Form 10-Q Regenicin, Inc. For: Mar 31
- Wall Street ends first day of third quarter with solid rebound
- Goldman Sachs Warns Clients of More Equity Market Losses in Second Half of 2022
- Kohl's (KSS) Falls 15% After Ending Sale Talks With Franchise Group and Issuing Q2 Warning
- General Motors Warns It Has 95k Vehicles in Inventory Without Certain Components
- FAAMG Stocks Fall 32% on Average During 1st-Half of 2022
Get inside Wall Street with StreetInsider Premium. Claim your 1-week free trial here.
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
|Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934|
the quarterly period ended |
|Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934|
|For the transition period from to __________|
(Exact name of registrant as specified in its charter)
|(State or other jurisdiction of incorporation or organization)||(IRS Employer Identification No.)|
|Principal US Market||Symbol||Class of Trading Security|
|(Address of principal executive offices)||(Registrant’s telephone number)|
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. ☐Yes ☒
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files). ☐Yes ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
|Large accelerated filer||☐||☐|
|Non-accelerated filer||☐||Smaller reporting company|
|Emerging growth company|
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐Yes ☒
State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: as of May 13, 2022.
NOTICE: THIS 10Q FILING DOES NOT CONTAIN FINANCIAL OR OTHER INFORMATION WHICH HAS BEEN AUDITED OR REVIEWED BY OUR INDEPENDENT PUBLIC ACCOUNTING FIRM FOR REASONS SPECIFIED HEREIN. WE INTEND TO SUPPLEMENT THIS FILING, AT A CURRENTLY UNKNOWN LATER DATE, WITH SUCH REVIEWED AND AUDITED FINANCIAL INFORMATION, IF AND WHEN SUCH REVIEW AND AUDIT CAN BE OBTAINED.
|TABLE OF CONTENTS||Page|
|PART I – FINANCIAL INFORMATION|
|Item 1:||Financial Statements||3|
|Item 2:||Management’s Discussion and Analysis of Financial Condition and Results of Operations||4|
|Item 3:||Quantitative and Qualitative Disclosures About Market Risk||6|
|Item 4:||Controls and Procedures||6|
|PART II – OTHER INFORMATION|
|Item 1:||Legal Proceedings||8|
|Item 1A:||Risk Factors||8|
|Item 2:||Unregistered Sales of Equity Securities and Use of Proceeds||8|
|Item 3:||Defaults Upon Senior Securities||8|
|Item 4:||Mine Safety Disclosures||8|
|Item 5:||Other Information||8|
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The consolidated financial statements as of March 31, 2022 and for the three months ended March 31, 2022 and 2021 have not been reviewed by our independent registered public accounting firm. The consolidated balance sheet as September 30, 2021 has not been audited by our independent registered public accounting firm.
These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended March 31, 2022 are not necessarily indicative of the results that can be expected for the full year.
REGENICIN, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNREVIEWED AND UNAUDITED)
|Common stock of Amarantus|
|Total current and total assets||$||$|
|LIABILITIES AND STOCKHOLDERS' DEFICIENCY|
|Accrued expenses - other (related
party of $
|Accrued salaries - officers|
|Promissory note payable|
|Convertible promissory note - officer|
|Loans payable - officer|
|Total current liabilities|
|Series A 8% Convertible Preferred
|Common stock, $ par value; shares authorized; issued and outstanding|
|Additional paid-in capital|
|Less: treasury stock; shares at par||(||)||(||)|
|Total stockholders' deficiency||(||)||(||)|
|Total liabilities and stockholders' deficiency||$||$|
See Notes to Consolidated Financial Statements.
REGElNICIN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
March 31, 2022
March 31, 2021
March 31, 2022
March 31, 2021
|General and administrative|
|Total operating expenses|
|Operating loss before other operating income||(||)||(||)||(||)||(||)|
|Other operating income - reversal of accounts payable|
|Loss from operations||(||)||(||)||(||)||(||)|
|Other income (expenses)|
expense (related party of $
|Change in unrealized gain (loss) on securities||(||)||(||)|
|Total other expenses||(||)||(||)||(||)||(||)|
|Preferred stock dividends||(||)||(||)||(||)||(||)|
|Net loss attributable to common stockholders||$||(||)||$||(||)||$||(||)||$||(||)|
|Loss per share basic||$||(||)||$||(||)||$||(||)||$||(||)|
|Loss per share diluted||$||(||)||$||(||)||$||(||)||$||(||)|
|Weighted average number of shares outstanding basic|
|Weighted average number of shares outstanding diluted|
See Notes to Consolidated Financial Statements.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
|Convertible Preferred Stock||Common Stock||Paid-in||Accumulated||Treasury|
|Balances at October 1, 2021||$||$||$||$||(||)||$||(||)||(||)|
|Balances at December 31, 2021||885,000||$||157,911,410||$||$||$||(||)||$||(||)||(||)|
|Balances at March 31, 2022||885,000||$||157,911,410||$||$||$||(||)||$||(||)||(||)|
|Balances at October 1, 2020||885,000||$||157,911,410||$||$||$||(||)||$||(||)||(||)|
|Balances at December 31, 2020||885,000||$||157,911,410||$||$||$||(||)||$||(||)||(||)|
|Balances at March 31, 2021||885,000||$||157,911,410||$||$||$||(||)||$||(||)||(||)|
(1) The number of shares in treasury stock for all periods presented was 4,428,360.
See Notes to Consolidated Financial Statements.
REGENICIN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
|CASH FLOWS FROM OPERATING ACTIVITIES|
|Adjustments to reconcile net loss to net cash used in operating activities:|
|Unrealized loss on investment||(||)|
|Accrued interest on loans and notes payable|
|Changes in operating assets and liabilities|
|Accrued expenses - other|
|Accrued salaries - officers|
|Net cash used in operating activities||(||)||(||)|
|CASH FLOWS FROM FINANCING ACTIVITIES|
|Proceeds of loans from officers|
|Net cash provided by financing activities|
|NET DECREASE IN CASH||(||)||(||)|
|CASH - BEGINNING OF PERIOD|
|CASH - END OF PERIOD||$||$|
|Supplemental disclosures of cash flow information:|
|Cash paid for interest||$||$|
|Cash paid for taxes||$||$|
See Notes to Consolidated Financial Statements.
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY
Inc. ("Regenicin"), formerly known as Windstar, Inc., was incorporated in the state of Nevada on
NOTE 2 - BASIS OF PRESENTATION
Interim Financial Statements:
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and note disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of those of a recurring nature) considered necessary for a fair presentation have been included. Operating results for the six months ended March 31, 2022, are not necessarily indicative of the results that may be expected for the year ending September 30, 2022. These unaudited consolidated financial statements should be read in conjunction with the unaudited consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K/A for the year ended September 30, 2021, as filed with the Securities and Exchange Commission. The consolidated balance sheet as of September 30, 2021, contained herein has been derived from the unaudited consolidated financial statements as of September 30, 2021, but does not include all disclosures required by U.S. GAAP.
The Company's consolidated financial statements have been prepared assuming that the Company will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred recurring losses and as of December 31, 2022, has an accumulated deficit of approximately $15.6 million from inception, expects to incur further losses in the development of its business and has been dependent on funding operations through the issuance of convertible debt and private sale of equity securities. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Currently management plans to finance operations through the private or public placement of debt and/or equity securities. However, no assurance can be given at this time as to whether the Company will be able to obtain such financing. The consolidated financial statements do not include any adjustment relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Financial Instruments and Fair Value Measurement:
As of October 1, 2018, the Company adopted ASU No. 2016-01, “Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities”. The new standard principally affects accounting standards for equity investments, financial liabilities where the fair value option has been elected, and the presentation and disclosure requirements for financial instruments. Upon the effective date of the new standards, all equity investments in unconsolidated entities, other than those accounted for using the equity method of accounting, will generally be measured at fair value through earnings. There no longer is an available-for-sale classification and therefore, no changes in fair value will be reported in other comprehensive income (loss) for equity securities with readily determinable fair values. As a result of the adoption, the Company recorded a cumulative effect adjustment of a $950 decrease to accumulated other comprehensive income, and a corresponding decrease to accumulated deficit, as of October 1, 2018.
Common stock of Amarantus BioScience Holdings, Inc. (“Amarantus”) is carried at fair value in the accompanying consolidated balance sheets. Fair value is determined under the guidelines of GAAP which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Realized gains and losses, determined using the first-in, first-out (FIFO) method, and unrealized gains and losses are included in other income (expense) on the statement of operations.
common stock of Amarantus is valued at the closing price reported on the active market on which the security is traded. This valuation
methodology is considered to be using Level 1 inputs. The total value of Amarantus common stock at March 31, 2022 is $
Recently Issued Accounting Pronouncements:
Any recent pronouncements issued by the FASB or other authoritative standards groups with future effective dates are either not applicable or are not expected to be significant to the consolidated financial statements of the Company.
Basic loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted loss per share gives effect to dilutive convertible securities, options, warrants and other potential common stock outstanding during the period; only in periods in which such effect is dilutive.
The following weighted average securities have been excluded from the calculation even though the exercise price was less than the average market price of the common shares because the effect of including these potential shares was anti-dilutive due to the net losses incurred during 2022 and 2021:
|Convertible Preferred Stock|
|Convertible Promissory Note|
NOTE 4 – LOANS PAYABLE
Convertible Promissory Note – Officer
March 31, 2020, John Weber, the Company's Chief Financial Officer, advanced the Company a total of $
February 2011, an investor advanced $10,000. The loan does not bear interest and is due on demand. At both March 31, 2022 and September
30, 2021, the loan payable totaled $
Loans Payable - Officer:
September 30, 2020, J. Roy Nelson, the Company’s Chief Science Officer, made net advances to the Company totaling $
September 2018, Randall McCoy, the Company’s Chief Executive Officer, advanced to the Company $
July 2020 through March 31, 2022, John Weber, the Company’s Chief Financial Officer, advanced to the Company $
NOTE 5 - BRIDGE FINANCING
NOTE 6 - INCOME TAXES
The Company recorded no income tax expense for the six months ended March 31, 2022 and 2021 because the estimated annual effective tax rate was zero. As of March 31, 2022, the Company continues to provide a valuation allowance against its net deferred tax assets since the Company believes it is more likely than not that its deferred tax assets will not be realized.
NOTE 7 – STOCKHOLDERS' DEFICIENCY
At both March 31, 2022 and September 30, 2021, shares of Series A Preferred Stock (“Series A Preferred”) were outstanding.
A Preferred pays a dividend of
The Series A Preferred Stock was marketed through a private placement memorandum that included a reference to a ratchet provision which would have allowed the holders of the stock to claim a better conversion rate based on other stock transactions conducted by the Company during the three-year period following the original issuance of the shares. The Certificate of Designation does not contain a ratchet provision. Certain of the stock related transactions consummated by the Company during this time period may have triggered this ratchet provision, and thus created a claim by holders of the Series A Preferred Stock who purchased based on this representation for a greater conversion rate than initially provided. There have been no new developments related to the remaining Series A holders regarding this claim and the conversion rate of their Series A Preferred Stock. Changes to the preferred stock conversion ratio may result in modification or extinguishment accounting. That may result in a deemed preferred stock dividend which would reduce net income available to common stockholders in the calculation of earnings per share. Certain of the smaller Series A holders have already converted or provided notice of conversion of their shares. In respect of this claim, the Company and its outside counsel determined that it is not possible to offer an opinion regarding the outcome. An adverse outcome could materially increase the accumulated deficit.
dividends are cumulative commencing on the issue date when and if declared by the Board of Directors. As of March 31, 2022, and September
30, 2021, dividends in arrears were $
million (shares of Series B Convertible Preferred Stock
(“Series B Preferred”) have been authorized with a liquidation preference of $
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 505, “Equity.” Costs are measured at the estimated fair value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services as defined by ASC 505.
NOTE 9 - RELATED PARTY TRANSACTIONS
The Company’s principal executive offices are located in Little Falls, New Jersey. The headquarters is located in the offices of McCoy Enterprises LLC, an entity controlled by Mr. McCoy. The office is attached to his residence but has its own entrances, restroom and kitchen facilities.
The Company also maintains an office at Carbon & Polymer Research Inc. ("CPR") in Pennington, New Jersey, which is the Company's materials and testing laboratory. An officer of the Company is an owner of CPR.
No rent is charged for either premises.
On May 16, 2016, the Company entered into an agreement with CPR in which CPR will supply the collagen scaffolds used in the Company's production of the skin tissue. The contract contains a most favored customer clause guaranteeing the Company prices equal or lower than those charged to other customers. The Company has not yet made purchases from CPR.
See Note 4 for loans payable to related parties.
NOTE 10 - SUBSEQUENT EVENTS
Management has evaluated subsequent events through the date of this filing.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. 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. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.
During the quarter ended, March 31, 2022, the Company continued to position its product, NovaDerm®, to enter clinical trials to gain FDA product approval. Having secured Orphan Drug Designation as a biologic for NovaDerm®, we complied with all FDA annual reporting requirements.
As part of the initial asset purchase agreement of Permaderm®, we granted Amarantus Bioscience Holdings, Inc., a right of first refusal for the purchase of any engineered skin technology designed for treatment of severe burns in humans that we developed. This right of first refusal expired during on November 2019. The proceeds of this transaction provided needed working capital to greatly improve our product, conduct independent research and secure Orphan Status for NovaDerm®.
Recently, the risk of introducing pathogens when using materials from animals to produce drugs, devices, and biologics has increased awareness of the safety issues. NovaDerm® and future Regenicin products use animal sourced materials like collagen to produce the life-saving products. We have worked with our collagen supplier and the FDA to ensure we are meeting the expectations for traceability and purity of the FDA for NovaDerm® production. We have arranged for sufficient Bovine Closed Herd corium to produce sufficient collagen scaffolds to meet our needs for the clinical trials, ensuring compliance with FDA requirements.
Our major objective for 2022 is to secure the required funding to finalize some additional requirements of the IND application and begin the clinical trials. As previously reported, our goal in obtaining the required funding has been to minimize shareholders’ dilution as much as possible. Consequently, we are primarily pursuing financing through the issuance of debt instruments, international licensing agreements, governmental grants and sale of assets. We have completed all the administrative requirements to allow us to apply for grants. Regenicin is now registered with System For Award Management (“SAM”) which is required to do business with the US Government. We must have our IND submitted before we can request financial assistance from the US FDA Office of Orphan Products Clinical Trials Grant. We intend to take full advantage of working with OOPD to develop our clinical protocol according to suggestions from the FDA during our Pre-IND meeting.
The Orphan Drug Act created the Orphan Product Grants Program, which is administered by OOPD, to stimulate the development of promising products for rare diseases and conditions. Orphan product grants are a proven method of fostering and encouraging the development of new safe and effective medical products for rare diseases and conditions. These grants support new and continuing extramural research projects that test the safety and efficacy of promising new drugs, biologics, devices, and medical foods through human clinical trials in very vulnerable populations often with life-threatening conditions.
As a registered member of SAM we will be investigating numerous government programs to seek developmental funding needed to complete our IND.
We estimated that the completion of the IND and the clinical trials would take approximately 12-18 months and cost in the range of $6.9 million once initial funding is in place. It is estimated that the cost to finalize the IND will be approximately 1.9 million, and the cost to complete Phase 1/2 of the clinical trial will be approximately 5.0 million. In addition to the completion of the IND, the only other significant gating item to entering the clinical trials is funding for this process.
Two board positions remain open anticipating requests of Board representation from potential investors.
Importantly, we are filing this quarterly report without our auditor’s review of our financial information or this report. Our reason for doing this is simply that we cannot afford at this time to pay our auditor for past due services or prior filings or to pay the costs necessary for this current filing. Instead, we have provided herein information as typically presented in our 10Q quarterly report, including financial information, which has not been reviewed or audited by any independent outside source.
We intend, if and when able, to file an amendment to this 10Q and previously filed 10K with such audited and reviewed information. We are unaware at this time when, if ever, we will obtain the necessary funding for this amended filing, but we will continue to provide such information to investors as and when we are able through either this SEC EDGAR filing process and/or through postings on our website as things change.
Subject to funding, the initial trials are planned to begin with a total of ten subjects and an Initial Data Safety Monitoring Board, (DSMB), review of safety on the first three subjects once they have reached 6 months follow-up. We do not intend to interrupt our trial waiting for the DSMB report. Our management’s approach is to set up the trials so as to allow for a seamless transition into commercial production upon approval.
Our first cultured skin substitute product candidate, NovaDerm®, is a multi-layered tissue-engineered living skin prepared by utilizing autologous (patient’s own) skin cells. It is a graftable cultured epithelium skin substitute containing both epidermal and dermal components with a collagen base. Clinically, we expect our Cultured Skin substitute self-to-self skin graft product will perform the same as split thickness allograft skin. Our Autologous cultured skin substitute should not be rejected by the immune system of the patient, unlike porcine or cadaver cellular grafts. Immune system rejection is a serious concern in Xeno-transplant procedures which have a cellular component. The use of our cultured skin substitute should not require any specialized physician training because it is applied the same as in a standard split thickness allograft procedure.
NovaDerm® does not require the large harvest areas that are required when performing split thickness allograft procedures. NovaDerm® is designed to need only a small area of harvest material to cover the wound. Where split thickness allograft skin can be stretched 2 to 4 times, NovaDerm® can expand the coverage 100 to 400 times, greatly reducing scarring from harvesting. There are limits to how much burned area can be covered with the current split thickness allograft procedure. When a patient has more than 50% of their body with full thickness burns there is not enough harvest area available to cover the area so the same area harvested must be allowed to grow back the replacement skin before it can be harvested the second or third time, allowing to wound area to open with high risk of infection and even mortality.
Clinically speaking, a product designed to treat a life-threatening condition must be available for the patient when needed. Our Culture skin substitute is being developed to be ready to apply to the patient when the patient is ready for grafting, within the first month of the patient being admitted to the hospital. Patients with serious burn injuries may not be in a condition to be grafted on a predefined schedule made more than a month in advance. Therefore, in order to accommodate the patient’s needs, we are striving to ensure that our cultured skin substitute will have an adequate shelf life and manufacturing schedule to ensure it is available whether the patient needs it the first month, or any day after, until the patient’s wound is completely covered and closed. We intend to provide the patient enough NovaDerm® to meet the patients’ needs in a single lot of material with adequate shelf life to be available when the patient is ready. With our extended shelf life and enough material in the first shipment the physician may perform a second grafting 5 or ten days post grafting period 1.
We believe this technology has many different uses beyond the burn indication. The other uses may include chronic wounds, reconstructive surgery.
We, as aforementioned, are continuing to work with potential investors in order to secure the necessary funding based on our stated objectives. It has taken longer to raise the necessary funds than original estimated; however remain confident. For the past several years, officers and related parties have continued to fund our essential operating costs on a temporary basis, as discussed in the accompanying financial statements.
On January 21, 2022, we entered into a non- binding memorandum of terms in which we proposed to sell certain of our prime assets to a newly formed Limited Liability Company for a combination of an upfront purchase price, and intellectual property, royalty and milestone payments. The terms of this non binding arrangement are subject to our entering into an actual binding agreement, as well as, upon a number of conditions, including the Buyer’s due diligence investigation. The arrangement only requires us to cease and desist from any further discussions for the sale of the proposed assets, other than with the proposed Buyers, during an ‘exclusivity period’ lasting for between 90-120 days. We have not verified the Buyer’s willingness or ability to proceed on this arrangement and note that such arrangements are highly speculative and do not require either part to proceed.
Results of Operations for the Three Months Ended March 31, 2022 and 2021
We generated no revenues from September 6, 2007 (date of inception) to March 31, 2022. We do not expect to generate revenues until we are able to obtain FDA approval of our product and thereafter successfully market and sell the product.
We incurred operating expenses of $155,513 for the three months ended March 31, 2022, compared with operating expenses of $225,736 for the three months ended March 31, 2021. General and Administrative expenses accounted for all of our operating expenses for the three months ended March 31, 2022. The significant decrease in operating expenses for the three months ended March 31, 2022 was due to an over accrual of professional fees as of March 31, 2021, which was adjusted in subsequent filings.
Net other expense was $11,136 for the three months ended March 31, 2022, as compared to net other expense of $7,568 for the three months ended March 31, 2021. Other expenses for the three months ended March 31, 2022 consisted of interest expense of $9,011 and an unrealized loss on securities of $ 2,125. Other income and expense for the same period ended 2021 consisted of interest expense of $8,418, and an unrealized gain on securities of $850.
After provision for preferred stock dividends of $17,845, we recorded net loss of $184,107 for the three months ended March 31, 2022. By comparison, we recorded net loss of $250,762 for the three months ended March 31, 2021. The decrease in net loss for the quarter ended March 31, 2022 was primarily the result of the aforementioned over accrual of professional fees at March 31, 2021, which was adjusted in subsequent filings.
Liquidity and Capital Resources
As of March 31, 2022, we had cash of $1,713 and total current assets of $3,688. As of March 31, 2022, we had current liabilities of $5,282,340. We therefore had working capital deficit of $5,278,652.
Operating activities used $17,146 in cash for the three months ended March 31, 2022. This use of cash was primarily attributable to funding the loss for the period.
There were no investing activities during the reported period.
Cash flows from financing activities for the three months ended March 31, 2022 represents net proceeds from a loan from John Weber, the Company’s Chief Financial Officer of $17,000.
We have issued various promissory notes to meet our short term demands, the terms of which are provided in the notes to the consolidated financial statements accompanying this report. While this source of bridge financing has been helpful in the short term to meet our financial obligations, we will need additional financing to fund our operations, continue with the FDA approval process, and implement our business plan. Our long term financial needs are estimated at about $8-10 million.
Based upon our current financial condition, we do not have sufficient cash to operate our business at the current level for the next twelve months. We intend to fund operations through increased debt and/or equity financing arrangements, which may be insufficient to fund expenditures or other cash requirements. We plan to seek additional financing in a private equity or debt offering to secure funding for operations. Alternatively, we have been discussing the possibility of obtaining financing through a merger and/or other arrangements related to combining with other related companies or going private transactions. There can be no assurance that we will be successful in raising additional funding or in entering into any of these sorts of arrangements. If we are not able to secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.
Off Balance Sheet Arrangements
As of March 31, 2022, there were no off-balance sheet arrangements.
Our consolidated financial statements have been prepared assuming that we will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have incurred operating losses from inception, expect to incur further losses in the development of our business, and have been dependent on funding operations through the issuance of convertible debt and private sale of equity securities. These conditions raise substantial doubt about our ability to continue as a going concern. Management’s plans include continuing to finance operations through the private or public placement of debt and/or equity securities and the reduction of expenditures. However, no assurance can be given at this time as to whether we will be able to achieve these objectives. The consolidated financial statements do not include any adjustment relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
A smaller reporting company is not required to provide the information required by this Item.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31, 2022. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2022, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of March 31, 2022, our disclosure controls and procedures were not effective: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.
Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting
We plan to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending September 30, 2022 assuming we are able to obtain necessary funding or alternative financing: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.
We are unable to remedy our controls related to the inadequate segregation of duties and ineffective risk management until we receive financing to hire additional employees.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended March 31, 2022 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.
Item 1A. Risk Factors
A smaller reporting company is not required to provide the information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
|Exhibit Number||Description of Exhibit|
|31.1||Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002|
|31.2||Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002|
|32.1||Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002|
|101**||The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 formatted in Extensible Business Reporting Language (XBRL).|
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|Date:||May 23, 2022|
|By:||/s/ Randall McCoy|
Executive Officer and Director|
(Principal Executive Officer)
|By:||/s/ John J. Weber|
|John J. Weber|
Financial Officer and Director|
(Principal Financial Officer)
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- 420 with CNW — New Congressional Measure Will Enable Cannabis Companies to List on Stock Exchanges
- Atara Biotherapeutics Reports Inducement Grants Under Nasdaq Listing Rule 5635(c)(4)
- Kayne Anderson NextGen Energy & Infrastructure Provides Unaudited Balance Sheet Information and Announces its Net Asset Value and Asset Coverage Ratios at June 30, 2022
Create E-mail Alert Related CategoriesSEC Filings
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!