UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
Commission file number
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(Address of principal executive offices)
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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.
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| Smaller reporting company | Emerging Growth Company | ||||
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As of August 10, 2022, the registrant had shares of its common stock, par value $0.00001 per share, issued and outstanding.
RENOVACARE, INC.
FORM 10-Q
For The Quarter Ended June 30, 2022
TABLE OF CONTENTS
PART I
Item 1. Financial Statements
RENOVACARE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| ASSETS | (Unaudited) | |||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Equipment, net of accumulated depreciation of $ | ||||||||
| Intangible asset | ||||||||
| Security Deposit | ||||||||
| Right of Use Asset | ||||||||
| Other Assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Related party payables | ||||||||
| Lease liability - current | ||||||||
| Total current liabilities | ||||||||
| Convertible promissory note to related party | ||||||||
| Interest payable on convertible promissory note to related party | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders' equity | ||||||||
| Preferred stock: $ par value; shares authorized, shares issued and outstanding | ||||||||
| Common stock: $ par value; shares authorized, shares issued and outstanding at June 30, 2022 and December 31, 2021 | ||||||||
| Additional paid-in capital | ||||||||
| Retained deficit | ( | ) | ( | ) | ||||
| Total stockholders' equity | ( | ) | ||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||
(See accompanying notes to unaudited consolidated financial statements)
1
RENOVACARE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Operating expenses | ||||||||||||||||
| Research and development | ||||||||||||||||
| General and administrative | ( | ) | ||||||||||||||
| Total operating expenses, net | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income | ||||||||||||||||
| Interest income | ||||||||||||||||
| Other income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||||||
| Impairment of intangible asset | ( | ) | ( | ) | ||||||||||||
| Total other income | ( | ) | ( | ) | ||||||||||||
| Net loss | $ | ( | ) | ( | ) | ( | ) | $ | ( | ) | ||||||
| Basic and Diluted Loss per Common Share | $ | ( | ) | ( | ) | ( | ) | $ | ( | ) | ||||||
| Weighted average number of common shares outstanding - basic and diluted | ||||||||||||||||
(See accompanying notes to unaudited consolidated financial statements)
2
RENOVACARE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
| Additional | Total ' | |||||||||||||||||||
| FOR THE SIX MONTHS ENDED JUNE 30, 2022 | Common Stock | Paid-in | Retained | Stockholders | ||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock based compensation due to common stock purchase options | - | |||||||||||||||||||
| Net loss for the three months ended March 31, 2022 | - | ( | ) | ( | ) | |||||||||||||||
| Balance, March 31, 2022 | ( | ) | ||||||||||||||||||
| Stock based compensation due to common stock purchase options | - | |||||||||||||||||||
| Net loss for the three months ended June 30, 2022 | - | ( | ) | ( | ) | |||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| FOR THE SIX MONTHS ENDED JUNE 30, 2021 | ||||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock based compensation due to common stock purchase options | - | |||||||||||||||||||
| Reversal of stock-based compensation due to common stock purchase option cancellations | - | ( | ) | ( | ) | |||||||||||||||
| Net loss for the three months ended March 31, 2021 | - | ( | ) | ( | ) | |||||||||||||||
| Balance, March 31, 2021 | ( | ) | ||||||||||||||||||
| Stock based compensation due to common stock purchase options | - | |||||||||||||||||||
| Reversal of stock based compensation due to common stock purchase option cancellations | - | ( | ) | ( | ) | |||||||||||||||
| Net loss for the three months ended June 30, 2021 | - | ( | ) | ( | ) | |||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
(See accompanying notes to unaudited consolidated financial statements)
3
RENOVACARE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows used in operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash flows used in operating activities | ||||||||
| Depreciation expense | ||||||||
| Stock based compensation expense | ( | ) | ||||||
| Impairment of intangible asset | ||||||||
| Non cash lease (benefit) expense | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) decrease in prepaid expenses and other assets | ( | ) | ||||||
| Increase (decrease) in accounts payable | ( | ) | ||||||
| Increase (decrease) in related party accounts payable | ||||||||
| Increase (decrease) in related party interest payable | ||||||||
| Net cash flows used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from the issuance of a related party convertible promissory note | ||||||||
| Net cash flows from financing activities | ||||||||
| Decrease in cash | ( | ) | ( | ) | ||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
(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, 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 June 30, 2022, and for the three and six months ended June 30, 2022 and2021 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, 2021 included in our Annual Report on Form 10-K filed with the SEC on March 30, 2022.
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 June 30, 2022, results of operations and stockholders’ equity for the three and six months ended June 30, 2022 and 2021, and cash flows for the six months ended June 30, 2022 and 2021. 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
The Company has an authorized capital of shares of $par value common stock, of which shares are outstanding as of June 30, 2022, and shares of $par value preferred stock, of which 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, the Company’s proprietary technologies are the subject of forty-four (44) U.S. and foreign granted or pending patents or patent applications and seventeen (17) U.S. and foreign trademarks. Of the issued patents, five (5) are U.S. patents and seventeen (17) have issued or are allowed in Australia, Canada, China, Europe, Germany, France, Italy, Japan, Korea, Netherlands, Spain, Switzerland/Liechtenstein, and the United Kingdom. The Company has six (6) allowed trademarks in the United States, two (2) European registered trademarks, two (2) United Kingdom trademarks, two (2) Japan trademarks, and two (2) pending in Canada.
5
The Company does not have any commercialized products. The Company's activities have consisted principally of performing research and development activities and raising capital to support such activities. 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 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.
Going Concern
The
Company has not generated any revenue since inception and has sustained recurring losses and negative cash flows from operations since
inception. On June 30, 2022, the Company had $
The Company evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year beyond the filing of this Quarterly Report on Form 10-Q. Based on such evaluation and the Company’s current plans, which are subject to change, management believes that the Company’s existing cash as of June 30, 2022 is insufficient to satisfy its operating cash needs for the year after the filing of this Quarterly Report on Form 10-Q.
The
Company is responsible to bear the costs to defend itself and its directors and officers, pursuant to the indemnification clause in the
Company’s bylaws, against various Lawsuits (as defined in “Note 7. Commitments and Contingencies—Legal Proceedings”
below) currently consisting of a civil action filed by the SEC and two class actions and four derivative actions. See “Note 7.
Commitments and Contingencies—Legal Proceedings.” The legal costs to defend the Company against the Lawsuits are expected
to be material. During the six months ended June 30, 2022, the Company made legal retainer payments totaling $
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 future of the Company will depend on its ability to successfully raise capital from external sources. As noted above, management believes that the Company’s existing cash as of June 30, 2022 are insufficient to satisfy its operating cash needs for the year after the filing of this Quarterly Report on Form 10-Q. If the Company is unable to maintain sufficient financial resources, its business, financial condition and results of operations will be materially and adversely affected. This could affect future development and business activities and potential future product development and/or other future ventures. There can be no assurance that the Company will be able to obtain the needed financing on acceptable terms or at all. Additionally, equity or convertible debt financings will likely have a dilutive effect on the holdings of the Company’s existing stockholders. Debt financing may involve agreements that include covenants limiting or restricting the Company’s ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, and may be secured by all or a portion of the Company’s assets.
Accounting Pronouncements
The Company evaluates all Accounting Standards Updates (ASUs) issued by the Financial Accounting Standards Board (FASB) for consideration of their applicability. ASUs not included in the Company’s disclosures were assessed and determined to be either not applicable or are not expected to have a material impact on its Consolidated Financial Statements.
6
New Accounting Pronouncements Not Yet Adopted
None.
Accounting Pronouncements Recently Adopted
In August 2020, the FASB issued ASU 2020-06, “Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40),” to address the complexity in accounting for certain financial instruments with characteristics of liabilities and equity. Amongst other provisions, the amendments in this ASU significantly changed the guidance on the issuer’s accounting for convertible instruments and the guidance on the derivative scope exception for contracts in an entity’s own equity such that fewer conversion features will require separate recognition, and fewer freestanding instruments, like warrants, will require liability treatment. For smaller reporting companies, ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The Company adopted the new standard on January 1, 2022, with no impact to its financial statements.
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 six months ended June 30, 2022, and 2021:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Basic and Diluted EPS Computation | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Loss available to common stockholders' | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Denominator: | ||||||||||||||||
| Weighted average number of common shares outstanding | ||||||||||||||||
| Basic and diluted EPS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| 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 | ||||||||||||||||
| Warrants | ||||||||||||||||
| Total shares not included in the computation of diluted losses per share | ||||||||||||||||
7
Note 2. Assets – Intellectual Property
On
July 12, 2013, the Company, together with its wholly owned subsidiary, RenovaCare Sciences, Inc., entered into an Asset Purchase Agreement,
pursuant to which RenovaCare Sciences purchased all the rights, title and interest in the CellMistTM System. Acquisition
related costs amounted to $
During
the three months ended June 30, 2022, the Company recorded an impairment of the full carrying value of the intangible asset of $
Note 3. Prepaid Expenses
Prepaid expenses and other current assets consist of the following:
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Prepaid stock options for services | ||||||||
| Prepaid professional fees | ||||||||
| Prepaid research and development expense | ||||||||
| Other prepaid costs | ||||||||
| Refunds due | ||||||||
| Total prepaid expenses | $ | $ | ||||||
Note 4. Related Party Convertible Promissory Note
On
March 18, 2022, the Company issued an Unsecured Convertible Promissory Note (the “Unsecured Note”) to Kalen Capital.
Pursuant to the terms of the Unsecured Note, Kalen Capital loaned the Company $
During the three
and six months ended June 30, 2022, the Company recognized $
Note 5. Accounts Payable and Accrued Liabilities
Accounts payable and accrued expenses consists of the following:
| June
30, 2022 | December
31, 2021 | |||||||
| Legal fees and related | $ | $ | ||||||
| Officer compensation | ||||||||
| Consultants | ||||||||
| Trade payables | ||||||||
| Related party payables | ||||||||
| Total | $ | $ | ||||||
8
Note 6. Equity
Common Stock
At June 30, 2022, the Company had authorized shares of common stock with a par value of $per share and shares of common stock outstanding.
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 June 30, 2022 and December 31, 2021:
| Shares of Common Stock Issuable from Warrants Outstanding as of | Weighted | |||||||||||||||
| June 30, | December 31, | Average | ||||||||||||||
| Description | 2022 | 2021 | Exercise Price | Expiration | ||||||||||||
| Series F | $ | |||||||||||||||
| Series G | $ | |||||||||||||||
| Series H | $ | |||||||||||||||
| Series I | $ | |||||||||||||||
| Total | ||||||||||||||||
No warrants were exercised during the three months ended June 30, 2022.
Stock Options
The following table summarizes stock option activity for the six months ended June 30, 2022:
Number of Options | Weighted Average Exercise Price ($) | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value ($) | |||||||||||||
| Outstanding at December 31, 2021 | ||||||||||||||||
| Granted | ||||||||||||||||
| Forfeited | ( | ) | ||||||||||||||
| Outstanding at June 30, 2022 | ||||||||||||||||
| Outstanding at June 30, 2022 | years | - | ||||||||||||||
| Vested and exercisable at June 30, 2022 | years | - | ||||||||||||||
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 six months ended June 30, 2022 and 2021:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Research and development | $ | $ | $ | $ | ||||||||||||
| General and administrative | ( | ) | ( | ) | ||||||||||||
| Total | $ | $ | $ | $ | ( | ) | ||||||||||
Note 7. 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 (the “Premises”). Monthly base rent in year one of the lease is $
9
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 June 30, 2022, 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 June 30, | As of December 31, | |||||||
| 2022 | 2021 | |||||||
| Operating lease right-of-use asset | $ | $ | ||||||
| Current maturities of operating lease | $ | $ | ||||||
| Current maturities of operating lease in accounts payable | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
| Weighted Average remaining lease term (in years): | ||||||||
Supplemental information for the six months ended June 30, 2022 and 2021:
| 2022 | 2021 | |||||||
| Cash paid for amount included in the measurement of lease liabilities for operating lease | $ | $ | ||||||
Note 8. Commitments and Contingencies
Stem Cell Systems (SCS)
In
connection with the Company’s anticipated future regulatory filings, the Company has engaged StemCell Systems GmbH (“StemCell
Systems”) to provide it with medical device prototypes and related design documents and data 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 $
On
April 28, 2022 the Company provided StemCell Systems with notice of termination of the Strategic Agreement. Pursuant to the terms of
the Strategic Agreement, upon cancelation, the Company recognized a termination fee equal to 12 months of the base monthly fee and totaling
$
10
Legal Proceedings
SEC Civil Complaint
On May 28, 2021 the SEC filed a civil complaint (the “SEC Action”), in the United States District Court for the Southern District of New York, naming the Company and Harmel S. Rayat, the Company’s current President, Chief Executive Officer, Chief Financial Officer and Sole Director as defendants (the “Defendants”). The SEC Action alleges among other things that Mr. Rayat and the Company with violated the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and also alleges that Mr. Rayat aided and abetted the violations of those provisions by the Company. The SEC Action also alleges that the Company violated the reporting provisions of Exchange Act Section 15(d) and Rules 15d-11 and 12b-20 thereunder. The SEC seeks, among other relief, 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 an answer 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 continues to defend itself and the named individuals against the allegations set forth in the SEC Action. Due to the nature and early stage of the SEC Action, the Company is unable to estimate the total costs to defend itself or the potential costs to the Company in the event that it is not successful in its defense.
Class Action Complaints
On July 16, 2021, Gabrielle A. Boller filed a class action lawsuit in the U.S. District Court for the District of New Jersey (the “Boller Lawsuit”), against the Company and certain past and current officers and members of the Company’s board of directors (collectively, the “Boller Defendants”). The Boller Lawsuit alleges, among other things, that in connection with the facts and circumstances underlying the allegations in the SEC Action, the Boller Defendants 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 plaintiff seeks a determination that the Boller Lawsuit is a proper class action, compensatory damages in favor of the plaintiff and other class members, reasonable costs and expenses incurred in the Boller Lawsuit, including counsel fees and expert fees, and such other relief as the Court may deem proper.
The Company disputes the plaintiffs’ claims in the Boller Lawsuit and intends to defend these matters vigorously. To that end, the Company has engaged counsel to defend the Boller Defendants. Given the uncertainty of litigation, the preliminary stage of these cases, the legal standards that must be met for, among other things, class certification and success on the merits, the Company cannot estimate the reasonably possible loss or range of loss that may result from these actions.
On July 21, 2021, Michael Solakian, filed a class action lawsuit in the U.S. District Court for the District of New Jersey (the “Solakian Lawsuit”), against the Company and certain past and current officers and members of the Company’s board of directors (collectively, the “Solakian Defendants”). The Solakian Lawsuit alleges, among other things, that in connection with the facts and circumstances underlying the allegations in the SEC Action, the Solakian Defendants 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 plaintiff seeks a determination that the Solakian Lawsuit is a proper class action, compensatory damages in favor of the plaintiff and other class members, reasonable costs and expenses incurred in the Solakian Lawsuit, including counsel fees and expert fees, and such other relief as the Court may deem proper.
The Company disputes the plaintiffs’ claims in the Solakian Lawsuit and intends to defend these matters vigorously. To that end, the Company has engaged counsel to defend the Solakian Defendants. Given the uncertainty of litigation, the preliminary stage of these cases, the legal standards that must be met for, among other things, class certification and success on the merits, the Company cannot estimate the reasonably possible loss or range of loss that may result from these actions.
11
Shareholder Derivative Complaints
On December 20, 2021, Melvin Emberland (“Emberland”), derivatively and on behalf of nominal defendant Renovacare, Inc. filed a lawsuit (the “Emberland Lawsuit”) in the United States District Court for the District of New Jersey against the Company and certain of its current and former executive officers (the “Emberland Defendants”). In the complaint, Emberland’s allegations, relating to the facts and circumstances underlying the allegations in the SEC Action include, but are not limited to (i) breach of fiduciary duties by the individual Emberland Defendants, (ii) unjust enrichment and (iii) violation of Section 10(b) and 21D of the Securities Exchange Act of 1934. Emberland did not quantify any alleged damages in his complaint but, in addition to attorneys’ fees and costs, Emberland seeks (i) a declaration that the Emberland Defendants have breached and/or aided and abetted the breach of their fiduciary duties to the Company, (ii) a determination awarding to the Company restitution from the Meyer Defendants, and each of them, and ordering disgorgement of all profits, benefits and other compensation obtained by the Emberland Defendants, (iii) a directive to the Company and the Emberland Defendants to take all necessary actions to reform and improve the Company’s corporate governance and internal procedures to comply with applicable laws, and (iv) Plaintiff is seeking, among other things, restitution from the individual Emberland Defendants and disgorgement of profits, benefits and other compensation obtained by such Emberland Defendants, costs and disbursements of the action including reasonable attorney’s fees, accountants’ and expert fees and expenses, an order directing the taking of certain corporate actions relating to its board of directors and corporate governance.
The Company disputes Emberland’s claims and intends to defend these matters vigorously. To that end, the Company has engaged counsel to defend the Emberland Defendants. Given the uncertainty of litigation, the preliminary stage of the Emberland Lawsuit, the legal standards that must be met for success on the merits, the Company cannot estimate the reasonably possible loss or range of loss that may result from these actions.
On January 6, 2022, Zoser Vargas (“Vargas”), derivatively and on behalf of nominal defendant Renovacare, Inc. filed a lawsuit (the “Vargas Lawsuit”) in the United States District Court for the District of New Jersey against the Company and certain of its current and former executive officers (the “Vargas Defendants”). In the complaint Vargas’ allegations relating to the facts and circumstances underlying the allegations in the SEC Action include but are not limited to, (i) breach of fiduciary duties, (ii) waste of corporate assets, (iii) violation of law, and (iii) unjust enrichment. Vargas did not quantify any alleged damages in his complaint but, in addition to attorneys’ fees and costs, Vargas seeks, in addition to other things, (i) against the Vargas Defendants and in favor of the Company the amount of damages sustained by the Company as a result of the Vargas Defendants’ breaches of fiduciary duties, waste of corporate assets and unjust enrichment, (ii) directive for the Company to take all necessary actions to improve its corporate governance and internal procedures to comply with applicable law and (iii) awarding to the Company restitution from the Vargas Defendants, and each of them, and ordering disgorgement of all profits, benefits and other compensation obtained by the Vargas Defendants.
The Company disputes Vargas’ claims and intends to defend these matters vigorously. To that end, the Company has engaged counsel to defend the Vargas Defendants. Given the uncertainty of litigation, the preliminary stage of these cases, the legal standards that must be met for success on the merits, the Company cannot estimate the reasonably possible loss or range of loss that may result from these actions.
On January 28, 2022, Aviva Meyer (“Meyer”), derivatively and on behalf of nominal defendant Renovacare, Inc. filed a lawsuit (the “Meyer Lawsuit”) in the United States District Court for the District of New Jersey against the Company and certain of its current and former executive officers (the “Meyer Defendants”). In the complaint Meyer’s allegations relating to the facts and circumstances underlying the allegations in the SEC Action include but are not limited to, (i) breach of fiduciary duties, (ii) waste of corporate assets, (iii) violation of law, and (iii) unjust enrichment. Meyer did not quantify any alleged damages in his complaint but, in addition to attorneys’ fees and costs, Meyer seeks, in addition to other things, (i) against the Meyer Defendants and in favor of the Company the amount of damages sustained by the Company as a result of the Meyer Defendants’ breaches of fiduciary duties, waste of corporate assets and unjust enrichment, (ii) directive for the Company to take all necessary actions to improve its corporate governance and internal procedures to comply with applicable law and (iii) awarding to the Company restitution from the Meyer Defendants, and each of them, and ordering disgorgement of all profits, benefits and other compensation obtained by the Meyer Defendants.
The Company disputes Meyer’s claims and intends to defend these matters vigorously. To that end, the Company has engaged counsel to defend the Meyer Defendants Given the uncertainty of litigation, the preliminary stage of these cases, the legal standards that must be met for success on the merits, the Company cannot estimate the reasonably possible loss or range of loss that may result from these actions.
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On March 28, 2022, Peter Rigsby (“Rigsby”), derivatively and on behalf of nominal defendant Renovacare, Inc. filed a lawsuit (the “Rigsby Lawsuit”) in the Eight Judicial District Court of the State of Nevada in and for Clark County, against the Company and certain of its current and former executive officers (the “Rigsby Defendants”). In the complaint Rigsby’s allegations relating to the facts and circumstances underlying the allegations in the SEC Action include but are not limited to, (i) breach of fiduciary duties, (ii) waste of corporate assets, (iii) violation of law, and (iii) unjust enrichment. Rigsby did not quantify any alleged damages in his complaint but, in addition to attorneys’ fees and costs, Rigsby seeks, in addition to other things, (i) against the Rigsby Defendants and in favor of the Company the amount of damages sustained by the Company as a result of the Rigsby Defendants’ breaches of fiduciary duties, waste of corporate assets and unjust enrichment, (ii) directive for the Company to take all necessary actions to improve its corporate governance and internal procedures to comply with applicable law and (iii) awarding to the Company restitution from the Rigsby Defendants, and each of them, and ordering disgorgement of all profits, benefits and other compensation obtained by the Rigsby Defendants.
On May 19, 2022, Helen Medrano (“Medrano”), derivatively and on behalf of nominal defendant Renovacare, Inc. filed a lawsuit (the “Medrano Lawsuit”) in the Superior Court of Arizona against the Company and certain of its current and former executive officers (the “Medrano Defendants”). In the complaint Medrano’s allegations relating to the facts and circumstances underlying the allegations in the SEC Action include but are not limited to, (i) breach of fiduciary duties, (ii) conspiracy, aiding and abetting, (iii) violation of law, and (iii) unjust enrichment. Medrano did not quantify any alleged damages in her complaint but, in addition to attorneys’ fees and costs, Medrano seeks, in addition to other things, (i) against the Medrano Defendants and in favor of the Company the amount of damages sustained by the Company as a result of the Medrano Defendants’ breaches of fiduciary duties, waste of corporate assets and unjust enrichment, (ii) directive for the Company to take all necessary actions to improve its corporate governance and internal procedures to comply with applicable law and (iii) awarding to the Company restitution from the Medrano Defendants, and each of them, and ordering disgorgement of all profits by the Medrano Defendants.
The Company believes that the claims asserted in the SEC Action, the Boller Lawsuit, the Solakian Lawsuit, the Emberland Lawsuit, the Vargas Lawsuit, the Meyer Lawsuit, the Rigsby Lawsuit and the Medrano Lawsuit (collectively, the “Lawsuits”) are without merit and intends to vigorously defend each Lawsuit.
Note 9. Related Party Transactions
During
the three months ended June 30, 2022, Mr. Harmel S. Rayat, made payments totaling $
Note 10. Subsequent Events
Management has reviewed material events subsequent of the period ended June 30, 2022 and prior to the filing of financial statements in accordance with FASB ASC 855 “Subsequent Events”.
In
July 2022, the company’s facility lease expired and was not renewed. The Company, sold all office funiture for proceeds of $
On
July 25, 2022, the Company, Harmel S. Rayat, Wilmer Cutler Pickering Hale and Dorr LLP (“WilmerHale”) and AIG Claims
(collectively, the “Parties”), Inc. entered into a Confidential Policy Release and Settlement Agreement pursuant to
which, the Parties reached agreement on the disbursement of the remainder of the funds available to the Company pursuant to its Directors
& Officers insurance policy issued by National Union Fire Insurance Company of Pittsburgh. The remaining funds available totaled
$
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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. |
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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
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. The CellMist™ System also includes our unique, closed, automated cell isolation device (the “CID”) to harvest stem cells from tissues which is in prototype development.
Currently, our proprietary technologies are the subject of forty-four (44) U.S. and foreign granted or pending patents or patent applications and seventeen (17) U.S. and foreign trademarks. Of the issued patents, five (5) are U.S. patents and seventeen (17) have issued or are allowed in Australia, Canada, China, Europe, Germany, France, Italy, Japan, Korea, Netherlands, Spain, Switzerland/Lichtenstein, and the United Kingdom. The Company has six (6) allowed trademarks in the United States, two (2) European registered trademarks, two (2) United Kingdom trademarks, two (2) Japan trademarks, and two (2) pending in Canada.
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, designed to 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 designated to enroll 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.
During the end of Q1 2022, the Board decided to stop enrollment of patients into the clinical trial and take other measures to reduce the Company’s overhead in an effort to conserve financial resources as it continues to defend against the Lawsuits; however, medical evaluation of the treated subjects will continue periodically as scheduled in the clinical protocol at the clinical study site until October 2022, when the study concludes. The Company hopes to restart the clinical trial at a future date upon the occurrence of a favorable outcome against the Lawsuits and with additional financing.
Research, development and commercialization of new technologies generally requires significant financial resources, involves a high degree of risk, and there is no assurance that development activities will result in a commercially viable product. 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 defends itself against the Lawsuits (as defined in “Part 2-Other Information, Item 1. Legal Proceedings”). The Company will need to raise additional capital through partnerships or the sale of securities to accomplish its business plan. Failing to secure such additional funding poses a significant risk. The Company's ability to meet its financial obligations, including 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.
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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.
Operating Expenses
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 trial. |
| · | 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, our operation as a public company and to defend against the Lawsuits.
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 expense consists of the interest payable under our convertible note. 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 to the extent available up to the policy limit of $2,000,000.
Income Taxes
We have yet to generate taxable income. We have historically incurred operating losses resulting in carry forward tax losses totaling approximately $21,945,000 as of December 31, 2021. 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.
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Results of Operations
Comparison of Three and Six Months Ended June 30, 2022 and 2021
Research and Development Expenses
Three Months Ended June 30, | Increase / | Six Months Ended June 30, | Increase / | |||||||||||||||||||||
| 2022 | 2021 | (Decrease) | 2022 | 2021 | (Decrease) | |||||||||||||||||||
| Manufacturing clinical supplies(1) | $ | 17,996 | $ | 31,887 | $ | (13,891 | ) | $ | 31,715 | $ | 248,071 | $ | (216,356 | ) | ||||||||||
| Personnel related(2) | 66,303 | 115,503 | (49,200 | ) | 184,176 | 269,978 | (85,802 | ) | ||||||||||||||||
| Stock-based compensation(3) | 217,500 | 228,625 | (11,125 | ) | 435,000 | 507,438 | (72,438 | ) | ||||||||||||||||
| Clinical trials(4) | 41,655 | 219,601 | (177,946 | ) | 195,370 | 525,957 | (330,587 | ) | ||||||||||||||||
| Regulatory | 300 | 12,072 | (11,772 | ) | 5,016 | 21,904 | (16,888 | ) | ||||||||||||||||
| All other(5) | 35,650 | 96,881 | (61,231 | ) | 124,380 | 185,514 | (61,134 | ) | ||||||||||||||||
| $ | 379,404 | $ | 704,569 | $ | (325,165 | ) | $ | 975,657 | $ | 1,758,862 | $ | (783,205 | ) | |||||||||||
| (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 used in our clinical trial which mostly tailed off during the quarter ended June 30, 2022. |
| (2) | Personnel related expenses decreased primarily due to the suspension of the clinical trial. |
| (3) | Stock compensation expense relates to the stock purchase options granted to R&D related personnel. |
| (4) | In 2020 and early 2021, the Company’s incurred certain costs in preparation for its clinical trial during which time the set-up costs were mostly completed with future clinical trial costs expected to fluctuate depending on the number of enrollees into the clinical trial. During the three and six months ended June 30, 2022 compared to the same periods in 2021, clinical trial expenses decreased primarily due to the completion of the set-up costs and subsequent enrollment of only two patients. As a result of the decision during Q1 2022 to stop enrollment, clinical trial expenses have and are expected to continue to decrease. |
| (5) | All other expenses relate primarily to the prototype development of the electronic SkinGun™ and cell isolation device at StemCell Systems. The costs have and are expected to decrease significantly due to the Company’s cancellation of the Strategic Agreement dated April 28, 2022. |
General and Administrative Expenses
Three Months Ended June 30, | Increase / | Six Months Ended June 30, | Increase / | |||||||||||||||||||||
| 2022 | 2021 | (Decrease) | 2022 | 2021 | (Decrease) | |||||||||||||||||||
| Personnel related(1) | $ | 43,594 | $ | 238,911 | $ | (195,317 | ) | $ | 172,904 | $ | 468,363 | $ | (295,459 | ) | ||||||||||
| Stock-based compensation(2) | - | (29,026 | ) | 26,026 | 5,500 | (1,182,601 | ) | 1,188,101 | ||||||||||||||||
| Professional and consultant fees(3) | 1,252,502 | 141,682 | 1,110,820 | 2,238,459 | 425,473 | 1,812,986 | ||||||||||||||||||
| All other(4) | 453,159 | 49,243 | 403,916 | 478,949 | 152,531 | 326,418 | ||||||||||||||||||
| Total G&A Expense | $ | 1,749,255 | $ | 400,810 | $ | 1,348,445 | $ | 2,895,812 | $ | (136,234 | ) | $ | 3,032,046 | |||||||||||
| (1) | Personnel related costs decreased due to lower headcount. |
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| (2) | All stock options issued to G&A related personnel fully vested in Q1 2022. Stock compensation expense in 2021 decreased due to the forfeiture and cancellation of 2,730,571 stock options as a result of the resignation of the Company’s former Chairman, President and Chief Executive 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 $1,248,575 reversal of the prior recognized compensation expense related to the cancelled options. |
| (3) | Professional and consultant fees increased primarily due to an increase in legal fees related to the Lawsuits. During the three months ended June 30, 2022, the Company incurred $50,100 in fees related to patents and trademarks, $1,192,402 in legal fees related to the Lawsuits, and $10,000 related to the preparation and audit of our financial statements and related filings with the SEC. During the six months ended June 30, 2022, the Company incurred $99,367 in fees related to patents and trademarks, $2,056,342 in legal fees related to the Lawsuits, $39,000 related to the preparation and audit of our financial statements and related filings with the SEC, and $43,750 for other legal related costs. The Company is obligated, pursuant to its bylaws, to indemnify its directors and officers. As a result, all legal costs related to the Lawsuits are recorded to the books of the Company. Insurance proceeds to cover the cost of the Company’s defense against the Lawsuits is recorded to other income at the time of receipt. |
| (4) | All other costs increased primarily due to the inclusion of $372,000 termination fee related to the Company’s cancellation of the Strategic Agreement with Stem Cell Systems in April 2022 and $36,687 of travel and lodging costs paid by Mr. Rayat related to the Lawsuits and incurred during Q2. |
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. During the six months ended June 30, 2022 and 2021, the Company has incurred operating losses of $3,871,000 and $1,622,000, respectively, and has used cash in operating activities of $3,405,000 and $3,070,000, respectively. The Company expects to incur losses as it continues to fund its legal defense and scaled-back development of its products and technologies.
At June 30, 2022, the Company had current and total liabilities of $1,887,671 and $2,689,985 respectively, including $1,271,925 of current liabilities related to its defense against the Lawsuits compared to $1,395,107 of current assets. As of June 30, 2022, the Company’s working capital totaled negative $492,564 not including approximately $1,042,000 in proceeds expected to be realized under its D&O Policy with AIG during Q3 2022. In order to preserve its cash resources, the Company has taken measures to streamline operations, including ending enrollment of patients into its clinical trial, renegotiating and terminating certain agreements and service arrangements and entered into a loan agreement with Kalen Capital Corporation, an Alberta Canada corporation (“Kalen Capital”) which is wholly-owned by the Mr. Harmel S. Rayat, the Company’s President, Chief Executive Officer and Chairman, for $800,000 on March 18, 2022. As a result of the actions taken, the Company has temporarily improved its ability to remain solvent. However, due to the nature and stage of the Lawsuits, the Company is unable to estimate the total costs to defend itself or the potential costs to the Company in the event that it is not successful in its defense. As a result, the Company estimates cash on hand will be insufficient for the twelve months following the date these financial statements are issued.
Historically, the Company has been funded through the sale of equity securities and debt financings. 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. Although the Company has instituted cost savings measures, it will continue to assess its ongoing expenses.
Fair Value of Financial Instruments and Risks
The carrying value of cash, accounts payable and interest payable approximate their fair value because of the short-term nature of these instruments and their liquidity. It is not practical to determine the fair value of the Company’s notes payable due to the complex terms. Management is of the opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments.
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Market Risk Disclosures
We have not entered into derivative contracts either to hedge existing risks or for speculative purposes during the six months ended June 30, 2022 and the subsequent period through the date of this report.
Off-Balance Sheet Arrangements and Contractual Obligations
As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities (SPEs), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually limited purposes. As of June 30, 2022, we were not involved in any SPE transactions.
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
During the three months ended June 30, 2022, Mr. Harmel S. Rayat, made payments totaling $36,687 for travel and lodging costs related to the Lawsuits. No reimbursements have been made as of the date of this quarterly report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates. We do not hold or issue financial instruments for trading purposes.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Interim Chief Executive Officer and Interim Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), as of the end of the period covered by this quarterly report. Based on this evaluation, our Interim Chief Executive Officer and Interim Chief Financial Officer concluded that as of June 30, 2022, that our disclosure controls and procedures were effective such that the information required to be disclosed in our SEC filings is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial 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 8 to our unaudited consolidated financial statements for information on certain legal proceedings, which is incorporated by reference herein.
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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 2021. 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.
Item 6. Exhibits
| Exhibit No. | Description of Exhibit | |
| 31.1 | Certification of the Principal Executive Officer and 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. |
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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: August 12, 2022 | By: | /s/ Harmel S. Rayat | |
| Name: | Harmel S. Rayat | ||
| Title: | Interim President & Chief Executive Officer, and Interim Chief Financial Officer | ||
| (Principal Executive Officer and Principal Financial Officer) |
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