BAETA CORP – 10-Q/A – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                            AND RESULTS OF OPERATIONS  

You should read the following discussion together with "Selected Historical Financial Data" and our consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ materially from those we currently anticipate as a result of many factors, including the factors we describe under "Risk Factors," "Special Note Regarding Forward-Looking Statements" and elsewhere in this prospectus.

Forward Looking Statements

Some of the information in this section contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as "may," "will," "expect," "anticipate," "believe," "estimate" and "continue," or similar words. You should read statements that contain these words carefully because they:

                          · discuss our future expectations;      · contain projections of our future results of operations or of our financial     condition; and                        · state other "forward-looking" information.   

We believe it is important to communicate our expectations. However, there may be events in the future that we are not able to accurately predict or over which we have no control. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors," "Business" and elsewhere in this prospectus. See "Risk Factors."

Unless stated otherwise, the words "we," "us," "our," "the Company" or "BAETA" in this prospectus collectively refers to the Company, BAETA Corp.

Organizational History

BAETA Corp. (a development stage company) ("the Company") was incorporated in the State of New Jersey on August 14, 2007 as a product-driven medical technology company that manufactures advanced products for the global vital signs monitoring industry. The Company has developed a patent-pending pain management and pain assessment product for the estimated 25 million chronic pain sufferers in the U.S. alone.

All activity through September 30, 2011 relates to the Company's formation and initial research and development.

The Company is considered to be a development stage company and as such the financial statements presented herein are presented in accordance with Statement of Financial Accounting Standards ("SFAS") No. 7. "Accounting and Reporting By Development Stage Enterprises." The Company is subject to the risks associated with activities of development stage companies.

Forward Stock Split

On May 16, 2008, BAETA filed an amendment to the Company's Certificate of Incorporation with the Secretary of State of the State of New Jersey thereby effectuating a forward stock split of 20,000-to-1, effective 12:01 a.m. on May 16, 2008. The Company did not amend the par value of the Company's common stock.

Prior to the Forward Split, there were 1,000 shares of the Company's common stock, par value $0.0001 per share, issued and outstanding, all held by Dr. Alexander Gak, our President and Director. Upon the effectiveness of the Forward Split as of May 16, 2008, there became 20,000,000 shares of the Company's Common Stock issued and outstanding, all held by Dr. Gak. As of September 30, 2011, there are 25,323,696 shares of the Company's common stock issued and outstanding to approximately 98 shareholders of record.

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Plan of Operations

We anticipate that the Company will require approximately $500,000 to $1,000,000 in additional capital to execute its current 12-month plan of operations; including but not necessarily limited to expenses related to the patents pending for its developing products and technology, expansion of infrastructure and physical office space, hiring of key employees and sales and administrative and executive personnel as well as for the registration of its shares and compliance with securities regulations. We do not currently have sufficient capital to meet our needs for the next 12 months, and we are extremely reliant upon future financings to fund our operations. We intend to procure this additional capital by way of public and private offerings of our common stock.

We anticipate that we will use additional capital to retain and hire sales personnel and administrative and executive personnel at a level consistent with available capital, but aggressively to support initial product sales and market penetration. We do not believe that we can sustain or execute our plan of operations, nor bring our proposed products to market without additional capital of approximately $500,000 to $1,000,000.

Exclusive Software Agreement

On September 16, 2008, Dr. Alexander Gak, our President and Chairman, and Extranome, Inc., a New Jersey corporation entered into an Exclusive Software Agreement (the "Agreement"). Pursuant the Agreement, Extranome sold to Baeta Corp. all commercial rights to its software entitled MyHealthID Medical Records Systems for a twenty five year term. Pursuant to the Agreement, the Company agreed to pay Extranome $0.00 upfront, and in perpetuity approximately forty-nine percent of all net revenues generated from advertising by MyHealthID. Our President and sole director, Dr. Alexander Gak, is the 100% owner of Extranome, Inc., a New Jersey corporation.

Software Development Agreement with Extranome, Inc.

On November 1, 2008, BAETA Corp. entered into a Software Development Contract with Extranome, Inc. At the time of the transaction, BAETA and Extranome were controlled by Dr. Alexander Gak, our President and Chairman.

Pursuant to the Software Development Agreement, Extranome has been providing ongoing software development and product support services for BAETA since November 01, 2008. In accordance with Section 2 of the Software Development Agreement, BAETA is to pay Extranome for the contracted work in cash form; however BAETA currently does not have a sufficient amount of cash on hand. Therefore, BAETA is paying Extranome 50% in shares of its common stock, and 50% in cash. Extranome has received 30,000 shares for each month since December 1, 2008 as non-cash part of compensation for services rendered which represent approximately 50% of Extranome's due monthly compensation, and through September 30, 2011 has received 1,020,000 shares of BAETA Corp.BAETA will continue to issue company shares to Extranome in the amount of 50% of the monthly compensation for services rendered until it is able to compensate Extranome fully in cash.

Going Concern

The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern that contemplates the realization of assets and liquidation of liabilities in the normal course of business.

The Company's accumulated operating loss since inception is ($3,899,802). As of September 30, 2011, the Company has total liabilities of $1,531,866 compared to total assets of $212,944, limited cash on hand in the amount of $18,836, and stockholders' deficit of ($1,318,921).

The Company will actively pursue its business activities, offer noncash consideration, secure additional or refinance the debt and/or raise equity as a means of financing its operations and meet the credit obligations. If the Company is unable to return to its profitability or obtain necessary financing, it may substantially curtail or terminate its operations or seek other business opportunities through strategic alliances, acquisitions or other arrangements that may dilute the interests of existing stockholders. The company's management is currently seeking additional capital to support operations, but has not received any firm or other commitments from any parties and may or may not, be successful in obtaining capital sufficient to perpetuate the operations of the Company.

Evolving Industry Standards; Rapid Technological Changes

The Company's success in its business will depend in part upon its continued ability to enhance its existing products and services, to introduce new products and services quickly and cost effectively to meet evolving customer needs, to achieve market acceptance for new product and service offerings and to respond to emerging industry standards and other technological changes. There can be no assurance that the Company will be able to respond effectively to technological changes or new industry standards. Moreover, there can be no assurance that competitors of the Company will not develop competitive products, or that any such competitive products will not have an adverse effect upon the Company's operating results.

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Moreover, management intends to continue to implement "best practices" and other established process improvements in its operations going forward. There can be no assurance that the Company will be successful in refining, enhancing and developing its operating strategies and systems going forward, that the costs associated with refining, enhancing and developing such strategies and systems will not increase significantly in future periods or that the Company's existing software and technology will not become obsolete as a result of ongoing technological developments in the marketplace.

Sufficiency of Cash Flows

Because current cash balances and projected cash generation from operations are not sufficient to meet the Company's cash needs for working capital and capital expenditures, management intends to seek additional equity or obtain additional credit facilities. The sale of additional equity could result in additional and substantial dilution to the Company's shareholders. A portion of the Company's cash may be used to acquire or invest in complementary businesses or products or to obtain the right to use complementary technologies. From time to time, in the ordinary course of business, the Company evaluates potential acquisitions of such businesses, products or technologies.

Results of Operations for the fiscal year ended December 31, 2010 compared to December 31, 2009.

                                    1. Assets.      a. Cash. The Company's cash increased 520% from $3,189 for the fiscal year ended      December 31, 2009 to $16,600 as of December 31, 2010. The increase is      attributable to the sale of common stock and a short-term shareholder advance      and loan (see Current Liabilities).      b. Total Assets. Total Assets increased 147%, from $232,037 as of December 31,      2009 to $341,483 as of December 31, 2010 primarily as a result of an increase      in inventory and the development of our Software Asset.                                     2. Liabilities.      a. Current Liabilities. Current liabilities increased 185% from $293,006 as of      December 31, 2009 to $541,855 as of December 31, 2010. The increase is      attributable primarily to an increase in Accounts Payable to a related party      and an increase in a short-term Shareholder Advance and Shareholder Note      provided by the Company's CEO, Leonid Pushkantser.      b. Long-Term Liabilities. Long-Term Liabilities increased 72% from $610,366 as      of December 31, 2009 to $1,052,684 as of December 31, 2010. The increase is      attributable to a convertible note from an individual and advances from the      Company's CEO, Leonid Pushkantser and accrued interest on same.                                3. Stockholder's Equity.      a. Common Stock. Total Stockholder's Deficit decreased 188% from ($378,328) at      December 31, 2009 to ($711,201) at December 31, 2010, as the Company      continued to record operating losses during its development phase.      b. Retained Earnings. The Company's Accumulated Losses increased 143% from      $1,362,378 on December 31, 2009, to $2,766,078 on December 30, 2010. The      increase is attributable to the increase in operating expenditures and      development costs of the company's products during the development stages of      the Company.   

4. Revenue & Sales. Our revenues were $47 for the year ended December 31, 2010,

   compared with $9,003 in revenue for the year ending December 31, 2009. The    difference was due to a decrease in sales. As stated in the Company's Revenue    Recognition policy, the Company has no significant post delivery obligations    and the customer does not have any significant refund rights, acceptance    terms, discounts, or other terms that serve to reduce the amount recorded    relative to the sales price nor to delay the timing of recognition of revenue.   

5. Amortization Expense. Amortization Expense increased approximately 33% from

December 31, 2009 to December 31, 2010, from $423 to $602, respectively. This    change is attributable to the realization of amortization expense for tangible    and intangible assets acquired and capitalized by the Company during the    period.   

6. Research & Development. Research & Development costs for the period ended

December 31, 2010 were $276,650. That compares with $60,000 for the period    ended December 31, 2009. The Company has expensed approximately $419,062 to    date in the development of proprietary software that supports and integrates    with its commercial products.   

7. Sales & Marketing expenses. Sales & Marketing costs were $259,278 for the

   period ended December 31, 2010, compared to $113,071 for the year ended    December 31, 2009. The increase in sales & marketing costs for this time    period is attributed to launch efforts related to company products.                                            19

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8. General & Administrative Personel Expenses. These were $483,724 for fiscal

   2010 and $0 for fiscal 2009 as a result of reclassifying these expenses from    Other Miscellaneous Operating Expenses. Were these expenses broken out for    2009 they would have been $495,255.   

9. Professional Service Fees. These were $323,323 for fiscal 2010 and $0 for

   fiscal 2009 as a result of reclassifying these expenses from Other    Miscellaneous Operating Expenses. Were these expenses broken out for 2009 they    would have been $41,906. The increase is due largely to a stock based    compensation expense for a reserve equity agreement as well as increase in    general legal fees.   

10. Other Miscellaneous Operating Expenses. Other miscellaneous operating

    expenses for the fiscal year ended December 31, 2010 were $50,294. Total     operating expenses for the fiscal year ended December 31, 2009 were $616,389.     Other miscellaneous operating decreased significantly because they were     reclassified as noted above.   

11. Net Loss. Net loss for fiscal years ended December 31, 2010 and December 31,

    2009 were ($1,403,700) and ($802,649), respectively. The Company's total Net     Loss since inception to December 31, 2010 was ($2,766,078).   

Results of Operations at September 30, 2011 compared to December 31, 2010

Assets. Our total assets were $212,944 at September 30, 2011 compared to $341,483 as of December 31, 2010 primarily as a result of a reserve for the impairment of our Software Asset.

Liabilities. Our total liabilities were $1,531,866 at September 30, 2011 compared to $1,052,684 at December 31, 2010. This increase was primarily due to an increase in Accounts Payable in general, Accounts Payable to Extranome (Related Party), and an increase in Convertible Notes and Shareholder Notes.

Total Stockholders' Deficit. Our stockholders' deficit was $1,318,921 at September 30, 2011 compared to $711,201 at December 31, 2010. This increase in deficit was primarily due to increased losses offset some by additional paid in capital.

Results of Operations for the nine months ended September 30, 2011 compared to the nine months ended September 30, 2010.

Revenues. Our revenues were $1,244 for the nine months ended September 30, 2011, compared with $0 for the nine months ended September 30, 2010. The revenue for the quarter ended September 30, 2011 was due to the recognition of subscription revenue from customers.

Research & Development expenses. Research & Development costs were $141,750 for the nine months ended September 30, 2011, compared to $201,000 for the nine months ended September 30, 2010 reflecting a decrease in expenditures in this aspect of the business.

Sales & Marketing expenses. Sales & Marketing costs were $188,014 for the nine months ended September 30, 2011, compared to $172,414 for the nine months ended September 30, 2010. The slight increase in sales & marketing costs for this time period is attributed to marketing efforts related to company products.

General & Administrative Personnel Expenses: General & Administrative Personnel Expenses were $477,474 for the nine months ended September 30, 2011, compared to $364,461 for the nine months ended September 30, 2010. The increase in general and administrative personnel expenses for this time period is attributed to an increase in stock based compensation.

Professional Service Fees: Professional Service Fees were ($13,791) for the nine months ended September 30, 2011, compared to $65,313 for the nine months ended September 30, 2010. The decrease in professional service fees for this time period is attributed to a reversal of stock based compensation previously made in December, 2010 for the preparation of a financing agreement which was later withdrawn during the period.

Other miscellaneous operating expenses: Other miscellaneous operating expenses were $105,301 for the nine months ended September 30, 2011, compared to $36,203 for the nine months ended September 30, 2010. The increase in other miscellaneous operating expenses for this time period is primarily attributed to the creation of a beneficial conversion expense related to two convertible notes as well as an increase in insurance costs.

Net Loss. We had a net loss of $1,133,724 for the nine months ended September 30, 2011, compared to a net loss of $831,053 for the nine months ended September 31, 2010. This increase in net loss is due to the factors described above as well as creating a reserve for software impairment and an increase in interest expense.

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Liquidity and Capital Resources; Going Concern

Cash Balance. At September 30, 2011, we had $18,836 cash on-hand and our stockholder's deficit was ($1,318,921), and there is substantial doubt as our ability to continue as a going concern. We anticipate incurring losses in the near future. We do not have an established source of revenue sufficient to cover our operating costs in the next 12 months. Our ability to continue as a going concern is dependent upon our ability to successfully compete, operate profitably and/or raise additional capital through other means. If we are unable to reverse our losses, we will have to discontinue operations.

Off -Balance Sheet Operations

The Company does not have any off-balance sheet operations.

CRITICAL ACCOUNTING POLICIES

The Company's financial statements included herein were prepared in accordance with United States generally accepted accounting principles. Significant accounting policies are as follows:

                                  a. Use of Estimates    

The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America</location> requires management to make estimates and assumptions, which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

                              b. Cash and Cash Equivalents    

Cash and cash equivalents are considered to be all highly liquid investments purchased with an initial maturity of three (3) months or less.

                                    c. Income Taxes    

The Company complies with the provisions of SFAS No. 109 "Accounting for Income Taxes". Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts and are based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred income tax assets to the amount expected to be realized.

                         d. Fair Value of Financial Instruments    

The carrying value of cash equivalents, software development costs, and accrued expenses approximates fair value.

                                 e. Revenue Recognition    

Revenue is recognized in accordance with FASB ASC 605, "Revenue Recognition". The Company recognizes revenue when the significant risks and rewards of ownership have been transferred to the customer pursuant to applicable laws and regulations, including factors such as when there has been evidence of a sale arrangement, delivery has occurred, or service has been rendered, the price to the buyer is fixed or determinable, and collectability is reasonably assured.

Evidence of a sales arrangement and a fixed or determinable price can be provided by a purchase order from the customer or from the customer paying for and accepting the product

In the case of product sale, unless indicated differently in a contract between the customer and the Company, the Company assumes delivery to have occurred and title to have passed upon receipt of the product by the customer. Because the Company does not have a history with its customers yet, it assures collectability by recognizing revenue only after payment for product is received.

Concurrent with sale of the product, the customer often purchases access to our web portal for a specified term, often one year. If the customer pays for that access in advance, which is often the case, then the revenue is recognized equally during the period of access purchased.

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Other than the web portal access, if applicable, the Company has no significant post delivery obligations and its customers do not have any significant refund rights, acceptance terms, discounts, or other terms that serve to reduce the amount recorded relative to the sales price nor to delay the timing of recognition of revenue.

                             f. Software Development Costs    

The Company complies with the provisions of SFAS No. 86 "Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed". The Software Application Asset is for software that will be used in the company's products and began being capitalized after technological feasibility was established, which as required by SFAS No. 86, was after a working model was delivered to BAETA Corp and the working model software was tested for completeness, functionality, and consistency with expected product design. The testing was performed by the vendor that developed and delivered the product as well as by BAETA Corp and select potential customers. Capitalized software costs will begin being amortized when the software product is available for general release to customers. The asset is reviewed for impairment at an executive management meeting quarterly, during the review of the Company's financial results. Impairment is reviewed on a product-by-product basis by comparing the unamortized capitalized costs to the asset's net realizable value. The amount by which the unamortized capitalized costs exceed the net realizable value would be recognized as an impairment charge.

                                    g. Stock Options    

The Company complies with the provisions of SFAS No. 123R "Accounting for Stock-Based Compensation". The company uses the Black-Scholes-Merton closed-form model to value its stock options. Using that model, the Company includes as inputs to the model assumptions for the exercise price of each option, the expected term of each option, the current price of the underlying share, the expected volatility in the price of the underlying share for the expected term of each option, the expected dividends on the underlying share for the expected term of each option, and the risk free rate for the expected term of each option.

The exercise date of each option is included on the contractual agreements with each compensated provider. To estimate the expected term of options, the company used the "simplified" method as allowed in Staff Accounting Bulletin No. 110. The price of the underlying share is valued at the time of option grant with the most relevant measurement at the time being either current stock price of the company stock in a recent private placement or equity offering or vendor invoice/contract that most closely reflects the value of services performed or product delivered.. Volatility is estimated by using the implied volatility a comparable company that is public, with publicly traded options, that is in a similar industry, with a similar product set, at a stage of life and size as close to the Company as possible for the set of similar companies with publicly traded options. The Company is using implied volatility, because historic volatility for the Company does not exist and is not practicable to obtain from comparable companies. There are no dividends expected to be paid on the underlying shares during the expected term of any options. And, the risk free rate is obtained from the yield on a similar term U.S. Treasury.

                                 h. Stock Compensation    

Stock issued for services rendered is valued at the time of service with the most relevant measurement at the time being either current stock price of the company stock in a recent private placement or equity offering or vendor invoice/contract that most closely reflects the value of services performed or product delivered.

                                     i. Inventories    

Inventories are stated at the lower of average costs incurred or estimated net realizable value. Major types of inventories include materials and supplies.

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