RENOVACARE, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation, Organization,
Liquidity and Going Concern, Recent Accounting Standards and Earnings (Loss) Per Share
Basis of Presentation
The accompanying unaudited interim consolidated
financial statements of RenovaCare, Inc. and Subsidiary (“RenovaCare” or the “Company”) as of September
30, 2021, and for the three and nine months ended September 30, 2021 and 2020 have been prepared pursuant to the rules and regulations
of the Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and do not include all of
the information and note disclosures required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete
financial statements. These Consolidated Financial Statements should therefore be read in conjunction with the Consolidated Financial
Statements and Notes thereto for the fiscal year ended December 31, 2020 included in our Annual Report on Form 10-K filed with the
SEC on March 31, 2021.
The accompanying unaudited interim Consolidated
Financial Statements have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions that
affect amounts reported in the Consolidated Financial Statements and accompanying disclosures. Actual results may differ from those estimates.
The accompanying unaudited interim consolidated financial statements have been prepared on the same basis as the audited financial statements
and include all adjustments (including normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation
of the Company’s consolidated financial position as of September 30, 2021, results of operations and stockholders’ equity
for the three and nine months ended September 30, 2021 and 2020, and cash flows for the nine months ended September 30, 2021 and 2020.
The Company did not record an income tax provision during the periods presented due to net taxable losses. The results of operations for
any interim period are not necessarily indicative of the results of operations for the entire year.
Organization
RenovaCare, Inc., formerly Janus Resources, is
a Nevada corporation. RenovaCare, Inc. was incorporated under the laws of the State of Utah on July 14, 1983 as Far West Gold, Inc..
The Company has an authorized capital of 500,000,000
shares of $0.00001 par value common stock, of which 87,352,364 shares are outstanding as of September 30, 2021, and 10,000,000 shares
of $0.0001 par value preferred stock, of which none are outstanding.
RenovaCare, Inc., through its wholly owned subsidiary,
RenovaCare Sciences Corp. is a development-stage 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.
On July 12, 2013, the Company completed the acquisition
of its flagship technologies (collectively, the “CellMistTM System”). The
CellMist™ System is a cell isolation procedure that enzymatically renders stem cells from the patient’s own skin or other
tissues. The resulting stem cell suspension is administered topically from the Company’s novel solution sprayer device (the
“SkinGunTM”) as a cell therapy onto wounds including burns to facilitate healing.
Currently,
our proprietary technologies are the subject of and 43 U.S. and international patents or patent applications and 14 U.S. and international
trademarks. Of the issued patents, five are U.S. patents and twelve have issued or are allowed in Australia, Canada, Europe, Germany,
France, Italy, Japan, Korea, Netherlands, Spain, Switzerland/Lichenstein, and United Kingdom.
On May 6, 2021 the Food and Drug
Administration gave full-approval of the Company’s Investigational Device Exemption (IDE) application to proceed with initial clinical
testing of the CellMist™ System and SkinGun™
spray device in adult burn patients.
Improvements in the design and efficiency of the
CellMist™ System including a closed, automated cell isolation device and the SkinGun™ spray device are in development with
StemCell Systems (Berlin, Germany), the Company’s R&D innovation partner. The Company is adapting its core technologies for
possible use in other clinical indications. The Company is also developing the cell isolation and spray gun devices as stand-alone 510(k)-cleared
products for isolation of cells from other tissues and spraying other solutions of medical importance.
The Company's activities have consisted
principally of performing research and development activities and raising capital to support such activities. The Company has
enlisted the assistance of several Contract Manufacturing Organizations (CMO) to manufacture clinical supplies including components
of the CellMist System™ and the electronic SkinGun™ spray devices in compliance with FDA’s guidance for current
Good Manufacturing Practices (cGMP) and Contract Research Organizations (CRO) to test and validate the Company’s products and
processes and to conduct clinical trials that evaluate initially the safety and feasibility of an autologous skin cell therapy using
the Company’s products to facilitate burn wound healing. These development activities are subject to significant risks and
uncertainties, including possible failure of preclinical and clinical testing. 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 expects that it will need to raise additional capital through
partnerships or the sale of its securities to accomplish its business plan. Failing to secure such additional funding before
achieving sustainable revenue and profit from operations poses a significant risk. The Company's ability to fund the development of
its cellular therapies 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.
Liquidity and Going Concern
The Company has prepared its consolidated financial
statements on a “going concern” basis, which presumes that it will be able to realize its assets and discharge its liabilities
in the normal course of business for the foreseeable future. The consolidated financial statements do not include any adjustments to reflect
the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that
may result should the Company be unable to continue as a going concern.
Since Inception, the Company has incurred net
operating losses and operating cash flow deficits. The Company does not currently generate revenues and will continue to incur losses
from operations and operating cash flow deficits in the future. The Company's activities are subject to significant risks and uncertainties
due to the stage of the development of the Company's cellular therapies.
At September
30, 2021, the Company had approximately $3,400,000 in cash on hand. The Company estimates cash will be depleted in less than one
year from the date that these financial statements are available to be issued, if the Company does not generate sufficient cash to support
operations.
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.
The matters described above raise substantial
doubt about the Company's ability to continue as a going concern within one year after the date these condensed consolidated financial
statements were issued.
Recent Accounting Standards
Any reference in these notes to applicable accounting
guidance is meant to refer to the authoritative non-governmental US GAAP as found in the Financial Accounting Standards Board's Accounting
Standards Codification.
The Company reviews new accounting standards as
issued. Although some of these accounting standards issued or effective after the end of the Company’s previous fiscal year may
be applicable, the Company has not identified any standards that the Company believes merit further discussion other than as discussed
above. The Company believes that none of the new standards will have a significant impact on the financial statements.
Earnings (Loss) Per Share
The Company presents both basic and diluted earnings
per share ("EPS"). Basic EPS is calculated by dividing net income (loss) by the weighted average number of common shares
outstanding during the period presented. Diluted EPS amounts are based upon the weighted average number of common and common equivalent
shares outstanding during the period presented. The Company has not included the effects of warrants or stock options on net loss per
share because to do so would be antidilutive.
Following is the computation of basic and diluted
net loss per share for the three and nine months ended September 30, 2021 and 2020:
Summary of computation of basic and diluted net loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Basic and Diluted EPS Computation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss available to common stockholders'
|
|
$
|
(1,698,285
|
)
|
|
$
|
(2,817,964
|
)
|
|
$
|
(3,127,488
|
)
|
|
$
|
(7,004,310
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
87,352,364
|
|
|
|
87,352,364
|
|
|
|
87,352,364
|
|
|
|
87,352,364
|
|
Basic and diluted EPS
|
|
$
|
(0.02
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.08
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The shares listed below were not included in the computation of diluted losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
per share because to do so would have been antidilutive for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
3,139,999
|
|
|
|
5,845,570
|
|
|
|
3,139,999
|
|
|
|
5,845,570
|
|
Warrants
|
|
|
11,712,496
|
|
|
|
12,296,912
|
|
|
|
11,712,496
|
|
|
|
12,296,912
|
|
Total shares not included in the computation of diluted losses per share
|
|
|
14,852,495
|
|
|
|
18,142,482
|
|
|
|
14,852,495
|
|
|
|
18,142,482
|
|
Note 2. Prepaid Expenses
Prepaid expenses consist of the following:
Prepaid Expenses
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
|
2021
|
|
2020
|
Prepaid insurance
|
|
$
|
-
|
|
|
$
|
54,180
|
|
Prepaid stock options for services
|
|
|
87,001
|
|
|
|
86,999
|
|
Prepaid professional fees
|
|
|
65,000
|
|
|
|
65,000
|
|
Prepaid research and development expense
|
|
|
296,196
|
|
|
|
289,746
|
|
Other prepaid costs
|
|
|
16,118
|
|
|
|
70,350
|
|
Total prepaid expenses
|
|
$
|
464,315
|
|
|
$
|
566,275
|
|
Note 3. Equity
2013 Long-Term Incentive Plan
On June 20, 2013, the Company’s Board of
Directors (the “Board”) adopted the 2013 Long-Term Incentive Plan (the “2013 Plan”) and on November
15, 2013, a stockholder owning a majority of the Company’s issued and outstanding stock approved adoption to the 2013 Plan. Pursuant
to the terms of the 2013 Plan, an aggregate of 20,000,000 shares of the Company’s common stock have been reserved for issuance to
the Company’s officers, directors, employees and consultants in order to attract and hire key technical personnel and management.
Options granted to employees under the 2013 Plan, including directors and officers who are employees, may be incentive stock options or
non-qualified stock options; options granted to others under the 2013 Plan are limited to non-qualified stock options. As of September
30, 2021, there were 16,618,266 shares available for future grants.
The 2013 Plan is administered by the Board or
a committee designated by the Board. Subject to the provisions of the 2013 Plan, the Board has the authority to determine the officers,
employees and consultants to whom options will be granted, the number of shares covered by each option, vesting rights and the terms and
conditions of each option that is granted to them; however, no person may be granted options to purchase more than 2,000,000 shares in
any one fiscal year under the 2013 Plan, and the aggregate fair market value (determined at the time the option is granted) of the shares
with respect to which incentive stock options are exercisable for the first time by an optionee during any calendar year cannot exceed
$100,000. Options granted pursuant to the 2013 Plan are exercisable no later than ten years after the date of grant.
The exercise price per share of common stock for
options granted under the 2013 Plan is the fair market value of the Company's common stock on the date of grant, using the closing price
of the Company's common stock on the last trading day prior to the date of grant, except for incentive stock options granted to a holder
of ten percent or more of the Company's common stock, for whom the exercise price per share will not be less than 110% of the fair market
value. No option can be granted under the 2013 Plan after June 20, 2023.
Common Stock
At September 30, 2021, the Company had 500,000,000
authorized shares of common stock with a par value of $0.00001 per share and 87,352,364 shares of common stock outstanding.
During the three and nine months ended September
30, 2021 and 2020, the Company did not have any common stock transactions.
Warrants
The Company has issued warrants to purchase common
stock at various exercise prices in connection with loan agreements and private placements. The following table summarizes information
about warrants outstanding at September 30, 2021 and December 31, 2020:
Summary of warrants outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
of Common Stock Issuable from Warrants Outstanding as of
|
|
|
|
Weighted
|
|
|
|
|
|
|
September
30,
|
|
|
|
December
31,
|
|
|
|
Average
|
|
|
|
Description
|
|
|
2021
|
|
|
|
2020
|
|
|
|
Exercise
Price
|
|
|
Expiration
|
Series E
|
|
|
-
|
|
|
|
584,416
|
|
|
$
|
1.54
|
|
|
September 9, 2021
|
Series F
|
|
|
7,246
|
|
|
|
7,246
|
|
|
$
|
3.45
|
|
|
February 23, 2022 & March 9, 2022
|
Series G
|
|
|
460,250
|
|
|
|
460,250
|
|
|
$
|
2.68
|
|
|
July 21, 2022
|
Series H
|
|
|
910,000
|
|
|
|
910,000
|
|
|
$
|
2.75
|
|
|
October 16, 2022
|
Series I
|
|
|
10,335,000
|
|
|
|
10,335,000
|
|
|
$
|
2.00
|
|
|
November 26, 2025
|
Total
|
|
|
11,712,496
|
|
|
|
12,296,912
|
|
|
|
|
|
|
|
During the three months ended September 30, 2021,
all the Series E Warrants expired unexercised.
Stock Options
The following table summarizes stock option activity
for the six months ended September 30, 2021:
Summary of stock option activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Options
|
|
Weighted Average Exercise Price ($)
|
|
Weighted Average Remaining Contractual Term (years)
|
|
Aggregate Intrinsic Value ($)
|
Outstanding at December 31, 2020
|
|
|
5,895,570
|
|
|
|
2.45
|
|
|
|
5.14
|
|
|
|
1,650
|
|
Granted
|
|
|
50,000
|
|
|
|
1.72
|
|
|
|
9.82
|
|
|
|
-
|
|
Forfeited
|
|
|
(2,805,571
|
)
|
|
|
2.74
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2021
|
|
|
3,139,999
|
|
|
|
2.17
|
|
|
|
4.79
|
|
|
|
1,650
|
|
Vested and exercisable at September 30, 2021
|
|
|
2,564,999
|
|
|
|
1.95
|
|
|
|
4.73
|
|
|
|
1,650
|
|
The valuation methodology used to determine the
fair value of stock options is the Black-Scholes Model. The Black-Scholes Model requires the use of a number of assumptions including
volatility of the stock price, the risk-free interest rate, and the expected term of the stock options. The ranges of assumptions used
in the Black-Scholes Model during the nine months ended September 30, 2021 and 2020 is set forth in the table below:
Summary of assumption of stock option activity
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
2021
|
|
2020
|
Risk-free interest rate
|
|
|
0.73
|
%
|
|
|
0.021%
|
–
|
1.67%
|
|
Expected term in years
|
|
|
5.38
|
|
|
|
3.25
|
–
|
6.00
|
|
Weighted Avg. Expected Volatility
|
|
|
102.07
|
|
|
|
103.56%
|
–
|
110.71%
|
|
Expected dividend yield
|
|
|
0
|
%
|
|
|
|
0%
|
|
|
The risk-free interest rate assumption is based
upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the expected term. Estimated
volatility is a measure of the amount by which the stock price is expected to fluctuate each year during the term of an award. Our calculation
of estimated volatility is based on historical stock prices over a period equal to the term of the awards. The average expected life is
based on the contractual terms of the stock option using the simplified method. We utilize a dividend yield of zero based on the fact
that we have never paid cash dividends and have no current intention to pay cash dividends. Future stock-based compensation may significantly
differ based on changes in the fair value of our Common Stock and our estimates of expected volatility and the other relevant assumptions.
The following table sets forth the share-based
compensation cost resulting from stock option grants, including those previously granted and vesting over time, that were recorded in
the Company’s Statements of Operations for the three and nine months ended September 30, 2021 and 2020:
Summary of consolidated statement of operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Research and development
|
|
$
|
224,000
|
|
|
$
|
455,271
|
|
|
$
|
731,438
|
|
|
$
|
1,087,147
|
|
General and administrative
|
|
|
44,000
|
|
|
|
664,544
|
|
|
|
(1,138,601
|
)
|
|
|
2,084,953
|
|
Total
|
|
$
|
268,000
|
|
|
$
|
1,119,815
|
|
|
$
|
(407,163
|
)
|
|
$
|
3,172,100
|
|
Nine Months Ended September 30, 2021
On July 26, 2021, in connection with an Executive
Services Consulting Agreement of the same date, the Company granted Justin Frere, the Company’s Chief Financial Officer, an option
to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.72 and with a term of 10 years.
During the first half of 2021, certain individuals
resigned from the Company resulting in the forfeiture and cancellation of 2,805,571 options. Compensation expense was recorded on some
of these options prior to their full vesting. As a result, during the nine months ended September 30, 2021, the Company recognized $1,314,705
of reversals of the prior recognized compensation expense related to the cancelled options. During the three and nine months ended September
30, 2021, the expense recognized on options still in their vesting period totaled $268,000 and $907,541, respectively.
Note 4. Leases
In February 2020, the Company entered into a two-year
lease for office premises located at 4 Becker Farm Road, Suite 105, Roseland, New Jersey. Monthly base rent in year one of the lease is
$4,356; and $4,459 in year 2 of the lease. The term (and payment of the monthly rent) commenced upon completion of the landlord’s
work on August 1, 2020.
The Company’s existing Lease is not subject
to any restrictions or covenants which preclude its ability to pay dividends, obtain financing, or enter into additional Lease’s.
As of September 30, 2021, the Company
has not entered into any leases which have not yet commenced which would entitle the Company to significant rights or create additional
obligations.
The Company does not have any finance leases.
Supplemental lease information as of September 30, 2021:
Schedule of supplemental lease information
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2021
|
|
As of December 31, 2020
|
|
|
|
|
|
Operating lease right-of-use asset
|
|
$
|
41,171
|
|
|
$
|
79,462
|
|
|
|
|
|
|
|
|
|
|
Current maturities of operating lease
|
|
$
|
43,192
|
|
|
$
|
51,125
|
|
Non-current operating lease
|
|
|
-
|
|
|
|
28,607
|
|
Total operating lease liabilities
|
|
$
|
43,192
|
|
|
$
|
79,732
|
|
|
|
|
|
|
|
|
|
|
Weighted Average remaining lease term (in years):
|
|
|
0.84
|
|
|
|
1.6
|
|
Discount rate:
|
|
|
7.0
|
%
|
|
|
7.0
|
%
|
Right-of-use asset obtained in exchange for lease obligation
|
|
|
|
|
|
$
|
98,402
|
|
Supplemental cash flow information for the nine months ended September
30, 2021:
Cash paid for amount included in the measurement of lease liabilities for operating lease
|
|
$
|
39,410
|
|
The Company leases office space under a non-cancellable
operating lease expiring in 2022. Future lease payments included in the measurement of lease liabilities on the balance sheet at September
30, 2021 for future periods are as follows:
Leases (Details 1)
|
|
|
|
|
Years ending December 31, 2021,
|
|
|
2021 (Remaining)
|
|
$
|
13,377
|
|
2022
|
|
|
31,213
|
|
Total future minimum lease payments
|
|
|
44,590
|
|
Less imputed interest
|
|
|
(1,398
|
)
|
Total
|
|
$
|
43,192
|
|
Note 5. Commitments and Contingencies
Stem Cell Systems
In connection with the Company’s anticipated
regulatory filings, the Company has engaged StemCell Systems GmbH (“StemCell Systems”) to provide it with prototypes
and related documents under various agreements. On July 1, 2020, the Company and StemCell Systems entered into a Strategic R&D Agreement
(the “Strategic Agreement”) having an initial term of three years with successive one-year extensions unless earlier
terminated. The Strategic Agreement includes a $27,000 monthly fee to be paid to StemCell Systems along with any additional expenses incurred.
The Company, StemCell Systems and certain affiliates of StemCell Systems entered into a Rights of First Refusal and Corporate Opportunities
Agreement (the “ROFR Agreement”). Pursuant to the ROFR Agreement, (i) in the event a StemCell Systems stockholder receives
an offer from a third party to acquire the StemCell Systems stockholders ownership interest, the Company shall have ten business days
to purchase such ownership, and (ii) if during the terms of the Strategic Agreement, any StemCell Systems inventions, with respect to
skin, burns and wounds, designs, inventions and among other things, whether or not patentable, copyrightable or otherwise legally protectable
are discovered by StemCell Systems, the Company shall have the first option to negotiate mutually agreeable terms for the Company’s
acquisition or licensing of the StemCell Systems inventions. Pursuant to these engagements the Company incurred expenses of approximately
$142,000 and $133,000 during the three months ended September 30, 2021 and 2020, respectively; and $391,000 and $401,000 during the nine
months ended September 30, 2021 and 2020, respectively. Pursuant to the Strategic Agreement, as of September, 30, 2021, the Company is
obligated to pay for services totaling approximately $819,000 through July 1, 2023.
SEC Complaint
On May 28, 2021 the SEC filed a civil
complaint (the “Complaint”) naming the Company and Harmel S. Rayat, RenovaCare Chairman (the “Defendants”)
as defendants. The Complaint charges Mr. Rayat and the Company with violating the antifraud provisions of Section 10(b) of the Securities
Exchange Act of 1934 and Rule 10b-5 thereunder, and also charges Mr. Rayat with aiding and abetting the Company's violations of those
provisions. The complaint also charges the Company with violating the reporting provisions of Exchange Act Section 15(d) and Rules 15d-11
and 12b-20 thereunder. The SEC seeks permanent injunctions and civil penalties against the Defendants, and officer-and-director and penny
stock bars against Mr. Rayat. On August 31, 2021 the Defendants filed a response to the Complaint. On September 21, 2021, the SEC filed
a motion to strike Defendants equitable affirmative defenses which motion was granted by the court on October 18, 2021.
The Company believes that the claims
asserted in the Complaint are without merit and intends to defend this matter vigorously. However, because of the inherent uncertainty
as to the outcome of this proceeding, the Company is unable, at this time, to estimate the possible impact of the outcome of this matter
nor provide assurance that the available insurance coverage will be sufficient to see the Complaint through to resolution.
Class Action Complaints
On July 16 and July 21, 2021, two purported
shareholders of the Company filed putative class actions in the United States District Court for the District of New Jersey against the
Company and certain of its current and former executive officers (captioned Gabrielle A. Boller, Individually and On Behalf of All
Others Similarly Situated v. RenovaCare, Inc., Harmel Rayat, and Thomas Bold, No. 2:21-cv-13766-SDW-ESK (“Boller”), and Michael
Solakian, Individually and On Behalf of All Others Similarly Situated v. RenovaCare, Inc., Harmel Rayat, and Thomas Bold, No. 2:21-cv-13930
(“Solakian”), respectively)(the “Class Action Complaints”). The Class Action Complaints in Boller
and Solakian were brought both individually and on behalf of a putative class of the Company’s stockholders, claiming
that in connection with the facts and circumstances underlying the allegations in the SEC Complaint, the Company engaged in fraudulent
conduct and made false and misleading statements of material fact or omitted to state material facts necessary to make the statements
made not misleading. The class period identified in the Class Action Complaints is August 13, 2017 through May 28, 2021 Both Boller and Solakian seek
to declare the action to be a class action and monetary damages, including costs and expenses, and award of reasonable attorneys’
fees, expert fees, and other costs, and such other relief as the Court may deem just and proper.
The Company believes that the claims
asserted in Boller and Solakian and any other Class Actions derived from the SEC Complaint are without merit and intends to
defend itself vigorously. Based on the early stages of these legal proceedings, and the inherent uncertainty as to their outcome, at this
time, the Company is not able to reasonably estimate a possible range of loss, if any, that may result from the allegations set forth
in the Class Action Complaints filed in the Class Actions.
Note 6. Transactions with Related Persons
During the three and nine months ended September
30, 2020, Talia Jevan Properties, Inc. made payments totaling $0 and $10,811, respectively, to Stephen Yan-Klassen, former CFO who resigned
in 2020, for his salary on behalf of the Company. Talia Jevan Properties, Inc. is a related party of Harmel S. Rayat, Chairman of the
Board.
On August 1, 2013, the Company entered into a
consulting agreement, as amended on May 1, 2016, with Jatinder Bhogal, an individual owning in excess of 5% of the Company’s issued
and outstanding shares of common stock, to provide consulting services to the Company through his wholly owned company, Vector Asset Management,
Inc. (“VAMI”). Pursuant to the consulting agreement, VAMI assisted the Company with identifying subject matter experts
in the medical device and biotechnology industries and assisted the Company with its ongoing research, development and eventual commercialization
of its Regeneration Technology. Pursuant to an amendment dated May 1, 2016, the VAMI monthly consulting fee was increased from $5,000
to $6,800. On June 22, 2018, the Company and VAM entered into an Executive Consulting Agreement (the “ECA”) pursuant
to which Mr. Bhogal served as the Company’s Chief Operating Officer. The ECA supersedes the prior consulting agreement. Pursuant
to the ECA, VAMI received compensation of $120,000 per year. On July 1, 2020 the Company amended the ECA and paid VAMI $4,000 per month
through November 30, 2020 and $200 per month thereafter until May 31, 2021 at which time the ECA as amended expired. For consulting services
provided by VAMI, during the three months ended September 30, 2021 and 2020, the Company recognized expenses of $0 and $12,000, respectively;
and $1,000 and $72,000 during the nine months ended September 30, 2021 and 2020, respectively. Jatinder Bhogal resigned as the Company’s
COO effective June 30, 2020.
Note 7. Subsequent Events
Management has reviewed material events subsequent
of the period ended September 30, 2021 and prior to the filing of financial statements in accordance with FASB ASC 855 “Subsequent
Events”.