Rule 5605(b). The notice had no immediate effect on the listing or trading of our common stock on NASDAQ. On February 22, 2017,~~operation, and prospects, and we ~~regained compliance with Listing Rule 5605(b)(1) with the appointment of Mr. Steve Gorlin and Dr. Jon Mogford.~~

~~On November 1, 2017, we were notified by NASDAQ of failure to comply with Nasdaq Listing Rule 5605(b)(1) which requires that a majority~~cannot anticipate all of the ~~directors comprising~~ways in which the political, economic, or financial market conditions could adversely impact our Board of Directors be considered “independent” and Listing Rule 5605(c)(2)(a) requiring an audit committee to be comprised of at least three independent directors. The Company plans to regain compliance upon appointment of one or more additional independent directors prior to the deadline provided by NASDAQ.business.

A delisting from NASDAQ would result in our common stock being eligible for quotation on the Over-The-Counter market which is generally considered to be a less efficient system than listing on markets such as NASDAQ or other national exchanges because of lower trading volumes, transaction delays and reduced security analyst and news media coverage. These factors could contribute to lower prices and larger spreads in the bid and ask prices for our common stock. Additionally, trading of our common stock on the OTCBB may make us less desirable to institutional investors and may, therefore, limit our future equity funding options and could negatively affect the liquidity of our stock.

~~None.~~During the three-month period ended June 30, 2022, we withheld or acquired from employees shares of common stock to satisfy statutory withholding tax liability upon the vesting of share-based awards. The following table sets forth information on our acquisition of these shares for each month during the period in which an acquisition occurred.

The foregoing description of the Agreement is not complete and is qualified in its entirety by reference to the Employment Agreement with Cameron Hoyler dated August 18, 2021, and Employment Agreement Amendment No. 1 dated August 11, 2022, filed as Exhibits 10.7 and 10.8 to this report, respectively, and are incorporated by reference herein.

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.

~~DELAWARE~~delaware		06-1529524
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock, Par Value $0.001		PTE		The Nasdaq Capital Market

Large accelerated filer	~~[ ]~~☐		Accelerated filer	~~[ ]~~☐
Non-accelerated filer	~~[ ]~~☒	~~(Do not check if smaller reporting company)~~	Smaller reporting company	~~[X]~~☒
			Emerging growth company	~~[ ]~~	☐

	Page
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of ~~January~~June 30, 2022 and December 31, ~~2018~~2021 (unaudited) ~~and October 31, 2017~~	3
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended ~~January 31, 2018~~June 30, 2022 and ~~2017~~2021 (unaudited)	4
Condensed Consolidated ~~Statement~~Statements of ~~Changes in~~ Stockholders’ Equity for the three and six months ended ~~January 31, 2018~~June 30, 2022 and 2021 (unaudited)	5
Condensed Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~January 31, 2018~~June 30, 2022 and ~~2017~~2021 (unaudited)	6
Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2130
Item 3. Quantitative and Qualitative Disclosures about Market Risk	2339
Item 4. Controls and Procedures	2339

PART II - OTHER INFORMATION

~~Item 1. Legal Proceedings~~	24
Item 1A. Risk Factors	2439
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	4540
~~Item 3. Defaults Upon Senior Securities~~	45
~~Item 4. Mine Safety Disclosures~~	45
~~Item 5. Other Information~~	45
Item 6. Exhibits	4642
~~SIGNATURES~~	47
SIGNATURES	43

	January 31, 2018			October 31, 2017
		(Unaudited)
ASSETS

Current assets:
Cash and cash equivalents	$	9,990		$	17,667
Prepaid expenses and other current assets		626			237
Receivable from Zift		60			60
Total current assets		10,676			17,964
Non-current assets:
Property and equipment, net		4,452			2,173
Security desposits – non-current		111			-
Receivable from Zift, non-current		-			15
Total non-current assets		4,563			2,188
TOTAL ASSETS	$	15,239		$	20,152

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities:
Accounts payable and accrued expenses	$	3,312		$	1,939
Warrant liability and embedded derivative		10,128			13,502
Total current liabilities		13,440			15,441
Total liabilities		13,440			15,441

Commitments and Contingencies

Redeemable convertible preferred stock - Series F - 6,455 shares authorized, issued and outstanding at January 31, 2018 and October 31, 2017; liquidation preference - $17,750.		5,414			4,541

STOCKHOLDERS’ EQUITY (DEFICIT):
Convertible preferred stock - 9,993,545 shares authorized, 1,656,838 and 3,230,655 shares issued and outstanding at January 31, 2018 and October 31, 2017, aggregate liquidation preference $1,089 and $2,140, respectively		109,104			109,995
Common stock - $.001 par value; 250,000,000 shares authorized; 7,094,544 and 6,515,524 shares issued and outstanding at January 31, 2018 and October 31, 2017, respectively		7			7
Additional paid-in capital		160,368			149,173
Accumulated deficit		(273,094	)		(259,005	)
Total stockholders’ equity (deficit)		(3,615	)		170
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	15,239		$	20,152

	For the three months ended
	January 31,
	2018			2017
Net revenues	$	13		$	-
Cost of sales		1			-
Gross profit		12			-

Operating costs and expenses
Research and development		6,602			-
General and administrative		10,898			5,225
		17,500			5,225
Operating loss		(17,488	)		(5,225	)
Other (expenses) income
Interest income		25			4
Change in fair value of derivative liabilities		3,374			(8	)
Net loss from continuing operations		(14,089	)		(5,229	)
Loss from discontinued operations		-			(432	)
Net loss		(14,089	)		(5,661	)
Deemed dividend – accretion of discount on Series F preferred stock		(904	)		-
Cumulative dividends on Series F preferred stock		(275	)		-
Net loss attributable to common shareholders	$	(15,268	)	$	(5,661	)

Net loss per share, basic and diluted:
Loss from continuing operations	$	(2.13	)	$	(1.56	)
Loss from discontinued operations		-			(0.13	)
Deemed dividend – accretion of discount on preferred stock		(0.14	)		-
Cumulative dividends on Series F preferred stock		(0.04	)		-
Net loss attributable to common shareholders	$	(2.31	)	$	(1.69	)

Weighted average shares outstanding, basic and diluted		6,615,350			3,346,788

	June 30, 2022			December 31, 2021

ASSETS
Current assets
Cash and cash equivalents	$	20,518		$	19,375
Accounts receivable, net		–			978
Assets held for sale		387			441
Prepaid expenses and other current assets		1,992			1,595
Total current assets		22,897			22,389
Property and equipment, net		3,670			6,923
Operating lease right-of-use assets		554			1,146
Other assets		910			720
TOTAL ASSETS	$	28,031		$	31,178

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses	$	1,944		$	3,115
Other current liabilities		1,568			1,520
Deferred revenue		–			74
Total current liabilities		3,512			4,709
Common stock warrant liability		4,222			6,844
Operating lease liabilities		63			43
Other long-term liabilities		188			338
Total liabilities		7,985			11,934

Commitments and Contingencies (Note 16)		-			-

STOCKHOLDERS’ EQUITY
Preferred stock – 25,000,000 shares authorized, 0 shares issued and outstanding at June 30, 2022 and December 31, 2021		–			–
Common stock - $.001 par value; 250,000,000 shares authorized; 4,971,236 and 3,299,379 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively^*		5			3
Additional paid-in capital		532,278			527,639
Accumulated deficit		(512,237	)		(508,398	)
Total stockholders’ equity		20,046			19,244
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	28,031		$	31,178

	Preferred Stock						Common Stock				Additional Paid-in			Accumulated			Total Stockholders’
	Number			Amount			Number		Amount		Capital			Deficit			Equity (Deficit)
Balance as of October 31, 2017		3,230,655		$	109,995			6,515,524	$	7	$	149,173		$	(259,005	)	$	170
Issuance of common stock in connection with:
Conversion of Series A preferred stock to common stock		(1,544,572	)		(378	)		350,000		-		378			-			-
Conversion of Series C preferred stock to common stock		(2,578	)		(201	)		59,950		-		201			-			-
Conversion of Series D preferred stock to common stock		(26,667	)		(312	)		44,445		-		312			-			-
Proceeds from option exercises		-			-			10,417		-		45			-			45
Stock-based compensation expense		-			-			102,500		-		11,132			-			11,132
Deemed dividend – accretion of discount on Series F preferred stock		-			-			-		-		(904	)		-			(904	)
Cumulative dividends on Series F preferred stock		-			-			-		-		(275	)		-			(275	)
Series F preferred stock dividends paid in common stock		-			-			11,708		-		306			-			306
Net loss		-			-			-		-		-			(14,089	)		(14,089	)
Balance as of January 31, 2018		1,656,838		$	109,104			7,094,544	$	7	$	160,368		$	(273,094	)	$	(3,615	)

	2022			2021			2022			2021
	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2022			2021			2022			2021
Net revenues
Products	$	–		$	1,195		$	–		$	2,924
Services		73			1,342			814			4,322
Total net revenues		73			2,537			814			7,246
Cost of revenues
Products		–			207			–			448
Services		125			717			616			2,641
Total costs of revenues		125			924			616			3,089
Gross (loss) profit		(52	)		1,613			198			4,157
Operating costs and expenses
Research and development		3,078			4,190			5,938			6,621
General and administrative		3,562			4,941			9,771			11,312
Sales and marketing		–			1,099			–			2,625
Restructuring and other charges		38			11			38			436
Impairment of assets held for sale		–			–			54			–
Total operating costs and expenses		6,678			10,241			15,801			20,994
Operating loss		(6,730	)		(8,628	)		(15,603	)		(16,837	)
Other income (expense), net
Gain on extinguishment of debt		–			3,612			–			3,612
Change in fair value of common stock warrant liability		6,630			1,807			11,735			(2,220	)
Inducement loss on sale of liability classified warrants		–			–			–			(5,197	)
Interest expense, net		(14	)		(39	)		(29	)		(77	)
Other income, net		46			60			58			121
Net loss and comprehensive loss	$	(68	)	$	(3,188	)	$	(3,839	)	$	(20,598	)

Net loss per share attributable to common stockholders
Basic^*	$	(0.01	)	$	(0.99	)	$	(0.85	)	$	(6.57	)
Diluted^*	$	(0.49	)	$	(1.01	)	$	(1.37	)	$	(6.57	)
Weighted average shares outstanding
Basic^*		5,148,106			3,224,117			4,512,692			3,135,715
Diluted^*		5,418,552			3,246,490			4,803,671			3,135,715

					**
	For the Three and Six Months Ended June 30, 2021
	Common Stock*					Additional Paid-in			Accumulated			Total Stockholders’
	Number			Amount		Capital			Deficit			Equity
Balance – December 31, 2020		2,194,284		$	2	$	505,547		$	(478,211	)	$	27,338
Issuance of common stock and pre-funded warrants through underwritten offering, net of issuance costs of $114		266,800			–		1,255			–			1,255
Issuance of common stock upon exercise of warrants		428,542			1		6,670			–			6,671
Reclassification of warrant liability upon exercise		–			–		8,964			–			8,964
Issuance of common stock upon exercise of pre-funded warrants		306,358			–		8			–			8
Stock-based compensation expense		–			–		1,651			–			1,651
Stock option exercises		100			–		3			–			3
Vesting of restricted stock units		22,617			–		–			–			–
Shares withheld for tax withholding		(4,664	)		–		(139	)		–			(139	)
Forfeiture of restricted stock awards		(1,385	)		–		–			–			–
Net loss		–			–		–			(17,410	)		(17,410	)
Balance – March 31, 2021		3,212,652			3		523,959			(495,621	)		28,341
Beginning balance		3,212,652			3		523,959			(495,621	)		28,341
Stock-based compensation expense		–			–		1,640			–			1,640
Purchase of ESPP shares		1,970			–		28			–			28
Vesting of restricted stock units		17,366			–		–			–			–
Shares withheld for tax withholding		(2,290	)		–		(53	)		–			(53	)
Net loss		–			–		–			(3,188	)		(3,188	)
Balance – June 30, 2021		3,229,698		$	3	$	525,574		$	(498,809	)	$	26,768
Ending balance		3,229,698		$	3	$	525,574		$	(498,809	)	$	26,768

	For the three months ended January 31,
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(14,089	)	$	(5,661	)
Loss from discontinued operations		-			432
Loss from continuing operations		(14,089	)		(5,229	)
Adjustments to reconcile net loss from continuing operations to net cash used in continuing operating activities:
Depreciation and amortization		256			-
Stock based compensation expense		11,132			3,975
Change in fair value of warrant liability and embedded derivative		(3,374	)		8
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		46			(204	)
Security deposits – non-current		(111	)		-
Accounts payable and accrued expenses		1,067			694
Net cash used in continuing operating activities		(5,073	)		(756	)
Net cash provided by discontinued operating activities		-			395
Net cash used in operating activities		(5,073	)		(361	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		(2,664	)		(1,538	)
Net cash used in continuing investing activities		(2,664	)		(1,538	)
Net cash provided by discontinued investing activities		15			-
Net cash used in investing activities		(2,649	)		(1,538	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from stock options exercised		45			-
Proceeds from the sale of common stock		-			2,278
Net cash provided by financing activities		45			2,278

Net decrease in cash and cash equivalents		(7,677	)		379
Cash and cash equivalents - beginning of period		17,667			6,523
Cash and cash equivalents - end of period	$	9,990		$	6,902

Supplemental schedule of non-cash investing and financing activities:
Conversion of Series A preferred stock to common stock	$	378		$	297
Conversion of Series B preferred stock to common stock	$	-		$	513
Conversion of Series C preferred stock to common stock	$	201		$	90
Conversion of Series D preferred stock to common stock	$	312		$	721
Unpaid liability for acquisition of property and equipment	$	360		$	54
Warrant exchange for common stock shares	$	-		$	78
Deemed dividend – accretion of discount on preferred stock	$	904		$	-
Cumulative dividends on Series F preferred stock	$	275		$	-
Series F preferred stock dividends paid in common stock	$	306		$	-

	2022			2021
	For the Six Months Ended June 30,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(3,839	)	$	(20,598	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		1,292			3,124
Depreciation and amortization		858			1,437
Impairment of assets held for sale		54			–
Amortization of intangible assets		–			95
Bad debt expense		–			134
Inventory write-off		–			697
Gain on extinguishment of debt – PPP loan		–			(3,612	)
Change in fair value of common stock warrant liability		(11,735	)		2,220
Inducement loss on sale of liability classified warrants		–			5,197
Loss on restructuring and other charges		–			269
(Gain) loss on sale of property and equipment		(36	)		7
Gain on sale of subsidiary and property		(32	)		–
Changes in operating assets and liabilities:
Accounts receivable		396			1,643
Inventory		–			110
Prepaid expenses and other current assets		(187	)		(1,294	)
Operating lease right-of-use assets		592			666
Other assets/liabilities, net		–			245
Accounts payable and accrued expenses		(1,015	)		(221	)
Other current liabilities		–			(14	)
Deferred revenue		(51	)		(82	)
Operating lease liabilities		(564	)		(728	)
Net cash used in operating activities		(14,267	)		(10,705	)
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Purchase of property and equipment		(31	)		(18	)
Proceeds from sale of property and equipment		165			10
Proceeds from sale of subsidiary and property, net of selling expenses and cash sold		2,327			–
Net cash provided by/(used in) investing activities		2,461			(8	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from insurance financing arrangements		1,027			1,028
Principal payments on term note payable and financing arrangements		(353	)		(359	)
Principal payments on financing leases		(186	)		(272	)
Net proceeds from the sale of common stock, warrants and pre-funded warrants		7,823			9,884
Proceeds from the sale of warrants		–			1,002
Proceeds from warrants exercised		–			6,671
Proceeds from pre-funded warrants exercised		1			8
Net proceeds from the sale of preferred stock and warrants		4,814			–
Cash paid for tax withholdings related to net share settlement		(179	)		(188	)
Proceeds from stock options exercised		–			3
Proceeds from ESPP purchase		2			28
Net cash provided by financing activities		12,949			17,805
Net increase in cash and cash equivalents		1,143			7,092
Cash and cash equivalents - beginning of period		19,375			25,522
Cash and cash equivalents - end of period	$	20,518		$	32,614

Supplemental cash flow information:
Cash paid for interest	$	39		$	66

Supplemental schedule of non-cash investing and financing activities:
Fair value of placement agent warrants issued in connection with offerings	$	417		$	838
Reclassification of warrant liability to stockholders’ equity upon exercise of warrant	$	–		$	8,964
Conversion of Series A and Series B preferred stock into common stock	$	16		$	–
Allocation of financing to warrant liability	$	9,113		$	8,629
Deferred and accrued offering costs	$	98		$	400
Sale of assets held for sale in exchange for a note receivable	$	400		$	–
Reclassification of lease deposit to short term	$	210		$	–

	January 31, 2018		October 31, 2017
Legal retainer	$	-	$	15
Prepaid insurance		64		69
Other prepaids		88		126
Advances on equipment purchases		435		-
Other assets		39		27
Total prepaid expenses and other current assets	$	626	$	237

	January 31, 2018			October 31, 2017
Medical equipment	$	4,911		$	2,418
Computers and software		238			211
Furniture and equipment		45			30
Total property and equipment, gross		5,194			2,659
Accumulated depreciation		(742	)		(486	)
Total property and equipment, net	$	4,452		$	2,173

	January 31, 2018		October 31, 2017
Accounts payable	$	25	$	25
Due to Zift		-		36
Medical study and supplies		511		362
Medical equipment purchase		360		54
Salaries and other compensation		1,312		574
Legal and accounting		737		555
Other accruals		367		333
Total accounts payable and accrued expenses	$	3,312	$	1,939

	Shares Authorized		Shares Issued and Outstanding		Net Carrying Value		Aggregate Liquidation Preference		Common Shares Issuable Upon Conversion
Series A		8,830,000		1,602,099	$	391	$	1,089		363,142
Series B		54,250		47,689		4,020		-		794,816
Series C		26,000		-		-		-		-
Series D		170,000		-		-		-		-
Series E		7,050		7,050		104,693		-		7,050,000
Series F		6,455		6,455		5,414		17,750		645,455
Other authorized, unissued		906,245		-		-		-		-
Total		10,000,000		1,663,293	$	114,518	$	18,839		8,853,413

●	●	Level 1: Observable inputs such as quoted prices in active markets for identical ~~instruments~~instruments.

●	●	Level 2: Quoted prices for similar instruments that are directly or indirectly observable in the ~~market~~market.

●	●	Level 3: Significant unobservable inputs supported by little or no market activity. Financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, for which determination of fair value requires significant judgment or estimation.

	Series F Conversion Feature
	January 31, 2018			October 31, 2017
Stock price	$	21.30		$	25.87
Exercise price	$	27.50		$	27.50
Risk-free rate		2.053	%		1.581	%
Volatility		86.4	%		96.0	%
Term		1.64			1.89

	Warrant Liability
	January 31, 2018			October 31, 2017
Stock price	$	21.30		$	25.87
Exercise price	$	30.00		$	30.00
Risk-free rate		2.053	%		1.581	%
Volatility		86.4	%		96.0	%
Term		1.64			1.89

	Level 1		Level 2		Level 3		Total
	June 30, 2022
	Level 1		Level 2		Level 3		Total
Liabilities
Common stock warrant liability	$	–	$	–	$	4,222	$	4,222
Total	$	–	$	–	$	4,222	$	4,222

	Fair Value at December 31, 2021		Initial Fair Value at Issuance		(Gain) Loss Upon Change in Fair Value			Liability Reduction Due to Exercises		Fair Value at June 30, 2022
Warrant liabilities
February 14, 2020 issuance	$	291	$	–	$	(268	)	$	–	$	23
December 23, 2020 issuance		239		–		(228	)		–		11
January 14, 2021 issuance		3,345		–		(3,097	)		–		248
January 25, 2021 issuance		2,969		–		(2,748	)		–		221
March 16, 2022 issuance		–		3,129		(2,905	)		–		224
June 8, 2022 issuance		–		5,984		(2,489	)		–		3,495
Total	$	6,844	$	9,113	$	(11,735	)	$	–	$	4,222

	Fair Value at December 31, 2020		Initial Fair Value at Issuance		(Gain) Loss Upon Change in Fair Value			Liability Reduction Due to Exercises			Fair Value at June 30, 2021
Warrant liabilities
February 14, 2020 issuance	$	328	$	–	$	168		$	–		$	496
December 23, 2020 issuance		5,647		–		3,802			(8,964	)		485
January 14, 2021 issuance		–		8,629		(1,700	)		–			6,929
January 25, 2021 issuance⁽¹⁾		–		6,199		(50	)		–			6,149
Total	$	5,975	$	14,828	$	2,220		$	(8,964	)	$	14,059

		For the Six Months ended
		June 30, 2022
Stock price	$	1.45 – 8.55
Exercise price	$	2.40 – 34.50
Risk-free rate		1.95 – 3.03	%
Volatility		98.4 – 123.6	%
Remaining term (years)		1.71 – 5.00

		For the Six Months ended
		June 30,2021
Stock price	$	25.50 – 30.25
Exercise price	$	2.50 – 34.50
Risk-free rate		0.42 – 1.13	%
Volatility		99.0 – 102.8	%
Remaining term (years)		4.48 – 5.87

	June 30, 2022		December 31, 2021
Other current receivable	$	104	$	67
Short term deposit		359		150
Prepaid insurance		1,015		239
Prepaid expenses		416		445
Deferred offering costs		98		694
Total prepaid expenses and other current assets	$	1,992	$	1,595

	June 30, 2022			December 31, 2021
Machinery and equipment	$	7,460		$	8,502
Land and buildings		–			2,000
Computers and software		1,107			1,129
Leasehold improvements		2,038			2,107
Construction in progress		–			133
Furniture and equipment		119			123
Total property and equipment, gross		10,724			13,994
Accumulated depreciation		(7,054	)		(7,071	)
Total property and equipment, net	$	3,670		$	6,923

	Fair Value Measurement as of January 31, 2018
	Level 1		Level 2		Level 3		Total
Liabilities
Warrant liability	$	-	$	-	$	2,765	$	2,765
Derivative liability		-		-		7,363		7,363
Total	$	-	$	-	$	10,128	$	10,128

	Fair Value Measurement as of October 31, 2017
	Level 1		Level 2		Level 3		Total
Liabilities
Warrant liability	$	-	$	-	$	4,256	$	4,256
Derivative liability		-		-		9,246		9,246
Total	$	-	$	-	$	13,502	$	13,502

	2017 Series F Preferred Stock - Warrant Liability			2017 Series F Preferred Stock - Embedded Derivative			Total Warrant and Derivative Liability
Fair value - October 31, 2017	$	4,256		$	9,246		$	13,502
Change in fair value		(1,491	)		(1,883	)		(3,374	)
Fair value - January 31, 2018	$	2,765		$	7,363		$	10,128

	Operating leases			Finance leases
2022 (excluding the six months ended June 30, 2022)	$	576		$	161
2023		48			312
2024		42			42
Total lease payments		666			515
Less:
Imputed interest		(18	)		(40	)
Total	$	648		$	475

	Number of shares			Weighted-Average Exercise Price
Outstanding - October 31, 2017		3,525,530		$	6.34
Granted		1,030,500		$	24.47
Exercised		(10,794	)	$	5.10
Forfeited		(34,167	)	$	18.90
Outstanding - January 31, 2018		4,511,069		$	10.39
Options exercisable - January 31, 2018		1,930,500		$	5.79
Weighted-average fair value of options granted during the period				$	16.57

	June 30, 2022		December 31, 2021
Finance lease right-of-use assets included within property and equipment, net	$	355	$	461

Current finance lease liabilities included within other current liabilities	$	287	$	329
Non-current finance lease liabilities included within other long-term liabilities		188		338
Total	$	475	$	667

	June 30, 2022		December 31, 2021
Current operating lease liabilities included within other current liabilities	$	585	$	1,169
Operating lease liabilities – non-current		63		43
Total	$	648	$	1,212

~~Risk free annual interest rate~~	~~2.01%-2.65~~	%
~~Expected volatility~~	~~81.32-85.54~~	%
~~Expected life~~	~~5.00-6.01~~
~~Assumed dividends~~	~~None~~

	Number of shares			Weighted-Average Grant-Date Fair Value
Unvested - October 31, 2017		227,132		$	7.83
Granted		102,500		$	23.91
Vested		(97,049	)	$	12.53
Unvested - January 31, 2018		232,583		$	12.95

	June 30, 2022		December 31, 2021
Current finance lease liabilities	$	287	$	329
Current operating lease liabilities		585		1,169
Short-term financing arrangement		692		–
Other		4		22
Total other current liabilities	$	1,568	$	1,520