Quarterly Report (10-q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

[X]	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	For the quarterly period ended March 31, 2019

[ ]	Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934

	For the transition period from to __________

	Commission File Number: 333-146834

Regenicin, Inc.
(Exact name of registrant as specified in its charter)

Nevada	27-3083341
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

OTCBB	RGIN	COMMON
Principal US Market	Symbol	Class of Trading Security

10 High Court, Little Falls, NJ

(Address of principal executive offices)

(973) 557-8914

(Registrant’s telephone number)

_______________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [ ] Yes [X] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ ] Yes [X] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

[ ] Large accelerated filer

[ ] Non-accelerated filer

[ ] Emerging growth company

[ ] Accelerated filer

[X] Smaller reporting company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 153,483,050 of May __, 2019.

Table of Contents

	TABLE OF CONTENTS	Page

PART I – FINANCIAL INFORMATION

Item 1:	Financial Statements	3
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	6
Item 4:	Controls and Procedures	6
PART II – OTHER INFORMATION
Item 1:	Legal Proceedings	7
Item 1A:	Risk Factors	7
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	7
Item 3:	Defaults Upon Senior Securities	7
Item 4:	Mine Safety Disclosures	7
Item 5:	Other Information	7
Item 6:	Exhibits	7

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Our consolidated financial statements included in this Form 10-Q are as follows:

F-1	Consolidated Balance Sheets as of March 31, 2019 (unaudited) and September 30, 2018;
F-2	Consolidated Statements of Operations for the three and six months ended March 31, 2019 and 2018 (unaudited);
F-3	Consolidated Statements of Stockholders’ Deficiency for the three and six months ended March 31, 2019 and 2018 (unaudited);
F-4	Consolidated Statements of Cash Flows for the six months ended March 31, 2019 and 2018 (unaudited); and
F-5	Notes to Consolidated Financial Statements.

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended March 31, 2019 are not necessarily indicative of the results that can be expected for the full year.

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REGENICIN, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

	March 31, 2019			September 30, 2018
	(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash	$	1,599		$	2,702
Prepaid expenses and other current assets		21,656			45,281
Common stock of Amarantus		7,125			8,450
Total current and total assets	$	30,380		$	56,433

LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable	$	67,577		$	67,532
Accrued expenses - other		317,191			340,931
Accrued salaries - officers		2,578,501			2,288,001
Note payable - insurance financing		30,429			37,800
Bridge financing		175,000			175,000
Loan payable		10,000			10,000
Loans payable - officer		246,568			137,222
Total current and total liabilities		3,425,266			3,056,486

STOCKHOLDERS' DEFICIENCY
Series A 10% Convertible Preferred stock, $0.001 par value, 5,500,000 shares authorized; 885,000 issued and outstanding		885			885
Common stock, $0.001 par value; 200,000,000 shares authorized; 157,911,410 issued and 153,483,050 outstanding		157,914			157,914
Additional paid-in capital		10,208,339			10,177,515
Accumulated deficit		(13,757,596	)		(13,332,889	)
Accumulated other comprehensive income		—			950
Less: treasury stock; 4,428,360 shares at par		(4,428	)		(4,428	)
Total stockholders' deficiency		(3,394,886	)		(3,000,053	)
Total liabilities and stockholders' deficiency	$	30,380		$	56,433

See Notes to Consolidated Financial Statements.

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REGENICIN, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

	Six Months Ended			Six Months Ended			Three Months Ended			Three Months Ended
	March 31, 2019			March 31, 2018			March 31, 2019			March 31, 2018
	(UNAUDITED)			(UNAUDITED)			(UNAUDITED)			(UNAUDITED)

Revenues	$	—		$	—		$	—		$	—

Operating expenses
General and administrative		384,329			431,452			176,161			228,413
Stock based compensation - general and administrative		30,824			—			—			—

Total operating expenses		415,153			431,452			176,161			228,413

Loss from operations		(415,153	)		(431,452	)		(176,161	)		(228,413	)

Other income (expenses)
Interest expense		(9,179	)		(9,920	)		(4,315	)		(4,853	)
Unrealized gain (loss) on securities		(1,325	)		—			2,125			—

Total other income (expenses)		(10,504	)		(9,920	)		(2,190	)		(4,853	)

Net loss		(425,657	)		(441,372	)		(178,351	)		(233,266	)

Preferred stock dividends		(35,303	)		(35,303	)		(17,458	)		(17,458	)

Net loss attributable to common stockholders	$	(460,960	)	$	(476,675	)		(195,809	)	$	(250,724	)

Loss per share:
Basic	$	(0.00	)	$	(0.00	)		(0.00	)	$	(0.00	)
Diluted	$	(0.00	)	$	(0.00	)		(0.00	)	$	(0.00	)

Weighted average number of shares outstanding
Basic		153,483,050			153,483,050			153,483,050			153,483,050
Diluted		153,483,050			153,483,050			153,483,050			153,483,050

See Notes to Consolidated Financial Statements.

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REGENICIN, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY

	Convertible Preferred Stock				Common Stock				Additional Paid-in		Accumulated			Accumulated Other Comprehensive			Treasury
	Shares		Amount		Shares		Amount		Capital		Deficit			Income			Stock (1)			Total

Balances at October 1, 2018		885,000	$	885		157,911,410	$	157,914	$	10,177,515	$	(13,332,889	)	$	950		$	(4,428	)	$	(3,000,053	)

Adoption of ASU 2016-01		—		—		—		—		—		950			(950	)		—			—

Stock based compensation		—		—		—		—		30,824		—			—			—			30,824

Net loss		—		—		—		—		—		(247,306	)		—			—			(247,306	)

Balances at December 31, 2018		885,000		885		157,911,410		157,914		10,208,339		(13,579,245	)		—			(4,428	)		(3,216,535	)

Net loss		—		—		—		—		—		(178,351	)		—			—			(178,351	)

Balances at March 31, 2019		885,000	$	885		157,911,410	$	157,914	$	10,208,339	$	(13,757,596	)	$	—		$	(4,428	)	$	(3,394,886	)

Balances at October 1, 2017		885,000	$	885		157,911,410	$	157,914	$	10,177,515	$	(12,773,831	)	$	500		$	(4,428	)	$	(2,441,445	)

Other Comprehensive income		—		—		—		—		—		—			27,250			—			27,250

Net loss		—		—		—		—		—		(208,106	)		—			—			(208,106	)

Balances at December 31, 2017		885,000		885		157,911,410		157,914		10,177,515		(12,981,937	)		27,750			(4,428	)		(2,622,301	)

Other Comprehensive loss		—		—		—		—		—		—			(21,125	)		—			(21,125	)

Net loss		—		—		—		—		—		(233,266	)		—			—			(233,266	)

Balances at March 31, 2018		885,000	$	885		157,911,410	$	157,914	$	10,177,515	$	(13,215,203	)	$	6,625		$	(4,428	)	$	(2,876,692	)

(1) The number of shares in treasury stock at October 1, 2018 and 2017, December 31, 2018 and 2017, and March 31, 2019 and 2018 was 4,428,360.

See Notes to Consolidated Financial Statements.

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REGENICIN, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended March 31, 2019			Six Months Ended March 31, 2018
	(UNAUDITED)			(UNAUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(425,657	)	$	(441,372	)
Adjustments to reconcile net loss to net cash used in operating activities:
Unrealized loss on investment		1,325			—
Accrued interest on notes and loans payable		8,726			8,726
Stock based compensation - general and administrative		30,824			—
Changes in operating assets and liabilities
Prepaid expenses and other current assets		23,625			38,937
Accounts payable		45			15,399
Accrued expenses - other		(32,466	)		7,291
Accrued salaries - officers		290,500			290,500
Net cash used in operating activities		(103,078	)		(80,519	)

CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of notes payable - insurance financing		(7,371	)		(22,279	)
Proceeds of loans from officers		118,075			85,708
Repayment of loans from officers		(8,729	)		—
Net cash provided by financing activities		101,975			63,429
NET DECREASE IN CASH		(1,103	)		(17,090	)
CASH - BEGINNING OF PERIOD		2,702			19,201
CASH - END OF PERIOD	$	1,599		$	2,111

Supplemental disclosures of cash flow information:
Cash paid for interest	$	453		$	—
Cash paid for taxes	$	—			—

See Notes to Consolidated Financial Statements.

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REGENICIN, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 - THE COMPANY

Windstar, Inc. was incorporated in the state of Nevada on September 6, 2007. On July 19, 2010, the Company amended its Articles of Incorporation to change the name of the Company to Regenicin, Inc. (“Regenicin”). In September 2013, Regenicin formed a new wholly-owned subsidiary for the sole purpose of conducting research in the State of Georgia (together, the “Company”). The subsidiary has no activity since its formation due to the lack of funding. The Company’s original business was the development of a purification device. Such business was assigned to the Company’s former management in July 2010. The Company adopted a new business plan and intended to develop and commercialize a potentially lifesaving technology by the introduction of tissue-engineered skin substitutes to restore the qualities of healthy human skin for use in the treatment of burns, chronic wounds and a variety of plastic surgery procedures.

The Company entered into a Know-How License and Stock Purchase Agreement (the “Know-How SPA”) with Lonza Walkersville, Inc. (“Lonza Walkersville”) on July 21, 2010. Pursuant to the terms of the Know-How SPA, the Company paid Lonza Walkersville $3,000,000 and, in exchange, the Company was to receive an exclusive license to use certain proprietary know-how and information necessary to develop and seek approval by the U.S. Food and Drug Administration (“FDA”) for the commercial sale of technology held by the Cutanogen Corporation (“Cutanogen”), a subsidiary of Lonza Walkersville. Additionally, pursuant to the terms of the Know-How SPA, the Company was entitled to receive certain related assistance and support from Lonza Walkersville upon payment of the $3,000,000. Under the Know-How SPA, once FDA approval was secured for the commercial sale of the technology, the Company would be entitled to acquire Cutanogen, Lonza Walkersville’s subsidiary, for $2,000,000 in cash. After prolonged attempts to negotiate disputes with Lonza Walkersville failed, on September 30, 2013, the Company filed a lawsuit against Lonza Walkersville, Lonza Group Ltd. and Lonza America, Inc. (“Lonza America”) in Fulton County Superior Court in the State of Georgia.

On November 7, 2014, the Company entered into an Asset Sale Agreement (the “Sale Agreement”) with Amarantus Bioscience Holdings, Inc., (“Amarantus”). Under the Sale Agreement, the Company agreed to sell to Amarantus all of its rights and claims in the litigation currently pending in the United States District Court for the District of New Jersey against Lonza Walkersville and Lonza America, Inc. (the “Lonza Litigation”). This includes all of the Cutanogen intellectual property rights and any Lonza manufacturing know-how technology. In addition, the Company agreed to sell the PermaDerm® trademark and related intellectual property rights associated with it. The purchase price paid by Amarantus was: (i) $3,600,000 in cash, and (ii) shares of common stock in Amarantus having a value of $3,000,000 at the date of the transaction.

The Company used the net proceeds of the transaction to fund development of cultured cell technology and to pursue approval of the products through the FDA as well as for general and administrative expenses. The Company has been developing its own unique cultured skin substitute since the Company received Lonza’s termination notice.

NOTE 2 - BASIS OF PRESENTATION

Interim Financial Statements:

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and note disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending September 30, 2019. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 2018, as filed with the Securities and Exchange Commission.

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Going Concern:

The Company's consolidated financial statements have been prepared assuming that the Company will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred cumulative losses and has an accumulated deficit of approximately $13.8 million from inception, expects to incur further losses in the development of its business and has been dependent on funding operations through the issuance of convertible debt, private sale of equity securities, and the proceeds from the Asset Sale. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Currently management plans to finance operations through the private or public placement of debt and/or equity securities. However, no assurance can be given at this time as to whether the Company will be able to obtain such financing. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Financial Instruments and Fair Value Measurement:

As of October 1, 2018, the Company adopted ASU No. 2016-01, “Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities”. The new standard principally affects accounting standards for equity investments, financial liabilities where the fair value option has been elected, and the presentation and disclosure requirements for financial instruments. Upon the effective date of the new standards, all equity investments in unconsolidated entities, other than those accounted for using the equity method of accounting, will generally be measured at fair value through earnings. There no longer is an available-for-sale classification and therefore, no changes in fair value will be reported in other comprehensive income (loss) for equity securities with readily determinable fair values. As a result of the adoption, the Company recorded a cumulative effect adjustment of a $950 decrease to accumulated other comprehensive income, and a corresponding decrease to accumulated deficit, as of October 1, 2018.

Common stock of Amarantus is carried at fair value in the accompanying consolidated balance sheets. Fair value is determined under the guidelines of GAAP which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Realized gains and losses, determined using the first-in, first-out (FIFO) method, and unrealized gains and losses are included in other income (expense) on the statement of operations.

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The common stock of Amarantus is valued at the closing price reported on the active market on which the security is traded. This valuation methodology is considered to be using Level 1 inputs. The total value of Amarantus common stock at March 31, 2019 is $7,125. The unrealized gain (loss) for the six and three months ended March 31, 2019 was $(1,325) and $2,125, net of income taxes, respectively, and was reported as other income (expense). The unrealized gain (loss) for the six and three months ended March 31, 2018 was $6,125 and $(21,125), net of income taxes, respectively, and was reported as a component of comprehensive income (loss).

Recently Issued Accounting Pronouncements:

Any recent pronouncements issued by the FASB or other authoritative standards groups with future effective dates are either not applicable or are not expected to be significant to the consolidated financial statements of the Company.

NOTE 3 - LOSS PER SHARE

Basic loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted loss per share gives effect to dilutive convertible securities, options, warrants and other potential common stock outstanding during the period; only in periods in which such effect is dilutive.

The following weighted average securities have been excluded from the calculation of net loss per share for the six months ended March 31, 2019 and 2018, as the exercise price was greater than the average market price of the common shares:

			2019				2018
	Warrants			------				722,500

The following weighted average securities have been excluded from the calculation even though the exercise price was less than the average market price of the common shares because the effect of including these potential shares was anti-dilutive due to the net loss incurred during the six months ended March 31, 2019 and 2018:

	2019		2018
Options		5,456,764		9,927,819
Convertible Preferred Stock		8,850,000		8,850,000

The effects of options and warrants on diluted earnings per share are reflected through the use of the treasury stock method and the excluded shares that are “in the money” are disclosed above in that manner.

NOTE 4 – LOANS PAYABLE

Loan Payable:

In February 2011, an investor advanced $10,000. The loan does not bear interest and is due on demand. At both March 31, 2019 and September 30, 2018, the loan payable totaled $10,000.

Loans Payable - Officer:

Loans payable - officer consists of the following:

Through September 2018, John Weber, the Company’s Chief Financial Officer, made advances to the Company totaling $105,858. From October 2018 through March 2019 he advanced an additional $109,275. The loans do not bear interest and are due on demand.

Through September 2018, J. Roy Nelson, the Company’s Chief Science Officer, made advances to the Company totaling $26,864. From October 2018 through March 2019 he made additional advances of $8,800 and was repaid $8,729 for a net increase of $71. The loans do not bear interest and are due on demand.

In September 2018, Randall McCoy, the Company’s Chief Executive Officer, made an advance to the Company of $4,500. The loan does not bear interest and is due on demand.

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NOTE 5- BRIDGE FINANCING

On December 21, 2011, the Company issued a $150,000 promissory note to an individual. The note bore interest so that the Company would repay $175,000 on the maturity date of June 21, 2012. Additional interest of 10% was charged on any late payments. The note was not paid at the maturity date and the Company is incurring additional interest as described above. At both March 31, 2019 and September 30, 2018, the note balance was $175,000. Interest expense was $8,726 for both the six months ended March 31, 2019 and 2018. Interest expense was $4,315 for both the three months ended March 31, 2019 and 2018. Accrued interest on the note was $118,614 and $109,888 as of March 31, 2019 and September 30, 2018, respectively and is included in accrued expenses in the accompanying balance sheet.

NOTE 6 - INCOME TAXES

The Company recorded no income tax expense for the six months ended March 31, 2019 and 2018 because the estimated annual effective tax rate was zero. As of March 31, 2019, the Company continues to provide a valuation allowance against its net deferred tax assets since the Company believes it is more likely than not that its deferred tax assets will not be realized.

In December 2017, the United States Government passed new tax legislation that, among other provisions, lowered the federal corporate tax rate from 35% to 21%. In addition to applying the new lower corporate tax rate to any taxable income the Company may have, the legislation affects the way the Company can use and carryforward net operating losses and results in a revaluation of deferred tax assets and liabilities recorded on its balance sheet. Given that current deferred tax assets are offset by a full valuation allowance, these changes have no net impact on the balance sheet. However, if the Company becomes profitable, they will receive a reduced benefit from such deferred tax assets.

At both March 31, 2019 and September 30, 2018, the Company had no material unrecognized tax benefits and no adjustments to liabilities or operations were required. The Company does not expect that its unrecognized tax benefits will materially increase within the next twelve months. The Company recognizes interest and penalties related to uncertain tax positions in general and administrative expense. As of March 31, 2019, and September 30, 2018 the Company has not recorded any provisions for accrued interest and penalties related to uncertain tax positions.

The Company files its federal income tax returns under a statute of limitations. The tax years ended September 30, 2015 through September 30, 2018 generally remain subject to examination by federal tax authorities.

NOTE 7 - STOCKHOLDERS’ DEFICIENCY

Preferred Stock:

Series A

At both March 31, 2019 and September 30, 2018, 885,000 shares of Series A Preferred Stock (“Series A Preferred”) were outstanding.

Series A Preferred pays a dividend of 8% per annum on the stated value and has a liquidation preference equal to the stated value of the shares ($885,000 liquidation preference as of March 31, 2019 and September 30, 2018 plus dividends in arrears as per below). Each share of Series A Preferred Stock has an initial stated value of $1 and is convertible into shares of the Company’s common stock at the rate of 10 for 1.

The Series A Preferred Stock was marketed through a private placement memorandum that included a reference to a ratchet provision which would have allowed the holders of the stock to claim a better conversion rate based on other stock transactions conducted by the Company during the three-year period following the original issuance of the shares. The Certificate of Designation does not contain a ratchet provision. Certain of the stock related transactions consummated by the Company during this time period may have triggered this ratchet provision, and thus created a claim by holders of the Series A Preferred Stock who purchased based on this representation for a greater conversion rate than initially provided. There have been no new developments related to the remaining Series A holders regarding this claim and the conversion rate of their Series A Preferred Stock. Changes to the preferred stock conversion ratio may result in modification or extinguishment accounting. That may result in a deemed preferred stock dividend which would reduce net income available to common stockholders in the calculation of earnings per share. Certain of the smaller Series A holders have already converted or provided notice of conversion of their shares. In respect of this claim, the Company and its outside counsel determined that it is not possible to offer an opinion regarding the outcome. An adverse outcome could materially increase the accumulated deficit.

The dividends are cumulative commencing on the issue date when and if declared by the Board of Directors. As of March 31, 2019, and September 30, 2018, dividends in arrears were $569,940 ($.64 per share) and $534,637 ($.60 per share), respectively.

Series B

On January 23, 2012, the Company designated a new class of preferred stock called Series B Convertible Preferred Stock (“Series B Preferred”). Four million shares have been authorized with a liquidation preference of $2.00 per share. Each share of Series B Preferred is convertible into ten shares of common stock. Holders of Series B Convertible Preferred Stock have a right to a dividend (pro-rata to each holder) based on a percentage of the gross revenue earned by the Company in the United States, if any, and the number of outstanding shares of Series B Convertible Preferred Stock, as follows: Year 1 - Total Dividend to all Series B holders = .03 x Gross Revenue in the U.S. Year 2 - Total Dividend to all Series B holders = .02 x Gross Revenue in the U.S. Year 3 - Total Dividend to all Series B holders = .01 x Gross Revenue in the U.S. At March 31, 2019, no shares of Series B Preferred are outstanding.

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NOTE 8 - STOCK-BASED COMPENSATION

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 505, “Equity ” . Costs are measured at the estimated fair value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services as defined by ASC 505.

On January 6, 2011, the Company approved the issuance of 885,672 options to each of the four members of the board of directors at an exercise price of $0.035, as amended, per share that were to expire, as extended, on December 31, 2018. Effective as of the expiration date, the Company extended the term of those options for two of the directors to December 31, 2023. All other contractual terms of the options remained the same. The option exercise price was compared to the fair market value of the Company’s shares on the date when the extension was authorized by the Company, resulting in the immediate recognition of $1,316 in compensation expense. There is no deferred compensation expense associated with this transaction, since all extended options had previously been fully vested. The extended options were valued utilizing the Black-Scholes option pricing model with the following assumptions: Exercise price of $0.035, expected volatility of 25.54%, risk free rate of 2.51% and expected term of 5 years.

On January 15, 2015, the Company approved the issuance of 10,000,000 options to one of its Officers at an exercise price of $0.02, per share that were set to expire on January 15, 2019. Effective December 31, 2018, the Company extended the term of those options to December 31, 2023. All other contractual terms of the options remained the same. The option exercise price was compared to the fair market value of the Company’s shares on the date when the extension was authorized by the Company, resulting in the immediate recognition of $29,508 in compensation expense. There is no deferred compensation expense associated with this transaction, since all extended options had previously been fully vested. The extended options were valued utilizing the Black-Scholes option pricing model with the following assumptions: Exercise price of $0.02, expected volatility of 25.54%, risk free rate of 2.51% and expected term of 5 years.

Stock-based compensation is included as a separate line item in operating expenses in the accompanying consolidated statement of operations.

NOTE 9 – LICENSE RIGHTS

On November 7, 2014, the Company entered into a Sale Agreement, as amended on January 30, 2015, with Amarantus. See Note 1. Under the Sale Agreement, the Company agreed to sell to Amarantus all of its rights and claims in the Lonza Litigation. These include all of the Cutanogen intellectual property rights and any Lonza manufacturing know-how technology. In addition, the Company had agreed to sell its PermaDerm® trademark and related intellectual property rights associated with it. The Company also granted to Amarantus an exclusive five (5) year option to license any engineered skin designed for the treatment of patients designated as severely burned by the FDA developed by the Company. Amarantus can exercise this option at a cost of $10,000,000 plus a royalty of 5% on gross revenues in excess of $150 million. As of March 31, 2019, the option has not been exercised.

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NOTE 10 - RELATED PARTY TRANSACTIONS

The Company’s principal executive offices are located in Little Falls, New Jersey. The headquarters is located in the offices of McCoy Enterprises LLC, an entity controlled by Mr. McCoy. The office is attached to his residence but has its own entrances, restroom and kitchen facilities.

The Company also maintains an office at Carbon & Polymer Research Inc. ("CPR") in Pennington, New Jersey, which is the Company's materials and testing laboratory. An officer of the Company is an owner of CPR. No rent is charged for either premise.

On May 16, 2016, the Company entered into an agreement with CPR in which CPR will supply the collagen scaffolds used in the Company's production of the skin tissue. The contract contains a most favored customer clause guaranteeing the Company prices equal or lower than those charged to other customers. The Company has not yet made purchases from CPR.

See Note 4 for loans payable to related parties.

NOTE 11 - SUBSEQUENT EVENTS

Management has evaluated subsequent events through the date of this filing.

F- 10

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

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Overview

The company’s major objective for 2019 remains to secure the required funding to finalize some additional requirements of the IND application and begin the clinical trials. It is estimated that the cost to finalize the IND will be approximately 1.5 million dollars, and the cost to complete Phase 1 of the clinical trial will be approximately 2 million dollars. As previously reported, our goal in obtaining this funding has been to minimize shareholders' dilution as much as possible. Consequently, we are primarily pursuing financing through the issuance of a debt instrument and international licensing agreements.

We have worked with a number of potential investors and continue to pursue the necessary funding based on our stated objectives. It has taken longer to raise the funds than originally estimated; however, we remain confident that our goal is achievable. In the interim, the officers and related parties intend to continue to fund the Company’s essential operating costs.

We have begun the preliminary planning for the clinical trials to the extent we are able, considering funding constraints. As previously reported, we have chosen a CRO to assist in our IND submission and conducting the trials. Clinical site selection and patient recruitment should be somewhat simpler than other clinical trials, as we are limited in site selection to the 150 burn centers qualified to treat catastrophic burns. In addition, the surgical protocol will be similar to the grafting procedures currently in use at those facilities. NovaDerm® should thus require minimal physician training.

The initial trials are planned to begin with a total of ten subjects with an Initial Data Safety Monitoring Board (DSMB) review of safety on the first three subjects once they have reached 6 months follow-up. We do not intend to interrupt our trial waiting for the DSMB report.

Our management is considering various possibilities and approaches to obtaining clinical trial materials and manufacturing. While no final decision has been made, management’s approach is to set up the trials so as to allow for a seamless transition into commercial production upon approval.

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Results of Operations for the Three and Six Months Ended March 31, 2019 and 2018

We generated no revenues from September 6, 2007 (date of inception) to March 31, 2019. We do not expect to generate revenues until we are able to obtain FDA approval of our product and thereafter successfully market and sell the product.

We incurred operating expenses of $176,161 and $415,153 for the three and six months ended March 31, 2019, compared with operating expenses of $228,413 and $431,452 for the three and six months ended March 31, 2018. General and administrative expenses accounted for substantially all of our operating expenses for the three and six months ended March 31, 2019. General and administrative expenses accounted for all of our operating expenses for the three and six months ended March 31, 2018.

Net other expense was $2,190 and $10,504 for the three and six months ended March 31, 2019, as compared to net other expenses of $4,853 and $9,920 for the three and six months ended March 31, 2018. Other income and expenses for the three and six months ended March 31, 2019 consisted of interest expense and an unrealized gain (loss) on securities. Other income and expenses for the three and six months ended March 31, 2018 consisted solely of interest expense.

After provision for preferred stock dividends of $17,458 and $35,303 for the three and six months ended March 31, 2019, we recorded a net loss attributable to common stockholders of $195,809 and $460,960 for the three and six months ended March 31, 2019. By comparison, we recorded a net loss attributable to common stockholders of $250,724 and $476,675 for the three and six months ended March 31, 2018.

Liquidity and Capital Resources

As of March 31, 2019, we had cash of $1,599 and total current assets of $30,380. As of March 31, 2019, we had current liabilities of $3,425,266. We therefore had negative working capital of $3,394,886.

Operating activities used $103,078 in cash for the six months ended March 31, 2019. The decrease in cash was primarily attributable to funding the loss for the period.

Investing activities provided no cash or cost during the reported period.

Cash flows from financing activities includes net proceeds from loans from officers of $109,346, and repayments of notes payable of $7,371.

We have issued various promissory notes to meet our short term demands, the terms of which are provided in the notes to the consolidated financial statements accompanying this report. While this source of bridge financing has been helpful in the short term to meet our financial obligations, we will need additional financing to fund our operations, continue with the FDA approval process, and implement our business plan. Our long term financial needs are estimated at about $8 -$10 million.

Based upon our current financial condition, we do not have sufficient cash to operate our business at the current level for the next twelve months. We intend to fund operations through increased debt and/or equity financing arrangements, which may be insufficient to fund expenditures or other cash requirements. We plan to seek additional financing in a private equity or debt offering to secure funding for operations. Alternatively, we have been discussing the possibility of obtaining financing through a merger and/or other arrangements related to combining with other related companies or a going private transaction. There can be no assurance that we will be successful in raising additional funding or in entering into any of these sorts of arrangements. If we are not able to secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.

Off Balance Sheet Arrangements

As of March 31, 2019, there were no off-balance sheet arrangements.

Going Concern

Our consolidated financial statements have been prepared assuming that we will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have incurred operating losses from inception, expect to incur further losses in the development of our business, and have been dependent on funding operations through the issuance of convertible debt and private sale of equity securities. These conditions raise substantial doubt about our ability to continue as a going concern. Management’s plans include continuing to finance operations through the private or public placement of debt and/or equity securities and the reduction of expenditures. However, no assurance can be given at this time as to whether we will be able to achieve these objectives. The consolidated financial statements do not include any adjustment relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

A smaller reporting company is not required to provide the information required by this Item.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31, 2019. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2019, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of March 31, 2019, our disclosure controls and procedures were not effective: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting

Our company plans to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending September 30, 2019 assuming we are able to obtain necessary funding: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

We are unable to remedy our controls related to the inadequate segregation of duties and ineffective risk management until we receive financing to hire additional employees.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended March 31, 2019 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

Item 1A. Risk Factors

A smaller reporting company is not required to provide the information required by this Item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The information set forth below relates to our issuances of securities without registration under the Securities Act of 1933 during the reporting period which were not previously included in a Quarterly Report on Form 10-Q or Current Report on Form 8-K.

For the three months ended March 31, 2019, we issued no shares of common stock.

These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None

Item 6. Exhibits

Exhibit Number	Description of Exhibit
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101**	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 formatted in Extensible Business Reporting Language (XBRL).
**Provided herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.