Filed pursuant to Rule 253(g)(2)
File No. 024-11617
OFFERING CIRCULAR
Dated: September 10, 2021
PURSUANT TO REGULATION A OF THE SECURITIES ACT OF 1933
U.S. STEM CELL, INC.
1560 Sawgrass Corporate Pkwy, 4th FL
Sunrise, Florida 33323
(954) 835-1500
250,000,000 Shares of Common Stock
at a price of $0.01 per Share
Minimum Investment: $25,000
Maximum Offering: $2,500,000
See The Offering - Page 11 and Securities Being Offered - Page 54
For Further Details. None of the Securities Offered Are Being Sold
By Present Security Holders. This Offering Will Commence Upon
Qualification of this Offering by the Securities and Exchange
Commission and Will Terminate 365 days from the date of
qualification by the Securities And Exchange Commission, Unless
Extended or Terminated Earlier By The Issuer
PLEASE REVIEW ALL RISK FACTORS ON PAGES 12 THROUGH PAGE
17 BEFORE MAKING AN INVESTMENT IN THIS COMPANY. AN INVESTMENT
IN THIS COMPANY SHOULD ONLY BE MADE IF YOU ARE CAPABLE OF
EVALUATING THE RISKS AND MERITS OF THIS INVESTMENT AND IF YOU HAVE
SUFFICIENT RESOURCES TO BEAR THE ENTIRE LOSS OF YOUR INVESTMENT,
SHOULD THAT OCCUR.
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT
PASS UPON THE MERITS OF OR GIVE ITS APPROVAL TO ANY SECURITIES
OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE
ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SELLING
LITERATURE. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION
FROM REGISTRATION WITH THE COMMISSION; HOWEVER, THE COMMISSION HAS
NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED
HEREUNDER ARE EXEMPT FROM REGISTRATION.
Because these securities are being offered on a “best efforts”
basis, the following disclosures are hereby made:
|
|
Price to Public
|
Commissions (1)
|
Proceeds to
Company (2)
|
Proceeds to
Other Persons (3)
|
|
Per Share
|
$0.01
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$0
|
$0.01
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None
|
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Minimum Investment
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$25,000
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$0
|
$25,000
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None
|
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Maximum Offering
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$2,500,000
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$0
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$2,500,000
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None
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(1) The Company shall pay no commissions to underwriters for the
sale of securities under this Offering.
(2) Does not reflect payment of expenses of this Offering, which
are estimated to not exceed $25,000 and which include, among other
things, legal fees, accounting costs, reproduction expenses, due
diligence, marketing, consulting, administrative services other
costs of blue sky compliance, and actual out-of-pocket expenses
incurred by the Company selling the Shares. This amount represents
the proceeds of the offering to the Company, which will be used as
set out in “USE OF PROCEEDS TO ISSUER.”
(3) There are no finder's fees or other fees being paid to third
parties from the proceeds. See “PLAN OF DISTRIBUTION.”
This Offering (the “Offering”) consists of Common Stock (the
“Shares” or individually, each a “Share”) that is being offered on
a “best efforts” basis, which means that there is no guarantee that
any minimum amount will be sold. The Shares are being offered and
sold by U.S. Stem Cell, Inc., a Florida Corporation (the
“Company”). There are 250,000,000 Shares being offered at a price
of $0.01 per Share with a minimum purchase of $25,000 per investor.
The Shares are being offered only by the Company on a best efforts
basis to an unlimited number of accredited investors and to
non-accredited investors based on the limitations of Regulation A.
Under Rule 251(d)(2)(i)(C) of Regulation of Regulation A+,
non-accredited, non-natural investors are subject to the investment
limitation and may only invest funds which do not exceed 10% of the
greater of the purchaser’s revenue or net assets (as of the
purchaser’s most recent fiscal year end). A non-accredited, natural
person may only invest funds which do not exceed 10% of the greater
of the purchaser’s annual income or net worth (please see below on
how to calculate your net worth). The maximum aggregate amount of
the Shares offered is 250,000,000 Shares of Common Stock
($2,500,000 at the maximum offering price). There is no minimum
number of Shares that needs to be sold in order for funds to be
released to the Company and for this Offering to close.
The Shares are being offered pursuant to Regulation A of Section
3(b) of the Securities Act of 1933, as amended, for Tier II
offerings. The Shares will only be issued to purchasers who satisfy
the requirements set forth in Regulation A. The offering is
expected to expire on the first of: (i) all of the Shares offered
are sold; or (ii) the close of business 365 days from the date of
qualification by the Commission, unless sooner terminated or
extended by the Company's CEO. Pending each closing, payments for
the Shares will be paid directly to the Company. Funds will be
immediately transferred to the Company where they will be available
for use in the operations of the Company's business in a manner
consistent with the “USE OF PROCEEDS TO ISSUER” in this Offering
Circular.
THIS OFFERING CIRCULAR DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NO PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS CONCERNING THE
COMPANY OTHER THAN THOSE CONTAINED IN THIS OFFERING CIRCULAR, AND
IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON.
PROSPECTIVE INVESTORS ARE NOT TO CONSTRUE THE CONTENTS OF THIS
OFFERING CIRCULAR, OR OF ANY PRIOR OR SUBSEQUENT COMMUNICATIONS
FROM THE COMPANY OR ANY OF ITS EMPLOYEES, AGENTS OR AFFILIATES, AS
INVESTMENT, LEGAL, FINANCIAL OR TAX ADVICE.
GENERALLY, NO SALE MAY BE MADE TO YOU IN THIS OFFERING IF THE
AGGREGATE PURCHASE PRICE YOU PAY IS MORE THAN 10% OF THE GREATER OF
YOUR ANNUAL INCOME OR NET WORTH. DIFFERENT RULES APPLY TO
ACCREDITED INVESTORS AND NON-NATURAL PERSONS. BEFORE MAKING ANY
REPRESENTATION THAT YOUR INVESTMENT DOES NOT EXCEED APPLICABLE
THRESHOLDS, WE ENCOURAGE YOU TO REVIEW RULE 251(d)(2)(i)(C) OF
REGULATION A. FOR GENERAL INFORMATION ON INVESTING, WE ENCOURAGE
YOU TO REFER TO www.investor.gov (WHICH IS NOT INCORPORATED BY
REFERENCE INTO THIS OFFERING CIRCULAR).
This Offering is inherently risky. See “Risk Factors” beginning on
page 12.
Sales of these securities will commence three calendar days of the
qualification date and the filing of a Form 253(g)(2) Offering
Circular AND it will be a continuous Offering pursuant to Rule
251(d)(3)(i)(F).
The Company is following the “Offering Circular” format of
disclosure under Regulation A.
AN OFFERING STATEMENT PURSUANT TO REGULATION A RELATING TO THESE
SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. INFORMATION CONTAINED IN THIS PRELIMINARY OFFERING
CIRCULAR IS SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED BEFORE THE
OFFERING STATEMENT FILED WITH THE COMMISSION IS QUALIFIED. THIS
PRELIMINARY OFFERING CIRCULAR SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR MAY THERE BE ANY SALES
OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION
OR SALE WOULD BE UNLAWFUL BEFORE REGISTRATION OR QUALIFICATION
UNDER THE LAWS OF SUCH STATE. THE COMPANY MAY ELECT TO SATISFY ITS
OBLIGATION TO DELIVER A FINAL OFFERING CIRCULAR BY SENDING YOU A
NOTICE WITHIN TWO BUSINESS DAYS AFTER THE COMPLETION OF THE
COMPANY’S SALE TO YOU THAT CONTAINS THE URL WHERE THE FINAL
OFFERING CIRCULAR OR THE OFFERING STATEMENT IN WHICH SUCH FINAL
OFFERING CIRCULAR WAS FILED MAY BE OBTAINED.
NASAA UNIFORM LEGEND
FOR RESIDENTS OF ALL STATES: THE PRESENCE OF A LEGEND FOR ANY
GIVEN STATE REFLECTS ONLY THAT A LEGEND MAY BE REQUIRED BY THAT
STATE AND SHOULD NOT BE CONSTRUED TO MEAN AN OFFER OR SALE MAY BE
MADE IN A PARTICULAR STATE. IF YOU ARE UNCERTAIN AS TO WHETHER OR
NOT OFFERS OR SALES MAY BE LAWFULLY MADE IN ANY GIVEN STATE, YOU
ARE HEREBY ADVISED TO CONTACT THE COMPANY. THE SECURITIES DESCRIBED
IN THIS OFFERING CIRCULAR HAVE NOT BEEN REGISTERED UNDER ANY STATE
SECURITIES LAWS (COMMONLY CALLED 'BLUE SKY' LAWS).
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR
OWN EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND
THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED.
THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE
FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED
THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
NOTICE TO FOREIGN INVESTORS
IF THE PURCHASER LIVES OUTSIDE THE UNITED STATES, IT IS THE
PURCHASER'S RESPONSIBILITY TO FULLY OBSERVE THE LAWS OF ANY
RELEVANT TERRITORY OR JURISDICTION OUTSIDE THE UNITED STATES IN
CONNECTION WITH ANY PURCHASE OF THE SECURITIES, INCLUDING OBTAINING
REQUIRED GOVERNMENTAL OR OTHER CONSENTS OR OBSERVING ANY OTHER
REQUIRED LEGAL OR OTHER FORMALITIES. THE COMPANY RESERVES THE RIGHT
TO DENY THE PURCHASE OF THE SECURITIES BY ANY FOREIGN
PURCHASER.
PATRIOT ACT RIDER
The Investor hereby represents and warrants that Investor is not,
nor is it acting as an agent, representative, intermediary or
nominee for, a person identified on the list of blocked persons
maintained by the Office of Foreign Assets Control, U.S. Department
of Treasury. In addition, the Investor has complied with all
applicable U.S. laws, regulations, directives, and executive orders
relating to anti-money laundering , including but not limited to
the following laws: (1) the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001, Public Law 107-56, and (2) Executive Order
13224 (Blocking Property and Prohibiting Transactions with Persons
Who Commit, Threaten to Commit, or Support Terrorism) of September
23, 2001.
NO DISQUALIFICATION EVENT (“BAD BOY”
DECLARATION)
NONE OF THE COMPANY, ANY OF ITS PREDECESSORS, ANY AFFILIATED
ISSUER, ANY DIRECTOR, EXECUTIVE OFFICER, OTHER OFFICER OF THE
COMPANY PARTICIPATING IN THE OFFERING CONTEMPLATED HEREBY, ANY
BENEFICIAL OWNER OF 20% OR MORE OF THE COMPANY'S OUTSTANDING VOTING
EQUITY SECURITIES, CALCULATED ON THE BASIS OF VOTING POWER, NOR ANY
PROMOTER (AS THAT TERM IS DEFINED IN RULE 405 UNDER THE SECURITIES
ACT OF 1933) CONNECTED WITH THE COMPANY IN ANY CAPACITY AT THE TIME
OF SALE (EACH, AN “ISSUER COVERED PERSON”) IS SUBJECT
TO ANY OF THE “BAD ACTOR” DISQUALIFICATIONS DESCRIBED
IN RULE 506(D)(1)(I) TO (VIII) UNDER THE SECURITIES ACT OF 1933
(A “DISQUALIFICATION EVENT”), EXCEPT FOR A
DISQUALIFICATION EVENT COVERED BY RULE 506(D)(2) OR (D)(3) UNDER
THE SECURITIES ACT. THE COMPANY HAS EXERCISED REASONABLE CARE TO
DETERMINE WHETHER ANY ISSUER COVERED PERSON IS SUBJECT TO A
DISQUALIFICATION EVENT.
Continuous Offering
Under Rule 251(d)(3) to Regulation A, the following types of
continuous or delayed Offerings are permitted, among others: (1)
securities offered or sold by or on behalf of a person other than
the issuer or its subsidiary or a person of which the issuer is a
subsidiary; (2) securities issued upon conversion of other
outstanding securities; or (3) securities that are part of an
Offering which commences within two calendar days after the
qualification date. These may be offered on a continuous basis and
may continue to be offered for a period in excess of 30 days from
the date of initial qualification. They may be offered in an amount
that, at the time the Offering statement is qualified, is
reasonably expected to be offered and sold within one year from the
initial qualification date. No securities will be offered or sold
“at the market.” The supplement will not, in the aggregate,
represent any change from the maximum aggregate Offering price
calculable using the information in the qualified Offering
statement. This information will be filed no later than two
business days following the earlier of the date of determination of
such pricing information or the date of first use of the Offering
circular after qualification.
Sale of these shares will commence within three calendar days of
the qualification date and it will be a continuous Offering
pursuant to Rule 251(d)(3)(i)(F).
Subscriptions are irrevocable and the purchase price is
non-refundable as expressly stated in this Offering Circular. The
Company, by determination of the Board of Directors, in its sole
discretion, may issue the Securities under this Offering for cash,
promissory notes, services, and/or other consideration without
notice to subscribers. All proceeds received by the Company from
subscribers for this Offering will be available for use by the
Company upon acceptance of subscriptions for the Securities by the
Company.
Forward Looking Statement Disclosure
This Form 1-A, Offering Circular, and any documents incorporated
by reference herein or therein contain forward-looking statements
and are subject to risks and uncertainties. All statements other
than statements of historical fact or relating to present facts or
current conditions included in this Form 1-A, Offering Circular,
and any documents incorporated by reference are forward-looking
statements. Forward-looking statements give the Company's current
reasonable expectations and projections relating to its financial
condition, results of operations, plans, objectives, future
performance, and business. You can identify forward-looking
statements by the fact that they do not relate strictly to
historical or current facts. These statements may include words
such as 'anticipate,' 'estimate,' 'expect,' 'project,' 'plan,'
'intend,' 'believe,' 'may,' 'should,' 'can have,' 'likely' and
other words and terms of similar meaning in connection with any
discussion of the timing or nature of future operating or financial
performance or other events. The forward-looking statements
contained in this Form 1-A, Offering Circular, and any documents
incorporated by reference herein or therein are based on reasonable
assumptions the Company has made in light of its industry
experience, perceptions of historical trends, current conditions,
expected future developments and other factors it believes are
appropriate under the circumstances. As you read and consider this
Form 1-A, Offering Circular, and any documents incorporated by
reference, you should understand that these statements are not
guarantees of performance or results. They involve risks,
uncertainties (many of which are beyond the Company's control) and
assumptions. Although the Company believes that these
forward-looking statements are based on reasonable assumptions, you
should be aware that many factors could affect its actual operating
and financial performance and cause its performance to differ
materially from the performance anticipated in the forward-looking
statements. Should one or more of these risks or uncertainties
materialize, or should any of these assumptions prove incorrect or
change, the Company's actual operating and financial performance
may vary in material respects from the performance projected in
these forward- looking statements. Any forward-looking statement
made by the Company in this Form 1-A, Offering Circular or any
documents incorporated by reference herein speaks only as of the
date of this Form 1-A, Offering Circular or any documents
incorporated by reference herein. Factors or events that could
cause our actual operating and financial performance to differ may
emerge from time to time, and it is not possible for the Company to
predict all of them. The Company undertakes no obligation to update
any forward-looking statement, whether as a result of new
information, future developments or otherwise, except as may be
required by law.
About This Form 1-A and Offering Circular
In making an investment decision, you should rely only on the
information contained in this Form 1-A and Offering Circular. The
Company has not authorized anyone to provide you with information
different from that contained in this Form 1-A and Offering
Circular. We are offering to sell, and seeking offers to buy the
Shares only in jurisdictions where offers and sales are permitted.
You should assume that the information contained in this Form 1-A
and Offering Circular is accurate only as of the date of this Form
1-A and Offering Circular, regardless of the time of delivery of
this Form 1-A and Offering Circular. Our business, financial
condition, results of operations, and prospects may have changed
since that date. Statements contained herein as to the content of
any agreements or other documents are summaries and, therefore, are
necessarily selective and incomplete and are qualified in their
entirety by the actual agreements or other documents.
TABLE OF CONTENTS
USE OF MARKET AND INDUSTRY DATA
This Offering Circular includes market and industry data that we
have obtained from third-party sources, including industry
publications, as well as industry data prepared by our management
on the basis of its knowledge of and experience in the industries
in which we operate (including our management’s estimates and
assumptions relating to such industries based on that knowledge).
Management has developed its knowledge of such industries through
its experience and participation in these industries. While our
management believes the third-party sources referred to in this
Offering Circular are reliable, neither we nor our management have
independently verified any of the data from such sources referred
to in this Offering Circular or ascertained the underlying economic
assumptions relied upon by such sources. Furthermore, internally
prepared and third-party market prospective information, in
particular, are estimates only and there will usually be
differences between the prospective and actual results, because
events and circumstances frequently do not occur as expected, and
those differences may be material. Also, references in this
Offering Circular to any publications, reports, surveys or articles
prepared by third parties should not be construed as depicting the
complete findings of the entire publication, report, survey or
article. The information in any such publication, report, survey or
article is not incorporated by reference in this Offering
Circular.
We are offering to sell, and seeking offers to buy, our securities
only in jurisdictions where such offers and sales are permitted.
You should rely only on the information contained in this Offering
Circular. We have not authorized anyone to provide you with any
information other than the information contained in this Offering
Circular. The information contained in this Offering Circular is
accurate only as of its date, regardless of the time of its
delivery or of any sale or delivery of our securities. Neither the
delivery of this Offering Circular nor any sale or delivery of our
securities shall, under any circumstances, imply that there has
been no change in our affairs since the date of this Offering
Circular. This Offering Circular will be updated and made available
for delivery to the extent required by the federal securities
laws.
Unless otherwise indicated or the context otherwise requires, all
references in this Offering Circular to “we,” “us,” “our,” “our
company,” “U. S. Stem Cell, Inc.” or the “Company” refer to U.S.
Stem Cell, Inc. and its subsidiaries.
OFFERING
CIRCULAR SUMMARY
This summary highlights selected information contained elsewhere in
this Offering Circular. This summary is not complete and does not
contain all the information that you should consider before
deciding whether to invest in our Common Stock. You should
carefully read the entire Offering Circular, including the risks
associated with an investment in the company discussed in the “Risk
Factors” section of this Offering Circular, before making an
investment decision. Some of the statements in this Offering
Circular are forward-looking statements. See the section entitled “
Forward-Looking Statement Disclosure.”
Corporate Information
U.S. Stem Cell, Inc. was incorporated in the State of Florida in
August 1999 as Bioheart, Inc. In 2015, we changed our name to U.S.
Stem Cell, Inc. Our principal executive offices are located at 1560
Sawgrass Corporate Pkwy, 4th Floor, Sunrise, FL 33323 and our
telephone number is (954) 835-1500. Information about us is
available on our corporate website at www. us-stemcell.com.
We include our website address in the Offering Circular on Form 1-
only as an interactive textual reference and do not intend it to be
an active link to our website. The information on our websites is
expressly not incorporated by reference in this Offering
Circular.
Mission Statement
We are a biotechnology company focused on the discovery,
development and, subject to regulatory approval, commercialization
of autologous cell therapies for the treatment of disease and
injury. We are also a regenerative medicine company specializing in
physician/veterinary training and certification and stem cell
products.
Going Concern
As of June 30, 2021, the Company had cash on hand of $137,962 and a
working capital deficit (current liabilities in excess of current
assets) of $11,086,870. During the six months ended June 30, 2021,
the net loss was $1,973,950 and net cash used in operating
activities was $635,233. Our independent registered public
accounting firm has issued its report in connection with the audit
of our annual financial statements as of December 31, 2020, that
included an explanatory paragraph describing the existence of
conditions that raise substantial doubt about our ability to
continue as a going concern and the unaudited financial statements
for the period ended June 30, 2021 also describes the existence of
conditions that raise substantial doubt about our ability to
continue as a going concern. These factors raise substantial doubt
about our ability to continue as a going concern within one year
after the date the financial statements are issued. The Company’s
financial statements do not include any adjustments that might
result from the outcome of this uncertainty should we be unable to
continue as a going concern.
Management estimates that the current funds on hand will be
sufficient to continue operations through the next six months. Our
ability to continue as a going concern is dependent upon our
ability to continue to implement our business plan. Our management
intends to continue the current business strategy, to the extent
possible, to finance their clinical development pipeline through
revenue (cash in-flows) generated through the marketing and sales
of unique educational and training services, animal health products
and distribution of products in the industry as well as 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.
Trading Market
Our Common Stock trades in the OTC Market under the symbol
“USRM”.
We are Offering, on a best-efforts, a number of shares of our
common stock at a per share price of $0.01 to be sold up to a
maximum of 250,000,000 shares. The fixed price per share determined
upon qualification shall be fixed for the duration of the Offering
unless a post-effective amendment is filed to reset the price per
share and approved by the Securities and Exchange Commission. There
is a minimum investment of $25,000 per investor. The shares are
intended to be sold directly through the efforts of our officers
and directors.
We have two billion (2,000,000,000) authorized common stock shares,
of which there are 456,217,501 issued and outstanding as of August
27, 2021. We have 20,000,000 authorized Preferred Shares, of which
none are outstanding.
We are quoted on the OTC Pink Sheet Market and there is a limited
established market for our stock. The Offering price of the Shares
has been determined arbitrarily by us. The price does not bear any
relationship to our assets, book value, earnings, or other
established criteria for valuing a privately held company. In
determining the number of shares to be offered and the Offering
price, we took into consideration our capital structure and the
amount of money we would need to implement our business plans.
Accordingly, the Offering price should not be considered an
indication of the actual value of our securities.
The Offering
This is a public Offering of securities of U.S. Stem Cell, Inc., a
Florida corporation. We are offering 250,000,000 shares of our
Common Stock at an Offering price of $0.01 per share (the “Offered
Shares” or “Shares”). This Offering will terminate on twelve months
from the day the Offering is qualified or the date on which the
maximum Offering amount is sold (such earlier date, the
“Termination Date”). The minimum purchase requirement per investor
is $25,000.
These securities are speculative securities. Investment in the
Company’s stock involves significant risk. You should purchase
these securities only if you can afford a complete loss of your
investment. See “Risk Factors” on page 12 to read about
factors you should consider before buying shares of Common
Stock.
Our Common Stock currently trades on the OTC Market under the
symbol “USRM” and the closing price of our Common Stock on August
24, 2021 was $0.012.
We are offering our shares without the use of an exclusive
placement agent. We expect to commence the sale of the shares as of
the date on which the Offering Statement is Qualified by the
SEC.
As there is no minimum Offering, upon the approval of any
subscription to this Offering Circular, we shall immediately
deposit said proceeds into our bank account and may dispose of the
proceeds in accordance with the Use of Proceeds.
This Offering will be conducted on a “best-efforts” basis, which
means our Officers will use their commercially reasonable best
efforts to offer and sell the Shares. Our Officers will not receive
any commission or any other remuneration for these sales. Any
Officer offering the securities on our behalf will rely on the safe
harbor from broker-dealer registration set out in Rule 3a4-1 under
the Securities Exchange Act of 1934, as amended.
This Offering Circular shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sales of
these securities in any state or jurisdiction in which such offer,
solicitation or sale would be unlawful, prior to registration or
qualification under the laws of any such state.
As there is no minimum Offering, upon the approval of any
subscription to this Offering Circular, the Company shall
immediately deposit said proceeds into the bank account of the
Company and may dispose of the proceeds in accordance with the Use
of Proceeds.
Completion of this Offering is not subject to us raising a minimum
Offering amount. We do not have an arrangement to place the
proceeds from this Offering in an escrow, trust or similar account.
Any funds raised from the Offering will be immediately available to
us for our immediate use. We have provided an estimate below of the
gross proceeds to be received by the Company if 25%, 50%, 75%, and
100% of the Shares registered in the Offering are sold.
In order to subscribe to purchase the shares, a prospective
investor must complete a subscription agreement and send payment by
check, wire transfer or ACH. We have not currently engaged any
party for the public relations or promotion of this Offering. As of
the date of this filing, there are no additional offers for shares,
nor any options, warrants, or other rights for the issuance of
additional shares except those described herein.
We are Offering to sell, and seeking offers to buy, our securities
only in jurisdictions where such offers and sales are permitted.
You should rely only on the information contained in this Offering
Circular. We have not authorized anyone to provide you with any
information other than the information contained in this Offering
Circular. The information contained in this Offering Circular is
accurate only as of its date, regardless of the time of its
delivery or of any sale or delivery of our securities. Neither the
delivery of this Offering Circular nor any sale or delivery of our
securities shall, under any circumstances, imply that there has
been no change in our affairs since the date of this Offering
Circular. This Offering Circular will be updated and made available
for delivery to the extent required by the federal securities
laws.
Section 15(g) of the Securities Exchange Act of 1934
Our shares are covered by section 15(g) of the Securities Exchange
Act of 1934, as amended that imposes additional sales practice
requirements on broker/dealers who sell such securities to persons
other than established customers and accredited investors
(generally institutions with assets in excess of $5,000,000 or
individuals with net worth in excess of $1,000,000, excluding their
primary residences or annual income exceeding $200,000 or $300,000
jointly with their spouses). For transactions covered by the Rule,
the broker/dealer must make a special suitability determination for
the purchase and have received the purchaser’s written agreement to
the transaction prior to the sale. Consequently, the Rule may
affect the ability of broker/dealers to sell our securities and may
affect your ability to sell your shares in the secondary
market.
Section 15(g) also imposes additional sales practice requirements
on broker/dealers who sell penny securities. These rules require a
one-page summary of certain essential items. The items include the
risk of investing in penny stocks in both public Offerings and
secondary marketing; terms important to in understanding of the
function of the penny stock market, such as bid and offer quotes, a
dealers spread and broker/dealer compensation; the broker/dealer
compensation, the broker/dealers’ duties to its customers,
including the disclosures required by any other penny stock
disclosure rules; the customers’ rights and remedies in cases of
fraud in penny stock transactions; and, FINRA’s toll free telephone
number and the central number of the North American Administrators
Association, for information on the disciplinary history of
broker/dealers and their associated persons.
The
Offering
This Offering Circular relates to the sale of up to 250,000,000
shares of our Common Stock, through the efforts of our executive
officers and directors, at a price of $0.01 per share, for total
Offering proceeds of up to $2,500,000, if all Offered Shares are
sold. The minimum amount established for investors is $25,000
unless such minimum is waived by the Company, in its sole
discretion, on a case-by-case basis. There is no minimum aggregate
Offering amount and the Company will not escrow or return investor
funds if any minimum number of shares is not sold. All money we
receive from the Offering will be immediately available to us for
the uses set forth in the “Use of Proceeds” section of this
Offering Circular.
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Type of Stock Offering:
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Common Stock
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Price Per Share:
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$0.01
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Minimum Investment:
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$25,000 per investor (250,000 Shares of Common Stock at the Maximum
Offering Price)
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Maximum Offering:
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$2,500,000. The Company will not accept investments greater than
the Maximum Offering amount.
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Maximum Shares Offered:
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250,000,000 Shares of Common Stock
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Use of Proceeds:
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See the description in section entitled “USE OF PROCEEDS TO
ISSUER” on page 24 herein.
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Voting Rights:
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The Shares have full voting rights.
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Length of Offering:
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Shares will be offered on a continuous basis until either (1) the
maximum number of Shares or sold; (2) 365 days from the date of
qualification by the Commission; or (3) the Company in its sole
discretion withdraws this
Offering.
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Risk factors:
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Investing in our Common Stock involves risks. See “Risk
Factors” for a discussion of certain factors that you should
carefully consider before making an investment decision.
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Dividend policy:
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Holders of our Common Stock are only entitled to receive dividends
when, as and if declared by our board of directors out of funds
legally available for dividends. We do not intend to pay dividends
for the foreseeable future. Our ability to pay dividends to our
stockholders in the future will depend on regulatory restrictions,
liquidity and capital requirements, our earnings and financial
condition, the general economic climate, our ability to service any
equity or debt obligations senior to our Common Stock and other
factors deemed relevant by our board of directors. For additional
information, see “Dividend Policy.”
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Use of proceeds:
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See “Use of Proceeds” beginning on page 25.
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Common Stock Outstanding as of August 27, 2021 (1)
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456,217,501 Shares
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Common Stock in this Offering
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250,000,000 Shares
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Stock to be outstanding after the offering (2)
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706,217,501 Shares
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(1)
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The Company has also authorized 20,000,000 shares of preferred
stock, of which 0 are issued and outstanding. No preferred stock is
being sold in this Offering.
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(2)
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The total number of Shares of Common Stock assumes that the maximum
number of Shares are sold in this Offering. The Company may not be
able to sell the Maximum Offering Amount. The Company will conduct
one or more closings on a rolling basis as funds are received from
investors. The net proceeds of the Offering will be the gross
proceeds of the Shares sold minus the expenses of the offering.
Investors should not assume that the Offered Shares will be listed.
A consistent public trading market for the shares may not
develop.
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Investment Analysis
There is no assurance U.S. Stem Cell, Inc. will be profitable, or
that management's opinion of the Company's future prospects will
not be outweighed by the unanticipated losses, adverse regulatory
developments and other risks. Investors should carefully consider
the various risk factors below before investing in the Shares.
ABOUT THIS OFFERING CIRCULAR
We have prepared this Offering Circular to be filed with the
Securities and Exchange Commission for our Offering of securities.
The Offering Circular includes exhibits that provide more detailed
descriptions of the matters discussed in this circular. You should
rely only on the information contained in this circular and its
exhibits. The Company has not authorized any person to provide you
with any information different from that contained in this Offering
Circular. The information contained in this Offering Circular is
complete and accurate only as of the date of this Offering
Circular, regardless of the time of delivery of this circular or
sale of our Shares. This Offering Circular contains summaries of
certain other documents, but reference is hereby made to the full
text of the actual documents for complete information concerning
the rights and obligations of the parties thereto. All documents
relating to this Offering and related documents and agreements, if
readily available to us, will be made available to a prospective
investor or its representatives upon request.
TAX CONSIDERATIONS
No information contained herein, nor in any prior, contemporaneous
or subsequent communication should be construed by a prospective
investor as legal or tax advice. We are not providing any tax
advice as to the acquisition, holding or disposition of the
securities offered herein. In making an investment decision,
investors are strongly encouraged to consult their own tax advisor
to determine the U.S. Federal, state and any applicable foreign tax
consequences relating to their investment in our securities. This
written communication is not intended to be “written advice,” as
defined in Circular 230 published by the U.S. Treasury
Department.
RISK FACTORS
The purchase of the Company's Common Stock involves substantial
risks. You should carefully consider the following risk factors in
addition to any other risks associated with this investment. The
Shares offered by the Company constitute a highly speculative
investment and you should be in an economic position to lose your
entire investment. The risks listed do not necessarily comprise all
those associated with an investment in the Shares and are not set
out in any particular order of priority. Additional risks and
uncertainties may also have an adverse effect on the Company's
business and your investment in the Shares. An investment in the
Company may not be suitable for all recipients of this Offering
Circular. You are advised to consult an independent professional
adviser or attorney who specializes in investments of this kind
before making any decision to invest. You should consider carefully
whether an investment in the Company is suitable in the light of
your personal circumstances and the financial resources available
to you.
The discussions and information in this Offering Circular may
contain both historical and forward- looking statements. To the
extent that the Offering Circular contains forward-looking
statements regarding the financial condition, operating results,
business prospects, or any other aspect of the Company's business,
please be advised that the Company's actual financial condition,
operating results, and business performance may differ materially
from that projected or estimated by the Company in forward-looking
statements. The Company has attempted to identify, in context,
certain of the factors it currently believes may cause actual
future experience and results may differ from the Company's current
expectations.
SHOULD ONE OR MORE OF THE FOREGOING RISKS OR UNCERTAINTIES
MATERIALIZE, OR SHOULD THE UNDERLYING ASSUMPTIONS OF OUR BUSINESS
PROVE INCORRECT, ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THOSE
ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED, INTENDED OR
PLANNED.
Before investing, you should carefully read and carefully consider
the following risk factors:
Risks Relating to the Company and Its Business
The Company is dependent upon its management, key personnel,
and consultants to execute its business plan.
The Company's success is heavily dependent upon the continued
active participation of the Company's current executive officer,
Mike Tomas. Loss of this individual could have a material adverse
effect upon the Company's business, financial condition, or results
of operations. Further, the Company's success and achievement of
the Company's growth plans depend on the Company's ability to
recruit, hire, train and retain other highly qualified technical
and managerial personnel. Competition for qualified employees among
companies in the health care, and the loss of any of such persons,
or an inability to attract, retain and motivate any additional
highly skilled employees required for the expansion of the
Company's activities, could have a materially adverse effect on its
ability to operate. The inability to attract and retain the
necessary personnel, consultants and advisors could have a material
adverse effect on the Company's business, financial condition, or
results of operations.
The Company's bank accounts will not be fully
insured.
The Company's regular bank accounts have federal insurance that is
limited to a certain amount of coverage. It is anticipated that the
account balances in each account may exceed those limits at times.
In the event that any of the Company's banks should fail, the
Company may not be able to recover all amounts deposited in these
bank accounts.
The Company's business plan is speculative.
The Company's present business and planned business are speculative
and subject to numerous risks and uncertainties. There is no
assurance that the Company will generate significant revenues or
profits.
The Company's expenses could increase without a corresponding
increase in revenues.
The Company's operating and other expenses could increase without a
corresponding increase in revenues, which could have a material
adverse effect on the Company's financial results and on your
investment. Factors which could increase operating and other
expenses include, but are not limited to (1) increases in the rate
of inflation, (2) increases in taxes and other statutory charges,
(3) changes in laws, regulations, or government policies which
increase the costs of compliance with such laws, regulations, or
policies, (4) significant increases in insurance premiums, and (5)
increases in borrowing costs.
Risks Related to our Intellectual Property
Our success will depend on our ability to obtain and maintain
meaningful intellectual property protection for any such
intellectual property. The names and/or logos of Company brands
(whether owned by the Company or licensed to us) may be challenged
by holders of trademarks who file opposition notices, or otherwise
contest trademark applications by the Company for its brands.
Similarly, domains owned and used by the Company may be challenged
by others who contest the ability of the Company to use the domain
name or URL. Current or future patent applications may not result
in issued patents which could hinder ability to obtain and maintain
other rights to technology required or desirable for the conduct of
our business. Such challenges could have a material adverse effect
on the Company's financial results as well as your investment.
Changes in the economy could have a detrimental impact on the
Company.
Changes in the general economic climate could have a detrimental
impact on consumer expenditure and, therefore, on the Company's
revenue. It is possible that recessionary pressures and other
economic factors (such as declining incomes, future potential
rising interest rates, higher unemployment and tax increases) may
adversely affect customers' confidence and willingness to spend.
Any of such events or occurrences could have a material adverse
effect on the Company's financial results and on your
investment.
Limitation on director liability.
The Company may provide for the indemnification of directors to the
fullest extent permitted by law and, to the extent permitted by
such law, eliminate or limit the personal liability of directors to
the Company and its shareholders for monetary damages for certain
breaches of fiduciary duty. Such indemnification may be available
for liabilities arising in connection with this Offering. Insofar
as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company has been
informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
Risks Related to Our Financial Position and Need for Additional
Financing
We will need to secure additional financing in 2021 in order
to continue to finance our operations. If we are unable to secure
additional financing on acceptable terms, or at all, we may be
forced to curtail or cease our operations.
As of December 31, 2020, we had cash and cash equivalents of
$18,570 and an accumulated capital deficit of $136,514,508. At June
30, 2021, we had cash and cash equivalents totaling $137,962.
However, our accumulated capital deficit as of June 30, 2021 was
$138,488,458. As such, our existing cash resources are insufficient
to finance even our immediate operations. Accordingly, we will need
to secure additional sources of capital to develop our business and
product candidates as planned. We are seeking substantial
additional financing through public and/or private financing, which
may include equity and/or debt financings, research grants and
through other arrangements, including collaborative
arrangements.
As part of such efforts, we may seek loans from certain of our
executive officers, directors and/or current shareholders. We may
also seek to satisfy some of our obligations to the guarantors of
our loan with Seaside National Bank & Trust, or the Guarantors,
through the issuance of various forms of securities or debt on
negotiated terms. 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, all other terms and conditions
remain unchanged. However, financing and/or alternative
arrangements with the Guarantors may not be available when we need
it, or may not be available on acceptable terms.
If we are unable to secure additional financing in the near term,
we may be forced to:
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curtail or abandon our existing business plans;
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reduce our headcount;
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default on our debt obligations;
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file for bankruptcy;
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seek to sell some or all of our assets; and/or
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Cease our operations.
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If we are forced to take any of these steps, any investment in our
common stock may be worthless.
If we raise additional capital and/or secure alternative
arrangements, with the Guarantors or otherwise, by issuing equity,
equity-related or convertible securities, the economic, voting and
other rights of our existing shareholders may be diluted, and those
newly issued securities may be issued at prices that are a
significant discount to current and/or then prevailing market
prices. In addition, any such newly issued securities may have
rights superior to those of our common stock. If we obtain
additional capital through collaborative arrangements, we may be
required to relinquish greater rights to our technologies or
product candidates than we might otherwise have or become subject
to restrictive covenants that may affect our business.
Our independent registered public accounting firm has
expressed substantial doubt about our ability to continue as a
going concern.
Our independent registered public accounting firm issued its report
in connection with the audit of our financial statements as of
December 31, 2020, which included an explanatory paragraph
describing the existence of conditions that raise substantial doubt
about our ability to continue as a going concern. In addition, the
notes to our financial statements for the quarter ended June 30,
2021 included an explanatory paragraph describing the existence of
conditions that raise substantial doubt about our ability to
continue as a going concern for a reasonable period of time. If we
are not able to continue as a going concern, it is likely that
holders of our common stock will lose all of their investment. Our
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
We are a development stage life sciences company with a
limited operating history and a history of net losses and negative
cash flows from operations. We may never be profitable, and if we
incur operating losses and generate negative cash flows from
operations for longer than expected, we may be unable to continue
operations.
We are a development stage life sciences company and have a limited
operating history, limited capital, limited sources of revenue, and
have incurred losses since inception. Our operations to date have
been limited to organizing our company, developing and engaging in
clinical trials of our MyoCell™ product candidate, expanding our
pipeline of complementary product candidates through internal
development and third party licenses, expanding and strengthening
our intellectual property position through internal programs and
third party licenses and recruiting management, research and
clinical personnel. Consequently, it may be difficult to predict
our future success or viability due to our lack of operating
history. As of December 31, 2020, we have accumulated a
deficit of $136,514,508 million and as of June 30, 2021, we have an
accumulated deficit of $138,488,458. Our MyoCell™ product candidate
has not received regulatory approval or generated any material
revenues and is not expected to generate any material revenues
until commercialization of MyoCell, if ever.
Our ability to continue generating revenues from any of our product
candidates will depend on a number of factors, including our
ability to successfully complete clinical trials, obtain necessary
regulatory approvals and implement our commercialization strategy.
In addition, even if we are successful in obtaining necessary
regulatory approvals and bringing one or more product candidates to
market, we will be subject to the risk that the marketplace will
not accept those products. We may, and anticipate that we will need
to, transition from a company with a research and development focus
to a company capable of supporting commercial activities and we may
not succeed in such a transition.
Because of the numerous risks and uncertainties associated with our
product development and commercialization efforts, we are unable to
predict the extent of our future losses or when or if we will
become profitable. Our failure to successfully commercialize our
product candidates or to become and remain profitable could impair
our ability to raise capital, expand our business, diversify our
product offerings and continue our operations.
The amount of capital the Company is attempting to raise in
this Offering is not enough to sustain the Company’s
current business plan.
In order to achieve the Company's near and long-term goals, the
Company will need to procure funds in addition to the amount raised
in the Offering. There is no guarantee the Company will be able to
raise such funds on acceptable terms, if at all. If we are not able
to raise sufficient capital in the future, we will not be able to
execute our business plan, our continued operations will be in
jeopardy and we may be forced to cease operations and sell or
otherwise transfer all or substantially all of our remaining
assets, which could cause you to lose all or a portion of your
investment.
Additional financing may be necessary for the implementation
of our growth strategy.
The Company may require additional debt and/or equity financing to
pursue our growth and business strategies. These include, but are
not limited to enhancing our operating infrastructure and otherwise
respond to competitive pressures. Given our limited operating
history and existing losses, there can be no assurance that
additional financing will be available, or, if available, that the
terms will be acceptable to us. Lack of additional funding could
force us to substantially curtail our growth plans. Furthermore,
the issuance by us of any additional securities pursuant to any
future fundraising activities undertaken by us would dilute the
ownership of existing shareholders and may reduce the price of our
Shares.
Risks Relating to This Offering and
Investment
The Company may undertake additional equity or debt financing
that may dilute the Shares in this Offering.
The Company may undertake further equity or debt financing, which
may be dilutive to existing shareholders, including you, or result
in an issuance of securities whose rights, preferences and
privileges are senior to those of existing shareholders, including
you, and also reducing the value of Shares subscribed for under
this Offering.
An investment in the Shares is speculative and there can be
no assurance of any return on such investment.
An investment in the Company's Shares is speculative, and there is
no assurance that investors will obtain any return on their
investment. Investors will be subject to substantial risks involved
in an investment in the Company, including the risk of losing their
entire investment.
The Shares are offered on a “best
efforts” basis and the Company may not raise the
maximum amount being offered.
Since the Company is offering the Shares on a “best efforts” basis,
there is no assurance that the Company will sell enough Shares to
meet its capital needs. If you purchase Shares in this Offering,
you will do so without any assurance that the Company will raise
enough money to satisfy the full Use Of Proceeds To Issuer which
the Company has outlined in this Offering Circular or to meet the
Company's working capital needs. If the maximum Offering amount is
not sold, we may need to incur additional debt or raise additional
equity in order to finance our operations. Increasing the amount of
debt will increase our debt service obligations and make less cash
available for distribution to our shareholders. Increasing the
amount of additional equity that we will have to seek in the future
will further dilute those investors participating in this
Offering.
We have not paid dividends in the past and do not anticipate
paying them in the future. You return on investment, if any, will
be limited to the market value of the Shares you
purchase.
We have never paid cash dividends on our Shares and do not
anticipate paying cash dividends in the future. Since we do not pay
dividends, our Shares may be less valuable because a return on your
investment will only occur if the market value of the Shares
appreciates beyond your purchase price. While the Company may
choose to pay dividends at some point in the future to its
shareholders, there can be no assurance that cash flow and profits
will allow such distributions to ever be made.
The Company may not be able to obtain additional
financing.
Even if the Company is successful in selling the maximum number of
Shares in the Offering, the Company may require additional funds to
continue and grow its business. The Company may not be able to
obtain additional financing as needed, on acceptable terms, or at
all, which would force the Company to delay its plans for growth
and implementation of its strategy which could seriously harm its
business, financial condition and results of operations. If the
Company needs additional funds, the Company may seek to obtain them
primarily through additional equity or debt financings. Those
additional financings could result in dilution to the Company's
current shareholders and to you if you invest in this Offering.
The offering price has been arbitrarily
determined.
The offering price of the Shares has been arbitrarily established
by the Company based upon its present and anticipated financing
needs and bears no relationship to the Company's present financial
condition, assets, book value, projected earnings, or any other
generally accepted valuation criteria. The offering price of the
Shares may not be indicative of the value of the Shares or the
Company, now or in the future.
The management of the Company has broad discretion in
application and use of Offering proceeds.
The management of the Company has broad discretion to adjust the
application and allocation of the net proceeds of this Offering in
order to address changed circumstances and opportunities. As such,
the success of the Company will be substantially dependent upon the
discretion and judgment of the management of the Company with
respect to the application and allocation of the net proceeds of
the Offering.
An investment in the Company Shares could result in a loss of
your entire investment.
An investment in this Offering involves a high degree of risk and
you should not purchase the Shares if you cannot afford the loss of
your entire investment. You may not be able to liquidate your
investment for any reason in the near future.
Sales of a substantial number of shares of our Common Stock
may cause the price of our Common Stock to decline.
If our shareholders sell substantial amounts of our Shares in the
public market, Shares sold may cause the price to decrease below
the current offering price. These sales may also make it more
difficult for us to sell equity or equity-related securities at a
time and price that we deem reasonable or appropriate.
The Shares in this Offering have no protective
provisions.
The Shares in this Offering have no protective provisions. As such,
you will not be afforded protection by any provision of the Shares
or as a Shareholder in the event of a transaction that may
adversely affect you, including a reorganization, restructuring,
merger or other similar transaction involving the Company. If there
is a 'liquidation event' or 'change of control' the Shares being
offered do not provide you with any protection. In addition, there
are no provisions attached to the Shares in the Offering that would
permit you to require the Company to repurchase the Shares in the
event of a takeover, recapitalization or similar transaction.
You will not have significant influence on the management of
the Company.
Substantially all decisions with respect to the management of the
Company will be made exclusively by the officers, directors,
managers or employees of the Company. You will have a very limited
ability, if at all, to vote on issues of Company management and
will not have the right or power to take part in the management of
the Company and will not be represented on the board of directors
or by managers of the Company. Accordingly, no person should
purchase Shares unless he or she is willing to entrust all aspects
of management to the Company.
No guarantee of return on investment.
There is no assurance that you will realize a return on your
investment or that you will not lose your entire investment. For
this reason, you should read this Form 1-A, Offering Circular, and
all exhibits and referenced materials carefully and should consult
with your own attorney and business advisor prior to making any
investment decision.
Our subscription agreement provides that Florida will be the
governing law and forum for substantially all disputes between us
and our investors, which could limit an investors’
ability to obtain a favorable judicial forum for disputes
with us or our directors, officers or employees but does not
preclude the investor for federal or state securities law
litigation.
By becoming an investor in this Offering, you are deemed to have
notice of and have consented to the provisions of our Subscription
Agreement related to governing law and choice of forum. This forum
provision may limit an investor’s ability to bring a claim in a
judicial forum that it finds favorable for disputes with us or our
directors, officers, or other employees, which may discourage
lawsuits against us and our directors, officers and other
employees. This provision does not apply to claims arising under
the Securities Act of 1933, the Securities Exchange Act of 1934, or
other federal securities laws for which there is exclusive federal
or concurrent federal and state jurisdiction. In addition,
investors cannot waive compliance with the federal securities laws
and the rules and regulations thereunder. In that regard, we note
that Section 22 of the Securities Act of 1933 creates concurrent
jurisdiction for federal and state courts over all suits brought to
enforce any duty or liability created by the Securities Act or the
rules and regulations thereunder. Exchange Act 27 creates exclusive
federal jurisdiction over all suits brought to enforce any duty or
liability created by the Exchange Act or the rules and regulations
thereunder. If a court were to find the exclusive forum provision
in our Subscription Agreement to be inapplicable or unenforceable
in an action, we may incur additional costs associated with
resolving the dispute in other jurisdictions, which could seriously
harm our business. In addition, an Investors’ ability to seek
relief in the state courts as a more favorable jurisdiction, will
likely fail because the Courts will defer to federal
jurisdiction.
Risks Related to Product Development
All of our product candidates are in an early stage of
development and we may never succeed in developing and/or
commercializing them. We depended heavily on the success of our
MyoCell™ product candidate. If we are unable to
commercialize MyoCell™ or any of our other product
candidates or experience significant delays in doing so, our
business may fail.
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We have invested a significant portion of our efforts and financial
resources in our MyoCell™ product candidate and depended
heavily on its success. MyoCell™ was currently in the clinical
testing stage of development, although we have suspended work under
our clinical trials.
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We need to devote significant additional research and development,
financial resources and personnel to develop commercially viable
products, obtain regulatory approvals and establish a sales and
marketing infrastructure.
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We are likely to encounter hurdles and unexpected issues as we
proceed in the development of our other product candidates. There
are many reasons that we may not succeed in our efforts to develop
our product candidates, including the possibility that:
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our product candidates will be deemed ineffective, unsafe or will
not receive regulatory approvals;
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our product candidates will be too expensive to manufacture or
market or will not achieve broad market acceptance
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others will hold proprietary rights that will prevent us from
marketing our product candidates; or
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our competitors will market products that are perceived as
equivalent or superior.
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Our approach of using cell-based therapy for the treatment of
heart damage is risky and unproven and no products using this
approach have received regulatory approval in the United States or
Europe.
No company, to our knowledge, has yet been successful in its
efforts to obtain regulatory approval in the United States or
Europe of a cell-based therapy product for the treatment of heart
damage. Cell-based therapy products, in general, may be susceptible
to various risks, including undesirable and unintended side
effects, unintended immune system responses, inadequate therapeutic
efficacy or other characteristics that may prevent or limit their
approval by regulators or commercial use. Many companies in the
industry have suffered significant setbacks in advanced clinical
trials, despite promising results in earlier trials.
One of our competitors exploring the use of skeletal myoblasts
ceased enrolling new patients in its European Phase II clinical
trial based on the determination of its monitoring committee that
there was a low likelihood that the trial would result in the
hypothesized improvement in heart function. Although our clinical
research to date suggests that MyoCell™ may improve the contractile
function of the heart, we have not yet been able to demonstrate a
mechanism of action and additional research is needed to precisely
identify such mechanism.
U.S. Food and Drug Administration injunction has curtailed
our business.
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 was filed at the request of the U.S. Food and Drug
Administration (FDA) and alleges that the respective
defendants manufacture “stromal vascular fraction” (SVF) products
from patient adipose (fat) tissue, which the companies then market
as stem cell-based treatments without first obtaining what the
government alleges are necessary FDA approvals. The Company has
retained counsel to defend in this action. . On June 25, 2019, the
federal court for the Southern District of Florida ruled in favor
of the government, enjoining the Company and the other defendants
from certain product sales and processes. The Company filed an
appeal on August 23, 2019 and attended oral argument on January
13th, 2021. On June 2nd, 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.
Healthcare reform could substantially reduce our revenues,
earnings and cash flows.
We cannot predict how employers, private payors or persons buying
insurance might react to the changes brought on by broad U.S.
healthcare reform legislation or what form many of these
regulations will take before implementation. The healthcare reform
legislation, enacted in 2010, introduced healthcare insurance
exchanges which provide a marketplace for eligible individuals and
small employers to purchase healthcare insurance. While patients
have begun receiving insurance coverage through these
exchanges, the business and regulatory environment for these
exchanges continues to evolve as the exchanges mature.
Additionally, there is uncertainty about how the applicable state
and federal agencies will enforce regulations relating to the
exchanges. There is also a considerable amount of uncertainty as to
the prospective implementation of the federal healthcare reform
legislation and what similar measures might be enacted at the state
level. There have been multiple attempts through legislative action
and legal challenges to repeal or amend the Patient Protection and
Affordable Care Act of 2010, as modified by the Health Reform Acts,
including the case that was recently heard by the U.S. Supreme
Court, King v. Burwell. Although the Supreme Court upheld the
provision by the federal government of subsidies to individuals in
federally facilitated healthcare exchanges in Burwell, which
ultimately did not disrupt significantly the implementation of the
healthcare reform legislation, we cannot predict whether other
current or future efforts to repeal or amend these laws will be
successful, nor can we predict the impact that such a repeal or
amendment would have on our business and operations, or on our
revenues and earnings. In addition, in the last year, the executive
branch and Congress have taken actions to weaken or modify the
Affordable Care Act. The enacted reforms, future legislative
changes, as well as current ongoing uncertainty in matters related
to the Affordable Care Act, could have a material adverse effect on
our results of operations.
Risks Related to Our Common Stock
Our common stock may be considered a “penny
stock,” and thereby be subject to additional sale and
trading regulations that may make it more difficult to
sell.
Our common stock is considered to be a “penny stock.” It does not
qualify for one of the exemptions from the definition of “penny
stock” under Section 3a51-1 of the Exchange Act. Our common stock
is a “penny stock” because it meets one or more of the following
conditions (i) the stock trades at a price less than $5.00 per
share; (ii) it is not traded on a “recognized” national exchange or
(iii) it is not quoted on the NASDAQ Global Market, or has a price
less than $5.00 per share. The principal result or effect of being
designated a “penny stock” is that securities broker-dealers
participating in sales of our common stock are subject to the
“penny stock” regulations set forth in Rules 15-2 through 15g-9
promulgated under the Securities Exchange Act. For example, Rule
15g-2 requires broker-dealers dealing in penny stocks to provide
potential investors with a document disclosing the risks of penny
stocks and to obtain a manually signed and dated written receipt of
the document at least two business days before effecting any
transaction in a penny stock for the investor’s account. Moreover,
Rule 15g-9 requires broker-dealers in penny stocks to approve the
account of any investor for transactions in such stocks before
selling any penny stock to that investor. This procedure requires
the broker-dealer to (i) obtain from the investor information
concerning his or her financial situation, investment experience
and investment objectives; (ii) reasonably determine, based on that
information, that transactions in penny stocks are suitable for the
investor and that the investor has sufficient knowledge and
experience as to be reasonably capable of evaluating the risks of
penny stock transactions; (iii) provide the investor with a written
statement setting forth the basis on which the broker-dealer made
the determination in (ii) above; and (iv) receive a signed and
dated copy of such statement from the investor, confirming that it
accurately reflects the investor’s financial situation, investment
experience and investment objectives. Compliance with these
requirements may make it more difficult and time consuming for
holders of our common stock to resell their shares to third parties
or to otherwise dispose of them in the market or otherwise.
FINRA sales practice requirements may limit a
shareholder’s ability to buy and sell our common
shares.
In addition to the “penny stock” rules described above, FINRA has
adopted rules that require that in recommending an investment to a
customer, a broker-dealer must have reasonable grounds for
believing that the investment is suitable for that customer. Prior
to recommending speculative low priced securities to their
non-institutional customers, broker-dealers must make reasonable
efforts to obtain information about the customer’s financial
status, tax status, investment objectives and other information.
Under interpretations of these rules, FINRA believes that there is
a high probability that speculative low priced securities will not
be suitable for at least some customers. FINRA requirements make it
more difficult for broker-dealers to recommend that their customers
buy our common shares, which may limit your ability to buy and sell
our stock and have an adverse effect on the market for our
shares. In addition, there are a limited number of clearing
houses that clear “penny stocks” and those that will clear such
stocks may enforce internal time consuming administrative
requirements and may arbitrarily determine to refuse to clear any
stock.
Rule 144 sales in the future may have a depressive effect on
the company’s stock price as an increase in supply of
shares for sale, with no corresponding increase in demand will
cause prices to fall.
All of the outstanding shares of common stock held by the present
officers, directors, and affiliate stockholders are “restricted
securities” within the meaning of Rule 144 under the Securities Act
of 1933, as amended. As restricted shares, these shares may be
resold only pursuant to an effective registration statement or
under the requirements of Rule 144 or other applicable exemptions
from registration under the Securities Act of 1933 and as required
under applicable state securities laws. Rule 144 provides in
essence that a person who is an affiliate or officer or director
who has held restricted securities for six months may, under
certain conditions, sell every three months, in brokerage
transactions, a number of shares that does not exceed the greater
of 1.0% of a Company’s issued and outstanding common stock. There
is no limit on the amount of restricted securities that may be sold
by a non-affiliate after the owner has held the restricted
securities for a period of six months if the Company is a current
reporting company under the Securities Exchange Act of 1934. The
Company, as of the date of this report, not current in its filings
but is making efforts to bring the filings current. A sale under
Rule 144 or under any other exemption from the Securities Act of
1933, if available, or pursuant to subsequent registration of
shares of common stock of present stockholders, may have a
depressive effect upon the price of the common stock in any market
that may develop. In addition, if we are deemed a shell company
pursuant to Section 12(b)-2 of the Act, our “restricted
securities”, whether held by affiliates or non-affiliates, may not
be re-sold for a period of 12 months following the filing of a Form
10 level disclosure or registration pursuant to the Securities Act
of 1933. Currently, we are not current in our report and the
exemption to registration required pursuant to Rule 144 is
unavailable to our shareholders. While we intend to bring our
filings current to permit the use of the exemption to registration
required pursuant to Rule 144, there can be no assurances as to
timing and subsequent continued filings.
Failure to achieve and maintain effective internal controls
in accordance with section 404 of the Sarbanes-Oxley Act could have
a material adverse effect on our business and operating
results.
It is time consuming, difficult and costly for us to develop and
maintain the internal controls, processes and reporting procedures
required by the Sarbanes-Oxley Act, and as our business develops,
we may need to hire additional financial reporting, internal
auditing and other finance staff in order to remain compliant. The
cost of compliance will adversely affect our financial results,
while, if we are unable to comply, we may not be able to obtain the
independent accountant certifications that the Sarbanes-Oxley Act
requires of publicly traded companies.
If we fail to comply in a timely manner with the requirements of
Section 404 of the Sarbanes-Oxley Act regarding internal control
over financial reporting or to remedy any material weaknesses in
our internal controls that we may identify, such failure could
result in material misstatements in our financial statements, cause
investors to lose confidence in our reported financial information
and have a negative effect on the trading price of our common
stock.
Pursuant to Section 404 of the Sarbanes-Oxley Act and current SEC
regulations, we are required to prepare assessments regarding
internal controls over financial reporting and furnish a report by
our management on our internal control over financial reporting.
Failure to achieve and maintain an effective internal control
environment or complete our Section 404 certifications could have a
material adverse effect on our stock price.
In addition, in connection with our on-going assessment of the
effectiveness of our internal control over financial reporting, we
may discover “material weaknesses” in our internal controls as
defined in standards established by the Public Company Accounting
Oversight Board, or the PCAOB. A material weakness is a significant
deficiency, or combination of significant deficiencies, that
results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not
be prevented or detected. The PCAOB defines “significant
deficiency” as a deficiency that results in more than a remote
likelihood that a misstatement of the financial statements that is
more than inconsequential will not be prevented or detected.
In the event that a material weakness is identified, upon receiving
sufficient financing or generating sufficient revenues, we will
employ qualified personnel and adopt and implement policies and
procedures to address any such material weaknesses. However, the
process of designing and implementing effective internal controls
is a continuous effort that requires us to anticipate and react to
changes in our business and the economic and regulatory
environments and to expend significant resources to maintain a
system of internal controls that is adequate to satisfy our
reporting obligations as a public company. We cannot assure you
that the measures we will take will remediate any material
weaknesses that we may identify or that we will implement and
maintain adequate controls over our financial process and reporting
in the future.
Any failure to complete our assessment of our internal control over
financial reporting, to remediate any material weaknesses that we
may identify or to implement new or improved controls, or
difficulties encountered in their implementation, could harm our
operating results, cause us to fail to meet our reporting
obligations or result in material misstatements in our financial
statements. Any such failure could also adversely affect the
results of the periodic management evaluations of our internal
controls and, in the case of a failure to remediate any material
weaknesses that we may identify, would adversely affect the annual
auditor attestation reports regarding the effectiveness of our
internal control over financial reporting that are required under
Section 404 of the Sarbanes-Oxley Act. Inadequate internal controls
could also cause investors to lose confidence in our reported
financial information, which could have a negative effect on the
trading price of our common stock.
The systems of internal controls and procedures that we have
developed and implemented to date are adequate in a research and
development business. The current transaction volume and limited
transaction channels mean that operating management, financial
management, board members and auditor can, and do, efficiently
perform a very extensive and detailed transaction review to ensure
compliance with the Company’s established procedures and controls.
If our business grows rapidly, we may not be able to keep up with
recruiting and training personnel, and enhancing our systems of
internal control in line with the growth in transaction volumes and
compliance risks which could result in loss of assets, profit, and
ability to manage the daily operations of our Company.
Public disclosure requirements and compliance with changing
regulation of corporate governance pose challenges for our
management team and result in additional expenses and costs which
may reduce the focus of management and the profitability of our
company.
Changing laws, regulations and standards relating to corporate
governance and public disclosure, including the Dodd-Frank Wall
Street Reform and Consumer Protection Act and the rules and
regulations promulgated thereunder, the Sarbanes-Oxley Act and SEC
regulations, have created uncertainty for public companies and
significantly increased the costs and risks associated with
accessing the U.S. public markets. Our management team will need to
devote significant time and financial resources to comply with both
existing and evolving standards for public companies, which will
lead to increased general and administrative expenses and a
diversion of management time and attention from revenue generating
activities to compliance activities.
COVID-19.
The outbreak of the coronavirus may negatively impact our
ability to provide services as well as consumer spending, which
could adversely affect our business, results of operations and
financial condition.
In December 2019, a novel strain of coronavirus was reported to
have surfaced in Wuhan, China, which has and is continuing to
spread throughout China and other parts of the world, including the
United States. On January 30, 2020, the World Health Organization
declared the outbreak of the coronavirus disease (COVID-19) a
“Public Health Emergency of International Concern.” On January 31,
2020, U.S. Health and Human Services Secretary Alex M. Azar II
declared a public health emergency for the United States to aid the
U.S. healthcare community in responding to COVID-19, and on March
11, 2020 the World Health Organization characterized the outbreak
as a “pandemic”. The significant outbreak of COVID-19 has resulted
in a widespread health crisis that could adversely affect the
economies and financial markets worldwide, and could adversely
affect our business, results of operations and financial
condition.
We cannot, at this point, determine the extent to which COVID-19
outbreak will impact business or the economy as both are highly
uncertain and cannot be predicted. The ability of to provide
services that adhere to COVID protocals and how long the pandemic
lasts, will have a direct impact on the scope and duration of the
services we provide, even once the pandemic subsides. This factor,
coupled with the possibility of economic recession or runaway
inflation, could have a deleterious impact on proceeds from
services for a significant period that could negatively impact our
revenues. Additionally, there is a risk that government responses
to thwart the spread of the virus, in the form of local or regional
quarantine or shelter-in-place orders, could require temporary
curtailment of operations.
The global impact of COVID-19 and actions taken to reduce
its spread continues to rapidly evolve and we will continue to
monitor the situation and the effects on our business and
operations closely. We do not yet know the full extent of potential
impacts on our business or operations or on the global economy as a
whole, particularly if the COVID-19 pandemic continues
and persists for an extended period of time. The length of time it
may take for global vaccine distribution and more normal economic
and operating conditions to resume remains uncertain and the
economic recovery period could continue for a prolonged period even
after the health risks of the pandemic subside. Given the
uncertainty, we cannot reasonably estimate the impact on our future
results of operations, cash flows or financial condition. To the
extent the ongoing COVID-19 pandemic adversely affects
our business and results of operations, it may also have the effect
of heightening many of the other risks and uncertainties described
in this “Risk Factors” section of this prospectus.
THE OUTBREAK OF COVID-19 HAS RESULTED IN A WIDESPREAD HEALTH CRISIS
THAT COULD ADVERSELY AFFECT THE ECONOMIES AND FINANCIAL MARKETS
WORLDWIDE AND COULD EXPONENTIALLY INCREASE THE RISK FACTORS
DESCRIBED HEREIN AND IN OUR PRIOR FILINGS.
IN ADDITION TO THE RISKS LISTED ABOVE, BUSINESSES ARE OFTEN SUBJECT
TO RISKS NOT FORESEEN OR FULLY APPRECIATED BY THE MANAGEMENT. IT IS
NOT POSSIBLE TO FORESEE ALL RISKS THAT MAY AFFECT THE COMPANY.
MOREOVER, THE COMPANY CANNOT PREDICT WHETHER THE COMPANY WILL
SUCCESSFULLY EFFECTUATE THE COMPANY'S CURRENT BUSINESS PLAN. EACH
PROSPECTIVE PURCHASER IS ENCOURAGED TO CAREFULLY ANALYZE THE RISKS
AND MERITS OF AN INVESTMENT IN THE SECURITIES AND SHOULD TAKE INTO
CONSIDERATION WHEN MAKING SUCH ANALYSIS, AMONG OTHER FACTORS, THE
RISK FACTORS DISCUSSED ABOVE.
DETERMINATION OF OFFERING PRICE
This Offering is a self-underwritten offering, which means that it
does not involve the participation of an underwriter to market. Our
Offering Price is arbitrary with no relation to value of the
Company.
DILUTION
The term 'dilution' refers to the reduction (as a percentage of the
aggregate Shares outstanding) that occurs for any given share of
stock when additional Shares are issued. If all of the Shares in
this Offering are fully subscribed and sold, the Shares offered
herein will constitute approximately 36.47% of the total Shares of
stock of the Company. Because The Company anticipates that
subsequent to this Offering the Company may require additional
capital and such capital may take the form of Common Stock, other
stock or securities or debt convertible into stock. Such future
fund raising will further dilute the percentage ownership of the
Shares sold herein in the Company.
If you purchase shares in this Offering, your ownership interest in
our Common Stock will be diluted immediately, to the extent of the
difference between the price to the public charged for each share
in this Offering and the net tangible book value per share of our
Common Stock after this Offering.
Our historical net tangible book value (total stockholders’
deficit) as of June 30, 2021 was $(11,886,270) or $(0.0273) per
share based on 456,217,501 outstanding shares of our Common Stock
outstanding on August 24, 2021. Historical net tangible book value
per share equals the amount of our total tangible assets, less
total liabilities, divided by the total number of shares of our
Common Stock outstanding, all as of the date specified.
The following table illustrates the per share dilution to new
investors discussed above, assuming the sale of 100% of the shares
offered for sale in this Offering at the Maximum Offering Price
(before deducting estimated offering expenses of $25,000):
|
Percentage of shares offered that are sold
|
|
100% |
|
| |
|
|
|
|
|
Price to the public charged for each share in this Offering
|
|
$ |
0.01 |
|
| |
|
|
|
|
|
Historical net tangible book value per share (1)
|
|
$ |
(0.0273 |
) |
| |
|
|
|
|
|
Increase in net tangible book value per share attributable to new
investors in this Offering (2)
|
|
$ |
0.0136 |
|
| |
|
|
|
|
|
Net tangible book value per share, after this Offering
|
|
$ |
(0.0137 |
) |
| |
|
|
|
|
|
Dilution per share to new investors
|
|
$ |
0.0237 |
|
| |
(1)
|
Based on net tangible shareholders equity book value as of June 30,
2021 of $(11,886,270) or ($0.0273) based on 456,217,501 outstanding
shares of Common Stock on August 24, 2021.
|
| |
(2)
|
Before deducting estimated offering expenses of $25,000.
|
There is no material disparity between the price of the Shares in
this Offering and the effective cash cost to officers, directors,
promoters and affiliated persons for shares acquired by them in a
transaction during the past year, or that they have a right to
acquire.
The following table illustrates the per share dilution to new
investors discussed above, assuming the sale of, respectively,
100%, 75%, 50% and 25% of the Shares offered for sale in this
Offering (after deducting our offering expenses):
|
|
|
100%
|
|
|
75%
|
|
|
50%
|
|
|
25%
|
|
|
Funding Level
|
|
$ |
2,500,000 |
|
|
$ |
1,875,000 |
|
|
$ |
1,250,000 |
|
|
$ |
625,000 |
|
|
Offering Price
|
|
$ |
0.01 |
|
|
$ |
0.01 |
|
|
$ |
0.01 |
|
|
$ |
0.01 |
|
|
Net tangible book value per share of Common Stock before this
Offering
|
|
$ |
(0.0273 |
) |
|
$ |
(0.0273 |
) |
|
$ |
(0.0273 |
) |
|
$ |
(0.0273 |
) |
|
Increase in net tangible book value per share attributable to new
investors in this Offering
|
|
$ |
0.0136 |
|
|
$ |
0.0112 |
|
|
$ |
0.0083 |
|
|
$ |
0.0047 |
|
|
Net tangible book value per share of Common Stock, after this
Offering
|
|
$ |
(0.0137 |
) |
|
$ |
(0.0161 |
) |
|
$ |
(0.0190 |
) |
|
$ |
(0.0227 |
) |
|
Dilution to investors in the Offering
|
|
$ |
0.0237 |
|
|
$ |
0.0261 |
|
|
$ |
0.0290 |
|
|
$ |
0.0327 |
|
PLAN OF DISTRIBUTION
We are offering a Maximum Offering of up to 250,000,000 in Shares
of our Common Stock for $0.01 per share, for a total of up to
$2,500,000. The offering is being conducted on a best-efforts basis
without any minimum number of shares or amount of proceeds required
to be sold. There is no minimum subscription amount required (other
than a per investor minimum purchase) to distribute funds to the
Company. The Company will not initially sell the Shares through
commissioned broker-dealers, but may do so after the commencement
of the offering. Any such arrangement will add to our expenses in
connection with the offering. If we engage one or more commissioned
sales agents or underwriters, we will supplement this Form 1-A to
describe the arrangement. Subscribers have no right to a return of
their funds. The Company may terminate the offering at any time for
any reason at its sole discretion, and may extend the Offering past
the termination date of 365 days from the date of qualification by
the Commission in the absolutely discretion of the Company and in
accordance with the rules and provisions of Regulation A of the
JOBS Act. None of the Shares being sold in this Offering are being
sold by existing securities holders.
After the Offering Statement has been qualified by the Securities
and Exchange Commission (the “SEC”), the Company will accept
tenders of funds to purchase the Shares. No escrow agent is
involved and the Company will receive the proceeds directly from
any subscription. You will be required to complete a subscription
agreement in order to invest.
Our officers and directors are not statutorily disqualified, are
not being compensated, and are not associated with a broker-dealer.
They are and will continue to hold their positions as officers or
directors following the completion of the Offering and have not
been during the past 12 months and are currently not brokers or
dealers or associated with brokers or dealers. They have not nor
will they participate in the sale of securities of any issuer more
than once every 12 months.
All subscription agreements and checks received by the Company for
the purchase of shares are irrevocable until accepted or rejected
by the Company and should be delivered to the Company as provided
in the subscription agreement. A subscription agreement executed by
a subscriber is not binding on the Company until it is accepted on
our behalf by the Company’s Chief Executive Officer or by specific
resolution of our board of directors. Any subscription not accepted
within 30 days will be automatically deemed rejected. Once
accepted, the Company will deliver a stock certificate to a
purchaser within five days from request by the purchaser;
otherwise, purchasers’ shares will be noted and held on the book
records of the Company.
At this time no broker-dealer registered with the SEC and a member
of the Financial Industry Regulatory Authority (“FINRA”), is being
engaged as an underwriter or for any other purpose in connection
with this Offering. This Offering will commence on the
qualification of this Offering Circular, as determined by the
Securities and Exchange Commission and continue for a period of 365
days. The Company may extend the Offering for an additional time
period unless the Offering is completed or otherwise terminated by
us, or unless we are required to terminate by application of
Regulation A of the JOBS Act. Funds received from investors will be
counted towards the Offering only if the form of payment, such as a
check or wire transfer, clears the banking system and represents
immediately available funds held by us prior to the termination of
the subscription period, or prior to the termination of the
extended subscription period if extended by the Company.
If you decide to subscribe for any Common Stock in this Offering,
you must deliver a funds for acceptance or rejection. The minimum
investment amount for a single investor is a principal amount of
$25,000 equal to 2,500,000 Shares of Common Stock at the offering
price. All subscription checks should be sent to the following
address:
U.S. Stem Cell, Inc.
1560 Sawgrass Corporate Pkwy, 4th FL
Sunrise, Florida 33323
In such case, subscription checks should be made payable to U.S.
Stem Cell, Inc. If a subscription is rejected, all funds will be
returned to subscribers within ten days of such rejection without
deduction or interest. Upon acceptance by the Company of a
subscription, a confirmation of such acceptance will be sent to the
investor. The Company maintains the right to accept or reject
subscriptions in whole or in part, for any reason or for no reason.
The Company maintains the right to accept subscriptions below the
minimum investment amount or minimum per share investment amount in
its discretion. All monies from rejected subscriptions will be
returned by the Company to the investor, without interest or
deductions.
This is an offering made under “Tier II” of Regulation A, and the
shares will not be listed on a registered national securities
exchange upon qualification but are listed on the OTC Markets OTCQB
market. For non-accredited investors, the shares will be sold only
to a person if the aggregate purchase price paid by such person is
no more than 10% of the greater of such person's annual income or
net worth, not including the value of his primary residence, as
calculated under Rule 501 of Regulation D promulgated under Section
4(a)(2) of the Securities Act of 1933, as amended. In the case of
sales to fiduciary accounts (Keogh Plans, Individual Retirement
Accounts (IRAs) and Qualified Pension/Profit Sharing Plans or
Trusts), the above suitability standards must be met by the
fiduciary account, the beneficiary of the fiduciary account, or by
the donor who directly or indirectly supplies the funds for the
purchase of the shares. Investor suitability standards in certain
States may be higher than those described in this Form 1-A and/or
Offering Circular. These standards represent minimum suitability
requirements for prospective investors, and the satisfaction of
such standards does not necessarily mean that an investment in the
Company is suitable for such persons. Different rules apply to
accredited investors.
Each investor must represent in writing that he/she/it meets the
applicable requirements set forth above and in the Subscription
Agreement, including, among other things, that (i) he/she/it is
purchasing the shares for his/her/its own account and (ii)
he/she/it has such knowledge and experience in financial and
business matters that he/she/it is capable of evaluating without
outside assistance the merits and risks of investing in the shares,
or he/she/it and his/her/its purchaser representative together have
such knowledge and experience that they are capable of evaluating
the merits and risks of investing in the shares. Broker-dealers and
other persons participating in the offering must make a reasonable
inquiry in order to verify an investor's suitability for an
investment in the Company. Transferees of the shares will be
required to meet the above suitability standards.
The shares may not be offered, sold, transferred, or delivered,
directly or indirectly, to any person who (i) is named on the list
of “specially designated nationals” or “blocked persons” maintained
by the U.S. Office of Foreign Assets Control (“OFAC”) at
www.ustreas.gov/offices/enforcement/ofac/sdn or as otherwise
published from time to time, (ii) an agency of the government of a
Sanctioned Country, (iii) an organization controlled by a
Sanctioned Country, or (iv) is a person residing in a Sanctioned
Country, to the extent subject to a sanctions program administered
by OFAC. A “Sanctioned Country” means a country subject to a
sanctions program identified on the list maintained by OFAC and
available at www.ustreas.gov/offices/enforcement/ofac/sdn or as
otherwise published from time to time. Furthermore, the shares may
not be offered, sold, transferred, or delivered, directly or
indirectly, to any person who (i) has more than fifteen percent
(15%) of its assets in Sanctioned Countries or (ii) derives more
than fifteen percent (15%) of its operating income from investments
in, or transactions with, sanctioned persons or Sanctioned
Countries.
The sale of other securities of the same class as those to be
offered for the period of distribution will be limited and
restricted to those sold through this Offering. Because the Shares
being sold are not publicly or otherwise traded, the market for the
securities offered is presently stabilized.
OTC Markets Considerations
The OTC Markets is separate and distinct from the New York Stock
Exchange and Nasdaq stock market or other national exchange.
Neither the New York Stock Exchange nor Nasdaq has a business
relationship with issuers of securities quoted on the OTC Markets.
The SEC’s order handling rules, which apply to New York Stock
Exchange and Nasdaq-listed securities, do not apply to securities
quoted on the OTC Markets.
Although other national stock markets have rigorous listing
standards to ensure the high quality of their issuers and can
delist issuers for not meeting those standards; the OTC Markets has
no listing standards. Rather, it is the market maker who chooses to
quote a security on the system, files the application, and is
obligated to comply with keeping information about the issuer in
its files.
Investors may have greater difficulty in getting orders filled than
if we were on Nasdaq or other exchanges. Trading activity in
general is not conducted as efficiently and effectively on OTC
Markets as with exchange-listed securities. Also, because OTC
Markets stocks are usually not followed by analysts, there may be
lower trading volume than New York Stock Exchange and Nasdaq-listed
securities.
USE OF PROCEEDS TO ISSUER
The Use of Proceeds is an estimate based on the Company's current
business plan. We may find it necessary or advisable to reallocate
portions of the net proceeds reserved for one category to another,
or to add additional categories, and we will have broad discretion
in doing so.
The maximum gross proceeds from the sale of the Shares in this
Offering are $2,500,000. The net proceeds from the offering,
assuming it is fully subscribed, are expected to be approximately
$2,475,000 after the payment of offering costs such as printing,
mailing, marketing, legal and accounting costs, and other
compliance and professional fees that may be incurred. The estimate
of the budget for offering costs is an estimate only and the actual
offering costs may differ from those expected by management.
Management of the Company has wide latitude and discretion in the
use of proceeds from this Offering. Ultimately, management of the
Company intends to use substantially all of the net proceeds for
general working capital. At present, management's best estimate of
the use of proceeds, at various funding milestones, is set out in
the chart below. However, potential investors should note that this
chart contains only the best estimates of the Company's management
based upon information available to them at the present time, and
that the actual use of proceeds is likely to vary from this chart
based upon circumstances as they exist in the future, various needs
of the Company at different times in the future, and the discretion
of the Company's management at all times.
A portion of the proceeds from this Offering may be used to
compensate or otherwise make payments to officers or directors of
the issuer. The officers and directors of the Company may be paid
salaries and receive benefits that are commensurate with similar
companies, and a portion of the proceeds may be used to pay these
ongoing business expenses.
USE OF PROCEEDS
|
Offering Price: $0.01 per share
|
|
10%
|
|
|
25%
|
|
|
50%
|
|
|
75%
|
|
|
100%
|
|
|
Working Capital
|
|
$ |
187,500 |
|
|
$ |
468,750 |
|
|
$ |
937,500 |
|
|
$ |
1,406,250 |
|
|
$ |
1,875,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
$ |
62,500 |
|
|
$ |
156,250 |
|
|
$ |
312,500 |
|
|
$ |
468,750 |
|
|
$ |
625,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
250,000 |
|
|
$ |
625,000 |
|
|
$ |
1,250,000 |
|
|
$ |
1,875,000 |
|
|
$ |
2,500,000 |
|
As indicated in the table above, if we sell only 75%, or 50%, or
25% or 10% of the shares offered for sale in this Offering, we
would expect to use the resulting net proceeds for the same
purposes as we would use the net proceeds from a sale of 100% of
the shares, and in approximately the same proportions, until such
time as such use of proceeds would leave us without working capital
reserve. At that point we would expect to modify our use of
proceeds by limiting our expansion, leaving us with the working
capital reserve indicated.
The expected use of net proceeds from this Offering represents our
intentions based upon our current plans and business conditions,
which could change in the future as our plans and business
conditions evolve and change. The amounts and timing of our actual
expenditures, specifically with respect to working capital, may
vary significantly depending on numerous factors. The precise
amounts that we will devote to each of the foregoing items, and the
timing of expenditures, will vary depending on numerous factors. As
a result, our management will retain broad discretion over the
allocation of the net proceeds from this Offering.
In the event we do not sell all the shares being offered, we may
seek additional financing from other sources in order to support
the intended use of proceeds indicated above. If we secure
additional equity funding, investors in this Offering would be
diluted. In all events, there can be no assurance that additional
financing would be available to us when wanted or needed and, if
available, on terms acceptable to us.
The allocation of the use of proceeds among the categories of
anticipated expenditures represents management’s best estimates
based on the current status of the Company’s proposed operations,
plans, investment objectives, capital requirements, and financial
conditions. No assurances can be provided that any milestone
represented herein will be achieved. Future events, including
changes in economic or competitive conditions of our business plan
or the completion of less than the total Offering amount, may cause
the Company to modify the above-described allocation of proceeds.
The Company’s use of proceeds may vary significantly in the event
any of the Company’s assumptions prove inaccurate. We reserve the
right to change the allocation of net proceeds from the Offering as
unanticipated events or opportunities arise. Additionally, the
Company may from time to time need to raise more capital to address
future needs.
The Company reserves the right to change the use of proceeds set
out herein based on the needs of the ongoing business of the
Company and the discretion of the Company's management. The Company
may reallocate the estimated use of proceeds among the various
categories or for other uses if management deems such a
reallocation to be appropriate.
DESCRIPTION OF BUSINESS
Company Overview and Plan of Operation
U.S. Stem Cell, Inc. (“Company,” “We,” “Our,” “Us”) was
incorporated under the laws of the State of Florida in August 1999.
We are a biotechnology company focused on the discovery,
development and, subject to regulatory approval, commercialization
of autologous cell therapies for the treatment of disease and
injury. We are also a regenerative medicine company specializing in
physician/veterinary training and certification and stem cell
products.. Our lead cardiac product candidate is MyoCell™, an
innovative clinical therapy designed to populate regions of scar
tissue within a patient’s heart with autologous muscle cells, or
cells from a patient’s body, for the purpose of improving cardiac
function in chronic heart failure patients.
Biotechnology Product Candidates
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, distribution
of regenerative medicine 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 US
Stem Cell Clinic of the Villages, LLC is currently dormant.
U.S. Stem Cell’s comprehensive map of products and services:
U.S. Stem Cell, Inc. was incorporated in the State of Florida in
August 1999 as Bioheart, Inc. In 2015, we changed our name to U.S.
Stem Cell, Inc. Our principal executive offices are located at 1560
Sawgrass Corporate Pkwy, 4th FL, Sunrise, Florida 33323 and our
telephone number is (954) 835-1500. Information about us is
available on our corporate websites at www.us-stemcell.com,
www.usstemcelltraining.com, www.vetbiologics.com,
www.regenerativewellnessclinic.com and
www.usstemcellclinic.com. We include our website
addresses in this Offering Circular only as an interactive textual
reference and do not intend it to be an active link to our website.
The information on our websites is expressly not incorporated by
reference in this Offering Circular.
This Offering Circular includes the following trademarks, service
marks and trade names owned by the Company: U.S. Stem Cell, Inc. ™,
US Stem Cell Training, Vetbiologics, US Stem Cell Clinic, LLC. ™,
MyoCell ™ and Adipocell ™. These trademarks, service marks and
trade names are the property of U.S. Stem Cell, Inc. and its
affiliates.
Regenerative Medicine/Cell Therapy Industry
Regenerative medicine is defined as the process of replacing or
regenerating human cells, tissues or organs to restore normal
function. Among the categories of therapeutic technology platforms
within this field are cell therapy; tissue engineering; tools,
devices and diagnostics; and aesthetic medicine. U.S. Stem Cell’s
business model is focused on two of these areas. First, cell
therapy, in which we introduce cells (adult, donor or patient, stem
cell or differentiated) into the body to prevent and treat disease;
and second, we are a provider of services and products to
physicians and veterinaries who provide or seek to provide cellular
therapies and direct patient care for individuals and animals who
may benefit from cellular therapy.
All living complex organisms start as a single cell that
replicates, differentiates (matures) and perpetuates in an adult
organism through its lifetime. Cellular therapy is the process that
uses cells to prevent, treat or cure disease, or regenerate damaged
or aged tissue. To date, the most common type of cell therapy has
been the replacement of mature, functioning cells such as through
blood and platelet transfusions. Since the 1970s, first bone marrow
and then blood and umbilical cord-derived stem cells have been used
to restore bone marrow, as well as blood and immune system cells
damaged by the chemotherapy and radiation that are used to treat
many cancers. These types of cell therapies are standard practice
world-wide and are typically reimbursed by
insurance.
Within the field of cell therapy, research and development using
stem cells to treat a host of diseases and conditions has greatly
expanded. Stem cells (in either embryonic or adult forms) are
primitive and undifferentiated cells that have the unique ability
to transform into or otherwise affect many different cells, such as
white blood cells, nerve cells or heart muscle cells. U.S. Stem
Cell’s cell therapy development efforts are focused on the use of
adult stem cells; those cells which are found in the muscle, fat
tissue and peripheral blood.
There are two general classes of cell therapies: Patient Specific
Cell Therapies (“PSCTs”) and Off-the-Shelf Cell Therapies
(“OSCTs”). In PSCTs, cells collected from a person (“donor”) are
transplanted, with or without modification, to a patient
(“recipient”). In cases where the donor and the recipient are the
same individual, these procedures are referred to as “autologous”.
In cases in which the donor and the recipient are not the same
individual, these procedures are referred to as “allogeneic.”
Autologous cells offer a low likelihood of rejection by the patient
and we believe the long-term benefits of these PSCTs can best be
achieved with an autologous product. In the case of OSCT, donor
cells are expanded many fold in tissue culture, and large banks of
cells are frozen in individual aliquots that may result in
treatments, in our observation, for as many as 10,000 people from a
single donor tissue. By definition, OSCTs are always allogeneic in
nature.
Cellular Therapy Product Development Pipeline
Specific to cellular therapy, we are focused on the discovery,
development and commercialization of autologous cellular therapies
for the treatment of chronic and acute heart damage as well as
vascular and autoimmune diseases.
At present, our development pipeline is on hold.
Status of Cellular Therapy Product Development Clinical
Trials.
MyoCell/MyoCell SDF-1
MyoCell™ is a regenerative, cellular therapy intended to improve
cardiac function for those with congestive heart failure and is
designed to be utilized months or even years after a patient has
suffered severe heart damage due to a heart attack or other cause.
We believe that MyoCell has the potential to become a leading
treatment for severe, chronic damage to the heart due to its
perceived ability to satisfy, at least in part, what we believe to
be an unmet demand for more effective and/or more affordable
therapies for chronic heart damage. MyoCell™ uses myoblasts,
cells that are precursors to muscle cells, from the patient’s own
body. The myoblasts are removed from a patient’s thigh muscle,
isolated, grown through our proprietary cell culturing process, and
injected directly in the scar tissue of a patient’s heart. A
qualified physician performs this minimally invasive procedure
using an endoventricular catheter. We entered into an agreement
with Biosense Webster (a Johnson & Johnson company) to use its
NOGA® Cardiac Navigation System along with its MyoStar™ injection
catheter for the delivery of MyoCell™ in the MARVEL Trial.
When injected into scar tissue within the heart wall, myoblasts
have been shown to be capable of engrafting in the damaged tissue
and differentiating into mature skeletal muscle cells. In a number
of clinical and animal studies, the engrafted skeletal muscle cells
have been shown to express various proteins that are important
components of contractile function. By using myoblasts obtained
from a patient’s own body, we believe MyoCell™ is able to avoid
certain challenges currently faced by other types of cell-based
clinical therapies including tissue rejection and instances of the
cells differentiating into cells other than muscle. Although a
number of therapies have proven to improve the cardiac function of
a damaged heart, no currently available competing treatment, to our
knowledge, has demonstrated an ability to generate new muscle
tissue within the scarred regions of a heart as MyoCell™ has
demonstrated.
Our completed clinical trials of MyoCell™ to date have been
primarily targeted to patients with severe, chronic damage to the
heart, who are in Class II or Class III heart failure according to
the New York Heart Association, or NYHA, heart failure
classification system. The NYHA system classifies patients in one
of four categories based on how limited they are during physical
activity. NYHA Class II heart failure patients have a mild
limitation of activity and are generally comfortable at rest or
with mild exertion while NYHA Class III heart failure patients
suffer from a marked limitation of activity and are generally
comfortable only at rest.
We believe the market for treating patients in NYHA Class II or
NYHA Class III heart failure is significant. According to the
American Heart Association (“AHA”) Statistics and the European
Society of Cardiology Task Force for the Treatment of Chronic Heart
Failure, in the United States and Europe there are approximately
5.2 million and 9.6 million, respectively, patients with heart
failure. The AHA Statistics further indicate that, after heart
failure is diagnosed, the one-year mortality rate is high, with one
in five dying and that 80% of men and 70% of women under age 65 who
have heart failure will die within eight years.
We believe that approximately 60% of heart failure patients are in
either NYHA Class II or NYHA Class III heart failure based upon a
1999 study entitled “Congestive Heart Failure Due to Diastolic or
Systolic Dysfunction – Frequency and Patient Characteristics in an
Ambulatory Setting” by Diller, PM, et. al.
MyoCell SDF-1 is intended to be an improvement to MyoCell™. MyoCell
SDF-1 is similar to MyoCell but the myoblast cells to be injected
for use in MyoCell SDF-1 are modified prior to injection by an
adenovirus vector or non-viral vector so that they will release
extra quantities of the SDF-1 protein, which expresses angiogenic
factors.
Advancement of the MyoCell™ and MyoCell™ SDF-1 clinical development
programs is contingent, among many factors, upon the Company
obtaining access to sufficient funding to execute the necessary
clinical trials to achieve proof of efficacy and regulatory
authorization to market such products. No assurances can be
provided that such development programs will be realized.
Adipocell
Adipocell, a proprietary kit for the isolation of adipose derived
stem cells which, as of the date of this filing, is currently on
hold.
Business Strategy
U.S. Stem Cell’s 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.
A fundamental shift in venture capital investment strategies where,
management believes, financial sponsorship is now directed toward
commercial or near commercial enterprises has required U.S. Stem
Cell to adapt its mission combining immediate revenue generating
opportunities with longer-term development programs. Accordingly,
U.S. Stem Cell has developed a multifaceted portfolio of revenue
generating products and services in its US Stem Cell Training,
Vetbiologics, and US Stem Cell Clinic, 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 venture financings – a modern biotechnology
company development strategy.
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 the Company can
raise additional capital at a reasonable fair market value, the
Company 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.
US STEM CELL TRAINING
US Stem Cell Training offers a variety of courses for physicians
and other health care professionals. These courses include didactic
lecture series and hands-on clinical techniques in the field of
regenerative medicine. We are currently hosting these courses
throughout the United States and in multiple countries. These
courses are also available in an online format. Pricing currently
ranges from $500-$7,500 depending on the location and modules.
U.S. STEM CELL, INC.
U.S. Stem Cell markets several products to physicians for in clinic
regenerative medicine use. These products include equipment
(centrifuges, heating block, laminar hood, autoclave) for
laboratory use. We are also providing a variety of materials
necessary to obtain bone marrow including, trocars, syringes and
other supplies.
VETBIOLOGICS
Vetbiologics is focused on providing regenerative medicine
therapies to veterinarians for use in both small and large animals.
We provide a complete regenerative medicine package which includes
training, equipment and supplies necessary for in clinic cell
therapy. We sell kits for isolating stem cells from bone marrow and
fat. We also provide kits for isolating platelet rich plasma. The
kits include all of the disposables and reagents necessary.
Vetbiologics is also working on several off the shelf type products
including an allogeneic stem cell source.
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 royalty payment is recorded as deferred
revenue and amortized over the term of the agreement. The
carrying balance as of December 31, 2020 and 2019 was $62,500 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.
Patents and Proprietary Rights
We own or hold licenses or sublicenses to an intellectual property
portfolio consisting of numerous patents and patent
applications in the United States, and in foreign countries, for
use in the field of heart muscle regeneration. References in this
report to “our” patents and patent applications and other similar
references include the patents and patent applications that are
owned by us, and references to patents and patent applications that
are “licensed” to us and other similar references refer to patents,
patent applications and other intellectual property that are
licensed or sublicensed to us.
Patent life determination depends on the date of filing of the
application or the date of patent issuance and other factors as
promulgated under the patent laws. Under the U.S. Drug Price
Competition and Patent Term Restoration Act of 1984, as amended, a
patent which claims a product, use or method of manufacture
covering drugs and certain other products, including biologic
products, may be extended for up to five years to compensate the
patent holder for a portion of the time required for research and
FDA review of the product. Only one patent applicable to an
approved drug or biologic product is eligible for a patent term
extension. This law also establishes a period of time following
approval of a drug or biologic product during which the FDA may not
accept or approve applications for certain similar or identical
drugs or biologic products from other sponsors unless those
sponsors provide their own safety and efficacy data.
MyoCell™ is no longer protected by patents, which means that
competitors will be free to sell products that incorporate the same
or similar technologies that are used in MyoCell™ without
infringing our patent rights. As a result, MyoCell, if approved for
use, may be vulnerable to competition. In addition, many of the
patent and patent applications that have been licensed to us that
pertain to our other product candidates do not cover certain
countries within Europe.
Our commercial success will depend to a significant degree on our
ability to:
|
●
|
defend and enforce our patents and/or compel the owners of the
patents licensed to us to defend and enforce such patents, to the
extent such patents may be applicable to our products and material
to their commercialization;
|
|
●
|
obtain additional patent and other proprietary protection for
MyoCell™ and our other product candidates;
|
|
●
|
obtain and/or maintain appropriate licenses to patents, patent
applications or other proprietary rights held by others with
respect to our technology, both in the United States and other
countries; and
|
|
●
|
preserve company trade secrets and other intellectual property
rights relating to our product candidates; and operate without
infringing the patents and proprietary rights of third parties.
|
In addition to patented intellectual property, we also rely on our
own trade secrets and proprietary know-how to protect our
technology and maintain our competitive position, since patent
protection may not be available or applicable to our technology.
Our policy is to require each of our employees, consultants
and advisors to execute a confidentiality and inventions assignment
agreement before beginning their employment, consulting or advisory
relationship with us. The agreements generally provide that the
individual must keep confidential and not disclose to other parties
any confidential information developed or learned by the individual
during the course of the individual’s relationship with us except
in limited circumstances. These agreements generally also provide
that we shall own all inventions conceived by the individual in the
course of rendering services to us. Moreover, some of our academic
institution licensors, collaborators and scientific advisors have
rights to publish data and information to which we have rights,
which may impair our ability to protect our proprietary information
or obtain patent protection in the future.
We work with others in our research and development activities and
one of our strategies is to enter into collaborative agreements
with third parties to develop our proposed products. Disputes may
arise about inventorship and corresponding rights in know-how and
inventions resulting from the joint creation or use of intellectual
property by us and our licensors, collaborators, consultants and
others. In addition, other parties may circumvent any proprietary
protection we do have. As a result, we may not be able to maintain
our proprietary position.
We are not currently a party to any litigation or other adverse
proceeding challenging our patents, patent licenses or
intellectual property rights. However, if we become involved in
litigation or any other adverse intellectual property proceeding,
for example, as a result of an alleged infringement, or a third
party alleging an earlier date of invention, we may have to spend
significant amounts of money and time and, in the event of an
adverse ruling, we could be subject to liability for damages,
including treble damages, invalidation of our intellectual property
and injunctive relief that could prevent us from using technologies
or developing products, any of which could have a significant
adverse effect on our business, financial condition and results of
operation.
In addition, any claims relating to the infringement of third party
proprietary rights, or earlier date of invention, even if not
meritorious, could result in costly litigation, lengthy
governmental proceedings, divert management’s attention and
resources and require us to enter royalty or license agreements
which are not advantageous, if available at all.
See the Section on page 13 entitled “Risk Factors — Risks
Related to Our Intellectual Property” for a discussion of
additional risks we face with respect to our intellectual property
rights.
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 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.
DESCRIPTION
OF PROPERTY
Our headquarters are located in Sunrise, Florida which we currently
lease on a month-to-month basis at a monthly lease rate of $99.00.
We believe the space available at our headquarters will be
sufficient to meet the needs of our operations for the foreseeable
future.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Forward-Looking Statements
Certain statements, other than purely historical information,
including estimates, projections, statements relating to our
business plans, objectives, and expected operating results, and the
assumptions upon which those statements are based, are
forward-looking statements. These forward-looking statements
generally are identified by the words believes, project, expects,
anticipates, estimates, intends, strategy, plan, may, will, would,
will be, will continue, will likely result, and similar
expressions. Forward-looking statements are based on current
expectations and assumptions that are subject to risks and
uncertainties which may cause actual results to differ materially
from the forward-looking statements. Our ability to predict results
or the actual effect of future plans or strategies is inherently
uncertain. Factors which could have a material adverse effect on
our operations and future prospects on a consolidated basis
include, but are not limited to: changes in economic conditions,
legislative/regulatory changes, availability of capital, interest
rates, competition, and generally accepted accounting principles.
These risks and uncertainties should also be considered in
evaluating forward-looking statements and undue reliance should not
be placed on such statements.
The following discussion and analysis should be read in conjunction
with our financial statements and the related notes thereto and
other financial information contained elsewhere in this Form
1-A.
Our MD&A is comprised of significant accounting estimates made
in the normal course of its operations, overview of our business
conditions, results of operations, liquidity and capital resources
and contractual obligations. We did not have any off balance sheet
arrangements as of December 31, 2020 or 2019.
The discussion and analysis of our financial condition and results
of operations is based upon its financial statements, which have
been prepared in accordance with generally accepted accounting
principles generally accepted in the United States (or “GAAP”). The
preparation of those financial statements requires us to make
estimates and judgments that affect the reported amount of assets
and liabilities at the date of its financial statements. Actual
results may differ from these estimates under different assumptions
or conditions.
Results of
Operations
Year Ended December 31, 2020 Compared to Year Ended December
31, 2019.
Revenues
Our primary source of revenue is from the sale of test kits and
equipment, training services, patient treatments and laboratory
services, and cell banking. Our revenue may vary substantially
from quarter to quarter and from year to year. We believe that
period-to-period comparisons of our results of operations are not
meaningful and should not be relied upon as indicative of our
future performance. We do not expect to generate substantial
revenues until we obtain regulatory approval for and commercialize
our product candidates.
We recognized revenues of $277,087 in 2020 compared to revenues of
$3,072,293 in 2019. Our revenue in 2020 was generated from the sale
of test kits and equipment, training services, patient treatments
and laboratory services, and cell banking. Our revenues for 2019
were generated from the sale, test kits and equipment, training
services, patient treatments and laboratory services, and cell
banking. The decrease in revenue was a consequence of the
Court Order resulting from the FDA court case result.
Cost of Sales
Cost of sales consists of the costs associated with the production
of MyoCath and test kits, product costs, labor for production and
training and lab and banking costs consistent with products and
services provided.
Cost of sales was $64,117 in the year ended December 31, 2020
compared to $1,335,237 in the year ended December 31,
2019. The decrease is due to the decrease in
revenues.
Research and Development
Research and development expenses were $0 in 2020, a decrease of
$263 from research and development expenses of $263 in 2019. The
decrease was primarily attributable to a decrease in the amount of
available funds.
The timing and amount of our planned research and development
expenditures is dependent on our ability to obtain additional
financing.
Selling, General and Administrative
Selling, general and administrative expenses were $2,613,211 in
2020, a decrease of $1,841,501 in selling, general and
administrative expenses of $4,454,712 in 2019. The decrease is due
to reduced operations due to the Court order.
Gain (loss) on settlement of debt
During the year ended December 31, 2020, we recognized a net gain
of $182 primarily related to the settlement of accounts payable and
accrued interest. In 2019, we recognized a gain of $214,883
primarily related to the dissolved GACP transaction and divestiture
of assets.
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 $386,536
which we will recognize to operations over the term of the lease
(36 months). During the year ended December 31, 2020, we recognized
$21,474 in current period operations as compared to $128,845 for
the previous year.
Income from equity investment
Our investment of a 49.9% 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 income (loss) from equity investments for the
period. For the year ended December 31, 2020 and 2019 our pro
rata share of income (loss) was $(23,539) and $117,318,
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 expense during the year ended December 31, 2020 was
$488,369 compared to $981,001 for the year ended December 31, 2019.
Interest expense primarily consists of interest incurred on the
principal amount of the Northstar loan, the Seaside National
Bank loan, the Capital Lease with GACP, accrued fees and interest
payable to the Guarantors, imputed interest on non-interest bearing
debt, the amortization of debt discounts and non-cash interest
incurred relating to our issued convertible notes payable. There
was nominal change in interest year over year.
On January 3, 2018, we renewed the loan with Seaside National Bank
and Trust extend the maturity date to May 18, 2020 all other terms
and conditions remain unchanged. On May 18, 2020, the Seaside loan
was turned into a Demand Note with no fixed maturity date but with
a re-documentation requirement every four years. The new
re-documentation deadline is May 2022.
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.
Three Months Ended June 30, 2021 as compared to the Three Months
Ended June 30, 2020.
Revenues
We recognized revenues of $35,442 for the three months ended June
30, 2021. These revenues were generated from the sales of
laboratory supplies and equipment, and services. We recognized
revenues of $39,654 for the three months ended June 30, 2020 from
the sale of MyoCath catheters, physician training, patient studies
and veterinary sales. Due to the Injunction, as described in Note
11- Government Claim in our financial statements, our revenue has
been impaired but for 2021 has moderately increased.
Cost of Sales
Cost of sales consists of the costs associated with the production
of MyoCath, laboratory supplies necessary for laboratory services,
physician course materials. Cost of sales were $13,677 and $16,877
in in the three-month periods ended June 30 2021 and 2020,
respectively. Associated gross margins were $21,765 (61.4%) and
$22,777 (46.0%) for the three months periods ended June 30 2021 and
2020, 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, 2021, the same as the research and development
expenses of $0 in the three-month period ended June 30, 2020.
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 $802,970 for
the three-month period ended June 30, 2021 compared to $491,358 for
the three-month period ended June 30, 2020, an increase of
$311,312. The increase in cost due to increase in activity in new
avenues of growth.
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, 2021, we incurred a net loss
of $45,995 primarily related to accounts payable and debt
restructured during the current period as compared to a net
aggregate loss of $5,387 for the same period last year.
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, 2021, our pro
rata share of its income (loss) was $0 as we divested the
assets in the first quarter of 2021. For the three month ended June
20, 2020 the pro rata share of income (loss) was $9,718. During the
last quarter of 2019 (and in early 2021 in the case of SCC), we
divested ourselves of our Member Interests in U.S. Stem Cell
Clinic, LLC and Regenerative Wellness Clinic, LLC , while and
US Stem Cell Clinic of the Villages, LLC is currently dormant.
Interest Expense
Interest expenses during the three months ended June 30, 2021 were
$166,994 compared to $104,993 for the three months ended June 30,
2020. 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, 2021 as compared to the Six Months
Ended June 30, 2020.
Revenues
We recognized revenues of $119,822 for the six months ended June
30, 2021. These revenues were generated from the sales of
laboratory supplies and equipment, and services. We recognized
revenues of $97,146 for the six months ended June 30, 2020 from the
sale of MyoCath catheters, physician training, sale of product and
services and veterinary division. Due to the Injunction, as
described in Note 11- Government Claim in our financial
statements, our revenue has been impaired but for 2021 has
moderately increased.
Cost of Sales
Cost of sales consists of the costs associated with the production
of MyoCath, laboratory supplies necessary for laboratory services,
physician course materials. Cost of sales were $29,198 and $34,974
in in the six-month periods ended June 30, 2021 and 2020,
respectively. Associated gross margins were $90,624 (75.6%) and
$62,172 (64.0%) for the six months periods ended June 30,
2021 and 2020 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, 2021, same as the six-month period
ended June 30, 2020. 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 $1,358,985 for
the six-month period ended June 30, 2021 compared to $1,028,893 for
the six-month period ended June 30, 2020, an increase of $330,092.
The increase in cost due to increase in activity in new avenues of
growth.
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, 2021, we incurred a net loss
of $(383,870) primarily related to accounts payable and debt
restructured during the current period as compared to a net
aggregate gain of $481 for the same period last year.
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, 2021, our pro rata
share of its income (loss) was $0 as we divested the assets
in the first quarter of 2021. For the six month ended June 20, 2020
the pro rata share of income (loss) was $9,718. During the last
quarter of 2019 (and in early 2021 in the case of SCC), we divested
ourselves of our Member Interests in U.S. Stem Cell Clinic,
LLC and Regenerative Wellness Clinic, LLC , while and US Stem
Cell Clinic of the Villages, LLC is currently dormant.
Interest Expense
Interest expenses during the six months ended June 30, 2021 were
$321,719 compared to $186,447 for the six months ended June 30,
2020. 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:
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our financial position and historical financial performance;
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arm’s length sales of our common stock;
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the development status of our product candidates;
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the business risks we face;
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vesting restrictions imposed upon the equity awards; and
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an evaluation and benchmark of our competitors; and
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prospects of a liquidity event.
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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.
Liquidity and Capital Resources
Net cash used in operating activities was $478,886 in 2020 as
compared to $1,210,994 of net cash used in operations in 2019. Our
net cash used in operations in 2020 resulted primarily from a net
loss of $2,890,493, partially offset by non-cash items including
related party notes payable issued for services rendered of
$1,119,615, stock-based compensation of $701,939 and interest and
amortization of debt discount of $447,380 as well as an increase in
accounts payable of $149,521.
In the six months ended June 30, 2021, we incurred negative cash
flow from operations of $635,233 and 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 year ended
December 31, 2020. Net cash provided by investing activities was $0
for the three-months ended March 31, 2021 represented proceeds from
our equity investment as compared to cash provided by investing
activities of $0 from our equity investments for the same period
last year. Net cash provided by investing activities was $0 for the
six-months ended June 30, 2021 represented proceeds from our equity
investment as compared to cash provided by investing activities of
$0 from our equity investments for the same period last year.
Financing Activities
Net cash provided by financing activities was $497,456 in the year
ended December 31, 2020 as compared to net cash used of $312,986 in
the year ended December 31, 2019. Our net cash provided by
financing activities in 2020 resulted primarily from proceeds of
$349,688 received from related party advances, $150,000 received
from the issuance of notes payable and $45,000 received from the
issuance of convertible notes payable, partially offset by
repayments of related party notes payable of 45,712.
Net cash provided in financing activities was an aggregate of
$754,625 in the six-month period ended June 30, 2021 as compared to
cash provided of $315,371 in the six-month period ended in June 30,
2020.
Existing Capital Resources and Future Capital
Requirements
Our MyoCell™ product candidate has not received regulatory approval
or generated any material revenues. We do not expect to generate
any material revenues or cash from sales of our MyoCell™ product
candidate until commercialization of MyoCell, 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. 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 December 31, 2020, we had cash and cash equivalents totaling
$18,570; our working capital deficit as of such date was
$10,759,372.
As of December 31, 2020, we had $8,346,367 in outstanding debt, net
of debt discount of $43,111.
At June 30, 2021, we had cash and cash equivalents totaling
$137,962. However, our working capital deficit as of such date was
$11,086,870.
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, 2021 and December 31, 2020, the remaining
carrying value of the note was $150,000. At June 30, 2021 and
December 31, 2020, accrued interest on the note was $5,779 and
$2,990, respectively
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
resulting from the FDA court case 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
As the Company continues to incur losses, achieving profitability
is dependent on achieving a level of revenues adequate to support
the Company's cost structure. The Company may never achieve
profitability, and unless and until it does, the Company will
continue to need to raise additional capital. Management intends to
fund future operations through additional private or public equity
offering and may seek additional capital through arrangements with
strategic partners of from other sources. There can be no
assurances, however, that additional funding will be available on
terms acceptable to the Company, or at all. Any equity financing
may be dilutive to existing shareholders.
Concentrations of Credit Risk
As of June 30, 2021, two customers represented 69% and 26%,
representing an aggregate of 85% of the Company’s accounts
receivable. As of December 31, 2020, two customers represented 50%
and 44% respectively, representing an aggregate of 94% of the
Company’s accounts receivable.
Off Balance Sheet Arrangements
As of June 30, 2021, there were no off balance sheet
arrangements.
Our Ability To Continue as a Going Concern
The Company’s management has evaluated whether there is substantial
doubt about the Company’s ability to continue as a going
concern and has determined that substantial doubt existed as
of the date of this Offering Circular. This determination was based
on the following factors, as of December 31, 2020, the Company had
cash on hand of $18,570 and a working capital deficit (current
liabilities in excess of current assets) of $10,759,372. During the
year ended December 31, 2020, the net loss was $2,890,493
and net cash used in operating activities was $478,886. As of
June 30, 2021, the Company had cash on hand of $137,962 and a
working capital deficit (current liabilities in excess of current
assets) of $11,086,870. During the six months ended June 30, 2021,
the net loss was $1,973,950 and net cash used in operating
activities was $635,233. 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 Order resulting from the FDA court case 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.
Critical Accounting Policies
We have identified the policies outlined below as critical to our
business operations and an understanding of our results of
operations. The list is not intended to be a comprehensive list of
all of our accounting policies. In many cases, the accounting
treatment of a particular transaction is specifically dictated by
accounting principles generally accepted in the United States, with
no need for management's judgment in their application. The impact
and any associated risks related to these policies on our business
operations is discussed throughout Management's Discussion and
Analysis of Financial Condition and Results of Operation where such
policies affect our reported and expected financial results. Note
that our preparation of the financial statements requires us to
make estimates and assumptions that affect the reported amount of
assets and liabilities, disclosure of contingent assets and
liabilities at the date of our financial statements, and the
reported amounts of revenue and expenses during the reporting
period. There can be no assurance that actual results will not
differ from those estimates.
While our critical accounting policies are described in our
financial statements appearing elsewhere in this Offering Circular,
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.
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.
Additional Company Matters
The Company has not filed for bankruptcy protection nor has it ever
been involved in receivership or similar proceedings.
Litigation
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 was
$27,350 as of June 30, 2021.
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. . The remaining
amount due under this settlement was $428,281 as of June 30,
2021.
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, 2021 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 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.
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.
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT
EMPLOYEES
Directors and Executive Officers
Set forth below is information regarding our current executive
officers and directors:
|
Miguel (Mike) Tomas
|
56
|
Director, President and Chief Executive Officer, Chief Financial
Officer
|
|
William P. Murphy, Jr., M.D.
|
97
|
Director, Chairman of the Board
|
|
Mark P. Borman
|
66
|
Director
|
|
Sheldon T. Anderson
|
70
|
Director
|
|
Greg Knutson
|
69
|
Director
|
Our Bylaws provide that we shall have that number of directors
determined by the majority vote of the board of directors.
Currently we have five directors. Each director will serve
until our next annual shareholder meeting. Directors are elected
for one-year terms. Our Board of Directors elects our officers at
the regular annual meeting of the Board of Directors following the
annual meeting of shareholders. Vacancies may be filled by a
majority vote of the remaining directors then in office. Our
directors and executive officers are as follows:
Executive Officers and Directors
Mike Tomas. Mike Tomas, President & CEO of U.S.
Stem Cell Inc, is considered by many in the industry as one of
the most experienced marketers and operating executives for
IT/Communications and Biotech/Life Sciences private equity and
venture groups portfolio companies. The son of a serial
entrepreneur, he spent nearly 20 years driving the evolution of
telecommunications technology in the U.S. and Mexico in leadership
roles ranging from sales, marketing, customer service,
telemarketing, engineering, and operations. Upon retiring as Chief
Marketing Officer of Avantel, MCI/Worldcom’s Global Ventures $1B
investment with Banamex (at the time, the largest bank in Latin
America), Mr. Tomás joined other former-MCI executives (including
MCI CEO Jerry Taylor) and helped form an integrated customer
communications software solution that was named on Red Herring
magazine’s “Top Ten to Watch” list.
Upon the successful sale of that company in 2001, Mr. Tomas helped
launch The ASTRI Group, an early-stage private equity investment
company providing capital, business development and strategic
marketing support to emerging private companies. Mr. Tomas sits on
the board of U.S. Stem Cell Inc. (adult stem cell development and
applications) and has sat on the boards of The IDEA Center (Miami
Dade College’s entrepreneurial institute), Career Source
Florida (appointed by Florida Governor Rick Scott to his statewide
workforce investment board) and is the past chairman of Florida
International University’s Global Entrepreneurship Center. Mr.
Tomas is an inductee into the Miami-Dade College and WACE Halls of
Fame for business, an FIU Torch Award winner--and winner of top
communications, medical innovations, education and entrepreneurial
awards. An avid athlete, Mr. Tomas was also a Miami-Dade County
Sports Commissioner.
William P. Murphy, Jr., M.D. Dr. Murphy has served
as a member of our Board of Directors since June 2003.
Dr. Murphy founded Small Parts, Inc., a supplier of high
quality mechanical components for design engineers, in 1964 and
served as its Chairman until his retirement in April 2005.
Small Parts, Inc. was acquired by Amazon.com, Inc. in
March 2005. From October 1999 until October 2004,
Dr. Murphy served as the Chairman and Chief Executive Officer
of Hyperion, Inc., a medical diagnosis company which had an
involuntary bankruptcy filed against it in December 2003.
Dr. Murphy is the founder of Cordis Corporation (now Cordis
Johnson & Johnson) which he led as President, Chairman and
Chief Executive Officer at various times during his 28 years
at Cordis until his retirement in October 1985. Cordis Johnson
& Johnson is a leading firm in cardiovascular
instrumentation.
Dr. Murphy received an M.D. in 1947 from the University of Illinois
and a B.S. in pre-medicine from Harvard College in 1946. He also
studied physiologic instrumentation at Massachusetts Institute of
Technology, or MIT. After a two year rotating internship at St.
Francis Hospital in Honolulu, he became a Research Fellow in
Medicine at the Peter Bent Brigham Hospital in Boston where he was
the dialysis engineer on the first clinical dialysis team in the
United States. He continued as an Instructor in Medicine and then a
research associate in Medicine at Harvard Medical School.
Dr. Murphy is the author of numerous papers and owns 17
patents.
He is the recipient of a number of honors, including the
prestigious Lemelson-MIT Lifetime Achievement Award, the MIT
Corporate Leadership Award, the Distinguished Service Award from
North American Society of Pacing and Electrophysiology, and the Jay
Malina Award from the Beacon Council of Miami, Florida. He is also
a member of the Inventors Hall of Fame.
Mark P. Borman. Mr. Borman has served as a member of the
Company’s Board of Directors since May 2009. He is a seasoned
financial officer with more than 30 years of broad-based financial
and investor relations experience. Mr. Borman brings small-company
entrepreneurial passion and larger-company disciplines. In addition
to the valuable experience he gained working with entrepreneurs and
their startups from 2009 to present, Mr. Borman has experience with
global, NASDAQ- and NYSE-listed companies in various executive and
financial roles. He is currently a board member with public and
private technology companies and serves on advisory and
non-profit boards. During his career, Mr. Borman has held positions
with ADC Telecommunications, General Instrument Corporation, First
Chicago Corporation, FMC Corporation, Price Waterhouse, and KPMG.
Mr. Borman received his B.A. in Accounting from Michigan State
University and his M.B.A. in Finance from the University of Chicago
Booth School of Business. He is an Audit Committee Financial
Expert under SEC rules, a Certified Public Accountant and Chartered
Financial Analyst. Mr. Borman is a Board Leadership Fellow and
member of the National Association of Corporate Directors.
Sheldon T. Anderson. Mr. Anderson is Chairman of the Florida
Advisory Board of Northern Trust Corporation. From 1992
through December 31, 2012, Mr. Anderson served in a variety of
executive capacities with Northern Trust Corporation, including his
most recent position as Chairman and Chief executive Officer
Southeast Region of Northern Trust Corporation. Mr. Anderson is the
Chair-elect of the Beacon Council, Miami-Dade County’s economic
development agency. He is a Board member of the Miami-Dade College
Foundation, Inc.; Museum of Contemporary Art (MOCA); the New World
Symphony; Baptist Health Systems Governing Board and Carrollton
School of the Sacred Heart. He is Past Chair and a member of the
Advisory Council of the United Way of Miami-Dade
County. Anderson is President of the Board of Cleveland
Orchestra Miami / Miami Music Association and also serves on the
Advisory Board of the University of Miami School of Law for
Ethics& Public Service. He is a member of the Orange Bowl
Committee and the President’s Council of Florida International
University. A Miami native, Sheldon holds a degree in
International Studies from Ohio State University.
Greg Knutson. Mr. Knutson founded Concrete Specialists,
Inc. in 1985 and continues to serve as its President. Mr. Knutson
founded Sunwood Properties in 2009 and continues to serve as its
President. Mr. Knutson founded G&G Land Development, LLC and
continues to serve as its Managing Partner. Mr. Knutson, a holder
of Member Interests in Northstar, was appointed as a Manager of
Northstar Biotech Group, LLC in late 2014.
Compensation of Directors and Executive Officers
On July 1, 2019, the Company’s Board of Directors approved the
2019/2020 salary for Mike Tomas, Chief Executive Officer, for
$750,000 per year, beginning July 1, 2019 with an incentive bonus
ranging from $150,000 to $500,000. In addition, the Board of
Directors approved a bonus of $500,000 and options to acquire
20,000,000 shares of the Company’s common stock for ten years with
four-year vesting and a cashless exercise provision. The cash bonus
may be paid in the form a six-month promissory note bearing
interest at 5% per annum. No compensatory package has been approved
for 2021.
Stock Incentive Plan
Stock Options
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.
Board of Directors
Our Board of Directors currently consists of five directors. [4 of
our directors are “independent” as defined in Rule 4200 of FINRA's
listing standards]. We may appoint additional independent directors
to our Board of Directors in the future, particularly to serve on
committees should they be established.
Audit Committee
The Board of Directors has a separately-designated standing Audit
Committee established in accordance with Section 3(a) (58) (A) of
the Exchange Act. The members of our Audit Committee are Mr.
Borman, who serves as Chairperson of the Audit Committee, Dr.
Murphy, and Mr. Anderson. Our Board of Directors has determined
that Mr. Borman qualifies as a “financial expert” as that term is
defined in the rules of the SEC implementing requirements of the
Sarbanes-Oxley Act of 2002.
Director Compensation
We currently do not pay our directors any compensation for their
services as board members, with the exception of reimbursing and
board related expenses. In the future, we may compensate directors,
particularly those who are not also employees and who act as
independent board members, on either a per meeting or fixed
compensation basis.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of the Exchange Act requires our directors and
executive officers, and persons who own more than ten percent (10%)
of our outstanding Common Stock, or the Reporting Persons, to file
with the SEC initial reports of ownership on Form 3 and reports of
changes in ownership of Common Stock on Forms 4 or 5. Such persons
are required by SEC regulation to furnish us with copies of all
such reports they file. Based solely on a review of Forms 3 and 4
furnished to us by the Reporting Persons or prepared on behalf of
the Reporting Persons by the Company, the Company believes that the
Reporting Persons have complied with reporting requirements
applicable to them.
Involvement in Certain Legal Proceedings
None of the following events have occurred during the past ten
years and are material to an evaluation of the ability or integrity
of any director or officer of the Company:
| |
1.
|
A petition under the Federal bankruptcy laws or any state
insolvency law was filed by or against, or a receiver, fiscal agent
or similar officer was appointed by a court for the business or
property of such person, or any partnership in which he was a
general partner at or within two years before the time of such
filing, or any corporation or business association of which he was
an executive officer at or within two years before the time of such
filing;
|
| |
2.
|
Such person was convicted in a criminal proceeding or is a named
subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses);
|
| |
3.
|
Such person was the subject of any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining him
from, or otherwise limiting, the following activities:
|
| |
|
a.
|
Acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person regulated by the
Commodity Futures Trading Commission, or an associated person of
any of the foregoing, or as an investment adviser, underwriter,
broker or dealer in securities, or as an affiliated person,
director or employee of any investment company, bank, savings and
loan association or insurance company, or engaging in or continuing
any conduct or practice in connection with such activity;
|
| |
|
b.
|
Engaging in any type of business practice; or
|
| |
|
c.
|
Engaging in any activity in connection with the purchase or sale of
any security or commodity or in connection with any violation of
Federal or State securities laws or Federal commodities laws;
|
| |
4.
|
Such person was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any Federal or
State authority barring, suspending or otherwise limiting for more
than 60 days the right of such person to engage in any activity
described in paragraph (f)(3)(i) of this section, or to be
associated with persons engaged in any such activity;
|
| |
5.
|
Such person was found by a court of competent jurisdiction in a
civil action or by the Commission to have violated any Federal or
State securities law, and the judgment in such civil action or
finding by the Commission has not been subsequently reversed,
suspended, or vacated;
|
| |
6.
|
Such person was found by a court of competent jurisdiction in a
civil action or by the Commodity Futures Trading Commission to have
violated any Federal commodities law, and the judgment in such
civil action or finding by the Commodity Futures Trading Commission
has not been subsequently reversed, suspended or vacated;
|
| |
7.
|
Such person was the subject of, or a party to, any Federal or State
judicial or administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated, relating to an alleged
violation of:
|
| |
|
a.
|
Any Federal or State securities or commodities law or regulation;
or
|
| |
|
b.
|
Any law or regulation respecting financial institutions or
insurance companies including, but not limited to, a temporary or
permanent injunction, order of disgorgement or restitution, civil
money penalty or temporary or permanent cease-and-desist order, or
removal or prohibition order; or
|
| |
|
c.
|
Any law or regulation prohibiting mail or wire fraud or fraud in
connection with any business entity; or
|
| |
8.
|
Such person was the subject of, or a party to, any sanction or
order, not subsequently reversed, suspended or vacated, of any
self-regulatory organization (as defined in Section 3(a)(26) of the
Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as
defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C.
1(a)(29)), or any equivalent exchange, association, entity or
organization that has disciplinary authority over its members or
persons associated with a member.
|
Code of Ethics
We have adopted a code of ethics that applies to our principal
executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions. Our code of ethics contains standards that are
reasonably designed to deter wrongdoing and to promote:
|
o
|
Honest and ethical conduct, including the ethical handling of
actual or apparent conflicts of interest between personal and
professional relationships;
|
|
o
|
Full, fair, accurate, timely, and understandable disclosure in
reports and documents that we file with, or submits to, the
Commission and in other public communications made by us;
|
|
o
|
Compliance with applicable governmental laws, rules and
regulations;
|
|
o
|
The prompt internal reporting of violations of the code to the
board of directors or another appropriate person or persons;
and
|
|
o
|
Accountability for adherence to the code.
|
Limitation of Liability and Indemnification of Officers and
Directors
Our Bylaws limit the liability of directors and officers of the
Company to the maximum extent permitted by Florida law. The Bylaws
state that the Company shall indemnify and hold harmless each
person who was or is a party or is threatened to be made a party
to, or is otherwise involved in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such
person is or was a director or an officer of the Company or such
director or officer is or was serving at the request of the Company
as a director, officer, partner, member, manager, trustee, employee
or agent of another company or of a partnership, limited liability
company, joint venture, trust or other enterprise.
The Company believes that indemnification under our Bylaws covers
at least negligence and gross negligence on the part of indemnified
parties. The Company also may secure insurance on behalf of any
officer, director, employee or other agent for any liability
arising out of his or her actions in connection with their services
to us, regardless of whether our Bylaws permit such
indemnification.
The Company may also enter into separate indemnification agreements
with its directors and officers, in addition to the indemnification
provided for in our Bylaws. These agreements, among other things,
may provide that we will indemnify our directors and officers for
certain expenses (including attorneys' fees), judgments, fines and
settlement amounts incurred by a director or executive officer in
any action or proceeding arising out of such person's services as
one of our directors or officers, or rendering services at our
request, to any of its subsidiaries or any other company or
enterprise. We believe that these provisions and agreements are
necessary to attract and retain qualified persons as directors and
officers.
There is no pending litigation or proceeding involving any of our
directors or officers as to which indemnification is required or
permitted, and we are not aware of any threatened litigation or
proceeding that may result in a claim for indemnification.
For additional information on indemnification and limitations on
liability of our directors and officers, please review the
Company's Bylaws, which are attached to this Offering Circular.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Summary Compensation Table
The following table sets forth, for the fiscal years ended
December 31, 2020 and 2019, the aggregate compensation awarded
to/earned by or paid to our Chief Executive Officer and our two
most highly compensated officers (other than the Chief Executive
Officer), who were serving as executive officers as of December 31,
2020, or the Named Executive Officers.
|
Name and
Principal
Position
|
|
Fiscal
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards ($)
|
|
|
|
Non-
Equity
Incentive Plan
Compensation
($)
|
|
|
Change in
Pension
Value
and Non-
Qualified
Deferred
Compensation
Earnings
($)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
|
Mike Tomas
CEO, President,
|
|
2020
|
|
$ |
1,305,837 |
|
|
$ |
500,000 |
(1) |
|
|
$ |
— |
|
|
$ |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,797,439 |
|
|
CFO and Director
|
|
2019
|
|
$ |
880,603 |
|
|
$ |
500,000 |
(2) |
|
|
$ |
— |
|
|
$ |
121,979 |
(3)(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,797,439 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,264,699 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,264,699 |
|
|
(1)
|
On July 1, 2020, Mr. Tomas received a $500,000 promissory note for
a bonus awarded. The promissory note bears 5%
interest per annum, is unsecured and is due on demand.
|
|
(2)
|
On July 1, 2019, Mr. Tomas received a $500,000 promissory note for
a bonus awarded. The promissory note bears 5%
interest per annum, is unsecured and is due on demand.
|
|
(3)
|
On September 1, 2019, Mr. Tomas was granted 20,000,000 options
to purchase the Company’s common stock at $0.00557 per share for
ten years, vesting over four years at each anniversary.
|
|
(4)
|
On November 18, 2019, Mr. Tomas was granted 1,500,000 options to
purchase the Company’s common stock at $0.00495 per share for ten
years, vesting immediately.
|
Employment Agreements
Employment Agreements
On July 1, 2019, the Company’s Board of Directors approved the
2019/2020 salary for Mike Tomas, Chief Executive Officer, for
$750,000 per year, beginning July 1, 2019 with an incentive bonus
ranging from $150,000 to $500,000. In addition, the Board of
Directors approved a bonus of $500,000 and options to acquire
20,000,000 shares of the Company’s common stock for ten years with
four-year vesting and a cashless exercise provision. The cash bonus
may be paid in the form a six-month promissory note bearing
interest at 5% per annum. On May 7, 2018, the Company’s Board of
Directors approved the 2018/2019 salary for Mike Tomas, Chief
Executive Officer, for $750,000 per year, beginning July 1, 2018
with an incentive bonus ranging from $150,000 to $500,000. In
addition, the Board of Directors approved a bonus of $500,000 and
options to acquire 20,000,000 shares of the Company’s common stock
for ten years with four-year vesting and a cashless exercise
provision. The cash bonus may be paid in the form a six-month
promissory note bearing interest at 5% per annum. No compensatory
package has been approved for 2021.
Outstanding Equity Awards at Fiscal Year End
The following table sets forth outstanding equity awards held by
our Named Executive Officers as of December 31, 2020
| |
|
Number of Securities Underlying
|
|
|
Option
|
|
Option
|
| |
|
Unexercised Options and Warrants
|
|
|
Exercise Price
|
|
Expiration
|
|
Name
|
|
Total (#)
|
|
|
Unexercisable (#)
|
|
|
($/per share)
|
|
Date
|
|
Mike Tomas
|
|
|
500
|
|
|
|
-
|
|
|
|
0.15402
|
|
8/12/2021
|
| |
|
|
500
|
|
|
|
-
|
|
|
|
0.15402
|
|
1/16/2022
|
| |
|
|
2,000
|
|
|
|
-
|
|
|
|
0.15402
|
|
8/6/2022
|
| |
|
|
10,000
|
|
|
|
-
|
|
|
|
0.15402
|
|
8/1/2023
|
| |
|
|
400
|
|
|
|
-
|
|
|
|
0.15402
|
|
9/1/2023
|
| |
|
|
10,800
|
|
|
|
-
|
|
|
|
0.15402
|
|
2/24/2024
|
| |
|
|
4,299
|
|
|
|
-
|
|
|
|
0.15402
|
|
5/12/2024
|
| |
|
|
10,000
|
|
|
|
-
|
|
|
|
0.15402
|
|
8/1/2024
|
| |
|
|
400
|
|
|
|
-
|
|
|
|
0.15402
|
|
11/3/2024
|
| |
|
|
291,885
|
|
|
|
-
|
|
|
|
0.15402
|
|
11/2/2025
|
| |
|
|
10,000
|
|
|
|
-
|
|
|
|
0.15402
|
|
11/2/2025
|
| |
|
|
11,500,000
|
|
|
|
-
|
|
|
|
0.01960
|
|
9/19/2026
|
| |
|
|
10,000,000
|
|
|
|
2,500,000
|
|
|
|
0.00430
|
|
2/6/2027
|
| |
|
|
16,500,000
|
|
|
|
3,750,000
|
|
|
|
0.03626
|
|
8/7/2027
|
| |
|
|
20,000,000
|
|
|
|
10,000,000
|
|
|
|
0.05360
|
|
5/7/2028
|
| |
|
|
1,500,000
|
|
|
|
-
|
|
|
|
0.02511
|
|
12/3/2028
|
| |
|
|
20,000,000
|
|
|
|
15,000,000
|
|
|
|
0.00557
|
|
9/1//2029
|
| |
|
|
1,500,000
|
|
|
|
-
|
|
|
|
0.00495
|
|
11/18/2029
|
Options Exercises and Stocks Vested
Options exercised and stocks vested as at December 31, 2020 are as
follows:
| |
|
Option awards
|
|
|
Stock awards
|
|
|
Name
|
|
Number of Shares
Acquired
on Exercise (#)
|
|
|
Value Realized
on Exercise ($)
|
|
|
Number of Shares
Acquired on
Vesting (#)
|
|
|
Value
Realized on
Investing ($)
|
|
|
Mike Tomas, CEO
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Grants of Plan-Based Awards
Grants of plan-based awards as at December 31, 2020 are as
follows:
|
|
|
Estimated future payouts
under non-equity incentive
plan awards
|
|
|
Estimated future payouts
under equity incentive
plan awards
|
|
|
All other stock
awards:
Number of shares of stock
or units
(#)
|
|
|
All other option
awards:
Number of securities underlying
options
(#)
|
|
|
Exercise or
base price
of option
awards
($/Sh)
|
|
|
Grant date
fair value
of stock and
option awards
|
|
|
Name
|
|
Grant
date
|
|
|
Threshold ($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
|
|
|
|
|
|
|
|
Mike Tomas, CEO
|
|
|
n/a
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Reference – Grant Date - n/a = not applicable.
Non-Qualified Deferred Compensation
As at December 31, 2020 the Company had no formalized deferred
compensation plan.
|
Name
|
|
Executive
contributions
in last FY ($)
|
|
|
Registrant
contributions in
last FY ($)
|
|
|
Aggregate
earnings in last
FY ($)
|
|
|
Aggregate
withdrawals/
distributions ($)
|
|
|
Aggregate
balance at last
FYE ($)
|
|
|
Mike Tomas, CEO
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Golden Parachute Compensation
As at December 31, 2020, the Company had no arrangements in place
relating to the termination of employees.
|
Name
|
|
Cash
($)
|
|
|
Equity
($)
|
|
|
Pension/NQDC
($)
|
|
|
Perquisites/benefits
($)
|
|
|
Tax
reimbursement
($)
|
|
|
Other
($)
|
|
|
Total
($)
|
|
|
Mike Tomas, CEO
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Compensation of Directors
The following table sets forth summary information concerning the
total compensation paid to our non-employee directors during the
fiscal year ended December 31, 2020 for services to our
company.
|
Name
|
|
Fees Earned
or Paid in
Cash ($)
|
|
|
Equity
Awards ($)
|
|
|
Total ($)
|
|
|
William P Murphy, Jr.
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Sheldon T. Andersen
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Mark Borman
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Gregory Knutson
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Total:
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Pension Benefits
As of December 31, 2020, the Company had no pension or retirement
plans.
|
Name
|
|
Plan name
|
|
Number of years
credited service
(#)
|
|
|
Present value of
accumulated benefit
($)
|
|
|
Payments during last
fiscal year ($)
|
|
|
Mike Tomas,CEO
|
|
not applicable
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Compensation Plan Information
The following table sets forth information as of December 31, 2020
for all compensation plans under the Company’s Stock Option
Plan:
|
Name
|
|
No. of
Shares of Common
Stock Underlying
Unexercised
Common Stock
Purchase Options
Exercisable (#)
|
|
Date of
Grant
|
|
Additional
Consideration
to be Received
Upon Exercise
or Material
Conditions
Required to
Exercise
|
|
|
Option
Exercise
Price ($)
|
|
|
Value
Realized if
Exercised ($)
|
|
Option
Expiration
Date
|
|
Mike Tomas, CEO
|
|
|
500
|
|
6/18/2010
|
|
$
|
—
|
|
|
$
|
0.15402
|
|
|
$
|
—
|
|
6/18/2020
|
| |
|
|
500
|
|
8/12/2011
|
|
|
—
|
|
|
|
0.15402
|
|
|
|
—
|
|
8/12/2021
|
| |
|
|
500
|
|
1/16/2012
|
|
|
—
|
|
|
|
0.15402
|
|
|
|
—
|
|
1/16/2022
|
| |
|
|
2,000
|
|
8/6/2012
|
|
|
—
|
|
|
|
0.15402
|
|
|
|
—
|
|
8/6/2022
|
| |
|
|
10,000
|
|
8/01/2013
|
|
|
—
|
|
|
|
0.15402
|
|
|
|
—
|
|
8/1/2023
|
| |
|
|
400
|
|
9/1/2013
|
|
|
—
|
|
|
|
0.15402
|
|
|
|
—
|
|
9/1/2023
|
| |
|
|
10,000
|
|
2/24/2014
|
|
|
—
|
|
|
|
0.15402
|
|
|
|
—
|
|
2/24/2024
|
| |
|
|
800
|
|
2/24/2014
|
|
|
—
|
|
|
|
0.15402
|
|
|
|
—
|
|
2/24/2024
|
| |
|
|
3,225
|
|
5/12/2014
|
|
|
—
|
|
|
|
0.15402
|
|
|
|
—
|
|
5/12/2014
|
| |
|
|
10,000
|
|
8/01/2014
|
|
|
—
|
|
|
|
0.15402
|
|
|
|
—
|
|
8/1/2024
|
| |
|
|
400
|
|
11/3/2014
|
|
|
—
|
|
|
|
0.15402
|
|
|
|
—
|
|
11/3/2024
|
| |
|
|
291,885
|
|
11/2/2015
|
|
|
—
|
|
|
|
0.15402
|
|
|
|
—
|
|
11/2/2025
|
| |
|
|
5,000
|
|
11/2/2015
|
|
|
—
|
|
|
|
0.15402
|
|
|
|
—
|
|
11/2/2025
|
| |
|
|
1,500,000
|
|
9/19/2016
|
|
|
—
|
|
|
|
0.01960
|
|
|
|
—
|
|
9/19/2026
|
| |
|
|
2,500,000
|
|
9/19/2016
|
|
|
—
|
|
|
|
0.01960
|
|
|
|
—
|
|
9/19/2026
|
| |
|
|
1,500,000
|
|
8/7/2017
|
|
|
—
|
|
|
|
0.03626
|
|
|
|
—
|
|
8/7/2027
|
| |
|
|
20,000,000
|
|
5/7/2018
|
|
|
—
|
|
|
|
0.05360
|
|
|
|
—
|
|
5/7/2028
|
| |
|
|
1,500,000
|
|
12/3/2018
|
|
|
—
|
|
|
|
0.02511
|
|
|
|
—
|
|
12/3/2028
|
| |
|
|
20,000,000
|
|
9/1/2019
|
|
|
—
|
|
|
|
0.00557
|
|
|
|
—
|
|
09/01/2029
|
| |
|
|
1,500,000
|
|
11/18/2019
|
|
|
—
|
|
|
|
0.00495
|
|
|
|
—
|
|
11/18/2029
|
Director Compensation
As of December 31, 2020, we had five directors that qualified for
compensation. Our non-employee directors do not receive cash
compensation for their services as directors. However, it is
generally our policy to annually grant each non-employee director
options to purchase shares of our common stock provided that he or
she has served as a member of our Board of Directors for at least
six months and one day of the twelve month period immediately
preceding the date of grant. Our one employee director, Mike Tomas,
is also granted director options to purchase shares of our common
stock In addition, we reimburse non-employee directors for
actual out-of-pocket expenses incurred.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN
SECURITYHOLDERS
The following table sets forth the beneficial ownership (1) of our
common stock as of June 30, 2021 based on an aggregate of
452,413,153 common shares issued, and 46,597,915 shares underlying
exercisable options, 7,384,398 issuable upon exercise of a
promissory note and 20,000 common stock purchase warrants, for an
aggregate of 506,415,466, for each of our greater than 5%
shareholders, directors, named executive officers that continue to
serve as executive officers of U.S. Stem Cell and by all of our
directors and named executive officers as a group as of June 30,
2021. Unless otherwise indicated, the address of each of the
individuals and entities named below is: c/o U.S. Stem Cell, Inc.,
1560 Sawgrass Corporate Parkway, 4th FL Sunrise FL 33323.
Except as noted below, to our knowledge, each person named in the
table has sole voting and investment power with respect to all
shares of our common stock beneficially owned by them.
The number and percentage of shares beneficially owned is
determined in accordance with Rule 13d-3 under the Exchange Act,
and the information is not necessarily indicative of beneficial
ownership for any other purpose. The Company believes that
each individual or entity named has sole investment and voting
power with respect to the securities indicated as beneficially
owned by them, subject to community property laws, where
applicable, except where otherwise noted. The “Amount of
Beneficial Ownership” in calculated based on total shares held
plus warrants held (plus stock options entitled to exercise).
The aggregate of these items will be used as the denominator
each for the percentage calculation below.
|
Name and Address of Beneficial Owner
|
|
Amount of Beneficial Ownership
|
|
|
|
Percent of Class
|
|
|
Mike Tomas, President, CEO, CFO, and Director
|
|
|
61,350,577 |
(1) |
|
|
|
13.5 |
% |
| |
|
|
|
|
|
|
|
|
|
|
William P. Murphy, Director**
|
|
|
18,448,262 |
(2) |
|
|
|
4.1 |
% |
| |
|
|
|
|
|
|
|
|
|
|
Mark P. Borman, Director
|
|
|
6,529,732 |
(3) |
|
|
|
1.4 |
% |
| |
|
|
|
|
|
|
|
|
|
|
Sheldon T. Anderson, Director
|
|
|
6,003,341 |
(4) |
|
|
|
1.3 |
% |
| |
|
|
|
|
|
|
|
|
|
|
Greg Knutson**
|
|
|
44,553,942 |
(5) |
|
|
|
9.8 |
% |
| |
|
|
|
|
|
|
|
|
|
|
All officers and directors as a group (5 persons)
|
|
|
136,885,854 |
(6) |
|
|
|
30.2 |
% |
| |
|
|
|
|
|
|
|
|
|
|
Northstar Biotechnology Group, LLC
|
|
|
35,494,544 |
(7) |
|
|
|
7.8 |
% |
|
(1)
|
Includes shares are held by The Astri Group over which Mr. Tomas
has shared voting and investment power and includes (i) includes
9,793 shares of common stock and (ii) 61,340,784 shares of common
stock issuable upon exercise of presently exercisable stock options
.
|
|
(2)
|
Includes (i) 12,445,322 shares of common stock and (ii) 6,002,940
shares of common stock issuable upon exercise of presently
exercisable stock options. Shares are directly owned by
trusts controlled by Dr. Murphy and his spouse.
|
|
(3)
|
Includes (i) 526,942 shares of common stock and (ii) 6,002,790
shares of common stock issuable upon exercise of presently
exercisable stock options
|
|
(4)
|
Includes (i) 1,941 shares of common stock and (ii) 6,001,400 shares
of common stock issuable upon exercise of presently exercisable
options.
|
|
(5)
|
Includes 1,675,000 shares held directly, 35,474,544 shares of
common stock held by Northstar Biotechnology Group, LLC, an entity
in which Mr. Knutson is the Manger, and 7,384,398 issuable upon
exercise of a promissory note and 20,000 common stock purchase
warrants held by Northstar Biotechnology Group, LLC, an entity in
which Mr. Knutson is the Manger.
|
|
(6)
|
Includes an aggregate of (i) 47,040,823 shares of common stock and
(ii) 46,597,915 shares underlying exercisable options, 7,384,398
issuable upon exercise of a promissory note and 20,000 common stock
purchase warrants.
|
|
(7)
|
Includes 35,474,544 shares of common stock and (ii) 20,000
shares of common stock issuable upon exercise of warrants.
|
DESCRIPTION OF SECURITIES
The following statements relating to the capital stock set forth
the material terms of our securities; however, reference is made to
the more detailed provisions of, and such statements are qualified
in their entirety by reference to, the Certificate of
Incorporation, amendment to the Certificate of Incorporation and
the By-laws, copies of which are filed as exhibits to this
registration statement.
COMMON STOCK
The holders of our Common Stock are entitled to one vote per share
on all matters to be voted on by our stockholders, including the
election of directors. Our stockholders are not entitled to
cumulative voting rights, and, accordingly, the holders of a
majority of the shares voting for the election of directors can
elect the entire board of directors if they choose to do so and, in
that event, the holders of the remaining shares will not be able to
elect any person to our board of directors.
On February 4, 2013, effective with the filing of the amendment to
the Company’s Articles of Incorporation with the Florida Secretary
of State (confirmed as filed on February 11, 2013), the Company
amended its Articles of Incorporation to increase the authorized
shares of capital stock of the Company to nine hundred and seventy
million (970,000,000) shares of capital stock consisting of nine
hundred and fifty million (950,000,000) shares of common stock and
twenty million (20,000,000) shares of preferred stock, both $.001
par value respectively.
Effective May 22, 2014, the Company amended its articles of
incorporation to increase the authorized shares of capital stock of
the Company from nine hundred and fifty million (950,000,000)
shares of common stock and twenty million (20,000,000) shares of
preferred stock, both $.001 par value respectively, to two billion
(2,000,000,000) shares of shares of common stock and twenty million
(20,000,000) shares of preferred stock, both $.001 par value
respectively.
On October 12, 2015, the Company filed an amendment to its Articles
of Incorporation and affected a 1-for-1,000 reverse stock
split of its issued and outstanding shares of common stock, $0.001
par value, and effective November 19, 2015. The Financial Industry
Regulatory Authority (“FINRA”) declared the ex-dividend date for
the dividend date as November 4, 2015 (the “2015 Reverse
Split”).
The holders of the Company’s Common Stock are entitled to receive
ratably such dividends, if any, as may be declared from time to
time by the board of directors, in its discretion, from funds
legally available there for and subject to prior dividend rights of
holders of any shares of our Preferred Stock which may be
outstanding and any contractual limitations. Upon the Company’s
liquidation, dissolution or winding up, subject to prior
liquidation rights of the holders of our Preferred Stock, if any,
the holders of our Common Stock are entitled to receive on a pro
rata basis our remaining assets available for distribution. Holders
of the Company’s Common Stock have no preemptive or other
subscription rights, and there are no conversion rights or
redemption or sinking fund provisions with respect to such shares.
All outstanding shares of the Company’s Common Stock are, fully
paid and not liable to further calls or assessment by the
Company.
Preferred Stock
The Company is authorized to issue 20,000,000 shares of preferred
stock, par value $0.001. The designations, rights, and preferences
of such preferred stock are to be determined by the Board of
Directors. Subsequently and prior to the 2015 “Reverse Split”,
20,000,000 shares were designated as Series A Preferred Stock.
The Series A Preferred Stock collectively has voting rights equal
to 25 votes on all matters presented to be voted by the holders of
common stock per share of preferred stock and the right to convert
to one share of common stock for each share of preferred stock.
Northstar Biotechnology Group, LLC was issued, prior to the 2015
“Reverse Split” , an aggregate of 20,000,000 shares of Series A
Preferred Stock which were converted to common stock pursuant to a
Settlement Agreement dated March 1, 2017. As of the date of
this report, no shares of preferred stock are issued and
outstanding.
DIVIDENDS
Dividends, if any, will be contingent upon our revenues and
earnings, if any, capital requirements and financial conditions.
The payment of dividends, if any, will be within the discretion of
our Board of Directors. We presently intend to retain all earnings,
if any, for use in its business operations and accordingly, the
Board of Directors does not anticipate declaring any dividends
prior to a business combination.
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN
TRANSACTIONS
As of June 30, 2021 and December 31, 2020, 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, 2021 and 2020, the Company received aggregate proceeds
from advances of $30,000 and $155,904, respectively. As of June 30,
2021 and December 31, 2020, the Company owed $891,432 and $861,432,
respectively, for related party advances.
Notes Payable – Related 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”).
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.
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.
On October 1, 2020, the Company issued 2,035,820 shares of its
common stock, having a fair value of $10,179, in lieu of payment in
cash of accrued and unpaid interest of $9,195, resulting in a loss
on settlement of $984.
On April 1, 2021, the Company issued 187,575 shares of its common
stock, having a fair value of $10,879, in lieu of payment in cash
of accrued and unpaid interest of $9,145, resulting in a loss on
settlement of $1,735.
As of June 30, 2021 and December 31, 2020, the remaining carrying
value of the note was $262,000. At June 30, 2021 and December 31,
2020, accrued interest on the note was $8,700 and $8,751,
respectively, 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.
As of March 31, 2021 and December 31, 2020, 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 March 31, 2021 and December 31, 2020, 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 March
31, 2021 and December 31, 2020, the remaining carrying value of the
note was $500,000.
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 March 31, 2021
and December 31, 2020, 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 March 31, 2021
and December 31, 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 March 31, 2021
and December 31, 2020, the remaining carrying value of the note was
$187,500.
On July 1, 2020, the Company issued a $500,000 promissory note as
payment of an annual bonus awarded. The promissory note bears
interest of 5% per annum and is due on demand. As of March 31, 2021
and December 31, 2020, the remaining carrying value of the note was
$500,000.
On September 30, 2020, the Company issued a $100,962 promissory
note in exchange for compensation earned. The promissory note bears
interest of 5% per annum and is due on demand. As of March 31, 2021
and December 31, 2020, the remaining carrying value of the note was
$100,962.
On December 31, 2020, the Company issued a $143,654 promissory note
in exchange for compensation earned. The promissory note bears
interest of 5% per annum and is due on demand. As of March 31, 2021
and December 31, 2020, the remaining carrying value of the note was
$143,654.
On June 30, 2021, the Company issued a $43,269 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, 2021,
the remaining carrying value of the note was $43,269.
At June 30, 2021 and December 31, 2021, accrued interest on the
notes was $544,584 and $482,468, respectively, and is included in
accrued expenses on the accompanying balance sheet.
| |
|
June 30,
2021
|
|
|
December 31,
2020
|
|
|
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
|
|
|
|
187,500
|
|
|
Note payable, Mr. Tomas
|
|
|
187,500
|
|
|
|
187,500
|
|
|
Note payable, Mr. Tomas
|
|
|
500,000
|
|
|
|
500,000
|
|
|
Note payable, Mr. Tomas
|
|
|
100,962
|
|
|
|
100,962
|
|
|
Note payable, Mr. Tomas
|
|
|
143,654
|
|
|
|
143,653
|
|
|
Note payable, Mr. Tomas
|
|
|
90,990
|
|
|
|
-
|
|
|
Note payable, Mr. Tomas
|
|
|
43,269
|
|
|
|
-
|
|
|
Total notes payable - related parties
|
|
$
|
2,855,738
|
|
|
$
|
2,721,478
|
|
Notes Payable - William P. Murphy Jr., M.D
On February 26, 2021, Dr. Murphy purchased an unsecured convertible
promissory notes in the aggregate principal amount of $200,000 that
mature 12 months after the respective issuance date. The note was
non-interest bearing and Dr. Murphy retained 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 of $0.0266. On
April 8, 2021, Dr Murphy converted the full value of the note into
7,518,797 shares of the Company’s common stock.
SECURITIES BEING OFFERED
The Company is offering Shares of its Common Stock. Except as
otherwise required by law, the Company's Articles of Incorporation
or Bylaws, each Shareholder shall be entitled to one vote for each
Share held by such Shareholder on the record date of any vote of
Shareholders of the Company. The Shares of Common Stock, when
issued, will be fully paid and non-assessable. Since it is
anticipated that at least for the next 12 months the majority of
the Company's voting power will be held by Management, the holders
of Common Stock issued pursuant to this Offering Circular should
not expect to be able to influence any decisions by management of
the Company through the voting power of such Common Stock.
The Company does not expect to create any additional classes of
Common Stock during the next 12 months, but the Company is not
limited from creating additional classes which may have preferred
dividend, voting and/or liquidation rights or other benefits not
available to holders of its common stock.
The Company does not expect to declare dividends for holders of
Common Stock in the foreseeable future. Dividends will be declared,
if at all (and subject to rights of holders of additional classes
of securities, if any), in the discretion of the Company's Board of
Directors. Dividends, if ever declared, may be paid in cash, in
property, or in shares of the capital stock of the Company, subject
to the provisions of law, the Company's Bylaws and the Certificate
of Incorporation. Before payment of any dividend, there may be set
aside out of any funds of the Company available for dividends such
sums as the Board of Directors, in its absolute discretion, deems
proper as a reserve for working capital, to meet contingencies, for
equalizing dividends, for repairing or maintaining any property of
the Company, or for such other purposes as the Board of Directors
shall deem in the best interests of the Company.
There is no minimum number of Shares that needs to be sold in order
for funds to be released to the Company and for this Offering to
hold its first closing.
The minimum subscription that will be accepted from an investor is
$250.00 for the purchase of 8,334 Shares at the Maximum Offering
Price (the 'Minimum Subscription').
A subscription for $250.00 or more in the Shares may be made only
by tendering to the Company the executed Subscription Agreement
(electronically or in writing) delivered with the subscription
price in a form acceptable to the Company, via check, wire, credit
or debit card, or ACH. The execution and tender of the documents
required, as detailed in the materials, constitutes a binding offer
to purchase the number of Shares stipulated therein and an
agreement to hold the offer open until the Expiration Date or until
the offer is accepted or rejected by the Company, whichever occurs
first.
The Company reserves the unqualified discretionary right to reject
any subscription for Shares, in whole or in part. The Company
reserves the unqualified discretionary right to accept any
subscription for Shares, in an amount less than the Minimum
Subscription. If the Company rejects any offer to subscribe for the
Shares, it will return the subscription payment, without interest
or reduction. The Company's acceptance of your subscription will be
effective when an authorized representative of the Company issues
you written or electronic notification that the subscription was
accepted.
There are no liquidation rights, preemptive rights, conversion
rights, redemption provisions, sinking fund provisions, impacts on
classification of the Board of Directors where cumulative voting is
permitted or required related to the Common Stock, provisions
discriminating against any existing or prospective holder of the
Common Stock as a result of such Shareholder owning a substantial
amount of securities, or rights of Shareholders that may be
modified otherwise than by a vote of a majority or more of the
shares outstanding, voting as a class defined in any corporate
document as of the date of filing. The Common Stock will not be
subject to further calls or assessment by the Company. There are no
restrictions on alienability of the Common Stock in the corporate
documents other than those disclosed in this Offering Circular. The
Company has engaged Transfer Online to serve as the transfer agent
and registrant for the Shares. For additional information regarding
the Shares, please review the Company's Bylaws, which are attached
to this Offering Circular.
Excepting matters arising under federal securities laws, any
disputes between the Company and shareholders shall be governed in
reliance on the laws of the state of Florida. Furthermore, the
Subscription Agreement for this Regulation A offering appoints the
state and federal courts located in Sunrise, Florida as having
jurisdiction over any disputes related to this Regulation A
offering between the Company and shareholders.
DISQUALIFYING EVENTS DISCLOSURE
Recent changes to Regulation A promulgated under the Securities Act
prohibit an issuer from claiming an exemption from registration of
its securities under such rule if the issuer, any of its
predecessors, any affiliated issuer, any director, executive
officer, other officer participating in the offering of the
interests, general partner or managing member of the issuer, any
beneficial owner of 20% or more of the voting power of the issuer's
outstanding voting equity securities, any promoter connected with
the issuer in any capacity as of the date hereof, any investment
manager of the issuer, any person that has been or will be paid
(directly or indirectly) remuneration for solicitation of
purchasers in connection with such sale of the issuer's interests,
any general partner or managing member of any such investment
manager or solicitor, or any director, executive officer or other
officer participating in the offering of any such investment
manager or solicitor or general partner or managing member of such
investment manager or solicitor has been subject to certain
“Disqualifying Events” described in Rule 506(d)(1) of Regulation D
subsequent to September 23, 2013, subject to certain limited
exceptions. The Company is required to exercise reasonable care in
conducting an inquiry to determine whether any such persons have
been subject to such Disqualifying Events and is required to
disclose any Disqualifying Events that occurred prior to September
23, 2013 to investors in the Company. The Company believes that it
has exercised reasonable care in conducting an inquiry into
Disqualifying Events by the foregoing persons and is aware of the
no such Disqualifying Events.
It is possible that (a) Disqualifying Events may exist of which the
Company is not aware and (b) the SEC, a court or other finder of
fact may determine that the steps that the Company has taken to
conduct its inquiry were inadequate and did not constitute
reasonable care. If such a finding were made, the Company may lose
its ability to rely upon exemptions under Regulation A, and,
depending on the circumstances, may be required to register the
Offering of the Company's Common Stock with the SEC and under
applicable state securities laws or to conduct a rescission offer
with respect to the securities sold in the Offering.
ERISA CONSIDERATIONS
Trustees and other fiduciaries of qualified retirement plans or
IRAs that are set up as part of a plan sponsored and maintained by
an employer, as well as trustees and fiduciaries of Keogh Plans
under which employees, in addition to self-employed individuals,
are participants (together, “ERISA Plans”), are governed by the
fiduciary responsibility provisions of Title 1 of the Employee
Retirement Income Security Act of 1974 (“ERISA”). An investment in
the Shares by an ERISA Plan must be made in accordance with the
general obligation of fiduciaries under ERISA to discharge their
duties (i) for the exclusive purpose of providing benefits to
participants and their beneficiaries; (ii) with the same standard
of care that would be exercised by a prudent man familiar with such
matters acting under similar circumstances; (iii) in such a manner
as to diversify the investments of the plan, unless it is clearly
prudent not do so; and (iv) in accordance with the documents
establishing the plan. Fiduciaries considering an investment in the
Shares should accordingly consult their own legal advisors if they
have any concern as to whether the investment would be inconsistent
with any of these criteria.
Fiduciaries of certain ERISA Plans which provide for individual
accounts (for example, those which qualify under Section 401(k) of
the Code, Keogh Plans and IRAs) and which permit a beneficiary to
exercise independent control over the assets in his individual
account, will not be liable for any investment loss or for any
breach of the prudence or diversification obligations which results
from the exercise of such control by the beneficiary, nor will the
beneficiary be deemed to be a fiduciary subject to the general
fiduciary obligations merely by virtue of his exercise of such
control. On October 13, 1992, the Department of Labor issued
regulations establishing criteria for determining whether the
extent of a beneficiary's independent control over the assets in
his account is adequate to relieve the ERISA Plan's fiduciaries of
their obligations with respect to an investment directed by the
beneficiary. Under the regulations, the beneficiary must not only
exercise actual, independent control in directing the particular
investment transaction, but also the ERISA Plan must give the
participant or beneficiary a reasonable opportunity to exercise
such control, and must permit him to choose among a broad range of
investment alternatives.
Trustees and other fiduciaries making the investment decision for
any qualified retirement plan, IRA or Keogh Plan (or beneficiaries
exercising control over their individual accounts) should also
consider the application of the prohibited transactions provisions
of ERISA and the Code in making their investment decision. Sales
and certain other transactions between a qualified retirement plan,
IRA or Keogh Plan and certain persons related to it (e.g., a
plan sponsor, fiduciary, or service provider) are prohibited
transactions. The particular facts concerning the sponsorship,
operations and other investments of a qualified retirement plan,
IRA or Keogh Plan may cause a wide range of persons to be treated
as parties in interest or disqualified persons with respect to it.
Any fiduciary, participant or beneficiary considering an investment
in Shares by a qualified retirement plan IRA or Keogh Plan should
examine the individual circumstances of that plan to determine that
the investment will not be a prohibited transaction. Fiduciaries,
participants or beneficiaries considering an investment in the
Shares should consult their own legal advisors if they have any
concern as to whether the investment would be a prohibited
transaction.
Regulations issued on November 13, 1986, by the Department of Labor
(the “Final Plan Assets Regulations”) provide that when an ERISA
Plan or any other plan covered by Code Section 4975 (e.g., an IRA
or a Keogh Plan which covers only self-employed persons) makes an
investment in an equity interest of an entity that is neither a
“publicly offered security” nor a security issued by an investment
company registered under the Investment Company Act of 1940, the
underlying assets of the entity in which the investment is made
could be treated as assets of the investing plan (referred to in
ERISA as “plan assets”). Programs which are deemed to be operating
companies or which do not issue more than 25% of their equity
interests to ERISA Plans are exempt from being designated as
holding “plan assets.” Management anticipates that we would clearly
be characterized as an “operating” for the purposes of the
regulations, and that it would therefore not be deemed to be
holding “plan assets.”
Classification of our assets of as “plan assets” could adversely
affect both the plan fiduciary and management. The term “fiduciary”
is defined generally to include any person who exercises any
authority or control over the management or disposition of plan
assets. Thus, classification of our assets as plan assets could
make the management a “fiduciary” of an investing plan. If our
assets are deemed to be plan assets of investor plans, transactions
which may occur in the course of its operations may constitute
violations by the management of fiduciary duties under ERISA.
Violation of fiduciary duties by management could result in
liability not only for management but also for the trustee or other
fiduciary of an investing ERISA Plan. In addition, if our assets
are classified as “plan assets,” certain transactions that we might
enter into in the ordinary course of our business might constitute
“prohibited transactions” under ERISA and the Code.
Under Code Section 408(i), as amended by the Tax Reform Act of
1986, IRA trustees must report the fair market value of investments
to IRA holders by January 31 of each year. The Service has not yet
promulgated regulations defining appropriate methods for the
determination of fair market value for this purpose. In addition,
the assets of an ERISA Plan or Keogh Plan must be valued at their
“current value” as of the close of the plan's fiscal year in order
to comply with certain reporting obligations under ERISA and the
Code. For purposes of such requirements, “current value” means fair
market value where available. Otherwise, current value means the
fair value as determined in good faith under the terms of the plan
by a trustee or other named fiduciary, assuming an orderly
liquidation at the time of the determination. We do not have an
obligation under ERISA or the Code with respect to such reports or
valuation although management will use good faith efforts to assist
fiduciaries with their valuation reports. There can be no
assurance, however, that any value so established (i) could or will
actually be realized by the IRA, ERISA Plan or Keogh Plan upon sale
of the Shares or upon liquidation of us, or (ii) will comply with
the ERISA or Code requirements.
The income earned by a qualified pension, profit sharing or stock
bonus plan (collectively, “Qualified Plan”) and by an individual
retirement account (“IRA”) is generally exempt from taxation.
However, if a Qualified Plan or IRA earns “unrelated business
taxable income” (“UBTI”), this income will be subject to tax to the
extent it exceeds $1,000 during any fiscal year. The amount of
unrelated business taxable income in excess of $1,000 in any fiscal
year will be taxed at rates up to 36%. In addition, such unrelated
business taxable income may result in a tax preference, which may
be subject to the alternative minimum tax. It is anticipated that
income and gain from an investment in the Shares will not be taxed
as UBTI to tax exempt shareholders, because they are participating
only as passive financing sources.
Transfer Agent
Our transfer agent is Continental Stock Transfer & Trust
Company, One State Street, 30th Floor, New York, NY 10004. Our
transfer agent is registered with the Securities and Exchange
Commission.
DIVIDEND POLICY
Subject to preferences that may be applicable to any
then-outstanding shares of Preferred Stock, if any, and any other
restrictions, holders of Common Stock are entitled to receive
ratably those dividends, if any, as may be declared from time to
time by our board of directors out of legally available funds. We
and our predecessors have not declared any dividends in the past.
Further, we do not presently contemplate that there will be any
future payment of any dividends on Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been a limited market for our
Common Stock on the OTC Markets. Future sales of substantial
amounts of our Common Stock, or securities or instruments
convertible into our Common Stock, in the public market, or the
perception that such sales may occur, could adversely affect the
market price of our Common Stock prevailing from time to time.
Furthermore, because there will be limits on the number of shares
available for resale shortly after this Offering due to contractual
and legal restrictions described below, there may be resales of
substantial amounts of our Common Stock in the public market after
those restrictions lapse. This could adversely affect the market
price of our Common Stock prevailing at that time.
Upon completion of this Offering, assuming the maximum amount of
shares of Common Stock offered in this Offering are sold, there
will be 706,217,501shares of our Common Stock outstanding.
Rule 144
In general, a person who has beneficially owned restricted shares
of our Common Stock for at least twelve months, in the event we are
a reporting company under Regulation A, or at least six months, in
the event we have been a reporting company under the Exchange Act
for at least 90 days before the sale, would be entitled to sell
such securities, provided that such person is not deemed to be an
affiliate of ours at the time of sale or to have been an affiliate
of ours at any time during the 90 days preceding the sale. A person
who is an affiliate of ours at such time would be subject to
additional restrictions, by which such person would be entitled to
sell within any three-month period only a number of shares that
does not exceed the greater of the following:
| |
•
|
1% of the number of shares of our Common Stock then outstanding;
or
|
| |
•
|
the average weekly trading volume of our Common Stock during the
four calendar weeks preceding the filing by such person of a notice
on Form 144 with respect to the sale;
|
provided that, in each case, we are subject to the periodic
reporting requirements of the Exchange Act for at least 90 days
before the sale. Rule 144 trades must also comply with the manner
of sale, notice and other provisions of Rule 144, to the extent
applicable.
INVESTOR ELIGIBILITY STANDARDS
ADDITIONAL INFORMATION ABOUT THE OFFERING
Investment Limitations
Generally, no sale may be made to you in this Offering if the
aggregate purchase price you pay is more than 10% of the greater of
your annual income or net worth (please see below on how to
calculate your net worth). Different rules apply to accredited
investors and non-natural persons. Before making any representation
that your investment does not exceed applicable thresholds, we
encourage you to review Rule 251(d)(2)(i)(C) of Regulation A+. For
general information on investing, we encourage you to refer to
www.investor.gov.
Because this is a Tier 2, Regulation A+ offering, most investors
must comply with the 10% limitation on investment in the Offering.
The only investor in this Offering exempt from this limitation is
an “accredited investor” as defined under Rule 501 of Regulation D
under the Securities Act. If you meet one of the following tests
you should qualify as an accredited investor:
| |
(i)
|
You are a natural person who has had individual income in excess of
$200,000 in each of the two most recent years, or joint income with
your spouse in excess of $300,000 in each of these years, and have
a reasonable expectation of reaching the same income level in the
current year;
|
| |
|
|
| |
(ii)
|
You are a natural person and your individual net worth, or joint
net worth with your spouse, exceeds $1,000,000 at the time you
purchase Shares (please see below on how to calculate your net
worth);
|
| |
|
|
| |
(iii)
|
You are an executive officer or general partner of the issuer or a
manager or executive officer of the general partner of the
issuer;
|
| |
|
|
| |
(iv)
|
You are an organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended, or the Code, a
corporation, a Massachusetts or similar business trust or a
partnership, not formed for the specific purpose of acquiring the
Shares, with total assets in excess of $5,000,000;
|
| |
(v)
|
You are a bank or a savings and loan association or other
institution as defined in the Securities Act, a broker or dealer
registered pursuant to Section 15 of the Exchange Act, an insurance
company as defined by the Securities Act, an investment company
registered under the Investment Company Act of 1940 (Investment
Company Act), or a business development company as defined in that
act, any Small Business Investment Company licensed by the Small
Business Investment Act of 1958 or a private business development
company as defined in the Investment Advisers Act of 1940;
|
| |
(v)
|
You are an entity (including an Individual Retirement Account
trust) in which each equity owner is an accredited
|
| |
|
|
| |
(vii)
|
You are a trust with total assets in excess of $5,000,000, your
purchase of Shares is directed by a person who either alone or with
his purchaser representative(s) (as defined in Regulation D
promulgated under the Securities Act) has such knowledge and
experience in financial and business matters that he is capable of
evaluating the merits and risks of the prospective investment, and
you were not formed for the specific purpose of investing in the
Shares; or
|
| |
|
|
| |
(viii)
|
You are a plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such
plan has assets in excess of $5,000,000.
|
Offering Period and Expiration Date
This Offering will start on the date on which the SEC initially
qualifies this Offering Statement (the Qualification Date) and will
terminate on the Termination Date.
Procedures for Subscribing
If you decide to subscribe for our Common Stock shares in this
Offering, you should:
|
1.
|
Electronically receive, review, execute and deliver to us a
Subscription Agreement; and
|
| |
|
|
2.
|
Deliver funds directly to the Company’s designated bank account via
bank wire transfer (pursuant to the wire transfer instructions set
forth in our Subscription Agreement) or electronic funds transfer
via wire transfer or via personal check mailed to the Company, at
1090 King Georges Post Road, Suite 603, Edison, NJ 08837.
|
Any potential investor will have ample time to review the
subscription agreement, along with their counsel, prior to making
any final investment decision. We shall only deliver such
subscription agreement upon request after a potential investor has
had ample opportunity to review this Offering Circular.
Right to Reject Subscriptions. After we receive your
complete, executed subscription agreement and the funds required
under the subscription agreement have been transferred to our
designated account, we have the right to review and accept or
reject your subscription in whole or in part, for any reason or for
no reason. We will return all monies from rejected subscriptions
immediately to you, without interest or deduction.
Acceptance of Subscriptions. Upon our acceptance of a
subscription agreement, we will countersign the subscription
agreement and issue the shares subscribed at closing. Once you
submit the subscription agreement, you may not revoke or change
your subscription or request your subscription funds. All submitted
subscription agreements are irrevocable.
Under Rule 251 of Regulation A+, non-accredited, non-natural
investors are subject to the investment limitation and may only
invest funds which do not exceed 10% of the greater of the
purchaser’s revenue or net assets (as of the purchaser’s most
recent fiscal year end). A non-accredited, natural person may only
invest funds which do not exceed 10% of the greater of the
purchaser’s annual income or net worth (please see below on how to
calculate your net worth).
NOTE: For the purposes of calculating your net worth, it is
defined as the difference between total assets and total
liabilities. This calculation must exclude the value of your
primary residence and may exclude any indebtedness secured by your
primary residence (up to an amount equal to the value of your
primary residence). In the case of fiduciary accounts, net worth
and/or income suitability requirements may be satisfied by the
beneficiary of the account or by the fiduciary, if the fiduciary
directly or indirectly provides funds for the purchase of the
Shares.
In order to purchase our Common Stock shares and prior to the
acceptance of any funds from an investor, an investor will be
required to represent, to the Company’s satisfaction, that such
investor is either an accredited investor or is in compliance with
the 10% of net worth or annual income limitation on investment in
this Offering.
LEGAL MATTERS
Certain legal matters with respect to the shares of common stock
offered hereby will be passed upon by Joseph I. Emas, P.A.
EXPERTS
The financial statements of U.S. Stem Cell, Inc. as of and for the
years ended December 31, 2020 and 2019 appearing in this Regulation
A Offering Circular have been audited by RBSM LLP, an independent
registered public accounting firm, as stated in its report thereon,
included therein, and are included in reliance upon such report and
upon the authority of such firm as experts in accounting and
auditing.
REPORTS
Following this Tier II, Regulation A offering, we will be required
to comply with certain ongoing disclosure requirements under Rule
257 of Regulation A which will be incorporated into our filings
under the Securities Exchange Act of 1934, as amended.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a Regulation A Offering Statement on
Form 1-A under the Securities Act with respect to the shares of
common stock offered hereby. This Offering Circular, which
constitutes a part of the Offering Statement, does not contain all
of the information set forth in the Offering Statement or the
exhibits and schedules filed therewith. For further information
about us and the common stock offered hereby, we refer you to the
Offering Statement and the exhibits and schedules filed therewith.
Statements contained in this Offering Circular regarding the
contents of any contract or other document that is filed as an
exhibit to the Offering Statement are not necessarily complete, and
each such statement is qualified in all respects by reference to
the full text of such contract or other document filed as an
exhibit to the Offering Statement. Upon the completion of this
Offering, we will be required to file periodic reports, proxy
statements, and other information with the SEC pursuant to the
Securities Exchange Act of 1934. You may read and copy this
information at the SEC's Public Reference Room, 100 F Street, N.E.,
Room 1580, Washington, D.C. 20549. You may obtain information on
the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC also maintains an Internet website that
contains reports, proxy statements and other information about
issuers, including us, that file electronically with the SEC. The
address of this site is www.sec.gov.
FINANCIAL STATEMENTS
OF U.S. STEM CELL, INC.
DECEMBER 31, 2019 AND DECEMBER 31, 2020
INDEX TO FINANCIAL STATEMENTS
|
Reports of Independent Registered Public Accounting Firms
|
F-2
|
| |
|
|
Balance Sheets as of December 31, 2020 and 2019
|
F-3
|
| |
|
|
Statements of Operations for the years ended December 31,
2020 and 2019
|
F-4
|
| |
|
|
Statement of Stockholders’ Deficit for the two years ended
December 31, 2020
|
F-5
|
| |
|
|
Statements of Cash Flows for the years ended December 31,
2020 and 2019
|
F-6
|
| |
|
|
Notes to Financial Statements
|
F-7
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Board of Directors and
Stockholders of U.S Stem Cell, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of U.S Stem Cell,
Inc. (the Company) as of December 31, 2020 and 2019, and the
related statements of operations, stockholders’ deficit, and cash
flows for each of the two years in the period ended December 31,
2020, and the related notes (collectively referred to as the
financial statements). In our opinion, the financial statements
present fairly, in all material respects, the financial position of
the Company as of December 31, 2020 and 2019, and the results of
its operations and its cash flows for each of the two years in the
period ended December 31, 2020, in conformity with accounting
principles generally accepted in the United States of
America.
The Company's Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in
Note 2 to the financial statements, the Company has suffered
recurring losses from operations, generated negative cash flows
from operating activities, will require additional capital to fund
its current operating plan, and has stated that substantial doubt
exists about the Company’s ability to continue as a going concern.
Management's evaluation of the events and conditions and
management’s plans in regarding these matters are also described in
Note 2. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these
financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting, but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period
audit of the financial statements that were communicated or
required to be communicated to the audit committee and that (1)
relate to accounts or disclosures that are material to the
financial statements and (2) involved our especially challenging,
subjective, or complex judgments. We determined that there were no
critical audit matters.
/s/ RBSM LLP
We have served as the Company’s auditor since 2018.
New York, NY
July 15, 2021
U.S. STEM CELL, INC.
BALANCE SHEETS
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
| |
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
18,570 |
|
|
$ |
- |
|
|
Accounts receivable, net
|
|
|
54,164 |
|
|
|
48,208 |
|
|
Inventories
|
|
|
5,418 |
|
|
|
8,096 |
|
|
Prepaid expenses and other current assets
|
|
|
10,000 |
|
|
|
10,000 |
|
|
Total current assets
|
|
|
88,152 |
|
|
|
66,304 |
|
| |
|
|
|
|
|
|
|
|
|
Investments
|
|
|
- |
|
|
|
23,539 |
|
| |
|
|
|
|
|
|
|
|
|
Total assets
|
|
$ |
88,152 |
|
|
$ |
89,843 |
|
| |
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Bank overdraft
|
|
$ |
- |
|
|
$ |
1,520 |
|
|
Accounts payable
|
|
|
1,282,010 |
|
|
|
1,187,989 |
|
|
Accrued expenses
|
|
|
1,511,281 |
|
|
|
1,115,526 |
|
|
Advances - related parties
|
|
|
861,432 |
|
|
|
511,744 |
|
|
Deferred revenue, current portion
|
|
|
3,000 |
|
|
|
23,800 |
|
|
Deferred gain on sale of equipment, current portion
|
|
|
- |
|
|
|
21,474 |
|
|
Deposits
|
|
|
465,286 |
|
|
|
465,286 |
|
|
Notes payable - related parties
|
|
|
3,877,057 |
|
|
|
2,757,442 |
|
|
Notes payable, current portion, net of debt discount of $9,610 and
$9,057, respectively
|
|
|
1,406,570 |
|
|
|
1,297,477 |
|
|
Promissory note payable, net of debt discount of $0 and $29,296,
respectively
|
|
|
1,397,762 |
|
|
|
1,368,467 |
|
|
Convertible notes payable, net of debt discount of $1,874 and $0,
respectively
|
|
|
43,126 |
|
|
|
- |
|
|
Total current liabilities
|
|
|
10,847,524 |
|
|
|
8,750,725 |
|
| |
|
|
|
|
|
|
|
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
|
|
Deferred revenue
|
|
|
59,500 |
|
|
|
62,500 |
|
|
Notes payable, net of debt discount of $31,627 and $41,391,
respectively
|
|
|
760,420 |
|
|
|
756,014 |
|
|
Total long-term liabilities
|
|
|
819,920 |
|
|
|
818,514 |
|
| |
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
11,667,444 |
|
|
|
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,
435,560,794 and 417,724,767 shares issued and outstanding,
respectively
|
|
|
435,561 |
|
|
|
417,725 |
|
|
Additional paid-in capital
|
|
|
124,499,655 |
|
|
|
123,726,894 |
|
|
Accumulated deficit
|
|
|
(136,514,508 |
)
|
|
|
(133,624,015 |
)
|
|
Total stockholders' deficit
|
|
|
(11,579,292 |
)
|
|
|
(9,479,396 |
)
|
| |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' deficit
|
|
$ |
88,152 |
|
|
$ |
89,843 |
|
The accompanying notes are an integral part of these financial
statements.
U.S. STEM CELL, INC.
STATEMENTS OF OPERATIONS
|
|
|
For the Year Ended December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
Products
|
|
$ |
209,696 |
|
|
$ |
378,621 |
|
|
Services
|
|
|
67,391 |
|
|
|
2,642,921 |
|
|
Management fees - related party
|
|
|
- |
|
|
|
50,751 |
|
|
Total revenue
|
|
|
277,087 |
|
|
|
3,072,293 |
|
| |
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
64,117 |
|
|
|
1,335,238 |
|
| |
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
212,970 |
|
|
|
1,737,055 |
|
| |
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
- |
|
|
|
263 |
|
|
Selling, general and administrative
|
|
|
2,613,211 |
|
|
|
4,454,712 |
|
|
Pre-litigation settlement
|
|
|
- |
|
|
|
698,937 |
|
|
Total operating expenses
|
|
|
2,613,211 |
|
|
|
5,153,912 |
|
| |
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(2,400,241 |
)
|
|
|
(3,416,857 |
)
|
| |
|
|
|
|
|
|
|
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
Gain (loss) on settlement of accounts payable and accrued interest,
net
|
|
|
182 |
|
|
|
214,883 |
|
|
Gain on sale of equipment
|
|
|
21,474 |
|
|
|
128,845 |
|
|
Miscellaneous income
|
|
|
- |
|
|
|
101,475 |
|
|
Income (loss) from equity investments
|
|
|
(23,539 |
)
|
|
|
117,318 |
|
|
Interest expense
|
|
|
(488,369 |
)
|
|
|
(981,001 |
)
|
|
Total other income (expenses)
|
|
|
(490,252 |
)
|
|
|
(418,480 |
)
|
| |
|
|
|
|
|
|
|
|
|
Net loss before income taxes
|
|
|
(2,890,493 |
)
|
|
|
(3,835,337 |
)
|
| |
|
|
|
|
|
|
|
|
|
Income taxes (benefit)
|
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$ |
(2,890,493 |
)
|
|
$ |
(3,835,337 |
)
|
| |
|
|
|
|
|
|
|
|
|
Net loss per common share, basic and diluted
|
|
$ |
(0.01 |
)
|
|
$ |
(0.01 |
)
|
| |
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding, basic and
diluted
|
|
|
429,291,011 |
|
|
|
398,037,479 |
|
The accompanying notes are an integral part of these financial
statements.
U.S. STEM CELL, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE TWO YEARS ENDED DECEMBER 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
- |
|
|
|
- |
|
|
|
22,371,084 |
|
|
|
22,371 |
|
|
|
326,089 |
|
|
|
- |
|
|
|
348,460 |
|
|
Common stock issued for services
|
|
|
- |
|
|
|
- |
|
|
|
4,000,000 |
|
|
|
4,000 |
|
|
|
85,250 |
|
|
|
- |
|
|
|
89,250 |
|
|
Contribution to equity investment
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
15,265 |
|
|
|
- |
|
|
|
15,265 |
|
|
Stock-based compensation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
735,176 |
|
|
|
- |
|
|
|
735,176 |
|
|
Common shares issued for cash
|
|
|
- |
|
|
|
- |
|
|
|
13,276,707 |
|
|
|
13,277 |
|
|
|
36,723 |
|
|
|
- |
|
|
|
50,000 |
|
|
Net loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,835,337 |
)
|
|
|
(3,835,337 |
)
|
|
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
|
|
|
- |
|
|
|
- |
|
|
|
13,836,027 |
|
|
|
13,836 |
|
|
|
59,822 |
|
|
|
- |
|
|
|
73,658 |
|
|
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
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
685,939 |
|
|
|
- |
|
|
|
685,939 |
|
|
Net loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,890,493 |
)
|
|
|
(2,890,493 |
)
|
|
Balance, December 31, 2020
|
|
|
- |
|
|
$ |
- |
|
|
|
435,560,794 |
|
|
$ |
435,561 |
|
|
$ |
124,499,655 |
|
|
$ |
(136,514,508 |
)
|
|
$ |
(11,579,292 |
)
|
The accompanying notes are an integral part of these financial
statements.
U.S. STEM CELL, INC.
STATEMENTS OF CASH FLOWS
|
|
|
For the Year Ended December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(2,890,493 |
)
|
|
$ |
(3,835,337 |
)
|
|
Adjustments to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
- |
|
|
|
242,615 |
|
|
Bad debt (recoveries)
|
|
|
- |
|
|
|
46,121 |
|
|
Interest and amortization of debt discount
|
|
|
447,380 |
|
|
|
198,355 |
|
|
Gain on settlement of accounts payable and accrued interest
|
|
|
(182 |
)
|
|
|
(214,883 |
)
|
|
Gain on sale of equipment
|
|
|
(21,474 |
)
|
|
|
(128,845 |
)
|
|
Related party notes payable issued for services rendered
|
|
|
1,119,615 |
|
|
|
978,077 |
|
|
Loss (income) on equity investments
|
|
|
23,539 |
|
|
|
(117,318 |
)
|
|
Note payable issued in pre-trial settlement
|
|
|
- |
|
|
|
698,937 |
|
|
Stock-based compensation
|
|
|
701,939 |
|
|
|
824,426 |
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(5,956 |
)
|
|
|
(76,294 |
)
|
|
Inventories
|
|
|
2,678 |
|
|
|
85,119 |
|
|
Prepaid expenses and other current assets
|
|
|
- |
|
|
|
28,128 |
|
|
Deposits
|
|
|
- |
|
|
|
10,160 |
|
|
Accounts payable
|
|
|
149,521 |
|
|
|
344,536 |
|
|
Accrued expenses
|
|
|
18,347 |
|
|
|
(21,926 |
)
|
|
Deferred revenue
|
|
|
(23,800 |
)
|
|
|
(272,865 |
)
|
|
Net cash used in operating activities
|
|
|
(478,886 |
)
|
|
|
(1,210,994 |
)
|
| |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Proceeds from equity investments
|
|
|
- |
|
|
|
166,834 |
|
|
Net cash provided by investing activities
|
|
|
- |
|
|
|
166,834 |
|
| |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Proceeds from (repayments to) overdraft protection
|
|
|
(1,520 |
)
|
|
|
1,520 |
|
|
Proceeds from sale of common shares
|
|
|
- |
|
|
|
50,000 |
|
|
Proceeds from related party advances
|
|
|
349,688 |
|
|
|
276,843 |
|
|
Proceeds from related party notes
|
|
|
- |
|
|
|
107,868 |
|
|
Repayments of related party notes
|
|
|
- |
|
|
|
(321,607 |
)
|
|
Proceeds from notes payable
|
|
|
150,000 |
|
|
|
84,876 |
|
|
Repayments of notes payable
|
|
|
(45,712 |
)
|
|
|
(512,486 |
)
|
|
Proceeds from convertible note payable
|
|
|
45,000 |
|
|
|
- |
|
|
Net cash provided by (used in) financing activities
|
|
|
497,456 |
|
|
|
(312,986 |
)
|
| |
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
18,570 |
|
|
|
(1,357,146 |
)
|
|
Cash and cash equivalents, beginning of year
|
|
|
- |
|
|
|
1,357,146 |
|
|
Cash and cash equivalents, end of year
|
|
$ |
18,570 |
|
|
$ |
- |
|
| |
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$ |
40,989 |
|
|
$ |
782,646 |
|
|
Income taxes paid
|
|
$ |
- |
|
|
$ |
- |
|
| |
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Common shares issued in settlement of accounts payable and accrued
interest
|
|
$ |
73,658 |
|
|
$ |
348,460 |
|
|
Beneficial conversion feature recognized on convertible note
|
|
$ |
15,000 |
|
|
$ |
- |
|
|
Equity contributed to investment
|
|
$ |
- |
|
|
$ |
15,265 |
|
The accompanying notes are an integral part of these financial
statements.
U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
NOTE 1 — NATURE OF OPERATIONS
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.
NOTE 2 – GOING CONCERN AND MANAGEMENT’S 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 December
31, 2020, the Company had cash on hand of $18,570 and a working
capital deficit (current liabilities in excess of current assets)
of $10,759,372. During the year ended December 31, 2020, the net
loss was $2,890,493 and net cash used in operating activities
was $478,886. These conditions raise substantial doubt about the
Company’s ability to continue as a going concern for one year from
the issuance of the 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 at December 31, 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.
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.
U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
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 December 31, 2020 and 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.
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).
Property and Equipment
Property and equipment are stated at cost. When retired or
otherwise disposed, the related carrying value and accumulated
depreciation are removed from the respective accounts and the net
difference less any amount realized from disposition, is reflected
in earnings. For financial statement purposes, property and
equipment are recorded at cost and depreciated using the
straight-line method over their estimated useful lives of 3 to 15
years. Equipment under capital leases is recorded at the estimated
present value of the minimum lease payments. Equipment under
capital leases is amortized over the term of the lease, which is
three years.
U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
Long-Lived Assets
The Company follows FASB ASC 360-10-15-3, “Impairment or Disposal
of Long-lived Assets.” Long-lived assets to be held and used are
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable. The carrying amount of a long-lived asset is not
recoverable if it exceeds the sum of the undiscounted cash flows
expected to result from the use and eventual disposition of the
asset. Long-lived assets to be disposed of are reported at the
lower of carrying amount or fair value less cost to sell. The
Company determined that there was no impairment on its long-lived
assets during the period presented.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting
Standards Codification 2014-09, Revenue from Contracts with
Customers (Topic 606), which 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. Topic 606 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 December 31, 2020 and 2019, the Company had deferred revenues of
$62,500 and $86,300, respectively, which includes $62,500 and
$65,500, respectively, to 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 and $263 for the year ended December 31, 2020 and
2019, respectively.
U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND 2019
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
December 31, 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: