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Commitments and Contingencies
9 Months Ended
Sep. 30, 2021
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

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.

 

 

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.