Item 1. Financial Statements
RENOVACARE, INC. AND SUBSIDIARY
|
CONSOLIDATED BALANCE SHEETS
|
AS OF MARCH 31, 2019 AND DECEMBER 31, 2018
|
|
|
March 31,
2019
|
|
December 31,
2018
|
ASSETS
|
|
(Unaudited)
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
14,943,550
|
|
|
$
|
15,397,524
|
|
Prepaid expenses and deposits
|
|
|
138,655
|
|
|
|
168,707
|
|
Total current assets
|
|
|
15,082,205
|
|
|
|
15,566,231
|
|
|
|
|
|
|
|
|
|
|
Equipment, net of accumulated depreciation of $766 and $687, respectively
|
|
|
185
|
|
|
|
264
|
|
Intangible assets
|
|
|
152,854
|
|
|
|
152,854
|
|
Total assets
|
|
$
|
15,235,244
|
|
|
$
|
15,719,349
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
249,492
|
|
|
$
|
222,163
|
|
Accounts payable - related parties
|
|
|
10,000
|
|
|
|
3,000
|
|
Interest payable to related parties
|
|
|
167,497
|
|
|
|
167,497
|
|
Total current liabilities
|
|
|
426,989
|
|
|
|
392,660
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
426,989
|
|
|
|
392,660
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity (deficit)
|
|
|
|
|
|
|
|
|
Preferred stock: $0.0001 par value; 10,000,000 shares authorized, no shares issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
Common stock: $0.00001 par value; 500,000,000 shares authorized, 87,175,522 shares issued and outstanding at March 31, 2019 and December 31, 2018
|
|
|
872
|
|
|
|
872
|
|
Additional paid-in capital
|
|
|
32,188,412
|
|
|
|
32,187,580
|
|
Retained deficit
|
|
|
(17,381,029
|
)
|
|
|
(16,861,763
|
)
|
Total stockholders' equity
|
|
|
14,808,255
|
|
|
|
15,326,689
|
|
Total liabilities and stockholders' equity
|
|
$
|
15,235,244
|
|
|
$
|
15,719,349
|
|
(See accompanying notes to unaudited consolidated financial statements)
RENOVACARE, INC. AND SUBSIDIARY
|
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
|
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
|
|
|
Three Months Ended
March 31,
|
|
|
2019
|
|
2018
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Operating expense
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
194,510
|
|
|
|
125,111
|
|
General and administrative
|
|
|
409,461
|
|
|
|
449,558
|
|
Total operating expense
|
|
|
603,971
|
|
|
|
574,669
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(603,971
|
)
|
|
|
(574,669
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
84,705
|
|
|
|
4,425
|
|
Interest expense
|
|
|
-
|
|
|
|
(20,465
|
)
|
Accretion of debt discount
|
|
|
-
|
|
|
|
(58,438
|
)
|
Total other income (expense)
|
|
|
84,705
|
|
|
|
(74,478
|
)
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(519,266
|
)
|
|
$
|
(649,147
|
)
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Loss per Common Share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding - basic and diluted
|
|
|
87,175,522
|
|
|
|
76,498,552
|
|
(See accompanying notes to unaudited consolidated financial
statements)
RENOVACARE, INC. AND SUBSIDIARY
|
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
|
FOR THE THREEMONTHS
ENDED MARCH 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Common
Stock
|
|
|
Paid-in
|
|
|
|
Retained
|
|
|
|
Stockholders'
|
|
|
|
|
Shares
|
|
|
|
Amount
|
|
|
|
Capital
|
|
|
|
Deficit
|
|
|
|
Equity
|
|
Balance, January 1, 2019
|
|
|
87,175,522
|
|
|
$
|
872
|
|
|
$
|
32,187,580
|
|
|
$
|
(16,861,763
|
)
|
|
$
|
15,326,689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation due to common stock purchase
options
|
|
|
-
|
|
|
|
-
|
|
|
|
832
|
|
|
|
-
|
|
|
|
832
|
|
Net loss for the three months ended
March 31, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(519,266
|
)
|
|
|
(519,266
|
)
|
Balance, March 31, 2019
|
|
|
87,175,522
|
|
|
$
|
872
|
|
|
$
|
32,188,412
|
|
|
$
|
(17,381,029
|
)
|
|
$
|
14,808,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR THE
THREEMONTHS ENDED MARCH 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2018
|
|
|
76,145,418
|
|
|
$
|
762
|
|
|
$
|
16,404,673
|
|
|
$
|
(14,740,922
|
)
|
|
$
|
1,664,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock from the exercise of warrants
|
|
|
569,797
|
|
|
|
6
|
|
|
|
109,994
|
|
|
|
-
|
|
|
|
110,000
|
|
Issuance of common stock from the exercise of stock options
|
|
|
125,307
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
-
|
|
Stock based compensation due to common stock purchase
options
|
|
|
-
|
|
|
|
-
|
|
|
|
122,497
|
|
|
|
-
|
|
|
|
122,497
|
|
Net loss for the three months ended
March 31, 2018
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(649,147
|
)
|
|
|
(649,147
|
)
|
Balance, March 31, 2018
|
|
|
76,840,522
|
|
|
$
|
769
|
|
|
$
|
16,637,163
|
|
|
$
|
(15,390,069
|
)
|
|
$
|
1,247,863
|
|
(See accompanying notes to unaudited consolidated financial statements)
RENOVACARE, INC. AND SUBSIDIARY
|
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
|
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
|
|
|
Three Months Ended
March 31,
|
|
|
2019
|
|
2018
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(519,266
|
)
|
|
$
|
(649,147
|
)
|
Adjustments to reconcile net loss to net cash flows used
in from operating activities
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
79
|
|
|
|
79
|
|
Stock based compensation expense
|
|
|
832
|
|
|
|
122,497
|
|
Accretion of debt discount
|
|
|
-
|
|
|
|
58,438
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Decrease (increase) in prepaid expenses
|
|
|
30,052
|
|
|
|
(351
|
)
|
Increase (decrease) in accounts payable
|
|
|
27,329
|
|
|
|
(86,174
|
)
|
Increase (decrease) in accounts payable - related parties
|
|
|
7,000
|
|
|
|
2,814
|
|
Increase (decrease) in interest payable - related parties
|
|
|
-
|
|
|
|
20,466
|
|
Increase (decrease) in contract payable
|
|
|
-
|
|
|
|
(100,000
|
)
|
Net cash flows used in from
operating activities
|
|
|
(453,974
|
)
|
|
|
(631,378
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds from exercise of warrants and issuance of common stock
|
|
|
-
|
|
|
|
110,000
|
|
Net cash flows from financing activities
|
|
|
-
|
|
|
|
110,000
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
(453,974
|
)
|
|
|
(521,378
|
)
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
15,397,524
|
|
|
|
2,906,237
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
14,943,550
|
|
|
$
|
2,384,859
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Interest paid in cash
|
|
$
|
-
|
|
|
$
|
-
|
|
Income taxes paid in cash
|
|
$
|
-
|
|
|
$
|
-
|
|
(See accompanying notes to unaudited consolidated financial statements)
RENOVACARE, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
Note 1. Basis of Presentation, Organization, Nature and Continuance
of Operations, Recent Accounting Standards and Earnings (Loss) Per Share
Basis of Presentation
The unaudited consolidated financial statements of RenovaCare,
Inc.
and Subsidiary
(the “Company”) as of March 31, 2019, and for the three months ended March 31, 2019 and
2018, 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, 2018, 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 March 31, 2019, the Company had $14,943,550 of cash on hand.
As a result of the cash on hand, the Company believes it currently has sufficient cash to meet its funding requirements over the
next twelve months following the issuance of this Quarterly Report on Form 10-Q. However, 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 Company expects that it may need to raise additional capital to accomplish its business plan over the next several years. If
additional funding is required, the Company expects to seek to obtain that funding through private equity or convertible debt.
There can be no assurance as to the availability or terms upon which such financing and capital might be available.
The accompanying unaudited consolidated financial statements
have been prepared in conformity with generally accepted accounting principles in the United States of America (“US
GAAP”), 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.
Applicable Accounting Guidance
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 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 did not have an impact on its 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 months ended March 31, 2019 and 2018:
|
|
Three Months Ended
March 31,
|
|
|
2019
|
|
2018
|
Basic and Diluted EPS Computation
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Loss available to common stockholders'
|
|
$
|
(519,266
|
)
|
|
$
|
(649,147
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
87,175,522
|
|
|
|
76,498,552
|
|
Basic and diluted EPS
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
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
|
|
|
317,500
|
|
|
|
357,500
|
|
Warrants
|
|
|
13,346,912
|
|
|
|
3,011,912
|
|
Convertible debt
|
|
|
-
|
|
|
|
629,954
|
|
Total shares not included in the computation of diluted losses per share
|
|
|
13,664,412
|
|
|
|
3,999,366
|
|
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 March 31, 2019 and December 31, 2018.
Note 3. Common Stock and Warrants
Common Stock
At March 31, 2019, the Company had 500,000,000 authorized shares
of common stock with a par value of $0.00001 per share, 87,175,522 shares of common stock outstanding and 19,440,765 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. No stock awards were made during the three months ended March 31, 2019. See “Note 7.
Stock Options” for further discussion.
Warrants
The following table summarizes information about warrants outstanding
at March 31, 2019 and December 31, 2018:
|
|
Shares of Common Stock Issuable from Warrants Outstanding as of
|
|
Weighted
|
|
|
Description
|
|
March 31,
2019
|
|
December 31,
2018
|
|
Average
Exercise Price
|
|
Expiration
|
Series A
|
|
|
|
240,000
|
|
|
|
240,000
|
|
|
$
|
0.35
|
|
|
July 12, 2019
|
Series D
|
|
|
|
810,000
|
|
|
|
810,000
|
|
|
$
|
1.10
|
|
|
June 5, 2020
|
Series E
|
|
|
|
584,416
|
|
|
|
584,416
|
|
|
$
|
1.54
|
|
|
September 8, 2021
|
Series F
|
|
|
|
7,246
|
|
|
|
7,246
|
|
|
$
|
3.45
|
|
|
February 23, 2022 & March 9, 2022
|
Series G
|
|
|
|
460,250
|
|
|
|
460,250
|
|
|
$
|
2.68
|
|
|
July 21, 2022
|
Series H
|
|
|
|
910,000
|
|
|
|
910,000
|
|
|
$
|
2.75
|
|
|
October 16, 2022
|
Series I
|
|
|
|
10,335,000
|
|
|
|
10,335,000
|
|
|
$
|
2.00
|
|
|
November 26, 2025
|
Total
|
|
|
|
13,346,912
|
|
|
|
13,346,912
|
|
|
|
|
|
|
|
Note 4. Stock Options
The following table summarizes stock option activity for the period
ended March 31, 2019:
|
|
Number of Options
|
|
Weighted Average Exercise Price ($)
|
|
Weighted Average Remaining Contractual Term
|
|
Aggregate Intrinsic Value ($)
|
Outstanding at December 31, 2018
|
|
|
317,500
|
|
|
|
3.41
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2019
|
|
|
317,500
|
|
|
|
3.41
|
|
|
|
7.44 years
|
|
|
|
29,225
|
|
Exercisable at March 31, 2019
|
|
|
307,500
|
|
|
|
3.49
|
|
|
|
7.52 years
|
|
|
|
24,525
|
|
Available for grant at March 31, 2019
|
|
|
19,440,765
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no options granted during the three months ended March
31, 2019.
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 March 31, 2019 and 2018, the Company recognized $832 and $122,497, respectively, in stock-based compensation.
As of March 31, 2019, the Company had no unrecognized compensation cost related to unvested stock options. Stock-based compensation
has been included in the unaudited consolidated statement of operations as follows:
|
|
Three Months Ended March 31,
|
|
|
2019
|
|
2018
|
Research and development
|
|
$
|
-
|
|
|
$
|
20,875
|
|
General and administrative
|
|
|
832
|
|
|
|
101,622
|
|
Total
|
|
$
|
832
|
|
|
$
|
122,497
|
|
The following table summarizes information about stock options outstanding
and exercisable at March 31, 2019:
|
|
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
|
1.05
|
|
|
55,000
|
|
|
|
5.01
|
|
|
|
1.05
|
|
|
|
45,000
|
|
|
|
5.01
|
|
|
|
1.05
|
|
1.25
|
|
|
7,500
|
|
|
|
6.22
|
|
|
|
1.25
|
|
|
|
7,500
|
|
|
|
6.22
|
|
|
|
1.25
|
|
1.34
|
|
|
7,500
|
|
|
|
6.26
|
|
|
|
1.34
|
|
|
|
7,500
|
|
|
|
6.26
|
|
|
|
1.34
|
|
1.70
|
|
|
7,500
|
|
|
|
6.55
|
|
|
|
1.70
|
|
|
|
7,500
|
|
|
|
6.55
|
|
|
|
1.70
|
|
2.28
|
|
|
7,500
|
|
|
|
7.31
|
|
|
|
2.28
|
|
|
|
7,500
|
|
|
|
7.31
|
|
|
|
2.28
|
|
4.20
|
|
|
232,500
|
|
|
|
8.12
|
|
|
|
4.20
|
|
|
|
232,500
|
|
|
|
8.12
|
|
|
|
4.20
|
|
Total
|
|
|
317,500
|
|
|
|
7.44
|
|
|
|
$3.41
|
|
|
|
307,500
|
|
|
|
7.52
|
|
|
|
$3.49
|
|
Note 5. Commitments
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 $76,600 and $12,015 in during the three
months ended March 31, 2019 and 2018, respectively. Dr. Gerlach, from whom the Company purchased the CellMist
TM
System
technologies, is a principal of StemCell Systems.
See also “Note 6. Related Party Transactions.”
Note 6. Related Party Transactions
As compensation for their service on the Board, Dr. Kirkland receives
an annual retainer of $6,000, payable in equal quarterly installments in arrears. Additionally, on March 15, 2016, the Company
granted to Dr. Kirkland an incentive stock option to purchase up to 50,000 shares of the Company’s common stock at an exercise
price of $1.91 per share; and on May 11, 2017, the Company granted to Dr. Kirkland an incentive stock option to purchase up to
75,000 shares of the Company’s common stock at an exercise price of $4.20 per share. The 50,000 options granted on March
15, 2016 became fully vested upon grant and the 75,000 options granted on May 11, 2017 vested 50% on the date of grant and 50%
one year hence. The options may be exercised on a “cashless basis”. On February 22, 2018, Dr. Kirkland exercised all
50,000 of the March 15, 2016 options on a cashless basis and received 41,033 shares of common stock. He has not exercised his May
11, 2017 options. Compensation expense of $0 and $29,654 with respect to these options was recorded during the three months ended
March 31, 2019 and 2018 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 these
engagements the Company incurred expenses of $76,600 and $12,015 in during the three months ended March 31, 2019 and 2018, respectively.
Dr. Gerlach, from whom the Company purchased the CellMist
TM
System technologies, is a principal of StemCell Systems.
Thomas Bold is a business consultant and economic advisor to StemCell Systems.
Dr. Gerlach is entitled to payments for consulting services. During
the three months ended March 31, 2019 and 2018, the Company recognized expenses related to Dr. Gerlach services of $0 and $4,660,
respectively. Accounts payable to Dr. Gerlach amounted to $0 at March 31, 2019 and December 31, 2018.
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 an amendment dated May 1, 2016, the VAM monthly consulting fee was increased from $5,000
to $6,800. On June 22, 2018, the Company and VAM entered into an Executive Consulting Agreement (“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 March 31, 2019 and 2018, the Company
recognized expenses of $30,000 and $20,400, respectively for consulting services provided by VAM.
During the year ended December 31, 2018, 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 and CEO.
On November 26, 2018, the Company entered into Subscription Agreements
with KCC for the purchase and sale of 10,335,000 Units of the Company's equity securities at a price of $1.50 per Unit, pursuant
to a private placement offering conducted by the Company for (i) aggregate cash proceeds of $14,407,500 and (ii) conversion of
$1,095,000 principal amount of outstanding loan indebtedness. The unpaid interest related to the loan indebtedness totaled $167,497
and is reflected on our balance sheet as a non-interest bearing liability. Each Unit consisted of: (i) one (1) share of common
stock; and (ii) one (1) Series I Stock Purchase Warrant to purchase one (1) share of common stock at a price of $2.00 per share
for a period of seven (7) years commencing on the date the Warrants were first issued. The Series I Warrants do not have a cashless
exercise provision. KCC does not have any registration rights with respect to the shares comprising a part of the Units
or issuable upon exercise of the Series I Warrants.
Note 7. Subsequent Events
Management has reviewed material events
subsequent of the period ended March 31, 2019 and prior to the filing of financial statements in accordance with FASB ASC 855 “Subsequent
Events”.
On May 9, 2019, the Company and StemCell Systems entered into
a Research & Development Agreement whereby StemCell Systems will work to advance the Company’s technologies. The Research
& Development Agreement is on a work-made-for-hire basis with an 18 month duration and estimated monthly fee of $25,000.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations
Forward-Looking Statements
You should read the following discussion and analysis of our
financial condition and results of operations together with our financial statements and related notes appearing elsewhere in this
Quarterly Report filed on Form 10-Q. This discussion and analysis contains forward-looking statements that involve risks, uncertainties
and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result
of many factors.
This discussion and analysis should be read in conjunction with
the accompanying unaudited interim consolidated financial statements and related notes. The discussion and analysis of the financial
condition and results of operations are based upon the unaudited interim consolidated financial statements, 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 of America requires us 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 we review our estimates and assumptions.
The estimates were based on historical experience and other assumptions that we believe 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
us 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.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q 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 RenovaCare, Inc. and its subsidiaries 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;
|
|
·
|
the effect on us from adverse publicity related to our products or the company itself; and
|
|
·
|
any adverse claims relating to our intellectual property.
|
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
RenovaCare, Inc. (formerly Janus Resources, Inc.) (together
with its wholly owned subsidiary, “
RenovaCare
” the “
Company
” “
we
” “
us
”
and “
our
”) was incorporated under the laws of the State of Nevada and has an authorized capital of 500,000,000
shares of $0.00001 par value common stock, of which 87,175,522 shares are outstanding as of March 31, 2019, and 10,000,000 shares
of $0.0001 par value preferred stock, of which none are outstanding.
On January 7, 2014, we filed a Certificate
of Amendment to Articles of Incorporation changing our name from “Janus Resources, Inc.” to “RenovaCare, Inc.”
so as to more fully reflect our operations. The Financial Industry Regulatory Authority (“
FINRA
”) declared the
name change effective as of January 9, 2014. In conjunction with the name change, we changed our stock symbol on the OTCQB from
“JANI” to “RCAR”.
Our principal executive offices are located at
9375
East Shea Blvd., Suite 107-A,
, Scottsdale, AZ 85260. Our telephone number is (888) 398-0202.
Description of Business
We are a development-stage company focusing on the acquisition,
development and commercialization of autologous (using a patient’s own cells) cellular therapies for medical and aesthetic
applications. On July 12, 2013, we, through our wholly owned subsidiary, RenovaCare Sciences Corp., completed the acquisition of
our flagship 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 to us on November 29, 2016 (Patent
No. US 9,505,000) and the other patent application was granted to us on April 4, 2017 (Patent No. US 9,610,430). Two additional
patent applications are pending.
On or about April 11, 2017, we received from Avita Medical a Petition
for Inter Partes Review purporting to challenge the validity of the claims in U.S. Patent No. 9,610,430 before the PTAB of the
U.S. Patent & Trademark Office. Upon consideration of the arguments and evidence set forth by us and Avita, on December 18,
2017, the PTAB rendered a Final Written Decision dismissing the Petition in its entirety and, accordingly, confirming all such
claims. Avita Medical’s right to file an appeal expired on February 21, 2018.
In the case of U.S. patents, a typical utility patent term is 20
years from the date on which the application for the patent was filed in the United States or, if the application contains a specific
reference to an earlier filed application or applications, from the date on which the earliest such application was filed. Patents
filed outside of the U.S. have a patent term typically running 20 years from the date of first filing, but which are determined
by the law of the country in which they issue. Patent term may be affected by events such as maintenance (or annuity) fee payment,
terminal or statutory disclaimer, post-grant proceedings, patent term adjustment, and/or patent term extension.
The development of our CellMist
TM
System is in the
early stage and we anticipate that we will be required to expend significant time and resources to further develop our technology
and determine whether a commercially viable product can be developed. Research and development of new technologies involves a high
degree of risk and there is no assurance that our development activities will result in a commercially viable product. The long-term
profitability of our operations will be, in part, directly related to the cost and success of our development programs, which may
be affected by a number of factors.
The average adult human has a skin surface area of between 16 -
21 square feet, which protects all other organs against the external environment. When a person’s skin is assailed by trauma
or exposed to extreme heat, the skin’s various layers may be destroyed and depending on the severity of the injury, might
cause life-threatening conditions. Currently, severe trauma to the skin, such as second or third degree burns, requires surgical
mesh-grafting of skin, whereby healthy skin is removed from one area of the patient’s body (a “donor site”) and
implanted on the damaged area.
While mesh grafting is often the method of choice, there are significant
deficiencies with this method. The surgical procedure to remove healthy skin from the donor site can be painful and leaves the
patient with a new wound that must also be attended to. In many instances the aesthetic results are not satisfying, as the color
of the skin from the donor site may not match the skin color of the damaged skin. Additionally, the size of the donor skin removed
must be substantially equal in size to the damaged skin area. These donor and injury sites can take weeks to heal, requiring expensive
hospital stays, ongoing wound dressing management, and in some cases, complex anti-infection strategies.
We are currently evaluating the potential of our CellMist
TM
System
in the treatment of tissue that has been subject to severe trauma such as second degree burns. The CellMist
TM
System
utilizes the patient’s own skin stem cells, reduces the size of the donor site, and has shown to significantly decrease scarring.
Furthermore, we believe the CellMist
TM
System could enable treatment of other skin disorders with minimal scarring.
Our Market Opportunity
According to medical market research firm, Kalorama Information,
the global market for wound care products is projected to grow to approximately $18.3 billion by 2019.
Burn Wounds
Burns are one of the most common and devastating forms of trauma.
Patients with serious thermal injury require immediate specialized care in order to minimize morbidity and mortality. Data from
the National Center for Injury Prevention and Control in the U.S. show that approximately 2 million fires are reported each year
which result in 1.2 million people with burn injuries (
see
American Burn Association
Burn Incidence and Treatment in
the US: 2000 Fact Sheet
, available at: http://www.ameriburn.org). Moderate to severe burn injuries requiring hospitalization
account for approximately 100,000 of these cases, and about 5,000 patients die each year from burn-related complications (see Church
D, Elsayed S, Reid O, Winston B, Lindsay R “
Burn wound infections
” Clinical Microbiology Reviews 2006;19(2):403–34,
available at: http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1471990).
The prevalence of patients with severe burns is even higher in emerging
economies. For example, according to the World Health Organization over 1,000,000 people in India are moderately to severely burnt
every year and approximately 265,000 people worldwide die from burn related injuries (see World Health Organization “
Burns:
Fact Sheet No. 365
,” reviewed September 2016, available at: http://www.who.int/mediacentre/factsheets/fs365/en/). According
to Critical Care, an international clinical medical journal, burns are also among the most expensive traumatic injuries because
of long and costly hospitalization, rehabilitation and wound and scar treatment (see Brusselaers, N., Monstrey, et al, “
Severe
Burn Injury in Europe: A systematic Review of the Incidence, Etiology, Morbidity, and Mortality
” available at: http://ccforum.com/content/14/5/R188).
Burn injuries account for a significant cost to the health care
system in North America and worldwide. In the U.S. there are currently 127 centers specializing in burn care. Recent estimates
in the U.S. show that 40,000 patients are admitted annually for treatment with burn injuries, over 60% of the estimated U.S. acute
hospitalizations related to burn injury were admitted to burn centers. Such centers now average over 200 annual admissions for
burn injury and skin disorders requiring similar treatment. The other 4,500 U.S. acute care hospitals average less than 3 burn
admissions per year (see American Burn Association
Burn Incidence and Treatment in the US: 2013 Fact Sheet
, available at:
http://www.ameriburn.org).
Initial hospitalization costs and physicians' fees for specialized
care of a patient with a major burn injury are currently estimated to be $200,000. Overall, costs escalate for major burn cases
because of repeated admissions for reconstruction and rehabilitation therapy. In the U.S., current annual estimates show that more
than $18 billion is spent on specialized care of patients with major burn injuries (see Church D, Elsayed S, Reid O, Winston B,
Lindsay R “
Burn wound infections
” Clinical Microbiology Reviews 2006;19(2):403–34, available at: http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1471990).
Most burn injuries involve layers of the upper skin, the epidermis.
Severe major trauma involves a complete loss of the entire thickness of the skin and often requires major surgery involving split-skin
mesh-grafting. Skin grafting is a procedure where healthy skin is removed from one area of the body and transplanted to a wound
site.
Our Technology
Our cell isolation methodology is referred to as the CellMist
TM
process, and our cell deposition device is referred to as the SkinGun
TM
. We isolate a patient's stem cells from a small
biopsy of the patient's skin. The stem cells are placed into a liquid solution, which is then filled into a sterile syringe. The
syringe is inserted into the SkinGun
TM
, which then sprays the stem cell-loaded liquid solution into the wound.
The first phase of gathering the patient's stem cells, creating
a liquid solution, and applying the stem cells takes approximately 1.5–2 hours. Within two weeks following the wound treatment
procedure, the skin cells fully generate a normal upper skin layer (re-epithelialization), and within months the skin regains its
color and texture.
Our cell isolation procedure and the cell spraying are performed
on the same day, in an on-site setting. Because the skin cells sprayed using the SkinGun
TM
are actually the patient's
own cells, the skin that is regenerated looks more natural than artificial skin replacements. During recovery, the skin cells grow
into fully functional layers of the skin and the regenerated skin leaves minimal scarring. Additionally, our methods require substantially
smaller donor areas than skin grafting, reducing donor area burden such as pain and the risk of complications.
The CellMist
TM
System remains an experimental,
unproven methodology and we continue to evaluate its efficacy. There is no guarantee that we will able to develop a commercially
viable product based upon the CellMist
TM
System and its underlying technology.
Domestic Regulation
Governmental authorities in the U.S., at the federal, state and
local level, and in other countries extensively regulate, among other things, the research, development, testing, manufacture,
labeling, packaging, promotion, storage, advertising, distribution, marketing and export and import of products or devices such
as those we are attempting to develop. Our device candidates, to the extent they are developed, will be subject to pre-market approval
by the FDA prior to their marketing for commercial use in the U.S., and to any approvals required by foreign governmental entities
prior to their marketing outside the U.S. In addition, any changes or modifications to a device that has received regulatory clearance
or approval that could significantly affect its safety or effectiveness, or would constitute a major change in its intended use,
may require the submission of a new application in the U.S. for pre-market approval, or for foreign regulatory approvals outside
the U.S.. The process of obtaining foreign approvals, can be expensive, time consuming and uncertain.
Premarket Approval
We will be required to file for premarket approval
(“
PMA
”) for the SkinGun
TM
or any other device that we commercialize if it is deemed a Class III
medical device. PMA is the FDA process of scientific and regulatory review to evaluate the safety and effectiveness of Class
III medical devices. Class III devices are those that support or sustain human life, are of substantial importance in
preventing impairment of human health, or which present a potential, unreasonable risk of illness or injury. Due to the level
of risk associated with Class III devices, the FDA has determined that general and special controls alone are insufficient to
assure the safety and effectiveness of class III devices. Therefore, these devices require a PMA application under section
515 of the Federal Food, Drug and Cosmetic Act in order to obtain marketing clearance.
PMA is the most stringent type of device marketing application required
by the FDA. The applicant must receive FDA approval of its PMA application prior to marketing the device. PMA approval is based
on a determination by FDA that the PMA contains sufficient valid scientific evidence to assure that the device is safe and effective
for its intended use(s). An approved PMA is, in effect, a private license granting the applicant (or owner) permission to market
the device.
Investigational Device Exemption (“IDE”)
Among the data required in a PMA application is human clinical test
data. The FDA’s regulation that governs the human testing is the IDE and other patient protection regulations. For devices
that are considered Significant Risk, an IDE application is required. It consists of the proposed clinical protocol and all supporting
study documentation and must be submitted and approved by FDA and an Institutional Review Board (IRB) prior to initiation of the
human testing. Since the CellMist
TM
System employs the use of stem cells taken from the patient, it is considered Significant
Risk by the FDA; therefore, we will be required to file an IDE application prior to conducting a clinical study for any application,
such as for treatment of severe burns. The FDA has a specified review timeline and process for IDE reviews - each review phase
takes 30 days and if the FDA has questions or concerns about the study design, there may be multiple review rounds until FDA either:
(a) conditionally approves, (b) approves or (c) denies approval of the clinical study conduct under the submitted IDE. There is
no guarantee that any IDE application we submit will be approved by the FDA.
HIPAA Requirements
Other federal legislation may affect our ability to obtain certain
health information in conjunction with any research activities we conduct. The Health Insurance Portability and Accountability
Act of 1996 (“
HIPAA
”), mandates, among other things, the adoption of standards designed to safeguard the privacy
and security of individually identifiable health information. In relevant part, the U.S. Department of Health and Human Services
(“
HHS
”), has released two rules to date mandating the use of new standards with respect to such health information.
The first rule imposes new standards relating to the privacy of individually identifiable health information. These standards restrict
the manner and circumstances under which covered entities may use and disclose protected health information so as to protect the
privacy of that information. The second rule released by HHS establishes minimum standards for the security of electronic health
information. While we do not believe we are directly regulated as a covered entity under HIPAA, the HIPAA standards impose requirements
on covered entities conducting research activities regarding the use and disclosure of individually identifiable health information
collected in the course of conducting the research.
Other U.S. Regulatory Requirements
In the U.S., the research, manufacturing, distribution, sale, and
promotion of drug and biological products are potentially subject to regulation by various federal, state and local authorities
in addition to the FDA, including the Centers for Medicare and Medicaid Services (formerly the Health Care Financing Administration),
other divisions of the U.S. Department of Health and Human Services (e.g., the Office of Inspector General), the U.S. Department
of Justice and individual U.S. Attorney offices within the Department of Justice, and state and local governments. For example,
sales, marketing and scientific/educational grant programs must comply with the anti-fraud and abuse provisions of the Social Security
Act, the False Claims Act, and similar state laws, each as amended. Pricing and rebate programs must comply with the Medicaid rebate
requirements of the Omnibus Budget Reconciliation Act of 1990 and the Veterans Health Care Act of 1992, each as amended. If products
are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and
requirements apply. All of these activities are also potentially subject to federal and state consumer protection, unfair competition,
and other laws.
International Regulation
The regulation of any potential product candidates we may produce
outside of the U.S. varies by country. Certain countries regulate human tissue products as a biological product, which would require
us to make extensive filings and obtain regulatory approvals before selling our product candidates. Certain other countries may
classify our product candidates as human tissue for transplantation but may restrict its import or sale. Other countries have no
application regulations regarding the import or sale of products similar to potential product candidates, creating uncertainty
as to what standards we may be required to meet.
Competition
The biotechnology, medical device, and wound care industries are
characterized by intense competition, rapid product development and technological change. Our CellMist
TM
System competes
with a variety of companies in the wound care markets, many of which offer substantially different treatments for similar problems.
Currently Avita Medical Limited is evaluating the efficacy of ReCell, a cell spray device and a cell isolation procedure for autologous
cells. Integra Lifesciences Holding Corp. sells Integra Dermal Regeneration Template, which does not use autologous cells, but
instead uses an animal-derived intercellular matrix with an artificial waterproof barrier. Other competitors include: MiMedx Group,
Inc.; Kinetic Concepts Inc.; Fibrocell Science, Inc.; Shire Plc and Organogenesis, Inc.
Many of our competitors are large, well-established companies with
considerably greater financial, marketing, sales and technical resources than those available to us. Additionally, many of our
present and potential competitors have research and development capabilities that may allow them to develop new or improved products
that may compete with our product lines. Our potential products could be rendered obsolete or made uneconomical by the development
of new products to treat the conditions addressed by our products, technological advances affecting the cost of production, or
marketing or pricing actions by one or more of our competitors.
Intellectual Property
General
In the course of conducting our business, we from time to time create
inventions. Obtaining, maintaining and protecting our inventions, including seeking patent protection, might be important depending
on the nature of the invention. To that end, we seek to implement patent and other intellectual property strategies to appropriately
protect our intellectual property. While we file and prosecute patent applications to protect our inventions, our pending patent
applications might not result in the issuance of patents or issued patents might not provide competitive advantages. Also, our
patent protection might not prevent others from developing competitive products using related or other technology.
The scope, enforceability and effective term of issued patents can
be highly uncertain and often involve complex legal and factual questions. Moreover, the issuance of a patent in one country does
not assure the issuance of a patent with similar claim scope in another country, and claim interpretation and infringement laws
vary among countries, so we are unable to predict the extent of patent protection in any country. The patents we obtain and the
unpatented proprietary technology we hold might not afford us significant commercial protection or advantage.
In addition to issued patents describe above, we plan to file
additional patent applications that, if issued, would provide further protection for The CellMist
TM
System. Although
we believe the bases for these patents and patent applications are sound, they are untested; and there is no assurance that they
will not be successfully challenged. There can be no assurance that any patent previously issued will be of commercial value, that
any patent applications will result in issued patents of commercial value, or that our technology will not be held to infringe
patents held by others.
Strategy
Our ultimate goal is to leverage the potential of our CellMist
TM
System, together with our cell isolation method, as cutting edge treatments in skin therapy. Before we can do so, however, there
are a number of steps we must first take, including:
|
·
|
initiating a series of clinical trials to determine the CellMist
TM
System’s safety and efficacy for treating wounds and burns;
|
|
|
|
|
·
|
formalizing collaborations with universities and scientific partners;
|
|
|
|
|
·
|
creating a network of clinical and research partners;
|
|
|
|
|
·
|
achieving
FDA and other regulatory clearance; and
|
|
|
|
|
·
|
expanding the range of possible applications.
|
Additionally, we will likely continue to raise significant capital
in order to fund our ongoing research and development operations, and there is no guarantee that we will be able to continue to
raise capital on acceptable terms, if at all.
Results of Operations
Three Months Ended March 31, 2019 Compared with the Three
Months Ended March 31, 2018
Operating Expenses
A summary of our operating expenses for the three months ended March
31, 2019 and 2018 follows:
|
|
Three Months Ended March 31,
|
|
Increase /
|
|
Percentage
|
|
|
2019
|
|
2018
|
|
(Decrease)
|
|
Change
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
194,510
|
|
|
$
|
104,236
|
|
|
$
|
90,274
|
|
|
|
87
|
%
|
General and administrative
|
|
|
408,629
|
|
|
|
347,936
|
|
|
|
60,693
|
|
|
|
17
|
%
|
Stock compensation
|
|
|
832
|
|
|
|
122,497
|
|
|
|
(121,665
|
)
|
|
|
-99
|
%
|
Total operating expenses
|
|
$
|
603,971
|
|
|
$
|
574,669
|
|
|
$
|
29,302
|
|
|
|
5
|
%
|
Research and Development
Research and development (“
R&D
”)
costs represent costs incurred to develop our CellMist
TM
System and are incurred pursuant to agreements with third party
providers and certain internal R&D cost allocations. Payments under these agreements include salaries and benefits for R&D
personnel, allocated overhead, contract services and other costs. R&D costs are expensed when incurred. R&D costs, excluding
stock based compensation, increased during the three months ended March 31, 2019 compared to 2018, as a result of the timing of
our R&D expenses.
General and Administrative
General and administrative costs include all expenditures incurred
other than research and development related costs, including costs related to personnel, professional fees, travel and entertainment,
public company costs, insurance and other office related costs. Costs increased during the three months ended March 31, 2019 compared
to 2018 and included an increase of $186,000 related to professional fees offset by a $123,000 decrease in investor communications
costs.
Stock 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. Stock compensation expense decreased during the quarter
ended March 31, 2019 compared to 2018 primarily due to the May 11, 2017 grant of 310,000 stock options with a weighted average
grant date fair value of $3.38 per share whereby one-half vested immediately and the second half vested through May 11, 2018; combined
with no option grants since, resulted in virtually no expense in 2019 compared to 2018.
Other Income (Expense)
Other income relates to interest earned on bank account deposits.
Other expense relates to our convertible promissory notes. Interest expense relates to the stated interest of the convertible promissory
notes. Accretion of debt discount represents the accretion of the discount applied to the notes as a result of the issuance of
detachable warrants and the beneficial conversion feature contained in the notes.
Liquidity and Capital Resources
The Company does not have any commercialized products, has not generated
any revenue since inception and has sustained recurring losses and negative cash flows since inception. The Company has incurred
recurring operating losses of $603,971 and $574,669 for the three months ended March 31, 2019 and 2018, respectively. The Company
expects to incur losses as it continues development of its products and technologies. The Company has been funded through the sale
of equity securities. As of March 31, 2019, the Company had $14,943,550 of cash. The Company believes that it currently has sufficient
cash to meet its funding requirements over the next year.
Net cash used in operating activities was $453,974 during the three
months ended March 31, 2019, compared to net cash used in operating activities of $631,378 during the three months ended March
31, 2018. The decrease in cash used in operating activities is primarily due to the timing of payments of accounts payable and
realization of prepaid expenses compared to the prior period.
There was no net cash used in investing activities during the three
months ended March 31, 2019 and 2018.
Net cash provided by financing activities was $0 during three months
ended March 31, 2019, compared to $110,000 during the three months ended March 31, 2018. During the three months ended March 31,
2018, the Company received $110,000 from the exercise of 100,000 Series D Warrants at an exercise price of $1.10
On November 26, 2018, the Company issued 9,605,000 units
of the Company’s equity securities at a price of $1.50 per unit, pursuant to a private placement offering conducted by the
Company resulting in $14,407,500 of proceeds to the Company.
On November 26, 2018, the Company issued 730,000 units
of the Company’s equity securities at a price of $1.50 per unit, pursuant to a private placement offering conducted by the
Company resulting in conversion of $1,095,000 principal amount of loan indebtedness.
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.
Fair Value of Financial Instruments and Risks
The carrying value of cash and cash equivalents, accounts payable,
and contract and contribution 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 and accrued interest 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.
Recently Issued Accounting Standards
See Note 1 to our Unaudited Consolidated Financial Statements for more information regarding recent accounting
standards and their impact to our consolidated results of operations and financial position.
Related Party Transactions
Our proposed business raises potential conflicts of interests between
certain of our officers and directors and us. Certain of our directors are employees or consultants to other companies in the healthcare
industry and, to the extent that such other companies may participate in ventures in which we may participate, our directors may
have a conflict of interest in negotiating and concluding terms regarding the extent of such participation. In the event that such
a conflict of interest arises at a meeting of our directors, a director who has such a conflict will abstain from voting for or
against the approval of such participation or such terms. Other than as indicated, we have no other procedures or mechanisms to
deal with conflicts of interest. We are not aware of the existence of any conflict of interest as described herein.
The Board is responsible for review, approval, or ratification of
“related-person transactions” involving RenovaCare, Inc. or its subsidiaries and related persons. Under SEC rules (Section
404 (d) of Regulation S-K), a related person is a director, officer, nominee for director, or 5% stockholder of the company since
the beginning of the previous fiscal year, and their immediate family members. RenovaCare, Inc. is required to report any transaction
or series of transactions in which the company or a subsidiary is a participant, and a related person has a direct or indirect
material interest where the amount involved exceeds the lesser of $120,000 or one percent of the average of the smaller reporting
company’s total assets at year end for the last two completed fiscal years.
Other than as disclosed below, during the three months ended March
31, 2019, none of our current directors, officers or principal shareholders, nor any family member of the foregoing, nor, to the
best of our information and belief, any of our former directors, senior officers or principal shareholders, nor any family member
of such former directors, officers or principal shareholders, has or had any material interest, direct or indirect, in any transaction,
or in any proposed transaction which has materially affected or will materially affect us.
As compensation for their service on the Board, Dr. Kirkland receives
an annual retainer of $6,000, payable in equal quarterly installments in arrears. Additionally, on March 15, 2016, the Company
granted to Dr. Kirkland an incentive stock option to purchase up to 50,000 shares of the Company’s common stock at an exercise
price of $1.91 per share; and on May 11, 2017, the Company granted to Dr. Kirkland an incentive stock option to purchase up to
75,000 shares of the Company’s common stock at an exercise price of $4.20 per share. The 50,000 options granted on March
15, 2016 became fully vested upon grant and the 75,000 options granted on May 11, 2017 vested 50% on the date of grant and 50%
one year hence. The options may be exercised on a “cashless basis” using the formula contained therein. On February
22, 2018, Dr. Kirkland exercised all 50,000 of the March 15, 2016 options on a cashless basis and received 41,033 shares of common
stock. He has not exercised his May 11, 2017 options. Compensation expense of $0 and $29,654 with respect to these options was
recorded during the three months ended March 31, 2019 and 2018 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 these
engagements the Company incurred expenses of $76,600 and $12,015 in during the three months ended March 31, 2019 and 2018, respectively.
Dr. Gerlach, from whom the Company purchased the CellMist
TM
System technologies, is a principal of StemCell Systems.
Thomas Bold is a business consultant and economic advisor to StemCell Systems.
Dr. Gerlach is entitled to payments for consulting services. During
the three months ended March 31, 2019 and 2018, the Company recognized expenses related to Dr. Gerlach services of $0 and $4,660,
respectively. Accounts payable to Dr. Gerlach amounted to $0 at March 31, 2019 and December 31, 2018.
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 an amendment dated May 1, 2016, the VAM monthly consulting fee was increased from $5,000
to $6,800. On June 22, 2018, the Company and VAM entered into an Executive Consulting Agreement (“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 March 31, 2019 and 2018, the Company
recognized expenses of $30,000 and $20,400, respectively for consulting services provided by VAM.
During the year ended December 31, 2018, 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 and CEO.
On November 26, 2018, the Company entered into Subscription Agreements
with KCC for the purchase and sale of 10,335,000 Units of the Company's equity securities at a price of $1.50 per Unit, pursuant
to a private placement offering conducted by the Company for (i) aggregate cash proceeds of $14,407,500 and (ii) conversion of
$1,095,000 principal amount of outstanding loan indebtedness. The unpaid interest related to the loan indebtedness totaled $167,497
and is reflected on our balance sheet as a non-interest bearing liability. Each Unit consisted of: (i) one (1) share of common
stock; and (ii) one (1) Series I Stock Purchase Warrant to purchase one (1) share of common stock at a price of $2.00 per share
for a period of seven (7) years commencing on the date the Warrants were first issued. The Series I Warrants do not have a cashless
exercise provision. KCC does not have any registration rights with respect to the shares comprising a part of the Units
or issuable upon exercise of the Series I Warrants.