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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
  For the quarterly period ended March 31, 2023
   
Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934
  For the transition period from                  to __________
   
 

Commission File Number: 333-146834 

 

Regenicin, Inc.
(Exact name of registrant as specified in its charter)

 

Wyoming 27-3083341
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)

 

OTCBB RGIN COMMON
Principal US Market Symbol Class of Trading Security

 

10 High Court, Little Falls, NJ 07424 (973) 557-8914
(Address of principal executive offices) (Registrant’s telephone number)

_______________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)

   

Indicate 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 ☒No

 

Indicate 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 ☒No

 

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
Non-accelerated filer Smaller reporting company
    Emerging growth company

  

If 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.  

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐Yes ☒No

 

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 153,483,050 as of April 4, 2023.

 

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 7
Item 4: Controls and Procedures 7
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
Item 6: Exhibits 8

 

 2 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements 

 

Our consolidated financial statements included in this Form 10-Q are as follows: 

 

The consolidated financial statements for the six months ended March 31, 2023 and 2022 have not been reviewed by our independent registered public accounting firm. The consolidated balance sheet as September 30, 2022 has not been audited by our independent registered public accounting firm. 

 

F-1 Consolidated Balance Sheets as of March 31, 2023 (unreviewed) and September 30, 2022 (unaudited);
F-2 Consolidated Statements of Operations for the three and six months ended March 31, 2023 and 2022 (unreviewed);
F-3 Consolidated Statements of Stockholders’ Deficiency for the six months ended March 31, 2023 and 2022 (unreviewed);
F-4 Consolidated Statements of Cash Flows for the six months ended March 31, 2023 and 2022 (unreviewed); and
F-5 Notes to Consolidated Financial Statements.

 

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, 2023 are not necessarily indicative of the results that can be expected for the full year.

 

 3 

REGENICIN, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(UNREVIEWED AND UNAUDITED)

 

  March 31,
2023
  September 30,
2022
   (Unreviewed)    (Unaudited) 
ASSETS         
CURRENT ASSETS         
Cash $10,880,109   $14,568 
Investment, at amortized cost  978,860      
Common stock of Amarantus  225    925 
Total current and total assets $11,859,194   $15,493 
LIABILITIES AND STOCKHOLDERS' DEFICIENCY         
CURRENT LIABILITIES         
Accounts payable $    $103,119 
Accrued expenses - other (related party of $75,389 and $65,471)  281,739    254,595 
Accrued salaries - officers  4,612,001    4,612,001 
Deferred income  12,533,625       
Promissory note payable  175,000    175,000 
Convertible promissory note - officer  335,683    335,683 
Loan payable  10,000    10,000 
Loans payable - officer  122,235    122,235 
Total current liabilities 18,070,283   5,612,633 
STOCKHOLDERS' DEFICIENCY         
Series A 8% Convertible Preferred stock, $0.001 par value, 5,500,000 shares authorized; 885,000 issued and outstanding  885    885 
Common stock, $0.001 par value; 200,000,000 shares authorized; 157,911,410 issued and 153,483,050 outstanding  157,914    157,914 
Additional paid-in capital  10,208,339    10,208,339 
Accumulated deficit  (16,573,799)   (15,959,850)
Less: treasury stock; 4,428,360 shares at par  (4,428)   (4,428)
Total stockholders' deficiency  (6,211,089)   (5,597,140)
Total liabilities and stockholders' deficiency $11,859,194   $15,493 

 

See Notes to Consolidated Financial Statements.

 F-4 

REGElNICIN, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNREVIEWED)

 

  Six Months Ended
March 31, 2023
  Six Months Ended
March 31, 2022
  Three Months Ended
March 31, 2023
  Three Months Ended
March 31, 2022
            
Revenues $     $     $     $   
Operating expenses                   
Research and development  432,256         94,743     
General and administrative  163,199    302,045    233,093    155,513 
Total operating expenses  595,455    302,045    327,836    155,513 
Operating loss before other operating income  (595,455)   (302,045)   (327,836)   (155,513)
Other operating income - reversal of accounts payable                       
Other income (expenses)                   
Interest expense (related party of $9,918, $9,132, $4,984 and $4,600)  (18,644)   (17,954)   (9,249)   (9,011)
Interest income on held-to-maturity investment  850         850      
Change in unrealized gain (loss) on securities  (700)   (775)    (200)   (2,125) 
Total other expenses  (18,494)   (18,729)   (8,599)   (11,136)
Net loss  (613,949)   (320,774)   (336,435)   (166,649)
Preferred stock dividends  (35,303)   (35,303)   (17,458)   (17,458)
Net loss attributable to common stockholders $(649,252)  $(356,077)  $(353,893)  $(184,107)
Loss per share basic $(0.00)  $(0.00)  $(0.00)  $(0.00)
Loss per share diluted $(0.00)  $(0.00)  $(0.00)  $(0.00)
Weighted average number of shares outstanding basic  153,483,050    153,483,050    153,483,050    153,483,050 
Weighted average number of shares outstanding diluted  153,483,050    153,483,050    153,483,050    153,483,050 

 

See Notes to Consolidated Financial Statements.

 F-5 

REGENICIN, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
(UNREVIEWED)

                         
              Additional          
  Convertible Preferred Stock  Common Stock  Paid-in  Accumulated   Treasury   
  Shares  Amount  Shares  Amount  Capital  Deficit   Stock (1)  Total
                         
Balances at October 1, 2022  885,000   $885    157,911,410   $157,914   $10,208,339   $(15,959,850)   $(4,428)   (5,597,140)
Net Loss                     (277,514        (277,514)
Balances at December 31, 2022  885,000    885    157,911,410    157,914    10,208,339    (16,297,135)    (4,428)   (5,934,425)
Net Loss                      (336,435)        (336,435)
Balances at March 31, 2023  885,000   $885    157,911,410   $157,914   $10,208,339   $(16,574,649)   $(4,428)   (6,211,939)
Balances at October 1, 2021  885,000    885    157,911,410    157,914    10,208,339    (15,320,588)    (4,428)   (4,957,878)
Net Loss                      (154,125)        (154,125)
Balances at December 31, 2021  885,000   885    157,911,410   157,914   10,208,339   (15,474,713)   (4,428)  (5,112,003)
Net Loss                      (166,649)        (166,649)
Balances at March 31, 2022  885,000   $885    157,911,410   $157,914   $10,208,339   $(15,641,362)   $(4,428)  $(5,278,652)

 

(1)The number of shares in treasury stock for all periods presented was 4,428,360.

 

See Notes to Consolidated Financial Statements. 

 F-6 

REGENICIN, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNREVIEWED)

 

Six Months Ended
March 31,
  Six Months Ended
March 31,
  2023  2022
 
CASH FLOWS FROM OPERATING ACTIVITIES         
Net loss $(613,949)  $(320,774)
Adjustments to reconcile net loss to net cash used in operating activities:         
Unrealized loss on investment  700   775 
Accrued interest on loans and notes payable  18,644    17,954 
Accretion of discount on held-to-maturity investment  (850      
Changes in operating assets and liabilities         
Accounts payable  (103,119   (8,676)
Accrued expenses - other  8,500    3,075 
Accrued salaries - officers        290,500 
Net cash used in operating activities  (690,074)   (17,146)
CASH FLOWS FROM INVESTING ACTIVITIES         
Proceeds of loans from officers        17,000 
Proceeds from the sale of partnership interests  (978,010)      
Net cash provided by financing activities  (978,010   17,000 
NET INCREASE IN CASH  10,865,541    (146) 
CASH - BEGINNING OF PERIOD  14,568    1,859 
CASH - END OF PERIOD $10,880,109   $1,713 
Supplemental disclosures of cash flow information:         
Cash paid for interest $     $   
Cash paid for taxes $     $   

 

See Notes to Consolidated Financial Statements.

 F-7 

REGENICIN, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNREVIEWED)

 

NOTE 1 - THE COMPANY

 

Regenicin, Inc. ("Regenicin"), formerly known as Windstar, Inc., was incorporated in the state of Nevada on September 6, 2007. On July 19, 2010, the Company amended its Articles of Incorporation to change the name of the Company to Regenicin, Inc. On August 31, 2022, we filed articles of continuance with the states of Nevada and Wyoming effectively moving our organizational jurisdiction from Nevada to Wyoming effective on that date. The Company's business plan is to develop and commercialize a potentially lifesaving technology by the introduction of tissue-engineered skin substitutes to restore the qualities of healthy human skin for use in the treatment of burns, chronic wounds and a variety of plastic surgery procedures.

 

In October 2022, the Company set up a new Nevada Series LLC called NovaDerm Product Package, LLC (“NPP LLC”). During November and December 2022, consistent with Nevada law governing this Master Series LLC, the Company established twenty-five (25) individual series LLCs, identifying each with a series letter of A through T or AA through EE. Thus, each of these sub-entities were named NovaDerm Product Package Series A, LLC through Series T, LLC, and then Series AA to Series EE, LLC (or NPP-A through NPP-T and NPP-AA through NPP-EE for short).

 

Into each of these twenty-five individual Series LLCs, the Company contributed the right and exclusive ownership to a certain amount of the bovine hides and corium that the Company currently owned and used as key materials in the preparation of its NovaDerm® product, as well as the right to designate: (a) the specific patient cultured skin to be prepared from these materials; (b) the amount of this cultured skin to be prepared up to a designated amount and (c) the medical facility to receive the fully prepared and processed NovaDerm® cultured skin from these materials (these materials and combined designation rights are collectively referred to herein as the “NovaDerm® Product Rights”). For NPP-A through NPP-T and NPP-AA through NPP-CC the Company designated 33,333 cm2 of these NovaDerm® Product Rights. For NPP-DD they designated 30,625 cm2 of NovaDerm® Product Rights and for NPP-EE they designated 28,783 cm2 of NovaDerm® Product Rights. Each contribution of each of the NovaDerm® Product Rights was provided in exchange for 100 membership interests in the Series LLC which represented 100% of all membership interests issued.

 

The Company subsequently transferred 99% of their membership interests (or 99 membership interests) in each of these Series LLC to various Limited Liability Companies, held by individuals unknown to us, in exchange for a pre-agreed payment. Prior to December 31, 2022, the members of these LLCs voted to donate 100% of the membership interests to charity.

 

While the Company retains possession of the materials transferred in each Series LLC contribution, the Company has a continuing obligation to segregate and manage those materials as well as to prepare the NovaDerm® cultured skin product as designated by each Series LLC holder or their designate. The identified materials are currently set apart from other such materials and are being held by the Company pending the identification of the patient and medical facility as instructed by each NovaDerm® Product Rights holder. Notwithstanding this retention of possession by the Company, the ownership and legal title to the materials are retained and fully vested in the individual Series LLC or its designate.

 

The above-described transfers of membership interests in the Series LLCs generated a substantial amount of cash which we are obligated to use for the completion of our NovaDerm IND and the administration of our product clinical trials. No assurance, however, can be given as to the success or failure of such IND or clinical trials, or as to any future FDA decisions made following these trials. Due to the continuing obligation the Company recorded the amount received as deferred income.

 

 F-8 

 

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 three months ended March 31, 2023, are not necessarily indicative of the results that may be expected for the year ending September 30, 2023. 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 for the year ended September 30, 2022, as filed with the Securities and Exchange Commission. The consolidated balance sheet as of September 30, 2022, contained herein has been derived from the unaudited consolidated financial statements as of September 30, 2022, but does not include all disclosures required by U.S. GAAP.

 

Going Concern:

 

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 March 31, 2023, has an accumulated deficit of approximately $16.6 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, private sale of equity securities, and recently the certain partnership interest. 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.

 

The 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, 2023 is $225. The change in unrealized loss for the six months ended March 31, 2023 and 2022 was $(700) and $(775) net of income taxes, respectively, and was reported as other income (expense).

 

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.

 

 F-9 

 

NOTE 3 - LOSS PER SHARE

 

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 of net loss per share for the six months ended March 31, 2023 and 2022 as the exercise price was greater than the average market price of the common shares:

 

  2023   2022  
Options   11,771,344        11,771,334     

 

The following weighted average securities have been excluded from the calculation because the effect of including these potential shares was anti-dilutive due to the net losses incurred during the six months ended March 31, 2023 and 2022:

 

  2023  2022
Convertible Preferred Stock  8,850,000    8,850,000 
Convertible Promissory Note  99,889,073    19,072,770 
 108,739,073    36,694,114 

 

NOTE 4 – LOANS PAYABLE

 

Convertible Promissory Note – Officer

 

Through March 31, 2020, John Weber, the Company's Chief Financial Officer, advanced the Company a total of $335,683. On March 31, 2020, these advances were converted into a convertible promissory note. Interest on the note is computed at 5% per annum and accrues from the time of the advances until the maturity date. The original maturity date was September 30, 2020, at which time all the accrued interest and principal became due. The note has been extended several times and most recently to December 31, 2022. For the six and three months ended March 31, 2023 and 2022 interest totaling $9,918, $9,132, $4,984 and $4,600, respectively, was incurred. Accrued interest on the note was $75,389 and $65,471 at March 31, 2023 and September 30, 2022, respectively, which is included in accrued expenses on the accompanying consolidated balance sheets. The note is convertible at the option of Mr. Weber into shares of the Company's common stock at the prevailing market rate on the date of conversion.

 

Loan Payable:

 

In February 2011, an investor advanced $10,000. The loan does not bear interest and is due on demand. At both March 31, 2023 and September 30, 2022, the loan payable totaled $10,000.

 

Loans Payable - Officer:

 

Through September 30, 2020, J. Roy Nelson, the Company’s Chief Science Officer, made net advances to the Company totaling $26,935. The loans do not bear interest and are due on demand.

 

In September 2018, Randall McCoy, the Company’s Chief Executive Officer, advanced to the Company $4,500. The loan does not bear interest and is due on demand.

 

From July 2020 through September 2022, John Weber, the Company’s Chief Financial Officer, advanced to the Company $90,800. The loan bears interest at 5% per annum and is due on demand.

 F-10 

 

NOTE 5 - BRIDGE FINANCING

 

On December 21, 2011, the Company issued a $150,000 promissory note to an individual. The note bore interest so that the Company would repay $175,000 on the maturity date of June 21, 2012. Additional interest of 10% was charged on any late payments. The note was not paid at the maturity date and the Company is incurring additional interest as described above. At both March 31, 2023 and September 30, 2022, the note balance was $175,000. Interest expense was $8,726 for each of the six months ended March 31, 2023 and 2022. Accrued interest on the note was $186,664 and $179,938 as of March 31, 2023 and September 30, 2022, respectively, and is included in Accrued expenses - other in the accompanying consolidated balance sheets.

 

NOTE 6 - INVESTMENTS

 

The Company determines the appropriate classification of its investments in debt securities at the time of purchase and reevaluates such determinations at each consolidated balance sheet date. Debt securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. Debt securities for which the Company does not have the intent or ability to hold to maturity are classified as available-for-sale. Held-to-maturity securities are recorded as either short term or long term on the consolidated balance sheet, based on contractual maturity date and are stated at amortized cost. Debt securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported at fair value, with unrealized gains and losses recognized in earnings. Debt securities not classified as held-to-maturity or as trading are classified as available-for-sale, and are carried at fair value, with the unrealized gains and losses, net of tax, included in the determination of comprehensive income and reported in members’ equity. At March 31, 2023, the Company held an investment in debt securities that was classified as held-to-maturity and consisted of the following:

 

   Amortized
Costs
  Unrealized
Loss
United States Treasury Obligation  $978,860   $(236)

  

NOTE 7 - INCOME TAXES

 

The Company recorded no income tax expense for the six months ended March 31, 2023 and 2022 because the estimated annual effective tax rate was zero. As of March 31, 2023, 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 8 – STOCKHOLDERS' DEFICIENCY

 

Preferred Stock:

 

Series A

 

At both March 31, 2023 and September 30, 2022, 885,000 shares of Series A Preferred Stock (“Series A Preferred”) were outstanding.

 

Series A Preferred pays a dividend of 8% per annum on the stated value and has a liquidation preference equal to the stated value of the shares ($885,000 liquidation preference as of March 31, 2023 and September 30, 2022 plus dividends in arrears as per below). Each share of Series A Preferred Stock has an initial stated value of $1.00 and is convertible into shares of the Company’s common stock at the rate of 10 for 1.

 

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.

 

The dividends are cumulative commencing on the issue date when and if declared by the Board of Directors. As of March 31, 2023, and September 30, 2022, dividends in arrears were $835,333 ($.96 per share) and $818,030 ($.92 per share), respectively.

 

Series B

 

Four million (4,000,000) shares of Series B Convertible Preferred Stock (“Series B Preferred”) have been authorized with a liquidation preference of $2.00 per share. Each share of Series B Preferred is convertible into ten shares of common stock. Holders of Series B Preferred have a right to a dividend (pro-rata to each holder) based on a percentage of the gross revenue earned by the Company in the United States, if any, and the number of outstanding shares of Series B Preferred, as follows: Year 1 - Total Dividend to all Series B holders = .03 x Gross Revenue in the U.S. Year 2 - Total Dividend to all Series B holders = .02 x Gross Revenue in the U.S. Year 3 - Total Dividend to all Series B holders = .01 x Gross Revenue in the U.S. At March 31, 2023, no shares of Series B Preferred are outstanding. 

 F-11 

 

NOTE 9 - STOCK-BASED COMPENSATION

 

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 10- 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.

 

The Company paid rent in the amount of $24,610 for the six months ended March 31, 2023. No rent was charged previously.

 

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 11 - SUBSEQUENT EVENTS

 

Management has evaluated subsequent events through the date of this filing.

 

 F-12 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” 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.

 

Overview of key events during the first two quarters ended March 31, 2023

 

During the first two quarters ended March 31, 2023, we implemented a program of pre-packaging and transferring materials and rights to set amounts of our NovaDerm® product to certain individuals through new series LLCs. These individuals were interested in acquiring our product materials and rights for the purpose of transferring them to charitable foundations interested in medical solutions for burn victims.

 

As part of this process, in October 2022, we set up a new Nevada Series LLC called NovaDerm Product Package, LLC (“NPP LLC”). During November and December 2022, consistent with Nevada law governing this Master Series LLC, we establish twenty-five (25) individual series LLCs, identifying each with a series letter of A through T or AA through EE. Thus, each of these sub-entities were named NovaDerm Product Package Series A, LLC through Series T, LLC, and then Series AA to Series EE, LLC (or NPP-A through NPP-T and NPP-AA through NPP-EE for short).

 

Into each of these twenty-five individual Series LLCs, we contributed the right and exclusive ownership to a fixed amount of the bovine hides and corium we use as key materials in the preparation of our NovaDerm® product, as well as the right to designate: (a) the specific patient cultured skin to be prepared from these materials; (b) the amount of this cultured skin to be prepared up to a designated amount and (c) the medical facility to receive the fully prepared and processed NovaDerm® cultured skin from these materials (these materials and combined designation rights are collectively referred to herein as the “NovaDerm® Product Rights”). For NPP-A through NPP-T and NPP-AA through NPP-CC we designated 33,333 cm2 of these NovaDerm® Product Rights. For NPP-DD we designated 30,625 cm2 of NovaDerm® Product Rights and for NPP-EE we designated 54,950 cm2 of NovaDerm® Product Rights. Each contribution of each of the NovaDerm® Product Rights was provided in exchange for 100 membership interests in the Series LLC which represented 100% of all membership interests issued.

 

Immediately after this contribution, we transferred 1 membership interest, or 1% of each Series LLC, to an individual in exchange for their management of the individual Series LLC operations. Following this transfer, we transferred the remaining 99 membership interests, or 99% of each of the Series LLCs to various Limited Liability Companies held by individuals unknown to us, in exchange for a pre-agreed payment. These transfers were made beginning in November 2022 and ending before year end.

 

While we retain possession of the materials transferred in each Series LLC contribution, we have a continuing obligation to segregated and manage those materials as well as to prepare the NovaDerm® cultured skin product as designated by each Series LLC holder or their designate. The identified materials are currently set apart from other such materials and are being held by us pending the identification of the patient and medical facility as instructed by each NovaDerm® Product Rights holder. Notwithstanding this retention of possession by us, the ownership and legal title to the materials are retained and fully vested in the individual Series LLC or its designate, where it was transferred.

 

 4 

 

The above-described transfers of membership interests in the Series LLCs generated a substantial amount of cash which we are obligated to use for the completion of our NovaDerm IND and the administration of our product clinical trials. As a result, during the second quarter of this fiscal year, we engaged a global Clinical Research Organization (CRO) with extensive experience performing clinical trials and preparing INDs to assist us in preparing our detailed submittal to the FDA. No assurance, however, can be given as to the success or failure of such IND or clinical trials, or as to any future FDA decisions made following our IND submission.

 

Our major objective for 2023 remains to complete the requirements of our NovaDerm IND application and begin our clinical trials. It remains our estimate that the cost to finalize the IND will be approximately $1.9 million dollars, and the cost to complete Phase 1/2 of the clinical trial will be approximately 5.0 million dollars. The time frame for each of these will vary based on several, as yet, variable factors and thus cannot be provided with any assurance. Furthermore, there can be no assurance that we will be able to complete these tasks for these estimated amounts or that we will be successful in the proving out our NovaDerm® Product in this process. Indeed, clinic trials are notoriously difficult and expensive and are likely to result in additional unplanned costs and a denial of FDA approval.

 

As previously reported, our goal in obtaining funding for this process has been to minimize shareholders' dilution as much as possible. We believe the manner in which we structured our transfer of NovaDerm® Product Rights has successfully achieved this objective. We will continue to work with potential investors, as necessary, in order to pursue other necessary funding based on our stated objective of successfully completing our planned clinical trials and obtaining FDA approval for the commercial sale of our NovaDerm® Product. It has taken longer to raise the funds than originally estimated; however, we remain hopeful that our goal is now achievable.

 

In the preparation of the IND application, we will continue to develop the testing suggested by the FDA during our Pre-IND meeting. Our scaffold supplier continues to perform the FDA suggested testing on collagen processing which addresses Bovine Closed Herd requirements for the enhanced safety and traceability of the collagen scaffolds used to produce NovaDerm®. We will be entering into discussions and evaluation of possible clinical trial sites for NovaDerm® as we proceed through the FDA approval process. Our discussions so far have confirmed that patient recruitment and enrollment should be faster and less complicated than other clinical trials because of our Orphan Designation and the fact that the surgical protocol will be similar to the grafting procedures currently in use at most facilities. NovaDerm® should thus require minimal physician training and documentation to complete the clinical trial, when and if conducted.

 

While we are currently in the process of working with our CRO to prepare the IND for filing, because of the numerous factors involved in the process, including pre-clinical testing, we remain unable at this time to provide a detailed timeline for the filing of the NovaDerm® IND or the commencement of clinical trials. Our initial trials, subject to FDA approval, 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. We have arranged for sufficient Bovine Closed Herd corium to produce sufficient collagen scaffolds to meet our needs for the clinical trials once the IND is approved.

 

Three board positions remain open on our Board of Directors.

 

Importantly, we are filing this quarterly report without our auditor’s review or any audit of our financial information or this report. Our reason for doing this is that we are still in the process of obtaining the completion of the audits of our past financial reports with our auditors for past years. 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 complete, to file an amendment to this 10Q filing with such reviewed and audited financial information. We are unaware, at this time, when we will obtain the necessary review and audit of the current and past filings; however, we have been working on re-engaging our auditors and will continue to provide current information to investors and the public through our EDGAR filings and postings on our website.

 5 

 

Results of Operations for the Six Months Ended March 31, 2023 and 2022

We generated no revenues from September 6, 2007 (date of inception) to March 31, 2023. We do not expect to generate revenue until we are able to obtain FDA approval of our product.

 

We incurred operating expenses of $595,455 for the three months ended March 31, 2023, compared with operating expenses of $155,513 for the three months ended March 31, 2022. General and administrative expenses accounted for $163,199 of our operating expenses and $432,256 was from research and development for the three months ended March 31, 2023. The major difference and shift in operating expenses from the three months ended March 31, 2022 was accounted for by an increase in research and development expense of $432,256. Otherwise, all operating expenses during the three months ended March 31, 2023 were from General and Administrative expenses in the amount of $233,093 and $94,743 in research and development expense.

 

Net other expense was $18,494 for the three months ended March 31, 2023, as compared to net other income of $11,136 for the three months ended March 31, 2022. Other income and expenses for the three months ended March 31, 2022 consisted of interest expenses of $9,011. Other income and expenses for the same period ended 2022 consisted of an unrealized loss on securities loss of $2,125 and an interest expense of $9,011.

 

After provision for preferred stock dividends of $17,845, we recorded net loss of $649,252 for the three months ended March 31, 2023. By comparison, we recorded net loss of $184,107 for the three months ended March 31, 2022. Our net loss for the quarter ended March 31, 2022 was primarily the result of $155,513 of general and administrative expenses.

 

Liquidity and Capital Resources

 

As of March 31, 2023, we had cash of $10,880,109 and total current assets of $11,859,194. As of March 31, 2023, we had current liabilities of $18,070,283. We therefore had a working capital deficit of $6,211,089.

 

Operating activities used $690,074 in cash for the six months ended March 31, 2023. The decrease in cash was primarily attributable to funding the loss for the period and an increase in research and development expense.

 

Investing activities and financing activities provided no cash or cost during the reported period. Based on the Company's cash balance we have sought the safest available investments for our research and operations designated funds. There remains a risk of loss when investing  and or depositing funds in any investment vehicle.

We note that the value of the shares of Amarantus we obtained and which created income from that sale of assets transaction have declined significantly in value since the consummation of the agreement.

 

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.

 

 6 

  

Off Balance Sheet Arrangements

 

As of March 31, 2023, there were no off-balance sheet arrangements.

 

Going Concern

 

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, 2023. 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, 2023, our disclosure controls and procedures were not effective due to 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, 2023, 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

 

Our company plans 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, 2023 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.

 

We are unable to remedy our controls related to the inadequate segregation of duties and ineffective risk management until we have hired sufficient qualified staff to perform the necessary functions.  

 

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, 2023 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

  

 7 

 

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 

 

The information set forth below relates to our issuances of securities without registration under the Securities Act of 1933 during the reporting period which were not previously included in a Quarterly Report on Form 10-Q or Current Report on Form 8-K.

 

For the six months ended March 31, 2023, no shares of common stock have been issued for the conversion of principal issued under our bridge financing and accrued interest.

 

These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders expressed their intention to acquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.

 

Item 3. Defaults upon Senior Securities

 

None

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None

 

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, 2023 formatted in Inline eXtensible Business Reporting Language (iXBRL).
**Provided herewith

 

 8 

 

SIGNATURES

 

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.

 

  Regenicin, Inc.
   
Date: May 15, 2023
   
By: /s/ Randall McCoy
  Randall McCoy
Title: Chief Executive Officer and Director
(Principal Executive Officer)

 

By: /s/ John J. Weber
  John J. Weber
Title: Chief Financial Officer and Director
(Principal Financial Officer)

 

 9