(The accompanying notes are an integral part of these consolidated financial statements)
(The accompanying notes are an integral part of these consolidated financial statements)
(The accompanying notes are an integral part of these consolidated financial statements)
(The accompanying notes are an integral part of these consolidated financial statements)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1.
Basis of Presentation, Organization,
Nature and Continuance of Operations
, Recent Accounting Pronouncements and
Earnings (Loss) Per Share
Basis of Presentation
The unaudited financial statements of RenovaCare, Inc. (the “Company”) as of June 30, 2018, and for the three and six months ended June 30, 2018 and 2017, have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States for interim financial reporting and include the Company’s wholly-owned subsidiary, RenovaCare Sciences. Accordingly, they do not include all of the disclosures required by accounting principles generally accepted in the United States for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2017, as filed with the Securities and Exchange Commission as part of the Company’s Form 10-K. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the interim financial information have been included. 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., together with its wholly owned subsidiary, focuses on the acquisition, research, development and, if warranted, commercialization of autologous (using a patient's own cells) cellular therapies that can be used for medical and aesthetic applications.
On July 12, 2013, the Company, through its wholly owned subsidiary, RenovaCare Sciences Corp., completed the acquisition of its flagship technologies (collectively, the “
CellMist
TM
System
”) along with associated United States patent applications and two foreign patent applications, the first of which was filed on August 23, 2007 (DE 10 2007 040 252.1) and the second of which was filed on April 27, 2011 (DE 10 2011 100 450.9), both of which have been granted. One of the US patent applications was granted on November 29, 2016 (Patent No. US 9,505,000) and the other patent application was granted on April 4, 2017 (Patent No. US 9,610,430).
The CellMist
TM
System is comprised of (a) a treatment methodology for cell isolation for the regeneration of human skin cells (the “
CellMist
TM
Solution
”) and (b) a solution sprayer device (the “
SkinGun
TM
”) for delivering the cells to the treatment area. The Company has filed additional patent applications related to the CellMist
TM
Solution and SkinGun
TM
technologies.
Nature and Continuance of Operations
The Company does not have any commercialized products. The Company's activities have consisted principally of performing research and development activities and raising capital. These development activities are subject to significant risks and uncertainties, including possible failure of preclinical testing. The Company has not generated any revenue since inception and has sustained recurring losses and negative cash flows from operations since inception. The Company expects to incur losses as it continues development of its products and technologies and expects that it will need to raise additional capital through the sale of its securities to accomplish its business plan and failing to secure such additional funding before achieving sustainable revenue and profit from operations poses a significant risk. The Company's ability to fund the development of its cellular therapies will depend on the amount and timing of cash receipts from future financing activities. There can be no assurance as to the availability or terms upon which such financing and capital might be available.
As of December 31, 2017, the Company had approximately $2,906,000 of cash on hand and current liabilities of $269,000. On February 13, 2018, the Company received $110,000 upon the exercise of 100,000 Series D Warrants. As of June 30, 2018, the Company had approximately $1,953,000 of cash on hand. The Company believes that it currently has sufficient cash to meet its funding requirements over the next year. Therefore, the conditions which initially indicated substantial doubt about the Company’s ability to continue as a going concern have been alleviated.
The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplates continuation of the Company as a going concern, which is dependent upon the Company’s ability to establish itself as a profitable business.
Recent Accounting Pronouncements
Any reference in these notes to applicable accounting guidance is meant to refer to the authoritative non-governmental US GAAP as found in the Financial Accounting Standards Board's Accounting Standards Codification.
In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-11,
Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815).
The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company has determined that the adoption of ASU 2017-11 will currently have no impact on its consolidated financial statements.
In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718), Scope of Modification Accounting. The amendments in this Update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for public business entities for reporting periods for which financial statements have not yet been issued. The Company adopted the guidance under ASU 2017-09 with no material impact on its consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, which supersedes ASC Topic 840, Leases, and creates a new topic, ASC Topic 842, Leases. ASU 2016-02 requires lessees to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on its balance sheet. ASU 2016-02 also expands the required quantitative and qualitative disclosures surrounding leases. ASU 2016-02 is effective for the Company beginning January 1, 2019. Early adoption is permitted. The Company has determined that the adoption of ASU 2016-02 will currently have no impact on its consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, to clarify the principles used to recognize revenue for all entities. In March 2016, the FASB issued ASU 2016-08 to further clarify the implementation guidance on principal versus agent considerations. The guidance is effective for annual and interim periods beginning after December 15, 2017, and early adoption is permitted. The Company has determined that the adoption of ASU 2014-09 did not have an impact on the consolidated financial statements.
The Company reviews new accounting standards as issued. Although some of these accounting standards issued or effective after the end of the Company’s previous fiscal year may be applicable, the Company has not identified any standards that the Company believes merit further discussion other than as discussed above. The Company believes that none of the new standards will have a significant impact on the financial statements.
Earnings (Loss) Per Share
The Company presents both basic and diluted earnings per share (“EPS”) amounts. Basic EPS is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period presented. Diluted EPS amounts are based upon the weighted average number of common and common equivalent shares outstanding during the period presented. The Company has not included the effects of warrants, stock options and convertible debt 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, 2018 and 2017:
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Basic and Diluted EPS Computation
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss available to common stockholders'
|
|
$
|
(465,479
|
)
|
|
$
|
(1,270,376
|
)
|
|
$
|
(1,114,626
|
)
|
|
$
|
(1,842,200
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
76,840,522
|
|
|
|
74,653,184
|
|
|
|
76,668,585
|
|
|
|
73,174,724
|
|
Basic and diluted EPS
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
357,500
|
|
|
|
545,000
|
|
|
|
357,500
|
|
|
|
545,000
|
|
Warrants
|
|
|
3,011,912
|
|
|
|
2,228,908
|
|
|
|
3,011,912
|
|
|
|
2,228,908
|
|
Convertible debt
|
|
|
670,757
|
|
|
|
633,656
|
|
|
|
670,757
|
|
|
|
633,656
|
|
Total shares not included in the computation of diluted losses per share
|
|
|
4,040,169
|
|
|
|
3,407,564
|
|
|
|
4,040,169
|
|
|
|
3,407,564
|
|
Note 2. Assets – Intellectual Property
On July 12, 2013, the Company, together with its wholly owned subsidiary, RenovaCare Sciences, entered into an asset purchase agreement (“APA”) with Dr. Jörg Gerlach, MD, PhD, pursuant to which RenovaCare Sciences purchased all of Dr. Gerlach’s rights, title and interest in the CellMist
TM
System. Acquisition related costs amounted to $52,852 and were capitalized together with the cash payment upon the closing of the transaction in July 2013 of $100,002. Intangible assets amounted to $152,854 at June 30, 2018 and December 31, 2017.
Note 3. Contract Payable
On June 9, 2014, the Company, together with its wholly owned subsidiary, RenovaCare Sciences, entered into an amended asset purchase agreement (the “Amended APA”) with Dr. Jörg Gerlach, MD, PhD, pursuant to which RenovaCare Sciences purchased all of Dr. Gerlach's rights, title and interest in the CellMist
TM
System. The Amended APA provided for cash payments of $300,000 as partial consideration for the purchase with the final payment due of $100,000 paid on January 24, 2018.
See also “Note 8. Related Party Transactions.”
Note 4. Debt
As of June 30, 2018 and December 31, 2017, the Company had the following outstanding debt balances:
|
|
Issue
|
|
Maturity
|
|
|
|
|
Debt
|
|
|
|
|
|
Interest
|
|
|
|
Date
|
|
Date
|
|
Principal
|
|
|
Discount
|
|
|
Balance
|
|
|
Payable
|
|
As of June 30, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 2017 Note as amended
|
|
2/23/2017
|
|
12/31/2019
|
|
$
|
395,000
|
|
|
$
|
-
|
|
|
$
|
395,000
|
|
|
$
|
38,747
|
|
September 2016 Note as amended
|
|
9/9/2016
|
|
12/31/2019
|
|
|
700,000
|
|
|
|
-
|
|
|
|
700,000
|
|
|
|
93,446
|
|
|
|
|
|
|
|
$
|
1,095,000
|
|
|
$
|
-
|
|
|
$
|
1,095,000
|
|
|
$
|
132,193
|
|
As of December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 2017 Note as amended
|
|
2/23/2017
|
|
12/31/2019
|
|
$
|
395,000
|
|
|
$
|
(58,438
|
)
|
|
$
|
336,562
|
|
|
$
|
24,074
|
|
September 2016 Note as amended
|
|
9/9/2016
|
|
12/31/2019
|
|
|
700,000
|
|
|
|
-
|
|
|
|
700,000
|
|
|
|
66,604
|
|
|
|
|
|
|
|
$
|
1,095,000
|
|
|
$
|
(58,438
|
)
|
|
$
|
1,036,562
|
|
|
$
|
90,678
|
|
February 2017 Convertible Promissory Notes
Between February 23, 2017 and March 9, 2017, the Company entered into three separate loan agreements containing identical terms (the “
February 2017 Loan Agreements
”) with Joseph Sierchio (“
Sierchio
”), an investor (the “
Investor
”) and Kalen Capital Corporation (“
KCC
”); KCC is wholly owned by Mr. Harmel S. Rayat, the Company's majority shareholder and Chairman and CEO (collectively, the “
Holders
”). Pursuant to the terms of the February 2017 Loan Agreements, Sierchio and the Investor each agreed to loan the Company $25,000 ($50,000 total) and KCC agreed to loan the Company $395,000 at an annual interest rate of 7% per year, compounded quarterly. Each loan was evidenced by a convertible promissory note (collectively, the “
February 2017 Notes
”). The February 2017 Notes, including any interest due thereon, may not be prepaid without the consent of the Holders. The February 2017 Notes were initially due on February 23, 2018, and, beginning on the one month anniversary, can be converted, at the Holders’ sole discretion, into shares of the Company’s common stock at conversion rate equal to the lesser of: (i) $3.45, the closing price of the Company’s common stock on the day prior to the issuance of the February 2017 Notes or (ii) a 20% discount to the average closing price of the Company’s common stock for the five days prior to the date on which the Holder(s) elect to convert the February 2017 Note(s), subject to a floor price of $2.76.
Per the February 2017 Loan Agreement, the Company issued Sierchio, the Investor and KCC a Series F Stock Purchase Warrant (the “
Series F Warrant
”) to purchase up to 7,246 shares, 7,246 shares and 114,493 shares, respectively, of the Company’s common stock at an exercise price per share equal to the lesser of: (i) $3.45, the closing price of the Company’s common stock on the day prior to issuance of the Series F Warrant; or (ii) a 20% discount to the average closing price of the Company’s common stock for the five days prior to the date on which the Holder elects to exercise their Series F Warrant. The Series F Warrant is exercisable for a period of five years from the date of issuance and may be exercised on a cashless basis.
The Company calculated the fair value of the Series F Warrants and intrinsic value of the beneficial conversion feature which resulted in a $443,286 discount to the February 2017 Notes which was fully accreted on March 31, 2018.
The February 2017 Loan Agreements provide the Holders with registration rights for all of the shares issuable upon conversion of the February 2017 Notes, including exercise of the Series F Warrants, beginning on the first anniversary of the February 2017 Loan Agreements.
During 2017, the Company repaid the Investor and Sierchio in full, including total note principal of $50,000 and total accrued interest of $1,825.
On January 29, 2018, KCC and the Company entered into an Amendment No. 1 to the February 2017 Note whereby the maturity date of the KCC February Note was extended from February 23, 2018 to December 31, 2019. Except for the extension of the maturity date, the February Note was not otherwise amended and continues in full force and effect.
During the three months ended June 30, 2018 and 2017, the Company recognized $7,440 and $7,819, respectively, of interest expense. During the six months ended June 30, 2018 and 2017, the Company recognized $14,673 and $10,824, respectively, of interest expense. During the three months ended June 30, 2018 and 2017, the Company recognized $0 and $110,517, respectively, of accretion related to the debt discount. During the six months ended June 30, 2018 and 2017, the Company recognized $58,438 and $153,347, respectively, of accretion related to the debt discount.
September 9, 2016 Convertible Promissory Note
On September 9, 2016, the Company entered into a loan agreement (the “
Loan Agreement
”) with KCC. Pursuant to the terms of the Loan Agreement, KCC loaned the Company $700,000 at an annual interest rate of 7% per year, compounded quarterly, which was evidenced by a convertible promissory note (the “
Note
”). The Note, including any interest due thereon, may be prepaid at any time without penalty. The Note matured on December 31, 2017, but was extended to December 31, 2019 pursuant to the Amendment No. 1, dated as of January 29, 2018, to the Note. Except for the extension of the maturity date, the Note was not otherwise amended and continues in full force and effect. Beginning on September 9, 2017, the Note became convertible, at KCC’s sole discretion, into shares of our common stock at conversion rate equal to the lesser of: (i) $1.54, the closing price of our common stock on the day prior to the issuance of the Note or (ii) a 20% discount to the average closing price of our common stock for the five days prior to the date on which KCC elects to convert the Note, subject to a floor price of $1.23 per share.
Per the Loan Agreement, the Company issued KCC a Series E Stock Purchase Warrant (the “
Series E Warrant
”) to purchase up to 584,416 shares of the Company’s common stock at a purchase price of the lesser of: (i) $1.54, the closing price of the Company’s common stock on the day prior to issuance of the Series E Warrant; or (ii) a 20% discount to the average closing price of the Company’s common stock for the five days prior to the date on which KCC elects to exercise the Series E Warrant. The Series E Warrant is exercisable for a period of five years from the date of issuance and may be exercised on a cashless basis.
The Loan Agreement provides KCC with registration rights for all of the shares issuable upon conversion of the Note and exercise of the Series E Warrant, beginning on the first anniversary of the Loan Agreement.
The Company calculated the fair value of the Series E Warrant and intrinsic value of the beneficial conversion feature which resulted in a $700,000 discount to the Note which was fully accreted on December 31, 2017.
During the three months ended June 30, 2018 and 2017, the Company recognized $13,610 and $12,698, respectively, of interest expense. During the six months ended June 30, 2018 and 2017, the Company recognized $26,842 and $25,042, respectively, of interest expense. During the three months ended June 30, 2018 and 2017, the Company recognized $0 and $133,264, respectively, of accretion related to the debt discount. During the six months ended June 30, 2018 and 2017, the Company recognized $0 and $265,063, respectively, of accretion related to the debt discount.
Note 5. Common Stock and Warrants
Common Stock
At June 30, 2018, the Company had 500,000,000 authorized shares of common stock with a par value of $0.00001 per share, 76,840,522 shares of common stock outstanding and 19,400,765 shares reserved for issuance under the Company’s 2013 Long-Term Incentive Plan (the “2013 Plan”) as adopted and approved by the Company’s Board of Directors (the “Board”) on June 20, 2013 that provides for the grant of stock options to employees, directors, officers and consultants. See “Note 6. Stock Options” for further discussion.
During the six months ended June 30, 2018, the Company had the following common stock related transactions:
|
·
|
On February 3, 2018, Thomas Bold, the Company’s President, CEO and Interim Chief Financial Officer exercised options to purchase up to 60,000 shares, on a cashless basis, resulting in the issuance of 44,083 shares of common stock.
|
|
|
|
|
·
|
On February 11, 2018, a consultant exercised options to purchase up to 40,000 shares, on a cashless basis, resulting in the issuance of 17,480 shares of common stock.
|
|
|
|
|
·
|
On February 12, 2018, Dr. Gerlach exercised a Series A Warrant to purchase up to 480,000 shares, on a cashless basis, resulting in the issuance of 457,480 shares of common stock.
|
|
|
|
|
·
|
On February 13, 2018, the Company issued 100,000 shares of common stock, upon the exercise of a Series D Warrant at an exercise price of $1.10 per share resulting in $110,000 of proceeds to the Company.
|
|
|
|
|
·
|
On February 22, 2018, Kenneth Kirkland, a member of the Company’s board of directors, exercised options to purchase up to 50,000 shares, on a cashless basis, resulting in the issuance of 41,033 shares of common stock.
|
|
|
|
|
·
|
On February 22, 2018, Joseph Sierchio, a member of the Company’s board of directors 1) exercised options to purchase up to 37,500 shares, on a cashless basis, resulting in the issuance of 22,711 shares of common stock; 2) exercised a Series F Warrant to purchase up to 7,246 shares, on a cashless basis, resulting in the issuance of 4,899 shares of common stock; and 3) exercised a Series H Warrant to purchase up to 10,000 shares, on a cashless basis, resulting in the issuance of 7,418 shares of common stock.
|
Warrants
The following table summarizes information about warrants outstanding at June 30, 2018 and December 31, 2017:
|
|
Shares of Common Stock Issuable from Warrants Outstanding as of
|
|
|
Weighted
|
|
|
|
|
Description
|
|
June 30,
|
|
|
December 31,
|
|
|
Average Exercise Price
|
|
|
Expiration
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
Series A
|
|
|
240,000
|
|
|
|
720,000
|
|
|
$
|
0.35
|
|
|
July 12, 2019
|
|
Series D
|
|
|
810,000
|
|
|
|
910,000
|
|
|
$
|
1.10
|
|
|
June 5, 2020
|
|
Series E
|
|
|
584,416
|
|
|
|
584,416
|
|
|
$
|
1.54
|
|
|
September 8, 2021
|
|
Series F
|
|
|
7,246
|
|
|
|
14,492
|
|
|
$
|
3.45
|
|
|
February 23, 2022 & March 9, 2022
|
|
Series G
|
|
|
460,250
|
|
|
|
460,250
|
|
|
$
|
2.68
|
|
|
July 21, 2022
|
|
Series H
|
|
|
910,000
|
|
|
|
920,000
|
|
|
$
|
2.75
|
|
|
October 16, 2022
|
|
Total
|
|
|
3,011,912
|
|
|
|
3,609,158
|
|
|
|
|
|
|
|
|
Note 6. Stock Options
On June 20, 2013, the Company’s Board adopted the 2013 Long-Term Incentive 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 are 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 June 30, 2018, there were 19,400,765 shares available for grant.
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 in any of the Company's fiscal year, options to purchase more than 2,000,000 shares 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 $100,000. Options granted pursuant to the 2013 Plan are exercisable no later than ten years after the date of grant.
The exercise price per share of common stock for options granted under the 2013 Plan will be the fair market value of the Company's common stock on the date of grant, using the closing price of the Company's common stock on the last trading day prior to the date of grant, except for incentive stock options granted to a holder of ten percent or more of the Company's common stock, for whom the exercise price per share will not be less than 110% of the fair market value. No option can be granted under the 2013 Plan after June 20, 2023.
Stock Option Activity
The following table summarizes stock option activity for the six month period ended June 30, 2018 and year ended December 31, 2017:
|
|
Number of Options
|
|
|
Weighted Average Exercise Price ($)
|
|
|
Weighted Average Remaining Contractual Term
|
|
Aggregate Intrinsic Value ($)
|
|
Outstanding at December 31, 2016
|
|
|
385,000
|
|
|
|
1.42
|
|
|
|
|
|
|
Grants
|
|
|
310,000
|
|
|
|
4.20
|
|
|
|
|
|
|
Exercises
|
|
|
(150,000
|
)
|
|
|
1.12
|
|
|
|
|
|
|
Outstanding at December 31, 2017
|
|
|
545,000
|
|
|
|
3.09
|
|
|
|
|
|
|
Exercises
|
|
|
(187,500
|
)
|
|
|
2.86
|
|
|
|
|
|
|
Outstanding at June 30, 2018
|
|
|
357,500
|
|
|
|
3.21
|
|
|
8.08 years
|
|
|
311,525
|
|
Exercisable at June 30, 2018
|
|
|
347,500
|
|
|
|
3.27
|
|
|
8.14 years
|
|
|
283,525
|
|
The fair value of each stock option is estimated at the date of grant using the Black-Scholes option pricing model. There were no stock options granted during the six months ended June 30, 2018. There were 310,000 stock options granted during the six months ended June 30, 2017 with a weighted-average grant date fair value of $3.38. During the six months ended June 30, 2018, there were 187,500 options exercised on a cashless basis resulting in the issuance of 125,307 shares of common stock, with an aggregate intrinsic value of $1,126,675. During the six months ended June 30, 2017, there were 150,000 options exercised on a cashless basis resulting in the issuance of 102,582 shares of common stock, with an aggregate intrinsic value of $397,100.
The share-based compensation cost resulting from stock option grants, including those previously granted and vesting over time is expensed ratably over the respective vesting periods. During the three months ended June 30, 2018 and 2017, the Company recognized $47,649 and $617,878, respectively, in share-based compensation related to stock options. During the six months ended June 30, 2018 and 2017, the Company recognized $170,146 and $620,872, respectively, in share-based compensation related to stock options.
As of June 30, 2018, the Company had approximately $1,248 of unrecognized compensation cost related to unvested stock options which is expected to be recognized over a period of 0.75 years. Stock-based compensation has been included in the Consolidated Statement of Operations as follows:
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Research and development
|
|
$
|
7,091
|
|
|
$
|
64,790
|
|
|
$
|
27,966
|
|
|
$
|
64,790
|
|
General and administrative
|
|
|
40,558
|
|
|
|
553,088
|
|
|
|
142,180
|
|
|
|
556,082
|
|
Total
|
|
$
|
47,649
|
|
|
$
|
617,878
|
|
|
$
|
170,146
|
|
|
$
|
620,872
|
|
The following table summarizes information about stock options outstanding and exercisable at June 30, 2018:
|
|
|
Stock Options Outstanding
|
|
|
Stock Options Exercisable
|
|
Range of Exercise Prices
|
|
|
Number of Shares Subject to Outstanding Options
|
|
|
Weighted Average Contractual Life (years)
|
|
|
Weighted Average Exercise Price
|
|
|
Number of Shares Subject To Options Exercise
|
|
|
Weighted Average Remaining Contractual Life (Years)
|
|
|
Weighted Average Exercise Price
|
|
|
0.80
|
|
|
|
10,000
|
|
|
|
6.13
|
|
|
|
0.80
|
|
|
|
10,000
|
|
|
|
6.13
|
|
|
|
0.80
|
|
|
1.05
|
|
|
|
55,000
|
|
|
|
5.76
|
|
|
|
1.05
|
|
|
|
45,000
|
|
|
|
5.76
|
|
|
|
1.05
|
|
|
1.25
|
|
|
|
7,500
|
|
|
|
6.96
|
|
|
|
1.25
|
|
|
|
7,500
|
|
|
|
6.96
|
|
|
|
1.25
|
|
|
1.34
|
|
|
|
7,500
|
|
|
|
7.01
|
|
|
|
1.34
|
|
|
|
7,500
|
|
|
|
7.01
|
|
|
|
1.34
|
|
|
1.65
|
|
|
|
10,000
|
|
|
|
7.34
|
|
|
|
1.65
|
|
|
|
10,000
|
|
|
|
7.34
|
|
|
|
1.65
|
|
|
1.70
|
|
|
|
7,500
|
|
|
|
7.30
|
|
|
|
1.70
|
|
|
|
7,500
|
|
|
|
7.30
|
|
|
|
1.70
|
|
|
1.91
|
|
|
|
20,000
|
|
|
|
7.71
|
|
|
|
1.91
|
|
|
|
20,000
|
|
|
|
7.71
|
|
|
|
1.91
|
|
|
2.28
|
|
|
|
7,500
|
|
|
|
8.06
|
|
|
|
2.28
|
|
|
|
7,500
|
|
|
|
8.06
|
|
|
|
2.28
|
|
|
4.20
|
|
|
|
232,500
|
|
|
|
8.87
|
|
|
|
4.20
|
|
|
|
232,500
|
|
|
|
8.87
|
|
|
|
4.20
|
|
|
Total
|
|
|
|
357,500
|
|
|
|
8.08
|
|
|
$
|
3.21
|
|
|
|
347,500
|
|
|
|
8.14
|
|
|
$
|
3.27
|
|
Note 7. Commitments
Effective March 1, 2015, the Company entered into a lease agreement (the “Lease”) in the Pittsburgh Life Sciences Greenhouse at a monthly rate of $750. The Lease was renewed effective March 1, 2016 at a monthly rate of $800 through August 30, 2018. Rent expense for the three months ended June 30, 2018 and 2017 was $2,400 and $2,400, respectively. Rent expense for the six months ended June 30, 2018 and 2017 was $4,800 and $4,800, respectively
In connection with the Company’s anticipated regulatory filings, the Company has engaged StemCell Systems GmbH (“StemCell Systems”) to provide it with prototypes and related documents under various agreements. Pursuant to these engagements the Company incurred expenses of $13,169 and $52,830 during the three months ended June 30, 2018 and 2017, respectively, and $25,184 and $106,830 during the six months ended June 30, 2018 and 2017, respectively. Dr. Gerlach, from whom the Company purchased the CellMist
TM
System technologies, is a principal of StemCell Systems.
On August 1, 2017, the Company and the University of Pittsburgh entered into a Corporate Research Agreement whereby the University of Pittsburgh will perform academic research related to the Company’s technologies in exchange for $171,595. During the three and six months ended June 30, 2018, the Company expensed $42,899 and $85,798, respectively, pursuant to the Corporate Research Agreement. Dr. Gerlach, from whom the Company purchased the CellMist
TM
System technologies, is a professor at the University.
See also “Note 8. Related Party Transactions.”
Note 8. Related Party Transactions
As compensation for their service on the Board, Dr. Kirkland and Mr. Sierchio receive an annual retainer of $6,000, payable in equal quarterly installments in arrears. The Chairman of the Board receives $1 per year.
Effective July 1, 2018, Joseph Sierchio resigned his position as a Company director. The law firm of Satterlee Stephens LLP (“Satterlee”), of which Joseph Sierchio is a partner, provides counsel to the Company. Mr. Sierchio will continue to be the Company’s primary attorney. During the three months ended June 30, 2018 and 2017, the Company recognized $96,415 and $77,537 of fees for legal services billed by Satterlee. During the six months ended June 30, 2018 and 2017, the Company recognized $159,362 and $180,668 of fees for legal services billed by Satterlee. At June 30, 2018 and December 31, 2017, accounts payable to Satterlee amounted to $60,000 and $30,000, respectively.
In connection with the Company’s anticipated FDA and other regulatory filings, the Company engaged StemCell Systems to provide it with prototypes and related documents. Pursuant to this engagement the Company incurred expenses of $13,169 and $52,830 during the three months ended June 30, 2018 and 2017, respectively, and $25,184 and $106,830 during the six months ended June 30, 2018 and 2017, respectively. Dr. Gerlach, from whom the Company purchased the CellMist
TM
System technologies, is a principal of StemCell Systems.
Dr. Gerlach is entitled to payments for consulting services. During the three months ended June 30, 2018 and 2017, the Company recognized expenses related to Dr. Gerlach services of $8,000 and $8,460, respectively. During the six months ended June 30, 2018 and 2017, the Company recognized expenses related to Dr. Gerlach services of $15,020 and $18,540, respectively. Accounts payable to Dr. Gerlach amounted to $8,000 and $17,640 at June 30, 2018 and December 31, 2017, respectively.
On August 1, 2013, the Company entered into a consulting agreement, as amended on May 1, 2016, with Jatinder Bhogal, an individual owning in excess of 5% of our issued and outstanding shares of common stock, to provide consulting services to the Company through his wholly owned company, Vector Asset Management, Inc. (“VAM”). Pursuant to the consulting agreement Vector assisted the Company with identifying subject matter experts in the medical device and biotechnology industries and assisted the Company with its ongoing research, development and eventual commercialization of its Regeneration Technology. Pursuant to the amendment the monthly consulting fee was increased to $6,800 from $5,000. On June 22, 2018, the Company and VAM entered into an Executive Consulting Agreement (“ECA”) whereby Mr. Bhogal will serve as the Company’s Chief Operating Officer. The ECA supersedes the prior consulting agreement. Pursuant to the ECA, VAM will receive compensation of $120,000 per year. During the three months ended June 30, 2018 and 2017, the Company recognized $23,067 and $20,400, respectively for consulting services provided by VAM. During the six months ended June 30, 2018 and 2017, the Company recognized $43,467 and $40,800, respectively for consulting services provided by VAM.
On February 12, 2018, Dr. Gerlach exercised a Series A Warrant to purchase up to 480,000 shares, on a cashless basis, resulting in the issuance of 457,480 shares of common stock.
On February 22, 2018, Kenneth Kirkland, a member of the Company’s board of directors, exercised options to purchase up to 50,000 shares, on a cashless basis, resulting in the issuance of 41,033 shares of common stock.
On February 22, 2018, Mr. Sierchio, a member of the Company’s board of directors until his resignation effective July 1, 2018, 1) exercised options to purchase up to 37,500 shares, on a cashless basis, resulting in the issuance of 22,711 shares of common stock; 2) exercised a Series F Warrant to purchase up to 7,246 shares, on a cashless basis, resulting in the issuance of 4,899 shares of common stock; and 3) exercised a Series H Warrant to purchase up to 10,000 shares, on a cashless basis, resulting in the issuance of 7,418 shares of common stock.
On February 3, 2018, Thomas Bold, the Company’s President, CEO and Interim Chief Financial Officer exercised options to purchase up to 60,000 shares, on a cashless basis, resulting in the issuance of 44,086 shares of common stock.
On August 1, 2017, the Company and the University of Pittsburgh entered into a Corporate Research Agreement whereby the University of Pittsburgh will perform academic research related to the Company’s technologies in exchange for $171,595. During the three and six months ended June 30, 2018, the Company expensed $42,899 and $85,798, respectively, pursuant to the Corporate Research Agreement. Dr. Gerlach, from whom the Company purchased the CellMist
TM
System technologies, is a professor at the University.
Note 9. Subsequent Events
Management has reviewed material events subsequent of the period ended June 30, 2018 and prior to the filing of financial statements in accordance with FASB ASC 855 “Subsequent Events”.
Subsequent to quarter end, the Company was offered executive office space located at 9375 E. Shea Blvd., Suite 107-A, Scottsdale, AZ 85260 for consideration of $1 per year. The executive office space is owned indirectly by Harmel S. Rayat, the Company’s majority shareholder and Chairman.