{"url_path":"/sec/rmtg/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 **","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-05-14","source_url":"https://www.sec.gov/Archives/edgar/data/1760026/0001213900-26-056841-index.html","accession_number":"0001213900-26-056841","cik":"0001760026","ticker":"RMTG","issuer_name":"Regenerative Medical Technology Group Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1760026/0001213900-26-056841-index.html","primary_entity_key":"0001760026","primary_entity_name":"Regenerative Medical Technology Group Inc."},"word_count":3271,"has_tables":true,"body_markdown":"**ITEM 7.**\n**MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**\n\n \n\n**General** \n\n** **\n\nThe following is a discussion by management of\nits view of the Company’s business, financial condition, and corporate performance for the past year. The purpose of this information\nis to give management’s recap of the past year, and to give an understanding of management’s current outlook for the near\nfuture. This section is meant to be read in conjunction with the Financial Statements of this Annual Report on Form 10-K.\n\n** **\n\n**Results of Operations**\n\n \n\nBelow is a summary of the results of operations for the years ended\nDecember 31, 2025, and 2024.\n\n \n\n  \nFor the Years Ended December 31, \n\n  \n2025  \n2024  \n$\nChange  \n%\nChange \n\nRevenue \n$5,100,315  \n$4,107,494  \n$992,821  \n 24.17%\n\nCost of revenue \n 2,289,537  \n 1,284,375  \n 1,005,162  \n 78.26%\n\nGross profit \n 2,810,778  \n 2,823,119  \n (12,341) \n -0.44%\n\n  \n    \n    \n    \n   \n\nOperating expenses \n    \n    \n    \n   \n\nAdvertising and marketing \n 716,698  \n 456,431  \n 260,267  \n 57.02%\n\nProfessional fees \n 1,390,146  \n 1,124,439  \n 265,707  \n 23.63%\n\nOfficer compensation \n 90,000  \n 90,000  \n -  \n 0.00%\n\nDepreciation and amortization expense \n 281,067  \n 220,559  \n 60,508  \n 27.43%\n\nInvestor relations \n 80,000  \n 52,193  \n 27,807  \n 53.28%\n\nGeneral and administrative \n 1,120,029  \n 798,316  \n 321,713  \n 40.30%\n\nTotal operating expenses \n 3,677,940  \n 2,741,938  \n 936,002  \n 34.14%\n\nNet income (loss) from operations \n (867,162) \n 81,181  \n (948,343) \n -1168.18%\n\n  \n    \n    \n    \n   \n\nOther expenses \n    \n    \n    \n   \n\nInterest expense \n (7,447,780) \n (5,641,609) \n (1,806,171) \n 32.02%\n\nChange in fair value of derivative liability \n 918,688  \n (2,543) \n 921,231  \n -36226.15%\n\nLoss on extinguishment of debt \n (416,155) \n -  \n (416,155) \n 0.00%\n\n**Total other expenses** \n (6,945,247) \n (5,644,152) \n (1,301,095) \n 23.05%\n\n  \n    \n    \n    \n   \n\nNet loss \n$(7,812,409) \n$(5,562,971) \n$(2,249,438) \n 40.44%\n\n \n\n21\n\n** **\n\n**Revenue**\n\n \n\nRevenue increased by 24.17% in the amount of $992,821\nfor the year ended December 31, 2025, compared to the same period in 2024. The increase in revenue was across all categories of revenue\nand a result of marketing and sales efforts to increase brand recognition and exposure in the industry. The strategic plans for 2025 were\nto seek and attract more Affiliates. Investing heavily in ISSCA events global presence, and brand positioning for ISSCA was intentional\n and aligned with our objective of accelerating affiliate expansion. During 2025, the Company signed three new affiliate partners\nthrough its ISSCA education and training programs.\n\n \n\nGrowth came from expanded product distribution\nnetworks, including new sales channels and increased volume in stem cell-related products. This reflects market demand for our biologic\nsolutions. Revenue increased due to higher patient volumes, a shift toward premium treatment mixes (e.g., advanced regenerative therapies),\noperational efficiencies in clinic operations, more international live conferences, expanded certification programs, and multi-day events\nto reach global audiences.\n\n \n\nThe strategic plans for 2025 to invest heavily\nin ISSCA events global presence, and brand positioning for ISSCA in 2025 to seek and attract more Affiliates resulted in higher cost\nof revenue resulting in a decrease in gross profit percentage in 2025. We believe that our strategy will result in increased revenue in\nfuture quarters. Our unaudited information for the first quarter of 2026 shows a 69% increase in revenue compared with the fourth quarter\nof 2025.\n\n \n\nThe following table presents the Company’s\nrevenue by product category for the years ended December 31, 2025, and 2024:\n\n \n\n  \nFor the Years Ended\nDecember 31, \n\n  \n2025  \n2024 \n\nTraining \n$1,125,521  \n$809,654 \n\nProduct supplies \n 2,024,573  \n 1,748,961 \n\nEquipment \n 75,835  \n 177,225 \n\nPatient procedures \n 1,874,386  \n 1,371,654 \n\nTotal revenue \n$5,100,315  \n$4,107,494 \n\n \n\n**Operating Expenses**\n\n \n\nOperating expenses increased by 34.14% in the\namount of $936,002 for the year ended December 31, 2025, compared to the year ended 2024. Listed below are the major changes to operating\nexpenses:\n\n \n\nAdvertising and marketing fees increased by $260,267\nfor the year ended December 31, 2025, compared to the year ended 2024, primarily due to an increase by Global Stem Cells Group in international\ncampaigns and promotions across divisions, including digital efforts for Cellgenic products, Cellular treatments, and ISSCA events.\n\n \n\nProfessional fees increased by $265,707 for the\nyear ended December 31, 2025, compared to the year ended 2024, primarily due to an increase by Global Stem Cells Group related to legal\nstructuring, international contracts, compliance (e.g., regulatory for Cellgenic and Cellular), accounting expansion, corporate advisory,\nand lease advisory.\n\n \n\nDepreciation and amortization increased by $60,508\nfor the year ended December 31, 2025, compared to the year ended 2024, primarily due to expanding facilities to support increased operations\nin Cellular and Cellgenic, plus ISSCA logistics.\n\n \n\nInvestor relations increased by $27,807 for the\nyear ended December 31, 2025, compared to the year ended 2024, primarily due to an agreement with an investor relation firm in May 2025.\n\n \n\nGeneral and administrative expense increased by\n$321,713 for the year ended December 31, 2025, compared to the year ended 2024, primarily due to expenses associated with expansion of\nclinic and travel due to more international events.\n\n \n\nWe expect our overall operating expenses to increase\ninto 2026 as we further implement our business plan. We expect increases in future quarters over all major categories as we engage in\nefforts to increase brand awareness with our products and services, including advertising campaigns and investor relation services. We\nalso expect an increase in general operating costs and growth initiatives as we ramp up operations and seek to expand them.\n\n** **\n\n22\n\n** **\n\n**Other Expense**\n\n \n\nOther expenses increased by $1,301,095 for the\nyear ended December 31, 2025, compared to the year ended 2024, primarily as a result of a decrease in amortization of discount of $760,391\nand $921,231 change in FV of derivative financial instrument offset by an increase of $2,562,248 of interest on promissory notes and loss\non extinguishment of debt of 416,155. In consideration for the extension of certain notes the company incurred a one-time 10% premium\nof $1,871,027.\n\n \n\nWe had interest expense of $7,447,780 and $5,641,609\nfor the years ended December 31, 2025, and 2024, respectively.\n\n \n\nWe expect to continue to experience high interest\npayments in the future as a result of our outstanding liabilities. If we are unable to generate sufficient revenues and/or additional\nfinancing to service this debt, there is a risk the lenders will call the notes, and we will be unable to repay the loans. If this happens,\nwe could go out of business.\n\n \n\n**Net Loss**\n\n \n\nWe recorded a net loss of $7,812,409 for the year\nended December 31, 2025, as compared with a net loss of $5,562,971 for the year ended 2024.\n\n \n\n**Liquidity and Capital Resources**\n\n \n\nSince inception, the Company has financed its\noperations through private placements, convertible notes, and unsecured and secured debt. The following is a summary of the cash and cash\nequivalents as of December 31, 2025, and December 31, 2024.\n\n \n\n  \nDecember 31,\n2025  \nDecember 31,\n2024  \n$\nChange  \n%\nChange \n\nCash and cash equivalents \n$956,718  \n$1,165,820  \n$(209,102) \n -17.94%\n\n \n\n**Summary of Cash Flows**\n\n \n\nBelow is a summary of the Company’s cash\nflows for the years ended December 31, 2025, and 2024.\n\n \n\n  \nFor the Years Ended\nDecember 31, \n\n  \n2025  \n2024 \n\nNet cash provided (used) in operating activities \n$(706,519) \n$850,699 \n\nNet cash used by investing activities \n (602,583) \n (215,419)\n\nNet cash used by financing activities \n 1,100,000  \n - \n\nNet increase (decrease) in cash and cash equivalents \n$(209,102) \n$635,280 \n\n \n\n**Operating activities**\n\n \n\nNet cash used by operating activities was $706,519\nduring the year ended December 31, 2025, and consisted of a net change in operating assets and liabilities of $5,937,864 and non-cash\nitems of $1,166,026, offset by a net loss of $7,812,409. The primary non-cash items for the year ended December 31, 2025, consisted of\namortization of debt discount of $1,366,291, depreciation and amortization of $281,067 and loss on extinguishment of debt of $416,155\noffset by change in derivative liabilities of $918,688. The significant change in operating assets and liabilities was an increase in\naccounts payable.\n\n \n\nNet cash provided by operating activities was\n$850,699 during the year ended December 31, 2024, and consisted of a net change in operating assets and liabilities of $4,063,888 and\nnon-cash items of $2,349,782, offset by a net loss of $5,562,971. The primary non-cash items for the year ended December 31, 2024, consisted\nof amortization of debt discount of $2,126,680, depreciation and amortization of $220,560 and change in derivative liabilities of $2,543.\nThe significant change in operating assets and liabilities was an increase in accounts payable.\n\n \n\n23\n\n \n\n**Investing activities**\n\n** **\n\nNet cash used in investing activities was $602,583\nand consisted of the purchase of property and equipment associated with the Cancun facility during the year ended December 31, 2025.\n\n \n\nNet cash used in investing activities was $215,419\nand consisted of the purchase of property and equipment associated with the Cancun facility during the year ended December 31, 2024.\n\n \n\n**Financing activities**\n\n \n\nNet cash provided by financing activities was\n$1,100,000 and consisted of a Promissory Debentures with a lender in the amount of $1,375,000 net discount in the amount of $275,000 during\nthe year ended December 31, 2025.\n\n \n\nNet cash used in financing activities was $0.00\nfor the year ended December 31, 2024.\n\n \n\nSince our\ninception, we have financed our operations through private placements, convertible notes, and unsecured debt, and we have also issued\ndebt in our company secured by all of our assets. We expect to continue to experience high interest payments in the future as a result\nof our outstanding liabilities. Additionally, as of the date of this report, there are a number of unsecured promissory notes with an\naggregate principal amount of $1,157,935 that have matured and are currently in default, but the Company has received no notice of default,\ndemand for payment, or acceleration from any lender. The Company has insufficient cash on hand to repay these notes. The company is currently\nin debt restructuring talks, and there are also other lenders as well who have demonstrated interest in assuming this debt. However, if\nwe are unable to generate sufficient revenues and/or additional financing to service this debt, there is a risk the lenders will call\nthe notes, secure our assets, as to those applicable secured notes, and demand payment. While management believes the risk of acceleration\nis low based on historical lender forbearance, a formal demand on any defaulted note could trigger acceleration of up to $16.6 million\nin secured debt. If after all these recourses are exhausted and the debt becomes unresolvable, like any other company, there’s a\nrisk we could go out of business.\n\n \n\nAt December 31, 2025, we had limited cash of $956,718,\na substantial working capital deficit, and although our revenues have increased, future losses are anticipated. Based upon the current\nfinancial condition, we do not have sufficient cash to operate our business at the current level for the next twelve months. We intend\nto fund operations through increased sales and debt and/or equity financing arrangements, which may be insufficient to fund expenditures\nor other cash requirements. We plan to seek additional financing in a private equity offering to secure funding for operations. There\ncan be no assurance that we will be successful in raising additional funding. If we are not able to secure additional funding, the implementation\nof our business plan will be impaired, and we could go out of business. There can be no assurance that such additional financing will\nbe available to us on acceptable terms or at all.\n\n \n\n**Going Concern**\n\n** **\n\nThe financial statements have been prepared assuming\nthe Company will continue as a going concern. The Company has incurred losses since inception, resulting in an accumulated deficit of\napproximately $75,365,511 and a working capital deficit of $35,601,860 as of December 31, 2025, and future losses are anticipated. These\nfactors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.\n\n \n\nThe ability of the Company to continue its operations\nas a going concern is dependent on management’s plans, which include the raising of capital through debt and/or equity markets with\nsome additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations\nare sufficient to fund working capital requirements.\n\n \n\nThe Company will require additional funding to\nfinance the growth of its current and expected future operations as well to achieve its strategic objectives. There can be no assurance\nthat financing will be available in amounts or terms acceptable to the Company, if at all. The accompanying financial statements have\nbeen prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal\ncourse of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification\nof the liabilities that might be necessary should the Company be unable to continue as a going concern.\n\n \n\n24\n\n \n\n**Off-Balance Sheet Arrangements**\n\n** **\n\nAs of December 31, 2025, the Company had no off-balance\nsheet arrangements.\n\n \n\n**Critical Accounting Policies**\n\n \n\nOur critical accounting policies have not materially\nchanged during the year ended December 31, 2025. Furthermore, the preparation of our financial statements is in conformity with generally\naccepted accounting principles in the United States of America, or GAAP. The preparation of our financial statements requires management\nto make judgments and estimates that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities\nat the date of the financial statements, and the reported amounts of expenses during the reporting period. Our management believes that\nwe consistently apply these judgments and estimates, and the financial statements fairly represent all periods presented. However, any\ndifferences between these judgments and estimates and actual results could have a material impact on our statements of income and financial\nposition.\n\n \n\n**Derivative Instruments**\n\n \n\nThe derivative instruments are accounted for as\nliabilities, the derivative instrument is initially recorded at its fair market value and is then re-valued at each reporting date, with\nchanges in fair value recognized in operations for each reporting period. The Company uses the Monte Carlo option pricing model to value\nthe derivative instruments.\n\n  \n\n**Stock Based Compensation**\n\n \n\nShare-based compensation issued to employees is\nmeasured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period. The\nCompany measures the fair value of the share-based compensation issued to non-employees at the grant date using the stock price observed\nin the trading market (for stock transactions) or the fair value of the award (for non-stock transactions), which were considered to be\nmore reliably determinable measures of fair value than the value of the services being rendered.\n\n \n\n**Revenue Recognition**\n\n** **\n\nIn accordance with FASB\nASC 606, Revenue from Contracts with Customers, the Company recognizes revenue when it satisfies a performance obligation by transferring\ncontrol of a promised good or service to a customer. Revenue is measured based on the consideration the Company expects to receive in\nexchange for those goods or services.\n\n \n\nThe Company’s primary\nrevenue streams are as follows:\n\n \n\n**Training**\n\n \n\nThe Company offers stem\ncell and exosome certification training programs for physicians and healthcare professionals. The performance obligation is satisfied\nupon completion of the training seminar and delivery of the related certification and materials. Revenue is recognized at the point in\ntime the seminar is completed and control of the training services has transferred to the customer.\n\n \n\n25\n\n \n\n**Products**\n\n \n\nThe Company sells regenerative\nmedicine and related products directly to physicians and clinics. Products are generally sold at the point of sale, shipped directly to\ncustomers, or provided in connection with patient procedures and training events. Revenue is recognized at the point in time control transfers\nto the customer, which generally occurs upon shipment or customer pickup.\n\n \n\n**Equipment**\n\n \n\nThe Company sells medical\nand regenerative medicine equipment to physicians and clinics. Equipment is shipped either directly from the manufacturer or by the Company\nto the customer. Revenue is recognized at the point in time control transfers to the customer, which generally occurs upon shipment or\ncustomer pickup.\n\n \n\n**Patient Procedures**\n\n \n\nThe Company provides\nregenerative medicine procedures at its clinic locations. Customers may remit deposits in advance of scheduled procedures, which are recorded\nas deferred revenue until the related services are performed. Revenue is recognized at the point in time the medical procedures are completed\nand the related performance obligations have been satisfied.\n\n \n\n**Use of Estimates**\n\n** **\n\nThe preparation of these financial statements\nin conformity with accounting principles generally accepted in the United States of America requires management to make estimates and\nassumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts\nof revenues and expenses during the reporting period. Actual results could differ from those estimates. The significant estimates included\nin these financial statements are associated with accounting for the goodwill, derivative liability valuations, valuation of preferred\nstock, fair value estimates, valuation of assets and liabilities in business combination and in its going concern analysis.\n\n** **\n\n**Fair Value of Financial Instruments**\n\n** **\n\nThe fair value of financial instruments, which\ninclude cash, accounts payable and accrued expenses and advances from related parties were estimated to approximate their carrying values\ndue to the immediate or short-term maturity of these financial instruments. Management is of the opinion that the Company is not exposed\nto significant interest, currency or credit risks arising from financial instruments.\n\n \n\nFair value is defined as the price which would\nbe received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement\ndate. A three-tier fair value hierarchy which prioritizes the inputs used in the valuation methodologies, as follows:\n\n \n\n \nLevel 1\nInputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.\n\n \n\n \nLevel 2\nInputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.\n\n \n\n \nLevel 3\nInputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.\n\n \n\n26\n\n \n\nAt December 31, 2025, and December 31, 2024, the\ncarrying amounts of the Company’s financial instruments, including cash, account payables, and accrued expenses, approximate their\nrespective fair value due to the short-term nature of these instruments.\n\n \n\nAt December 31, 2025, and December 31, 2024, the\nCompany does not have any assets or liabilities except for derivative liabilities related to convertible notes payable required to be\nmeasured at fair value in accordance with FASB ASC Topic 820, Fair Value Measurement.\n\n \n\n**New Accounting Pronouncements**\n\n \n\nRecently adopted accounting pronouncements require\npublic companies to disclose the impact of new standards on their financial statements, including details about the standard, the adoption\ndate, method of adoption, and expected effects. These disclosures help investors understand how changes in accounting principles\nwill affect a company’s financial performance and position. \n\n \n\n**Segment Reporting**\n\n \n\nIn November 2023, the\nFASB issued ASU 2023-07, Segment Reporting (Topic 280). The amendments in this update expand segment disclosure requirements, including\nnew segment disclosure requirements for entities with a single reportable segment among other disclosure requirements. This update is\neffective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15,\n2024. Adoption of this standard is on a modified retrospective basis and had no impact on the Company’s financial position, results\nof operations, cash flows or net income per share. As of 2025 and 2024 the Company had one reporting segment, all revenue is reported\nunder this segment Global Stem Cells Group.\n\n \n\nOther accounting standards and amendments to existing\naccounting standards that have been issued and have future effective dates are not applicable or are not expected to have a significant\nimpact on the Company’s consolidated financial statements."}