RENOVACARE, INC. Cautionary Note Regarding Forward-Looking Statements
This discussion and analysis of financial condition and results of operations is
based upon and should be read in conjunction with the unaudited interim
consolidated financial statements of
This Quarterly Report on Form 10-Q also contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, as well as information relating to the Company that is based on management's exercise of business judgment and assumptions made by and information currently available to management. Although forward-looking statements in this Quarterly Report on Form 10-Q reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. When used in this document and other documents, releases and reports released by us, the words "anticipate," "believe," "estimate," "expect," "intend," "the facts suggest" and words of similar import, are intended to identify any forward-looking statements. You should not place undue reliance on these forward-looking statements. These statements reflect our current view of future events and are subject to certain risks and uncertainties as noted below. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results could differ materially from those anticipated in these forward-looking statements. Actual events, transactions and results may materially differ from the anticipated events, transactions or results described in such statements. Although we believe that our expectations are based on reasonable assumptions, we can give no assurance that our expectations will materialize. Many factors could cause actual results to differ materially from our forward-looking statements and unknown, unidentified or unpredictable factors could materially and adversely impact our future results. We undertake no obligation and do not intend to update, revise or otherwise publicly release any revisions to our forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of any unanticipated events. Several of these factors include, without limitation:
· our ability to meet requisite regulations or receive regulatory approvals in
the United States , and our ability to retain any regulatory approvals that
we may obtain; and the absence of adverse regulatory developments in the
United States and abroad;
· new entrance of competitive products or further penetration of existing
products in our markets;
· results of our clinical trials;
· failure of our products to gain market acceptance;
· the cost and success of our development programs;
· our failure to obtain financing as, if and when needed, on commercially
acceptable terms;
· our failure to attract and retain qualified personnel;
· our failure to adequately manage our growth and expansion;
· the effect on us from adverse publicity related to our products or the
Company itself; and
· our failure to defend against any adverse claims relating to our
intellectual property.
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The safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, apply to forward-looking statements made by us. The reader is cautioned that no statements contained in this Form 10-Q should be construed as a guarantee or assurance of future performance or results. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks described in this report and matters described in this report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur.
Overview
We are a development-stage biotechnology and medical device company focusing on the research, development and commercialization of autologous (using a patient's own cells) cellular therapies that can be used for medical and aesthetic applications. The Company does not have any commercialized products. The Company's activities have consisted principally of performing research and development activities, business development efforts, and raising capital to support such activities.
The Company, through its wholly owned subsidiary,
Currently, our proprietary technologies are the subject of forty-four (44)
In
During the three months ended
Research, development and commercialization of new technologies generally requires significant financial resources, involves a high degree of risk, and there is no assurance that development activities will result in a commercially viable product. The Company has not generated any revenue and has sustained recurring losses and negative cash flows from operations since inception. The Company expects to incur losses as it continues development of its products and technologies and defends itself against the Lawsuits (as defined in "Part 2-Other Information, Item 1. Legal Proceedings"). The Company will need to raise additional capital through partnerships or the sale of securities to accomplish its business plan. Failing to secure such additional funding poses a significant risk. The Company's ability to meet its financial obligations, including to fund the development of its cellular therapies depends on the amount and timing of cash receipts from future financing activities. There can be no assurance as to the availability or terms upon which such financing and capital might be available.
15
Components of Our Results of Operations
Revenue
To date we have not generated any product revenues and do not expect to generate any revenue for the foreseeable future. Our ability to generate revenue and become profitable depends upon our ability to obtain marketing approval and successfully commercialization of our CellMistTM System.
Operating Expenses Research and Development
Research and development ("R&D") expenses consist primarily of costs incurred for the development of our CellMistTM System and include:
· design, pilot-scale manufacturing and pre-clinical testing of our cell
isolation and SkinGunTM spray devices.
· employee-related expenses associated with our research and development
activities, including salaries, benefits, travel and non-cash
stock-based compensation expenses.
· costs associated with quality management systems including device
verification and validation testing, and regulatory operations and
regulatory compliance.
· expenses incurred under agreements related to our clinical trial.
· other research and development costs including contract consulting fees
and non-cash stock-based compensation to contract research
organizations (CROs) and other third parties.
We do not believe that it is possible at this time to accurately project total expenses required for us to reach commercialization of our CellMistTM System. In the future, we expect that research and development expenses will increase due to our ongoing product development and approval efforts. We expense research and development costs as incurred.
General and Administrative
General and administrative expenses consist primarily of personnel costs, including non-cash stock-based compensation related to directors and employees, professional service costs including legal, accounting, and other consulting fees and other general and administrative expenses including investor relations, insurance, and facilities costs. We expect general and administrative expenses to increase in the future as we hire personnel and incur additional costs to support the expansion of our research and development activities, our operation as a public company and to defend against the Lawsuits.
Stock-Based Compensation
Expense associated with equity-based transactions is calculated and expensed in our financial statements as required pursuant to various accounting rules and is non-cash in nature. Stock compensation represents the expense associated with the amortization of our stock options.
Other Income (Expense)
Other expense consists of the interest payable under our convertible note. Other income consists of interest income earned on our cash and cash equivalents and the reimbursement of legal fees from our Directors & Officers insurance policy.
Income Taxes
We have yet to generate taxable income. We have historically incurred operating
losses resulting in carry forward tax losses totaling approximately
16 Results of Operations
Comparison of Three Months Ended
Research and Development Expenses
Three Months Ended March 31, Increase /
2022 2021 (Decrease)
Manufacturing clinical supplies(1) $ 13,719 $ 216,183 $ (202,464 )
Personnel related(2) 117,873 154,175 (36,302 )
Stock-based compensation(3) 217,500 278,813 (61,313 )
Clinical trials(4) 153,715 306,356 (152,641 )
Regulatory(5) 4,716 9,832 (5,116 )
All other(5) 88,731 88,934 (203 )
$ 596,254 $ 1,054,293 $ (458,039 ) (1) Manufacturing clinical supplies decreased due to completion of the
pilot-scale manufacturing and validation testing of the components of the
CellMist™ System and the electronic SkinGun™ spray device to be used in our
clinical trials which mostly tailed off during the quarters ended March 31,
2021 .
(2) Personnel related expenses decreased primarily due to the absence of a bonus
paid to our Chief Science Officer during the three months ended
2021.
(3) Stock compensation expense decreased due primarily to the completion of
vesting in 2021 of prior issued stock options.
(4) In 2020 and early 2021, the Company's incurred certain costs in preparation
for its clinical trial during which time the set-up costs were mostly
completed with future clinical trial costs expected to fluctuate depending on
the number of enrollees into the clinical trial. During the three months
ended March 31, 2022 compared to the same period in 2021, clinical trial
expenses decreased primarily due to the completion of the set-up costs and
subsequent enrollment of only two patients. As a result of the decision
during Q1 to stop enrollment, the Company expects clinical trial expenses to
decrease moving forward.
(5) All other expenses relate primarily to the prototype development of the
electronic SkinGun ™ at StemCell Systems. These costs are expected to
decrease as a result of the Company's, April 28, 2022 notice to terminate the
Strategic R&D Agreement.
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General and Administrative Expenses
Three Months Ended March 31, Increase /
2022 2021 (Decrease)
Personnel related(1) $ 129,311 $ 208,684 $ (79,373 )
Stock-based compensation(2) 5,500 (1,153,575 ) 1,159,075
Professional and consultant fees(3) 985,957 283,791 702,166
All other(4) 25,788 124,056 (98,268 )
Total G&A Expense $ 1,146,556 $ (537,044 ) $ 1,683,600 (1) Personnel related costs are expected to decrease slightly due to lower
headcount starting mid-year 2021.
(2) Stock compensation expense in 2021 decreased due to the forfeiture and
cancellation of 2,730,571 stock options as a result of the resignation of the
Company's former Chairman, President and Chief Executive Officer and two
members of the Company's Board of Directors Compensation expense was recorded
on these options prior to their full vesting. As a result, the Company
recognized a $1,248,575 reversal of the prior recognized compensation expense
related to the cancelled options.
(3) Professional and consultant fees increased primarily due an increase in legal
fees related to the Lawsuits. During the three months ended March 31, 2022 ,
the Company incurred $49,267 in fees related to our patents and trademarks,
$863,940 in legal fees related to the Lawsuits, $29,000 related to the
preparation and audit of our financial statements and related filings with
the SEC , and $43,750 for other legal related costs. The Company is obligated,
pursuant to its bylaws, to indemnify its directors and officers. As a result,
all legal costs related to the Lawsuits are recorded to the books of the
Company. Insurance proceeds to cover the cost of the Company's defense
against the Lawsuits is recorded to other income at the time of receipt.
(4) All other costs decreased primarily due to the absence of expense related to
directors' and officers' insurance and, to a lesser extent, a decrease in
investor relations activities.
Liquidity and Capital Resources
The Company does not have any commercialized products, has not generated any
meaningful revenue since inception and has sustained recurring losses and
negative cash flows since inception. During the three months ended
At
Historically, the Company has been funded through the sale of equity securities and debt financings. The future of the Company will depend on its ability to successfully raise capital from external sources to fund operations. If the Company is unable to obtain adequate funds, or if such funds are not available to it on acceptable terms, the Company's ability to continue its business to develop its cellular therapies will be significantly impaired and it may cause the Company to curtail operations. Although the Company has instituted cost savings measures, it will continue to assess its ongoing expenses.
Fair Value of Financial Instruments and Risks
The carrying value of cash, accounts payable and interest payable approximate their fair value because of the short-term nature of these instruments and their liquidity. It is not practical to determine the fair value of the Company's notes payable due to the complex terms. Management is of the opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments.
18 Market Risk Disclosures
We have not entered into derivative contracts either to hedge existing risks or
for speculative purposes during the three months ended
Off-Balance Sheet Arrangements and Contractual Obligations
As part of our ongoing business, we do not participate in transactions that
generate relationships with unconsolidated entities or financial partnerships,
such as entities often referred to as structured finance or special purpose
entities (SPEs), which would have been established for the purpose of
facilitating off-balance sheet arrangements or other contractually limited
purposes. As of
Recently Accounting Standards
See Note 1 to our Consolidated Financial Statements for more information regarding recent accounting standards and their impact to our consolidated results of operations and financial position.
Transactions with Related Persons
None.
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