UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 


 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

 

Commission File Number: 001-33718

 

U.S. STEM CELL, INC.

(Exact name of registrant as specified in its charter)

 

Florida

65-0945967

(State or other jurisdiction of incorporation or organization

(I.R.S. Employer Identification No.)

 

1560 Sawgrass Corporate Pkwy 4th Floor, Sunrise, FL 33323

(Address of principal executive offices) (Zip Code)

 

(954) 835-1500

(Registrant’s telephone number, including area code)

 

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 ☐ No ☒

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ 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. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer 

Non-Accelerated filer 

Smaller reporting company  

   

Emerging growth 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 ☐ No ☒

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

USRM

OTC

 

As of July 15, 2021, there were 452,413,153 outstanding shares of the Registrant’s common stock, par value $0.001 per share.

 

Transitional Small Business Disclosure Format Yes ☐ No ☒

 

 

 

 

TABLE OF CONTENTS

 

 

PART I.

FINANCIAL INFORMATION

Page

No.

Item 1.

Financial Statements  

 
 

Condensed Balance Sheets as of June 30, 2020 (Unaudited) and December 31, 2019

3

 

Condensed Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019 (Unaudited)

4
 

Condensed Statements of Stockholders' Deficit for the Three and Six Months Ended June 30, 2020 and 2019 (Unaudited)

5
 

Condensed Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019 (Unaudited)

7
 

Notes to Condensed Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

36

Item 4.

Controls and Procedures

36

     

PART II.

OTHER INFORMATION

 
     

Item 1.

Legal Proceedings

37

Item 1A.

Risk Factors

38

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

38

Item 3.

Defaults Upon Senior Securities

38

Item 4.

Mine Safety Disclosures

38

Item 5.

Other Information

38

Item 6.

Exhibits

38

 

Signatures

41

 

 

 

 

PART IFINANCIAL INFORMATION

 

Item 1. Financial Statements

 

U.S. STEM CELL, INC.

CONDENSED BALANCE SHEETS

 

   

June 30,

   

December 31,

 
   

2020

   

2019

 
   

(unaudited)

         

ASSETS

               

Current assets:

               

Cash and cash equivalents

  $ 153,265     $ -  

Accounts receivable, net

    22,295       48,208  

Inventories

    7,299       8,096  

Prepaid expenses and other current assets

    11,689       10,000  

Total current assets

    194,548       66,304  
                 

Investments

    9,718       23,539  
                 

Total assets

  $ 204,266     $ 89,843  
                 

LIABILITIES AND STOCKHOLDERS' DEFICIT

               

Current liabilities:

               

Bank overdraft

  $ -     $ 1,520  

Accounts payable

    1,215,061       1,187,989  

Accrued expenses

    1,241,415       1,115,526  

Advances - related parties

    667,648       511,744  

Deferred revenue, current portion

    23,495       23,800  

Deferred gain on sale of equipment, current portion

    -       21,474  

Deposits

    465,286       465,286  

Notes payable - related parties

    3,132,442       2,757,442  

Notes payable, current portion, net of debt discount of $9,394 and $9,057, respectively

    1,389,040       1,297,477  

Promissory note payable, net of debt discount of $0 and $29,296, respectively

    1,397,762       1,368,467  

Convertible note payable, net of debt discount of $9,998 and $0, respectively

    25,002       -  

Total current liabilities

    9,557,151       8,750,725  
                 

Long-term liabilities:

               

Deferred revenue

    61,000       62,500  

Notes payable, net of debt discount of $36,526 and $41,391, respectively

    794,966       756,014  

Total long-term liabilities

    855,966       818,514  
                 

Total liabilities

    10,413,117       9,569,239  
                 

Commitments and contingencies (See Note 13)

               
                 

Stockholders' deficit:

               

Preferred stock, par value $0.001; 20,000,000 shares authorized, -0- issued and outstanding

    -       -  

Common stock, par value $0.001; 2,000,000,000 shares authorized, 428,001,981 and 417,724,767 shares issued and outstanding, respectively

    428,002       417,725  

Additional paid-in capital

    124,132,196       123,726,894  

Accumulated deficit

    (134,769,049 )     (133,624,015 )

Total stockholders' deficit

    (10,208,851 )     (9,479,396 )
                 

Total liabilities and stockholders' deficit

  $ 204,266     $ 89,843  

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

 

U.S. STEM CELL, INC.

CONDENSED STATEMENTS OF OPERATIONS

(unaudited)

 

   

For Three months ended June 30,

   

For the Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 

Revenue:

                               

Products

  $ 26,993     $ 154,966     $ 71,377     $ 271,666  

Services

    12,661       1,136,574       25,769       2,285,352  

Management fees - related party

    -       6,444       -       49,776  

Total revenue

    39,654       1,297,984       97,146       2,606,794  
                                 

Cost of sales

    16,877       505,994       34,974       1,028,093  
                                 

Gross profit

    22,777       791,990       62,172       1,578,701  
                                 

Operating expenses:

                               

Research and development

    -       531       -       951  

Selling, general and administrative

    491,358       825,602       1,028,893       2,010,994  

Pre-litigation settlement

    -       500,000       -       500,000  

Total operating expenses

    491,358       1,326,133       1,028,893       2,511,945  
                                 

Loss from operations

    (468,581 )     (534,143 )     (966,721 )     (933,244 )
                                 

Other income (expenses):

                               

Gain (loss) on settlement of accounts payable and accrued interest, net

    (5,387 )     1,649       481       (11,311 )

Gain on sale of equipment

    -       32,212       21,474       64,423  

Miscellaneous income

    -       -       -       69  

Income (loss) from equity investments

    9,718       26,312       (13,821 )     127,256  

Interest expense

    (104,993 )     (365,156 )     (186,447 )     (759,537 )

Total other income (expenses)

    (100,662 )     (304,983 )     (178,313 )     (579,100 )
                                 

Net loss before income taxes

    (569,243 )     (839,126 )     (1,145,034 )     (1,512,344 )
                                 

Income taxes (benefit)

    -       -       -       -  
                                 

NET LOSS

  $ (569,243 )   $ (839,126 )   $ (1,145,034 )   $ (1,512,344 )
                                 

Net loss per common share, basic and diluted

  $ (0.00 )   $ (0.00 )   $ (0.00 )   $ (0.00 )
                                 

Weighted average number of common shares outstanding, basic and diluted

    427,968,284       393,575,661       425,955,114       389,147,377  

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

 

U.S. STEM CELL, INC.

CONDENSED STATEMENT OF STOCKHOLDERS' DEFICIT

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020

 

                                   

Additional

                 
   

Preferred Stock

   

Common Stock

   

Paid-in

   

Accumulated

         
   

Shares

   

Amount

   

Shares

   

Amount

   

Capital

   

Deficit

   

Total

 

Balance, March 31, 2020

    -     $ -       424,935,588     $ 424,936     $ 123,935,713     $ (134,199,806 )   $ (9,839,157 )

Common stock issued in settlement of accounts payable and accrued interest

    -       -       3,066,393       3,066       21,465       -       24,531  

Stock-based compensation

    -       -       -       -       175,018       -       175,018  

Net loss

    -       -       -       -       -       (569,243 )     (569,243 )

Balance, June 30, 2020 (unaudited)

    -     $ -       428,001,981     $ 428,002     $ 124,132,196     $ (134,769,049 )   $ (10,208,851 )

 

                                   

Additional

                 
   

Preferred Stock

   

Common Stock

   

Paid-in

   

Accumulated

         
   

Shares

   

Amount

   

Shares

   

Amount

   

Capital

   

Deficit

   

Total

 

Balance, December 31, 2019

    -     $ -       417,724,767     $ 417,725     $ 123,726,894     $ (133,624,015 )   $ (9,479,396 )

Common stock issued in settlement of accounts payable and accrued interest

    -       -       6,277,214       6,277       27,886       -       34,163  

Common stock issued for services

    -       -       4,000,000       4,000       12,000       -       16,000  

Beneficial conversion feature recognized on convertible note

    -       -       -       -       15,000       -       15,000  

Stock-based compensation

    -       -       -       -       350,416       -       350,416  

Net loss

    -       -       -       -       -       (1,145,034 )     (1,145,034 )

Balance, June 30, 2020 (unaudited)

    -     $ -       428,001,981     $ 428,002     $ 124,132,196     $ (134,769,049 )   $ (10,208,851 )

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

 

U.S. STEM CELL, INC.

CONDENSED STATEMENT OF STOCKHOLDERS' DEFICIT

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019

 

                                   

Additional

                 
   

Preferred Stock

   

Common Stock

   

Paid-in

   

Accumulated

         
   

Shares

   

Amount

   

Shares

   

Amount

   

Capital

   

Deficit

   

Total

 

Balance, March 31, 2019

    -     $ -       389,675,905     $ 389,676     $ 122,976,584     $ (130,461,896 )   $ (7,095,636 )

Common stock issued in settlement of accounts payable and accrued interest

    -       -       4,018,915       4,019       85,201       -       89,220  

Stock-based compensation

    -       -       -       -       169,216       -       169,216  

Net loss

    -       -       -       -       -       (839,126 )     (839,126 )

Balance, June 30, 2019 (unaudited)

    -     $ -       393,694,820     $ 393,695     $ 123,231,001     $ (131,301,022 )   $ (7,676,326 )

 

   

Preferred Stock

   

Common Stock

   

Paid-in

   

Accumulated

         
   

Shares

   

Amount

   

Shares

   

Amount

   

Capital

   

Deficit

   

Total

 

Balance, December 31, 2018

    -     $ -       378,076,976     $ 378,077     $ 122,528,391     $ (129,788,678 )   $ (6,882,210 )

Common stock issued in settlement of accounts payable and accrued interest

    -       -       12,117,844       12,118       266,063       -       278,181  

Common stock issued for services

    -       -       3,500,000       3,500       82,850       -       86,350  

Contribution to equity investment

    -       -       -       -       15,265       -       15,265  

Stock-based compensation

    -       -       -       -       338,432       -       338,432  

Net loss

    -       -       -       -       -       (1,512,344 )     (1,512,344 )

Balance, June 30, 2019 (unaudited)

    -     $ -       393,694,820     $ 393,695     $ 123,231,001     $ (131,301,022 )   $ (7,676,326 )

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

 

U.S. STEM CELL, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)

 

   

For the Six Months Ended June 30,

 
   

2020

   

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

               

Net loss

  $ (1,145,034 )   $ (1,512,344 )

Adjustments to reconcile net loss to net cash used in operating activities:

               

Depreciation and amortization

    -       103,304  

Bad debt (recoveries)

    -       19,321  

Interest and amortization of debt discount

    165,413       94,557  

(Gain) loss on settlement of accounts payable and accrued interest

    (481 )     11,311  

Gain on sale of equipment

    (21,474 )     (64,423 )

Related party notes payable issued for services rendered

    375,000       -  

Loss (income) on equity investments

    13,821       (127,256 )

Note payable issued in pre-trial settlement

    -       500,000  

Stock-based compensation

    364,727       411,932  

Changes in operating assets and liabilities:

               

Accounts receivable

    25,913       (13,450 )

Inventories

    797       49,512  

Accounts payable

    52,571       195,902  

Accrued expenses

    8,446       (72,748 )

Deferred revenue

    (1,805 )     (131,425 )

Net cash used in operating activities

    (162,106 )     (535,807 )
                 

CASH FLOWS FROM INVESTING ACTIVITIES:

               

Proceeds from equity investments

    -       166,833  

Net cash provided by investing activities

    -       166,833  
                 

CASH FLOWS FROM FINANCING ACTIVITIES:

               

Repayments for overdraft protection

    (1,520 )     -  

Proceeds from related party advances

    155,904       90,000  

Repayments of related party notes

    -       (258,252 )

Proceeds from notes payable

    150,000       -  

Repayments of notes payable

    (24,013 )     (232,396 )

Proceeds from convertible note payable

    35,000       -  

Net cash provided by (used in) financing activities

    315,371       (400,648 )
                 

Net increase (decrease) in cash and cash equivalents

    153,265       (769,622 )

Cash and cash equivalents, beginning of period

    -       1,357,146  

Cash and cash equivalents, end of period

  $ 153,265     $ 587,524  
                 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

               

Interest paid

  $ 21,034     $ 622,414  

Income taxes paid

  $ -     $ -  
                 

SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:

               

Common shares issued in settlement of accounts payable and accrued interest

  $ 34,163     $ 278,181  

Beneficial conversion feature recognized on convertible note

  $ 15,000     $ -  

Common shares issued for prepaid services

  $ 1,689     $ -  

Equity contributed to investment

  $ -     $ 15,265  

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

 

U.S. STEM CELL, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2020

 

NOTE 1NATURE OF OPERATIONS

 

Overview

 

U.S. Stem Cell, Inc. was incorporated under the laws of the State of Florida in August 1999. The Company is in the cardiovascular sector of the cell technology industry delivering cell therapies and biologics that help address congestive heart failure, lower limb ischemia, chronic heart ischemia, acute myocardial infarctions and other issues. The business includes the development of proprietary cell therapy products as well as revenue generating physician and patient-based regenerative medicine/cell therapy training services, cell collection and cell storage services, the sale of cell collection and treatment kits for humans and animals, and the operation of cell therapy clinics. To date, the Company has not generated significant revenues in that they remain less than their total operating expenses, has incurred expenses, and has sustained losses. Consequently, its operations are subject to all the risks inherent in the establishment of a research and development business enterprise.

 

Basis of Presentation

 

The interim unaudited condensed financial statements included herein reflect all material adjustments (consisting of normal recurring adjustments and reclassifications and non-recurring adjustments) which, in the opinion of the Company’s management, are ordinary and necessary for a fair presentation of results for the interim periods. Certain information and footnote disclosures required under generally accepted accounting principles in the United States of America (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The Company’s management believes the disclosures are adequate to make the information presented not misleading.

 

The condensed balance sheet information as of December 31, 2019 was derived from the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2019 (“2019 Annual Report”), filed with the SEC pursuant to Section 13 or 15(d) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on July 15, 2021. These interim unaudited condensed financial statements should be read in conjunction with the 2019 Annual Report. The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the entire fiscal year or for any other period.

 

NOTE 2 GOING CONCERN AND MANAGEMENTS LIQUIDITY PLANS

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

 

As shown in the accompanying financial statements, as of June 30, 2020, the Company had cash on hand of $153,265 and a working capital deficit (current liabilities in excess of current assets) of $9,362,603. During the six months ended June 30, 2020, the net loss was $1,145,034 and net cash used in operating activities was $162,106. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the unaudited condensed financial statements.

 

The Company’s primary source of operating funds has been from revenue generated from sales with additional cash proceeds from the sale of common stock and the issuances of promissory notes and other debt. The Company has experienced net losses from operations since inception, but it expects these conditions to improve in the future as it develops its business model. The Company had a stockholders’ deficit of 10,208,851 at June 30, 2020 and requires additional financing to fund future operations.

 

The Company’s existence is dependent upon management’s ability to develop profitable operations and to obtain additional funding sources. There can be no assurance that the Company’s financing efforts will result in profitable operations or the resolution of the Company’s liquidity problems. The accompanying statements do not include any adjustments that might result should the Company be unable to continue as a going concern. Along with diversifying the portfolio of products distributed by the Company, including equipment and biologics, it is the intention of the Company management to both continue to adhere to the Court Order (see Note 13 of the Financial Statements) as well as re -establish its good standing with the Agency (FDA). These points are not mutually exclusive nor negotiable and management believes that there are still  business and patient goodness opportunities while still abiding by all legal requirements  As a result, management shall be continuing with the development of  US Stem Cell Training, Inc., an operating division of the Company, that  is a content developer of regenerative medicine/cell therapy informational and training materials for physicians and patients and complies with both requirements--as well as Vetbiologics, an operating division of the Company, that  is a veterinary regenerative medicine company committed to providing veterinarians with the ability to deliver the highest quality regenerative medicine therapies to dogs, cats and horses.

 

 

U.S. STEM CELL, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2020

 

NOTE 3 SIGNIFICANT ACCOUNTING POLICIES

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include stock-based compensation, debt discounts and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates.

 

Fair Value

 

Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The carrying value of cash and cash equivalents, accounts payable, accrued liabilities, and short-term borrowings, as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed.

 

The Company follows Accounting Standards Codification subtopic 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”) and Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”), which permits entities to choose to measure many financial instruments and certain other items at fair value.

 

Cash

 

The Company considers cash to consist of cash on hand and temporary investments having an original maturity of 90 days or less that are readily convertible into cash.

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable are non-interest bearing and are stated at gross invoice amounts less an allowance for doubtful accounts. Credit is extended to customers based on an evaluation of their financial condition, industry reputation, and other judgmental factors considered by the Company’s management. The Company generally does not require collateral or other security interest to support accounts receivable. Based on trends and specific factors, the customer’s credit terms may be modified, including required payment upon delivery.

 

The Company performs regular on-going credit evaluations of its customers as deemed relevant. As events, trends, and circumstance warrant, the Company’s management estimates the amounts that are more likely than not to be uncollectible. These amounts are recognized as bad debt expense and are reflected within selling, general, administrative and other expenses on the Company’s accompanying statement of operations.

 

Any charges to the allowance for doubtful accounts on accounts receivable are charged to operations in amounts sufficient to maintain the allowance for uncollectible accounts at a level management believes is adequate to cover any probable losses. Management determines the adequacy of the allowance based on historical write-off percentages and the current status of accounts receivable. Accounts receivable are charged off against the allowance when collectability is determined to be permanently impaired. As of June 30, 2020 and December 31, 2019, the allowance for doubtful accounts was $13,203.

 

Inventories

 

Inventories are stated at the lower of cost or market with cost being determined on a first-in, first-out (FIFO) basis. The Company writes down its inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. During the periods presented, there were no inventory write-downs.

 

 

U.S. STEM CELL, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2020

 

Investments

 

The Company follows Accounting Standards Codification subtopic 323-10, Investments-Equity Methods and Joint Ventures (“ASC 323-10) which requires the accounting for investments where the Company can exert significant influence, but not control of a joint venture or equity investment. The Company accounted for its 49.9% member interest ownerships of U.S. Stem Cell Clinic, LLC and Regenerative Wellness Clinic, LLC, respectively, and its 49% member interest ownership of U.S. Stem Cell Clinic of the Villages utilizing the equity method of accounting (See Note 5).

 

Revenue Recognition

 

Effective January 1, 2018, the Company recognizes revenue in accordance with Accounting Standards Codification 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific revenue recognition guidance throughout the Industry Topics of the Accounting Standards Codification. The updated guidance states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also provides for additional disclosures with respect to revenues and cash flows arising from contracts with customers.

 

At the time of each transaction, management assesses whether the fee associated with the transaction is fixed or determinable and whether or not collection is reasonably assured. The assessment of whether the fee is fixed or determinable is based upon the payment terms of the transaction. Collectability is assessed based on a number of factors, including past transaction history with the client and the creditworthiness of the client.

 

The Company’s primary sources of revenue are from the sale of test kits and equipment, training services, patient treatments, laboratory services and cell banking. 

 

Revenues for kits and equipment sold are not recorded until kits and equipment are received by the customer. Revenues from in-person trainings are recognized when the training occurs and revenues from on demand online trainings are recognized when the customer purchases the rights to the training course. Any cash received as a deposit for trainings are recorded by the Company as a liability.

 

Patient treatments and laboratory services revenue are recognized when those services have been completed or satisfied.

 

Revenues for cell banking are accounted for as multiple performance obligations as described in ASC 606 and addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. Because the Company sells its services separately, on more than a limited basis and at a price within a narrow range, the Company was able to allocate revenue based on stand-alone pricing. The multiple performance obligations include stem cell banking, dose retrieval and yearly storage fees. Revenues for stem cell banking and dose retrieval is recognized at the point of service and revenues for the yearly storage fees is recognized over the term of the banking contract, which is typically one year with annual renewals.

 

At June 30, 2020 and December 31, 2019, the Company had deferred revenues of $84,495 and $86,300, respectively, which includes $64,000 and $65,500, respectively, for the Intellectual Property Licensing Agreement.

 

Research and Development

 

The Company accounts for research and development costs in accordance with Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved as defined under the applicable agreement. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. The Company incurred research and development expenses of $0 for the three and six months ended June 30, 2020, respectively; and $531 and $951 for the three and six months ended June 30, 2019, respectively.

 

 

U.S. STEM CELL, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2020

 

Stock-Based Compensation

 

Stock-based compensation expense is measured at the grant date fair value of the award and is expensed over the requisite service period. For stock-based awards to employees, non-employees and directors, the Company calculates the fair value of the award on the date of grant using the Black-Scholes option pricing model. Determining the fair value of stock-based awards at the grant date under this model requires judgment, including estimating volatility, employee stock option exercise behaviors and forfeiture rates. The assumptions used in calculating the fair value of stock-based awards represent the Company’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment.

 

Income Taxes

 

The Company follows Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods.

 

Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate.  Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse and are considered immaterial.

 

Net Loss per Common Share

 

The Company computes earnings (loss) per share under Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”). Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year.  Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable.

 

The computation of basic and diluted income (loss) per share as of June 30, 2020 and 2019 excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period.

 

Potentially dilutive securities excluded from the computation of basic and diluted net loss per share are as follows:

 

   

 June 30,

 
   

2020

   

2019

 

Options

    111,119,914       112,970,670  

Warrants

    1,110,468       1,112,251  

Convertible note

    7,820,647       -  

Total potentially dilutive shares

    120,051,029       114,082,921  

 

Recent Accounting Pronouncements

 

FASB Accounting Standards Updates (“ASU”) 2017-04 (Topic 350), “Intangibles – Goodwill and Others” – Issued in January 2017, ASU 2017-04 simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. This guidance was effective for the Company in the first fiscal quarter of 2020. The adoption of this standard did not have a material impact on the Company’s financial statements and related disclosures.

 

 

U.S. STEM CELL, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2020

 

In February 2016, the FASB established ASC Topic 842, Leases (Topic 842), by issuing ASU No. 2016-02, which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. The new standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations. The Company adopted the new standard on January 1, 2019. The new standard provides a number of optional practical expedients in transition. The Company has elected the ‘package of practical expedients’, which permit it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter is not applicable to the Company. The new standard had a material effect on the Company’s financial statements. The most significant effects of adoption relate to (1) the recognition of new ROU assets and lease liabilities on its balance sheet for real estate operating leases; and (2) providing significant new disclosures about its leasing activities. Upon adoption, the Company recognized additional operating lease liabilities, net of deferred rent, of approximately $57,000 based on the present value of the remaining minimum rental payments under current leasing standards for existing operating leases. The Company also recognized corresponding ROU assets of approximately $57,000. On October 24, 2019, the Company entered into an Assignment and Assumption of Lease by and between the Company, American Cell Technology, LLC, and Sawgrass Business Plaza, LLC. Subsequently, the Company relocated to a new location within the same city and entered into a month-to-month lease. Accordingly, the right of use assets and lease liabilities were eliminated. The new standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company will not recognize ROU assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. Beginning in 2019, the Company changed to its disclosed lease recognition policies and practices, as well as to other related financial statement disclosures due to the adoption of this standard.

 

FASB ASU No. 2018-07 (Topic 718), “Compensation – Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting” – Issued in June 2018, ASU 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606. The Company adopted the new standard on January 1, 2019. The adoption of this guidance did not have a material impact on the Company’s financial condition or results of operations.

 

In August 2020, the FASB issued ASU 2020-06, which simplifies the guidance on accounting for convertible debt instruments by removing the separation models for: (1) convertible debt with a cash conversion feature; and (2) convertible instruments with a beneficial conversion feature. As a result, the Company will not separately present in equity an embedded conversion feature in such debt. Instead, we will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. We expect the elimination of these models will reduce reported interest expense and increase reported net income for the Company’s convertible instruments falling under the scope of those models before the adoption of ASU 2020-06. Also, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will be no longer available. The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2020-06 on its financial statements.

 

In August 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 removes certain disclosure requirements, including the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. ASU 2018-13 also adds disclosure requirements, including changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements, and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments on changes in unrealized gains and losses, and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. This guidance was effective for the Company in the first fiscal quarter of 2020. The adoption of this standard did not have a material impact on the Company’s financial statements and related disclosures.

 

There are various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s financial position, results of operations or cash flows.

 

 

U.S. STEM CELL, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2020

 

NOTE 4PROPERTY AND EQUIPMENT

 

Property and equipment as of June 30, 2020 and December 31, 2019 is summarized as follows:

 

   

June 30,
2020

   

December 31,
2019

 

Furniture, fixtures and equipment

  $ 5,598     $ 5,598  

Computer equipment

    1,809       1,809  

Property and equipment, cost

    7,407       7,407  

Less: accumulated depreciation and amortization

    (7,407 )     (7,407 )

Property and equipment, net

  $ -     $ -  

 

As a consequence of the Court Order (see Note 13 “Government Claim”), the Company resolved to divest itself of certain equipment and other assets (the “Equipment Assets”) used in connection with the Company’s human tissue banking business, but consistent however with the requirements of the Court Order, and to adjust the business plan and operations to accommodate this potential divesture. To facilitate the above, the Company entered into a Termination and Release Agreement and a Letter Agreement intended to divest itself of certain equipment and other assets underlying the related equipment lease transaction. In addition, on October 24, 2019, the Company entered into an Assignment and Assumption of Lease by and between the Company, American Cell Technology, LLC, and Sawgrass Business Plaza, LLC. Subsequently, the Company relocated to a new location within the same city and entered into a month-to-month lease. As part of the termination of the operating lease, the Company left certain property and equipment (all of which had been fully depreciated) at the old location.

 

In connection with the sale of the lab, medical and other equipment, the Company realized a gain on sale of equipment of $386,535.  The gain is recognized ratably over the term of the lease to operations. During the three and six months ended June 30, 2020, the Company recognized $0 and $21,474, respectively; and $32,212 and $64,423 during the three and six months ended June 30, 2019, respectively, as gain on sale of equipment.  As of June 30, 2020 and December 31, 2019, deferred gain on sale of equipment was $0 and $21,474, respectively.

 

Depreciation expense was $0 for the three and six months ended June 30, 2020, respectively. Depreciation expense was $51,652 and $103,304, of which $51,652 and $103,304 was included in cost of sales, for the three and six months ended June 30, 2019, respectively.

 

NOTE 5INVESTMENTS

 

U.S. Stem Cell Clinic, LLC

 

The investment in U.S. Stem Cell Clinic, LLC is comprised of a 49.9% (increased from 33.3% on January 29, 2019) member interest ownership and is accounted for using the equity method of accounting. The Company’s income (loss) earned by U.S. Stem Cell Clinic, LLC member interest was $9,718 and ($13,821) for the three and six months ended June 30, 2020, respectively; and ($521) and $72,151 for the three and six months ended June 30, 2019, respectively (inception to date income of $609,439) and is included in other income (expense) in the accompanying Statements of Operations.  In addition, during the six months ended June 30, 2020 and 2019, the Company received distributions totaling $0 and $64,870, respectively, from U.S. Stem Cell Clinic, LLC (inception to date of $663,870).  The carrying value of the investment at June 30, 2020 and December 31, 2019 is $9,718 and $23,539, respectively (See also Note 16; In March, 2021, the Company divested its entire interest in U.S. Stem Cell Clinic, LLC).

 

At June 30, 2020 and December 31, 2019, accounts receivable for sales of product and services to U.S. Stem Cell Clinic, LLC was $28,763. Revenues earned from sales to U.S. Stem Clinic, LLC for the three and six months ended June 30, 2020 were $0 and $1,441, respectively; and $163,512 and $295,389 for the three and six months ended June 30, 2019, respectively.

 

In January 2019, a member of U.S. Stem Cell Clinic, LLC contributed 16.6% of his ownership interest to the Company increasing the Company’s member interest from 33.3% to 49.9%. The Company recorded the contribution to equity of $4,435.

 

An affiliate of one of the Company’s officers is a minority investor in the U.S. Stem Cell Clinic, LLC.

 

 

 

U.S. STEM CELL, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2020

 

Regenerative Wellness Clinic, LLC

 

The investment in Regenerative Wellness Clinic, LLC is comprised of a 49.9% (increased from 33.3% on January 29, 2019) member interest ownership and is accounted for using the equity method of accounting. The Company has provided technical expertise, but no cash investment with Regenerative Wellness Clinic, LLC’s startup in 2017. The Company’s income earned by Regenerative Wellness Clinic, LLC member interest was $0 for the three and six months ended June 30, 2020; and $34,340 and $72,255 for the three and six months ended June 30, 2019, respectively (inception to date income of $113,047) and is included in other income (expense) in the accompanying Statements of Operations. In addition, during the six months ended June 30, 2020 and 2019, the Company received distributions totaling $0 and $101,963, respectively, from Regenerative Wellness Clinic, LLC (inception to date of $101,963). The carrying value of the investment at June 30, 2020 and December 31, 2019 is $0.

 

In October 2019, the Company divested its entire interest in U.S. Stem Cell Clinic, LLC.

 

At December 31, 2019, accounts receivable for sales of products and services to Regenerative Wellness Clinic, LLC was $0. Revenues earned from sales to Regenerative Wellness Clinic, LLC for the three and six months ended June 30, 2019 was $76,736 and $116,347, respectively.

 

In January 2019, a member of Regenerative Wellness Clinic, LLC contributed 16.6% of his ownership interest to the Company increasing the Company’s member interest from 33.3% to 49.9%. The Company recorded the contribution to equity of $10,830.

 

An affiliate of one of the Company’s officers is an investor in the Regenerative Wellness Clinic, LLC.

 

U.S. Stem Cell of the Villages LLC

 

On January 30, 2018, Greg Knutson, a director of the Company (“Knutson”) and the Company agreed to open and operate a regenerative medicine/cell therapy clinic providing cellular treatments for patients afflicted with neurological, autoimmune, orthopedic and degenerative diseases in Florida.  To that end, U.S. Stem Cell Clinic of The Villages LLC (the “LLC”) was formed January 30, 2018. Knutson provided the Company with the sum of Three Hundred Thousand Dollars ($300,000) (the “Investment”) to be utilized for the formation and initial operation of the LLC.  Currently, Knutson holds a 51% member interest in the LLC and the Company holds a 49% member interest. The Company will provide operating assistance as well as management services, the latter to be compensated at fee of five percent (5%) of the LLC gross revenues.

 

As of December 31, 2018, upon completion of U.S. Stem Cell of the Villages LLC, the Company received $189,909 from Greg Knutson, the holder of the 51% member interest. Accordingly, this was recognized as additional paid-in capital. Subsequently, the Company contributed $86,750 as its initial investment in the U.S. Stem Cell of the Villages, LLC. The Company’s 49% income (loss) incurred by U.S. Stem Cell of the Villages LLC member interest was $0 for the three and six months ended June 30, 2020; and ($7,507) and ($17,150) for the three and six months ended June 30, 2019, respectively (inception to date loss of $23,050) and is included in other income (expense) in the accompanying Statements of Operations. In addition, during the six months ended June 30, 2020 and 2019, the Company received distributions totaling $0 from U.S. Stem Cell of the Villages LLC. The carrying value of the investment at June 30, 2020 and December 31, 2019 was $0.

 

At June 30, 2020 and December 31, 2019, accounts receivable for sales of products and services to U.S. Stem Cell of the Villages LLC was $0. Revenues earned from sales to U.S. Stem Cell of the Villages LLC for the three and six months ended June 30, 2020 was $0, respectively; and $39,151 and $130,352 for the three and six months ended June 30, 2019, respectively.

 

During the three and six months ended June 30, 2020, the Company received $0; and $6,444 and $49,776 for the three and six months ended June 30, 2019, respectively, in management fees from the LLC.

 

As of the date of this filing, US Stem Cell Clinic of the Villages, LLC is currently dormant.

 

NOTE 6RIGHT TO USE ASSETS AND LEASE LIABILITY

 

The Company leased its headquarters in Sunrise, Florida which consisted of 4,860 square feet of space at a rate of approximately $82,620 per year. On February 4, 2016, the Company extended its facility lease to extend the term of the lease until August 31, 2019 at a monthly base rent of $7,306 plus a pro rata share of landlord’s operating expenses. Effective September 1, 2019, the Company entered into a second amendment to extend the lease through August 31, 2024 with base rent beginning at $87,674 per year and escalating to $98,678 per year plus a pro rata share of the landlord’s operating expenses.

 

 

U.S. STEM CELL, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2020

 

On September 1, 2019, the lease commencement date, the Company estimated the lease liability and the right of use assets at present value using the Company’s estimated incremental borrowing rate of 8% and determined their initial present values, at inception, of $383,351. In determining the length of the lease term to its long-term lease, the Company determined there was not an option to extend the lease.

 

In determining the length of the lease term for this long-term lease, the Company determined there was not an option to extend the lease. At lease commencement date, the Company estimated the lease liability and the right of use assets at present value using the Company’s estimated incremental borrowing rate of 8% and determined the initial present value, at inception, of $274,180. On January 1, 2019, upon adoption of ASC Topic 842, the Company recorded right to use assets of $56,734 and lease liability of $56,734.

 

On October 24, 2019, the Company entered into an Assignment and Assumption of Lease by and between the Company, American Cell Technology, LLC, and Sawgrass Business Plaza, LLC. Subsequently, the Company relocated to a new location within the same city and entered into a month-to-month lease. Accordingly, the right of use assets and lease liabilities were eliminated.

 

During the three and six months ended June 30, 2020 and 2019, lease expense was comprised of the following:

 

   

 For the Three Months Ended June 30,

   

 For the Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 

Operating lease expense

  $ 1,395     $ 34,109     $ 2,202     $ 70,640  

Variable lease expense

    -       234       -       685  

Total lease expense

  $ 1,395     $ 34,343     $ 2,202     $ 71,325  

 

NOTE 7ACCRUED EXPENSES

 

Accrued expenses consisted of the following as of June 30, 2020 and December 31, 2019:   

 

   

June 30,
2020

   

December 31,
2019

 

Interest and fees payable to the Guarantors of the Company’s loan agreement with Seaside Bank

  $ 497,382     $ 456,190  

Accrued interest payable

    664,901       580,204  

Vendor accruals and other

    79,132       79,132  

Marketing obligation

    -       -  

Accrued expenses and other current liabilities

  $ 1,241,415     $ 1,115,526  

 

During the six months ended June 30, 2020, the Company issued 1,445,647 shares of its common stock, having a fair value of $11,565, in lieu of payment in cash of accrued and unpaid interest of $9,145, resulting in a loss on settlement of $2,420.

 

NOTE 8NOTES PAYABLE

 

Notes payable were comprised of the following as of June 30, 2020 and December 31, 2019:

 

   

June 30,
2020

   

December 31,
2019

 

Seaside Bank note payable

  $ 980,000     $ 980,000  

Hunton & Williams note payable

    389,000       391,000  

Weider note payable

    465,426       482,939  

Mallard note payable

    245,500       250,000  

EIDL note payable

    150,000       -  

Total notes payable

    2,229,926       2,103,939  

Less unamortized debt discount

    (45,920 )     (50,448 )

Total notes payable net of unamortized debt discount

    2,184,006       2,053,491  

Less current portion

    (1,389,040 )     (1,297,477 )

Long-term portion

  $ 794,966     $ 756,014  

 

 

U.S. STEM CELL, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2020

 

Seaside Bank

 

On October 25, 2010, the Company entered into a Loan Agreement with Seaside National Bank and Trust for a $980,000 loan at 4.25% per annum interest that was used to refinance the Company’s loan with Bank of America. The obligation is guaranteed by certain stockholders of the Company. The Company renewed the loan with Seaside National Bank and Trust during the first quarter of 2018 to extend the maturity date to May 18, 2020. The Company renewed the loan with Seaside National Bank and Trust during the first quarter of 2020 to extend the maturity date to May 18, 2022.

 

Hunton & Williams

 

At December 31, 2016, the Company has two outstanding notes payable with interest at 8% per annum due at maturity. The two notes, $61,150 and $323,822, are payable in one balloon payment upon the date the Noteholder provides written demand, however the Company is not obligated to make payments until the Northstar Biotech Group, LLC (or successor) Loan is paid off.

 

On August 31, 2017, the Company and the noteholder entered into a Note Forbearance, Modification and Repayment Agreement (“Agreement”). The two notes, $61,150 and $323,822, were payable in one balloon payment upon the date of a written demand and upon certain triggering events occurring. The sum of unpaid principal and accumulated interest for both notes as of August 31, 2017 of $747,680 and an account payable of $40,596 result in an aggregate balance due of $788,276.

 

The noteholder agreed to accept full payment of their obligation over a four (4) year period in 48 monthly installments on an adjusted debt obligation in aggregate of $624,000 (reducing the outstanding balance), with such payments staggered in amounts such that the Company will pay $10,000 monthly the first year, $12,000 monthly the second year, $14,000 monthly the third year, and $16,000 monthly the final year.  In addition, the noteholder agreed to suspend accrual interest on the notes commencing September 1, 2017.

 

The Agreement remains in full force and effect provided the Company continues to make the monthly payments, there is no event of default as defined in the notes and an agreement to a subordination agreement by Northstar Biotech Group, LLC, which has been provided. In May 2019, the Company did not make the required scheduled payment. In September 2010, the noteholder agreed to waive their default rights under the agreement provided a minimum of $5,000 was paid by the end of 2019 and to reduce the required monthly payment to $500 per month commencing in January 2020. The Company satisfied the $5,000 payment requirement by the end of 2019 and commenced making the required $500 monthly payments in January 2020.

 

The Company imputed an interest rate of 5% and discounted the note accordingly. The imputed debt discount of $69,700 was amortized to interest expense using the effective interest method. For the three and six months ended June 30, 2020, the Company amortized $0; and $1,733 and $10,740 for the three and six months ended June 30, 2019, respectively, of debt discount to interest expense. At March 31, 2020, the Company was in default and was renegotiating the payment structure. Thus, the remaining unamortized debt discount was charged to interest expense at March 31, 2020. As of June 30, 2020 and December 31, 2019, the remaining carrying value of the note was $389,000 and $391,000, respectively.

 

Weider

 

The Company, as one of the parties entered into a Settlement Agreement and General Release (the “Agreement”) dated June 3, 2019 related to certain medical procedures. Without admitting any liability, and as part of that Agreement, the Company agreed to provide a five-year 5.25% unsecured promissory note, dated June 15, 2019, in the principal amount of $500,000, payable in monthly increments of $5,000 per month, with a final balloon payment due on June 15, 2024. As of June 30, 2020 and December 31, 2019, the remaining carrying value of the note was $465,426 and $482,939, respectively.

 

Mallard

 

The Company, as one of the parties entered into a Settlement Agreement and General Release (the “Agreement”) dated December 6, 2019 related to certain medical procedures. Without admitting any liability, and as part of that Agreement, the Company agreed to provide a five-year non-interest bearing unsecured promissory note, dated December 6, 2019, in the principal amount of $250,000, payable in monthly increments of $750 per month, with a final balloon payment of $205,000 due on January 1, 2025. The Company imputed an interest rate of 5% and discounted the note accordingly. The imputed debt discount of $51,063 is being amortized to interest expense using the effective interest method. For the three and six months ended June 30, 2020, the Company amortized $2,277 and $4,529, respectively, of debt discount to interest expense. As of June 30, 2020 and December 31, 2019, the remaining carrying value of the note was $199,580 and $199,551, net of debt discount of $45,920 and $50,448, respectively.

 

 

U.S. STEM CELL, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2020

 

Economic Injury Disaster Loan (EIDL)

 

On June 20, 2020, the Company executed the standard loan documents for an EIDL from the U.S. Small Business Administration in light of the impact of the COVID-19 pandemic on our business. Pursuant to that certain Loan Authorization and Agreement (the “SBA Loan Agreement”), the principal amount of the EIDL received was $150,000, with proceeds to be used for working capital purposes. Interest accrues at the rate of 3.75% per annum. Installment payments, including principal and interest, are due monthly beginning June 20, 2021 (twelve months from the date of the SBA Loan Agreement) in the amount of $731. The balance of principal and interest is payable thirty years from the date of the SBA Loan Agreement. As of June 30, 2020, the remaining carrying value of the note was $150,000. At June 30, 2020, accrued interest on the note was $154, and is included in accrued expenses on the accompanying balance sheet.

 

NOTE 9PROMISSORY NOTE PAYABLE

 

On June 1, 2015, the Company issued an amended and restated promissory note of $1,697,762 in settlement of the $1,500,000 outstanding subordinated debt, related accrued interest of $373,469 and accumulated and unpaid guarantor fees of $624,737.

 

The note is unsecured and non-interest bearing and requires four semi-annual payments of $75,000 beginning on December 31, 2015 with the remaining unpaid balance due June 1, 2020.  On June 1, 2020, the Company defaulted on the promissory note. Upon default, the note became due in full and the Company began accruing interest at the default interest rate of 18%.

 

The Company imputed an interest rate of 5% and discounted the promissory note accordingly. The imputed debt discount of $368,615 is amortized to interest expense using the effective interest method. For the three and six months ended June 30, 2020, the Company amortized $11,871 and $29,295, respectively; and $17,424 and $34,657 for the three and six months ended June 30, 2019, respectively, of debt discount to interest expense.  As of June 30, 2020 and December 31, 2019, the remaining carrying value of the note was $1,397,762 and $1,368,467, net of debt discount of $0 and $29,296, respectively.

 

NOTE 10CONVERTIBLE NOTE PAYABLE

 

On February 5, 2020, the Company issued an unsecured convertible promissory note in the principal amount of $35,000 that matures on February 5, 2021 and bears interest at a rate of 5% per annum. The investor has the right to convert the outstanding balance of the note at any time into shares of common stock of the Company at a conversion price equal to a thirty percent (30%) discount of the average closing price of the Company’s common stock on the OTC Markets electronic exchange for the prior thirty (30) trading days prior to conversion, subject to adjustment. Upon the occurrence of an event of default, the investor may accelerate the note pursuant to which the outstanding balance will become, at the noteholder’s election, immediately due and payable. As a result of the beneficial conversion feature of the note, debt discount of $15,000 was recognized with a corresponding increase in additional paid-in capital. The debt discount is being amortized to interest expense using the effective interest method. For the three and six months ended June 30, 2020, the Company amortized $3,247 and $5,002, respectively, of debt discount to interest expense.  As of June 30, 2020, the remaining carrying value of the note was $25,002, net of debt discount of $9,998. At June 30, 2020, accrued interest on the note was $700, and is included in accrued expenses on the accompanying balance sheet.

 

NOTE 11RELATED PARTY TRANSACTIONS

 

AdvancesRelated Parties

 

As of June 30, 2020 and December 31, 2019, the Company’s officers and directors have provided advances that are unsecured, non-interest bearing and due on demand. During the six months ended June 30, 2020 and 2019, the Company received aggregate proceeds from advances of $155,904 and $90,000, respectively. As of June 30, 2020 and December 31, 2019, the Company owed $667,648 and $511,744, respectively, for advances.

 

Notes PayableRelated Parties

 

Northstar Biotechnology Group, LLC

 

On February 29, 2012, a promissory note issued to BlueCrest Master Fund Limited (“BlueCrest”) was assigned to Northstar Biotechnology Group, LLC (“Northstar”), owned partly by certain directors and existing shareholders of the Company at the time, including Dr. William P. Murphy Jr., Dr. Samuel Ahn and Charles Hart. At the date of the assignment, the principal amount of the BlueCrest note was $544,267 (the “Note”).

 

 

U.S. STEM CELL, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2020

 

On March 30, 2012, the Company and Northstar agreed to extend until May 1, 2012 the initial payment date for any and all required monthly under the Note, such that the first of the four monthly payments required under the Note will be due and payable on May 1, 2012 and all subsequent payments will be due on a monthly basis thereafter commencing on June 1, 2012, and to waive any and all defaults and/or events of default under the Note with respect to such payments. The Company did not make the required payment, and as a result, was in default of the revised agreement. The Company renegotiated the terms of the Note and Northstar agreed to suspend the requirement of principal payments by the Company and allow payment of interest-only in common stock.

 

On September 21, 2012, the Company issued 5,000 common stock purchase warrants to Northstar that was treated as additional interest expense upon issuance.

 

On October 1, 2012, the Company and Northstar entered into a limited waiver and forbearance agreement providing a recapitalized new note balance comprised of all sums due Northstar with a maturity date extended perpetually. The Company agreed to issue 5,000,000 shares of Series A Convertible Preferred Stock and 10,000 shares of common stock in exchange for $210,000 as payment towards outstanding debt, default interest, penalties, professional fees outstanding and due Northstar. In addition, the Company executed a security agreement granting Northstar a lien on all patents, patent applications, trademarks, service marks, copyrights and intellectual property rights of any nature, as well as the results of all clinical trials, know-how for preparing Myoblasts, old and new clinical data, existing approved trials, all right and title to Myoblasts, clinical trial protocols and other property rights.

 

In addition, the Company granted Northstar a perpetual license on products as described for resale, relicensing, and commercialization outside the United States. In connection with the granted license, Northstar shall pay the Company a royalty of up to 8% on revenues generated.

 

Effective October 1, 2012, the interest rate was 12.85% per annum. The parties agreed, as of February 28, 2013, to reduce the interest rate to 7% per annum.

 

In connection with the consideration paid, Northstar waived, from the effective date through the earlier of termination or expiration of the agreement, satisfaction of the obligations as described in the forbearance agreement.

 

In 2012, 5,000,000 shares of Series A Convertible Preferred Stock were approved to be issued, which was subsequently increased to 20,000,000 shares of preferred stock as Series A Convertible Preferred Stock. In addition, the Company was obligated to issue additional preferred stock equal in lieu of payment of cash of accrued and unpaid interest on each six-month anniversary of the effective date (October 1, 2012). In lieu of the initial two payments in preferred stock, the parties agreed to modify the voting rights of the subsequently cancelled Series A Convertible Preferred Stock from 20 votes per share on matters to be voted on by the common stockholders to 25 votes per share on matters to be voted on by the common stockholders and all prior and subsequent payments of interest will be in common stock. The Company is required to issue additional shares of its common stock (as amended), in lieu of cash, each six-month anniversary of the effective date for any accrued and unpaid interest.

 

On September 30, 2013, the Company issued 8,772 shares of its common stock as payment of $100,000 towards principal.

 

On December 24, 2013, the Company issued 3,916 shares of its common stock as payment of accrued interest through June 30, 2013 of $85,447.

 

On April 2, 2014, the Company issued 275 shares of its common stock in lieu of payment in cash of accrued and unpaid interest of $12,635 due April 1, 2014 per the forbearance agreement.

 

On September 17, 2014, the limited waiver and forbearance agreement entered into on October 1, 2012 to provide that the perpetual license on products as described for resale, relicensing and commercialization outside the United States was amended as such on the condition that Northstar provide certain financing, which financing the Company, in its sole discretion, could decline and retain the license.

 

On October 3, 2014, the Company issued 515 shares of its common stock in lieu of payment in cash of accrued and unpaid interest of $12,705 due October 1, 2014 per the forbearance agreement.

 

On April 3, 2015, the Company issued 1,363 shares of its common stock in lieu of payment in cash of accrued and unpaid interest of $12,635 due April 1, 2015 per the forbearance agreement.

 

On October 2, 2015, the Company issued 4,156 shares of its common stock in lieu of payment in cash of accrued and unpaid interest of $12,705 due October 1, 2015 per the forbearance agreement.

 

 

U.S. STEM CELL, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2020

 

On October 7, 2015, the Company issued 34,522 shares of its common stock in settlement of $100,000 principal payment towards the outstanding debt.

 

On April 7, 2016, the Company issued 57,778 shares of its common stock in lieu of payment in cash of accrued and unpaid interest of $12,705 due April 1, 2016 per the forbearance agreement.

 

On October 6, 2016, the Company issued 848,490 shares of its common stock in lieu of payment in cash of accrued and unpaid interest of $12,705 due October 1, 2016 per the forbearance agreement.

 

On March 1, 2017, Northstar and the Company entered into a settlement agreement (“Settlement Agreement “) related to then pending litigation. Pursuant to the terms and conditions of the Settlement Agreement, Northstar converted its outstanding Series A Convertible preferred stock, into twenty million (20,000,000) shares of common stock according to the original conversion terms. In addition, and separate and apart from the conversion, Northstar received eleven million (11,000,000) shares of the Company’s common stock. Northstar will receive ten percent (10%) of all Company international sales (based on a gross sales basis). There was no effect of the 10% obligation as there were no international sales in 2017 or through 2019. Furthermore, a Northstar designee, Greg Knutson, was appointed as a member of the Board of Directors of the Company and two Company directors, Michael Tomas and Kristin Comella, each exercised their prior Northstar options to each receive a five percent (5%) member interest in Northstar.  The parties agreed to a mutual release and Northstar agreed to terminate any UCC lien on the Company assets previously filed for the benefit of Northstar. On March 9, 2017 and April 1, 2017, the Company issued 30,000,000 and 1,000,000 shares of its common stock, respectively, as described above. In connection with the settlement, the Company recorded a loss on litigation settlement of $316,800.

 

On April 1, 2017, the Company issued 286,315 shares of its common stock in lieu of payment in cash of accrued and unpaid interest of $12,703.

 

On October 2, 2017, the Company issued 559,187 shares of its common stock in lieu of payment in cash of accrued and unpaid interest of $12,705.

 

On October 19, 2018, the Company issued 164,523 shares of its common stock in lieu of payment in cash of accrued and unpaid interest of $9,195.

 

On April 19, 2019, the Company issued 379,141 shares of its common stock in lieu of payment in cash of accrued and unpaid interest of $9,145.

 

On October 1, 2019, the Company issued 1,692,353 shares of its common stock in lieu of payment in cash of accrued and unpaid interest of $9,195.

 

On April 1, 2020, the Company issued 1,445,647 shares of its common stock, having a fair value of $11,565, in lieu of payment in cash of accrued and unpaid interest of $9,145, resulting in a loss on settlement of $2,420.

 

As of June 30, 2020 and December 31, 2019, the remaining carrying value of the note was $262,000. At June 30, 2020 and December 31, 2019, accrued interest on the note was $8,700, and is included in accrued expenses on the accompanying balance sheet.

 

Notes Payable - Mr. Tomas, President and Chief Executive Officer

 

On August 7, 2017, the Company issued a $500,000 promissory note in exchange for compensation earned. The promissory note bears interest of 5% per annum and is due one year from date of issuance. During the six months ended June 30, 2020 and 2019, the Company paid principal of $0 and $336,607, respectively, of this note. As of June 30, 2020 and December 31, 2019, the remaining carrying value of the note was $161,786.

 

On May 7, 2018, the Company issued a $500,000 promissory note in exchange for compensation earned. The promissory note bears interest of 5% per annum and is due six months from date of issuance. As of June 30, 2020 and December 31, 2019, the remaining carrying value of the note was $500,000.

 

On July 1, 2019, the Company issued a $500,000 promissory note in exchange for compensation earned. The promissory note bears interest of 5% per annum and is due November 7, 2019. As of June 30, 2020 and December 31, 2019, the remaining carrying value of the note was $500,000.

 

 

U.S. STEM CELL, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2020

 

On December 31, 2019, the Company issued a $178,077 promissory note in exchange for compensation earned. The promissory note bears interest of 5% per annum and is due on demand. As of June 30, 2020 and December 31, 2019, the remaining carrying value of the note was $178,077.

 

On March 31, 2020, the Company issued a $187,500 promissory note in exchange for compensation earned. The promissory note bears interest of 5% per annum and is due on demand. As of June 30, 2020, the remaining carrying value of the note was $187,500.

 

On June 30, 2020, the Company issued a $187,500 promissory note in exchange for compensation earned. The promissory note bears interest of 5% per annum and is due on demand. As of June 30, 2020, the remaining carrying value of the note was $187,500.

 

At June 30, 2020 and December 31, 2019, accrued interest on the notes was $425,437 and $389,695, respectively, and is included in accrued expenses on the accompanying balance sheet.

 

Notes Payable - Dr. Comella, former Chief Science Officer as of June 30, 2020.

 

On September 6, 2016, the Company issued a $300,000 promissory note in exchange for compensation earned. The promissory note bears interest of 5% per annum and is due upon demand. During the six months ended June 30, 2019, the Company received back $78,355 of principal amounts previously paid for this note. As of June 30, 2020 and December 31, 2019, the remaining carrying value of the note was $255,579.

 

On August 7, 2017, the Company issued a $300,000 promissory note in exchange for compensation earned. The promissory note bears interest of 5% per annum and is due one year from date of issuance. As of June 30, 2020 and December 31, 2019, the remaining carrying value of the note was $300,000.

 

On May 7, 2018, the Company issued a $300,000 promissory note in exchange for compensation earned. The promissory note bears interest of 5% per annum and is due six months from date of issuance. As of June 30, 2020 and December 31, 2019, the remaining carrying value of the note was $300,000.

 

On July 1, 2019, the Company issued a $300,000 promissory note in exchange for compensation earned. The promissory note bears interest of 5% per annum and is due November 7, 2019. As of June 30, 2020 and December 31, 2019, the remaining carrying value of the note was $300,000.

 

At June 30, 2020 and December 31, 2019, accrued interest on the notes was $179,518 and $150,708, respectively, and is included in accrued expenses on the accompanying balance sheet.

 

Dr. Comella is no longer a member of the Board of Directors after September 1, 2019.

 

   

June 30,
2020

   

December 31,
2019

 

Northstar

  $ 262,000     $ 262,000  

Note payable, Mr. Tomas

    161,786       161,786  

Note payable, Mr. Tomas

    500,000       500,000  

Note payable, Mr. Tomas

    500,000       500,000  

Note payable, Mr. Tomas

    178,077       178,077  

Note payable, Mr. Tomas

    187,500       -  

Note payable, Mr. Tomas

    187,500       -  

Note payable, Dr. Comella*

    255,579       255,579  

Note payable, Dr. Comella*

    300,000       300,000  

Note payable, Dr. Comella*

    300,000       300,000  

Note payable, Dr. Comella*

    300,000       300,000  

Total officer and director notes

  $ 3,132,442     $ 2,757,442  
                 

* Dr. Comella is no longer a member of the Board of Directors effective September 1, 2019.

 

 

 

U.S. STEM CELL, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2020

 

Other TransactionsRelated Parties

 

Transactions with GACP

 

On March 3, 2017, the Company entered into an asset sale and lease agreement (sale/leaseback transaction, the “Asset Sale and Lease Agreement”) with General American Capital Partners (GACP), whereby the Company sold certain lab, medical and other equipment relating to the cell banking business for $400,000 and leased back the sold equipment over a three-year term. The Company determined that the transaction was a capitalized lease and accordingly recorded the leased assets and liabilities based on the estimated present value of the minimum lease payments. In connection with the Asset Sale and Lease Agreement, the Company is obligated to accrue 10% of cell-banking revenue as for marketing, offset by any incurred costs of the Company.  At June 30, 2020 and December 31, 2019, the outstanding accrued marketing obligation is $0.

 

On March 3, 2017, the Company also entered into a customer purchase agreement with GACP whereby the Company received a deposit $50,000 (included in long-term liabilities at December 31, 2018) in exchange for the sale of the first 5,000 future customers of the cell-banking business after the effective date of the agreement; GACP also had the right to purchase additional customers at a price of $20 per customer.  There is no reduction in the selling price should the new customers be fewer than 5,000.  The effective date of the sale is upon the expiry or early termination of the aforementioned Asset Sale and Lease Agreement.

 

March 3, 2017, the Company also entered into an asset purchase agreement of intellectual property with GACP whereby the Company received a deposit of $50,000 (included in long-term liabilities at December 31, 2018) for the sale of all of the Company’s worldwide rights, title or interest in certain intellectual and other property (as defined) associated with the cell-banking business. The effective date of the sale is upon the expiry or early termination of the aforementioned Asset Sale and Lease Agreement.

 

Effective May 9, 2018, pursuant to an Amendment to the Asset Sale and Lease Agreement, GACP suspended their obligation to open additional clinics (tolling such obligation to a mutually agreeable date in the future) and it has suspended the monthly aggregate number of stem cell kits set forth for purchase in a given month arising from such clinics.

 

As a consequence of the Court Order dated June 4, 2019 (see Note 13 “Government Claim”), the Company resolved to divest itself of certain equipment and other assets (the “Equipment Assets”) used in connection with the Company’s human tissue banking business, but consistent however with the requirements of the Court Order, and to adjust the business plan and operations to accommodate this potential divesture. To facilitate the above, the Company entered into the following agreements:

 

 

Termination and Release Agreement by and between GACP, the Company, and Michael Tomas and Kristin Comella dated September 24, 2019 (terminating the Non-Competition and Non-Solicitation Agreement between U.S. Stem Cell, Inc. and GACP Stem Cell Bank LLC., dated March 3, 2017).

 

 

Letter Agreement on Stem Cell Processing and Storage by and between the Company and American Cell Technology, LLC

 

Effective October 9, 2019, the Company terminated the Asset Sale and Lease Agreement by and between the Company and GACP. Accordingly, the long-term deposit liabilities were written off, resulting in a gain on debt settlement of $100,000. In addition, the right of use assets and lease liabilities were also written off.

 

NOTE 12FAIR VALUE MEASUREMENT

 

The Company adopted the provisions of ASC 825-10. ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:

 

 

U.S. STEM CELL, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2020

 

 

Level 1 – Quoted prices in active markets for identical assets or liabilities.

 

 

Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

 

 

Level 3 – Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

 

All items required to be recorded or measured on a recurring basis are based upon Level 3 inputs.

 

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.

 

As of June 30, 2020 and December 31, 2019, the Company did not have any items that would be classified as level 1, 2 or 3 disclosures.

 

As of June 30, 2020 and December 31, 2019, the Company did not have any derivative instruments that were designated as hedges.

 

NOTE 13COMMITMENTS AND CONTINGENCIES

 

Royalty Agreement / Middle East

 

On November 9, 2016, the Company entered into an Intellectual Property License Agreement whereby the Company granted High Rise Group Company the exclusive right to the Company’s intellectual property (as defined) for the licensed use and development in Kuwait and other GCC/Middle East countries for 25 years in exchange for a payment of $75,000 and a 5% royalty generated under the agreement.  The licensing agreement is recorded as deferred revenue and amortized over the term of the agreement.  The carrying balance as of June 30, 2020 and December 31, 2019 was $64,000 and $65,500, respectively.

 

The intent is for U.S. Stem Cell Middle East to offer regenerative treatment options to patients, based on U.S. Stem Cell, Inc. products and technologies like MyoCell™. To date, the first clinic in Kuwait City has been completed but has not begun operations as High Rising Group has not yet been able to secure regulatory approvals to operate.

 

Litigation

 

On December 12, 2017, a product liability lawsuit was filed in Broward County, specifically Jeannine Mallard v. U.S. Stem Cell, Inc., US Stem Cell Clinics LLC., Regenestem, LLC., Regenestem Network, LLC., and Kristin C. Comella. The Company will continue to defend it vigorously. On December 6, 2019, the Company was one of the parties to a Settlement Agreement and General Release (the “Agreement”) related to certain medical procedures. Without admitting any liability, and as part of that Agreement, the Company agreed to provide a five-year non-interest bearing unsecured promissory note, dated December 6, 2019, in the principal amount of $250,000, payable in monthly increments of $750 per month, with a final balloon payment of $205,000 due on January 1, 2025 (see Note 8, “Mallard”).

 

On September 17, 2015, a product liability lawsuit was filed in Broward County, specifically Patsy Bade v. Bioheart, Inc. US Stem Cell Clinics LLC, Alejandro Perez, ARNP, and Shareen Greenbaum, M.D., and on November 30, 2015, a product liability lawsuit was filed in Broward County, specifically Elizabeth Noble v. Bioheart, Inc. US Stem Cell Clinics LLC, Alejandro Perez, ARNP, and Shareen Greenbaum, M.D. During the year ended December 31, 2016, both matters settled by the Company’s insurance policy with no additional cost to the Company, except for the obligation to pay the insurance company deductible of $100,000, of which $11,000 was paid in fiscal 2017. The remaining amount due under this settlement is $29,000 and $30,050 as of June 30, 2020 and December 31, 2019, respectively, and is included in accounts payable.

 

On June 3, 2019, the Company was one of the parties to a Settlement Agreement and General Release (the “Agreement”) related to certain medical procedures. Without admitting any liability, and as part of that Agreement, the Company agreed to provide a five-year 5.25% Promissory Note, dated June 15, 2019, in the principal amount of Five Hundred Thousand Dollars ($500,000), payable in monthly increments of Five Thousand ($5,000) per month (see Note 8, “Weider”).

 

 

U.S. STEM CELL, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2020

 

The Company is subject at times to other legal proceedings and claims, which arise in the ordinary course of its business.  Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial position, results of operations or liquidity.  There was no outstanding litigation as of June 30, 2020 other than that described above.

 

Government Claim

 

On May 9, 2018, the U.S. Department of Justice filed an injunctive action, specifically United States of America v. U.S. Stem Clinic, LLC, U.S. Stem Cell, Inc., Kristin C. Comella, and Theodore Gradel. The Complaint alleges, among other matters that the defendants manufacture “stromal vascular fraction” (SVF) products from patient adipose (fat) tissue, which the companies then market as stem cell-based treatments, and which U.S. Stem Cell Clinic, LLC administers to patients, without first obtaining what the government alleges are necessary FDA approvals. Although Theodore Gradel was initially listed as a defendant, he subsequently entered into a consent agreement and is no longer party to this case.

 

The U.S. and the defendants filed cross motions for summary judgment, each asking for a ruling in its favor. On June 3, 2019, the Court entered an order granting Summary Judgment for the government and denying the defendants’ motion for summary judgment. The order focused on the defendants’ actions in providing and marketing SVF therapy. In an order dated June 4, 2019, the Court granted the defendants’ request to allow it the opportunity to work out the language of the form of injunction with the government, and if unsuccessful, to provide a status report to the Court by June 14, 2019, outlining areas of disagreement. The Court further ordered that the defendants (U.S. Stem Clinic, LLC, U.S. Stem Cell, Inc., and Kristin C. Comella) ‘not sell, provide or otherwise engage in any SVF therapy or any other activities to be regulated by the FDA as explained in the Court’s Order on the Parties’ Motions for Summary Judgment.” On June 25, 2019, the Court entered an Order of Permanent Injunction, generally enjoining the defendants with respect to the SVF Product and requiring other actions. The Company filed an appeal on August 23, 2019 and attended oral argument on January 13, 2021.  On June 2, 2021, the Eleventh Circuit Court ruled to affirm lower courts’ judgement. The Company did not challenge the district court’s judgment upon any other ground. The Company, in divesting certain equipment and other assets and assigning its lease, has and will continue to experience a decrease in revenues as the Company both maintains the remainder of the business and transitions into similar or unrelated business opportunities as determined by management. However, management is not able to predict the duration, scope, results, or consequences of the  summary judgment and any transition of the business plan.

 

Since the Court’s issuance of the Order of Permanent Injunction, the Company has received demand letters for compensation from persons who store their SVF Product and/or other tissue product with the tissue bank (several of the persons have requested refunds of the monies paid to the tissue bank and one person has requested a full refund of monies paid to an altogether separate company due to her not receiving the full amount of treatments she requested; such requests for compensation, to date, have not been material) and requests that the Company preserve cells in the Company’s possession.  The Company sought guidance from the Court, which entered an order generally staying the requirement to destroy any SVF Product, pending a decision on the Company’s appeal. 

 

NOTE 14STOCKHOLDERSDEFICIT

 

Common Stock

 

During the six months ended June 30, 2020, the Company issued an aggregate of 4,831,567 shares of its common stock, having a fair value of $22,598, in settlement of outstanding accounts payable. In connection with the issuances, the Company incurred a $2,901 net gain on settlement.

 

During the six months ended June 30, 2020, the Company issued 1,445,647 shares of its common stock, having a fair value of $11,565, in lieu of payment in cash of accrued and unpaid interest of $9,145, resulting in a loss on settlement of $2,420.

 

During the six months ended June 30, 2020, the Company issued an aggregate of 4,000,000 shares of its common stock, having a fair value of $16,000, for services, of which $1,689 remains in prepaid expenses as of June 30, 2020.

 

 

U.S. STEM CELL, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2020

 

Stock Options

 

On April 1, 2013, the Board of Directors approved, subject to subsequently received stockholder approval, the establishment of the Bioheart 2013 Omnibus Equity Compensation Plan, or the “2013 Omnibus Plan” (replacing the 1999 Officers and Employees Stock Option Plan, or the Employee Plan, and the 1999 Directors and Consultants Stock Option Plan). The 2013 Omnibus Plan initially reserved up to fifty thousand (50,000) shares of common stock for issuance. On August 4, 2014, the Board of Directors approved to set the reserve to one hundred thousand (100,000) shares of common stock for issuance and to close the 1999 Officers and Employees Stock Option Plan. On February 2, 2015, at the annual meeting of stockholders, the 2013 Omnibus Equity Compensation Plan was approved.

 

On November 2, 2015, the Company increased the shares reserved under the 2013 Omnibus Plan to five hundred million (500,000,000) shares of common stock for issuance. Effective September 16, 2016, the Company approved an additional twenty five million (25,000,000) shares of common stock to the reserve; effective April 21, 2017, the Company approved an additional twenty five million (25,000,000) shares of common stock to the reserve; effective August 7, 2017, the Company approved an additional thirty million (30,000,000) shares of common stock to the reserve; and effective May 7, 2018, the Company approved an addition of one hundred million (100,000,000) shares of common stock to reserve.

 

A summary of the stock option activity for the six months ended June 30, 2020 is as follows:

 

           

Weighted

   

Weighted

         
           

Average

   

Average

         
   

Number of

   

Exercise

   

 Remaining Life

   

Intrinsic

 
   

Options

   

Price

   

In Years

   

Value

 

Outstanding, December 31, 2019

    111,120,474     $ 0.0247       8.3     $ -  

Granted

    -                          

Exercised

    -                          

Forfeited/Expired

    (560 )   $ 0.1540                  

Outstanding, June 30, 2020

    111,119,914     $ 0.0247       7.8     $ 36,856  
                                 

Exercisable, June 30, 2020

    62,832,414     $ 0.0269       7.4     $ 22,050  

 

Options Outstanding

   

Options Exercisable

 
             

Weighted

   

Weighted

           

Weighted

 
     

Outstanding

   

Average

   

Average

   

Exercisable

   

Average

 

Exercise

   

Number of

   

Exercise

   

Remaining Life

   

Number of

   

Exercise

 

Price

   

Options

   

Price

   

In Years

   

Options

   

Price

 
                                           

 $0.004 to $0.010

      41,900,000     $ 0.0051       8.5       15,825,000     $ 0.0046  

 $0.011 to $0.020

      16,300,000     $ 0.0196       6.2       13,800,000     $ 0.0196  

 $0.021 to $0.030

      9,710,000     $ 0.0253       8.4       8,052,500     $ 0.0252  
$0.0363       22,735,000     $ 0.0363       7.1       14,680,000     $ 0.0363  
$0.0536       20,000,000     $ 0.0536       7.9       10,000,000     $ 0.0536  
$0.1540       474,914     $ 0.1540       5.3       474,914     $ 0.1540  
        111,119,914     $ 0.0247       7.8       62,832,414     $ 0.0269  

 

The aggregate intrinsic value of outstanding stock options was $36,856, based on options with an exercise price less than the Company’s stock price of $0.0060 as of June 30, 2020, which would have been received by the option holders had those option holders exercised their options as of that date.

 

 

U.S. STEM CELL, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2020

 

The fair value of all options that vested during the six months ended June 30, 2020 and 2019 was $350,416 and $338,432, respectively. As of June 30, 2020, the Company had $1,065,136 of total unrecognized compensation cost related to non-vested awards granted under the 2013 Omnibus Plan, which the Company expects to recognize over a weighted average period of 1.02 years.

 

Warrants

 

A summary of the warrant activity for the six months ended June 30, 2020 is as follows:

 

                   

Weighted

         
           

Weighted

   

Average

         
           

Average

   

Remaining

         
   

Number of

   

Exercise

   

Life

   

Intrinsic

 
   

Warrants

   

Price

   

In Years

   

Value

 

Outstanding, December 31, 2019

    1,110,468     $ 12.8400       8.2     $ -  

Granted

    -                          

Exercised

    -                          

Expired

    -                          

Outstanding, June 30, 2020

    1,110,468     $ 12.84       7.7     $ -  
                                 

Exercisable, June 30, 2020

    1,108,923     $ 2.14       7.7     $ -  

 

Warrants Outstanding

   

Warrants Exercisable

 
             

Weighted

   

Weighted

           

Weighted

 
     

Outstanding

   

Average

   

Average

   

Exercisable

   

Average

 

Exercise

   

Number of

   

Exercise

   

Remaining Life

   

Number of

   

Exercise

 

Price

   

Warrants

   

Price

   

In Years

   

Warants

   

Price

 
                                           

 $0.03 to $20.00

      1,086,536     $ 1.27       7.7       1,086,536     $ 1.27  

 $20.01 to $30.00

      19,543     $ 25.06       3.7       19,543     $ 25.06  

 $40.01 to $50.00

      2,253     $ 48.83       2.3       2,253     $ 48.83  

 $50.01 to $60.00

      543     $ 60.00       1.1       543     $ 60.00  
>$60.00       1,593     $ 7,690.00       6.3       48     $ 7,690.00  
        1,110,468     $ 12.84       7.7       1,108,923     $ 2.14  

 

The aggregate intrinsic value of the issued and exercisable warrants of $-0- represents the total pretax intrinsic value, based on warrants with an exercise price less than the Company’s stock price of $0.0060 as of June 30, 2020, which would have been received by the warrant holders had those warrants holders exercised their warrants as of that date.

 

NOTE 15CONCENTRATIONS

 

Concentrations of Credit Risk

 

The Company’s financial instruments that are exposed to a concentration of credit risk are cash and accounts receivable. Generally, the Company’s cash and cash equivalents in interest-bearing accounts does not exceed FDIC insurance limits. The financial stability of these institutions is periodically reviewed by senior management.

 

 

U.S. STEM CELL, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2020

 

Concentrations of Revenues

 

For the three and six months ended June 30, 2020 and 2019, the following customers accounted for more than 10% of the Company’s net revenues:

 

   

For the Three Months Ended June 30,

   

For the Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 

 Customer 1

    25 %     -       10 %     -  

 Customer 2

    20 %     -       -       -  

 Customer 3

    10 %     -       -       -  

 Customer 4

    -       -       19 %     -  

 Customer 4

    -       -       -       -  

 Totals

    55 %     0 %     29 %     0 %

 

Customer 5 is U.S. Stem Cell Clinic, LLC, a related party, a partly owned investment in which the Company holds a 49.9% member interest.

 

Concentrations of Accounts Receivable

 

As of June 30, 2020 and December 31, 2019, the following customers represented more than 10% of the Company’s accounts receivable:

 

   

June 30,
2020

   

December 31,
2019

 

 Customer 1

    81 %     47 %

 Customer 2

    -       47 %

 Totals

    81 %     94 %

 

Customer 1 is U.S. Stem Cell Clinic, LLC, a related party, a partly owned investment in which the Company holds a 49.9% member interest.

 

NOTE 16SUBSEQUENT EVENTS

 

On June 1, 2020, the Company defaulted on a promissory note. Upon default, the note became due in full and the Company began accruing interest at the default interest rate of 18% (See Note 9)

 

In March 2021, the Company divested its entire interest in U.S. Stem Cell Clinic, LLC.

 

 

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

 

Unless otherwise indicated, references in this Quarterly Report on Form 10-Q towe,” “us,andourare to the Company, unless the context requires otherwise. The following discussion and analysis by our management of our financial condition and results of operations should be read in conjunction with our unaudited condensed interim financial statements and the accompanying related notes included in this quarterly report and our audited financial statements and related notes and Managements Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission.

 

Cautionary Statement Regarding Forward-Looking Statements

 

This report may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act, and we intend that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Any such forward-looking statements would be contained principally in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors.” Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities and the effects of regulation. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “hopes,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions.

 

This report may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act, and we intend that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Any such forward-looking statements would be contained principally in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors.” Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities and the effects of regulation. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “hopes,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions.

 

Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss many of these risks in greater detail in “Risk Factors.” Risk factors include, but are not limited to, the economic effects of the pandemic, the promptness of distribution of vaccines, domestically and internationally to limit the impact of COVID-19, and the short and long term economic impact of COVID-19 on the marketplace. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this report. You should read this report and the documents that we reference in this report and have filed as exhibits to the report completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

 

Additional information concerning these, and other risks and uncertainties is contained in our filings with the Securities and Exchange Commission, including the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019.

 

Unless otherwise indicated or the context otherwise requires, all references in this Form 10-Q to “we,” “us,” “our,” “our company,” “U. S. Stem Cell, Inc.” or the “Company” refer to U.S. Stem Cell, Inc. and its subsidiaries.

 

 

Our Ability to Continue as a Going Concern

 

Our independent registered public accounting firm has issued its report dated July 15, 2021, in connection with the audit of our annual financial statements as of December 31, 2019, that included an explanatory paragraph describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern and Note 2 to the unaudited financial statements for the period ended June 30, 2020 also describes the existence of conditions that raise substantial doubt about our ability to continue as a going concern.

 

Overview

 

We are an enterprise in the regenerative medicine/cellular therapy industry. Our prior focus was on the discovery, development, and commercialization of cell based therapeutics. Our business included the development of proprietary cell therapy products as well as revenue generating physician and patient based regenerative medicine/cell therapy training services,

 

US Stem Cell Training, Inc. (“SCT”), an operating division of our company, is a content developer of regenerative medicine/cell therapy informational and training materials for physicians and patients. SCT also provides in-person and online training courses which are delivered through in-person presentations at SCT’s state of the art facilities and globally at university, hospital and physician’s office locations as well as through online webinars. Additionally, SCT provides hands-on clinical application training for physicians and health care professionals interested in providing regenerative medicine / cell therapy procedures.

 

Vet biologics, (“VBI”), an operating division of our company, is a veterinary regenerative medicine company committed to providing veterinarians with the ability to deliver the highest quality regenerative medicine therapies to dogs, cats and horses. VBI provides veterinarians with extensive regenerative medicine capabilities including the ability to isolate regenerative stem cells from a patient’s own adipose (fat) tissue directly on-site within their own clinic or stall-side.

 

During fiscal 2019, we had interests in US Stem Cell Clinic, LLC, (“SCC”), Regenerative Wellness Clinic, LLC, and US Stem Cell Clinic of the Villages, LLC as partially owned investments of our company (in which we had a 49.9%, 49.9% and 49% respectively member interests), which were physician run regenerative medicine/cell therapy clinics providing cellular treatments for patients afflicted with neurological, autoimmune, orthopedic and degenerative diseases. During the last quarter of 2019 (and in early 2021 in the case of SCC), we divested ourselves of our Member Interests in SCC and Regenerative Wellness Clinic, LLC, while and US Stem Cell Clinic of the Villages, LLC is currently dormant.

 

Our comprehensive map of products and services:

 

As of June 30, 2020:

 

As of the date of this filing:

USSTEM20200630_10QIMG001.GIF

 

 

 

 

Our mission is to advance to market novel regenerative medicine and cellular therapy products that substantially benefit humankind. Our business strategy is, to the extent possible, finance our clinical development pipeline through revenue (cash in-flows) generated through the marketing and sales of unique educational and training services, animal health products and personalized cellular therapeutic treatments.. Accordingly, we have developed a multifaceted portfolio of revenue generating products and services in our US Stem Cell Training, Vetbiologics, operating divisions that will, if successful, financially support its clinical development programs. Our goal is to maximize shareholder value through the generation of short-term profits that increase cash in-flows and decrease the need for venture financings – a modern biotechnology company development strategy.

 

Today, our company is a combination of opportunistic business enterprises. What we are establishing is a foundation of value in the products and services we are and plan to sell from US Stem Cell Training, Vetbiologics,. Our strategy is to expand the revenues generated from each of these operating divisions and to reinvest the profits we generate into our clinical development pipeline.

 

On November 9, 2016, we executed a Commercial Agency Agreement with High Rising Group Company (General Trading and Construction) and subsequently, on February 10,  2017, we authorized High Rising Group Company as an independent contractor and Licensee for our company for the territories of Kuwait and the Middle East (expressly excluding prohibited countries pursuant to the Patriot Act and The Iran Threat Reduction and Syria Human Rights Act of 2012). The intent of the agreement is for High Rising Group Company to establish clinics specializing in regenerative medicine, stem cell treatment and therapy, including stem cell bank, training, and all related stem cell machines and equipment.  To date, the first clinic in Kuwait City has been completed but has not begun operations as High Rising Group has not yet been able to secure regulatory approvals to operate. With the ongoing construction of the The Sheikha Salwa Sabah Al-Ahmad Center for Stem Cell and Umbilical Cord, a public/private partnership with the government of Kuwait, (see http://news.kuwaittimes.net/website/stem-cell-center-epitomizes-ppp which is expressly not incorporated by reference to this filing), management hopes (but cannot guarantee) that private sector stem cell centers, as described above, will get regulatory approval.

 

On March 3, 2017, we entered into an asset sale and lease agreement (sale/leaseback transaction; “Asset Sale and Lease Agreement”), with GACP (General American Capital Partners) Stem Cell Bank LLC, a Florida limited liability company (“GACP) whereby we sold certain lab, medical and other equipment relating to the cell banking business for $400,000 and leased back the sold equipment over a three year term.  The lease includes a base monthly rental payment of $20,000, due the first day of each calendar month.  In addition, we are required to pay 2.3%, 22.5% and 31.6% of revenues collected on deposits arising from cell banking business for years 1, 2 and 3, respectively.  At the expiration of the lease, we returned all leased equipment and along with any maintenance records, logs, etc. in our  possession to the lessor with no right of repurchase. Further, as a consequence of the Court Order , the Company resolved to divest itself of certain equipment and other assets (the “Equipment Assets”) used in connection with the Company’s human tissue banking business, but consistent however with the requirements of the Court Order, and to adjust the business plan and operations to accommodate this potential divesture. The divestiture became effective October 10th, 2019.

 

We will continue to evaluate and act upon opportunities to increase our top line revenue position and that correspondingly increase cash in-flows. These opportunities include but are not limited to the development and marketing of new products and services, mergers and acquisitions, joint ventures, licensing deals and more.

 

Further, if the opportunity presents itself whereby we can raise additional capital at a reasonable fair market value, our management will do so. Accordingly, we plan to continue in our efforts to restructure, equitize or eliminate legacy balance sheet issues that are obstacles to market capitalization appreciation and capital fund raising.

 

 

Results of Operations Overview

 

We are a research and development company and our product candidates have not received regulatory approval or generated any material revenues and is not expected generate revenues until commercialization, if ever. We have generated substantial net losses and negative cash flow from operations since inception and anticipate incurring significant net losses and negative cash flows from operations for the foreseeable future as we continue clinical trials, undertake new clinical trials, apply for regulatory approvals, make capital expenditures, add information systems and personnel, make payments pursuant to our license agreements upon our achievement of certain milestones, continue development of additional product candidates using our technology, establish sales and marketing capabilities and incur the additional cost of operating as a public company. In addition, and as a result of the Court Order (see Note 13), we resolved to divest our company of certain equipment and other assets which will substantially reduce our ability to generate revenues until such time as alternative revenue producing materialize as well as assign our lease.

 

Three Months Ended March 31, 2020 as compared to the Three Months Ended March 31, 2019

 

Revenues

 

We recognized revenues of $39,654 for the three months ended June 30, 2020. These revenues were generated from the sales of laboratory supplies and equipment, and services. We recognized revenues of $1,297,984 for the three months ended June 30, 2019 from the sale of MyoCath catheters, physician training, patient studies and laboratory services. Due to the Injunction, as described in our Note 13 to our financial statements, our revenue for 2020 has been severely reduced.

 

Cost of Sales

 

Cost of sales consists of the costs associated with the production of MyoCath, laboratory supplies necessary for laboratory services and physician course materials.

 

Cost of sales were $16,877 and $505,994 in in the three-month periods ended June 30, 2020 and 2019, respectively. Associated gross margins were $22,777 (42.5%) and $39,395 (31.4%) for the three months periods ended June 30, 2020 and 2019, respectively.

 

Research and Development

 

Our research and development expenses consist of costs incurred in identifying, developing, and testing, our products and services. Research and development expenses were $0 in the three-month period ended June 30, 2020, a decrease of $531 from the research and development expenses of $531 in the three-month period ended June 30, 2019. Current management focus is towards on sales in addition to research and development and its corresponding ongoing costs. The timing and amount of our planned research and development expenditures is dependent on our ability to obtain additional financing.

 

Marketing, General and Administrative

 

Our marketing, general and administrative costs were $491,358 for the three-month period ended June 30, 2020 compared to $825,602 for the three-month period ended June 30, 2019, a decrease of $334,244. The decrease in costs are primarily due to reduction in operations due to the Court Order.

 

Our marketing, general and administrative expenses primarily consist of the costs associated with our general management and product and service marketing programs, including, but not limited to, salaries and related expenses for executive, administrative and marketing personnel, rent, insurance, legal and accounting fees, consulting fees, travel and entertainment expenses, conference costs and other clinical marketing and trade program expenses.

 

(Gain) Loss on settlement of debt

 

During the three months ended June 30, 2020, we incurred a net gain of ($5,387) primarily related to accounts payable and debt restructured during the current period as compared to a net aggregate loss of $1,649 for the same period last year.

 

Gain on sale of equipment

 

In March 2017, we entered a sale/leaseback transaction whereby we sold our lab and other medical equipment and re-leased the equipment back for 36 months.  In connection with the sale/leaseback, we realized a gain on sale of equipment of $0, which we will recognize to operations over the term of the lease (36 months).

 

 

Income from equity investment

 

Our investment of a 49.9% (33.3% in 2018) member interest ownership of U.S. Stem Cell Clinic, LLC and Regenerative Wellness Clinic as well as a 49% interest in U.S. Stem Cell Clinic of the Villages LLC are accounted for using the equity method of accounting.  As such, we report our pro rata share of its income or loss for the period.  For the three months ended June 30, 2020 and 2019, our pro rata share of its income was $9,718 and $26,312, respectively. We divested ourselves of our member interests in Regenerative Wellness Clinic, LLC and U.S. Stem Cell Clinic, LLC in October 2019 and March 2021, respectively. U.S. Stem Cell Clinic of the Villages, LLC is currently dormant.

 

Interest Expense

 

Interest expenses during the three months ended June 30 2020 were $81,454 compared to $394,381 for the three months ended June 30, 2019. Interest expenses primarily consists of interest incurred on the principal amount of the Northstar loan, our former Bank of America loan, the Seaside National Bank loan, accrued fees and interest payable to the Guarantors, our capital lease and the amortization of debt discounts and non-cash interest incurred relating to our issued convertible notes payable.

 

Six Months Ended June 30, 2020 as compared to the Six Months Ended June, 2019 

 

Revenues

 

We recognized revenues of $97,146 for the six months ended June 30, 2020. These revenues were generated from the sales of laboratory supplies and equipment, and services. We recognized revenues of $2,606,794 for the six months ended June 30, 2019 from the sale of MyoCath catheters, physician training, patient studies and laboratory services. Due to the Injunction, as described in our Note 13 to our financial statements, our revenue for 2020 has been severely reduced.

 

Cost of Sales

 

Cost of sales consists of the costs associated with the production of MyoCath, laboratory supplies necessary for laboratory services, and physician course materials.

 

Cost of sales were $34,974 and $1,028,093 in in the six-month periods ended June 30 2020 and 2019, respectively. Associated gross margins were $62,172 (36%) and $1,578,701 (39.4%) for the six months periods ended June 30, 2020 and 2019, respectively.

 

Research and Development

 

Our research and development expenses consist of costs incurred in identifying, developing, and testing, our products and services. Research and development expenses were $0 in the six-month period ended June 30, 2020, a decrease of $951 from the research and development expenses of $951 in the six-month period ended June 30, 2019. Current management focus is towards on sales in addition to research and development and its corresponding ongoing costs. The timing and amount of our planned research and development expenditures is dependent on our ability to obtain additional financing.

 

Marketing, General and Administrative

 

Our marketing, general and administrative costs were $1,028,893 for the six-month period ended June 30, 2020 compared to $2,010,994 for the six-month period ended June 30, 2019, an decrease of $982,101. The decrease in costs are primarily due to reduction in operations due to the Court Order.

 

Our marketing, general and administrative expenses primarily consist of the costs associated with our general management and product and service marketing programs, including, but not limited to, salaries and related expenses for executive, administrative and marketing personnel, rent, insurance, legal and accounting fees, consulting fees, travel and entertainment expenses, conference costs and other clinical marketing and trade program expenses.

 

(Gain) Loss on settlement of debt

 

During the six months ended June 30, 2020, we incurred a net gain of 481 primarily related to accounts payable and debt restructured during the current period as compared to a net aggregate loss of $11,311 for the same period last year.

 

 

Gain on sale of equipment

 

In March 2017, we entered a sale/leaseback transaction whereby we sold our lab and other medical equipment and re-leased the equipment back for 36 months.  In connection with the sale/leaseback, we realized a gain on sale of equipment of $0, which we will recognize to operations over the term of the lease (36 months).

 

Income from equity investment

 

Our investment of a 49.9% (33.3% in 2018) member interest ownership of U.S. Stem Cell Clinic, LLC and Regenerative Wellness Clinic as well as a 49% interest in U.S. Stem Cell Clinic of the Villages LLC are accounted for using the equity method of accounting.  As such, we report our pro rata share of its income or loss for the period.  For the six months ended June 30, 2020 and 2019, our pro rata share of its income (loss) was $(13,821) and $127,256, respectively. We divested ourselves of our member interests in Regenerative Wellness Clinic, LLC and U.S. Stem Cell Clinic, LLC in October 2019 and March 2021, respectively. U.S. Stem Cell Clinic of the Villages, LLC is currently dormant.

 

Interest Expense

 

Interest expenses during the six months ended June 30, 2020 were $186,447 compared to $759,537 for the six months ended June 30, 2019. Interest expenses primarily consists of interest incurred on the principal amount of the Northstar loan, our former Bank of America loan, the Seaside National Bank loan, accrued fees and interest payable to the Guarantors, our capital lease and the amortization of debt discounts and non-cash interest incurred relating to our issued convertible notes payable.

 

Stock-Based Compensation

 

Stock-based compensation reflects our recognition as an expense of the value of stock options and other equity instruments issued to our employees and non-employees over the vesting period of the options and other equity instruments. We have granted to our employee’s options to purchase shares of common stock at exercise prices equal to the fair market value of the underlying shares of common stock at the time of each grant, as determined by our Board of Directors, with input from management.

 

We follow Accounting Standards Codification subtopic 718-10. Compensation (“ASC 718-10”) which requires that all share-based payments to both employee and non-employees be recognized in the income statement based on their fair values.

 

In awarding our common stock, our Board of Directors considered a number of factors, including, but not limited to:

 

 

our financial position and historical financial performance;

 

arm’s length sales of our common stock;

 

the development status of our product candidates;

 

the business risks we face;

 

vesting restrictions imposed upon the equity awards; and

 

an evaluation and benchmark of our competitors; and

 

prospects of a liquidity event.

 

On April 1, 2013, the Board of Directors approved, subject to subsequently received shareholder approval, the establishment of the Bioheart 2013 Omnibus Equity Compensation Plan, or the “2013 Omnibus Plan”. The 2013 Omnibus Plan initially reserved up to fifty thousand (50,000) shares of common stock for issuance. On August 4, 2014, the Board of Directors approved to set the reserve to one hundred thousand (100,000) shares of common stock for issuance and to close the 1999 Officers and Employees Stock Option Plan. On February 2, 2015, at the annual meeting of shareholders, the majority of shareholders approved the 2013 Omnibus Equity Compensation Plan. On November 2, 2015, the Board of Directors approved the increase of the reserve under the 2013 Omnibus Plan to five hundred million (500,000,000) shares of common stock for issuance, effective September 16, 2016, approved an addition of twenty five million (25,000,000) shares of common stock to the reserve, effective April 21, 2017, approved an addition of twenty five million (25,000,000) shares of common stock to the reserve, effective August 7, 2017, approved an addition of thirty million (30,000,000) shares of common stock to the reserve and effective May 7, 2018, approved an addition of one hundred million (100,000,000) shares of common stock to reserve.

 

 

Critical Accounting Policies

 

Our discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

 

Actual results may differ from these estimates under different assumptions or conditions. While our critical accounting policies are described in Note 1 to our financial statements appearing elsewhere in this report, we believe the following policies are important to understanding and evaluating our reported financial results:

 

Revenue Recognition

 

Effective January 1, 2018, the Company recognizes revenue in accordance with Accounting Standards Codification 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific revenue recognition guidance throughout the Industry Topics of the Accounting Standards Codification. The updated guidance states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also provides for additional disclosures with respect to revenues and cash flows arising from contracts with customers.

 

At the time of each transaction, management assesses whether the fee associated with the transaction is fixed or determinable and whether or not collection is reasonably assured. The assessment of whether the fee is fixed or determinable is based upon the payment terms of the transaction. Collectability is assessed based on a number of factors, including past transaction history with the client and the creditworthiness of the client.

 

The Company’s primary sources of revenue are from the sale of test kits and equipment, training services, patient treatments, laboratory services and cell banking. 

 

Revenues for kits and equipment sold are not recorded until kits and equipment are received by the customer. Revenues from in-person trainings are recognized when the training occurs and revenues from on demand online trainings are recognized when the customer purchases the rights to the training course. Any cash received as a deposit for trainings are recorded by the Company as a liability.

 

Patient treatments and laboratory services revenue are recognized when those services have been completed or satisfied.

 

Revenues for cell banking sales are accounted for as multiple performance obligations as described in ASC 606 and addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. Because the Company sells its services separately, on more than a limited basis and at a price within a narrow range, the Company was able to allocate revenue based on stand-alone pricing. The multiple performance obligations include stem cell banking, dose retrieval and yearly storage fees. Revenues for stem cell banking and dose retrieval is recognized at the point of service and revenues for the yearly storage fees is recognized over the term of the banking contract, which is typically one year with annual renewals.

 

Research and Development Activities

 

We account for research and development costs in accordance with Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved as defined under the applicable agreement. Our company-sponsored research and development costs related to both present and future products are expensed in the period incurred.

 

Inflation

 

Our opinion is that inflation has not had, and is not expected to have, a material effect on our operations.

 

 

Climate Change

 

Our opinion is that neither climate change, nor governmental regulations related to climate change, have had, or are expected to have, any material effect on our operations.

 

Concentrations of Credit Risk

 

As of June 30, 2020, one customer, a related party (US Stem Cell Clinic LLC, a partly owned investment in which the Company holds a 49.9% interest), represented 81% of the Company’s accounts receivable. As of December 31, 2019, two customers, of which one customer is a related party (US Stem Cell Clinic LLC, a partly owned investment in which the Company holds a 49.9% interest), represented 47% and 47%, respectively, representing an aggregate of 94% of the Company’s accounts receivable.

 

For the three months ended June 30, 2020, three customers represented 25%, 20% and 10%, respectively, of the Company’s revenues.  For the three months ended June 30, 2019, one customer, a related party (US Stem Cell Clinic LLC, a partly owned investment in which the Company holds a 49.9% interest), represented 13% of the Company’s revenues.

 

For the six months ended June 30, 2020, two customers represented 19% and 10%, respectively, of the Company’s revenues.  For the six months ended June 30, 2019, one customer, a related party (US Stem Cell Clinic LLC, a partly owned investment in which the Company holds a 49.9% interest), represented 11% of the Company’s revenues.

 

Recent Accounting Policies 

 

There are various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on our  financial position, results of operations or cash flows.

 

Liquidity and Capital Resources

 

In the three months ended June 30, 2020, we incurred negative cash flow from operations of $162,106and will continue to finance our considerable operational cash needs with cash generated from financing activities and revenues.

 

Investing Activities

 

Net cash provided by investing activities was $0 for the three-months ended June 30, 2020 represented proceeds from our equity investment as compared to cash provided by investing activities of $166,833 from our equity investments for the same period last year.

 

Financing Activities

 

Net cash provided in financing activities was an aggregate of $315,371 in the three-month period ended June 30, 2020 as compared to cash used of $400,649 in the three-month period ended in June 30, 2019.

 

Existing Capital Resources and Future Capital Requirements and Plan of Operations

 

We have generated substantial net losses and negative cash flow from operations since inception and anticipate incurring significant net losses and negative cash flows from operations for the foreseeable future. Historically, we have relied on proceeds from the sale of our common stock and our incurrence of debt to provide the funds necessary to conduct our research and development activities and to meet our other cash needs.

 

At June 30, 2020, we had cash and cash equivalents totaling $153,265. However, our working capital deficit as of such date was approximately $10.4 million.

 

 

Along with diversifying the portfolio of products distributed by our company, including equipment and biologics, it is the intention of our Company to both continue to adhere to the Court Order (see Note 13 of the Financial Statements) as well as re -establish its good standing with the Agency (FDA). These points are not mutually exclusive nor negotiable and we believe that there are still  business and patient goodness opportunities while still abiding by all legal requirements  As a result, management shall be continuing with the development of  US Stem Cell Training, Inc. , an operating division of our company, that  is a content developer of regenerative medicine/cell therapy informational and training materials for physicians and patients and complies with both requirements--as well as Vetbiologics, an operating division of our company, that  is a veterinary regenerative medicine company committed to providing veterinarians with the ability to deliver the highest quality regenerative medicine therapies to dogs, cats and horses. In addition, our company is transitioning the current clinics to a more diversified regenerative medicine platform, while complying with recent court rulings. While not providing legal advice, our company may also engage in managing third-party clinics to ensure they too abide by recent regulatory requirements

 

Economic Injury Disaster Loan (EIDL)

 

On June 20, 2020, the Company executed the standard loan documents for an EIDL from the U.S. Small Business Administration in light of the impact of the COVID-19 pandemic on our business. Pursuant to that certain Loan Authorization and Agreement (the “SBA Loan Agreement”), the principal amount of the EIDL received was $150,000, with proceeds to be used for working capital purposes. Interest accrues at the rate of 3.75% per annum. Installment payments, including principal and interest, are due monthly beginning June 20, 2021 (twelve months from the date of the SBA Loan Agreement) in the amount of $731. The balance of principal and interest is payable thirty years from the date of the SBA Loan Agreement. As of June 30, 2020, the remaining carrying value of the note was $150,000. At June 30, 2020, accrued interest on the note was $154, and is included in accrued expenses on the accompanying balance sheet.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not required under Regulation S-K for “smaller reporting companies.”

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

As required under Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2020. Based upon that evaluation, the Chief Executive Officer and Chief Accounting Officer concluded that our disclosure controls and procedures as of June 30, 2020 were not effective, for the same reasons as previously disclosed under Item 9A. “Controls and Procedures” in our Annual Report on Form 10-K for our fiscal year ended December 31, 2019. 

 

Changes in Internal Controls over Financial Reporting

 

There have been no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-(f) of the Exchange Act) that occurred during our last fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

PAR IIOTHER INFORMATION

 

 

Item 1. Legal Proceedings

 

On September 17, 2015, a product liability lawsuit was filed in Broward County, specifically Patsy Bade v. Bioheart, Inc. US Stem Cell Clinics LLC, Alejandro Perez, ARNP, and Shareen Greenbaum, M.D., and on November 30, 2015, a product liability lawsuit was filed in Broward County, specifically Elizabeth Noble v. Bioheart, Inc. US Stem Cell Clinics LLC, Alejandro Perez, ARNP, and Shareen Greenbaum, M.D. During the year ended December 31, 2016, both matters settled by the Company’s insurance policy with no additional cost to the Company, excluding the Company payment of the $100,000 insurance company deductible of which $11,000 was paid in fiscal 2017. As a result of the final settlement and determination of insurance coverage, the Company recognized $100,000 of expense due to litigation for the year ended December 31, 2017. The remaining amount due under this settlement is $29,000 and $30,050 as of June 30, 2020 and December 31, 2019, respectively, and is included in accounts payable.

 

On December 12, 2017, a product liability lawsuit was filed in Broward County, specifically Jeannine Mallard v. U.S. Stem Cell, Inc., US Stem Cell Clinics LLC., Regenestem, LLC., Regenestem Network, LLC., and Kristin C. Comella. The Company will continue to defend it vigorously. On December 6, 2019, the Company was one of the parties to a Settlement Agreement and General Release (the “Agreement”) related to certain medical procedures. Without admitting any liability, and as part of that Agreement, the Company agreed to provide a five-year non-interest bearing unsecured promissory note, dated December 6, 2019, in the principal amount of $250,000, payable in monthly increments of $750 per month, with a final balloon payment of $205,000 due on January 1, 2025.

 

On June 3, 2019, the Company was one of the parties to a Settlement Agreement and General Release (the “Agreement”) related to certain medical procedures. Without admitting any liability, and as part of that Agreement, the Company agreed to provide a five-year 5.25% Promissory Note, dated June 15, 2019, in the principal amount of Five Hundred Thousand Dollars ($500,000), payable in monthly increments of Five Thousand ($5,000) per month. As of June 30, 2020 and December 31, 2019, the remaining carrying value of the note was $465,426 and $482,939, respectively.

 

The Company is subject at times to other legal proceedings and claims, which arise in the ordinary course of its business.  Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial position, results of operations or liquidity.  There was no outstanding litigation as of March 31, 2020 other than that described above.

 

Government Claim

 

On May 9, 2018, the U.S. Department of Justice filed an injunctive action, specifically United States of America v. U.S. Stem Clinic, LLC, U.S. Stem Cell, Inc., Kristin C. Comella, and Theodore Gradel. The Complaint alleges, among other matters that the defendants manufacture “stromal vascular fraction” (SVF) products from patient adipose (fat) tissue, which the companies then market as stem cell-based treatments, and which U.S. Stem Cell Clinic, LLC administers to patients, without first obtaining what the government alleges are necessary FDA approvals. Although Theodore Gradel was initially listed as a defendant, he subsequently entered into a consent agreement and is no longer a party to this case.

 

The U.S. and the defendants filed cross motions for summary judgment, each asking for a ruling in its favor. On June 3, 2019, the Court entered an order granting Summary Judgment for the government and denying the defendants’ motion for summary judgment. The order focused on the defendants’ actions in providing and marketing SVF therapy. In an order dated June 4, 2019, the Court granted the defendants’ request to allow it the opportunity to work out the language of the form of injunction with the government, and if unsuccessful, to provide a status report to the Court by June 14, 2019, outlining areas of disagreement. The Court further ordered that the defendants (U.S. Stem Clinic, LLC, U.S. Stem Cell, Inc., and Kristin C. Comella) ‘not sell, provide or otherwise engage in any SVF therapy or any other activities to be regulated by the FDA as explained in the Court’s Order on the Parties’ Motions for Summary Judgment.” On June 25, 2019, the Court entered an Order of Permanent Injunction, generally enjoining the defendants with respect to the SVF Product and requiring other actions. The Company filed an appeal on August 23, 2019 and its counsel attended appellate oral argument on January 13, 2021. On June 2, 2021, the Eleventh Circuit Court ruled to affirm lower courts’ judgement. The Company did not challenge the district court’s judgment upon any other ground. The Company is not able to predict the duration, scope, results, or consequences of the U.S. Department of Justice actions and final rulings and management is assessing its options on a going forward basis. 

 

The Company, in divesting certain equipment and other assets and assigning its lease, has and will continue to experience a decrease in revenues as the Company both maintains the remainder of the business and transitions into similar or unrelated business opportunities as determined by management; However, management is not able to predict the duration, scope, results, or consequences of the summary judgment and any transition of the business plan. There can be no assurance that the Company will prevail on its appeal and obtain a reversal of the final judgment.

 

 

After the Court’s issuance of the Order of Permanent Injunction, the Company has received demand letters for compensation from persons who store their SVF Product and/or other tissue product with the tissue bank (several of the persons have requested refunds of the monies paid to the tissue bank and one person has requested a full refund of monies paid to an altogether separate company due to her not receiving the full amount of treatments she requested; such requests for compensation, to date, have not been material) and requests that the Company preserve cells in the Company’s possession.  The Company sought guidance from the Court, which entered an order generally staying the requirement to destroy any SVF Product, pending a decision on the Company’s appeal.  Many of the tissue bank depositors attempted to intervene in the FDA action, and filed an appeal when their intervention was denied. Their appeal was dismissed. It is anticipated that these depositors will present their position on tissue/SVF preservation to the trial court now that the appeal has been decided. As disclosed by the Company previously, the Company entered into a transaction in 2019 in which it divested itself of the operation of the tissue bank.

 

Item 1A. Risk Factors

 

Not required under Regulation S-K for “smaller reporting companies.”

 

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

 

None

 

Item 3. Defaults Upon Senior Securities

 

There were no defaults upon senior securities during the period ended June 30, 2020.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None

 

Item 6. Exhibits

 

Exhibit No.

Exhibit Description

   

2.1(20)

Asset Sale and Lease Agreement between U.S. Stem Cell, Inc. and GACP Stem Cell Bank LLC., dated March 3, 2017.

2.2(20)

Asset Purchase Agreement between U.S. Stem Cell, Inc. and GACP Stem Cell Bank LLC., dated March 3, 2017.

2.3(20)

Customer Purchase Agreement between U.S. Stem Cell, Inc. and GACP Stem Cell Bank LLC., dated March 3, 2017.

3.1 (1)

Articles of Incorporation

3.2(5)

Amended and Restated Articles of Incorporation

3.3(8)

Articles of Amendment to the Articles of Incorporation

3.4(17)

Articles of Amendment to the Articles of Incorporation

3.5 (7)

Amended and Restated Bylaws

3.6(19)

Amendment to Bylaws

4.1(4)

Loan and Security Agreement, dated as of May 31, 2007 by and between BlueCrest Capital Finance, L.P. and the Registrant

4.2(9)

Amendment to Loan and Security Agreement, between the Company and BlueCrest Venture Finance Master Fund Limited, dated as of April 2, 2009

4.3(9)

Grant of Security Interest (Patents), between the Company and BlueCrest Venture Finance Master Fund Limited, dated as of April 2, 2009

4.4(9)

Security Agreement (Intellectual Property), between the Company and BlueCrest Venture Finance Master Fund Limited, dated as of April 2, 2009

4.5(9)

Subordination Agreement, by Hunton & Williams, LLP in favor of BlueCrest Venture Finance Master Fund Limited, entered into and effective April 2, 2009

 

 

4.6(9)

Amended and Restated Promissory Note, dated April 2, 2009, by the Company to BlueCrest Venture Finance Master Fund Limited

4.7(9)

Warrant to purchase shares of the Registrant’s common stock, dated April 2, 2009, issued to BlueCrest Venture Finance Master Fund Limited

4.8(10)

Warrant to purchase shares of the Registrant’s common stock, dated April 2, 2009, issued to Rogers Telecommunications Limited

4.9(10)

Warrant to purchase shares of the Registrant’s common stock, dated April 2, 2009, issued to Hunton & Williams, LLP

4.10 (15)

Series A Convertible Preferred Stock

10.1(1)

Lease Agreement between the Registrant and Sawgrass Business Plaza, LLC, as amended, dated November 14, 2006.

10.2(3)

Loan Guarantee, Payment and Security Agreement, dated as of June 1, 2007, by and between the Registrant, Howard J. Leonhardt and Brenda Leonhardt

10.3(3)

Loan Guarantee, Payment and Security Agreement, dated as of June 1, 2007, by and between the Registrant and William P. Murphy Jr., M.D.

10.4(3)

Loan Agreement, dated as of June 1, 2007, by and between the Registrant and Bank of America, N.A.

10.5(5)

Loan Guarantee, Payment and Security Agreement, dated as of September 12, 2007, by and between the Registrant and Samuel S. Ahn, M.D.

10.6(5)

Loan Guarantee, Payment and Security Agreement, dated as of September 12, 2007, by and between the Registrant and Dan Marino

10.7(5)

Loan Guarantee, Payment and Security Agreement, dated as of September 19, 2007, by and between the Registrant and Jason Taylor

10.8(6)

Loan Guarantee, Payment and Security Agreement, dated as of October 10, 2007, by and between the Registrant and Howard and Brenda Leonhardt

10.9(6)

Second Amendment to Loan Guarantee, Payment and Security Agreement, dated as of October 10, 2007, by and between the Registrant and Howard and Brenda Leonhardt

10.10(6)

Second Amendment to Loan Guarantee, Payment and Security Agreement, dated as of October 10, 2007, by and between the Registrant and William P. Murphy, Jr., M.D.

10.11(11)

Loan Agreement with Seaside National Bank and Trust, dated October 25, 2010.

10.12(11)

Promissory Note with Seaside National Bank and Trust, dated October 25, 2010.

10.13(11)

Amended and Restated Loan and Security Agreement with BlueCrest Venture Finance Master Fund Limited, dated October 25, 2010.

10.14(12)

Unsecured Convertible Promissory Note for $25,000, with Magna Group, LLC, dated January 3, 2011.

10.15(12)

Promissory Note for $139,728.82 with Magna Group, LLC, dated January 3, 2011.

10.16(13)

Unsecured Convertible Promissory Note for $34,750, with Magna Group, LLC, dated May 16, 2011.

10.17(13)

Promissory Note for $139,728.82 with Magna Group, LLC, dated May 16, 2011.

10.18**(14)

2013 U.S. Stem Cell, Inc. Omnibus Equity Compensation Plan

10.19(16)

Senior Convertible Note with Magna Equities II, LLC, dated October 1, 2015

10.20(16)

Securities Purchase Agreement, dated as of October 1, 2015, by and between Magna Equities II, LLC and U.S. Stem Cell, Inc.

10.21(16)

Registration Rights Agreement, dated as of October 1, 2015, by and between Magna Holdings I, LLC and U.S. Stem Cell, Inc.

10.22(18)

Senior Convertible Note Magna Equities II, LLC, dated December 3, 2015

10.23(18)

Amended and Restated Senior Convertible Note, dated December 3, 2015.

10.24(18)

Securities Purchase Agreement, dated as of December 3, 2015, by and between Magna Equities II, LLC and U.S. Stem Cell, Inc.

10.25(18)

Registration Rights Agreement, dated as of December 3, 2015, by and between Magna Holdings I, LLC and U.S. Stem Cell, Inc.

10.26(20)

Non-Competition and Non-Solicitation Agreement between U.S. Stem Cell, Inc. and GACP Stem Cell Bank LLC., dated March 3, 2017.

10.27(21)

First Amendment to Lease Agreement between the Registrant and Sawgrass Business Plaza, LLC, as amended, dated November 17, 2017.

10.28(22)

Second Amendment to Lease Agreement between the Registrant and Sawgrass Business Plaza, LLC, as amended, dated November 17, 2017.

10.29(23)

Termination and Release Agreement by and between GACP, the Company, and Michael Tomas and Kristin Comella dated September 24, 2019.

 

 

10.30(23)

Letter Agreement on Stem Cell Processing and Storage by and between the Company and American Cell Technology, LLC, dated September 24, 2019

10.31(24)

Assignment and Assumption of Lease by and between the Company, American Cell Technology, LLC, and Sawgrass Business Plaza, LLC, dated October 24, 2019.

14.1(2)

Code of Business Conduct and Ethics

31.1*

Certification of Chief Executive Officer and Chief Financial Officer (Principal Accounting Officer) pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*

Certifications of Chief Executive Officer and Chief Financial Officer (Principal Accounting Officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101 INS

XBRL Instance Document

101 SCH

XBRL Taxonomy Extension Schema Document

101 CAL

XBRL Taxonomy Calculation Linkbase Document

101 DEF

XBRL Taxonomy Extension Definition Linkbase Document

101 LAB

XBRL Taxonomy Labels Linkbase Document

101 PRE

XBRL Taxonomy Presentation Linkbase Document

*

Filed herewith 

**

Indicates management contract or compensatory plan.

(1)

Incorporated by reference to the Company’s Form S-1 filed with the Securities and Exchange Commission (the “SEC”) on February 13, 2007.

(2)

Incorporated by reference to Amendment No. 1 to the Company’s Form S-1 filed with the SEC on June 5, 2007.

(3)

Incorporated by reference to Amendment No. 3 to the Company’s Form S-1 filed with the SEC on August 9, 2007.

(4)

Incorporated by reference to Amendment No. 4 to the Company’s Form S-1 filed with the SEC on September 6, 2007.

(5)

Incorporated by reference to Amendment No. 5 to the Company’s Form S-1 filed with the SEC on October 1, 2007.

(6)

Incorporated by reference to Post-effective Amendment No. 1 to the Company’s Form S-1 filed with the SEC on October 11, 2007.

(7)

Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on July 3, 2008.

(8)

Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on August 8, 2008.

(9)

Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on April 8, 2009.

(10)

Incorporated by reference to the Company’s Annual Report on Form 10-K filed with the SEC on April 15, 2009.

(11)

Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on October 29, 2010.

(12)

Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on January 12, 2011.

(13)

Incorporated by reference to the Company Current Report on Form 8-K filed with the SEC on May 25, 2011.

(14)

Incorporated by reference to the Company Quarterly Report on Form 10-Q filed with the SEC on May 9, 2013.

(15)

Incorporated by reference to the Company’s Definitive Proxy Statement on Schedule 14A filed with the SEC on April 28, 2014.

(16)

Incorporated by reference to the Company Current Report on Form 8-K filed with the SEC on October 2, 2015.

(17)

Incorporated by reference to the Company Current Report on Form 8-K filed with the SEC on November 4, 2015.

(18)

Incorporated by reference to the Company Current Report on Form 8-K filed with the SEC on December 4, 2015.

(19)

Incorporated by reference to the text of the Company Current Report on Form 8-K filed with the SEC on August 3, 2016.

(20)

Incorporated by reference to the Company Current Report on Form 8-K filed with the SEC on March 8, 2017.

(21)

Incorporated by reference to the Company Annual Report on Form 10-K filed with the SEC on April 16, 2018.

(22)

Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 7, 2019.

(23)

Incorporated by reference to the Company Current Report on Form 8-K filed with the SEC on September 27, 2019.

(24)

Incorporated by reference to the Company Current Report on Form 8-K filed with the SEC on October 24, 2019.

 

 

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.

 

   

U.S. Stem Cell, Inc.

 

Date: July 15, 2021

By:   

/s/ Mike Tomas

   

Mike Tomas

   

Chief Executive Officer &

   

President and Principal Financial

   

and Accounting Officer

 

 

 

 

41
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