UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 000-30156
| RENOVACARE, INC. |
| (Exact name of registrant as specified in its charter) |
| Nevada | 98-0170247 | |
| (State or other jurisdiction of incorporation) | (I.R.S. Employer Identification No.) |
4 Becker Farm Road, Suite 105
Roseland, NJ 07068
(Address of principal executive offices)
888-398-0202
(Registrant's telephone number, including area code)
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company", and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☐ | ||
| Smaller reporting company | ☒ | Emerging Growth Company | ☐ |
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 12b-2 of the Exchange Act):
Yes ☐ No ☒
Securities registered pursuant to Section 12(b) of the Act: None.
As of June 19, 2020 the registrant had 87,352,364 shares of its common stock, par value $0.00001 per share, issued and outstanding.
EXPLANATORY NOTE
As previously disclosed in the Current Report on Form 8-K filed by RenovaCare, Inc. (the “Company”) with the Securities and Exchange Commission (the “SEC”) on May 13, 2020, the filing of the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2020 (the “Form 10-Q”) was delayed due to circumstances related to the novel coronavirus (“COVID-19”) pandemic. The Company’s headquarters and outside financial consultant are located in New Jersey. The Company’s outside legal counsel and independent registered public accounting firm are located in New York, New York. The governors of New York and New Jersey have announced statewide stay at home orders in an attempt to prevent the further spread of COVID-19 in their respective states. Construction was stopped on the Company’s new offices in New Jersey due to Federal State restrictions, so the Company has not had the ability to easily manage work during this time period. Furthermore, the offices of many of the Company’s other advisors related to the subject matter of the Company’s Form 10Q are subject to government mandate, closed. The Company was therefore unable to file the Form 10-Q on its customary schedule. The Company relied on the SEC’s Order under Section 36 of the Securities Exchange Act of 1934 Modifying Exemptions from the Reporting and Proxy Delivery Requirements for Public Companies,” dated March 25, 2020 (Release No. 34-88465) to delay the filing of this Form 10-Q.
At this time, it is not possible to fully assess the impact of the COVID-19 pandemic on the Company’s operations and capital requirements. Should the COVID-19 pandemic continue, it may adversely affect the Company’s ability to (i) retain employees and consultants, (ii) obtain additional financing on terms acceptable to the Company, if at all, (iii) delay regulatory submissions and approvals, (iv) delay, limit or preclude the Company from securing clinical study sites; and (iv) preclude or delay entry into joint venture or partnership arrangements. The occurrence of any one or more of such events may affect the Company’s ability to continue on its pathway to commercialization of its CellMist™ System.
RENOVACARE, INC.
FORM 10-Q
For The Quarter Ended March 31, 2020
TABLE OF CONTENTS
(The accompanying notes are an integral part of these condensed consolidated financial statements)
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(The accompanying notes are an integral part of these condensed consolidated financial statements)
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(The accompanying notes are an integral part of these condensed consolidated financial statements)
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(The accompanying notes are an integral part of these condensed consolidated financial statements)
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RENOVACARE, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation, Organization, Nature and Continuance of Operations, Recent Accounting Standards and Earnings (Loss) Per Share
Basis of Presentation
The accompanying interim unaudited condensed consolidated financial statements and related disclosures of RenovaCare, Inc. and Subsidiary (the “Company”) as of March 31, 2020, and for the three months ended March 31, 2020 and 2019 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed on May 14, 2020. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) have been condensed or omitted.
In the opinion of management, the interim condensed consolidated financial statements reflect all adjustments considered necessary for a fair statement of the interim periods. All such adjustments are of a normal, recurring nature. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year.
Organization
RenovaCare, Inc., together with its wholly owned subsidiary, focuses on the acquisition, research, development and, if warranted, commercialization of autologous (using a patient's own cells) cellular therapies that can be used for medical and aesthetic applications.
On July 12, 2013, the Company, through its wholly owned subsidiary, RenovaCare Sciences Corp., completed the acquisition of its flagship technologies (collectively, the “CellMistTM System”) along with associated United States patent applications and two foreign patent applications, the first of which was filed on August 23, 2007 (DE 10 2007 040 252.1) and the second of which was filed on April 27, 2011 (DE 10 2011 100 450.9), both of which have been granted. One of the US patent applications was granted on November 29, 2016 (Patent No. US 9,505,000) and the other patent application was granted on April 4, 2017 (Patent No. US 9,610,430). In August 2019, the Company was awarded a continuation of Patent No. US 9,505,000 (Patent No. US 10,376,658), allowing the Company’s novel solution sprayer device (the “SkinGunTM”) to now be used to spray all varieties of tissues and cells, thus opening the door for its potential application in the regeneration of tissues and organs, beyond skin.
The CellMistTM System is comprised of (a) a treatment methodology for cell isolation for the regeneration of human skin cells (the “CellMistTM Solution”) and (b) the SkinGunTM for delivering the cells to the treatment area.
Nature and Continuance of Operations
The Company does not have any commercialized products. The Company's activities have consisted principally of performing research and development activities and raising capital. These development activities are subject to significant risks and uncertainties, including possible failure of preclinical testing. The Company has not generated any revenue since inception and has sustained recurring losses and negative cash flows from operations since inception. The Company expects to incur losses as it continues development of its products and technologies and expects that it will need to raise additional capital through the sale of its securities to accomplish its business plan and failing to secure such additional funding before achieving sustainable revenue and profit from operations poses a significant risk. The Company's ability to fund the development of its cellular therapies will depend on the amount and timing of cash receipts from future financing activities. There can be no assurance as to the availability or terms upon which such financing and capital might be available. Additionally, there is significant uncertainty relating to the full impact of the COVID-19 pandemic on the Company’s operations and capital requirements. Should the COVID-19 pandemic continue, it may adversely affect the Company’s ability to (i) retain employees and consultants; (ii) obtain additional financing on terms acceptable to the Company, if at all; (iii) delay regulatory submissions and approvals; (iv) delay, limit or preclude the Company from securing clinical study sites; (v) delay, limit or preclude the Company from achieving technology or product development goals, milestones, or objectives; and (vi) preclude or delay entry into join venture or partnership arrangements. The occurrence of any one or more of such events may affect the Company’s ability to continue on its pathway to commercialization of its technology or products.
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As of March 31, 2020, the Company had $11,382,102 of cash on hand and a working capital of $11,290,023. As a result of the cash on hand the working capital, the Company believes it currently has sufficient cash to meet its funding requirements over the next twelve months following the issuance of this Quarterly Report on Form 10-Q. However, the Company has experienced and continues to experience negative cash flows from operations, as well as an ongoing requirement for substantial additional capital investment. The Company expects that it may need to raise additional capital to accomplish its business plan over the next several years. If additional funding is required, the Company expects to seek to obtain that funding through private equity or convertible debt. There can be no assurance as to the availability or terms upon which such financing and capital might be available.
New Accounting Standards
Any reference in these notes to applicable accounting guidance is meant to refer to the authoritative non-governmental US GAAP as found in the Financial Accounting Standards Board's Accounting Standards Codification.
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for the Company beginning in fiscal 2021. The Company is currently assessing the impact that this pronouncement will have on its consolidated financial statements.
The Company reviews new accounting standards as issued. Although some of these accounting standards issued or effective after the end of the Company’s previous fiscal year may be applicable, the Company has not identified any standards that the Company believes merit further discussion other than as discussed above. The Company believes that none of the new standards will have a significant impact on the financial statements.
Earnings (Loss) Per Share
The Company presents both basic and diluted earnings per share ("EPS") amounts. Basic EPS is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period presented. Diluted EPS amounts are based upon the weighted average number of common and common equivalent shares outstanding during the period presented. The Company has not included the effects of warrants or stock on net loss per share because to do so would be antidilutive.
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Following is the computation of basic and diluted net loss per share for the three months ended March 31, 2020 and 2019:
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2020 | 2019 | |||||||
| Basic and Diluted EPS Computation | ||||||||
| Numerator: | ||||||||
| Loss available to common stockholders' | $ | (1,174,753 | ) | $ | (519,266 | ) | ||
| Denominator: | ||||||||
| Weighted average number of common shares outstanding | 87,352,364 | 87,175,522 | ||||||
| Basic and diluted EPS | $ | (0.01 | ) | $ | (0.01 | ) | ||
| The shares listed below were not included in the computation of diluted losses per share because to do so would have been antidilutive for the periods presented: | ||||||||
| Stock options | 2,938,071 | 317,500 | ||||||
| Warrants | 13,106,912 | 13,346,912 | ||||||
| Total shares not included in the computation of diluted losses per share | 16,044,983 | 13,664,412 | ||||||
Note 2. Prepaid Expenses
Prepaid expenses consist of the following:
| March 31, | ||||||||
| 2020 | 2019 | |||||||
| Prepaid insurance | $ | 216,720 | $ | - | ||||
| Prepaid professional fees | 102,500 | 102,500 | ||||||
| Total prepaid expenses | $ | 319,220 | $ | 102,500 | ||||
Note 3. Assets – Intellectual Property
On July 12, 2013, the Company, together with its wholly owned subsidiary, RenovaCare Sciences, entered into an asset purchase agreement (“APA”) with Dr. Jörg Gerlach, MD, PhD, pursuant to which RenovaCare Sciences purchased all of Dr. Gerlach’s rights, title and interest in the CellMistTM System. Acquisition related costs amounted to $52,852 and were capitalized together with the cash payment upon the closing of the transaction in July 2013 of $100,002. Intangible assets amounted to $152,854 at March 31, 2020 and December 31, 2019.
Note 4. Common Stock and Warrants
Common Stock
At March 31, 2020, the Company had 500,000,000 authorized shares of common stock with a par value of $0.00001 per share, 87,352,364 shares of common stock outstanding and 19,440,765 shares reserved for issuance under the Company’s 2013 Long-Term Incentive Plan (the “2013 Plan”) as adopted and approved by the Company’s Board of Directors (the “Board”) on June 20, 2013 that provides for the grant of stock options to employees, directors, officers and consultants. During the three months ended March 31, 2020, the Company granted Alan L. Rubino, the Company’s President and Chief Executive Officer, an option to purchase up to 620,571 shares of the Company’s common stock at an exercise price of $3.23. See “Note 5. Stock Options” for further discussion.
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Warrants
The following table summarizes information about warrants outstanding at March 31, 2020 and December 31, 2019:
| Shares of Common Stock Issuable from Warrants Outstanding as of | Weighted | |||||||||||||||
| March 31, | December 31, | Average | ||||||||||||||
| Description | 2020 | 2019 | Exercise Price | Expiration | ||||||||||||
| Series D | 810,000 | 810,000 | $ | 1.10 | June 5, 2020 | |||||||||||
| Series E | 584,416 | 584,416 | $ | 1.54 | September 8, 2021 | |||||||||||
| Series F | 7,246 | 7,246 | $ | 3.45 | February 23, 2022 & March 9, 2022 | |||||||||||
| Series G | 460,250 | 460,250 | $ | 2.68 | July 21, 2022 | |||||||||||
| Series H | 910,000 | 910,000 | $ | 2.75 | October 16, 2022 | |||||||||||
| Series I | 10,335,000 | 10,335,000 | $ | 2.00 | November 26, 2025 | |||||||||||
| Total | 13,106,912 | 13,106,912 | ||||||||||||||
Note 5. Stock Options
The following table summarizes stock option activity for the period ended March 31, 2020:
| Number of Options | Weighted Average Exercise Price ($) | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value ($) | |||||||||||||
| Outstanding at December 31, 2019 | 2,317,500 | 2.68 | 5.68 years | $ | 1,460,507 | |||||||||||
| Grants | 620,571 | |||||||||||||||
| Outstanding at March 31, 2020 | 2,938,071 | 2.80 | 5.50 years | $ | 11,625 | |||||||||||
| Exercisable at March 31, 2020 | 317,500 | 3.41 | 4.17 years | 11,625 | ||||||||||||
| Available for grant at March 31, 2020 | 16,820,194 | |||||||||||||||
During the three months ended March 31, 2020, the Company granted Alan L. Rubino, the Company’s President and Chief Executive Officer, an option to purchase up to 620,571 shares of the Company’s common stock at an exercise price of $3.23. The option was granted in fulfillment of the Company’s obligation under the terms of Mr. Rubino’s employment agreement dated November 15, 2019. The fair value of the option was estimated at the date of grant using the Black-Scholes option pricing model. Assumptions regarding volatility, expected term, dividend yield and risk-free interest rate are required the Black-Scholes model. The volatility assumption is based on the Company’s historical experience. The risk-free interest rate is based on a U.S. Treasury note with maturity similar to the option award’s expected life. The expected life represents the average period of time that options granted are expected to be outstanding.
The assumptions for volatility, expected life, dividend yield and risk-free interest rate for the options granted are as follows:
| Three Months Ended | ||||
| March 31, 2020 | ||||
| Risk-free interest rate | 1.67 | % | ||
| Expected life in years | 3.30 | |||
| Expected Volatility | 107.35 | % | ||
| Expected dividend yield | 0 | % | ||
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The share-based compensation cost resulting from stock option grants, including those previously granted and vesting over time is expensed ratably over the respective vesting periods. During the three months ended March 31, 2020 and 2019, the Company recognized $465,763 and $832, respectively, in stock-based compensation. As of March 31, 2020, the Company’s unrecognized compensation cost related to unvested stock options was $2,746,876 to be amortized through 2023. Stock-based compensation has been included in the consolidated statement of operations as follows:
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2020 | 2019 | |||||||
| Research and development | $ | - | $ | - | ||||
| General and administrative | 465,763 | 832 | ||||||
| Total | $ | 465,763 | $ | 832 | ||||
The following table summarizes information about stock options outstanding and exercisable at March 31, 2020:
| Stock Options Outstanding | Stock Options Exercisable | |||||||||||||||||||||||||
| Range of Exercise Prices | Number of Shares Subject to Outstanding Options | Weighted Average Contractual Life (years) | Weighted Average Exercise Price | Number of Shares Subject to Options Exercise | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | ||||||||||||||||||||
| 1.05 | 55,000 | 4.00 | 1.05 | 55,000 | 4.00 | 1.05 | ||||||||||||||||||||
| 1.25 | 7,500 | 5.21 | 1.25 | 7,500 | 5.21 | 1.25 | ||||||||||||||||||||
| 1.34 | 7,500 | 5.25 | 1.34 | 7,500 | 5.25 | 1.34 | ||||||||||||||||||||
| 1.70 | 7,500 | 5.54 | 1.70 | 7,500 | 5.54 | 1.70 | ||||||||||||||||||||
| 2.28 | 7,500 | 6.30 | 2.28 | 7,500 | 6.30 | 2.28 | ||||||||||||||||||||
| 4.20 | 232,500 | 4.03 | 4.20 | 232,500 | 4.03 | 4.20 | ||||||||||||||||||||
| 1.98 | 667,800 | 5.63 | 1.98 | - | - | - | ||||||||||||||||||||
| 2.48 | 667,800 | 5.63 | 2.48 | - | - | - | ||||||||||||||||||||
| 3.23 | 664,400 | 5.63 | 3.23 | - | - | - | ||||||||||||||||||||
| 3.23 | 620,571 | 5.76 | 3.23 | - | - | - | ||||||||||||||||||||
| Total | 2,938,071 | 5.50 | $ | 2.80 | 317,500 | 4.17 | $ | 3.41 | ||||||||||||||||||
Note 6. Leases
The Company determines if an arrangement is a lease, or contains a lease, at the inception of an arrangement. If the Company determines that the arrangement is a lease, or contains a lease, at lease inception, it then determines whether the lease is an operating lease or finance lease. Operating and finance leases result in recording a right-of-use (“ROU”) asset and lease liability on the consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. For purposes of calculating operating lease ROU assets and operating lease liabilities, the Company uses the non-cancellable lease term plus options to extend that it is reasonably certain to exercise. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. The Company’s leases generally do not provide an implicit rate. As such, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company has elected not to recognize ROU assets and lease liabilities that arise from short-term (12 months or less) leases for any class of underlying asset. The Company has elected not to separate lease and non-lease components for any class of underlying asset.
In February of 2020, the Company entered into a two-year lease for office premises located at 4 Becker Farm Road, Suite 105, Roseland, New Jersey. Monthly base rent in year one of the lease is $3,998; and $4,100 in year 2 of the lease. The term (and payment of the monthly rent) commences upon substantial completion of the landlord’s work, which was expected to occur on or before May 31, 2020. Due to the COVID-19 pandemic the landlord’s work has not been completed as of the date these condensed interim financial statements have been released. During the period of the landlord’s work, the Company does not have the right of use of the office premise; accordingly, we have not recognized a ROU asset and lease liability as of March 31, 2020.
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Note 7. Commitments and Contingencies
In connection with the Company’s anticipated regulatory filings, the Company has engaged StemCell Systems GmbH (“StemCell Systems”) to provide it with prototypes and related documents under various agreements. Pursuant to these engagements the Company incurred expenses of $76,460 and $76,600 in during the three months ended March 31, 2020 and 2019, respectively. Dr. Gerlach, from whom the Company purchased the CellMistTM System technologies, is a principal of StemCell Systems.
On June 3, 2019, the Company entered into a Charitable Gift Agreement with the University of Pittsburgh (“University”), pursuant to which the Company committed to provide a charitable donation to the University in the agreement amount of $250,000 (the “Grant”). The Company will pay the Grant in four quarterly installments with the first payment made on or before July 1, 2019. During the three months ended March 31, 2020 and 2019 the Company made payments totaling $62,500 and $0, respectively. At March 31, 2020, the balance remaining under this gift was $62,500. Due to the terms of the Grant, the Company will recognize the related expense upon payment.
Note 8. Related Party Transactions
At the period ended March 31, 2020, Talia Jevan Properties, Inc. made a payment of $5,287 to Stephen Yan-Klassen, CFO, for his salary on behalf of the Company. Talia Jevan Properties, Inc. is a related party of Harmel Rayat, Chairman of the Board.
On August 1, 2013, the Company entered into a consulting agreement, as amended on May 1, 2016, with Jatinder Bhogal, an individual owning in excess of 5% of our issued and outstanding shares of common stock, to provide consulting services to the Company through his wholly owned company, Vector Asset Management, Inc. (“VAM”). Pursuant to the consulting agreement Vector assisted the Company with identifying subject matter experts in the medical device and biotechnology industries and assisted the Company with its ongoing research, development and eventual commercialization of its Regeneration Technology. Pursuant to an amendment dated May 1, 2016, the VAM monthly consulting fee was increased from $5,000 to $6,800. On June 22, 2018, the Company and VAM entered into an Executive Consulting Agreement (“ECA”) pursuant to which Mr. Bhogal serves as the Company’s Chief Operating Officer. The ECA supersedes the prior consulting agreement. Pursuant to the ECA, VAM will receive compensation of $120,000 per year. During the three months ended March 31, 2020 and 2019, the Company recognized expenses of $30,000 and $30,000, respectively for consulting services provided by VAM.
Note 9. Subsequent Events
Management has reviewed material events subsequent of the period ended March 31, 2020 and prior to the filing of financial statements in accordance with FASB ASC 855 “Subsequent Events”.
On May 22, 2020 the Company granted stock options to certain of its officers, directors and consultants (the “May 2020 Option Grant”) to purchase up to an aggregate of 1,550,000 shares of the Company’s common stock (the “May 2020 Option Grant”). The May 2020 Option Grant (i) is exercisable at a price of $1.40 per share, (ii) vested as to 1,275,000 shares on the date of grant and will vest as to the remaining 1,275,000 shares on the first anniversary of the date of grant.
On June 1, 2020, pursuant to the terms of the Employment Agreement between the Company and Dr. Robin Robinson (discussed below) the Company granted a stock option to Dr. Robin Robinson, its Vice-President, Chief Scientific Officer, to purchase up to an aggregate of 200,000 shares of the Company’s common stock (the “June 2020 Option Grant”). The June 2020 Option Grant (i) is exercisable at a price of $1.40 per share, (ii) vested as to 100,000 shares on the date of grant and will vest as to the remaining 100,000 shares on the first anniversary of the date of grant.
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Each of the May 2020 Option Grant and the June 2020 Option Grant provides that the exercise price shall be paid: (i) in cash or by certified check or bank draft payable to the order of the Company; (ii) by delivering, along with a properly executed exercise notice to the Company, a copy of irrevocable instructions to a broker to deliver promptly to the Company the aggregate exercise price and, if requested by the Optionee, the amount of any applicable federal, state, local or foreign withholding taxes required to be withheld by the Company, provided, however, that such exercise may be implemented solely under a program or arrangement established and approved by the Company with a brokerage firm selected by the Company; (iii) at any time prior to the Company’s listing of any of its securities for trading on a national stock exchange, pursuant to “a net issue” or “cashless” exercise basis; or, (iv) by any other procedure approved by the Board or its Compensation Committee, if any, or by a combination of the foregoing.
On May 26, 2020, the Company and Dr. Robin Robinson executed an Employment Agreement (the “Employment Agreement”) having an effective date of June 1, 2020 (the “Effective Date”) pursuant to which Dr. Robinson Dr. Robin A. Robinson now serves as the Company’s Chief Scientific Officer.
In addition to a base salary of $220,000 Dr. Robinson will be eligible to earn an annual bonus equal to up to 30% of his base salary then in effect based upon the Company’s assessment of Dr. Robinson’s achievement of personal performance goals. Pursuant to the terms of the Employment Agreement Dr. Robinson received the June 2020 Stock Option discussed above.
The Employment Agreement has a 2 year term; however, it may be terminated by either party at any time; If terminated by the Company without cause, as defined in the Employment Agreement, in addition to certain specified benefits, Dr. Robinson is entitled to a severance payment equal to six months of his base salary then in effect.
In connection with the Employment Agreement the Company and Dr. Robinson also entered into a Confidential Information and Invention Assignment Agreement in the form attached to the Employment Agreement, effective as of the Effective Date.
On June 15, 2020, the Company and Robert Cook executed an Employment Agreement (the “Employment Agreement”) having an effective date of June 22, 2020 (the “Effective Date”) pursuant to which Mr. Cook will serve as the Company’s Chief Financial Officer.
In addition to a base salary of $130,000 Mr. Cook will be eligible to earn an annual discretionary bonus equal to up to 30% of his base annual salary then in effect. The Company has also agreed to grant Mr. Cook an option to purchase up to 100,000 shares of the Company’s common stock. The option will vest as to 50,000 shares on the date of grant and as to the remaining 50,000 shares on the day prior to the 1st anniversary date of the grant date.
Mr. Cook’s employment by the Company is an “at will employment;” the Employment Agreement may be terminated by either party at any time, with or without cause. If terminated by the Company without cause, as defined in the Employment Agreement, in addition to certain specified benefits, Mr. Cook is entitled to a severance payment equal to up to three months of his base annual salary then in effect. Pursuant to the terms of the Employment Agreement, Mr. Cook will spend up to 50% of his time on the Company’s affairs.
In connection with the Employment Agreement, the Company and Mr. Cook also entered into a Confidential Information and Invention Assignment Agreement in the form attached to the Employment Agreement, effective as of the Effective Date.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewhere in this Quarterly Report filed on Form 10-Q. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors.
This discussion and analysis should be read in conjunction with the accompanying unaudited interim consolidated financial statements and related notes. The discussion and analysis of the financial condition and results of operations are based upon the unaudited interim consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis we review our estimates and assumptions. The estimates were based on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions, but we do not believe such differences will materially affect our financial position or results of operations. Critical accounting policies, the policies us believes are most important to the presentation of its financial statements and require the most difficult, subjective and complex judgments, are outlined below in "Critical Accounting Policies," and have not changed significantly.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, as well as information relating to RenovaCare, Inc. and its subsidiaries that is based on management's exercise of business judgment and assumptions made by and information currently available to management. Although forward-looking statements in this Quarterly Report on Form 10-Q reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. When used in this document and other documents, releases and reports released by us, the words "anticipate," "believe," "estimate," "expect," "intend," "the facts suggest" and words of similar import, are intended to identify any forward-looking statements. You should not place undue reliance on these forward-looking statements. These statements reflect our current view of future events and are subject to certain risks and uncertainties as noted below. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results could differ materially from those anticipated in these forward-looking statements. Actual events, transactions and results may materially differ from the anticipated events, transactions or results described in such statements. Although we believe that our expectations are based on reasonable assumptions, we can give no assurance that our expectations will materialize. Many factors could cause actual results to differ materially from our forward-looking statements and unknown, unidentified or unpredictable factors could materially and adversely impact our future results. We undertake no obligation and do not intend to update, revise or otherwise publicly release any revisions to our forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of any unanticipated events. Several of these factors include, without limitation:
| · | our ability to meet requisite regulations or receive regulatory approvals in the United States, and our ability to retain any regulatory approvals that we may obtain; and the absence of adverse regulatory developments in the United States and abroad; | |
| · | new entrance of competitive products or further penetration of existing products in our markets; | |
| · | the effect on us from adverse publicity related to our products or the company itself; and | |
| · | any adverse claims relating to our intellectual property. |
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The safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, apply to forward-looking statements made by us. The reader is cautioned that no statements contained in this Form 10-Q should be construed as a guarantee or assurance of future performance or results. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks described in this report and matters described in this report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur.
Overview
RenovaCare, Inc. (formerly Janus Resources, Inc.) (together with its wholly owned subsidiary, “RenovaCare” the “Company” “we” “us” and “our”) was incorporated under the laws of the State of Nevada and has an authorized capital of 500,000,000 shares of $0.00001 par value common stock, of which 87,352,364 shares are outstanding as of March 31, 2020, and 10,000,000 shares of $0.0001 par value preferred stock, of which none are outstanding.
On January 7, 2014, we filed a Certificate of Amendment to Articles of Incorporation changing our name from “Janus Resources, Inc.” to “RenovaCare, Inc.” so as to more fully reflect our operations. The Financial Industry Regulatory Authority (“FINRA”) declared the name change effective as of January 9, 2014. In conjunction with the name change, we changed our stock symbol on the OTCQB from “JANI” to “RCAR”.
Our principal executive offices are located at 4 Becker Farm Road, Suite 105, Roseland, NJ 07068. Our telephone number is (888) 398-0202.
Description of Business
We are a development-stage company focusing on the development and commercialization of autologous (using a patient’s own cells) cellular therapies for medical and aesthetic applications. The Company, through its wholly owned subsidiary, RenovaCare Sciences Corp., owns the CellMist™ System which is comprised of (a) a treatment methodology for cell isolation for the regeneration of human skin cells (the “CellMist™ Solution”) and (b) a solution sprayer device (the (SkinGun™”) for delivering cells to the treatment area. Along with US patent applications that were granted in November 2016 (Patent No. US 9,505,000), and April 2017 (Patent No. 9,610,430) and, most recently, in August 2019 (Patent No. 10,376,658). The Company has filed additional patent applications related to the CellMist™ System and other technologies.
In the case of U.S. patents, a typical utility patent term is 20 years from the date on which the application for the patent was filed in the United States or, if the application contains a specific reference to an earlier filed application or applications, from the date on which the earliest such application was filed. Patents filed outside of the U.S. have a patent term typically running 20 years from the date of first filing, however, such patent terms are determined by the law of the country in which they are issued. Patent terms may be affected by events such as maintenance (or annuity) fee payment, terminal or statutory disclaimer, post-grant proceedings, patent term adjustment, and/or patent term extension.
The development of our CellMistTM System is in the early stage and we anticipate that we will be required to expend significant time and resources to further develop our technology and determine whether a commercially viable product can be developed. Research and development of new technologies involves a high degree of risk and there is no assurance that our development activities will result in a commercially viable product. The long-term profitability of our operations will be, in part, directly related to the cost and success of our development programs, which may be affected by a number of factors.
The average adult human has a skin surface area of between 16 - 21 square feet, which protects all other organs against the external environment. When a person’s skin is assailed by trauma or exposed to extreme heat, the skin’s various layers may be destroyed and depending on the severity of the injury, might cause life-threatening conditions. Currently, severe trauma to the skin, such as second or third degree burns, requires surgical mesh-grafting of skin, whereby healthy skin is removed from one area of the patient’s body (a “donor site”) and implanted on the damaged area.
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While mesh grafting is often the method of choice, there are significant deficiencies with this method. The surgical procedure to remove healthy skin from the donor site can be painful and leaves the patient with a new wound that must also be attended to. In many instances the aesthetic results are not satisfying, as the color of the skin from the donor site may not match the skin color of the damaged skin. Additionally, the size of the donor skin removed must be substantially large in size compared to the damaged skin area. These donor and injury sites can take weeks to heal, requiring expensive hospital stays, ongoing wound dressing management, and in some cases, complex anti-infection strategies.
We are currently evaluating the potential of our CellMistTM System in the treatment of tissue that has been subject to severe trauma such as second-degree burns. The CellMistTM System utilizes the patient’s own skin stem cells, and can reduce the size of the donor site and significantly decrease scarring. Furthermore, we believe the CellMistTM System could enable treatment of other skin disorders with minimal scarring.
Our Mission and Strategy
Our ultimate goal is to leverage the potential of our CellMistTM System, as cutting-edge treatments in skin therapy. Before we can do so, however, there are a number of steps we must first take, including:
| · | initiating a series of clinical trials to determine the CellMistTM System’s safety and efficacy for treating wounds and burns; |
| · | formalizing collaborations with universities, scientific, and/or commercial partners; |
| · | creating a network of clinical research partners; |
| · | achieving FDA and/or other regulatory clearance; and |
| · | expanding the range of possible clinical applications. |
We believe that we now have an experienced leadership team which has come together to achieve our mission of improving the lives of burn patients by creating potentially more effective, safer and tolerable treatments. To achieve our goal, we have established the following strategic priorities:
| · | Obtain regulatory approval and prepare to commercialize our CellMistTM System. |
We intend to continue to pursue our efforts to secure regulatory (FDA) approval in 2020, and if ultimately approved, commence our feasibility study in the United States.
| · | Selectively pursue strategic partnership, join venture, and licensing opportunities to complement our existing operations. |
We intend to continue to pursue strategic licensing, partnership, and joint venture opportunities. We will continue to target opportunities that will complement our existing technology and operations to create value for stockholders and support our business strategy and mission.
| · | Secure additional financing as and when required. |
Additionally, we will need to pursue financing opportunities, traditional and non-dilutive, and if available on acceptable terms, if at all, in order to raise sufficient capital to fund our ongoing research and development operations in order to expand the range of possible clinical applications of our CellMistTM System.
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Our Market Opportunity
We believe that expedited healing is urgently needed for patients suffering from burns, chronic wounds, acute wounds and scars. In the U.S. alone, this $45 billion market is greater than spending on high-blood pressure management, cholesterol treatments, and back pain therapeutics.
Burns
Burns are one of the most common and devastating forms of trauma. Most burn injuries involve layers of the upper skin, the epidermis. Severe major trauma involves a complete loss of the entire thickness of the skin and often requires major surgery involving split-skin mesh-grafting. Skin grafting is a procedure where healthy skin is removed from one area of the body and transplanted to a wound site.
Patients with serious thermal injury require immediate specialized care in order to minimize morbidity and mortality. Data from the National Center for Injury Prevention and Control in the U.S. show that approximately 2 million fires are reported each year which result in 1.2 million people with burn injuries (see American Burn Association Burn Incidence and Treatment in the US: 2000 Fact Sheet, available at: http://www.ameriburn.org). Moderate to severe burn injuries requiring hospitalization account for approximately 100,000 of these cases, and about 5,000 patients die each year from burn-related complications (see Church D, Elsayed S, Reid O, Winston B, Lindsay R “Burn wound infections” Clinical Microbiology Reviews 2006;19(2):403–34, available at: http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1471990).
The prevalence of patients with severe burns is even higher in emerging economies. For example, according to the World Health Organization over 1,000,000 people in India are moderately to severely burnt every year and approximately 180,000 people worldwide die from burn related injuries (see World Health Organization “Burns: Fact Sheet No. 365,” reviewed March 6, 2018, available at: http://www.who.int/mediacentre/factsheets/fs365/en/). According to Critical Care, an international clinical medical journal, burns are also among the most expensive traumatic injuries because of long and costly hospitalization, rehabilitation and wound and scar treatment (see Brusselaers, N., Monstrey, et al, “Severe Burn Injury in Europe: A systematic Review of the Incidence, Etiology, Morbidity, and Mortality” available at: http://ccforum.com/content/14/5/R188).
Burn injuries account for a significant cost to the health care system in North America and worldwide. In the U.S. there are currently 128 centers specializing in burn care. Recent estimates in the U.S. show that 40,000 patients are admitted annually for treatment with burn injuries, over 60% of the estimated U.S. acute hospitalizations related to burn injury were admitted to burn centers. Such centers now average over 200 annual admissions for burn injury and skin disorders requiring similar treatment. The other 4,500 U.S. acute care hospitals average less than 3 burn admissions per year (see American Burn Association Burn Incidence and Treatment in the US: 2013 Fact Sheet, available at: http://www.ameriburn.org).
According to the Agency for Healthcare Research and Quality, the annual costs for the treatment of burns is $1.5 billion, with another $5 billion in costs associated with lost work (see https://www.hcup-us.ahrq.gov/reports/statbriefs/sb217-Burn-Hospital-Stays-ED-Visits-2013.pdf). Initial hospitalization costs and physicians' fees for specialized care of a patient with a major burn injury are currently estimated to be $200,000. Overall, costs escalate for major burn cases because of repeated admissions for reconstruction and rehabilitation therapy. In the U.S., current annual estimates show that more than $18 billion is spent on specialized care of patients with major burn injuries (see Church D, Elsayed S, Reid O, Winston B, Lindsay R “Burn wound infections” Clinical Microbiology Reviews 2006;19(2):403–34, available at: http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1471990).
Wounds
According to The Wall Street Journal, 6.5 million people are affected by chronic wounds, and $25 billion is spent annually on treating chronic wounds on patients in the U.S. alone (see Järbrink, Krister et al. “Prevalence and incidence of chronic wounds and related complications: a protocol for a systematic review.” Systematic reviews vol. 5,1 152. 8 Sep. 2016 doi:10.1186/s13643-016-0329-y).
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The Wound Care Market Global Forecast to 2024 report issued by Markets& Markets states that in 2019, advanced wound care products accounted for the largest market share and is expected to have the highest growth projected at a compound annual growth rate of 4.6% to 2024. Major factors driving the growth of this market of hard-to-heal wounds are an increase in an aging population and greater prevalence of chronic disease, including diabetes and obesity. The development of regenerative medicine and healing capabilities allow for more effective treatment, quicker healing and improved health economic outcomes.
The healthcare facilities (hospitals and clinics) segment accounted for the largest market share in 2019 as these systems are used for critical cases, improve quality of care for patients, and have the infrastructure and resources to support treatment.
Our Technology
Our CellMist System is comprised of the CellMistTM solution, a liquid suspension of a patient’s own skin cells, and our proprietary SkinGunTM sprays isolated stem cells and related skin cells from a small biopsy of the patient's skin. The stem cells are placed into the CellMistTM solution, which is then filled into a sterile syringe. The sterile syringe is inserted into the SkinGunTM, which then sprays the stem cell-loaded liquid solution into the wound.
The first phase of gathering the patient's skin cells, creating a liquid solution, and applying the stem cells takes approximately 1.5–2 hours. Published studies show that within days following the wound treatment procedure, the skin cells generate a protective skin layer (re-epithelialization), and within months the skin regains its color and texture.
Our cell isolation procedure and the cell spraying are performed on the same day, in an on-site setting. Because the skin cells sprayed using the SkinGunTM are actually the patient's own cells, the skin that is regenerated looks more natural than other skin replacement technologies. During recovery, the skin cells grow into fully functional layers of the skin and the regenerated skin leaves minimal scarring in observational patient treatment. Additionally, our methods require substantially smaller donor areas than skin grafting, reducing donor area burden such as pain and the risk of complications.
In August 2019, the Company was awarded a continuation of Patent No. US 9,505,000 (Patent No. US 10,376,658), allowing the SkinGunTM to be used to spray all varieties of tissues and cells, thus opening the door for its potential application in the regeneration of tissues and organs, beyond skin.
The CellMistTM System remains an experimental, unproven methodology and we continue to evaluate its safety and efficacy. There is no guarantee that we will able to develop a commercially viable product based upon the CellMistTM System and its underlying technology.
Domestic Regulation
Governmental authorities in the U.S., at the federal, state and local level, extensively regulate, among other things, the research, development, testing, manufacture, labeling, packaging, promotion, storage, advertising, distribution, marketing and export and import of products or devices such as those we are attempting to develop. Our device candidates, to the extent they are developed, will be subject to pre-market approval by the FDA prior to their marketing for commercial use in the United States, and to any approvals required by foreign governmental entities prior to their marketing outside the United States. In addition, any changes or modifications to a device that has received regulatory clearance or approval that could significantly affect its safety or effectiveness, or would constitute a major change in its intended use, may require the submission of a new application in the U.S. for pre-market approval, or for foreign regulatory approvals outside the United States. The process of obtaining foreign approvals, can be expensive, time consuming and uncertain. See “International Regulation” below.
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Premarket Approval
In the United States, medical devices are classified on the basis of control deemed necessary to reasonably ensure the safety and effectiveness of the device. Most Class I devices are subject to general controls and exempt from Pre-Market Notification (510k)). These controls include registration and listing and adherence to the Good Manufacturing Practice (GMP) requirements of the Quality System Regulation Labeling requirements. Most Class II devices are subject to the Pre-Market Notification ((510(k)) process as well as general and special controls that include performance testing (bench, animal and clinical in some cases), electrical safety testing, biocompatibility testing, sterilization and shelf-life testing, software testing, and system verification and validation testing. Class III devices are those which require a Pre-Market Approval (PMA) from the FDA to ensure their safety and effectiveness. Class III devices are those that support or sustain human life, are of substantial importance in preventing impairment of human health, or which present a potential, unreasonable risk of illness or injury. Due to the level of risk associated with Class III devices, FDA has determined that general and special controls alone are insufficient to assure the safety and effectiveness of Class III devices. PMA is the most stringent type of device marketing application required by FDA. The applicant must receive FDA approval of its PMA application prior to marketing the device. PMA approval is based on a determination by FDA that the PMA contains sufficient valid scientific evidence to assure that the device is safe and effective for its intended use(s). An approved PMA is, in effect, a private license granting the applicant (or owner) permission to market the device.
We will be required to file for a PMA for the SkinGunTM or any other device that we commercialize if it is deemed a Class III medical device. PMA is the FDA process of scientific and regulatory review to evaluate the safety and effectiveness of Class III medical devices.
Investigational Device Exemption (“IDE”)
Among the data required in a PMA application is human clinical test data. The FDA’s regulation that governs the human testing is the IDE and other patient protection regulations. For devices that are considered Significant Risk, an IDE application is required. It consists of the proposed clinical protocol and all supporting study documentation and must be submitted and approved by FDA and an Institutional Review Board (IRB) prior to initiation of the human testing. Since the CellMistTM System employs the use of stem cells taken from the patient, it is considered Significant Risk by the FDA; therefore, we will be required to file an IDE application prior to conducting a clinical study for any application, such as for treatment of severe burns. The FDA has a specified review timeline and process for IDE reviews - each review phase takes 30 days and if the FDA has questions or concerns about the study design, there may be multiple review rounds until FDA either: (a) conditionally approves, (b) approves or (c) denies approval of the clinical study conduct under the submitted IDE. There is no guarantee that any IDE application we submit will be approved by the FDA.
HIPAA Requirements and Other U.S. Regulatory Requirements
Other federal legislation may affect our ability to obtain certain health information in conjunction with any research activities we conduct. The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), mandates, among other things, the adoption of standards designed to safeguard the privacy and security of individually identifiable health information. In relevant part, the U.S. Department of Health and Human Services (“HHS”), has released two rules to date mandating the use of new standards with respect to such health information. The first rule imposes new standards relating to the privacy of individually identifiable health information. These standards restrict the manner and circumstances under which covered entities may use and disclose protected health information so as to protect the privacy of that information. The second rule released by HHS establishes minimum standards for the security of electronic health information. While we do not believe we are directly regulated as a covered entity under HIPAA, the HIPAA standards impose requirements on covered entities conducting research activities regarding the use and disclosure of individually identifiable health information collected in the course of conducting the research.
In addition, in the U.S., the research, manufacturing, distribution, sale, and promotion of drug and biological products are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including the Centers for Medicare and Medicaid Services (formerly the Health Care Financing Administration), other divisions of the U.S. Department of Health and Human Services (e.g., the Office of Inspector General), the U.S. Department of Justice and individual U.S. Attorney offices within the Department of Justice, and state and local governments. For example, sales, marketing and scientific/educational grant programs must comply with the anti-fraud and abuse provisions of the Social Security Act, the False Claims Act, and similar state laws, each as amended. Pricing and rebate programs must comply with the Medicaid rebate requirements of the Omnibus Budget Reconciliation Act of 1990 and the Veterans Health Care Act of 1992, each as amended. If products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply. All of these activities are also potentially subject to federal and state consumer protection, unfair competition, and other laws.
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International Regulation
The regulation of any potential product candidates we may produce outside of the U.S. varies by country. Certain countries regulate human tissue products as a biological product, which would require us to make extensive filings and obtain regulatory approvals before selling our product candidates. Certain other countries may classify our product candidates as human tissue for transplantation but may restrict its import or sale. Other countries have no application regulations regarding the import or sale of products similar to potential product candidates, creating uncertainty as to what standards we may be required to meet.
Competition
The biotechnology, medical device, and wound care industries are characterized by intense competition, rapid product development and technological change. Our CellMistTM System competes with a variety of companies in the wound care markets, many of which offer substantially different treatments for similar problems. Currently Avita Medical Limited is commercially marketing ReCell, a cell spray device and a cell isolation procedure for autologous cells. Integra Lifesciences Holding Corp. sells Integra Dermal Regeneration Template, which does not use autologous cells, but instead uses an animal-derived intercellular matrix with an artificial waterproof barrier. Medline Industries, Inc. sells HyaloMatrix, which also does not use autologous cells, but instead is a non-woven pad entirely composed of a benzyl ester of hyaluronic acid, and a semipermeable silicone membrane. Other competitors include: MiMedx Group, Inc.; Castle Creek Biosciences, Inc.; and Organogenesis, Inc.
Many of our competitors are larger, well-established companies with considerably greater financial, marketing, sales and technical resources than those available to us. Additionally, many of our present and potential competitors have research and development capabilities that may allow them to develop new or improved products that may compete with our product lines. Our potential products could be rendered obsolete or made uneconomical by the development of new products to treat the conditions addressed by our products, technological advances affecting the cost of production, or marketing or pricing actions by one or more of our competitors.
Intellectual Property
General
In the course of conducting our business, we from time to time create inventions. Obtaining, maintaining and protecting our inventions, including seeking patent protection, might be important depending on the nature of the invention. To that end, we seek to implement patent and other intellectual property strategies to appropriately protect our intellectual property. While we file and prosecute patent applications to protect our inventions, our pending patent applications might not result in the issuance of patents or issued patents might not provide competitive advantages. Also, our patent protection might not prevent others from developing competitive products using related or other technology.
The scope, enforceability and effective term of issued patents can be highly uncertain and often involve complex legal and factual questions. Moreover, the issuance of a patent in one country does not assure the issuance of a patent with similar claim scope in another country, and claim interpretation and infringement laws vary among countries, so we are unable to predict the extent of patent protection in any country. The patents we obtain and the unpatented proprietary technology we hold might not afford us significant commercial protection or advantage.
In addition to issued patents describe above, we plan to file additional patent applications that, if issued, would provide further protection for The CellMistTM System. Although we believe the bases for these patents and patent applications are sound, they are untested; and there is no assurance that they will not be successfully challenged. There can be no assurance that any patent previously issued will be of commercial value, that any patent applications will result in issued patents of commercial value, or that our technology will not be held to infringe patents held by others.
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Operations
We expect to be engaged in research and development activities for the foreseeable future.
Results of Operations
Three Months Ended March 31, 2020 Compared with the Three Months Ended March 31, 2019
Operating Expenses
A summary of our operating expenses for the three months ended March 31, 2020 and 2019 follows:
| Three Months Ended March 31, | Increase / | Percentage | ||||||||||||||
| 2020 | 2019 | (Decrease) | Change | |||||||||||||
| Operating expenses | ||||||||||||||||
| Research and development | $ | 192,773 | $ | 194,510 | $ | (1,737 | ) | -1 | % | |||||||
| General and administrative | 1,035,566 | 409,461 | 626,105 | 153 | % | |||||||||||
| Total operating expenses | $ | 1,228,339 | $ | 603,971 | $ | 624,368 | 103 | % | ||||||||
Research and Development
Research and development (“R&D”) costs represent costs incurred to develop our CellMistTM System and are incurred pursuant to agreements with third party providers and certain internal R&D cost allocations. Payments under these agreements include salaries and benefits for R&D personnel, allocated overhead, contract services and other costs. R&D costs are expensed when incurred. R&D costs remained relatively consistent for the three months ended March 31, 2020 compared to the three months ended March 31, 2019. We expect R&D costs to increase over time as we expand our efforts related to the Company’s regulatory and product development efforts.
General and Administrative
General and administrative costs increased approximately $626,000 or 153% during the three months ended March 31, 2020 compared to the three months ended March 31, 2019. Included in general and administrative costs are professional fees, stock-based compensation, payroll and related costs and other general costs. Professional fees decreased approximately $31,000 due to decreased costs related to corporate compliance and governance matters. Stock-based compensation increased approximately $465,000 due to the amortization of stock option grants to our new chief executive officer in fulfillment of his employment agreement dated November 15, 2019. Payroll and related costs increased approximately $115,000 due to the hiring of our new chief executive officer. Other general costs increased approximately $79,000 primarily due to the charitable gift agreement with the University of Pittsburgh entered into in June 2019.
Other Income
Other income relates to interest earned on bank account deposits. Other income decreased approximately $31,000 due to due a lower cash balance during the period March 31, 2020 compared March 31, 2019.
Liquidity and Capital Resources
The Company does not have any commercialized products, has not generated any revenue since inception and has sustained recurring losses and negative cash flows from operations since inception. The Company has incurred operating losses of $11,228,339 and $603,971 for the three months ended March 31, 2020 and 2019, respectively. The Company expects to incur losses as it continues development of its products and technologies. The Company has been funded through the sale of equity securities. As of March 31, 2020, the Company had $11,382,102 of cash. The Company believes that it currently has sufficient cash to meet its funding requirements over the next year.
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Net cash used in operating activities was $795,151 during the three months ended March 31, 2020, compared to net cash used in operating activities of $453,974 during the three months ended March 31, 2019. The increase in cash used in operating activities is primarily attributable to our increase in net loss.
Cash used in investing activities was $7,995 compared for the three months ended March 31, 2020 compared to $0 for the three months ended March 31, 2019. The increase is due to a payment of a security deposit for our new corporate headquarters located in Roseland, New Jersey.
Fair Value of Financial Instruments and Risks
The carrying value of cash and cash equivalents, prepaid expenses and accounts payable, approximate their fair value because of the short-term nature of these instruments and their liquidity. Management is of the opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments.
Off-balance Sheet Arrangements and Contractual Obligations
We do not have any off-balance sheet arrangements or contractual obligations at March 31, 2020, and the subsequent period to through the date of this report, that are likely to have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that have not been disclosed in our consolidated financial statements.
Recently Issued Accounting Standards
See Note 1 to our Consolidated Financial Statements for more information regarding recent accounting standards and their impact to our consolidated results of operations and financial position.
Related Party Transactions
At the period ended March 31, 2020, Talia Jevan Properties, Inc. made a payment of $5,287 to Stephen Yan-Klassen, CFO, for his salary on behalf of the Company. Talia Jevan Properties, Inc. is a related party of Harmel Rayat, Chairman of the Board.
On August 1, 2013, the Company entered into a consulting agreement, as amended on May 1, 2016, with Jatinder Bhogal, an individual owning in excess of 5% of our issued and outstanding shares of common stock, to provide consulting services to the Company through his wholly owned company, Vector Asset Management, Inc. (“VAM”). Pursuant to the consulting agreement Vector assisted the Company with identifying subject matter experts in the medical device and biotechnology industries and assisted the Company with its ongoing research, development and eventual commercialization of its Regeneration Technology. Pursuant to an amendment dated May 1, 2016, the VAM monthly consulting fee was increased from $5,000 to $6,800. On June 22, 2018, the Company and VAM entered into an Executive Consulting Agreement (“ECA”) whereby Mr. Bhogal will serve as the Company’s Chief Operating Officer. The ECA supersedes the prior consulting agreement. Pursuant to the ECA, VAM will receive compensation of $120,000 per year. During the three months ended March 31, 2020 and 2019, the Company recognized expenses of $30,000 and $30,000, respectively for consulting services provided by VAM.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined as a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
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The Company maintains “disclosure controls and procedures,” as such term is defined under Rule 13a-15(e) and 15d-15(e) of the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the framework in “Internal Control — Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, management concluded that our internal control over financial reporting was not effective at March 31, 2020 because of the material weaknesses described below.
There is inadequate segregation of duties consistent with control objectives. Our Company’s management is comprised of a very small number of individuals resulting in a situation where limitations of segregation of duties exist. In order to remedy this situation, we would need to hire additional staff to provide greater segregation of duties. In addition, management has concluded that there are ineffective monitoring controls related to the financial close and reporting process, including management’s risk assessment process and its identification, evaluation, and timely remediation of control deficiencies.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), or in factors that could materially affect internal controls, during the period ended March 31, 2020.
None.
Smaller reporting companies are not required to provide the information required by this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
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_______________
| * | Filed herewith. |
| ** | Furnished herewith. XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. |
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Pursuant to the requirements of Sections 13 or 15 (d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
RenovaCare, Inc.
(Registrant)
| Date: June 22, 2020 | By: | /s/ Alan L. Rubino | |
| Name: | Alan L. Rubino | ||
| Title: | Chief Executive Officer | ||
| (Principal Executive Officer) |
| Date: June 22, 2020 | By: | /s/ Stephen Yan-Klassen | |
| Name: | Stephen Yan-Klassen | ||
| Title: | Chief Financial Officer | ||
| (Principal Financial Officer and Principal Accounting Officer) | |||
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EXHIBIT 31.1
CERTIFICATION PURSUANT TO RULE 13A-14(A) OR RULE 15D-14(A)
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Alan L. Rubino, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of RenovaCare, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. |
| 5. | I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
| Date: June 22, 2020 | By: | /s/ Alan L. Rubino | |
| Name: | Alan L. Rubino | ||
| Title: | Chief Executive Officer | ||
| (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO RULE 13A-14(A) OR RULE 15D-14(A)
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Stephen Yan-Klassen, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of RenovaCare, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. |
| 5. | I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
| Date: June 22, 2020 | By: | /s/ Stephen Yan-Klassen | |
| Name: | Stephen Yan-Klassen | ||
| Title: | Chief Financial Officer | ||
| (Principal Financial Officer and Principal Accounting Officer) | |||
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, as the Chief Executive Officer and the Chief Financial Officer of RenovaCare, Inc., respectively, certifies that, to the best of their knowledge and belief, the Quarterly Report on Form 10-Q for the three months ended March 31, 2020 that accompanies this certification fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the quarterly report fairly presents, in all material respects, the financial condition and results of operations of RenovaCare, Inc. at the dates and for the periods indicated. The foregoing certification is made pursuant to 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) and shall not be relied upon for any other purpose.
| Date: June 22, 2020 | By: | /s/ Alan L. Rubino | |
| Name: | Alan L. Rubino | ||
| Title: | Chief Executive Officer and Director | ||
| (Principal Executive Officer) |
| Date: June 22, 2020 | By: | /s/ Stephen Yan-Klassen | |
| Name: | Stephen Yan-Klassen | ||
| Title: | Chief Financial Officer | ||
| (Principal Financial Officer and Principal Accounting Officer) | |||
Basis of Presentation, Organization, Nature and Continuance of Operations, Recent Accounting Standards (Details Narrative) - USD ($) |
Mar. 31, 2020 |
Dec. 31, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
|---|---|---|---|---|
| Accounting Policies [Abstract] | ||||
| Cash | $ 11,382,102 | $ 12,185,248 | $ 14,943,550 | $ 15,397,524 |
| Working capital | $ 11,290,023 |
Common Stock and Warrants (Details Narrative) - $ / shares |
3 Months Ended | |
|---|---|---|
Mar. 31, 2020 |
Dec. 31, 2019 |
|
| Common stock, Authorized | 500,000,000 | 500,000,000 |
| Common stock, par value | $ 0.00001 | $ 0.00001 |
| Common stock, shares outstanding | 87,352,364 | 87,352,364 |
| Number of shares available for grant under incentive plan | 19,440,765 | |
| Number of options granted | 16,820,194 | |
| Alan L. Rubino [Member] | ||
| Number of options granted | 620,571 | |
| Exercise price | $ 3.23 |
Common Stock and Warrants |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock and Warrants |
Note 4. Common Stock and Warrants
Common Stock
At March 31, 2020, the Company had 500,000,000 authorized shares of common stock with a par value of $0.00001 per share, 87,352,364 shares of common stock outstanding and 19,440,765 shares reserved for issuance under the Company’s 2013 Long-Term Incentive Plan (the “2013 Plan”) as adopted and approved by the Company’s Board of Directors (the “Board”) on June 20, 2013 that provides for the grant of stock options to employees, directors, officers and consultants. During the three months ended March 31, 2020, the Company granted Alan L. Rubino, the Company’s President and Chief Executive Officer, an option to purchase up to 620,571 shares of the Company’s common stock at an exercise price of $3.23. See “Note 5. Stock Options” for further discussion.
Warrants
The following table summarizes information about warrants outstanding at March 31, 2020 and December 31, 2019:
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Prepaid Expenses |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||
| Prepaid Expenses | Note 2. Prepaid Expenses
Prepaid expenses consist of the following:
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Related Party Transactions |
3 Months Ended |
|---|---|
Mar. 31, 2020 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions | Note 8. Related Party Transactions
At the period ended March 31, 2020, Talia Jevan Properties, Inc. made a payment of $5,287 to Stephen Yan-Klassen, CFO, for his salary on behalf of the Company. Talia Jevan Properties, Inc. is a related party of Harmel Rayat, Chairman of the Board.
On August 1, 2013, the Company entered into a consulting agreement, as amended on May 1, 2016, with Jatinder Bhogal, an individual owning in excess of 5% of our issued and outstanding shares of common stock, to provide consulting services to the Company through his wholly owned company, Vector Asset Management, Inc. (“VAM”). Pursuant to the consulting agreement Vector assisted the Company with identifying subject matter experts in the medical device and biotechnology industries and assisted the Company with its ongoing research, development and eventual commercialization of its Regeneration Technology. Pursuant to an amendment dated May 1, 2016, the VAM monthly consulting fee was increased from $5,000 to $6,800. On June 22, 2018, the Company and VAM entered into an Executive Consulting Agreement (“ECA”) pursuant to which Mr. Bhogal serves as the Company’s Chief Operating Officer. The ECA supersedes the prior consulting agreement. Pursuant to the ECA, VAM will receive compensation of $120,000 per year. During the three months ended March 31, 2020 and 2019, the Company recognized expenses of $30,000 and $30,000, respectively for consulting services provided by VAM. |
Prepaid Expenses (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||
| Prepaid Expenses | Prepaid expenses consist of the following:
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Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
| Income Statement [Abstract] | ||
| Revenue | $ 0 | $ 0 |
| Operating expenses | ||
| Research and development | 192,773 | 194,510 |
| General and administrative | 1,035,566 | 409,461 |
| Total operating expenses | 1,228,339 | 603,971 |
| Loss from operations | (1,228,339) | (603,971) |
| Other income (expense) | ||
| Interest income | 53,586 | 84,705 |
| Total other income (expense) | 53,586 | 84,705 |
| Net loss | $ (1,174,753) | $ (519,266) |
| Basic and Diluted Loss per Common Share | $ (0.01) | $ (0.01) |
| Weighted average number of common shares outstanding - basic and diluted | 87,352,364 | 87,175,552 |
Commitments (Details Narrative) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Jun. 03, 2019 |
Mar. 31, 2020 |
Mar. 31, 2019 |
|
| Company agreement expense | $ 76,460 | $ 76,600 | |
| Charitable Gift Agreement [Member] | University of Pittsburgh | |||
| Donation | $ 250,000 | ||
| Payment of donations | 62,500 | $ 0 | |
| Gifts remaining | $ 62,500 | ||
Document and Entity Information - shares |
3 Months Ended | |
|---|---|---|
Mar. 31, 2020 |
Jun. 22, 2020 |
|
| Document And Entity Information | ||
| Entity Registrant Name | RenovaCare, Inc. | |
| Entity Central Index Key | 0001016708 | |
| Document Type | 10-Q | |
| Document Period End Date | Mar. 31, 2020 | |
| Amendment Flag | false | |
| Current Fiscal Year End Date | --12-31 | |
| Entity File Number | 000-30156 | |
| Is Entity's Reporting Status Current? | Yes | |
| Is Entity Emerging Growth Company? | false | |
| Entity Interactive Data Current | Yes | |
| Entity Filer Category | Non-accelerated Filer | |
| Entity Small Business | true | |
| Entity Incorporation, State or Country Code | NV | |
| Entity Shell Company | false | |
| Entity Common Stock, Shares Outstanding | 87,352,364 | |
| Document Fiscal Period Focus | Q1 | |
| Document Fiscal Year Focus | 2020 |
Common Stock and Warrants (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of warrants outstanding | The following table summarizes information about warrants outstanding at March 31, 2020 and December 31, 2019:
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Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) |
Common Stock |
Additional Paid-In Capital |
Retained Deficit |
Total |
|---|---|---|---|---|
| Beginning Balance, Shares at Dec. 31, 2018 | 87,175,522 | |||
| Beginning Balance, Amount at Dec. 31, 2018 | $ 872 | $ 32,187,580 | $ (16,861,763) | $ 15,326,689 |
| Stock based compensation due to common stock purchase options | 832 | 832 | ||
| Net loss | (519,266) | (519,266) | ||
| Ending Balance, Shares at Mar. 31, 2019 | 87,175,522 | |||
| Ending Balance, Amount at Mar. 31, 2019 | $ 872 | 32,188,412 | (17,381,029) | 14,808,255 |
| Beginning Balance, Shares at Dec. 31, 2019 | 87,352,264 | |||
| Beginning Balance, Amount at Dec. 31, 2019 | $ 874 | 32,378,833 | (20,219,845) | 12,159,862 |
| Stock based compensation due to common stock purchase options | 465,763 | 465,763 | ||
| Net loss | (1,174,753) | (1,174,753) | ||
| Ending Balance, Shares at Mar. 31, 2020 | 87,352,264 | |||
| Ending Balance, Amount at Mar. 31, 2020 | $ 874 | $ 32,844,596 | $ (21,394,598) | $ 11,450,872 |
Stock Options |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Options | Note 5. Stock Options
The following table summarizes stock option activity for the period ended March 31, 2020:
During the three months ended March 31, 2020, the Company granted Alan L. Rubino, the Company’s President and Chief Executive Officer, an option to purchase up to 620,571 shares of the Company’s common stock at an exercise price of $3.23. The option was granted in fulfillment of the Company’s obligation under the terms of Mr. Rubino’s employment agreement dated November 15, 2019. The fair value of the option was estimated at the date of grant using the Black-Scholes option pricing model. Assumptions regarding volatility, expected term, dividend yield and risk-free interest rate are required the Black-Scholes model. The volatility assumption is based on the Company’s historical experience. The risk-free interest rate is based on a U.S. Treasury note with maturity similar to the option award’s expected life. The expected life represents the average period of time that options granted are expected to be outstanding.
The assumptions for volatility, expected life, dividend yield and risk-free interest rate for the options granted are as follows:
The share-based compensation cost resulting from stock option grants, including those previously granted and vesting over time is expensed ratably over the respective vesting periods. During the three months ended March 31, 2020 and 2019, the Company recognized $465,763 and $832, respectively, in stock-based compensation. As of March 31, 2020, the Company’s unrecognized compensation cost related to unvested stock options was $2,746,876 to be amortized through 2023. Stock-based compensation has been included in the consolidated statement of operations as follows:
The following table summarizes information about stock options outstanding and exercisable at March 31, 2020:
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Assets - Intellectual Property |
3 Months Ended |
|---|---|
Mar. 31, 2020 | |
| Notes to Financial Statements | |
| Assets - Intellectual Property |
Note 3. Assets – Intellectual Property
On July 12, 2013, the Company, together with its wholly owned subsidiary, RenovaCare Sciences, entered into an asset purchase agreement (“APA”) with Dr. Jörg Gerlach, MD, PhD, pursuant to which RenovaCare Sciences purchased all of Dr. Gerlach’s rights, title and interest in the CellMistTM System. Acquisition related costs amounted to $52,852 and were capitalized together with the cash payment upon the closing of the transaction in July 2013 of $100,002. Intangible assets amounted to $152,854 at March 31, 2020 and December 31, 2019.
|
Subsequent Events |
3 Months Ended |
|---|---|
Mar. 31, 2020 | |
| Subsequent Events [Abstract] | |
| Subsequent Events | Note 9. Subsequent Events
Management has reviewed material events subsequent of the period ended March 31, 2020 and prior to the filing of financial statements in accordance with FASB ASC 855 “Subsequent Events”.
On May 22, 2020 the Company granted stock options to certain of its officers, directors and consultants (the “May 2020 Option Grant”) to purchase up to an aggregate of 1,550,000 shares of the Company’s common stock (the “May 2020 Option Grant”). The May 2020 Option Grant (i) is exercisable at a price of $1.40 per share, (ii) vested as to 1,275,000 shares on the date of grant and will vest as to the remaining 1,275,000 shares on the first anniversary of the date of grant.
On June 1, 2020, pursuant to the terms of the Employment Agreement between the Company and Dr. Robin Robinson (discussed below) the Company granted a stock option to Dr. Robin Robinson, its Vice-President, Chief Scientific Officer, to purchase up to an aggregate of 200,000 shares of the Company’s common stock (the “June 2020 Option Grant”). The June 2020 Option Grant (i) is exercisable at a price of $1.40 per share, (ii) vested as to 100,000 shares on the date of grant and will vest as to the remaining 100,000 shares on the first anniversary of the date of grant.
Each of the May 2020 Option Grant and the June 2020 Option Grant provides that the exercise price shall be paid: (i) in cash or by certified check or bank draft payable to the order of the Company; (ii) by delivering, along with a properly executed exercise notice to the Company, a copy of irrevocable instructions to a broker to deliver promptly to the Company the aggregate exercise price and, if requested by the Optionee, the amount of any applicable federal, state, local or foreign withholding taxes required to be withheld by the Company, provided, however, that such exercise may be implemented solely under a program or arrangement established and approved by the Company with a brokerage firm selected by the Company; (iii) at any time prior to the Company’s listing of any of its securities for trading on a national stock exchange, pursuant to “a net issue” or “cashless” exercise basis; or, (iv) by any other procedure approved by the Board or its Compensation Committee, if any, or by a combination of the foregoing.
On May 26, 2020, the Company and Dr. Robin Robinson executed an Employment Agreement (the “Employment Agreement”) having an effective date of June 1, 2020 (the “Effective Date”) pursuant to which Dr. Robinson Dr. Robin A. Robinson now serves as the Company’s Chief Scientific Officer.
In addition to a base salary of $220,000 Dr. Robinson will be eligible to earn an annual bonus equal to up to 30% of his base salary then in effect based upon the Company’s assessment of Dr. Robinson’s achievement of personal performance goals. Pursuant to the terms of the Employment Agreement Dr. Robinson received the June 2020 Stock Option discussed above.
The Employment Agreement has a 2 year term; however, it may be terminated by either party at any time; If terminated by the Company without cause, as defined in the Employment Agreement, in addition to certain specified benefits, Dr. Robinson is entitled to a severance payment equal to six months of his base salary then in effect.
In connection with the Employment Agreement the Company and Dr. Robinson also entered into a Confidential Information and Invention Assignment Agreement in the form attached to the Employment Agreement, effective as of the Effective Date.
On June 15, 2020, the Company and Robert Cook executed an Employment Agreement (the “Employment Agreement”) having an effective date of June 22, 2020 (the “Effective Date”) pursuant to which Mr. Cook will serve as the Company’s Chief Financial Officer.
In addition to a base salary of $130,000 Mr. Cook will be eligible to earn an annual discretionary bonus equal to up to 30% of his base annual salary then in effect. The Company has also agreed to grant Mr. Cook an option to purchase up to 100,000 shares of the Company’s common stock. The option will vest as to 50,000 shares on the date of grant and as to the remaining 50,000 shares on the day prior to the 1st anniversary date of the grant date.
Mr. Cook’s employment by the Company is an “at will employment;” the Employment Agreement may be terminated by either party at any time, with or without cause. If terminated by the Company without cause, as defined in the Employment Agreement, in addition to certain specified benefits, Mr. Cook is entitled to a severance payment equal to up to three months of his base annual salary then in effect. Pursuant to the terms of the Employment Agreement, Mr. Cook will spend up to 50% of his time on the Company’s affairs.
In connection with the Employment Agreement, the Company and Mr. Cook also entered into a Confidential Information and Invention Assignment Agreement in the form attached to the Employment Agreement, effective as of the Effective Date. |
Leases (Details Narrative) |
3 Months Ended |
|---|---|
|
Mar. 31, 2020
USD ($)
| |
| Leases [Abstract] | |
| Lease term | 2 years |
| Base rent for First year | $ 3,998 |
| Base rent for Second year | $ 4,100 |
Prepaid Expenses (Details) - USD ($) |
Mar. 31, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Notes to Financial Statements | ||
| Prepaid insurance | $ 216,720 | |
| Prepaid professional fees | 102,500 | 102,500 |
| Total prepaid expenses | $ 319,220 | $ 102,500 |
Stock Options (Details) - USD ($) |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2020 |
Dec. 31, 2019 |
|
| Number of Options | ||
| Options outstanding - beginning balance | 2,317,500 | |
| Options granted | 620,571 | |
| Options oustanding - ending balance | 2,938,071 | 2,317,500 |
| Options exercisable | 317,500 | |
| Options available for grant | 16,820,194 | |
| Weighted average exercise price | ||
| Options outstanding - beginning balance | $ 2.68 | |
| Options outstanding - ending balance | 2.8 | $ 2.68 |
| Options exercisable | $ 3.41 | |
| Weighted average remaining contracted term | ||
| Options outstanding | 5 years 6 months | 5 years 8 months 5 days |
| Options exercisable | 4 years 2 months 1 day | |
| Aggregate intrinsic value | ||
| Options outstanding - beginning balance | $ 1,460,507 | |
| Options oustanding - ending balance | 11,625 | $ 1,460,507 |
| Options exercisable | $ 11,625 |
Related Party Transactions (Details Narrative) - USD ($) |
1 Months Ended | 3 Months Ended | |
|---|---|---|---|
Jun. 22, 2018 |
Mar. 31, 2020 |
Mar. 31, 2019 |
|
| Vector Asset Management, Inc [Member] | |||
| Compensation expense | $ 120,000 | ||
| Consulting services, expense | $ 30,000 | $ 30,000 | |
| Stephen Yan-Klesson | |||
| Related Party expenses | $ 5,287 | ||
Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
Mar. 31, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Preferred stock, par value | $ 0.0001 | $ 0.0001 |
| Preferred stock, Authorized | 10,000,000 | 10,000,000 |
| Preferred stock, shares Issued | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
| Common stock, par value | $ 0.00001 | $ 0.00001 |
| Common stock, Authorized | 500,000,000 | 500,000,000 |
| Common stock, shares Issued | 87,352,364 | 87,352,364 |
| Common stock, shares outstanding | 87,352,364 | 87,352,364 |
Basis of Presentation, Organization, Nature and Continuance of Operations, Recent Accounting Standards and Earnings Per Share |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation, Organization, Nature and Continuance of Operations, Recent Accounting Standards and Earnings (Loss) Per Share | Note 1. Basis of Presentation, Organization, Nature and Continuance of Operations, Recent Accounting Standards and Earnings (Loss) Per Share
Basis of Presentation
The accompanying interim unaudited condensed consolidated financial statements and related disclosures of RenovaCare, Inc. and Subsidiary (the “Company”) as of March 31, 2020, and for the three months ended March 31, 2020 and 2019 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed on May 14, 2020. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) have been condensed or omitted.
In the opinion of management, the interim condensed consolidated financial statements reflect all adjustments considered necessary for a fair statement of the interim periods. All such adjustments are of a normal, recurring nature. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year.
Organization
RenovaCare, Inc., together with its wholly owned subsidiary, focuses on the acquisition, research, development and, if warranted, commercialization of autologous (using a patient's own cells) cellular therapies that can be used for medical and aesthetic applications.
On July 12, 2013, the Company, through its wholly owned subsidiary, RenovaCare Sciences Corp., completed the acquisition of its flagship technologies (collectively, the “CellMistTM System”) along with associated United States patent applications and two foreign patent applications, the first of which was filed on August 23, 2007 (DE 10 2007 040 252.1) and the second of which was filed on April 27, 2011 (DE 10 2011 100 450.9), both of which have been granted. One of the US patent applications was granted on November 29, 2016 (Patent No. US 9,505,000) and the other patent application was granted on April 4, 2017 (Patent No. US 9,610,430). In August 2019, the Company was awarded a continuation of Patent No. US 9,505,000 (Patent No. US 10,376,658), allowing the Company’s novel solution sprayer device (the “SkinGunTM”) to now be used to spray all varieties of tissues and cells, thus opening the door for its potential application in the regeneration of tissues and organs, beyond skin.
The CellMistTM System is comprised of (a) a treatment methodology for cell isolation for the regeneration of human skin cells (the “CellMistTM Solution”) and (b) the SkinGunTM for delivering the cells to the treatment area.
Nature and Continuance of Operations
The Company does not have any commercialized products. The Company's activities have consisted principally of performing research and development activities and raising capital. These development activities are subject to significant risks and uncertainties, including possible failure of preclinical testing. The Company has not generated any revenue since inception and has sustained recurring losses and negative cash flows from operations since inception. The Company expects to incur losses as it continues development of its products and technologies and expects that it will need to raise additional capital through the sale of its securities to accomplish its business plan and failing to secure such additional funding before achieving sustainable revenue and profit from operations poses a significant risk. The Company's ability to fund the development of its cellular therapies will depend on the amount and timing of cash receipts from future financing activities. There can be no assurance as to the availability or terms upon which such financing and capital might be available. Additionally, there is significant uncertainty relating to the full impact of the COVID-19 pandemic on the Company’s operations and capital requirements. Should the COVID-19 pandemic continue, it may adversely affect the Company’s ability to (i) retain employees and consultants; (ii) obtain additional financing on terms acceptable to the Company, if at all; (iii) delay regulatory submissions and approvals; (iv) delay, limit or preclude the Company from securing clinical study sites; (v) delay, limit or preclude the Company from achieving technology or product development goals, milestones, or objectives; and (vi) preclude or delay entry into join venture or partnership arrangements. The occurrence of any one or more of such events may affect the Company’s ability to continue on its pathway to commercialization of its technology or products.
As of March 31, 2020, the Company had $11,382,102 of cash on hand and a working capital of $11,290,023. As a result of the cash on hand the working capital, the Company believes it currently has sufficient cash to meet its funding requirements over the next twelve months following the issuance of this Quarterly Report on Form 10-Q. However, the Company has experienced and continues to experience negative cash flows from operations, as well as an ongoing requirement for substantial additional capital investment. The Company expects that it may need to raise additional capital to accomplish its business plan over the next several years. If additional funding is required, the Company expects to seek to obtain that funding through private equity or convertible debt. There can be no assurance as to the availability or terms upon which such financing and capital might be available.
New Accounting Standards
Any reference in these notes to applicable accounting guidance is meant to refer to the authoritative non-governmental US GAAP as found in the Financial Accounting Standards Board's Accounting Standards Codification.
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for the Company beginning in fiscal 2021. The Company is currently assessing the impact that this pronouncement will have on its consolidated financial statements.
The Company reviews new accounting standards as issued. Although some of these accounting standards issued or effective after the end of the Company’s previous fiscal year may be applicable, the Company has not identified any standards that the Company believes merit further discussion other than as discussed above. The Company believes that none of the new standards will have a significant impact on the financial statements.
Earnings (Loss) Per Share
The Company presents both basic and diluted earnings per share ("EPS") amounts. Basic EPS is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period presented. Diluted EPS amounts are based upon the weighted average number of common and common equivalent shares outstanding during the period presented. The Company has not included the effects of warrants or stock on net loss per share because to do so would be antidilutive.
Following is the computation of basic and diluted net loss per share for the three months ended March 31, 2020 and 2019:
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Commitments and Contingencies |
3 Months Ended |
|---|---|
Mar. 31, 2020 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies | Note 7. Commitments and Contingencies
In connection with the Company’s anticipated regulatory filings, the Company has engaged StemCell Systems GmbH (“StemCell Systems”) to provide it with prototypes and related documents under various agreements. Pursuant to these engagements the Company incurred expenses of $76,460 and $76,600 in during the three months ended March 31, 2020 and 2019, respectively. Dr. Gerlach, from whom the Company purchased the CellMistTM System technologies, is a principal of StemCell Systems.
On June 3, 2019, the Company entered into a Charitable Gift Agreement with the University of Pittsburgh (“University”), pursuant to which the Company committed to provide a charitable donation to the University in the agreement amount of $250,000 (the “Grant”). The Company will pay the Grant in four quarterly installments with the first payment made on or before July 1, 2019. During the three months ended March 31, 2020 and 2019 the Company made payments totaling $62,500 and $0, respectively. At March 31, 2020, the balance remaining under this gift was $62,500. Due to the terms of the Grant, the Company will recognize the related expense upon payment. |
Basis of Presentation, Organization, Nature and Continuance of Operations, Recent Accounting Standards and Earnings (Tables) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of computation of basic and diluted net loss per share | Following is the computation of basic and diluted net loss per share for the three months ended March 31, 2020 and 2019:
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