See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
(1) The number of shares in treasury stock for all periods presented was 4,428,360.
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - 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.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The accompanying consolidated financial statements
include the accounts of Regenicin and its wholly owned subsidiary. All significant inter-company balances and transactions have been eliminated.
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 September 30, 2022, has an accumulated
deficit of approximately $15.95 million from inception, expects to incur further losses in the development of its business and has been
dependent on funding operations through the issuance of convertible debt and private sale of equity securities. These conditions raise
substantial doubt about the Company's ability to continue as a going concern. Currently management plans to finance operations through
the private or public placement of debt and/or equity securities. However, no assurance can be given at this time as to whether the Company
will be able to obtain such financing. The consolidated financial statements do not include any adjustment relating to the recoverability
and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company
be unable to continue as a going concern.
Income (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 securities have been excluded from the calculation as the
exercise price was greater than the average market price of the common shares:
The following weighted average securities have been
excluded from the calculation even though the exercise price was less than the average market price of the common shares because the effect
of including these potential shares was anti-dilutive due to the net losses incurred during 2022 and 2021:
|
2022 | |
2021 |
Options |
| 11,771,344 | | |
| 11,771,344 | |
Convertible Preferred Stock |
| 8,850,000 | | |
| 8,850,000 | |
Convertible Promissory Note |
| 35,712,910 | | |
| 16,784,150 | |
Shares excluded from the calculation of diluted loss per share |
| 56,334,254 | | |
| 37,405,494 | |
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 September 30, 2022 is $925. The change in unrealized loss for the year ended September
30, 2022 and 2021 was $1,825 and $25 net of income taxes, respectively, and was reported as other expense.
The carrying value of cash, prepaid expenses and
other current assets, accounts payable, accrued expenses and all loans and notes payable in the Company’s consolidated balance
sheets approximated their values as of and September 30, 2022 and 2021 due to their short-term nature.
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 and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting period. Such estimation includes the selection
of assumptions underlying the calculation of the fair value of options. Actual results could differ from those estimates.
Stock-Based Compensation:
The Company accounts for stock-based compensation
in accordance with FASB ASC 718, “Compensation - Stock Compensation.” Under the fair value recognition provision of
the ASC, stock-based compensation cost is estimated at the grant date based on the fair value of the award. The Company estimates the
fair value of stock options granted using the Black-Scholes-Merton option pricing model.
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 market 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.
Income Taxes:
The Company accounts for income taxes in accordance
with accounting guidance FASB ASC 740, "Income Taxes," which requires that the Company recognize deferred tax liabilities
and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using
enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the
change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely than not that
some or all deferred tax assets will not be realized.
The Company has adopted the provisions of FASB ASC
740-10-05 "Accounting for Uncertainty in Income Taxes." The ASC clarifies the accounting for uncertainty in income taxes
recognized in an enterprise's financial statements. The ASC prescribes a recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC
provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
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.
NOTE C – LICENSE OF RIGHTS
On November
7, 2014, the Company entered into a Sale Agreement, as amended on January
30, 2015, with Amarantus BioScience Holdings, Inc. (“Amarantus”). Under the Sale Agreement, the Company granted
to Amarantus an exclusive five (5) year option to license any engineered skin designed for the treatment of patients designated as
severely burned by the FDA developed by the Company. Amarantus could exercise this option at a cost of $10,000,000 plus a royalty of
5% on gross revenues in excess of $150 million. The option had not been exercised and had since
expired.
NOTE
D – ACCRUED EXPENSES
Accrued expenses consisted of the following:
|
2022 | |
2021 |
Professional fees |
$ | 9,186 | | |
$ | 25,743 | |
Interest |
| 245,409 | | |
| 209,151 | |
Accrued expenses |
$ | 254,595 | | |
$ | 234,894 | |
NOTE
E - 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 September 30, 2022. For the years ended September 30, 2022 and 2021 interest totaling $18,758 and
$17,213 respectively
was incurred and accrued. Lifetime accrued interest on the note was $65,471 and
$46,713 at
September 30, 2022 and 2021, 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 September 30, 2022 and 2021, the loan payable totaled $10,000.
Loans Payable - Officer:
Through September 30, 2019, 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 to September 2022, John Weber, the Company’s Chief Financial Officer, advanced to the Company a total of $90,800. The
bears interest at 5% per annum and is due on demand.
NOTE F – PROMISSORY NOTES PAYABLE
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 September 30, 2022 and 2021, the note balance was $175,000.
Interest expense was $17,500
for each of the years ended September 30, 2022, and 2021, respectively. Accrued interest on the note was $179,938
and $162,438
at September 30, 2022 and 2021, respectively, which is included in accrued expenses on the accompanying consolidated balance
sheets.
NOTE G - RELATED PARTY TRANSACTIONS
The Company’s principal executive offices are
located in Little Falls, New Jersey. The headquarters is located in the offices of McCoy Enterprises LLC, an entity controlled by Mr.
McCoy. The office is attached to his residence but has its own entrances, restroom and kitchen facilities.
The Company also maintains an office at Carbon &
Polymer Research Inc. ("CPR") in Pennington, New Jersey, which is the Company's materials and testing laboratory. An officer
of the Company is an owner of CPR. No rent is charged for either premise.
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 NoteE for loans payable to related parties.
NOTE H
- INCOME TAXES
The Company did not incur current income tax expense
for either of the years ended September 30, 2022 or 2021.
At September 30, 2022, the Company had available
approximately $4.6 million
of net operating loss (“NOL”) carry forwards which expire in the years 2029 through 2037. However, the use of the net
operating loss carryforwards may be limited under Section 382 of the Internal
Revenue Code. Section 382 of the Internal Revenue Code of 1986, as amended (the Code), imposes an annual limitation on the amount of
taxable income that may be offset by a corporation’s NOLs if the corporation experiences an “ownership change” as defined
in Section 382 of the Code. The Company has not yet undertaken the process to calculate these changes.
Significant components of the Company’s deferred
tax assets at September 30, 2022 and 2021 are as follows:
|
2022 | |
2021 |
Net operating loss carry forwards |
$ | 1,235,018 | | |
$ | 1,229,570 | |
Unrealized loss |
| 808,940 | | |
| 807,975 | |
Stock based compensation |
| 17,061 | | |
| 17,061 | |
Accrued expenses |
| 1,247,940 | | |
| 1,091,070 | |
Total deferred tax assets |
| 3,308,959 | | |
| 3,145,676 | |
Valuation allowance |
| (3,308,959 | ) | |
| (3,145,676 | ) |
Net deferred tax assets |
$ | — | | |
$ | — | |
Due to the uncertainty of their realization, a valuation
allowance has been established for all of the income tax benefit for these deferred tax assets.
The following is a reconciliation of the Company’s
income tax rate using the federal statutory rate to the actual income tax rate as of September 30, 2022 and 2021:
|
2022 | |
2021 |
Federal tax rate |
| (21 | )% | |
| (21 | )% |
Effect of state taxes |
| (6 | )% | |
| (6 | )% |
Effect of NOL |
| (2 | )% | |
| (2 | )% |
Change in valuation allowance |
| 25 | % | |
| 25 | % |
Total |
| 0 | % | |
| 0 | % |
At September 30, 2022 and 2021, the Company had
no material unrecognized tax benefits and no adjustments to liabilities or operations were required. The Company does not expect that
its unrecognized tax benefits will materially increase within the next twelve months. The Company recognizes interest and penalties related
to uncertain tax positions in general and administrative expense. As of September 30, 2022, and 2021 the Company has not recorded any
provisions for accrued interest and penalties related to uncertain tax positions.
The Company files its federal and state income tax
returns under a statute of limitations. The tax years ended September 30, 2020 through September 30, 2022 generally remain subject to
examination by federal tax authorities.
NOTE
I - STOCKHOLDERS’ DEFICIENCY
Preferred Stock:
Series A
Series A Preferred earns 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 September
30, 2022 and 2021 plus dividends in arrears as per below). Each share of Preferred Stock has an initial stated value of $1 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 September 30, 2022, and 2021, dividends in arrears were $818,030
($.92 per share) and $747,232 ($.84 per share), respectively.
At both September 30, 2022 and 2021, 885,000 shares
of Series A Preferred were outstanding.
Series B
On January 23, 2012, the Company designated a new
class of preferred stock called Series B Convertible Preferred Stock (“Series B Preferred”). 4,000,000 shares 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 Convertible Preferred Stock, 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 September 30, 2021, and
2020 no shares of Series B Preferred are outstanding.
2010 Incentive Plan:
On December 15, 2010, the board of directors approved
the Regenicin, Inc. 2010 Incentive Plan (the “Plan”). The Plan provides for the granting of incentive stock options, non-qualified
stock options, stock appreciation rights, restricted stock, stock units, performance shares and performance units to the Company’s
employees, officers, directors and consultants. The Plan provides for the issuance of up to 4,428,360 shares of the Company’s common
stock.
Effective October 1, 2019, the Company adopted ASU
No. 2018-07, “Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” (“ASU
2018-07”). ASU 2018-07 expanded the scope of Topic 718 to include share-based payment transactions for acquiring goods and services
from nonemployees. The guidance also specifies that Topic 718 applies to all share-based payment transactions in which a grantor acquires
goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The adoption of ASU
2018-07 did not have a significant impact on the Company’s consolidated financial statements.
On January
6, 2011, the Company approved the issuance of 885,672
options to each of the four members of the board of directors at an exercise price of $0.035,
as amended, per share that were to expire, as extended, on December 31, 2018. Effective as of the expiration date, the Company
extended the term of those options for two of the directors to December
31, 2023. All other contractual terms of the options remained the same. The option exercise price was compared to the fair
market value of the Company's shares on the date when the extension was authorized by the Company, resulting in the immediate
recognition of $1,316 in compensation expense. There is no deferred compensation expense associated with this transaction, since all
extended options had previously been fully vested. The extended options were valued utilizing the Black-Scholes option pricing model
with the following assumptions: Exercise price of $0.035, expected volatility of 25.54%, risk free rate of 2.51% and expected term
of 5 years.
On January
15, 2015, the Company approved the issuance of 10,000,000
options to one of its Officers at an exercise price of $0.02,
per share that were set to expire on January 15, 2019. Effective December 31, 2019, the Company extended the term of those options
to December
31, 2023. All other contractual terms of the options remained the same. The option exercise price was compared to the fair
market value of the Company’s shares on the date when the extension was authorized by the Company, resulting in the immediate
recognition of $29,508 in compensation expense, which is included in the results of operations for the year ended September 30,
2021. There is no deferred compensation expense associated with this transaction, since all extended options had previously been
fully vested. The extended options were valued utilizing the Black-Scholes option pricing model with the following assumptions:
Exercise price of $0.02, expected volatility of 25.54%, risk free rate of 2.51% and expected term of 5 years
Expected life is determined using the “simplified
method” permitted by Staff Accounting Bulletin No. 107. The stock volatility factor is based on the Nasdaq Biotechnology Index.
The Company did not use the volatility rate for Company’s common stock as the Company’s common stock had not been trading
for the sufficient length of time to accurately compute its volatility when these options were issued.
No stock based compensation was recorded the
years ended September 30, 2022 and 2021.
Option activity for 2022 and 2020 is summarized as
follows:
| |
Options | |
Weighted Average Exercise Price |
| Options outstanding, October 1, 2020 | | |
| 11,771,334 | | |
$ | 0.019 | |
| Granted | | |
| — | | |
| — | |
| Forfeited | | |
| — | | |
| — | |
| Options outstanding, September 30, 2021 | | |
| 11,771,334 | | |
$ | 0.019 | |
| Granted | | |
| — | | |
| — | |
| Forfeited | | |
| — | | |
| — | |
| Options outstanding, September 30, 2022 | | |
| 11,771,334 | | |
$ | 0.019 | |
| Aggregate
intrinsic value | | |
$ | 0 | | |
| | |
The aggregate intrinsic value was calculated based
on the positive difference between the closing market price of the Company’s Common Stock and the exercise price of the underlying
options.
The following table summarizes information regarding
stock options outstanding at September 30, 2022:
|
|
|
|
Weighted Average Remaining |
|
Options Exercisable Weighted Average |
Ranges of prices |
|
Number
Outstanding |
|
Contractual
Life |
|
Exercise
Price |
|
Number
Exercisable |
|
Exercise
Price |
$ |
0.020 |
|
|
|
10,000,000 |
|
|
|
1.25 |
|
|
$ |
0.020 |
|
|
|
10,000,000 |
|
|
$ |
0.020 |
|
$ |
0.035 |
|
|
|
1,771,344 |
|
|
|
1.25 |
|
|
$ |
0.035 |
|
|
|
1,771,344 |
|
|
$ |
0.035 |
|
|
$0.020-$0.035 |
|
|
|
11,771,334 |
|
|
|
1.25 |
|
|
$ |
0.019 |
|
|
|
11,771,344 |
|
|
$ |
0.022 |
|
As of September 30, 2022, there was no unrecognized
compensation cost related to non-vested options granted.
NOTE
J - SUBSEQUENT EVENTS
Subsequent to the end of this fiscal year, 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 then 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 certain amount of the bovine hides and corium we currently own and 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 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.
We subsequently transferred 99% of our 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 year-end, the members of these LLCs voted to donate 100% of the
membership interests to charity.
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.
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.