News Column

NEOSTEM, INC. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

August 7, 2014

The following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Cautionary Note Regarding Forward-Looking Statements" herein and under "Risk Factors" in our annual report on Form 10-K for the year ended December 31, 2013. The following discussion should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this quarterly report and in our annual report on Form 10-K for the year ended December 31, 2013.

Overview

NeoStem, Inc. ("we," "NeoStem" or the "Company") is a leader in the emerging cellular therapy industry. We are pursuing the preservation and enhancement of human health globally through the development of cell based therapeutics that prevent, treat or cure disease. We have multiple cell therapy platforms that work to address the pathology of disease using a person's own cells to amplify the body's natural repair mechanisms including enhancing the destruction of cancer initiating cells, repairing and

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replacing damaged or aged tissue, cells and organs and restoring their normal function. We believe that cell therapy will play a large role in changing the natural history of diseases as more breakthrough therapies are developed, ultimately lessening the overall burden of disease on patients and their families as well as the economic burden that these diseases impose upon modern society.

Our business includes the development of novel proprietary cell therapy products, as well as a revenue-generating contract development and manufacturing service business that we leverage for the development of our therapeutics while providing service to other companies in the cell therapy industry. The combination of our own therapeutic development business and a revenue-generating service provider business provides the Company with unique capabilities for cost effective in-house product development and immediate revenue and future cash flow to help underwrite our internal development programs. This business model enables the Company to be opportunistic in growing its pipeline as evidenced by the Company's acquisition in May 2014 of California Stem Cell, Inc. ("CSC"), a cell biotechnology corporation that is developing cellular immunotherapies for cancer, an area we view to be one of the most promising sub-sectors in biotechnology. The lead product candidate in its immunotherapy pipeline is NBS20, also referred to as DC/TC (dendritic cell/tumor cell), and is targeting malignant melanoma initiating cells. This immunotherapy designed to treat Stage IV or recurrent Stage III metastatic melanoma, which has been granted fast track and orphan designation by the Food and Drug Administration ("FDA"), also has a Phase 3 protocol that is the subject of a Special Protocol Assessment (SPA). The SPA indicates that the FDA is in agreement with the design, clinical endpoints, and planned clinical analyses of the Phase 3 trial that would serve as the basis for a Biologics License Application ("BLA") that would be filed with the FDA requesting marketing approval of this therapeutic candidate. This protocol calls for enrolling 250 evaluable patients and is expected to be initiated later in 2014. We are evaluating other clinical indications into which we may advance this program, including liver, ovarian and lung cancers.

We are also currently developing therapies to address ischemia utilizing CD34 cells. Ischemia occurs when the supply of oxygenated blood in the body is restricted. We seek to reverse this restriction through the development and formation of new blood vessels. NBS10, also referred to as AMR-001, is our most clinically advanced product candidate in our ischemic repair program and is being developed to treat damaged heart muscle following an acute myocardial infarction (heart attack) ("AMI"). In December 2013, the Company completed enrollment in its PreSERVE AMI study. PreSERVE AMI is a randomized, double-blinded, placebo-controlled Phase 2 clinical trial testing NBS10, an autologous (donor and recipient are the same) adult stem cell product for the treatment of patients with left ventricular dysfunction following acute ST segment elevation myocardial infarction (STEMI). The last patient in the trial was infused in December 2013 and the last patient six-month follow-up occurred in June 2014. Once the primary end point six-month data is collected, the data set will be locked and analysis will begin. An abstract for the PreSERVE AMI study has been accepted for presentation at the American Heart Association's Scientific Sessions being held November 15-19, 2014 although we anticipate results of the study will be released earlier. If approved by the FDA and/or other worldwide regulatory agencies following successful completion of further trials, NBS10 would address a significant medical need for which there is currently no effective treatment, potentially improving longevity and quality of life for those suffering a STEMI, and positioning the Company to capture a meaningful share of this worldwide market. We are evaluating other clinical indications into which we may advance this program, including traumatic brain injury ("TBI"), congestive heart failure ("CHF") and critical limb ischemia ("CLI").

Another platform technology we are developing utilizes T Regulatory Cells ("Tregs") to treat diseases caused by imbalances in an individual's immune system. Collaborating with the University of California, San Francisco, we are utilizing the technology platform of our majority-owned subsidiary, Athelos Corporation ("Athelos"), to restore immune balance by enhancing Treg cell number and function. Tregs are a natural part of the human immune system and regulate the activity of T effector cells, the cells that are responsible for protecting the body from viruses and other foreign antigen exposure. When Tregs function properly, only harmful foreign materials are attacked by T effector cells. In autoimmune disease it is thought that deficient Treg activity permits the T effector cells to attack the body's own tissues, while in allergic diseases, like asthma, it is thought that the immune system overreacts to harmless foreign substances. We plan to initiate in 2014, subject to review and approval of the protocols by the appropriate regulatory authorities, a Phase 2 study of NBS03D, a Treg based therapeutic, in the treatment of type 1 diabetes, and a Phase 1 study of NBS03A, a Treg based therapeutic, in Canada in support of our steroid resistant asthma development program.

Pre-clinical assets include our VSEL TM (Very Small Embryonic Like) Technology regenerative medicine platform. Regenerative medicine holds the promise of improving clinical outcomes and reducing overall healthcare costs. We are working on a Department of Defense funded study of VSELsTM for the treatment of chronic wounds. Other preclinical work with VSELsTM includes exploring macular degeneration as a target indication.

Progenitor Cell Therapy, LLC ("PCT") is a contract manufacturer in the cellular therapy industry that generates revenue. This wholly owned subsidiary, which we acquired in 2011, is an industry leader in providing high quality manufacturing capabilities and support to developers of cell-based therapies to enable them to improve efficiencies and profitability and reduce the capital investment required for their own development activities. Since its inception more than 15 years ago, PCT has provided pre-

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clinical and clinical current Good Manufacturing Practice ("cGMP") development and manufacturing services to more than 100 clients. PCT has experience advancing regenerative medicine product candidates from product inception through rigorous quality standards all the way through to human testing, BLA filing and FDA product approval. PCT's core competencies in the cellular therapy industry include manufacturing of cell therapy-based products, engineering and innovation services, product and process development, cell and tissue processing, regulatory support, storage, distribution and delivery and consulting services. PCT has two cGMP, state-of-the art cell therapy research, development, and manufacturing facilities in New Jersey and California, serving the cell therapy community with integrated and regulatory compliant distribution capabilities. The Company is pursuing commercial expansion of our manufacturing operations both in the U.S. and internationally. Additionally, with our acquisition of CSC in Irvine, California, we are now in a position to leverage NeoStem Oncology's expertise in immunotherapy and advance our platform technology, as well as the technologies of PCT's client base.

Strategic acquisitions have been the cornerstone of NeoStem's growth and have been selected in order to provide value to stockholders by taking advantage of the infrastructure we have created which includes strong development, regulatory and manufacturing expertise. By adding NBS20, our DC/TC product candidate and a late stage novel proprietary cancer cell therapy into our pipeline, we look to further advance towards our goal of delivering transformative cell based therapies to the market to help patients suffering from life-threatening medical conditions. Coupled with our strong manufacturing capability, we believe the stage is set for us to realize meaningful clinical development and manufacturing efficiencies, further positioning NeoStem to lead the cell therapy industry.

Results of Operations

Three and Six Months Ended June 30, 2014 Compared to Three and Six Months Ended June 30, 2013

Net loss for the three months ended June 30, 2014 was approximately $12.8 million compared to $8.6 million for the three months ended June 30, 2013. Net loss for the six months ended June 30, 2014 was approximately $26.6 million compared to $17.5 million for the six months ended June 30, 2013.

Revenues

For the three months ended June 30, 2014, total revenues were approximately $4.5 million compared to $4.4 million for the three months ended June 30, 2013, representing an increase of $0.1 million, or 3%. Revenues were comprised of the following (in thousands):

Three Months Ended June 30, 2014 2013 Clinical Services $ 2,493.9$ 3,114.1 Clinical Services Reimbursables 1,099.3 423.6 Processing and Storage Services 895.7 821.7 $ 4,488.9$ 4,359.4 Clinical Services, representing process development and clinical manufacturing services provided by PCT to its various clients, were approximately $2.5 million for the three months ended June 30, 2014 compared to $3.1 million for the three months ended June 30, 2013, representing a decrease of approximately $0.6 million or 20%. The decrease was primarily due to $0.6 million of lower process development revenue, such revenue being recognized on a "completed contract" basis. Clinical manufacturing revenue (which is recognized as services are rendered) was unchanged. Overall, there were approximately 50% more Clinical Services active clients as of June 30, 2014 compared to June 30, 2013. Process Development Revenue - Process development revenues were approximately $1.0 million for the three months ended June 30, 2014 compared to $1.7 million for the three months ended June 30, 2013. In accordance with our revenue recognition policy, process development revenue is recognized upon contract completion (i.e., when the services under a particular contract are completed). Although process development revenues decreased for the three months ended June 30, 2014 compared with the three months ended June 30, 2013, the number of active process development contracts was approximately double in the current year period, resulting in approximately $2.1 million of deferred process development revenue as of June 30, 2014. This revenue will be recognized in future periods upon completion of those contracts. Process development revenue will continue to fluctuate from period to period as a result of our process development revenue recognition policy. 25



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Index Clinical Manufacturing Revenue - Clinical manufacturing revenues were approximately $1.4 million for both the three months ended June 30, 2014 and 2013. Clinical Services Reimbursables, representing reimbursement of expenses for certain consumables incurred on behalf of our clinical service revenue clients, were approximately $1.1 million for the three months ended June 30, 2014 compared to $0.4 million for the three months ended June 30, 2013, representing an increase of approximately $0.7 million or 159%. Generally, clinical services reimbursables correlate with clinical services revenues. However, differences in the cost of supplies to be reimbursed can vary greatly from contract to contract based on the cost of supplies needed for each client's manufacturing and development process, and may impact this correlation. In addition, our terms for billing reimbursable expenses do not include a significant mark up in the acquisition cost of such consumables, and as a result, changes in this revenue category have little impact on our gross profit and net loss. Processing and Storage Services, primarily representing revenues from our oncology stem cell processing, cord blood, and adult stem cell processing and banking activities, were approximately $0.9 million for the three months ended June 30, 2014 compared to $0.8 million for the three months ended June 30, 2013, representing an increase of approximately $0.1 million or 9%.



For the six months ended June 30, 2014, total revenues were approximately $8.5 million compared to $6.9 million for the six months ended June 30, 2013, representing an increase of $1.7 million, or 24%. Revenues were comprised of the following (in thousands):

Six Months Ended June 30, 2014 2013 Clinical Services $ 5,060.9$ 4,479.7 Clinical Services Reimbursables 1,847.3 786.4 Processing and Storage Services 1,636.3 1,617.2 $ 8,544.5$ 6,883.3 Clinical Services were approximately $5.1 million for the six months ended June 30, 2014 compared to $4.5 million for the six months ended June 30, 2013, representing an increase of approximately $0.6 million or 13%. The increase was primarily due to $0.6 million of higher clinical manufacturing revenue, whereas process development revenue was unchanged. Overall, there were approximately 50% more Clinical Services active clients as of June 30, 2014 compared to June 30, 2013. Process Development Revenue - Process development revenues were approximately $1.8 million for both the six months ended June 30, 2014 and 2013. Although process development revenues were unchanged for the six months ended June 30, 2014 compared with the six months ended June 30, 2013, the number of active process development contracts was approximately double in the current year period, resulting in approximately $2.1 million of deferred process development revenue as of June 30, 2014. Process development revenue will continue to fluctuate from period to period as a result of our process development revenue recognition policy. Clinical Manufacturing Revenue - Clinical manufacturing revenues were approximately $3.2 million for the six months ended June 30, 2014, compared to $2.6 million for the six months ended June 30, 2013. The increase is primarily due to an increase in the number of patients our customers have enrolled and treated in clinical trials. Clinical Services Reimbursables were approximately $1.8 million for the six months ended June 30, 2014 compared to $0.8 million for the six months ended June 30, 2013, representing an increase of approximately $1.1 million or 135%. Generally, clinical services reimbursables correlate with clinical services revenues. However, differences in the cost of supplies to be reimbursed can vary greatly from contract to contract based on the cost of supplies needed for each client's manufacturing and development process, and may impact this correlation. In addition, our terms for billing reimbursable expenses do not include a significant mark up in the acquisition cost of such consumables, and as a result, changes in this revenue category have little impact on our gross profit and net loss. 26



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Processing and Storage Services were approximately $1.6 million for both the six months ended June 30, 2014 and 2013.



Operating Costs and Expenses of Revenues

For the three months ended June 30, 2014, operating expenses totaled $16.9 million compared to $12.5 million for the three months ended June 30, 2013, representing an increase of $4.4 million or 35%. Operating expenses were comprised of the following:

Cost of revenues were approximately $3.7 million the three months ended June 30, 2014 compared to $4.2 million for the three months ended June 30, 2013, representing a decrease of $0.6 million or 13%. Overall, gross profit for the three months ended June 30, 2014 was $0.8 million or 18%, compared to gross profit for the three months ended June 30, 2013 of $0.1 million or 3%. Gross profit percentages generally will increase as Clinical Service revenue increases. However, gross profit percentages will also fluctuate from period to period due to the mix of service and reimbursable revenues and costs, as well as the timing of our revenue recognition under our revenue recognition policy. Research and development expenses were approximately $5.8 million for the three months ended June 30, 2014 compared to $4.0 million for the three months ended June 30, 2013, representing an increase of approximately $1.8 million, or 46%. Research and development expenses associated with the targeted cancer immunotherapy program, and specifically efforts associated with the planned initiation of the Phase 3 clinical trial for our lead product candidate NBS20, also referred to as DC/TC, targeting malignant melanoma initiating cells, were $2.0 million for the three months ended June 30, 2014. The oncology platform was acquired in the CSC merger on May 8, 2014. Research and development expenses related to NBS10, also referred to as AMR-001, including expenses associated with our Phase 2 clinical trial, decreased by approximately $1.6 million for the three months ended June 30, 2014 compared to the prior year period. The Phase 2 clinical trial completed enrollment in the fourth quarter of 2013. Research and development expenses associated with our immune modulation program utilizing T regulatory cells ("Tregs") increased by approximately $1.4 million, and was primarily due to our efforts to develop Tregs for the treatment of type 1 diabetes, steroid resistant asthma, and organ transplant rejection. Within the immune modulation program, we continue to focus efforts on initiating a Phase 2 study of NBS03D in type 1 diabetes in 2014, and a Phase 1 study of NBS03A in Canada in support of a steroid resistant asthma indication in 2014, subject to review and approval of the protocols by the appropriate regulatory authorities. Research and development associated with engineering and innovation initiatives at PCT to improve scale up, automation, and integration capabilities also increased marginally during the current quarter compared to the prior year quarter. Equity-based compensation included in research and development expenses for the three months ended June 30, 2014 and June 30, 2013 were approximately $0.4 million and $0.1 million, respectively. Selling, general and administrative expenses were approximately $7.4 million for the three months ended June 30, 2014 compared to $4.3 million for the three months ended June 30, 2013, representing an increase of approximately $3.1 million, or 72%. Equity-based compensation included in selling, general and administrative expenses for the three months ended June 30, 2014 was approximately $1.3 million, compared to approximately $0.9 million for the three months ended June 30, 2013, representing an increase of $0.4 million. The increase in equity-based compensation is due to the broader use of equity-based compensation during the current quarter, as well as changes in option vesting provisions initiated in 2013, impacting the timing of equity-based compensation expense recognition. Equity-based compensation expense will continue to fluctuate in future quarters as equity-linked instruments are used to compensate employees, consultants and other service providers. Non-equity-based general and administrative expenses for the three months ended June 30, 2014 were approximately $6.1 million, compared to approximately $3.4 million for the three months ended June 30, 2013, representing an increase of $2.7 million. The increase was related to higher strategic and corporate development activities, including efforts associated with the acquisition of CSC on May 8, 2014, expenses associated with the additional CSC operating activities since the acquisition date, and increased corporate infrastructure to support our expanded clinical activities.



For the six months ended June 30, 2014, operating expenses totaled $34.5 million compared to $23.9 million for the six months ended June 30, 2013, representing an increase of $10.6 million or 44%. Operating expenses were comprised of the following:

Cost of revenues were approximately $7.5 million for the six months ended June 30, 2014 compared to $6.6 million for the six months ended June 30, 2013, representing an increase of $0.9 million or 13%. Overall, gross profit for the six months ended June 30, 2014 was $1.0 million or 12%, compared to gross profit for the six months ended June 30, 2013 27



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of $0.3 million or 4%. Gross profit percentages generally will increase as Clinical Service revenue increases. However, gross profit percentages will also fluctuate from period to period due to the mix of service and reimbursable revenues and costs, as well as the timing of our revenue recognition under our revenue recognition policy.

Research and development expenses were approximately $10.6 million for the six months ended June 30, 2014 compared to $7.1 million for the six months ended June 30, 2013, representing an increase of approximately $3.5 million, or 48%. Research and development expenses associated with the targeted caner immunotherapy program, and specifically efforts associated with the planned initiation of the Phase 3 clinical trial for our lead product NBS20 targeting malignant melanoma initiating cells, were $2.0 million for the six months ended June 30, 2014. The oncology platform was acquired in the CSC merger on May 8, 2014. Research and development expenses related to NBS10, also referred to as AMR-001, including expenses associated with our Phase 2 clinical trial, decreased by approximately $1.5 million for the six months ended June 30, 2014 compared to the prior year period. The Phase 2 clinical trial completed enrollment in the fourth quarter of 2013. Research and development expenses associated with our immune modulation program that utilizes T regs increased by approximately $2.4 million, and was primarily due to our efforts to develop Tregs for the treatment of type 1 diabetes, steroid resistant asthma, and organ transplant rejection. Within the immune modulation program, we continue to focus efforts on initiating a Phase 2 study of NBS03D in type 1 diabetes in 2014, and a Phase 1 study of NBS03A in Canada in support of a steroid resistant asthma indication in 2014 subject to review and approval of the protocols by the appropriate regulatory authorities. Research and development associated with engineering and innovation initiatives at PCT to improve scale up, automation, and integration capabilities also increased during the current quarter compared to the prior year quarter. Equity-based compensation included in research and development expenses for the six months ended June 30, 2014 and June 30, 2013 were approximately $0.8 million and $0.3 million, respectively. Selling, general and administrative expenses were approximately $16.4 million for the six months ended June 30, 2014 compared to $10.1 million for the six months ended June 30, 2013, representing an increase of approximately $6.3 million, or 62%. Equity-based compensation included in selling, general and administrative expenses for the six months ended June 30, 2014 was approximately $4.6 million, compared to approximately $2.8 million for the six months ended June 30, 2013, representing an increase of $1.8 million. The increase in equity-based compensation is due to the broader use of equity-based compensation during the current year, as well as changes in option vesting provisions initiated in 2013, impacting the timing of equity-based compensation expense recognition. Equity-based compensation expense will continue to fluctuate in future quarters as equity-linked instruments are used to compensate employees, consultants and other service providers. Non-equity-based general and administrative expenses for the six months ended June 30, 2014 were approximately $11.8 million, compared to approximately $7.2 million for the six months ended June 30, 2013, representing an increase of $4.6 million. The increase was related to higher strategic and corporate development activities, including efforts associated with the acquisition of CSC on May 8, 2014, expenses associated with the additional CSC operating activities since the acquisition date, and increased corporate infrastructure to support our expanded clinical activities.



Historically, to minimize our use of cash, we have used a variety of equity and equity-linked instruments to compensate employees, consultants and other service providers. The use of these instruments has resulted in charges to the results of operations, which has been significant in the past. In general, these equity and equity-linked instruments are used to pay for employee and consultant compensation, director fees, marketing services, investor relations and other activities. For example, in August 2014, the Compensation Committee granted equity awards to certain employees for the successful completion of the CSC acquisition in May 2014. These awards, comprised of 112,244 shares of the Company's common stock and options to purchase 300,000 shares of the Company's common stock, were fully vested upon grant. The equity awards, along with the withholding taxes associated with the common stock awards which are being paid by the Company, are expected to result in compensation charges in the third quarter of 2014 of approximately $2.4 million.

Other Income (Expense)

Other expense, net for the three and six months ended June 30, 2014 was approximately $186,000 and $375,000, respectively, and primarily relates to the increase in the estimated fair value of our contingent consideration liability associated with potential earn out payments on the net sales of our product candidate NBS10 (in the event of and following the date of first commercial sale of NBS10). Other income, net, for the three and six months ended June 30, 2013 was approximately $58,000 and $69,000, respectively, and primarily relates to the revaluation of derivative liabilities.

For the three and six months ended June 30, 2014 interest expense was $106,000 and $200,000, respectively, compared with $66,000 and $109,000, respectively, for the three and six months ended June 30, 2013.

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The provision for income taxes for the three and six months ended June 30, 2014 relate to the taxable temporary differences on the goodwill recognized in the PCT acquisition in 2011, which is being amortized over 15 years for tax purposes. A tax provision will continue to be recognized each period over the amortization period, and will only reverse when the goodwill is eliminated through a sale, impairment, or reclassification from an indefinite-lived asset to a finite-lived asset.

Noncontrolling Interests



In March 2011, we acquired rights to use patents under licenses from Becton, Dickinson and Company ("BD") in exchange for a 19.9% interest in our Athelos subsidiary. Pursuant to the Stock Purchase Agreement signed in March 2011, BD's ownership will be diluted based on new investment in Athelos (subject to certain anti-dilution provisions). As of June 30, 2014, BD's ownership interest in Athelos was decreased to 10.0%, and our ownership increased to 90.0%. For the three and six months ended June 30, 2014, BD's share of Athelos' net loss totaled approximately $0.2 million and $0.3 million, respectively. For the three and six months ended June 30, 2013, BD's share of Athelos' net loss totaled approximately $0.1 million and $0.1 million, respectively.

Analysis of Liquidity and Capital Resources

At June 30, 2014 we had a cash and cash equivalents and marketable securities of approximately $33.8 million, working capital of approximately $28.9 million, and stockholders' equity of approximately $78.0 million.

During the six months ended June 30, 2014, we met our immediate cash requirements through revenue generated from our PCT operations, existing cash balances, the issuance of common stock under our purchase agreement with Aspire, and warrant and option exercises. Additionally, we used equity and equity-linked instruments to pay for services and compensation.

Net cash provided by or used in operating, investing and financing activities from continuing operations were as follows (in thousands):

Six Months Ended June 30, 2014 2013



Net cash used in operating activities $ (22,506.2 )$ (13,125.8 ) Net cash used in investing activities (3,308.2 ) (268.5 ) Net cash provided by financing activities 12,545.8 14,379.3

Operating Activities

Our cash used in operating activities in the six months ended June 30, 2014 totaled approximately $22.5 million, which is the sum of (i) our net loss of $26.6 million, and adjusted for non-cash expenses totaling $7.1 million (which includes adjustments for equity-based compensation and depreciation and amortization), and (ii) changes in operating assets and liabilities providing approximately $3.0 million.

Our cash used in operating activities in the six months ended June 30, 2013 totaled approximately $13.1 million, which is the sum of (i) our net loss of $17.5 million, and adjusted for non-cash expenses totaling $4.5 million (which includes adjustments for equity-based compensation and depreciation and amortization), and (ii) changes in operating assets and liabilities providing approximately $0.2 million.

Investing Activities



During the six months ended June 30, 2014, we spent approximately $2.4 million for property and equipment, and invested approximately $0.9 million in marketable securities. During the six months ended June 30, 2013, we spent approximately $0.3 million for property and equipment.

Financing Activities

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During the six months ended June 30, 2014, our financing activities consisted of the following: We raised gross proceeds of approximately $10.1 million through the issuance of approximately 1.5 million shares of Common Stock under the provisions of our equity line of credit with Aspire.



We raised approximately $0.2 million from the exercise of 41,136 options.

We raised approximately $1.4 million from the exercise of 265,250 warrants.

We received proceeds of $1.3 million from the issuance of notes payable relating to certain insurance policies and equipment financings, less repayments of $0.4 million. During the six months ended June 30, 2013, our financing activities consisted of the following: We raised $11.5 million (or $10.5 million in net proceeds after deducting underwriting discounts and commissions and offering expenses) through an underwritten offering of 2.3 million shares of our common stock at a public offering price of $5.00 per share. We raised gross proceeds of approximately $3.8 million through the issuance of 654,300 shares of Common Stock under the provisions of our equity line of credit with Aspire. We raised approximately $0.1 million from the exercise of approximately 20,800 warrants.



Liquidity and Capital Requirements Outlook

We anticipate requiring additional capital in order to fund the development of cell therapy product candidates, particularly in our Targeted Immunotherapy Program, CD34 Cell Program and T Regulatory Cell Program, as well as engage in strategic transactions. The most significant funding needs are anticipated to be in connection with the conduct of our Intus Phase 3 clinical trial of NBS20 for stage IV and recurrent stage III melanoma which is expected to be initiated in 2014 and cost approximately $25 million, and other costs related to the cancer immunotherapy operations acquired from CSC in May 2014. The acquisition of CSC could result in our re-prioritizing the timing of the initiation of certain of our other earlier stage clinical trials. We also anticipate requiring additional capital to grow the PCT business, including implementing additional automation capabilities and pursuing plans to establish commercial capacity and expand internationally. Additionally, we recently completed expansion in the Allendale, New Jersey facility adding laboratory, clean room suites and support facilities, and completed expansion in the Mountain View, California facility adding manufacturing capacity with additional clean rooms, laboratory space and support facilities.

To meet our short and long term liquidity needs, we currently expect to use existing cash balances, our revenue generating activities, and a variety of other means. Those other means include the continued use of a common stock purchase agreement with Aspire (the "Aspire Agreement"). We entered into a new $30 million common stock purchase agreement with Aspire in March 2014, of which we had $25.6 million remaining available at June 30, 2014. Other sources of liquidity could include potential issuances of debt or equity securities in public or private financings, additional warrant exercises, option exercises, and/or sale of assets. In addition, we will continue to seek as appropriate grants for scientific and clinical studies from the National Institutes of Health, Department of Defense, and other governmental agencies and foundations, but there can be no assurance that we will be successful in qualifying for or obtaining such grants. Our history of operating losses and liquidity challenges, may make it difficult for us to raise capital on acceptable terms or at all. The demand for the equity and debt of small cap biopharmaceutical companies like ours is dependent upon many factors, including the general state of the financial markets. During times of extreme market volatility, capital may not be available on favorable terms, if at all. Our inability to obtain such additional capital could materially and adversely affect our business operations. We believe that our current cash balances and revenue generating activities, along with access to the Aspire Agreement, will be sufficient to fund the business, as now operated, into 2015.

While we continue to seek capital through a number of means, there can be no assurance that additional financing will be available on acceptable terms, if at all, and our negotiating position in capital generating efforts may worsen as existing resources are used. Additional equity financing may be dilutive to our stockholders; debt financing, if available, may involve significant cash payment obligations and covenants that restrict our ability to operate as a business, our stock price may not reach levels necessary to induce option or warrant exercises, and asset sales may not be possible on terms we consider acceptable. If we are unable to raise the funds necessary to meet our long-term liquidity needs, we may have to delay or discontinue the acquisition and development of cell therapies, and/or the expansion of our business or raise funds on terms that we currently consider unfavorable.

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