0001171843-21-007881.txt : 20211112 0001171843-21-007881.hdr.sgml : 20211112 20211112165006 ACCESSION NUMBER: 0001171843-21-007881 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 47 CONFORMED PERIOD OF REPORT: 20210930 FILED AS OF DATE: 20211112 DATE AS OF CHANGE: 20211112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RenovaCare, Inc. CENTRAL INDEX KEY: 0001016708 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 980170247 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-30156 FILM NUMBER: 211404466 BUSINESS ADDRESS: STREET 1: 9375 E. SHEA BLVD. STREET 2: SUITE 107-A CITY: SCOTTSDALE STATE: AZ ZIP: 85260 BUSINESS PHONE: 888-398-0202 MAIL ADDRESS: STREET 1: 9375 E. SHEA BLVD. STREET 2: SUITE 107-A CITY: SCOTTSDALE STATE: AZ ZIP: 85260 FORMER COMPANY: FORMER CONFORMED NAME: Janus Resources, Inc. DATE OF NAME CHANGE: 20110110 FORMER COMPANY: FORMER CONFORMED NAME: ENTHEOS TECHNOLOGIES INC DATE OF NAME CHANGE: 20001002 FORMER COMPANY: FORMER CONFORMED NAME: WHATSONLINE COM INC DATE OF NAME CHANGE: 19990722 10-Q 1 f10q_111121p.htm FORM 10-Q
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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 September 30, 2021

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number 000-30156

 

RENOVACARE, INC.
(Exact name of registrant as specified in its charter)

 

Nevada  98-0384030
(State or other jurisdiction of incorporation)  (I.R.S. Employer Identification No.)

 

9375 E. Shea Blvd., Suite 107-A

Scottsdale, AZ 85260

  (Address of principal executive offices)  
         

 

888-398-0202

(Registrant's telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
N/A   N/A   N/A

 

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 (Do not check if a smaller reporting company)  
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

 

As of November 10, 2021, the registrant had 87,352,364 shares of its common stock, par value $0.00001 per share, issued and outstanding.

 

 

 

RENOVACARE, INC.

FORM 10-Q

For The Quarter Ended September 30, 2021

 

TABLE OF CONTENTS

 

    Page #  
PART I - FINANCIAL INFORMATION      
         
Item 1. Financial Statements      
  Consolidated Balance Sheets     1  
  Consolidated Statements of Operations     2  
  Consolidated Statements of Stockholders’ Equity     3  
  Consolidated Statements of Cash Flows     4  
  Notes to Consolidated Financial Statements     5  
           
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations     13  
           
Item 3. Quantitative and Qualitative Disclosures About Market Risk     18  
           
Item 4. Controls and Procedures     18  
           
PART II - OTHER INFORMATION
         
Item 1. Legal Proceedings     19  
           
Item 1A. Risk Factors     19  
           
Item 6. Exhibits     20  
           
Signatures     21  

 

 

 

PART I

Item 1. Financial Statements

RENOVACARE, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

           
   September 30,  December 31,
   2021  2020
ASSETS   (Unaudited)      
Current assets          
Cash  $3,421,765   $7,412,969 
Prepaid expenses   464,315    566,275 
Total current assets
   3,886,080    7,979,244 
           
Equipment, net of accumulated depreciation of $10,630 and $3,584, respectively   31,594    38,640 
Intangible assets   152,854    152,854 
Security Deposit   7,995    7,995 
Right of Use Asset   41,171    79,462 
Other Assets   72,497    137,749 
Total assets  $4,192,191   $8,395,944 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
           
Current liabilities          
Accounts payable and accrued liabilities  $670,125   $1,237,437 
Lease liability - current   43,192    51,125 
Total current liabilities   713,317    1,288,562 
Lease Liability - long term   -    28,607 
Total liabilities   713,317    1,317,169 
           
Commitments and contingencies   -    - 
           
Stockholders' equity          
Preferred stock: $0.0001 par value; 10,000,000 shares authorized, no shares issued and outstanding   -    - 
Common stock: $0.00001 par value; 500,000,000 shares authorized, 87,352,364 shares issued and outstanding at September 30, 2021 and December 31, 2020   874    874 
Additional paid-in capital   36,373,669    36,846,082 
Retained deficit   (32,895,669)   (29,768,181)
Total stockholders' equity   3,478,874    7,078,775 
Total liabilities and stockholders' equity  $4,192,191   $8,395,944 

 

(See accompanying notes to unaudited consolidated financial statements)

 

1

 

 

RENOVACARE, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

                     
   Three Months Ended  Nine Months Ended
   September 30,  September 30,
   2021  2020  2021  2020
Revenue  $-   $-   $-   $- 
                     
Operating expenses                    
Research and development   744,625    1,551,989    2,503,487    3,091,383 
General and administrative   955,899    1,290,890    819,665    4,024,317 
Total operating expenses, net   1,700,524    2,842,879    3,323,152    7,115,700 
Loss from operations   (1,700,524)   (2,842,879)   (3,323,152)   (7,115,700)
                     
Other income                    
Interest income   2,239    24,915    4,861    111,390 
Other income   -    -    190,803    - 
Total other income   2,239    24,915    195,664    111,390 
Net loss  $(1,698,285)  $(2,817,964)  $(3,127,488)  $(7,004,310)
                     
Basic and Diluted Loss per Common Share  $(0.02)  $(0.03)  $(0.04)  $(0.08)
                     
Weighted average number of common shares outstanding - basic and diluted   87,352,364    87,352,364    87,352,364    87,352,364 

 

(See accompanying notes to unaudited consolidated financial statements)

 

 

2

 

 

RENOVACARE, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)

 

                          
         Additional         Total 
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021   

Common Stock

    

Paid-in

    

Retained

    

Stockholders'

 
    

Shares

    

Amount

    

Capital

    

Deficit

    

Equity

 
Balance, December 31, 2020   87,352,364   $874   $36,846,082   $(29,768,181)  $7,078,775 
Stock based compensation due to common stock purchase options   -    -    352,063    -    352,063 
Reversal of stock based compensation due to common stock purchase option cancellations   -    -    (1,248,575)   -    (1,248,575)
Net loss for the three months ended March 31, 2021   -    -    -    (517,242)   (517,242)
Balance, March 31, 2021   87,352,364    874    35,949,570    (30,285,423)   5,665,021 
Stock based compensation due to common stock purchase options   -    -    243,979    -    243,979 
Reversal of stock based compensation due to common stock purchase option cancellations   -    -    (66,130)   -    (66,130)
Net loss for the three months ended June 30, 2021   -    -    -    (911,961)   (911,961)
Balance, June 30, 2021   87,352,364    874    36,127,419    (31,197,384)   4,930,909 
Stock based compensation due to common stock purchase options   -    -    246,250    -    246,250 
Net loss for the three months ended September 30, 2021   -    -    -    (1,698,285)   (1,698,285)
Balance, September 30, 2021   87,352,364   $874   $36,373,669   $(32,895,669)  $3,478,874 
                          
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020                         
                          
Balance, December 31, 2019   87,352,364   $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 for the three months ended March 31, 2020   -    -    -    (1,174,753)   (1,174,753)
Balance, March 31, 2020   87,352,364    874    32,844,596    (21,394,598)   11,450,872 
Stock based compensation due to common stock purchase options   -    -    1,586,522    -    1,586,522 
Net loss for the three months ended June 30, 2020   -    -    -    (3,011,593)   (3,011,593)
Balance, June 30, 2020   87,352,364    874    34,431,118    (24,406,191)   10,025,801 
Stock based compensation due to common stock purchase options   -    -    1,119,815    -    1,119,815 
Stock based compensation issued for prepaid services   -    -    260,997    -    260,997 
Net loss for the three months ended September 30, 2020   -    -    -    (2,817,964)   (2,817,964)
Balance, September 30, 2020   87,352,364   $874   $35,811,930   $(27,224,155)  $8,588,649 

 

(See accompanying notes to unaudited consolidated financial statements)

3

 

RENOVACARE, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

           
    Nine Months Ended 
    

September 30,

 
    2021    2020 
Cash flows used in operating activities          
Net loss   (3,127,488)   (7,004,310)
Adjustments to reconcile net loss to net cash flows used in operating activities          
Depreciation expense   7,046    309 
Stock based compensation expense   (407,163)   3,172,100 
Amortization of right of use asset   38,291    6,978 
Changes in operating assets and liabilities:          
(Increase) decrease in prepaid expenses and other assets   101,960    (69,608)
Increase (decrease) in accounts payable   (567,312)   416,045 
Increase (decrease) in accounts payable - related parties   -    20,675 
Increase (decrease) in lease liability   (36,538)   (6,874)
Net cash flows used in operating activities   (3,991,204)   (3,464,685)
           
Cash flows from investing activity          
Decrease (increase) in security deposit   -    (7,995)
Purchase of fixed assets   -    (41,273)
Net cash flows from investing activity   -    (49,268)
Decrease in cash   (3,991,204)   (3,513,953)
Cash at beginning of period   7,412,969    12,185,248 
Cash at end of period   3,421,765    8,671,295 
           
Supplemental disclosure of non cash financing activities          
Stock based compensation issued for prepaid services   -    260,997 

 

(See accompanying notes to unaudited consolidated financial statements)

 

 

4

 

RENOVACARE, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1. Basis of Presentation, Organization, Liquidity and Going Concern, Recent Accounting Standards and Earnings (Loss) Per Share

 

Basis of Presentation

 

The accompanying unaudited interim consolidated financial statements of RenovaCare, Inc. and Subsidiary (“RenovaCare” or the “Company”) as of September 30, 2021, and for the three and nine months ended September 30, 2021 and 2020 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for  quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. These Consolidated Financial Statements should therefore be read in conjunction with the Consolidated Financial Statements and Notes thereto for the fiscal year ended December 31, 2020 included in our Annual Report on Form 10-K filed with the SEC on March 31, 2021.

 

The accompanying unaudited interim Consolidated Financial Statements have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying disclosures. Actual results may differ from those estimates. The accompanying unaudited interim consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments (including normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s consolidated financial position as of September 30, 2021, results of operations and stockholders’ equity for the three and nine months ended September 30, 2021 and 2020, and cash flows for the nine months ended September 30, 2021 and 2020. The Company did not record an income tax provision during the periods presented due to net taxable losses. The results of operations for any interim period are not necessarily indicative of the results of operations for the entire year.

 

Organization

 

RenovaCare, Inc., formerly Janus Resources, is a Nevada corporation. RenovaCare, Inc. was incorporated under the laws of the State of Utah on July 14, 1983 as Far West Gold, Inc..

 

The Company 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 September 30, 2021, and 10,000,000 shares of $0.0001 par value preferred stock, of which none are outstanding.

 

RenovaCare, Inc., through its wholly owned subsidiary, RenovaCare Sciences Corp. is a development-stage company focusing on the research, development and 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 completed the acquisition of its flagship technologies (collectively, the “CellMistTM System”). The CellMist™ System is a cell isolation procedure that enzymatically renders stem cells from the patient’s own skin or other tissues. The resulting stem cell suspension is administered topically from the Company’s novel solution sprayer device (the “SkinGunTM”) as a cell therapy onto wounds including burns to facilitate healing.

 

Currently, our proprietary technologies are the subject of and 43 U.S. and international patents or patent applications and 14 U.S. and international trademarks. Of the issued patents, five are U.S. patents and twelve have issued or are allowed in Australia, Canada, Europe, Germany, France, Italy, Japan, Korea, Netherlands, Spain, Switzerland/Lichenstein, and United Kingdom.

 

On May 6, 2021 the Food and Drug Administration gave full-approval of the Company’s Investigational Device Exemption (IDE) application to proceed with initial clinical testing of the CellMist System and SkinGun spray device in adult burn patients.

 

5

 

 

Improvements in the design and efficiency of the CellMist™ System including a closed, automated cell isolation device and the SkinGun™ spray device are in development with StemCell Systems (Berlin, Germany), the Company’s R&D innovation partner. The Company is adapting its core technologies for possible use in other clinical indications. The Company is also developing the cell isolation and spray gun devices as stand-alone 510(k)-cleared products for isolation of cells from other tissues and spraying other solutions of medical importance.

 

The Company's activities have consisted principally of performing research and development activities and raising capital to support such activities. The Company has enlisted the assistance of several Contract Manufacturing Organizations (CMO) to manufacture clinical supplies including components of the CellMist System™ and the electronic SkinGun™ spray devices in compliance with FDA’s guidance for current Good Manufacturing Practices (cGMP) and Contract Research Organizations (CRO) to test and validate the Company’s products and processes and to conduct clinical trials that evaluate initially the safety and feasibility of an autologous skin cell therapy using the Company’s products to facilitate burn wound healing. These development activities are subject to significant risks and uncertainties, including possible failure of preclinical and clinical testing. The Company has not generated any revenue 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 partnerships or the sale of its securities to accomplish its business plan. 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 depends 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.

 

Liquidity and Going Concern

 

The Company has prepared its consolidated financial statements on a “going concern” basis, which presumes that it will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

 

Since Inception, the Company has incurred net operating losses and operating cash flow deficits. The Company does not currently generate revenues and will continue to incur losses from operations and operating cash flow deficits in the future. The Company's activities are subject to significant risks and uncertainties due to the stage of the development of the Company's cellular therapies.

 

At September 30, 2021, the Company had approximately $3,400,000 in cash on hand. The Company estimates cash will be depleted in less than one year from the date that these financial statements are available to be issued, if the Company does not generate sufficient cash to support operations.

 

The future of the Company will depend on its ability to successfully raise capital from external sources to fund operations. If the Company is unable to obtain adequate funds, or if such funds are not available to it on acceptable terms, the Company's ability to continue its business to develop its cellular therapies will be significantly impaired and it may cause the Company to curtail operations.

 

The matters described above raise substantial doubt about the Company's ability to continue as a going concern within one year after the date these condensed consolidated financial statements were issued.

 

Recent 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.

 

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.

 

6

 

 

 

Earnings (Loss) Per Share

 

The Company presents both basic and diluted earnings per share ("EPS"). 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 options 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 and nine months ended September 30, 2021 and 2020:

 

                    
   Three Months Ended  Nine Months Ended
   September 30,  September 30,
   2021  2020  2021  2020
Basic and Diluted EPS Computation                    
Numerator:                    
Loss available to common stockholders'  $(1,698,285)  $(2,817,964)  $(3,127,488)  $(7,004,310)
Denominator:                    
Weighted average number of common shares outstanding   87,352,364    87,352,364    87,352,364    87,352,364 
Basic and diluted EPS  $(0.02)  $(0.03)  $(0.04)  $(0.08)
                     
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   3,139,999    5,845,570    3,139,999    5,845,570 
Warrants   11,712,496    12,296,912    11,712,496    12,296,912 
Total shares not included in the computation of diluted losses per share   14,852,495    18,142,482    14,852,495    18,142,482 

 

Note 2. Prepaid Expenses

 

Prepaid expenses consist of the following:

 

          
   September 30,  December 31,
   2021  2020
Prepaid insurance  $-   $54,180 
Prepaid stock options for services   87,001    86,999 
Prepaid professional fees   65,000    65,000 
Prepaid research and development expense   296,196    289,746 
Other prepaid costs   16,118    70,350 
Total prepaid expenses  $464,315   $566,275 

 

Note 3. Equity

 

2013 Long-Term Incentive Plan

 

On June 20, 2013, the Company’s Board of Directors (the “Board”) adopted the 2013 Long-Term Incentive Plan (the “2013 Plan”) and on November 15, 2013, a stockholder owning a majority of the Company’s issued and outstanding stock approved adoption to the 2013 Plan. Pursuant to the terms of the 2013 Plan, an aggregate of 20,000,000 shares of the Company’s common stock have been reserved for issuance to the Company’s officers, directors, employees and consultants in order to attract and hire key technical personnel and management. Options granted to employees under the 2013 Plan, including directors and officers who are employees, may be incentive stock options or non-qualified stock options; options granted to others under the 2013 Plan are limited to non-qualified stock options. As of September 30, 2021, there were 16,618,266 shares available for future grants.

 

7

 

 

 

The 2013 Plan is administered by the Board or a committee designated by the Board. Subject to the provisions of the 2013 Plan, the Board has the authority to determine the officers, employees and consultants to whom options will be granted, the number of shares covered by each option, vesting rights and the terms and conditions of each option that is granted to them; however, no person may be granted options to purchase more than 2,000,000 shares in any one fiscal year under the 2013 Plan, and the aggregate fair market value (determined at the time the option is granted) of the shares with respect to which incentive stock options are exercisable for the first time by an optionee during any calendar year cannot exceed $100,000. Options granted pursuant to the 2013 Plan are exercisable no later than ten years after the date of grant.

 

The exercise price per share of common stock for options granted under the 2013 Plan is the fair market value of the Company's common stock on the date of grant, using the closing price of the Company's common stock on the last trading day prior to the date of grant, except for incentive stock options granted to a holder of ten percent or more of the Company's common stock, for whom the exercise price per share will not be less than 110% of the fair market value. No option can be granted under the 2013 Plan after June 20, 2023.

 

Common Stock

 

At September 30, 2021, the Company had 500,000,000 authorized shares of common stock with a par value of $0.00001 per share and 87,352,364 shares of common stock outstanding.

 

During the three and nine months ended September 30, 2021 and 2020, the Company did not have any common stock transactions.

 

Warrants

 

The Company has issued warrants to purchase common stock at various exercise prices in connection with loan agreements and private placements. The following table summarizes information about warrants outstanding at September 30, 2021 and December 31, 2020:

 

                  
    

Shares of Common Stock Issuable from Warrants Outstanding as of

    

Weighted

    
    

September 30,

    

December 31,

    

Average

    
Description   

2021

    

2020

    

Exercise Price

  

Expiration

Series E   -    584,416   $1.54   September 9, 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   11,712,496    12,296,912         

 

During the three months ended September 30, 2021, all the Series E Warrants expired unexercised.

 

8

 

 

 

Stock Options

 

The following table summarizes stock option activity for the six months ended September 30, 2021:

 

                    
   Number of Options  Weighted Average Exercise Price ($)  Weighted Average Remaining Contractual Term (years)  Aggregate Intrinsic Value ($)
Outstanding at December 31, 2020   5,895,570    2.45    5.14    1,650 
Granted   50,000    1.72    9.82    - 
Forfeited   (2,805,571)   2.74           
Outstanding at September 30, 2021   3,139,999    2.17    4.79    1,650 
Vested and exercisable at September 30, 2021   2,564,999    1.95    4.73    1,650 

 

The valuation methodology used to determine the fair value of stock options is the Black-Scholes Model. The Black-Scholes Model requires the use of a number of assumptions including volatility of the stock price, the risk-free interest rate, and the expected term of the stock options. The ranges of assumptions used in the Black-Scholes Model during the nine months ended September 30, 2021 and 2020 is set forth in the table below:

 

              
   Nine Months Ended September 30,
   2021  2020
Risk-free interest rate   0.73%   0.021% 1.67% 
Expected term in years   5.38    3.25 6.00 
Weighted Avg. Expected Volatility   102.07    103.56% 110.71% 
Expected dividend yield   0%     0%  

 

 

The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the expected term. Estimated volatility is a measure of the amount by which the stock price is expected to fluctuate each year during the term of an award. Our calculation of estimated volatility is based on historical stock prices over a period equal to the term of the awards. The average expected life is based on the contractual terms of the stock option using the simplified method. We utilize a dividend yield of zero based on the fact that we have never paid cash dividends and have no current intention to pay cash dividends. Future stock-based compensation may significantly differ based on changes in the fair value of our Common Stock and our estimates of expected volatility and the other relevant assumptions.

 

The following table sets forth the share-based compensation cost resulting from stock option grants, including those previously granted and vesting over time, that were recorded in the Company’s Statements of Operations for the three and nine months ended September 30, 2021 and 2020:

 

                    
   Three Months Ended September 30,  Nine Months Ended September 30,
   2021  2020  2021  2020
Research and development  $224,000   $455,271   $731,438   $1,087,147 
General and administrative   44,000    664,544    (1,138,601)   2,084,953 
Total  $268,000   $1,119,815   $(407,163)  $3,172,100 

 

Nine Months Ended September 30, 2021

 

On July 26, 2021, in connection with an Executive Services Consulting Agreement of the same date, the Company granted Justin Frere, the Company’s Chief Financial Officer, an option to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.72 and with a term of 10 years.

 

9

 

 

 

During the first half of 2021, certain individuals resigned from the Company resulting in the forfeiture and cancellation of 2,805,571 options. Compensation expense was recorded on some of these options prior to their full vesting. As a result, during the nine months ended September 30, 2021, the Company recognized $1,314,705 of reversals of the prior recognized compensation expense related to the cancelled options. During the three and nine months ended September 30, 2021, the expense recognized on options still in their vesting period totaled $268,000 and $907,541, respectively.

 

Note 4. Leases

 

In February 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 $4,356; and $4,459 in year 2 of the lease. The term (and payment of the monthly rent) commenced upon completion of the landlord’s work on August 1, 2020.

 

The Company’s existing Lease is not subject to any restrictions or covenants which preclude its ability to pay dividends, obtain financing, or enter into additional Lease’s.

 

As of September 30, 2021, the Company has not entered into any leases which have not yet commenced which would entitle the Company to significant rights or create additional obligations.

 

The Company does not have any finance leases.

 

Supplemental lease information as of September 30, 2021:

 

          
   As of September 30, 2021  As of December 31, 2020
       
Operating lease right-of-use asset  $41,171   $79,462 
           
Current maturities of operating lease  $43,192   $51,125 
Non-current operating lease   -    28,607 
Total operating lease liabilities  $43,192   $79,732 
           
Weighted Average remaining lease term (in years):   0.84    1.6 
Discount rate:   7.0%   7.0%
Right-of-use asset obtained in exchange for lease obligation       $98,402 

 

Supplemental cash flow information for the nine months ended September 30, 2021:

 

Cash paid for amount included in the measurement of lease liabilities for operating lease  $39,410 

 

The Company leases office space under a non-cancellable operating lease expiring in 2022. Future lease payments included in the measurement of lease liabilities on the balance sheet at September 30, 2021 for future periods are as follows:

 

     
Years ending December 31, 2021,   
2021 (Remaining)  $13,377 
2022   31,213 
Total future minimum lease payments   44,590 
Less imputed interest   (1,398)
Total  $43,192 

 

10

 

 

 

Note 5. Commitments and Contingencies

 

Stem Cell Systems

 

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. On July 1, 2020, the Company and StemCell Systems entered into a Strategic R&D Agreement (the “Strategic Agreement”) having an initial term of three years with successive one-year extensions unless earlier terminated. The Strategic Agreement includes a $27,000 monthly fee to be paid to StemCell Systems along with any additional expenses incurred. The Company, StemCell Systems and certain affiliates of StemCell Systems entered into a Rights of First Refusal and Corporate Opportunities Agreement (the “ROFR Agreement”). Pursuant to the ROFR Agreement, (i) in the event a StemCell Systems stockholder receives an offer from a third party to acquire the StemCell Systems stockholders ownership interest, the Company shall have ten business days to purchase such ownership, and (ii) if during the terms of the Strategic Agreement, any StemCell Systems inventions, with respect to skin, burns and wounds, designs, inventions and among other things, whether or not patentable, copyrightable or otherwise legally protectable are discovered by StemCell Systems, the Company shall have the first option to negotiate mutually agreeable terms for the Company’s acquisition or licensing of the StemCell Systems inventions. Pursuant to these engagements the Company incurred expenses of approximately $142,000 and $133,000 during the three months ended September 30, 2021 and 2020, respectively; and $391,000 and $401,000 during the nine months ended September 30, 2021 and 2020, respectively. Pursuant to the Strategic Agreement, as of September, 30, 2021, the Company is obligated to pay for services totaling approximately $819,000 through July 1, 2023.

 

SEC Complaint

 

On May 28, 2021 the SEC filed a civil complaint (the “Complaint”) naming the Company and Harmel S. Rayat, RenovaCare Chairman (the “Defendants”) as defendants. The Complaint charges Mr. Rayat and the Company with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and also charges Mr. Rayat with aiding and abetting the Company's violations of those provisions. The complaint also charges the Company with violating the reporting provisions of Exchange Act Section 15(d) and Rules 15d-11 and 12b-20 thereunder. The SEC seeks permanent injunctions and civil penalties against the Defendants, and officer-and-director and penny stock bars against Mr. Rayat. On August 31, 2021 the Defendants filed a response to the Complaint. On September 21, 2021, the SEC filed a motion to strike Defendants equitable affirmative defenses which motion was granted by the court on October 18, 2021.

 

The Company believes that the claims asserted in the Complaint are without merit and intends to defend this matter vigorously. However, because of the inherent uncertainty as to the outcome of this proceeding, the Company is unable, at this time, to estimate the possible impact of the outcome of this matter nor provide assurance that the available insurance coverage will be sufficient to see the Complaint through to resolution.

 

Class Action Complaints

 

On July 16 and July 21, 2021, two purported shareholders of the Company filed putative class actions in the United States District Court for the District of New Jersey against the Company and certain of its current and former executive officers (captioned Gabrielle A. Boller, Individually and On Behalf of All Others Similarly Situated v. RenovaCare, Inc., Harmel Rayat, and Thomas Bold, No. 2:21-cv-13766-SDW-ESK (“Boller”), and Michael Solakian, Individually and On Behalf of All Others Similarly Situated v. RenovaCare, Inc., Harmel Rayat, and Thomas Bold, No. 2:21-cv-13930 (“Solakian”), respectively)(the “Class Action Complaints”). The Class Action Complaints in Boller and Solakian were brought both individually and on behalf of a putative class of the Company’s stockholders, claiming that in connection with the facts and circumstances underlying the allegations in the SEC Complaint, the Company engaged in fraudulent conduct and made false and misleading statements of material fact or omitted to state material facts necessary to make the statements made not misleading. The class period identified in the Class Action Complaints is August 13, 2017 through May 28, 2021 Both Boller and Solakian seek to declare the action to be a class action and monetary damages, including costs and expenses, and award of reasonable attorneys’ fees, expert fees, and other costs, and such other relief as the Court may deem just and proper.

 

11

 

 

 

The Company believes that the claims asserted in Boller and Solakian  and any other Class Actions derived from the SEC Complaint are without merit and intends to defend itself vigorously. Based on the early stages of these legal proceedings, and the inherent uncertainty as to their outcome, at this time, the Company is not able to reasonably estimate a possible range of loss, if any, that may result from the allegations set forth in the Class Action Complaints filed in the Class Actions.

 

Note 6. Transactions with Related Persons

 

During the three and nine months ended September 30, 2020, Talia Jevan Properties, Inc. made payments totaling $0 and $10,811, respectively, to Stephen Yan-Klassen, former CFO who resigned in 2020, for his salary on behalf of the Company. Talia Jevan Properties, Inc. is a related party of Harmel S. 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 the Company’s issued and outstanding shares of common stock, to provide consulting services to the Company through his wholly owned company, Vector Asset Management, Inc. (“VAMI”). Pursuant to the consulting agreement, VAMI 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 VAMI 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 (the “ECA”) pursuant to which Mr. Bhogal served as the Company’s Chief Operating Officer. The ECA supersedes the prior consulting agreement. Pursuant to the ECA, VAMI received compensation of $120,000 per year. On July 1, 2020 the Company amended the ECA and paid VAMI $4,000 per month through November 30, 2020 and $200 per month thereafter until May 31, 2021 at which time the ECA as amended expired. For consulting services provided by VAMI, during the three months ended September 30, 2021 and 2020, the Company recognized expenses of $0 and $12,000, respectively; and $1,000 and $72,000 during the nine months ended September 30, 2021 and 2020, respectively. Jatinder Bhogal resigned as the Company’s COO effective June 30, 2020.

 

Note 7. Subsequent Events

 

Management has reviewed material events subsequent of the period ended September 30, 2021 and prior to the filing of financial statements in accordance with FASB ASC 855 “Subsequent Events”.

 

 

 

12

 

 

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

 

Cautionary Note Regarding Forward-Looking Statements

 

This discussion and analysis of financial condition and results of operations is based upon and should be read in conjunction with the unaudited interim consolidated financial statements of RenovaCare, Inc. (“RenovaCare”) and its wholly-owned subsidiary (collectively with RenovaCare, “we,” “our,” “us,” or the “Company”), appearing elsewhere in this Quarterly Report on Form 10-Q, 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 requires the Company 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 the Company reviews its estimates and assumptions. The estimates were based on historical experience and other assumptions that the Company believes 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 the Company 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 since 2020.

 

This Quarterly Report on Form 10-Q also 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 the Company 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;
  · results of our clinical trials;
  · failure of our products to gain market acceptance;
  · the cost and success of our development programs;
  · our failure to obtain financing as, if and when needed, on commercially acceptable terms;
  · our failure to attract and retain qualified personnel;
  · our failure to adequately manage our growth and expansion;
  · the effect on us from adverse publicity related to our products or the Company itself; and
  · our failure to defend against any adverse claims relating to our intellectual property.

 

13

 

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

 

We are a development-stage biotechnology and medical device company focusing on the research, development and commercialization of autologous (using a patient's own cells) cellular therapies that can be used for medical and aesthetic applications. The Company does not have any commercialized products. The Company's activities have consisted principally of performing research and development activities, business development efforts, and raising capital to support such activities.

  

The Company, through its wholly owned subsidiary, RenovaCare Sciences Corp., owns the CellMist™ System which is a cell isolation procedure that enzymatically renders stem cells from the patient’s own skin or other tissues. The resulting stem cell suspension is administered topically with our SkinGun™ spray device as a cell therapy onto wounds including burns to facilitate healing.

 

In May 2021, the Company announced that the US Food and Drug Administration (FDA) fully approved the Company’s Investigational Device Exemption (IDE) application to conduct a clinical trial, designated CELLMIST 1, that will evaluate the safety and feasibility of autologous skin and pluripotent stem cells rendered by its manual CellMist™ System from donor skin and applied topically with the electronic SkinGun™ spray device for treatment of acute burn wounds. The clinical trial protocol is an open-label, single-arm clinical study that is enrolling 14 adult human burn subjects with partial-thickness, second-degree deep thermal burn wounds covering between 10% and 30% total body surface area. The Company may engage up to four (4) U.S. burn centers to conduct the clinical study. Currently, the clinical trial is activated, enrolling and treating patients. The CELLMIST 1 clinical study is expected to reach completion in late 2022.

 

Our unique new closed, automated cell isolation device to harvest stem cells from tissues using the CellMistTM System is in prototype development. We expect significant time and resources will be devoted to develop our novel technology and determine the commercial feasibility of the product. Research and development of new technologies involve 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.

 

In August 2019, the Company was awarded a continuation of a patent allowing the SkinGunTM to be used to spray all varieties of tissues and cells, thus allowing for its potential application in the regeneration of tissues and organs, beyond skin; and, in November 2020 and October 2021, the Company was issued a total of three new patents encompassing improvements to the SkinGun™, expanding its potential application beyond the surgical setting into the field, and allowing the use of liquid suspension solutions to include drugs, hormones, and other useful agents.

 

Currently, our proprietary technologies are the subject of and 43 U.S. and international patents or patent applications and 14 U.S. and international trademarks. Of the issued patents, five are U.S. patents and twelve have issued or are allowed in Australia, Canada, Europe, Germany, France, Italy, Japan, Korea, Netherlands, Spain, Switzerland/Lichenstein, and United Kingdom. The Company has six allowed trademarks in the United States, two European registered trademarks, two United Kingdom trademarks, two Japan trademarks, and two pending in Canada.

 

The Company has not generated any revenue 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 partnerships or the sale of its securities to accomplish its business plan. 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 depends 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.

 

14

 

Additionally, there is significant uncertainty relating to the full impact of the COVID-19 pandemic on the Company’s operations and capital requirements. Should financing when needed be unavailable or prohibitively expensive or 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 the operation of clinical study sites and testing laboratories; (v) delay, limit or preclude the Company from achieving technology or product development goals, milestones, or objectives; and (vi) 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 its pathway to commercialization of its technology or products.

 

Although the Company continues to monitor the situation and may adjust policies as more information and public health guidance become available, the COVID-19 pandemic is ongoing, and its dynamic nature, including uncertainties relating to the ultimate spread of the virus, the severity of the disease, the duration of the outbreak and actions that may be taken by governmental authorities to contain the outbreak or to treat its impact, makes it difficult to assess whether there will be further impact on the development and commercialization of the Company’s technology which could have a material adverse effect on the Company’s results of operations and cash flows.

 

Components of Our Results of Operations

 

Revenue

 

To date we have not generated any product revenues and do not expect to generate any revenue for the foreseeable future. Our ability to generate revenue and become profitable depends upon our ability to obtain marketing approval and successfully commercialization of our CellMistTM System.

 

Research and Development

 

Research and development (“R&D”) expenses consist primarily of costs incurred for the development of our CellMistTM System and include:

 

  · design, pilot-scale manufacturing and pre-clinical testing of our cell isolation and SkinGunTM spray devices.

  · employee-related expenses associated with our research and development activities, including salaries, benefits, travel and non-cash stock-based compensation expenses.

  ·

costs associated with quality management systems including device verification and validation testing, and regulatory operations and regulatory compliance.

  · expenses incurred under agreements related to our clinical trials.

  · other research and development costs including contract consulting fees and non-cash stock-based compensation to contract research organizations (CROs) and other third parties.

 

We do not believe that it is possible at this time to accurately project total expenses required for us to reach commercialization of our CellMistTM System. In the future, we expect that research and development expenses will increase due to our ongoing product development and approval efforts. We expense research and development costs as incurred.

 

General and Administrative

 

General and administrative expenses consist primarily of personnel costs, including non-cash stock-based compensation related to directors and employees, professional service costs including legal, accounting, and other consulting fees and other general and administrative expenses including investor relations, insurance, and facilities costs. We expect general and administrative expenses to increase in the future as we hire personnel and incur additional costs to support the expansion of our research and development activities and our operation as a public company.

 

15

 

Stock-Based Compensation

 

Expense associated with equity-based transactions is calculated and expensed in our financial statements as required pursuant to various accounting rules and is non-cash in nature. Stock compensation represents the expense associated with the amortization of our stock options.

 

Other Income (Expense)

 

Other income consists of interest income earned on our cash and cash equivalents and the reimbursement of legal fees from our Directors & Officers insurance policy.

 

Income Taxes

 

We have yet to generate taxable income. We have historically incurred operating losses resulting in carry forward tax losses totaling approximately $22.3 million as of December 31, 2020. We anticipate that we will continue to generate tax losses for the foreseeable future and that we will be able to carry forward these tax losses indefinitely to future taxable years. Accordingly, we do not expect to pay taxes until we have taxable income after the full utilization of our carry forward tax losses. We have provided a full valuation allowance with respect to the deferred tax assets related to these carry forward losses.

 

Results of Operations

 

Comparison of Three and Nine Months Ended September 30, 2021 and September 30, 2020

 

Research and Development Expenses

 

    

Three Months Ended September 30,

    

Increase /

    

Nine Months Ended September 30,

    

Increase /

 
    

2021

    2020    

(Decrease)

    

2021

    2020    

(Decrease)

 
Manufacturing clinical supplies(1)  $50,019   $557,956   $(507,937)  $298,090   $940,021   $(641,931)
Personnel related(2)   113,248    81,667    31,581    382,926    253,216    129,710 
Stock-based compensation(3)   224,000    455,271    (231,271)   731,438    1,087,147    (355,709)
Clinical trials(4)   243,030    29,500    213,530    768,987    33,900    735,087 
Regulatory(5)   10,349    69,829    (59,480)   32,253    158,716    (126,463)
All other(5)   103,979    357,766    (253,787)   289,793    618,383    (328,590)
   $744,625   $1,551,989   $(807,364)  $2,503,487   $3,091,383   $(587,896)

 

(1)Manufacturing clinical supplies decreased due to completion of the pilot-scale manufacturing and validation testing of the components of the CellMist™ System and the electronic SkinGun™ spray device to be used in our clinical trials.
(2)Personnel related expenses increased due to the allocation of Stem Cell Systems personnel in support of the development of our CellMist™ System.
(3)Stock compensation expense decreased due primarily to the completion of vesting in 2020 of prior issued stock options in excess of the amounts recognized in the current year upon the continued vesting of other R&D related stock option grants.
(4)Clinical trial expenses increased due to the addition of clinical professionals, clinical site activation costs and costs related to the preparation of our clinical trials which began in the second quarter of 2021. We expect clinical trial expenses to increase moving forward due to patient enrollment, treatment, follow-up visits, clinical sample testing and medical site monitoring.
(5)All other expenses decreased as validation testing for the electronic SkinGun ™ concluded and we transitioned to prototype development of the cell isolation device at StemCell Systems.

 

16

 

General and Administrative Expenses

 

    

Three Months Ended September 30,

    

Increase /

    

Nine Months Ended September 30,

    

Increase /

 
    2021    2020    

(Decrease)

    2021    2020    

(Decrease)

 
Personnel related(1)  $223,591   $245,135   $(21,544)  $691,954   $681,823   $10,131 
Stock-based compensation(2)   44,000    664,544    (620,544)   (1,138,601)   2,084,953    (3,223,554)
Professional and consultant fees(3)   644,077    246,062    398,015    1,069,550    790,826    278,724 
All other(4)   44,231    135,149    (90,918)   196,762    466,715    (269,953)
Total G&A Expense  $955,899   $1,290,890   $(334,991)  $819,665   $4,024,317   $(3,204,652)

 

(1)Personnel related costs are expected to decrease slightly due to lower headcount starting mid-year 2021.
(2)Stock compensation expense decreased due to the forfeiture and cancellation of 2,805,571 stock options as a result of the resignation of the Company’s former Chairman, President and Chief Executive Officer, the Company’s former Chief Financial Officer, and two members of the Company’s Board of Directors. Compensation expense was recorded on these options prior to their full vesting. As a result, the Company recognized a $0 and $1,314,705 reversal of the prior recognized compensation expense related to the cancelled options for the three and nine months ended September 30, 2021, respectively. The G&A expense recognized for options still in their vesting period totaled $44,000 and $176,104 during the three and nine months ended September 30, 2021, respectively.
(3)Professional and consultant fees increased primarily due to an increase in legal fees related to the SEC Complaint and fees related to our patents and trademarks offset by a decrease in accounting and consulting fees.
(4)All other costs decreased primarily due to the absence of the charitable contribution to the Office of Research at the University of Pittsburgh which the Company recognized $125,000 during the nine months ended September 30, 2020 in addition to decreases in investor relations and insurance offset by an increase in rent.

 

Liquidity and Capital Resources

 

The Company does not have any commercialized products, has not generated any meaningful revenue since inception and has sustained recurring losses and negative cash flows since inception. The Company has incurred operating losses of $3.3 million and $7.1 million during the nine months ended September 30, 2021 and 2020, respectively. The Company expects to incur losses as it continues development of its products and technologies. Historically, the Company has been funded through the sale of equity securities and debt financings. At September 30, 2021, the Company had approximately $3,400,000 in cash on hand and current liabilities of $713,000. The Company estimates cash will be depleted in less than one year from the date that these financial statements are available to be issued, if the Company does not generate sufficient cash to support operations. The future of the Company will depend on its ability to successfully raise capital from external sources to fund operations. If the Company is unable to obtain adequate funds, or if such funds are not available to it on acceptable terms, the Company's ability to continue its business to develop its cellular therapies will be significantly impaired and it may cause the Company to curtail operations.

 

Net cash used in operating activities was $4.0 million during the nine months ended September 30, 2021, primarily due to operating costs of $3.3 million and the payment of liabilities of approximately $600 thousand.

 

Net cash used in investing was $0 for the nine months ended September 30, 2021 and $49 thousand for the nine months ended September 30, 2020.

 

There was no net cash used in financing activities during the nine months ended September 30, 2021 and 2020.

 

17

 

Fair Value of Financial Instruments and Risks

 

The carrying value of cash 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.

 

Market Risk Disclosures

 

We have not entered into derivative contracts either to hedge existing risks or for speculative purposes during the nine months ended September 30, 2021 or year ended December 31, 2020, and the subsequent period through the date of this report.

 

Off-Balance Sheet Arrangements and Contractual Obligations

 

We do not have any off-balance sheet arrangements or contractual obligations at September 30, 2021, and the subsequent period through the date of this annual 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 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.

 

Transactions with Related Persons

 

See Note 6 to our Consolidated Financial Statements for more information regarding transactions with related persons and their impact to our consolidated results of operations and financial position.

 

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.

 

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.

 

18

 

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 September 30, 2021 due to 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. Management believes that the material weaknesses set forth above were the result of the scale of our operations and are intrinsic to our small size and that this weakness did not have a material effect on our financial statements and results of operations.

 

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 three months ended September 30, 2021, or subsequent to the date that management completed their evaluation, that materially affected, or are reasonably likely to materially affect, our internal control over financing reporting.

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

From time to time, we are involved in litigation and other proceedings, including matters related to intellectual property and regulatory claims. See Note 5 to our unaudited consolidated financial statements for information on certain legal proceedings, which is incorporated by reference herein.

 

Item 1A. Risk Factors

 

Our results of operations and financial condition could be adversely affected by numerous risks. In addition to the other information in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors discussed in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for Fiscal 2020. These are not the only risks and uncertainties facing us. Additional risks not currently known to us or that we currently believe are immaterial may also negatively impact our business, financial condition, results of operations and future prospects.

 

We are the subject of an SEC Complaint. Adverse developments in our ongoing proceeding and/or future legal proceedings could have a material adverse effect on our business, reputation, financial condition, results of operations or stock price.

 

We are currently subject to an SEC Complaint. Refer to Note 5 to our Consolidated Financial Statements of this Quarterly Report for additional information regarding this specific matter. We may be subject to additional investigations, arbitration proceedings, audits, regulatory inquiries and similar actions, including matters related to intellectual property, employment, securities laws, disclosures, tax, accounting, class action and product liability, as well as regulatory and other claims related to our business and our industry, which we refer to collectively as legal proceedings. We cannot predict the outcome of any particular proceeding, or whether ongoing investigations, will be resolved favorably or ultimately result in charges or material damages, fines or other penalties, enforcement actions, bars against serving as an officer or director, or practicing before the SEC, or civil or criminal proceedings against us or members of our senior management.

 

Legal proceedings in general, and securities and class action litigation and regulatory investigations in particular, can be expensive and disruptive. Our insurance may not cover all claims that may be asserted against us, and we are unable to predict how long the legal proceedings to which we are currently subject will continue. An unfavorable outcome of any legal proceeding may have an adverse impact on our business, financial condition and results of operations or our stock price. Any proceeding could negatively impact our reputation among our stakeholders. Furthermore, publicity surrounding ongoing legal proceedings, even if resolved favorably for us, could result in additional legal proceedings against us, as well as damage our image.

 

19

 

 

Item 6. Exhibits

 

Exhibit No.   Description of Exhibit
31.1   Certification of the Principal Executive Officer pursuant to Rule 13a-14(a).*
31.2   Certification of the Principal Financial Officer pursuant to Rule 13a-14(a).*
32.1   Certification by the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
     
101.INS   Inline XBRL Instance Document**
101.SCH   Inline XBRL Taxonomy Extension - Schema Document**
101.CAL   Inline XBRL Taxonomy Extension - Calculation Linkbase Document**
101.DEF   Inline XBRL Taxonomy Extension - Definition Linkbase Document**
101.LAB   Inline XBRL Taxonomy Extension - Label Linkbase Document**
101.PRE   Inline XBRL Taxonomy Extension - Presentation Linkbase Document**
104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

_______________

* Filed herewith.
** Furnished herewith. iXBRL (Inline 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.

 

 

 

 

20

 

 

SIGNATURES

 

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: November 12, 2021 By: /s/ Dr. Kaiyo Nedd  
  Name: Dr. Kaiyo Nedd  
  Title: Chief Executive Officer  
    (Principal Executive Officer)  
       
Date: November 12, 2021 By: /s/ Justin Frere, CPA  
  Name: Justin Frere, CPA  
  Title: Chief Financial Officer  
    (Principal Financial Officer and Principal Accounting Officer)  

 

 

 

 

21

 

 

EX-31.1 2 exh_311.htm EXHIBIT 31.1

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, Dr. Kaiyo Nedd, 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: November 12, 2021 By: /s/ Dr. Kaiyo Nedd  
  Name: Dr. Kaiyo Nedd  
  Title: Chief Executive Officer  
    (Principal Executive Officer)  

 

EX-31.2 3 exh_312.htm EXHIBIT 31.2

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, Justin Frere, 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: November 12, 2021 By: /s/ Justin Frere, CPA  
  Name: Justin Frere, CPA  
  Title: Chief Financial Officer  
    (Principal Financial Officer and Principal Accounting Officer)  

 

 

 

EX-32.1 4 exh_321.htm EXHIBIT 32.1

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 and nine months ended September 30, 2021 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: November 12, 2021 By: /s/ Dr. Kaiyo Nedd  
  Name: Dr. Kaiyo Nedd  
  Title: Chief Executive Officer and Director  
    (Principal Executive Officer)  
       
Date: November 12, 2021 By: /s/ Justin Frere, CPA  
  Name: Justin Frere, CPA  
  Title: Chief Financial Officer  
    (Principal Financial Officer and Principal Accounting Officer)  

 

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