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EX-32.1 - RegenoCELL Therapeutics, Inc. | v205535_ex32-1.htm |
EX-31.1 - RegenoCELL Therapeutics, Inc. | v205535_ex31-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
x QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the
quarterly period ended September 30, 2010
¨
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the
transition period from _________________ to
Commission
File Number: 000-50639
REGENOCELL THERAPEUTICS,
INC.
(Exact
name of registrant as specified in its charter)
Florida
|
22-3880440
|
(State
or other jurisdiction of incorporation
|
(I.R.S.
Employer Identification No.)
|
or
organization)
|
2 Briar
Lane
Natick,
Massachusetts 01760
(Address
of Principal Executive Offices)
(508)
647-4065
(Registrant's
telephone number, including area code)
Check
whether the registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past
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 x No
¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer”,
“accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. Yes x No
¨
Large
Accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer (Do not check
|
Smaller
reporting company x
|
if
a smaller reporting company) ¨
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨ No
x
Indicate
the number of shares outstanding of the registrant's common stock, par value
$0.0001 per share, outstanding as of the latest practical date. 81,687,500
shares of common stock outstanding as of December 9, 2010.
REGENOCELL
THERAPEUTICS, INC.
Quarterly
Report on Form 10-Q
For
the Quarterly Period Ended September 30, 2010
FORWARD-LOOKING
STATEMENTS
This Form
10-Q for the quarterly period ended September 30, 2010 contains forward-looking
statements that involve risks and uncertainties. Forward-looking
statements in this document or incorporated herein by reference that are not
related to historical results are “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995.
Statements
that are predictive, that depend upon or refer to future events or conditions,
and/or that include words such as “expects,” “anticipates,” “intends,” “plans,”
“believes,” “estimates,” “hopes,” and similar expressions constitute
forward-looking statements. In addition, any statements concerning future
financial performance (including future revenues, earnings or growth rates),
business strategies or prospects, or possible future actions by us are also
forward-looking statements.
These
forward-looking statements are based on beliefs of our management as well as
current expectations, projections, assumptions and information currently
available to the Company and are subject to certain risks and uncertainties that
could cause actual results to differ materially from historical results or those
anticipated or implied by such forward-looking statements. In
evaluating these statements, you should consider various factors including the
assumptions, risks and uncertainties set forth in our Annual Report on Form 10-K
for the year ended December 31, 2009 and other reports and documents we have
filed with or furnished to the Securities and Exchange
Commission. Should one or more of those risks or uncertainties
materialize or should underlying expectations, projections and assumptions prove
incorrect, actual results may vary materially from those
described. Those events and uncertainties are difficult to predict
accurately and many are beyond our control. The Company assumes no obligation to
update these forward-looking statements to reflect events or circumstances that
occur after the date of these statements except as specifically required by
law. Accordingly, past results and trends should not be used to
anticipate future results or trends.
2
INDEX
Part
I— FINANCIAL INFORMATION
|
4
|
Item
1. Interim Financial Statements and Notes – Quarter Ended September 30,
2010
|
4
|
Item
2. Management’s Discussion and Analysis or Plan of
Operations
|
13
|
Item
3. Controls and Procedures
|
18
|
Part
II— OTHER INFORMATION
|
18
|
Item
1. Legal Proceedings
|
18
|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
18
|
Item
3. Defaults upon Senior Securities
|
18
|
Item
4. Submission of Matters to a Vote of Security Holders
|
19
|
Item
5. Other Information
|
19
|
Item
6. Exhibits and Reports on Form 8-K
|
20
|
Signatures
|
20
|
3
PART
I - FINANCIAL INFORMATION
Item
1 – Interim Financial Statements and Notes – Quarter Ended September 30,
2010
Contents
Page
No.
|
|
Consolidated
Balance Sheets – September 30, 2010 and December 31, 2009
|
5
|
Consolidated
Statements of Operations for the Three and Nine Months Ended September 30,
2010 and 2009
|
7
|
Consolidated
Statement of Stockholders’ Equity from December 31, 2008 through September
30, 2010
|
8
|
Consolidated
Statements of Cash Flows for the Nine Months ended September 30, 2010 and
2009
|
9
|
Notes
to Condensed Consolidated Financial Statements
|
10
|
4
RegenoCELL
Therapeutics, Inc.
Consolidated
Balance Sheets
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash
|
$ | 28,510 | $ | 102,078 | ||||
Accounts
receivable
|
33,000 | - | ||||||
Prepaid
expenses
|
144,880 | - | ||||||
Other
current assets
|
8,182 | - | ||||||
Total
Current Assets
|
214,572 | 102,078 | ||||||
PROPERTY
AND EQUIPMENT, net
|
124,898 | 2,893 | ||||||
OTHER
ASSETS
|
||||||||
Security
deposits
|
137,072 | - | ||||||
Goodwill
|
49,338 | - | ||||||
Net
intangible licensing costs
|
5,004,000 | - | ||||||
TOTAL
ASSETS
|
$ | 5,529,880 | $ | 104,971 |
The
accompanying notes are an integral part of these financial
statements.
5
RegenoCELL
Therapeutics, Inc.
Consolidated
Balance Sheets
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
(Unaudited)
|
||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
payable
|
$ | 483,562 | $ | 64,981 | ||||
Accrued
interest payable
|
263,139 | 110,597 | ||||||
Accrued
expenses
|
485,284 | 750 | ||||||
Notes
payable, related parties
|
309,265 | 120,094 | ||||||
Notes
payable, current portion
|
112,000 | 162,323 | ||||||
Total
Current Liabilities
|
1,653,250 | 458,745 | ||||||
LONG-TERM
LIABILITIES
|
||||||||
Notes
payable, net of current portion
|
3,911,823 | - | ||||||
TOTAL
LIABILITIES
|
5,565,073 | 458,745 | ||||||
STOCKHOLDERS'
EQUITY (DEFICIT)
|
||||||||
Preferred
Stock $.0001 par value, 80,000,000 shares authorized,
|
- | - | ||||||
no
shares issued and outstanding
|
||||||||
Common
Stock, $.0001 par value, 520,000,000 shares authorized,
|
||||||||
81,687,500
and 41,437,500 shares issued and outstanding, repectively
|
8,169 | 4,144 | ||||||
Additional
Paid in Capital
|
1,259,010 | 4,913 | ||||||
Accumulated
Deficit
|
(1,278,736 | ) | (362,831 | ) | ||||
Accumulated
Other Comprehensive Income (Loss)
|
(23,636 | ) | - | |||||
Total
Stockholders' Equity (Deficit)
|
(35,193 | ) | (353,774 | ) | ||||
TOTAL
LIABILITIES STOCKHOLDERS' EQUITY (DEFICIT)
|
$ | 5,529,880 | $ | 104,971 |
The
accompanying notes are an integral part of these financial
statements.
6
RegenoCELL
Therapeutics, Inc.
Consolidated
Statements of Operations
(Unaudited)
For the Three Months Ended
|
For the Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
REVENUES
|
$ | 172,033 | $ | - | $ | 738,855 | $ | - | ||||||||
OPERATING
EXPENSES
|
||||||||||||||||
General
and administrative
|
169,778 | 17,396 | 480,748 | 33,881 | ||||||||||||
Professional
fees
|
131,702 | - | 440,919 | - | ||||||||||||
Development
costs
|
- | 46,914 | 64,625 | 46,914 | ||||||||||||
Employee
expenses
|
280,893 | - | 410,633 | - | ||||||||||||
Total
Operating Expenses
|
582,373 | 64,310 | 1,396,925 | 80,795 | ||||||||||||
OPERATING
INCOME (LOSS)
|
(410,341 | ) | (64,310 | ) | (658,071 | ) | (80,795 | ) | ||||||||
OTHER
INCOME (EXPENSE)
|
||||||||||||||||
Marketing
rights
|
- | - | 30,000 | - | ||||||||||||
Interest
expense
|
(6,994 | ) | - | (287,981 | ) | - | ||||||||||
Other
income
|
146 | - | 146 | - | ||||||||||||
Total
Other Income (Expenses)
|
(6,848 | ) | - | (257,835 | ) | - | ||||||||||
NET
LOSS BEFORE INCOME TAXES
|
(417,189 | ) | (64,310 | ) | (915,906 | ) | (80,795 | ) | ||||||||
Income
taxes
|
- | - | - | - | ||||||||||||
NET
LOSS
|
$ | (417,189 | ) | $ | (64,310 | ) | $ | (915,906 | ) | $ | (80,795 | ) | ||||
OTHER
COMPREHENSIVE INCOME (LOSS)
|
||||||||||||||||
Foreign
currency translation adjustment
|
24,881 | - | (23,636 | ) | - | |||||||||||
TOTAL
COMPREHENSIVE LOSS
|
$ | (392,308 | ) | $ | (64,310 | ) | $ | (939,542 | ) | $ | (80,795 | ) | ||||
BASIC
AND DILUTED LOSS PER
|
||||||||||||||||
COMMON
SHARE
|
$ | (0.01 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.00 | ) | ||||
WEIGHTED
AVERAGE NUMBER OF
|
||||||||||||||||
COMMON
SHARES OUTSTANDING
|
81,654,348 | 131,437,500 | 81,071,016 | 131,437,500 |
The
accompanying notes are an integral part of these financial
statements.
7
RegenoCELL
Therapeutics, Inc.
Consolidated
Statements of Stockholders’ Equity (Deficit)
(Unaudited)
Accumulated
|
||||||||||||||||||||||||
Additional
|
Other
|
|||||||||||||||||||||||
Common
Stock
|
Paid-in
|
Comprehensive
|
Accumulated
|
|||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Deficit
|
Total
|
|||||||||||||||||||
December
31, 2008 - Balance
|
131,437,500 | $ | 13,144 | $ | 4,913 | $ | - | $ | (134,168 | ) | $ | (116,111 | ) | |||||||||||
December
30, 2009 - Cancellation of restricted
|
||||||||||||||||||||||||
common
stock issued on July 22, 2008
|
(90,000,000 | ) | (9,000 | ) | - | - | - | (9,000 | ) | |||||||||||||||
December
31, 2009 - Net (Loss)
|
- | - | - | - | (228,663 | ) | (228,663 | ) | ||||||||||||||||
December
31, 2009 - Balance
|
41,437,500 | 4,144 | 4,913 | - | (362,831 | ) | (353,774 | ) | ||||||||||||||||
January
1, 2010- Issuance of restricted common
|
||||||||||||||||||||||||
stock
in acquisition of licensing rights
|
40,000,000 | 4,000 | 1,129,122 | - | - | 1,133,122 | ||||||||||||||||||
July
6, 2010 - Issuance of common
|
||||||||||||||||||||||||
stock
for services (unaudited)
|
200,000 | 20 | 99,980 | - | - | 100,000 | ||||||||||||||||||
August
11, 2010 - Issuance of restricted common
|
||||||||||||||||||||||||
stock
for cash (unaudited)
|
50,000 | 5 | 24,995 | - | - | 25,000 | ||||||||||||||||||
Foreign
currency translation adjustment (unaudited)
|
- | - | - | (23,636 | ) | - | (23,636 | ) | ||||||||||||||||
September
30, 2010 - Net (Loss) (unaudited)
|
- | - | - | - | (915,906 | ) | (915,906 | ) | ||||||||||||||||
September
30, 2010 - Balance (unaudited)
|
81,687,500 | $ | 8,169 | $ | 1,259,010 | $ | (23,636 | ) | $ | (1,278,737 | ) | $ | (35,194 | ) |
The
accompanying notes are an integral part of these financial
statements.
8
RegenoCELL
Therapeutics, Inc.
Consolidated
Statements of Cash Flows
(Unaudited)
For
the Nine Months Ended
|
||||||||
September 30,
|
||||||||
2010
|
2009
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net
Loss
|
$ | (915,906 | ) | $ | (80,795 | ) | ||
Adjustments
to reconcile net loss to net cash
|
||||||||
provided
by operating activities:
|
||||||||
Depreciation
|
75,325 | - | ||||||
Common
stock issued for services
|
100,000 | - | ||||||
Amortization
of discount on note payable
|
128,445 | - | ||||||
Changes
in operating assets and liabilities:
|
||||||||
(Increase)
in accounts receivable
|
(33,000 | ) | - | |||||
(Increase)
in prepaid expenses
|
(114,804 | ) | - | |||||
(Increase)
in other current assets
|
(7,990 | ) | - | |||||
Increase
(Decrease) in accounts payable
|
417,736 | 46,914 | ||||||
Increase
(Decrease) in accrued expenses
|
122,787 | (2,250 | ) | |||||
Increase
in accrued interest
|
152,542 | 3,792 | ||||||
Increase
in customer deposits
|
16,500 | - | ||||||
Net
cash provided by (used in) operating activities
|
(58,365 | ) | (32,339 | ) | ||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Acquisition
of property and equipment
|
(76,123 | ) | (3,099 | ) | ||||
Acquisition
of licensing rights
|
(100,000 | ) | - | |||||
Net
cash used in investing activities
|
(176,123 | ) | (3,099 | ) | ||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Repayment
of notes payable
|
(50,323 | ) | - | |||||
Common
stock issued for cash
|
25,000 | - | ||||||
Proceeds
from note payable
|
13,125 | 35,438 | ||||||
Proceeds
from notes payable related parties
|
188,546 | - | ||||||
Net
cash provided by financing activities
|
176,348 | 35,438 | ||||||
EFFECTS
OF EXCHANGE RATE CHANGES
|
(15,428 | ) | - | |||||
NET
INCREASE (DECREASE) IN CASH
|
(73,568 | ) | - | |||||
CASH
AT BEGINNING OF PERIOD
|
102,078 | - | ||||||
CASH
AT END OF PERIOD
|
$ | 28,510 | $ | - | ||||
SUPPLEMENTAL
CASH FLOW DISCLOSURES
|
||||||||
Cash
paid for interest
|
$ | - | $ | - | ||||
Cash
paid for income taxes
|
$ | - | $ | - | ||||
NON-CASH
INVESTING AND FINANCING ACTIVITIES
|
||||||||
Debt
incurred for acquisition of property and equipment
|
$ | 334,266 | $ | - | ||||
Debt
incurred for acquisition of licensing agreement
|
$ | 4,900,000 | $ | - | ||||
Stock
issued for acquisition of licensing agreement
|
$ | 4,000 | $ | - |
The
accompanying notes are an integral part of these financial
statements.
9
RegenoCELL
Therapeutics, Inc.
Notes to
Condensed Consolidated Financial Statements
September
30, 2010 and December 31, 2009
NOTE
1 – CONDENSED FINANCIAL STATEMENTS
The
accompanying financial statements have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the financial
position, results of operations, and cash flows at September 30, 2010, and for
all periods presented herein, have been made.
Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted. It is
suggested that these condensed financial statements be read in conjunction with
the financial statements and notes thereto included in the Company's December
31, 2009 audited financial statements. The results of operations for
the periods ended September 30, 2010 is not necessarily indicative of the
operating results for the full year.
NOTE
2 - GOING CONCERN
The
Company's financial statements are prepared using generally accepted accounting
principles in the United States of America applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. The Company has not yet established an ongoing source
of revenues sufficient to cover its operating costs and allow it to continue as
a going concern. The ability of the Company to continue as a going concern is
dependent on the Company obtaining adequate capital to fund operating losses
until it becomes profitable. If the Company is unable to obtain adequate
capital, it could be forced to cease operations.
In order
to continue as a going concern, the Company will need, among other things,
additional capital resources. Management's plan is to obtain such resources for
the Company by obtaining capital from management and significant shareholders
sufficient to meet its minimal operating expenses and seeking equity and/or debt
financing. However management cannot provide any assurances that the Company
will be successful in accomplishing any of its plans.
The
ability of the Company to continue as a going concern is dependent upon its
ability to successfully accomplish the plans described in the preceding
paragraph and eventually secure other sources of financing and attain profitable
operations. The accompanying financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going
concern.
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of
Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
Recent Accounting
Pronouncements
The
Company has evaluated recent pronouncements and does not expect their adoption
to have a material impact on the Company’s financial position, or
statements.
10
RegenoCELL
Therapeutics, Inc.
Notes to
Condensed Consolidated Financial Statements
September
30, 2010 and December 31, 2009
NOTE
4 – ASSET ACQUISITION
In early
January 2010 the Company created a wholly owned foreign subsidiary in Israel for
the purpose of developing and operating the laboratory facilities associated
with its products. The name of the subsidiary is Regenocell Laboratories
Ltd. On January 7th 2010, the Companies foreign subsidiary Regenocell
Laboratories Ltd. consummated an asset purchase agreement with TheraVitae
Limited. Under the terms of the agreement the Company acquired certain assets of
TheraVitae Limited at a book value of approximately $360,000, in exchange for
assuming certain liabilities of approximately $334,000 and $75,000 in cash (all
currency is in US dollars).
Purchase
Price
|
||||||||
Cash
Paid
|
$ | 75,000 | ||||||
Liabilities
Assumed
|
334,266 | |||||||
Total
Purchase Price
|
$ | 409,266 | ||||||
Assets
received
|
||||||||
Computer
|
173,058 | |||||||
Prepaid
Exp
|
26,676 | |||||||
Security
Deposit
|
137,072 | |||||||
Furniture
|
23,122 | |||||||
Net
Value of Assets Purchased
|
359,928 | |||||||
Goodwill
|
$ | 49,338 |
During
the quarter, Company entered into an agreement which became effective on January
7, 2010 to purchase the intangible assets of a company incorporated in Hong
Kong, Yieldex. Per the agreement, the Company purchased the rights to
patents and patent applications in connection with its activities of stem cell
research, therapy development, and clinical trials under the trade name
"TheraVitae." The agreement also assigned rights to testing
procedures, testing results, and full copy data from clinical trials conducted
by the seller over its operating and research history.
The
Company entered into an agreement which became effective on January 7, 2010 to
purchase the intangible assets of a company incorporated in Hong Kong,
Yieldex. Per the agreement, the Company purchased the rights to
patents and patent applications in connection with its activities of stem cell
research, therapy development, and clinical trials under the trade name
"TheraVitae." The agreement also assigned rights to testing
procedures, testing results, and full copy data from clinical trials conducted
by the seller over its operating and research history. This also
includes all other related procedures, software files, etc. The
assets were acquired in exchange for 40,000,000 shares of the Company’s common
stock, $100,000 cash, and a non interest bearing note, payable January 4, 2015,
in the amount of $4,900,000. Per the terms of the agreement, repayment of the
note will be made out of proceeds of revenues relating to the assigned
intangible assets and out of capital raised by management.
Management
has discounted the face of the note to present value assuming a 5.25% interest
rate. The amount of the discount is approximately $1,129,300, is being amortized
in equal monthly amounts of approximately $21,437 over the term of the note and
charged to interest expense on the income statement. As of September 30, 2010
the unamortized discount was $1,000,678.
NOTE
5 – RELATED PARTY NOTES PAYABLE
During
the nine months ended September 30, 2010, the Company has borrowed $309,265 from
a related party to fund continuing operations. This note bears no
interest, is due on demand and is uncollateralized. The balance as of December
31, 2009 was approximately $120,094.
11
RegenoCELL
Therapeutics, Inc.
Notes to
Condensed Consolidated Financial Statements
September
30, 2010 and December 31, 2009
NOTE
6 – NOTES PAYABLE
On March
30, 2010, a note payable representing 2.5 percent of total notes payable
outstanding went into default which meant that the default terms of the note
went into effect. According to the terms of the agreement, in the
event of default, the borrower is to pay an interest rate of 18 percent per
annum on all outstanding amounts owing to the lender until all amounts including
interest are paid in full. The interest began to accrue from the date of breach
and will extend up to the date all amounts owing are repaid in full by the
Company to the lender.
NOTE
7 – EQUITY TRANSACTIONS
On July
6, 2010, the Company issued 200,000 shares of its common stock for legal
services valued at $0.50 per share.
On August
11, 2010, the Company issued 50,000 shares of its restricted common stock for
cash at $0.50 per share. The investor also received 50,000 common stock purchase
warrants with an exercise price of $0.75 per share.
NOTE
8 – SUBSEQUENT EVENTS
In
accordance with ASC 855-10, Company management reviewed all material events
through the date of this report and there are no material subsequent events to
report.
12
ITEM
2. Management’s
Discussion and Analysis or Plan of Operations
Overview
The
Company was incorporated in Florida on February 1, 2002 and planned to develop
cafes in South Carolina expanding to other states in the South East, featuring
gourmet coffee, pastries and related items. The Company’s objective was to
develop cafes that provided a forum for rapid service and a strong community
identity with the widespread popularity of coffee and related products. Due to
intense competition, in early 2008 the Company changed its focus.
On July
16, 2008 the Company began focusing on a new stem cell therapy business
opportunity as set forth in a Letter of Intent dated March 31, 2008 with
TheraVitae, Inc. by completing several actions. These actions included the
filing of Amended Articles of Incorporation which among other matters changed
the name of the corporation to RegenoCELL Therapeutics, Inc. and increased the
authorized capitalization to 520,000,000 shares of Common Stock and 80,000,000
shares of Preferred Stock, approved Amended Bylaws, issued restricted common
shares to Douglas T. Rice (250,000) for introducing this new business
opportunity, Dominick Mazza (5,000,000) for consulting services for this new
business opportunity and James F. Mongiardo (15,000,000) for negotiating the
Letter of Intent which will become the new business of the corporation and for
directing and building it as its President and Chief Executive Officer, ratified
the March 31 Letter of Intent with TheraVitae, and approved the Employment
Agreement with James F. Mongiardo as President and Chief Executive
Officer.
The
Letter of Intent with TheraVitae provides for a non exclusive license in Mexico
and later the Islands of the Caribbean to commercialize TheraVitae’s stem cell
therapy for cardiovascular indications. The Company may establish
clinics to treat congestive heart failure patients with VesCell, TheraVitae’s
stem cell therapy. It also provides for an exclusive license in the
United States, Canada and Mexico to obtain regulatory approvals and then market
VesCell stem cell therapy for the treatment of peripheral artery
disease.
Further
in connection with this change in business focus, the Board of Directors
accepted the resignations of Scott Massey and Phillips N. Dee as directors and
officers of the Company and elected James F. Mongiardo to fill the vacancies on
the Board. Mr. Mongiardo was elected as Chief Executive Officer,
President, Treasurer, Secretary and sole director of the Company.
In 2009
the parties to the Letter of Intent reached an impasse and the license was not
acquired.
In early
January 2010 the Company created a wholly owned foreign subsidiary in Israel for
the purpose of developing and operating the laboratory facilities associated
with its products. The name of the subsidiary is Regenocell Laboratories
Ltd.
On
January 7th 2010,
the Company’s foreign subsidiary Regenocell Laboratories Ltd. consummated an
asset purchase agreement with TheraVitae Limited. Under the terms of the
agreement the Company will acquire certain assets of TheraVitae Limited,
approximate net book value of $346,000, in exchange for assuming certain
liabilities of approximately $334,000 and $75,000 in cash (all currency is in US
dollars).
13
In early
January 2010 the Company signed an Assignment of Rights agreement with Yieldex
LTD a Hong Kong corporation. Under the agreement the Company
purchased the right to use outside of Asia the patents and patent applications
related to Yieldex LTD’s stem cell research, therapy development and clinical
trials. In addition the Company obtained the rights to all the clinical trial
results, endorsements, files and other pertinent information. Under
the terms of the agreement the Company will pay Yieldex LTD $5,000,000 (US) in
cash over a period of 5 years. In addition the Company will also irrevocably
issue 40,000,000 shares of Common stock to Yieldex LTD.
Critical
Accounting Policies
Our
financial statements are impacted by the accounting policies used and the
estimates and assumptions made by management during their
preparation. A complete summary of these policies is included in Note
3 of the notes to our consolidated financial statements. We have
identified below the accounting policies that are of particular importance in
the presentation of our financial position, results of operations and cash flows
and which require the application of significant judgment by
management.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from those estimates.
Provision
for Taxes
The
Company applies ASC 740, which requires the asset and liability method of
accounting for income taxes. This method requires that the current or
deferred tax consequences of all events recognized in the financial statements
be measured by applying the provisions of enacted tax laws to determine the
amount of taxes payable or refundable currently or in future
years. Deferred tax assets are reviewed for recoverability and the
Company records a valuation to reduce its deferred tax assets when it is more
likely than not that all or some portion of the deferred tax assets will not be
recovered.
Foreign
Currency Translation
Assets
and liabilities of consolidated subsidiaries whose functional currency is not
the U.S. dollar are translated into U.S. dollars, the functional currency of the
Company, using the exchange rate in effect at each period
end. Revenues and expenses are translated at the weighted average
exchange rate during the period. The effects of the foreign currency
translation adjustment arising from differences in exchange rate from period to
period are deferred and accumulated in other comprehensive loss for subsidiaries
whose functional currency is their local currency. Currency
transaction gain or losses, derived on monetary assets and liabilities stated in
a currency other than the functional currency, are recognized in current
operations and have not been significant to the Company’s operating results in
any period.
Off
Balance Sheet Arrangements
The
Company is not a party to any off-balance sheet arrangements.
14
Description
of Property
The
Company does not own any real property or any interest in real property and does
not invest in real property or have any policies with respect thereto as a part
of its operations or otherwise.
The
principal business address of the Company is 2 Briar Lane, Natick, Massachusetts
01760, which is space owned by the President and Chief Executive Officer of the
Company. Rent has not been charged for the office space and it is not expected
that rent will be charged in the near-term.
Regenocell
Laboratories, Ltd. has assumed a lease with Africa-Israel for its manufacturing
operations in Israel. Lease payments converted to dollars are $10,400
plus VAT totaling $12,050 per month. The lease runs through August
31, 2011 with a two year option to renew. There is $135,000 in a
restricted account used by Bank Hapoalim to guarantee payment of the
lease. These funds were transferred and accordingly the bank
guarantee transferred from TheraVitae Limited to Regenocell Laboratories,
Ltd.
Management’s
Discussion and Analysis and Plan of Operations
The new
mission of the Company is to bring stem cell therapy treatments to the market as
quickly as possible. The Company manufacturers a product utilizing
adult stem cells for the treatment of congestive heart failure and other
indications. These adult stem cells are grown into large numbers in vitro
(outside the body) and then encouraged to differentiate into angiogenic
precursor cells or blood vessel forming cells for the treatment of congestive
heart failure. These adult stem cells can also be used for the
treatment of other conditions such as peripheral artery disease. The
manufacturing operations for this process are located in Israel.
Currently
congestive heart failure patients cleared for treatment have one-half pint of
blood drawn which is sent to the cell processing facility in Israel. After the
adult stem cells in the patient’s blood have been extracted and grown into large
numbers of angiogenic precursor cells, they are sent to several locations for
infusion into the patient in a minimally invasive procedure. The stem
cell therapy is either delivered through a catheter or injected directly into
the myocardium. All patients are private pay.
The
results to date have been impressive. Over three hundred (500)
congestive heart failure patients with no other options have shown similar
results to a clinical trial of 24 patients. In that trial,
statistically significant improvements between baseline and the three month and
six month follow-up were achieved for:
|
·
|
Improvement
in the six minutes walking test.
|
|
·
|
Increase
in metabolic equivalent units (METs) during the stress
test.
|
|
·
|
Decrease
in the perfusion defect region of the target
artery.
|
|
·
|
Decrease
in the Canadian Cardiovascular Society (CCS) Grading
Scale.
|
On
January 7, 2010 the Company entered into two agreements. Closing
occurred on February 4, 2010.
15
The first
agreement is between TheraVitae Limited, the Israeli corporation manufacturing
the stem cell therapy product, and a newly formed Israeli corporation which is a
wholly owned subsidiary of the Company, Regenocell Laboratories,
Ltd. Pursuant to the terms of the agreement, certain assets were
acquired and certain liabilities assumed. These assets include all
the manufacturing and office equipment and the transfer of the
lease. At signing the Company paid $75,000 toward the reduction of
the assumed liabilities. All the employees were terminated then
offered and accepted employment with Regenocell Laboratories, Ltd.
The
second agreement is between Yieldex, Ltd. and the Company for the acquisition of
certain rights. This includes clinical data, the non exclusive use of
the CRM System which manages clinical data and input necessary to schedule a
patient for stem cell production, and all rights in patent and patent
applications, if any, in connection with activities of stem cell research,
therapy development and clinical trials under the trade name ”TheraVitae” for
the world except for Asia. Israel is excluded by definition from
being part of Asia. The cash price is $5,000,000 (five million United
States dollars), of which $75,000 was paid to TheraVitae Limited and $25,000 to
Yieldex on January 7. The balance is due in monthly installments on
or before January 4, 2015. Minimum installments are $5,000 per
patient processed in Israel after the first eight patients during the preceding
month. In addition 25% of any equity raised by the Company will be
applied to the outstanding balance.
In
addition 40,000,000 (forty million) shares of the Company’s common stock, par
value $.0001, was issued to Yieldex Ltd and its nominees. The
40,000,000 shares are restricted and subject to a two year Lock-Up period
beginning January 4, 2010. These shares are also subject to a voting
agreement. During the Lock-Up period and for any subsequent period
until the shares are sold to the public in the open market, the Board
of Directors will be expanded to five members and the shareholders whose shares
are locked up will vote for a maximum of two directors. The Company’s
affiliated shareholders who are not parties to the Lock-Up agreement will vote
their shares for the same two directors until the aggregate number of Yieldex
shares are 15,000,000 (fifteen million) or less. The Yieldex shareholders agree
to vote the Yieldex shares for a maximum of three directors designated by James
F. Mongiardo. While this voting rights agreement is in effect,
unanimous approval of all the directors then in office or approval of holders of
at least a majority of the shares will be required for: (i) any proposal to
increase capital in a way that would result in dilution of existing
shareholders’ percentages by ten percent (10%) or more; (ii) any proposal to
merge, consolidate or amalgamate with any other corporate entity; (iii) any
proposal to sell all or a material part of the assets; and, (iv) any proposal to
amend the bylaws.
As a
result of the actions described above, on February 4, 2010 the Company’s primary
asset is Regenocell Laboratories Ltd. which is manufacturing and selling stem
cell therapy product used to treat congestive heart failure and peripheral
artery disease. Purchases are or have been made to treat patients for
these indications in Bangkok, Thailand and the Dominican Republic. It
is anticipated that purchases will also be made to treat patients in Croatia and
other countries.
For the
three months ended September 30, 2010, the Company had revenues of $172,033
compared to no revenues for the same three months in 2009. Revenues
for the nine months ended September 30, 2010 were $738,855 compared to no
revenues for the same nine months in 2009. Total comprehensive loss
for the three months ended September 30, 2010 was $(392,308) compared to
$(64,310) for the same three months in 2009. Net comprehensive loss
for the nine months ended September 30, 2010 was $(939,542) compared to
$(80,795) for the same nine months in 2009. The increase in revenues
and the increase in net comprehensive loss are a result of the asset purchase
and assignment of rights transactions completed in January 2010.
Cash on
hand was $28,510 as of September 30, 2010 which amount is inadequate to fund the
company’s current projected capital requirements. In order to
implement the new strategy of the Company, the Company will need to raise
capital during the next twelve months. The Company has funded
operations to date in part through the sale of equity securities and loans,
although such efforts have been insufficient to effectively pursue its business
strategy.
16
With
respect to Regenocell Laboratories, Ltd., processing eight patients during a
month will result in revenues exceeding $130,000. The combination of
the existing business being serviced by the manufacturing operations and the
addition of patients to be treated in other locations is expected to keep
patient flow for the manufacturing facility at or above the breakeven of eight
patients. Capacity at the current configuration of the manufacturing
facility is more than double the breakeven. There can be no assurance
of any patient flow for any given month.
Our
capital requirements will depend on numerous factors, including but not limited
to the commitments and progress of our research and development efforts, the
progress of clinical trials, the cost of sales and marketing for the congestive
heart failure stem cell therapy business and other products, medical and
business consultants and advisors, the time and cost involved in maintaining
regulatory compliance, and competing technological and market
developments. Future activities, including the establishment of stem
cell therapy for the treatment of peripheral artery disease in the medical
marketplace, will be subject to our ability to raise funds.
We intend
to raise capital primarily through the public or private sale of securities
(equity and/or debt), although there can be no assurance that we will be able to
obtain capital or, if such capital is available, that the terms of any financing
will be acceptable. If the Company succeeds in raising capital, such
funds will be used to facilitate the manufacturing operations of Regenocell
Laboratories Ltd., to find new customers for Regenocell Laboratories Ltd. With
respect to peripheral artery disease, capital will be used for completing the
research and development to submit an IND (and its equivalent in Europe) for
authorization to begin clinical trials in the United States and Europe. This may
include payment for additional animal trials. Payment for clinical trials
includes retaining the services of a clinical research organization, payment to
the clinical research site(s) for patients enrolled in the clinical trials,
payment for the stem cell therapy used in these clinical trials, payment for
costs associated with Institution Review Board Approval, and preparation of
reports to the Food and Drug Administration (“FDA”) and European Medicines
Agency (“EMEA”), requests to continue later phase clinical trials and submission
of a BLA to the FDA and its equivalent to the EMEA requesting marketing approval
for the treatment of peripheral artery disease.
The
Company also does not expect to purchase any plant or significant equipment over
the next 12 months. Regenocell Laboratories, Ltd. may purchase
between $100,000-$300,000 in new equipment for its manufacturing
operations.
If we are
unsuccessful at raising sufficient capital to fund our operations, for whatever
reason, we may be forced to seek opportunities outside of our new corporate
focus or to seek a buyer for our business or another entity with which we could
partner. Ultimately, if all of these alternatives fail, we may be
required to cease operations and seek protection from creditors under applicable
bankruptcy laws.
17
ITEM
3. Controls and
Procedures
Evaluation of disclosure controls
and procedures
In
connection with the preparation of this Quarterly Report on Form 10-Q, an
evaluation was carried out by our management, with the participation of the
Chief Executive Officer and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934 (Exchange Act)) as of March 31,
2010. Disclosure controls and procedures are designed to ensure that
information required to be disclosed in reports filed or submitted under the
Exchange Act is recorded, processed, summarized, and reported within the time
periods specified in the SEC rules and forms and that such information is
accumulated and communicated to management, including the Chief Executive
Officer and the Chief Financial Officer, to allow timely decisions regarding the
required disclosures. Based on its evaluation, our management
concluded, as of the end of the period covered by this report, that our
disclosure controls and procedures were effective.
There has
been no change in our internal control over financial reporting (as defined in
Rule 13 a-15(f) under the Exchange Act) during the quarter ended September 30,
2010 that has materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
PART
II – OTHER INFORMATION
Item
1. Legal Proceedings
On
February 10, 2010, Kwalata Trading Limited, a wholly owned subsidiary of
TheraVitae, Inc., a Canadian corporation, obtained an ex parte order from the
District Court for the Central Region of Israel to seize the intellectual
property alleged owned by Kwalata which is in the possession of either
Theravitae, Ltd. or Regenocell Laboratories Ltd., the wholly owned Israeli
subsidiary corporation of the Company. The Court appointed trustee took files
and computers including computers dedicated solely to equipment
from Regenocell Laboratories facilities at 7, Pinchas St., Ness Ziona
in what the Company considered to be an unlawful attempt to close the
facilities.
Prior to
a scheduled hearing, a settlement agreement was reached which then became the
resolution of the case by the District Court for the Central Region of
Israel. All equipment and files taken are to be returned subject to
copying by the applicants at their expense. Excluded from copying are
attorney-client privileged documents, business documents and private
documents. Regenocell Laboratories and the Company agree not to
disclose the alleged intellectual property to third parties except in the
ordinary course of business, for government filings and when a non disclosure
agreement is obtained. This order remains in effect until a subsequent order by
the Court or the resolution of an arbitration begun in Canada by Kwalata against
TheraVitae, Ltd.
On
October 20, 2010, TheraVitae, Inc., the same Canadian corporation involved in
the litigation in Israel, served the Company with a Statement of Claim filed
with the Ontario, Canada Superior Court of Justice alleging breach of a
Confidentiality and Non-Circumvention Agreement. A response is due on
or before December 31, 2010. The Company believes that the Statement
of Claim is totally without merit.
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
Pursuant
to a Private Placement dated June 10, 2010, fifty thousand Units were sold at
$.50 per Unit. Net proceeds to the Company were $25,000, all of which
was used to fund operations in Israel. The purchaser of the Units was
issued 50,000 unregistered common shares and a five year warrant to purchase
50,000 unregistered common shares at $.75 per share.
Item
3. Defaults Upon Senior Securities
Not
applicable.
18
Item
4. Submission of Matters to a Vote of Security Holders
On
January 4, 2010 through written consent in lieu of a special meeting of the
stockholders of RegenoCELL Therapeutics, Inc., stockholders representing at
least of majority of the outstanding stock of the Company agreed to purchase
certain assets which will give the Company control over the manufacture of the
stem cell product which will be used to treat patients in Mexico as well as
supply that products for patients being treated by other corporations in
Bangkok, the Dominican Republic and other locations, and the Company having
arranged for the funding needed to execute the agreements which will give it
control over the manufacture of the stem cell product thereupon approved,
adopted, ratified and confirmed the following actions taken by the Board of
Directors: (1) Effective January 4, 2010, or as soon as practicable
thereafter, create a wholly owned subsidiary incorporated under the laws of the
state of Israel with the corporate name “Regenocell Laboratories,
Ltd.” The sole shareholder of Regenocell Laboratories, Ltd. shall be
the Corporation; and upon creation of Regenocell Laboratories, Ltd., authorize
James F. Mongiardo to serve as its sole director; and upon the appointment of
James F. Mongiardo as the sole director of Regenocell Laboratories, Ltd.,
authorize the opening of corporate accounts for Regenocell Laboratories, Ltd.
with Bank Hapoalim or another local bank in Israel with employees of Regenocell
Laboratories, Ltd. being authorized as signatories on said accounts; (2) approve
an Asset Purchase Agreement between Regenocell Laboratories, Ltd. and TheraVitae
Ltd., a company incorporated under the laws of the state of Israel; (3) approve
an Assignment of Rights between Yieldex, Ltd., a company incorporated under the
laws of Hong Kong; (4) pursuant to the terms of the Yieldex agreement, issue
forty million (40,000,000) restricted common shares, par value $.0001. Said
shares shall be initially issued in the name of “Yieldex, Ltd.”, held in escrow
by the Corporation and voted in accordance with recommendations by the
Corporation’s Board until agreed upon Share Lock-Up and Corporate Governance
documents are executed by each entity or person to receive these shares. When
presented with such documents setting forth the entire re-allocation of these
shares, the Corporation shall instruct Florida Atlantic Stock Transfer to cancel
the Yieldex, Ltd. stock certificate and re-issue the same number shares in
accordance with the instructions and documentation received; (5) approve a Loan
Agreement between Mr. Christian Frampton and the Corporation for one hundred
sixty thousand United States dollars ($160,000); and (6) in return for the
personal guarantee of the President of the Corporation James F. Mongiardo to
guarantee the repayment of the capital but not the fee of the loan, grant James
F. Mongiardo a first lien on all assets of the Corporation including its wholly
owned subsidiaries until said capital has been repaid by the
Corporation.
Item
5. Other Information
On June
22, 2010, a Registration Statement on From S-1 was filed to register shares
which the Company believed were already free trading and 5,450,000 restricted
shares issued on or after July 16, 2008. This was done at the request
of FINRA who indicated that the effectiveness of such a Registration Statement
was necessary before FINRA would approve trading on the OTC Bulletin
Board. The SEC decided not to review the Registration
Statement. The S-1 became effective July 6, 2010. The new
market maker then submitted a Form 211 to FINRA on July 13, 2010 seeking
approval for the Company’s shares to trade on the OTC Bulletin
Board. FINRA on July 21 made additional comments. A
proposal was then made by the Company to the new market maker on a response
which the market maker accepted. Certain shareholders located in
Florida agreed to open accounts with the new market maker. These
shareholders and certain others also agreed to a Lock-up/Leak out agreement for
one year. The market-maker submitted a response to
FINRA. On September 27, 2010, FINRA approved trading on the
Over-the-Counter Bulletin Board and Pink Sheets.
19
Item
6. Exhibits and Reports on Form 8-K.
a)
|
Exhibits
|
The
following are exhibits included with this Quarterly Report on Form
10-Q:
31.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to
Rule 13a-14 or 15d-14 of the Securities Exchange Act of 1934, 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.
b)
|
Reports
on Form 8-K
|
The
Company filed a Current Report on Form 8-K on March 22, 2010 which was then
amended on March 31, 2010 in connection with a change in certifying accountants
from Lieberman, Sharma & Associates, PA to Sadler, Gibb &
Associates.
The
Company filed a Current Report on Form 8-K on April 9, 2010 in connection with
the actions taken by the Board of Directors with the approval of at least a
majority of the outstanding stock of the Company to acquire certain assets and
assume certain liabilities in Israel through its wholly owned subsidiary
Regenocell Laboratories, Ltd. from Thera Vitae, Ltd. and to enter into an
assignment of rights agreement with Yieldex, Ltd.
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.
REGENOCELL
THERAPEUTICS, INC.
|
|||
Dated: December
13, 2010
|
|||
By:
|
/s/ James F. Mongiardo
|
||
James
F. Mongiardo
|
|||
Principal
Executive Officer,
|
|||
President,
Principal Financial Officer,
|
|||
Principal
Accounting Officer, and
|
|||
Director
|
20