U.S. STEM CELL, INC. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
As shown in the accompanying financial statements, as ofMarch 31, 2022 , the Company had cash on hand of$14,469 and a working capital deficit (current liabilities in excess of current assets) of$12,599,396 . During the three months endedMarch 31, 2022 , the net loss was$1,155,823 and net cash used in operating activities was$63,806 . These conditions raise substantial doubt about the Company's ability to continue as a going concern for one year from the issuance of the financial statements. The Company's primary source of operating funds has been from revenue generated from sales with additional cash proceeds from the sale of common stock and the issuances of promissory notes and other debt. The Company has experienced net losses from operations since inception, but it expects these conditions to improve in the future as it develops its business model. The Company had a stockholders' deficit atMarch 31, 2022 and requires additional financing to fund future operations. The Company's existence is dependent upon management's ability to develop profitable operations and to obtain additional funding sources. There can be no assurance that the Company's financing efforts will result in profitable operations or the resolution of the Company's liquidity problems. The accompanying statements do not include any adjustments that might result should the Company be unable to continue as a going concern.
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Significant estimates include stock-based
compensation, debt discounts and the valuation allowance related to deferred tax
assets. Actual results may differ from these estimates.
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2022
(unaudited)
Cash
The Company considers cash to consist of cash on hand and temporary investments
having an original maturity of 90 days or less that are readily convertible into
cash.
Fair Value Measurements
Accounting Standards Codification subtopic 825-10, Financial Instruments ("ASC
825-10") requires disclosure of the fair value of certain financial instruments.
The carrying value of cash and cash equivalents, accounts payable, accrued
liabilities, and short-term borrowings, as reflected in the balance sheets,
approximate fair value because of the short-term maturity of these instruments.
All other significant financial assets, financial liabilities and equity
instruments of the Company are either recognized or disclosed in the financial
statements together with other information relevant for making a reasonable
assessment of future cash flows, interest rate risk and credit risk. Where
practicable the fair values of financial assets and financial liabilities have
been determined and disclosed; otherwise only available information pertinent to
fair value has been disclosed.
The Company follows Accounting Standards Codification subtopic 820-10, Fair Value Measurements and Disclosures ("ASC 820-10") and Accounting Standards Codification subtopic 825-10, Financial Instruments ("ASC 825-10"), which permits entities to choose to measure many financial instruments and certain other items at fair value.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are non-interest bearing and are stated at gross invoice amounts less an allowance for doubtful accounts. Credit is extended to customers based on an evaluation of their financial condition, industry reputation, and other judgmental factors considered by the Company's management. The Company generally does not require collateral or other security interest to support accounts receivable. Based on trends and specific factors, the customer's credit terms may be modified, including required payment upon delivery.
The Company performs regular on-going credit evaluations of its customers as deemed relevant. As events, trends, and circumstance warrant, the Company's management estimates the amounts that are more likely than not to be uncollectible. These amounts are recognized as bad debt expense and are reflected within selling, general, administrative and other expenses on the Company's accompanying statements of operations.
Any charges to the allowance for doubtful accounts on accounts receivable are charged to operations in amounts sufficient to maintain the allowance for uncollectible accounts at a level management believes is adequate to cover any probable losses. Management determines the adequacy of the allowance based on historical write-off percentages and the current status of accounts receivable. Accounts receivable are charged off against the allowance when collectability is determined to be permanently impaired. As ofMarch 31, 2022 andDecember 31, 2021 , the allowance for doubtful accounts was$75,000 . Inventories Inventories are stated at the lower of cost or market with cost being determined on a first-in, first-out (FIFO) basis. The Company writes down its inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. During the periods presented, there were no inventory write-downs. Investments The Company follows Accounting Standards Codification subtopic 323-10,Investments-Equity Methods and Joint Ventures ("ASC 323-10") which requires the accounting for investments where the Company can exert significant influence, but not control of a joint venture or equity investment. The Company accounted for its 49.9% member interest ownership ofU.S. Stem Cell Clinic, LLC and its 49% member interest ownership ofU.S. Stem Cell Clinic of the Villages utilizing the equity method of accounting (See Note 4). 9
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2022
(unaudited)
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards
Codification Topic 606 "Revenue from Contracts with Customers" ("ASC 606"). ASC
606 is based on the principle that revenue is recognized to depict the transfer
of goods or services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those goods or
services.
The Company's primary sources of revenue are from the sale of test kits and equipment, training services, patient treatments, laboratory services and cell banking.
Revenues for kits and equipment sold are not recorded until kits and equipment are received by the customer. Revenues from in-person trainings are recognized when the training occurs and revenues from on demand online trainings are recognized when the customer purchases the rights to the training course. Any cash received as a deposit for trainings are recorded by the Company as a liability.
Patient treatments and laboratory services revenue are recognized when those services have been completed or satisfied.
Revenues for cell banking are accounted for as multiple performance obligations as described in ASC 606 and addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. Because the Company sells its services separately, on more than a limited basis and at a price within a narrow range, the Company was able to allocate revenue based on stand-alone pricing. The multiple performance obligations include stem cell banking, dose retrieval and yearly storage fees. Revenues for stem cell banking and dose retrieval is recognized at the point of service and revenues for the yearly storage fees is recognized over the term of the banking contract, which is typically one year with annual renewals.
At
Research and Development
The Company accounts for research and development costs in accordance with
Accounting Standards Codification subtopic 730-10, Research and Development
("ASC 730-10"). Under ASC 730-10, all research and development costs must be
charged to expense as incurred. Accordingly, internal research and development
costs are expensed as incurred. Third-party research and development costs are
expensed when the contracted work has been performed or as milestone results
have been achieved as defined under the applicable agreement. Company-sponsored
research and development costs related to both present and future products are
expensed in the period incurred. The Company did not incur any research and
development expenses during the periods presented.
Stock-Based Compensation
Stock-based compensation expense is measured at the grant date fair value of the
award and is expensed over the requisite service period. For stock-based awards
to employees, non-employees and directors, the Company calculates the fair value
of the award on the date of grant using the Black-Scholes option pricing model.
Determining the fair value of stock-based awards at the grant date under this
model requires judgment, including estimating volatility, employee stock option
exercise behaviors and forfeiture rates. The assumptions used in calculating the
fair value of stock-based awards represent the Company's best estimates, but
these estimates involve inherent uncertainties and the application of
management's judgment.
Income Taxes
The Company follows Accounting Standards Codification subtopic 740-10, Income
Taxes ("ASC 740-10") for recording the provision for income taxes. Deferred tax
assets and liabilities are computed based upon the difference between the
financial statement and income tax basis of assets and liabilities using the
enacted marginal tax rate applicable when the related asset or liability is
expected to be realized or settled. Deferred income tax expenses or benefits are
based on the changes in the asset or liability during each period. If available
evidence suggests that it is more likely than not that some portion or all of
the deferred tax assets will not be realized, a valuation allowance is required
to reduce the deferred tax assets to the amount that is more likely than not to
be realized. Future changes in such valuation allowance are included in the
provision for deferred income taxes in the period of change. Deferred income
taxes may arise from temporary differences resulting from income and expense
items reported for financial accounting and tax purposes in different periods.
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2022
(unaudited)
Deferred taxes are classified as current or non-current, depending on the
classification of assets and liabilities to which they relate. Deferred taxes
arising from temporary differences that are not related to an asset or liability
are classified as current or non-current depending on the periods in which the
temporary differences are expected to reverse and are considered immaterial.
Net Loss per Common Share
The Company computes earnings (loss) per share under Accounting Standards
Codification subtopic 260-10, Earnings Per Share ("ASC 260-10"). Net loss per
common share is computed by dividing net loss by the weighted average number of
shares of common stock outstanding during the year. Diluted earnings per share,
if presented, would include the dilution that would occur upon the exercise or
conversion of all potentially dilutive securities into common stock using the
"if converted" method.
The computation of basic and diluted income (loss) per share as excludes potentially dilutive securities when their inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during the period.
Potentially dilutive securities excluded from the computation of basic and diluted net loss per share are as follows:
March 31,
2022 2021
Options 110,643,384 110,644,914
Warrants 13,603,127 1,110,468
Convertible notes 37,705,827 32,699,044Total potentially dilutive shares 161,952,338 144,454,426
Reclassifications Certain reclassifications have been made to the prior years' data to conform to the current year presentation. These reclassifications had no effect on reported income (losses).
Recent Accounting Pronouncements
InAugust 2020 , the FASB issued ASU 2020-06, which simplifies the guidance on accounting for convertible debt instruments by removing the separation models for: (1) convertible debt with a cash conversion feature; and (2) convertible instruments with a beneficial conversion feature. As a result, the Company will not separately present in equity an embedded conversion feature in such debt. Instead, we will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. We expect the elimination of these models will reduce reported interest expense and increase reported net income for the Company's convertible instruments falling under the scope of those models before the adoption of ASU 2020-06. Also, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will be no longer available. The Company adopted ASU 2020-06 in the first quarter of 2022 utilizing the modified retrospective method. As a result, the Company adjusted its beginning balance sheet with a decrease in additional paid-in capital of$384,174 , offset by a decrease in debt discount on convertible debt of$241,589 and an increase in accumulated deficit of$142,585 . InJune 2016 , the FASB issued ASU No. 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments", which significantly changes how entities will measure credit losses for most financial assets, including accounts receivable. ASU No. 2016-13 will replace today's "incurred loss" approach with an "expected loss" model, under which companies will recognize allowances based on expected rather than incurred losses. OnNovember 15, 2019 , the FASB delayed the effective date of Topic 326 for certain small public companies and other private companies until fiscal years beginning afterDecember 15, 2022 forSEC filers that are eligible to be smaller reporting companies under theSEC's definition, as well as private companies and not-for-profit entities. The Company does not expect the new guidance will have a material impact on its financial statements. There are various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company's financial position, results of operations or cash flows. 11
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2022
(unaudited)
NOTE 4 - INVESTMENTS
During March 2021 , we divested ourselves of our Member Interest in U.S. Stem
Cell Clinic, LLC , while U.S. Stem Cell Clinic of the Villages, LLC is currently
dormant.
U.S. Stem Cell Clinic, LLC
The investment in U.S. Stem Cell Clinic, LLC was comprised of a 49.9% (increased
from 33.3% on January 29, 2019 ) member interest ownership and is accounted for
using the equity method of accounting. The Company's income (loss) earned by
U.S. Stem Cell Clinic, LLC member interest was $0 for the three months ended
March 31, 2022 and 2021, (inception to date income of $599,721 ) and is included
in other income (expense) in the accompanying statements of operations. In
addition, during the three months ended March 31, 2022 and 2021, the Company
received distributions totaling $0 from U.S. Stem Cell Clinic, LLC (inception to
date of $663,870 ). In March 2021 , the Company divested its entire interest in
U.S. Stem Cell Clinic, LLC (See Note 5, 6 and 11). The carrying value of the
investment at March 31, 2022 and December 31, 2021 is $0 .
Revenues earned from sales to
An affiliate of one of the Company's officers is a minority investor in the
OnJanuary 30, 2018 ,Greg Knutson , a director of the Company ("Knutson") and the Company agreed to open and operate a regenerative medicine/cell therapy clinic providing cellular treatments for patients afflicted with neurological, autoimmune, orthopedic and degenerative diseases inFlorida . To that end,U.S. Stem Cell Clinic ofThe Villages LLC (the "Villages ") was formedJanuary 30, 2018 . Knutson provided the Company with the sum of Three Hundred Thousand Dollars ($300,000 ) (the "Investment") to be utilized for the formation and initial operation ofthe Villages . Currently, Knutson holds a 51% member interest inthe Villages and the Company holds a 49% member interest. The Company will provide operating assistance as well as management services, the latter to be compensated at fee of five percent (5%) ofthe Villages gross revenues. As ofDecember 31, 2018 , upon completion ofU.S. Stem Cell of theVillages LLC , the Company received$189,909 fromGreg Knutson , the holder of the 51% member interest. Accordingly, this was recognized as additional paid-in capital. Subsequently, the Company contributed$86,750 as its initial investment inthe Villages . The Company's 49% income (loss) earned bythe Villages member interest was$0 for the three months endedMarch 31, 2022 and 2021, (inception to date loss of$23,050 ) and is included in other income (expense) in the accompanying statements of operations. In addition, during the three months endedMarch 31, 2022 and 2021, the Company received distributions totaling$0 fromthe Villages . The carrying value of the investment atMarch 31, 2022 andDecember 31, 2021 is$0 .
At
During the three months ended
As of the date of this filing,
NOTE 5 - ACCRUED EXPENSES Accrued expenses consisted of the following as ofMarch 31, 2022 andDecember 31, 2021 : March 31, December 31, 2022 2021 Interest and fees payable to the Guarantors of the Company's loan agreement with Seaside Bank$ 667,249 $ 644,670 Accrued interest payable 1,356,974 1,227,588 Vendor accruals and other 79,132 79,132 Total Accrued expenses$ 2,103,355 $ 1,951,390 12
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2022
(unaudited)
On February 10, 2021 , as part of a settlement agreement, the Company transferred
its entire member interest in U.S. Stem Cell, LLC to Dr. Kristen Comella as
settlement for $100,000 of accrued interest owed to Dr. Comella , resulting in a
gain on settlement of $100,000 (See Note 4, Note 6 and Note 11 "Litigation").
NOTE 6 - NOTES PAYABLE
Notes payable were comprised of the following as of March 31, 2022 and December
31, 2021 :
March 31, December 31,
2022 2021
Seaside Bank note payable $ 980,000 $ 980,000
Dr. Comella note payable* 255,579 255,579
Dr. Comella note payable* 300,000 300,000
Dr. Comella note payable* 300,000 300,000
Dr. Comella note payable* 300,000 300,000
Hunton & Williams note payable 378,000 380,000
Weider note payable 403,622 413,239
Mallard note payable 231,250 232,750
EIDL note payable 150,000 150,000
Total notes payable 3,298,451 3,311,568
Less unamortized debt discount (29,191 ) (31,627 )
Total notes payable net of unamortized debt discount 3,269,260 3,279,941
Less current portion (2,557,081 ) (2,557,881 )
Long-term portion $ 712,179 $ 722,060 *
Seaside Bank OnOctober 25, 2010 , the Company entered into a Loan Agreement withSeaside National Bank and Trust for a$980,000 loan at 4.25% per annum interest that was used to refinance the Company's loan with Bank of America. The obligation is guaranteed by certain stockholders of the Company. The Company renewed the loan withSeaside National Bank and Trust during the first quarter of 2018 to extend the maturity date toMay 18, 2020 . The Company renewed the loan withSeaside National Bank and Trust during the first quarter of 2020 to extend the maturity date toMay 18, 2022 .
OnSeptember 6, 2016 , the Company issued a$300,000 promissory note in exchange for compensation earned. The promissory note bears interest of 5% per annum and is due upon demand. As ofMarch 31, 2022 andDecember 31, 2021 , the remaining carrying value of the note was$255,579 . OnAugust 7, 2017 , the Company issued a$300,000 promissory note in exchange for compensation earned. The promissory note bears interest of 5% per annum and is due one year from date of issuance. As ofMarch 31, 2022 andDecember 31, 2021 , the remaining carrying value of the note was$300,000 . OnMay 7, 2018 , the Company issued a$300,000 promissory note in exchange for compensation earned. The promissory note bears interest of 5% per annum and is due six months from date of issuance. As ofMarch 31, 2022 andDecember 31, 2021 , the remaining carrying value of the note was$300,000 . OnJuly 1, 2019 , the Company issued a$300,000 promissory note in exchange for compensation earned. The promissory note bears interest of 5% per annum and is dueNovember 7, 2019 . As ofMarch 31, 2022 andDecember 31, 2021 , the remaining carrying value of the note was$300,000 . 13
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2022
(unaudited)
On February 10, 2021 , as part of a settlement agreement, the Company transferred
its entire member interest in U.S. Stem Cell, LLC to Dr. Kristen Comella as
settlement for $100,000 of accrued interest owed to Dr. Comella , resulting in a
gain on settlement of $100,000 (See Note 4, Note 5 and Note 11 "Litigation"). At
March 31, 2022 and December 31, 2021 , accrued interest on the notes was $180,671
and $166,424 , respectively, and is included in accrued expenses on the
accompanying balance sheet.
Hunton & Williams AtDecember 31, 2016 , the Company has two outstanding notes payable with interest at 8% per annum due at maturity. The two notes,$61,150 and$323,822 , are payable in one balloon payment upon the date the Noteholder provides written demand, however the Company is not obligated to make payments until theNorthStar Biotech Group, LLC (or successor) Loan is paid off. OnAugust 31, 2017 , the Company and the noteholder entered into a Note Forbearance, Modification and Repayment Agreement ("Agreement"). The two notes,$61,150 and$323,822 , were payable in one balloon payment upon the date of a written demand and upon certain triggering events occurring. The sum of unpaid principal and accumulated interest for both notes as ofAugust 31, 2017 of$747,680 and an accounts payable of$40,596 result in an aggregate balance due of$788,276 . The noteholder agreed to accept full payment of their obligation over a four (4) year period in 48 monthly installments on an adjusted debt obligation in aggregate of$624,000 (reducing the outstanding balance), with such payments staggered in amounts such that the Company will pay$10,000 monthly the first year,$12,000 monthly the second year,$14,000 monthly the third year, and$16,000 monthly the final year. In addition, the noteholder agreed to suspend accrual interest on the notes commencingSeptember 1, 2017 . The Agreement remains in full force and effect provided the Company continues to make the monthly payments, there is no event of default as defined in the notes and an agreement to a subordination agreement byNorthStar Biotech Group, LLC , which has been provided. InMay 2019 , the Company did not make the required scheduled payment. InSeptember 2019 , the noteholder agreed to waive their default rights under the agreement provided a minimum of$5,000 was paid by the end of 2019 and to reduce the required monthly payment to$500 per month commencing inJanuary 2020 . The Company satisfied the$5,000 payment requirement by the end of 2019 and commenced making the required$500 monthly payments inJanuary 2020 . The Company last made a$500 payment inMarch 2021 and thereby became delinquent until making three$1,500 payments during the fourth quarter of 2021 (a total of$6,000 in payments were made during 2021) thereby becoming current as ofDecember 31, 2021 . The Company imputed an interest rate of 5% and discounted the note accordingly. The imputed debt discount of$69,700 was amortized to interest expense using the effective interest method. InSeptember 2019 , the Company was in default and was negotiating a revised payment structure. Thus, the remaining unamortized debt discount was charged to interest expense atSeptember 30, 2019 . As ofMarch 31, 2022 andDecember 31, 2021 , the remaining carrying value of the note was$378,000 and$380,000 , respectively. Weider The Company, as one of the parties entered into a Settlement Agreement and General Release (the "Agreement") datedJune 3, 2019 related to certain medical procedures. Without admitting any liability, and as part of that Agreement, the Company agreed to provide a five-year 5.25% unsecured promissory note, datedJune 15, 2019 , in the principal amount of$500,000 , payable in monthly increments of$5,000 per month, with a final balloon payment due onJune 15, 2024 . Accordingly, the Company recognized Pre-litigation expense of$500,000 . As ofMarch 31, 2022 andDecember 31, 2021 , the remaining carrying value of the note was$403,622 and$413,239 , respectively. Mallard The Company, as one of the parties entered into a Settlement Agreement and General Release (the "Agreement") datedDecember 6, 2019 related to certain medical procedures. Without admitting any liability, and as part of that Agreement, the Company agreed to provide a five-year non-interest bearing unsecured promissory note, datedDecember 6, 2019 , in the principal amount of$250,000 , payable in monthly increments of$750 per month, with a final balloon payment of$205,000 due onJanuary 1, 2025 . The Company imputed an interest rate of 5% and discounted the note accordingly. The imputed debt discount of$51,063 is being amortized to interest expense using the effective interest method. Accordingly, the Company recognized Pre-litigation expense of$198,937 . For the three months endedMarch 31, 2022 and 2021, the Company amortized$2,437 and$2,330 , respectively, of debt discount to interest expense. As ofMarch 31, 2022 andDecember 31, 2021 , the remaining carrying value of the note was$202,059 and$201,123 , net of debt discount of$29,191 and$31,627 , respectively. 14
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2022
(unaudited)
Economic Injury Disaster Loan (EIDL)
OnJune 20, 2020 , the Company executed the standard loan documents for an EIDL from theU.S. Small Business Administration in light of the impact of the COVID-19 pandemic on our business. Pursuant to that certain Loan Authorization and Agreement (the "SBA Loan Agreement"), the principal amount of the EIDL received was$150,000 , with proceeds to be used for working capital purposes. Interest accrues at the rate of 3.75% per annum. Installment payments, including principal and interest, are due monthly beginningJune 20, 2021 (twelve months from the date of the SBA Loan Agreement) in the amount of$731 . OnMarch 15, 2021 , the initial payment date was extended 12 months toJune 20, 2022 . The balance of principal and interest is payable thirty years from the date of the SBA Loan Agreement. As ofMarch 31, 2022 andDecember 31, 2021 , the remaining carrying value of the note was$150,000 . AtMarch 31, 2022 andDecember 31, 2021 , accrued interest on the note was$10,002 and$8,615 , respectively, and is included in accrued expenses on the accompanying balance sheet.
NOTE 7 - PROMISSORY NOTE PAYABLE
OnJune 1, 2015 , the Company issued an amended and restated promissory note of$1,697,762 in settlement of the$1,500,000 outstanding subordinated debt, related accrued interest of$373,469 and accumulated and unpaid guarantor fees of$624,737 . The note is unsecured and non-interest bearing and requires four semi-annual payments of$75,000 beginning onDecember 31, 2015 with the remaining unpaid balance dueJune 1, 2020 . OnJune 1, 2020 , the Company defaulted on the promissory note. Upon default, the note became due in full and the Company began accruing interest at the default interest rate of 18%. The Company imputed an interest rate of 5% and discounted the promissory note accordingly. The imputed debt discount of$368,615 was amortized to interest expense using the effective interest method. As ofMarch 31, 2022 andDecember 31, 2021 , the remaining carrying value of the note was$1,397,762 .
NOTE 8 - CONVERTIBLE NOTES PAYABLE
The Company adopted ASU 2020-06 in the first quarter of 2022 utilizing the modified retrospective method. As a result, the Company eliminated an aggregate of$241,589 of debt discount stemming from beneficial conversion features on convertible debt. Accordingly, the Company will not separately present in equity an embedded conversion feature in such debt. OnFebruary 5, 2020 , the Company issued an unsecured convertible promissory note in the principal amount of$35,000 that matured onFebruary 5, 2021 and bears interest at a rate of 5% per annum. The investor has the right to convert the outstanding balance of the note at any time into shares of common stock of the Company at a conversion price equal to a thirty percent (30%) discount of the average closing price of the Company's common stock on the OTC Markets electronic exchange for the prior thirty (30) trading days prior to conversion, subject to adjustment. Upon the occurrence of an event of default, the investor may accelerate the note pursuant to which the outstanding balance will become, at the noteholder's election, immediately due and payable. As a result of the beneficial conversion feature of the note, debt discount of$15,000 was recognized with a corresponding increase in additional paid-in capital. As ofFebruary 5, 2021 , the maturity date, the note was in default. OnJuly 30, 2021 , the investor converted the full value of the note into 3,804,348 shares of the Company's common stock, having a fair value of$50,000 , resulting in a loss on conversion of$15,000 . The agreement contains a provision that in the event the conversion right is exercised, then the Holder waives all outstanding interest. Accordingly, all outstanding accrued interest at the time of conversion was reversed. The debt discount was amortized to interest expense using the effective interest method. For the three months endedMarch 31, 2021 , the Company amortized$1,874 of debt discount to interest expense. As ofMarch 31, 2022 andDecember 31, 2021 , the remaining carrying value of the note was$0 . AtMarch 31, 2022 andDecember 31, 2021 , accrued interest on the note was$0 . OnSeptember 8, 2020 , the Company issued an unsecured convertible promissory note in the principal amount of$10,000 that was due on demand and accrued interest at a rate of 5% per annum. The investor had the right to convert the outstanding balance of the note at any time into shares of common stock of the Company at a conversion price of$0.0467 . Upon the occurrence of an event of default, the remaining principal and accrued interest become immediately due and payable, with interest accruing at 18% per annum on any unpaid amounts. OnNovember 9, 2021 , the investor converted the entire principal balance of$10,000 and accrued interest of$588 into 226,713 shares of the Company's common stock. As the conversion was at a fixed conversion price, no gain or loss was recognized on conversion. As ofMarch 31, 2022 andDecember 31, 2021 , the remaining carrying value of the note was$0 . As ofMarch 31, 2022 andDecember 31, 2021 , accrued interest on the note was$0 . 15
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2022
(unaudited)
From February 17, 2021 through February 26, 2021 , the Company issued unsecured
convertible promissory notes in the aggregate principal amount of $619,000 that
matured 12 months after the respective issuance date. The notes are non-interest
bearing and the investor has the right to convert the outstanding balance of the
note at any time into shares of common stock of the Company at a conversion
price of $0.0266 . The agreements contain a provision that in the event the
conversion right is exercised, then the Holder waives all outstanding interest.
Upon the occurrence of an event of default, the remaining principal and accrued
interest become immediately due and payable. As a result of the beneficial
conversion feature of the notes, an aggregate of $521,850 of debt discount was
recognized with a corresponding increase in additional paid-in capital. The debt
discount was being amortized to interest expense using the effective interest
method. On March 23, 2021 , one of the holders, a related party, converted a
convertible note with a face value of $200,000 , dated February 26, 2021 ,
into 7,518,797 shares of the Company's common stock. Upon conversion, the
remaining unamortized debt discount was expensed immediately. In addition, all
outstanding accrued interest at the time of conversion was reversed. As the
conversion was at a fixed conversion price, no gain or loss was recognized on
conversion (See Note 9 and 12). During the three months ended March 31, 2022 ,
the Company entered into addendums with certain holders owning an aggregate of
$294,000 of the convertible notes whereby: for $214,000 of the convertible
notes, the conversion price was changed from $0.0266 to $0.008 , the maturity
date was extended for two years and an aggregate of 53,400,000 commons shares
and five-year warrants to purchase 12,500,000 common shares at $0.008 per share
were issued; and for $80,000 of the convertible notes, the interest rate was
changed from 0% to 12%. As a result of the changes in the conversion price and
the interest rate, the addendums resulted in an extinguishment of $294,000 of
the old debt in exchange for new debt with the same face value having different
terms. Accordingly, a loss on debt extinguishment of $491,607 was recognized in
the accompanying statements of operations. On March 11, 2022 , one of the holders
converted a convertible note with a face value of $25,000 , dated February 26,
2021 (as amended on February 26, 2022 ), into 3,125,000 shares of the Company's
common stock. As the conversion was at a fixed conversion price, no gain or loss
was recognized on conversion. During the three months ended March 31, 2022 and
2021, $10,000 and $0 of convertible notes were repaid. As of March 31, 2022 ,
$115,000 of convertible notes payable were in default. For the three months
ended March 31, 2021 , the Company amortized $5,252 of debt discount to interest
expense. As of March 31, 2022 and December 31, 2021 , the remaining carrying
value of the notes was $384,000 and 419,000, respectively.
On March 24, 2021 , the Company issued an unsecured convertible promissory note
in the principal amount of $110,000 that matured 12 months after the issuance
date. The note was non-interest bearing and the investor had the right to
convert the outstanding balance of the note at any time into shares of common
stock of the Company at a conversion price of $0.0070 . The agreement contains a
provision that in the event the conversion right is exercised, then the Holder
waives all outstanding interest. Upon the occurrence of an event of default, the
remaining principal and accrued interest become immediately due and payable. As
a result of the beneficial conversion feature of the note, $110,000 of debt
discount was recognized with a corresponding increase in additional paid-in
capital. The debt discount was being amortized to interest expense using the
effective interest method. On November 9, 2021 , the holder converted the full
value of the note into 15,741,286 shares of the Company's common stock. Upon
conversion, the remaining unamortized debt discount was expensed immediately. In
addition, all outstanding accrued interest at the time of conversion was
reversed. As the conversion was at a fixed conversion price, no gain or loss was
recognized on conversion. For the three months ended March 31, 2021 , the Company
amortized $0 of debt discount to interest expense. As of March 31, 2022 and
December 31, 2021 , the remaining carrying value of the note was $0 .
On June 20, 2021 , the Company issued an unsecured convertible promissory note in
the principal amount of $20,000 that matured 12 months after the issuance date.
The note was non-interest bearing and the investor had the right to convert the
outstanding balance of the note at any time into shares of common stock of the
Company at a conversion price of $0.0125 . The agreement contains a provision
that in the event the conversion right is exercised, then the Holder waives all
outstanding interest. Upon the occurrence of an event of default, the remaining
principal and accrued interest become immediately due and payable. As a result
of the beneficial conversion feature of the note, $2,400 of debt discount was
recognized with a corresponding increase in additional paid-in capital. The debt
discount was being amortized to interest expense using the effective interest
method. On November 9, 2021 , the holder converted the full value of the note
into 1,600,000 shares of the Company's common stock. Upon conversion, the
remaining unamortized debt discount was expensed immediately. In addition, all
outstanding accrued interest at the time of conversion was reversed. As the
conversion was at a fixed conversion price, no gain or loss was recognized on
conversion. For the three months ended March 31, 2021 , the Company amortized
$0 of debt discount to interest expense. As of March 31, 2022 and December 31,
2021 , the remaining carrying value of the note was $0 .
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2022
(unaudited)
On October 29, 2021 , the Company issued an unsecured convertible promissory note
in the principal amount of $17,000 that matures 12 months after the issuance
date. The note is non-interest bearing and the investor has the right to convert
the outstanding balance of the note at any time into shares of common stock of
the Company at a conversion price of $0.008 . Upon the occurrence of an event of
default, the remaining principal and accrued interest become immediately due and
payable. As a result of the beneficial conversion feature of the note, $7,438 of
debt discount was recognized with a corresponding increase in additional paid-in
capital. The debt discount was being amortized to interest expense using the
effective interest method. For the three months ended March 31, 2021 , the
Company amortized $0 of debt discount to interest expense. As of March 31, 2022
and December 31, 2021 , the remaining carrying value of the note was $17,000 .
On February 26, 2022 , the Company issued an unsecured convertible promissory
note in the principal amount of $27,000 that matures 24 months after the
issuance date and 6,750,000 shares of common stock in exchange for proceeds of
$27,000 . The note is non-interest bearing and the investor has the right to
convert the outstanding balance of the note at any time into shares of common
stock of the Company at a conversion price of $0.008 . The value ascribed to the
common shares was $18,563 , which was recognized as debt discount with a
corresponding increase in additional paid-in capital. The debt discount is being
amortized to interest expense using the effective interest method. For the three
months ended March 31, 2022 , the Company amortized $456 of debt discount to
interest expense. As of March 31, 2022 , the remaining carrying value of the note
was $8,893 , net of debt discount of $18,107 .
NOTE 9 - RELATED PARTY TRANSACTIONS
Advances - Related Parties As ofMarch 31, 2022 andDecember 31, 2021 , the Company's officers and directors have provided advances that are unsecured, non-interest bearing and due on demand. During the three months endedMarch 31, 2022 and 2021, the Company received aggregate proceeds from advances of$10,000 and$30,000 , respectively. As ofMarch 31, 2022 andDecember 31, 2021 , the Company owed$961,432 and$951,432 , respectively, for related party advances.
Notes Payable - Related Parties
Note Payable -
OnFebruary 29, 2012 , a promissory note issued toBlueCrest Master Fund Limited ("BlueCrest") was assigned toNorthStar Biotechnology Group, LLC ("NorthStar"), owned partly by certain directors and existing shareholders of the Company at the time, including Dr.William P. Murphy Jr ., Dr.Samuel Ahn andCharles Hart . At the date of the assignment, the principal amount of the BlueCrest note was$544,267 (the "Note"). OnMarch 30, 2012 , the Company andNorthStar agreed to extend untilMay 1, 2012 the initial payment date for any and all required monthly under the Note, such that the first of the four monthly payments required under the Note will be due and payable onMay 1, 2012 and all subsequent payments will be due on a monthly basis thereafter commencing onJune 1, 2012 , and to waive any and all defaults and/or events of default under the Note with respect to such payments. The Company did not make the required payment, and as a result, was in default of the revised agreement. The Company renegotiated the terms of the Note andNorthStar agreed to suspend the requirement of principal payments by the Company and allow payment of interest-only in common stock.
On
OnOctober 1, 2012 , the Company andNorthStar entered into a limited waiver and forbearance agreement providing a recapitalized new note balance comprised of all sums dueNorthStar with a maturity date extended perpetually. The Company agreed to issue 5,000,000 shares of Series A Convertible Preferred Stock and 10,000 shares of common stock in exchange for$210,000 as payment towards outstanding debt, default interest, penalties, professional fees outstanding and dueNorthStar . In addition, the Company executed a security agreement grantingNorthStar a lien on all patents, patent applications, trademarks, service marks, copyrights and intellectual property rights of any nature, as well as the results of all clinical trials, know-how for preparing Myoblasts, old and new clinical data, existing approved trials, all right and title to Myoblasts, clinical trial protocols and other property rights. 17
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2022
(unaudited)
In addition, the Company granted NorthStar a perpetual license on products as
described for resale, relicensing, and commercialization outside the United
States . In connection with the granted license, NorthStar shall pay the Company
a royalty of up to 8% on revenues generated.
Effective
In connection with the consideration paid,
In 2012, 5,000,000 shares of Series A Convertible Preferred Stock were approved to be issued, which was subsequently increased to 20,000,000 shares of preferred stock as Series A Convertible Preferred Stock. In addition, the Company was obligated to issue additional preferred stock equal in lieu of payment of cash of accrued and unpaid interest on each six-month anniversary of the effective date (October 1, 2012 ). In lieu of the initial two payments in preferred stock, the parties agreed to modify the voting rights of the subsequently cancelled Series A Convertible Preferred Stock from 20 votes per share on matters to be voted on by the common stockholders to 25 votes per share on matters to be voted on by the common stockholders and all prior and subsequent payments of interest will be in common stock. The Company is required to issue additional shares of its common stock (as amended), in lieu of cash, each six-month anniversary of the effective date for any accrued and unpaid interest.
On
On
OnApril 2, 2014 , the Company issued 275 shares of its common stock in lieu of payment in cash of accrued and unpaid interest of$12,635 dueApril 1, 2014 per the forbearance agreement. OnSeptember 17, 2014 , the limited waiver and forbearance agreement entered into onOctober 1, 2012 to provide that the perpetual license on products as described for resale, relicensing and commercialization outsidethe United States was amended as such on the condition thatNorthStar provide certain financing, which financing the Company, in its sole discretion, could decline and retain the license. OnOctober 3, 2014 , the Company issued 515 shares of its common stock in lieu of payment in cash of accrued and unpaid interest of$12,705 dueOctober 1, 2014 per the forbearance agreement. OnApril 3, 2015 , the Company issued 1,363 shares of its common stock in lieu of payment in cash of accrued and unpaid interest of$12,635 dueApril 1, 2015 per the forbearance agreement. OnOctober 2, 2015 , the Company issued 4,156 shares of its common stock in lieu of payment in cash of accrued and unpaid interest of$12,705 dueOctober 1, 2015 per the forbearance agreement.
On
OnApril 7, 2016 , the Company issued 57,778 shares of its common stock in lieu of payment in cash of accrued and unpaid interest of$12,705 dueApril 1, 2016 per the forbearance agreement. OnOctober 6, 2016 , the Company issued 848,490 shares of its common stock in lieu of payment in cash of accrued and unpaid interest of$12,705 dueOctober 1, 2016 per the forbearance agreement. 18
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2022
(unaudited)
On March 1, 2017 , NorthStar and the Company entered into a settlement agreement
("Settlement Agreement ") related to then pending litigation. Pursuant to the
terms and conditions of the Settlement Agreement, NorthStar converted its
outstanding Series A Convertible preferred stock, into twenty million
(20,000,000) shares of common stock according to the original conversion terms.
In addition, and separate and apart from the conversion, NorthStar received
eleven million (11,000,000) shares of the Company's common stock. NorthStar will
receive ten percent (10%) of all Company international sales (based on a gross
sales basis). There was no effect of the 10% obligation as there were no
international sales in 2017 or through 2019. Furthermore, a NorthStar designee,
Greg Knutson , was appointed as a member of the Board of Directors of the Company
and two Company directors, Michael Tomas and Kristin Comella , each exercised
their prior NorthStar options to each receive a five percent (5%) member
interest in NorthStar . The parties agreed to a mutual release and NorthStar
agreed to terminate any UCC lien on the Company assets previously filed for the
benefit of NorthStar . On March 9, 2017 and April 1, 2017 , the Company
issued 30,000,000 and 1,000,000 shares of its common stock, respectively, as
described above. In connection with the settlement, the Company recorded a loss
on litigation settlement of $316,800 .
On
On
On
On
On
On
OnOctober 1, 2020 , the Company issued 2,035,820 shares of its common stock, having a fair value of$10,179 , in lieu of payment in cash of accrued and unpaid interest of$9,195 , resulting in a loss on settlement of$984 .
On
On
As ofMarch 31, 2022 andDecember 31, 2021 , the remaining carrying value of the note was$262,000 . AtMarch 31, 2022 andDecember 31, 2021 , accrued interest on the note was$13,273 and$8,751 , respectively, and is included in accrued expenses on the accompanying balance sheet.
Notes Payable -
OnAugust 7, 2017 , the Company issued a$500,000 promissory note in exchange for compensation earned. The promissory note bears interest of 5% per annum and is due one year from date of issuance. As ofMarch 31, 2022 andDecember 31, 2021 , the remaining carrying value of the note was$161,786 . OnMay 7, 2018 , the Company issued a$500,000 promissory note in exchange for compensation earned. The promissory note bears interest of 5% per annum and is due six months from date of issuance. As ofMarch 31, 2022 andDecember 31, 2021 , the remaining carrying value of the note was$500,000 . 19
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2022
(unaudited)
On July 1, 2019 , the Company issued a $500,000 promissory note in exchange for
compensation earned. The promissory note bears interest of 5% per annum and is
due November 7, 2019 . As of March 31, 2022 and December 31, 2021 , the remaining
carrying value of the note was $500,000 .
On December 31, 2019 , the Company issued a $178,077 promissory note in exchange
for compensation earned. The promissory note bears interest of 5% per annum and
is due on demand. As of March 31, 2022 and December 31, 2021 , the remaining
carrying value of the note was $178,077 .
On March 31, 2020 , the Company issued a $187,500 promissory note in exchange for
compensation earned. The promissory note bears interest of 5% per annum and is
due on demand. As of March 31, 2022 and December 31, 2021 , the remaining
carrying value of the note was $187,500 .
On June 30, 2020 , the Company issued a $187,500 promissory note in exchange for
compensation earned. The promissory note bears interest of 5% per annum and is
due on demand. As of March 31, 2022 and December 31, 2021 , the remaining
carrying value of the note was $187,500 .
On July 1, 2020 , the Company issued a $500,000 promissory note as payment of an
annual bonus awarded. The promissory note bears interest of 5% per annum and is
due on demand. As of March 31, 2022 and December 31, 2021 , the remaining
carrying value of the note was $500,000 .
On September 30, 2020 , the Company issued a $100,962 promissory note in exchange
for compensation earned. The promissory note bears interest of 5% per annum and
is due on demand. As of March 31, 2022 and December 31, 2021 , the remaining
carrying value of the note was $100,962 .
On December 31, 2020 , the Company issued a $143,654 promissory note in exchange
for compensation earned. The promissory note bears interest of 5% per annum and
is due on demand. As of March 31, 2022 and December 31, 2021 , the remaining
carrying value of the note was $143,654 .
On March 31, 2021 , the Company issued a $90,990 promissory note in exchange for
compensation earned. The promissory note bears interest of 5% per annum and is
due on demand. As of March 31, 2022 and December 31, 2021 , the remaining
carrying value of the note was $90,990 .
On June 30, 2021 , the Company issued a $43,269 promissory note in exchange for
compensation earned. The promissory note bears interest of 5% per annum and is
due on demand. As of March 31, 2022 and December 31, 2021 , the remaining
carrying value of the note was $43,269 .
On September 30, 2021 , the Company issued a $187,500 promissory note in exchange
for compensation earned. The promissory note bears interest of 5% per annum and
is due on demand. As of March 31, 2022 and December 31, 2021 , the remaining
carrying value of the note was $187,500 .
On December 31, 2021 , the Company issued a $100,962 promissory note in exchange
for compensation earned. The promissory note bears interest of 5% per annum and
is due on demand. As of March 31, 2022 and December 31, 2021 , the remaining
carrying value of the note was $100,962 .
On March 31, 2022 , the Company issued a $187,500 promissory note in exchange for
compensation earned. The promissory note bears interest of 5% per annum and is
due on demand. As of March 31, 2022 , the remaining carrying value of the note
was $187,500 .
At
20
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2022
(unaudited)
March 31, December 31,
2022 2021
NorthStar $ 262,000 $ 262,000
Note payable, Mr. Tomas 161,786 161,786
Note payable, Mr. Tomas 500,000 500,000
Note payable, Mr. Tomas 500,000 500,000
Note payable, Mr. Tomas 178,077 178,077
Note payable, Mr. Tomas 187,500 187,500
Note payable, Mr. Tomas 187,500 187,500
Note payable, Mr. Tomas 500,000 500,000
Note payable, Mr. Tomas 100,962 100,962
Note payable, Mr. Tomas 143,654 143,653
Note payable, Mr. Tomas 90,990 90,991
Note payable, Mr. Tomas 43,269 43,269
Note payable, Mr. Tomas 187,500 187,500
Note payable, Mr. Tomas 100,962 100,962
Note payable, Mr. Tomas 187,500 -
Total notes payable - related parties
Note Payable -
OnFebruary 26, 2021 ,Dr. Murphy purchased an unsecured convertible promissory note in the aggregate principal amount of$200,000 maturing 12 months after the issuance date. The note was non-interest bearing andDr. Murphy had the right to convert the outstanding balance of the note at any time into shares of common stock of the Company at a conversion price of$0.0266 . OnMarch 23, 2021 ,Dr Murphy converted the full value of the note into 7,518,797 shares of the Company's common stock (See Note 8 and Note 12).
Convertible Notes Payable - Related Parties
Convertible Note Payable -
OnMarch 15, 2022 , the Company entered into an addendum for a$100,000 promissory note payable toGreg Knutson , a director, whereby the conversion price was changed from$0.0266 to$0.008 , the maturity date was extended for two years, andMr. Knutson received 25,000,000 common shares and a five-year common stock warrant to purchase 12,500,000 shares of common stock at$0.008 per share.
NOTE 10 - FAIR VALUE MEASUREMENT
The Company adopted the provisions of ASC 825-10. ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:
? Level 1 - Quoted prices in active markets for identical assets or liabilities.
? Level 2 - Observable inputs other than Level 1 prices such as quoted prices
for similar assets or liabilities; quoted prices in markets with insufficient
volume or infrequent transactions (less active markets); or model-derived
valuations in which all significant inputs are observable or can be derived
principally from or corroborated by observable market data for substantially
the full term of the assets or liabilities.
? Level 3 - Unobservable inputs to the valuation methodology that are
significant to the measurement of fair value of assets or liabilities.
All items required to be recorded or measured on a recurring basis are based upon Level 3 inputs.
To the extent that valuation is based on models or inputs that are less
observable or unobservable in the market, the determination of fair value
requires more judgment. In certain cases, the inputs used to measure fair value
may fall into different levels of the fair value hierarchy. In such cases, for
disclosure purposes, the level in the fair value hierarchy within which the fair
value measurement is disclosed and is determined based on the lowest level input
that is significant to the fair value measurement.
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2022
(unaudited)
As of
As of
NOTE 11 - COMMITMENTS AND CONTINGENCIES
Leases InOctober 2019 , the Company relocated to a new location within the same city and entered into a month-to-month lease. During the three months endedMarch 31, 2022 and 2021, lease expense was comprised of the following: For the Three Months Ended March 31, 2022 2021 Operating lease expense $ 1,434 $ 1,432 Total lease expense $ 1,434 $ 1,432
Royalty Agreement /
OnNovember 9, 2016 , the Company entered into an Intellectual Property License Agreement whereby the Company grantedHigh Rise Group Company the exclusive right to the Company's intellectual property (as defined) for the licensed use and development inKuwait and other GCC/Middle East countries for 25 years in exchange for a payment of$75,000 and a 5% royalty generated under the agreement. The licensing agreement is recorded as contract liabilities and amortized over the term of the agreement. The carrying balance as ofMarch 31, 2022 andDecember 31, 2021 was$58,750 and$59,500 , respectively. The intent is forU.S. Stem Cell Middle East to offer regenerative treatment options to patients, based onU.S. Stem Cell, Inc. products and technologies like MyoCell™. To date, the first clinic inKuwait City has been completed but has not begun operations asHigh Rising Group has not yet been able to secure regulatory approvals to operate. Litigation OnSeptember 17, 2015 , a product liability lawsuit was filed inBroward County , specificallyPatsy Bade v.Bioheart, Inc. US Stem Cell Clinics LLC ,Alejandro Perez , ARNP, andShareen Greenbaum , M.D., and onNovember 30, 2015 , a product liability lawsuit was filed inBroward County , specificallyElizabeth Noble v.Bioheart, Inc. US Stem Cell Clinics LLC ,Alejandro Perez , ARNP, andShareen Greenbaum ,M.D. During the year endedDecember 31, 2016 , both matters settled by the Company's insurance policy with no additional cost to the Company, except for the obligation to pay the insurance company deductible of$100,000 , of which$11,000 was paid in fiscal 2017. The remaining amount due under this settlement is$26,410 and$26,600 as ofMarch 31, 2022 andDecember 31, 2021 , respectively, and is included in accounts payable. OnJuly 27, 2020 ,Brenda Leonhardt filed a lawsuit againstU.S. Stem Cell, Inc. ,Mike Tomas , Dr.William P. Murphy , Jr.,Richard T. Spencer , III,Mark Borman , Dr.Samuel S. Ahn ,Charles Hart ,Sheldon T. Anderson ,Greg Knutson , andKristin Comella inBroward County Court , Case No. CACE-10-012095. The lawsuit alleges breach of a settlement agreement, breach of contract with respect to failure to make a balloon payment under a promissory note, and several tort theories such as misrepresentation and fraudulent transfer. The Company denies most of the allegations in the lawsuit and moved to dismiss almost all of the claims. The motions to dismiss was recently denied.U.S. Stem Cell, Inc. does note that it provided a promissory note toMs. Leonhardt , which has not been fully satisfied. The Company, as one of the parties entered into a Settlement Agreement and General Release (the "Agreement") datedJune 3, 2019 related to certain medical procedures. Without admitting any liability, and as part of that Agreement, the Company agreed to provide a five-year 5.25% unsecured promissory note, datedJune 15, 2019 , in the principal amount of$500,000 , payable in monthly increments of$5,000 per month, with a final balloon payment due onJune 15, 2024 . Accordingly, the Company recognized Pre-litigation expense of$500,000 . As ofMarch 31, 2022 andDecember 31, 2021 , the remaining carrying value of the note was$403,621 and$413,239 , respectively. At present, the Company is delinquent two payments and, if not cured, would be considered in default of the promissory note underlying the Agreement. 22
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2022
(unaudited)
On February 10, 2021 , as part of a settlement agreement, the Company transferred
its entire member interest in U.S. Stem Cell Clinic, LLC to Dr. Kristin Comella
as settlement for $100,000 of accrued interest owed to Dr. Comella (See Note 4,
5 and 6).
The Company is subject at times to other legal proceedings and claims, which
arise in the ordinary course of its business. Although occasional adverse
decisions or settlements may occur, the Company believes that the final
disposition of such matters should not have a material adverse effect on its
financial position, results of operations or liquidity. There was no outstanding
litigation as of March 31, 2022 other than that described above.
Government Claim
On May 9, 2018 , the U.S. Department of Justice filed an injunctive action,
specifically United States of America v. U.S. Stem Clinic, LLC , U.S. Stem Cell,
Inc. , Kristin C. Comella , and Theodore Gradel . The Complaint alleges, among
other matters that the defendants manufacture "stromal vascular fraction" (SVF)
products from patient adipose (fat) tissue, which the companies then market as
stem cell-based treatments, and which U.S. Stem Cell Clinic, LLC administers to
patients, without first obtaining what the government alleges are necessary FDA
approvals. Although Theodore Gradel was initially listed as a defendant, he
subsequently entered into a consent agreement and is no longer party to this
case.
The U.S. and the defendants filed cross motions for summary judgment, each
asking for a ruling in its favor. On June 3, 2019 , the Court entered an order
granting Summary Judgment for the government and denying the defendants' motion
for summary judgment. The order focused on the defendants' actions in providing
and marketing SVF therapy. In an order dated June 4, 2019 , the Court granted the
defendants' request to allow it the opportunity to work out the language of the
form of injunction with the government, and if unsuccessful, to provide a status
report to the Court by June 14, 2019 , outlining areas of disagreement. The Court
further ordered that the defendants (U.S. Stem Clinic, LLC , U.S. Stem Cell,
Inc. , and Kristin C. Comella ) 'not sell, provide or otherwise engage in any SVF
therapy or any other activities to be regulated by the FDA as explained in the
Court's Order on the Parties' Motions for Summary Judgment." On June 25, 2019 ,
the Court entered an Order of Permanent Injunction, generally enjoining the
defendants with respect to the SVF Product and requiring other actions. The
Company filed an appeal on August 23, 2019 and attended oral argument on January
13, 2021 . On June 2, 2021 , the Eleventh Circuit Court ruled to affirm lower
courts' judgement. The Company is not able to predict the duration, scope,
results, or consequences of the U.S. Department of Justice actions and final
rulings and management is assessing its options on a going forward basis. The
Company, in having divested certain equipment and other assets and assigning its
lease, has and will continue to experience a decrease in revenues as the Company
both maintains the remainder of the business and transitions into similar or
unrelated business opportunities as determined by management. However,
management is not able to predict the duration, scope, results, or consequences
of the summary judgment and any transition of the business plan.
After the Court's issuance of the Order of Permanent Injunction, the Company has
received demand letters for compensation from persons who store their SVF
Product and/or other tissue product with the tissue bank (several of the persons
have requested refunds of the monies paid to the tissue bank and one person has
requested a full refund of monies paid to an altogether separate company due to
her not receiving the full amount of treatments she requested; such requests for
compensation, to date, have not been material) and requests that the Company
preserve cells in the Company's possession. The Company sought guidance from the
Court, which entered an order generally staying the requirement to destroy any
SVF Product, pending a decision on the Company's appeal. However, that appeal
has now been concluded and the stay order is no longer in place.
NOTE 12 - STOCKHOLDERS' DEFICIT
Adjustment to Opening Balances Upon Adoption of ASU 2020-06
Upon adoption of ASU 2020-06 during the first quarter of 2022, the Company
adjusted its beginning balance sheet with a decrease in additional paid-in
capital of
Common Stock During the three months endedMarch 31, 2022 , the Company issued an aggregate of 1,951,207 shares of its common stock, having a fair value of$15,609 , in settlement of outstanding accounts payable of$20,000 . In connection with the issuances, the Company incurred a$4,390 net gain on settlement. 23
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2022
(unaudited)
On February 24, 2022 , the Company issued an aggregate of 20,000,000 shares of
its common stock, having a fair value of $140,000 , for services to be rendered,
which are being amortized to expense over the term of the agreement of 180 days.
During the three months ended March 31, 2022 , the Company entered into addendums
with certain holders owning an aggregate of $214,000 of the convertible notes
whereby the conversion price was changed from $0.0266 to $0.008 , the maturity
date was extended for two years and an aggregate of 53,400,000 commons shares
and five-year warrants to purchase 12,500,000 common shares at $0.008 per share
were issued. As a result of the changes in the conversion price, the addendums
resulted in an extinguishment of $214,000 of the old debt in exchange for new
debt with the same face value having different terms. Accordingly, a loss on
debt extinguishment of $491,607 was recognized in the accompanying statements of
operations.
On February 26, 2022 , the Company issued an unsecured convertible promissory
note in the principal amount of $27,000 that matures 24 months after the
issuance date and 6,750,000 shares of common stock in exchange for proceeds of
$27,000 . The value ascribed to the common shares was $18,563 , which was
recognized as debt discount with a corresponding increase in additional paid-in
capital.
On March 23, 2022 , a convertible note with a face value of $25,000 , having a net
book value of $25,000 at the date of conversion, was converted into 3,125,000
shares of the Company's common stock. As the conversion was at a fixed
conversion price, no gain or loss was recognized on conversion (See Note 8).
On September 10, 2021 , the Company filing of an Offering Circular on Form 1-A,
pursuant to Regulation A (File Number: 024-11617) was qualified by the
Securities and Exchange Commission . The Company registered 250,000,000 shares of
common stock for maximum proceeds of $2,500,000 (before deducting the maximum
broker discount and costs of the offering). On March 23, 2022 , the Company
issued 3,125,000 shares of common stock to investors for cash proceeds of
$25,000 , net of fees and commission, pursuant to the Offering Circular.
Stock Options
On April 1, 2013 , the Board of Directors approved, subject to subsequently
received stockholder approval, the establishment of the Bioheart 2013 Omnibus
Equity Compensation Plan, or the "2013 Omnibus Plan" (replacing the 1999
Officers and Employees Stock Option Plan, or the Employee Plan, and the 1999
Directors and Consultants Stock Option Plan). The 2013 Omnibus Plan initially
reserved up to fifty thousand (50,000) shares of common stock for issuance. On
August 4, 2014 , the Board of Directors approved to set the reserve to one
hundred thousand (100,000) shares of common stock for issuance and to close the
1999 Officers and Employees Stock Option Plan. On February 2, 2015 , at the
annual meeting of stockholders, the 2013 Omnibus Equity Compensation Plan was
approved.
On November 2, 2015 , the Company increased the shares reserved under the 2013
Omnibus Plan to five hundred million (500,000,000) shares of common stock for
issuance. Effective September 16, 2016 , the Company approved an
additional twenty five million (25,000,000) shares of common stock to the
reserve; effective April 21, 2017 , the Company approved an additional twenty
five million (25,000,000) shares of common stock to the reserve; effective
August 7, 2017 , the Company approved an additional thirty million (30,000,000)
shares of common stock to the reserve; and effective May 7, 2018 , the Company
approved an additional one hundred million (100,000,000) shares of common stock
to reserve.
A summary of the stock option activity for the three months ended March 31, 2022
is as follows:
Weighted Weighted
Average Average
Number of Exercise Remaining Life Intrinsic
Options Price In Years Value
Outstanding,
6.3$ 36,686 Granted - Exercised - Forfeited/Expired (500 )$ 0.1540 Outstanding, March 31, 2022 110,643,384$ 0.0247 6.0$ 178,806 Exercisable, March 31, 2022 93,490,884$ 0.0256 5.8$ 134,152 24
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2022
(unaudited)
Options Outstanding Options Exercisable
Weighted Weighted Weighted
Outstanding Average Average Exercisable Average
Exercise Number of Exercise Remaining Life Number of Exercise
Price Options Price In Years Options Price
$0.004
to $0.010 41,800,000 $ 0.0051 6.8 30,150,000 $ 0.0050
$0.011
to $0.020 16,250,000 $ 0.0196 4.5 16,250,000 $ 0.0196
$0.021
to $0.030 9,510,000 $ 0.0252 6.6 9,007,500 $ 0.0252
$0.0363 22,635,000 $ 0.0363 5.4 22,635,000 $ 0.0363
$0.0536 20,000,000 $ 0.0536 6.1 15,000,000 $ 0.0536
$0.1540 448,384 $ 0.1540 3.5 448,384 $ 0.1540
110,643,384 $ 0.0247 6.0 93,490,884 $ 0.0256
The aggregate intrinsic value of outstanding stock options was $178,806 , based
on options with an exercise price less than the Company's stock price of $0.0094
as of March 31, 2022 , which would have been received by the option holders had
those option holders exercised their options as of that date.
The fair value of all options that vested during the three months ended March
31, 2022 and 2021 was $80,644 and $158,337 , respectively. As of March 31, 2022 ,
the Company had $76,645 of total unrecognized compensation cost related to
non-vested awards granted under the 2013 Omnibus Plan, which the Company expects
to recognize over a weighted average period of 0.62 years.
Warrants
A summary of the warrant activity for the three months ended March 31, 2022 is
as follows:
Weighted
Weighted Average
Average Remaining
Number of Exercise Life Intrinsic
Warrants Price In Years Value
Outstanding, December 31, 2021 1,103,127 $ 12.41 6.2 $ -
Granted 12,500,000 0.008
Exercised -
Expired -
Outstanding, March 31, 2022 13,603,127 $ 1.01 5.0 $ 17,500
Exercisable, March 31, 2022 13,601,582 $ 0.14 5.0 $ 17,500
Warrants Outstanding Warrants Exercisable
Weighted Weighted Weighted
Outstanding Average Average Exercisable Average
Exercise Number of Exercise Remaining Life Number of Exercise
Price Warrants Price In Years Warrants Price
$0.008
to $0.03 13,500,000 $ 0.01 5.1 13,500,000 $ 0.01
$10.00
to $20.00 81,036 $ 15.29 1.2 81,036 $ 15.29
$20.01
to $30.00 19,543 $ 25.06 1.9 19,543 $ 25.06
$49.86 1,003 $ 49.86 2.0 1,003 $ 49.86
$7,690.00 1,545 $ 7,690.00 4.8 - $ 7,690.00
13,603,127 $ 1.01 5.0 13,601,582 $ 0.14
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2022
(unaudited)
The aggregate intrinsic value of the issued and exercisable warrants of $17,500
represents the total pretax intrinsic value, based on warrants with an exercise
price less than the Company's stock price of $0.0094 as of March 31, 2022 , which
would have been received by the warrant holders had those warrants holders
exercised their warrants as of that date.
NOTE 13 - CONCENTRATIONS
Concentrations of Credit Risk
The Company's financial instruments that are exposed to a concentration of credit risk are cash and accounts receivable. Generally, the Company's cash and cash equivalents in interest-bearing accounts does not exceedFDIC insurance limits. The financial stability of these institutions is periodically reviewed by senior management. Concentrations of Revenues
For the three months ended
For the Three Months Ended March 31,
2022 2021
Customer 1 20 % -
Customer 2 17 % -
Customer 3 10 % -
Customer 4 - 47 %
Customer 5 - 12 %
Totals 47 % 59 %
Concentrations of Accounts Receivable
As of
March 31, December 31,
2022 2021
Customer 1 94 % 98 %
Totals 94 % 98 %
NOTE 14 - SUBSEQUENT EVENTS
On
On
On
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Unless otherwise indicated, references in this Quarterly Report on Form 10-Q to "we," "us," and "our" are to the Company, unless the context requires otherwise. The following discussion and analysis by our management of our financial condition and results of operations should be read in conjunction with our unaudited condensed interim financial statements and the accompanying related notes included in this quarterly report and our audited financial statements and related notes and Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year endedDecember 31, 2021 filed with theSecurities and Exchange Commission .
Cautionary Statement Regarding Forward-Looking Statements
This report may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act, and we intend that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking statements are based on our management's beliefs and assumptions and on information currently available to our management. Any such forward-looking statements would be contained principally in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors." Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities and the effects of regulation. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as "anticipates," "believes," "could," "estimates," "expects," "hopes," "intends," "may," "plans," "potential," "predicts," "projects," "should," "will," "would" or similar expressions. This report may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act, and we intend that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking statements are based on our management's beliefs and assumptions and on information currently available to our management. Any such forward-looking statements would be contained principally in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors." Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities and the effects of regulation. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as "anticipates," "believes," "could," "estimates," "expects," "hopes," "intends," "may," "plans," "potential," "predicts," "projects," "should," "will," "would" or similar expressions. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss many of these risks in greater detail in "Risk Factors." Risk factors include, but are not limited to, the economic effects of the pandemic, the promptness of distribution of vaccines, domestically and internationally to limit the impact of COVID-19, and the short and long term economic impact of COVID-19 on the marketplace. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management's beliefs and assumptions only as of the date of this report. You should read this report and the documents that we reference in this report and have filed as exhibits to the report completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. Additional information concerning these, and other risks and uncertainties is contained in our filings with theSecurities and Exchange Commission , including the section entitled "Risk Factors" in our Annual Report on Form 10-K for the year endedDecember 31, 2020 . Unless otherwise indicated or the context otherwise requires, all references in this Form 10-Q to "we," "us," "our," "our company," "U.S. Stem Cell, Inc. " or the "Company" refer toU.S. Stem Cell, Inc. and its subsidiaries.
Our Ability to Continue as a Going Concern
Our independent registered public accounting firm has issued its report datedMarch 31, 2022 , in connection with the audit of our annual financial statements as ofDecember 31, 2021 that included an explanatory paragraph describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern and Note 2 to the unaudited financial statements for the period endedMarch 31, 2022 also describes the existence of conditions that raise substantial doubt about our ability to continue as a going concern. 27
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Table of Contents Overview We are an enterprise in the regenerative medicine/cellular therapy industry. Our prior focus was on the discovery, development, and commercialization of cell based therapeutics. Our business included the development of proprietary cell therapy products as well as revenue generating physician and patient based regenerative medicine/cell therapy training services,US Stem Cell Training, Inc. ("SCT"), an operating division of our company, is a content developer of regenerative medicine/cell therapy informational and training materials for physicians and patients. SCT also provides in-person and online training courses which are delivered through in-person presentations at SCT's state of the art facilities and globally at university, hospital and physician's office locations as well as through online webinars. Additionally, SCT provides hands-on clinical application training for physicians and health care professionals interested in providing regenerative medicine / cell therapy procedures. Vet biologics, ("VBI"), an operating division of our company, is a veterinary regenerative medicine company committed to providing veterinarians with the ability to deliver the highest quality regenerative medicine therapies to dogs, cats and horses. VBI provides veterinarians with extensive regenerative medicine capabilities including the ability to isolate regenerative stem cells from a patient's own adipose (fat) tissue directly on-site within their own clinic or stall-side.
We have a 49% member interest in
a
partially owned investment of our company.
Our comprehensive map of products and services:
As of the date of this filing:
[[Image Removed: chart.jpg]]
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Our mission is to advance to market novel regenerative medicine and cellular therapy products that substantially benefit humankind. Our business strategy is, to the extent possible, finance our clinical development pipeline through revenue (cash in-flows) generated through the marketing and sales of unique educational and training services, animal health products and personalized cellular therapeutic treatments. Accordingly, we have developed a multifaceted portfolio of revenue generating products and services in our US Stem Cell Training, Vetbiologics, operating divisions that will, if successful, financially support its clinical development programs. Our goal is to maximize shareholder value through the generation of short-term profits that increase cash in-flows and decrease the need for venture financings - a modern biotechnology company development strategy. Today, our company is a combination of opportunistic business enterprises. What we are establishing is a foundation of value in the products and services we are and plan to sell from US Stem Cell Training and Vetbiologics. Our strategy is to expand the revenues generated from each of these operating divisions and to reinvest the profits we generate into our clinical development pipeline. OnNovember 9, 2016 , we executed a Commercial Agency Agreement withHigh Rising Group Company (General Trading and Construction) and subsequently, onFebruary 10, 2017 , we authorizedHigh Rising Group Company as an independent contractor and Licensee for our company for the territories ofKuwait and theMiddle East (expressly excluding prohibited countries pursuant to the Patriot Act and The Iran Threat Reduction and Syria Human Rights Act of 2012). The intent of the agreement is forHigh Rising Group Company to establish clinics specializing in regenerative medicine, stem cell treatment and therapy, including stem cell bank, training, and all related stem cell machines and equipment. To date, the first clinic inKuwait City has been completed but has not begun operations asHigh Rising Group has not yet been able to secure regulatory approvals to operate. With the ongoing construction of theThe Sheikha Salwa Sabah Al-Ahmad Center for Stem Cell and Umbilical Cord , a public/private partnership with the government ofKuwait , (see http://news.kuwaittimes.net/website/stem-cell-center-epitomizes-ppp which is expressly not incorporated by reference to this filing), management hopes (but cannot guarantee) that private sector stem cell centers, as described above, will get regulatory approval. We will continue to evaluate and act upon opportunities to increase our top line revenue position and that correspondingly increase cash in-flows. These opportunities include but are not limited to the development and marketing of new products and services, mergers and acquisitions, joint ventures, licensing deals and more.
Further, if the opportunity presents itself whereby we can raise additional capital at a reasonable fair market value, our management will do so. Accordingly, we plan to continue in our efforts to restructure, equitize or eliminate legacy balance sheet issues that are obstacles to market capitalization appreciation and capital fund raising.
On
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Results of Operations Overview
We are a research and development company and our product candidates have not received regulatory approval or generated any material revenues and is not expected generate revenues until commercialization, if ever. We have generated substantial net losses and negative cash flow from operations since inception and anticipate incurring significant net losses and negative cash flows from operations for the foreseeable future as we continue clinical trials, undertake new clinical trials, apply for regulatory approvals, make capital expenditures, add information systems and personnel, make payments pursuant to our license agreements upon our achievement of certain milestones, continue development of additional product candidates using our technology, establish sales and marketing capabilities and incur the additional cost of operating as a public company. In addition, and as a result of the Court Order (see Note 11- Government Claim), we resolved to divest our company of certain equipment and other assets which will substantially reduce our ability to generate revenues until such time as alternative revenue producing materialize as well as assign our lease.
Three Months Ended
Revenues We recognized revenues of$23,310 for the three months endedMarch 31, 2022 . These revenues were generated from the sales of laboratory supplies and equipment, and services. We recognized revenues of$84,380 for the three months endedMarch 31, 2021 from the sale of MyoCath catheters, physician training, patient studies and veterinary sales. Due to the Injunction, as described in Note 11- Government Claim in our financial statements, our revenue has been impaired but for 2022 has moderately increased. Cost of Sales Cost of sales consists of the costs associated with the production of MyoCath, laboratory supplies necessary for laboratory services, physician course materials. Cost of sales were$7,335 and$15,521 in in the three-month periods endedMarch 31, 2022 and 2021, respectively. Associated gross margins were$15,975 (68.5%) and$68,859 (81.06%) for the three months periods endedMarch 31, 2022 and 2021, respectively. Research and Development Our research and development expenses consist of costs incurred in identifying, developing, and testing, our products and services. Research and development expenses were$0 in the three-month period endedMarch 31, 2022 , the same as the research and development expenses of$0 in the three-month period endedMarch 31, 2021 . Current management focus is towards on sales in addition to research and development and its corresponding ongoing costs. The timing and amount of our planned research and development expenditures is dependent on our ability to obtain additional financing.
Marketing, General and Administrative
Our marketing, general and administrative costs were$530,614 for the three-month period endedMarch 31, 2022 compared to$556,015 for the three-month period endedMarch 31, 2021 , a decrease of$25,401 . The decrease in cost due to decrease in activity. Our marketing, general and administrative expenses primarily consist of the costs associated with our general management and product and service marketing programs, including, but not limited to, salaries and related expenses for executive, administrative and marketing personnel, rent, insurance, legal and accounting fees, consulting fees, travel and entertainment expenses, conference costs and other clinical marketing and trade program expenses.
(Gain) Loss on settlement of debt
During the three months endedMarch 31, 2022 , we incurred a net gain of$4,390 primarily related to accounts payable and debt restructured during the current period as compared to a net aggregate loss of$337,875 for the same period last year. 30
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Table of Contents Income from equity investment Our investment of a 49% interest inU.S. Stem Cell Clinic of theVillages LLC are accounted for using the equity method of accounting. As such, we report our pro rata share of its income or loss for the period. For the three months endedMarch 31, 2022 , our pro rata share of its income (loss) was$0 . For the three month endedMarch 31, 2021 the pro rata share of income (loss) was$0 .US Stem Cell Clinic of theVillages, LLC is currently dormant. Interest Expense Interest expenses during the three months endedMarch 31, 2022 were$153,967 compared to$154,725 for the three months endedMarch 31, 2021 . Interest expenses primarily consists of interest incurred on the principal amount of theNorthStar loan, our former Bank of America loan, theSeaside National Bank loan, accrued fees and interest payable to the Guarantors, our capital lease and the amortization of debt discounts and non-cash interest incurred relating to our issued convertible notes payable. Stock-Based Compensation Stock-based compensation reflects our recognition as an expense of the value of stock options and other equity instruments issued to our employees and non-employees over the vesting period of the options and other equity instruments. We have granted to our employee's options to purchase shares of common stock at exercise prices equal to the fair market value of the underlying shares of common stock at the time of each grant, as determined by our Board of Directors, with input from management.
We follow Accounting Standards Codification subtopic 718-10. Compensation ("ASC 718-10") which requires that all share-based payments to both employee and non-employees be recognized in the income statement based on their fair values.
In awarding our common stock, our Board of Directors considered a number of factors, including, but not limited to:
? our financial position and historical financial performance; ? arm's length sales of our common stock; ? the development status of our product candidates; ? the business risks we face; ? vesting restrictions imposed upon the equity awards; and ? an evaluation and benchmark of our competitors; and ? prospects of a liquidity event. OnApril 1, 2013 , the Board of Directors approved, subject to subsequently received shareholder approval, the establishment of the Bioheart 2013 Omnibus Equity Compensation Plan, or the "2013 Omnibus Plan". The 2013 Omnibus Plan initially reserved up to fifty thousand (50,000) shares of common stock for issuance. OnAugust 4, 2014 , the Board of Directors approved to set the reserve to one hundred thousand (100,000) shares of common stock for issuance and to close the 1999 Officers and Employees Stock Option Plan. OnFebruary 2, 2015 , at the annual meeting of shareholders, the majority of shareholders approved the 2013 Omnibus Equity Compensation Plan. OnNovember 2, 2015 , the Board of Directors approved the increase of the reserve under the 2013 Omnibus Plan to five hundred million (500,000,000) shares of common stock for issuance, effectiveSeptember 16, 2016 , approved an addition of twenty five million (25,000,000) shares of common stock to the reserve, effectiveApril 21, 2017 , approved an addition of twenty five million (25,000,000) shares of common stock to the reserve, effectiveAugust 7, 2017 , approved an addition of thirty million (30,000,000) shares of common stock to the reserve and effectiveMay 7, 2018 , approved an addition of one hundred million (100,000,000) shares of common stock to reserve. Critical Accounting Policies Our discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted inthe United States . The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. 31
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Actual results may differ from these estimates under different assumptions or conditions. While our critical accounting policies are described in Note 1 to our financial statements appearing elsewhere in this report, we believe the following policies are important to understanding and evaluating our reported financial results: Revenue Recognition EffectiveJanuary 1, 2018 , the Company recognizes revenue in accordance with Accounting Standards Codification 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific revenue recognition guidance throughout the Industry Topics of the Accounting Standards Codification. The updated guidance states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also provides for additional disclosures with respect to revenues and cash flows arising from contracts with customers. At the time of each transaction, management assesses whether the fee associated with the transaction is fixed or determinable and whether or not collection is reasonably assured. The assessment of whether the fee is fixed or determinable is based upon the payment terms of the transaction. Collectability is assessed based on a number of factors, including past transaction history with the client and the creditworthiness of the client.
The Company's primary sources of revenue are from the sale of test kits and equipment, training services, patient treatments, laboratory services and cell banking.
Revenues for product and equipment sold are not recorded until product and equipment are received by the customer. Revenues from in-person trainings are recognized when the training occurs and revenues from on demand online trainings are recognized when the customer purchases the rights to the training course. Any cash received as a deposit for trainings are recorded by the Company as a liability.
Patient treatments and laboratory services revenue are recognized when those services have been completed or satisfied.
Research and Development Activities
We account for research and development costs in accordance with Accounting
Standards Codification subtopic 730-10, Research and Development ("ASC 730-10").
Under ASC 730-10, all research and development costs must be charged to expense
as incurred. Accordingly, internal research and development costs are expensed
as incurred. Third-party research and development costs are expensed when the
contracted work has been performed or as milestone results have been achieved as
defined under the applicable agreement. Our company-sponsored research and
development costs related to both present and future products are expensed in
the period incurred.
Inflation
Our opinion is that inflation has not had, and is not expected to have, a material effect on our operations.
Climate Change Our opinion is that neither climate change, nor governmental regulations related to climate change, have had, or are expected to have, any material effect on our operations. Concentrations of Credit Risk
As of
Recent Accounting Policies
There are various other updates recently issued, most of which represented
technical corrections to the accounting literature or application to specific
industries and are not expected to a have a material impact on our financial
position, results of operations or cash flows.
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Liquidity and Capital Resources
In the three months endedMarch 31, 2022 , we incurred negative cash flow from operations of$63 ,806and will continue to finance our considerable operational cash needs with cash generated from financing activities and revenues. Investing Activities Net cash provided by investing activities was$0 for the three-months endedMarch 31, 2022 represented proceeds from our equity investment as compared to cash provided by investing activities of$0 from our equity investments for the same period last year. Financing Activities
Net cash provided in financing activities was an aggregate of
Existing Capital Resources and Future Capital Requirements and Plan of Operations
We have generated substantial net losses and negative cash flow from operations since inception and anticipate incurring significant net losses and negative cash flows from operations for the foreseeable future. Historically, we have relied on proceeds from the sale of our common stock and our incurrence of debt to provide the funds necessary to conduct our research and development activities and to meet our other cash needs.
At
Along with diversifying the portfolio of products distributed by our company, including equipment and biologics, it is the intention of our Company to both continue to adhere to the Court Order (see Note 11- Government Claim) as well as re -establish its good standing with the Agency (FDA). These points are not mutually exclusive nor negotiable and we believe that there are still business and patient goodness opportunities while still abiding by all legal requirements As a result, management shall be continuing with the development ofUS Stem Cell Training, Inc. , an operating division of our company, that is a content developer of regenerative medicine/cell therapy informational and training materials for physicians and patients and complies with both requirements--as well as Vetbiologics, an operating division of our company, that is a veterinary regenerative medicine company committed to providing veterinarians with the ability to deliver the highest quality regenerative medicine therapies to dogs, cats and horses. In addition, our company is transitioning the current clinics to a more diversified regenerative medicine platform, while complying with recent court rulings. While not providing legal advice, our company may also engage in managing third-party clinics to ensure they too abide by recent regulatory requirements
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that are material to investors.
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