NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note
1. Organization, Overview of Operations, Basis of Presentation, Liquidity, Recent Accounting Standards
and Earnings (Loss) Per Share
Organization
RenovaCare,
Inc. was incorporated on July 14, 1983 in the State of Utah under the name Far West Gold, Inc., and changed its domicile to Nevada in
1997. On January 7, 2014, the Company changed its name at the time from “Janus Resources, Inc.” to “RenovaCare, Inc.”
so as to more fully reflect its current operations and business, and changed its trading symbol to “RCAR” effective as of
January 9, 2014.
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 June 30, 2021, and
10,000,000 shares
of $0.0001 par
value preferred stock, of which none are
outstanding.
Overview
of Operations
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.
In
August 2019, the Company was awarded a continuation of a patent allowing the SkinGunTM to be used to spray all varieties
of tissues and cells, thus allowing for its potential application in the regeneration of tissues and organs, beyond skin; and, in November
2020, the Company was issued two new patents encompassing improvements to the SkinGun™, expanding
its potential application beyond the surgical setting into the field, and allowing the use of liquid suspension solutions to include
drugs, hormones, and other useful agents.
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.
The
Company has four United States patents and patents in Germany, Australia, Canada, and Europe, with the European patent being validated
in France, Germany, Italy, Netherlands, Spain, Switzerland/Lichtenstein, and United Kingdom. The Company also has patent applications
pending in the United States and in multiple countries.
The
Company has six allowed trademarks in the United States and two pending applications. Globally, the Company has two European registered
trademarks, two United Kingdom trademarks, two pending in Canada, and one allowed and one pending in Japan.
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 does not have any commercialized products. 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.
Basis
of Presentation
The
accompanying unaudited interim consolidated financial statements of RenovaCare, Inc. and Subsidiary (the “Company”)
as of June 30, 2021, and for the three and six months ended June 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 June 30,
2021, results of operations and stockholders’ equity for the three and six months ended June 30, 2021 and 2020, and cash flows
for the six months ended June 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.
Liquidity
As
of June 30, 2021, the Company had $4,342,978 of
cash on hand and cash equivalents, and working capital of $4,592,838.
As a result, the Company believes it currently has sufficient cash to meet its funding requirements over the next twelve months following
the issuance of this Quarterly Report on Form 10-Q. However, the Company has experienced and continues to experience negative cash flows
from operations, as well as an ongoing requirement for substantial additional capital investment. The Company expects that it may need
to raise additional capital to accomplish its business plan over the next several years. There can be no assurance as to the availability
or terms upon which such financing and capital might be available. See “Overview of Operations” above.
Additionally,
there is uncertainty relating to the full impact of the COVID-19 pandemic on the Company’s operations and capital requirements.
Should financing when needed be unavailable or prohibitively expensive or the COVID-19 pandemic continue, it may adversely affect the
Company’s ability to (i) retain employees and consultants; (ii) obtain additional financing on terms acceptable to the Company,
if at all; (iii) delay regulatory submissions and approvals; (iv) delay, limit or preclude the Company from the operation of clinical
study sites and testing laboratories; (v) delay, limit or preclude the Company from achieving technology or product development goals,
milestones, or objectives; and (vi) preclude or delay entry into joint venture or partnership arrangements. The occurrence of any one
or more of such events may affect the Company’s ability to continue on its pathway to commercialization of its technology or products.
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") amounts. Basic EPS is calculated by dividing net income
(loss) by the weighted average number of common shares outstanding during the period presented. Diluted EPS amounts are based upon the
weighted average number of common and common equivalent shares outstanding during the period presented. The Company has not included
the effects of warrants, stock options and convertible debt on net loss per share because to do so would be antidilutive.
Following
is the computation of basic and diluted net loss per share for the three and six months ended June 30, 2021 and 2020:
|
Summary
of computation of basic and diluted net loss per share
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
June
30,
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Basic
and Diluted EPS Computation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
available to common stockholders'
|
|
$
|
(911,961
|
)
|
|
$
|
(3,011,593
|
)
|
|
$
|
(1,429,203
|
)
|
|
$
|
(4,186,346
|
)
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding
|
|
|
87,352,364
|
|
|
|
87,352,364
|
|
|
|
87,352,364
|
|
|
|
87,352,364
|
|
|
Basic
and diluted EPS
|
|
$
|
(0.01
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
3,089,999
|
|
|
|
4,788,071
|
|
|
|
3,089,999
|
|
|
|
4,788,071
|
|
|
Warrants
|
|
|
12,296,912
|
|
|
|
12,296,912
|
|
|
|
12,296,912
|
|
|
|
12,296,912
|
|
|
Total
shares not included in the computation of diluted losses per share
|
|
|
15,386,911
|
|
|
|
17,084,983
|
|
|
|
15,386,911
|
|
|
|
17,084,983
|
|
Note
2. Prepaid Expenses
Prepaid expenses
consist of the following:
|
Prepaid
Expenses
|
|
|
|
|
|
|
|
June
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
|
|
|
18,271
|
|
|
|
70,350
|
|
|
Total
prepaid expenses
|
|
$
|
466,468
|
|
|
$
|
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 June 30, 2021, there were 16,668,266
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
June 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 six months ended June 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 June 30, 2021 and December 31, 2020:
|
Summary
of warrants outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
of Common Stock Issuable from Warrants Outstanding as of
|
|
Weighted
|
|
|
|
|
|
June
30,
|
|
December
31,
|
|
Average
|
|
|
|
Description
|
|
2021
|
|
2020
|
|
Exercise
Price
|
|
Expiration
|
|
Series
E
|
|
|
584,416
|
|
|
|
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
|
|
|
12,296,912
|
|
|
|
12,296,912
|
|
|
|
|
|
|
|
Stock
Options
The
following table summarizes stock option activity for the six months ended June 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
|
|
|
|
3,376,267
|
|
|
Forfeited
|
|
|
(2,805,571
|
)
|
|
|
2.74
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at June 30, 2021
|
|
|
3,089,999
|
|
|
|
2.18
|
|
|
|
4.96
|
|
|
|
4,177,775
|
|
|
Vested and
exercisable at June 30, 2021
|
|
|
2,427,499
|
|
|
|
1.90
|
|
|
|
4.93
|
|
|
|
3,972,400
|
|
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 six months ended June 30, 2020 is set forth in the
table below:
|
Summary
of assumption of stock option activity
|
|
|
|
|
|
Six
Months Ended
|
|
|
|
June
30, 2020
|
|
Risk-free
interest rate
|
|
0.034%
|
-
|
1.67%
|
|
Expected
term in years
|
|
3.25
|
–
|
4.98
|
|
Weighted
Avg. Expected Volatility
|
|
105.71%
|
–
|
106.88%
|
|
Expected
dividend yield
|
|
|
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 six months ended June 30, 2021
and 2020:
|
Summary
of consolidated statement of operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended June 30,
|
|
Six
Months Ended June 30
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Research
and development
|
|
$
|
228,625
|
|
|
$
|
631,876
|
|
|
$
|
507,438
|
|
|
$
|
631,876
|
|
|
General
and administrative
|
|
|
(29,026
|
)
|
|
|
954,646
|
|
|
|
(1,182,601
|
)
|
|
|
1,420,409
|
|
|
Total
|
|
$
|
(199,599
|
)
|
|
$
|
1,586,522
|
|
|
$
|
(675,163
|
)
|
|
$
|
2,052,285
|
|
Three
and Six Months Ended June 30, 2021
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 three and six months ended June 30, 2021, the Company recognized
$66,130
and $1,248,575,
respectively, of reversals of the prior recognized compensation expense related to the cancelled options. During the three and six months
ended June 30, 2021, the expense recognized for options still in their vesting period totaled $265,726
and $639,541,
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 June 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 June 30, 2021:
|
Schedule
of supplemental lease information
|
|
|
|
|
|
|
|
As
of
June 30,
2021
|
|
As
of
December
31, 2020
|
|
|
|
|
|
|
|
Operating
lease right-of-use asset
|
|
$
|
53,492
|
|
|
$
|
79,462
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
maturities of operating lease
|
|
$
|
51,132
|
|
|
$
|
51,125
|
|
|
Non-current
operating lease
|
|
|
4,433
|
|
|
|
28,607
|
|
|
Total
operating lease liabilities
|
|
$
|
55,565
|
|
|
$
|
79,732
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average remaining lease term (in years):
|
|
|
1.09
|
|
|
|
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 six months ended June 30, 2021:
|
Cash
paid for amount included in the measurement of lease liabilities for operating lease
|
|
$
|
26,136
|
|
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 June 30, 2021 for future periods are as follows:
|
Schedule
of future lease payments
|
|
|
|
|
|
Years
ending December 31, 2021,
|
|
|
|
2021
(Remaining)
|
|
$
|
26,652
|
|
|
2022
|
|
|
31,213
|
|
|
Total future
minimum lease payments
|
|
|
57,864
|
|
|
Less
imputed interest
|
|
|
(2,299
|
)
|
|
Total
|
|
$
|
55,565
|
|
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 StemCells 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 $128,000
and $122,000
during the three months ended June 30, 2021 and
2020, respectively; and $248,000 and
$199,000 during
the six months ended June 30, 2021 and 2020, respectively.
SEC
Complaint
On
May 28, 2021 the SEC filed a civil complaint naming the Company and Harmel S. Rayat, RenovaCare Chairman as defendants (the “Complaint”).
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 Mr. Rayat and the Company, and officer-and-director and penny
stock bars against Mr. Rayat.
The
Company believes that the claims asserted in the Complaint are without merit and intends to defend this matter vigorously. Most, if not
all, of the cost to defend the Company and Mr. Rayat is expected to be covered by insurance. 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 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. 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 complaints filed in the Class Actions.
Note
6. Related Party Transactions
During
the three and six months ended June 30, 2020, Talia Jevan Properties, Inc. made payments totaling $5,287
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 June 30, 2021 and 2020, the Company recognized expenses of $400
and $30,000,
respectively; and $1,000
and $60,000
during the six months ended June 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 June 30, 2021 and prior to the filing of financial statements in accordance
with FASB ASC 855 “Subsequent Events”.