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, 2021 , the Company had cash on hand of$444,108 and a working capital deficit (current liabilities in excess of current assets) of$10,318,806 . During the three months endedMarch 31, 2021 , the net loss was$979,756 and net cash used in operating activities was$317,515 . These conditions raise substantial doubt about the Company's ability to continue as a going concern for one year from the issuance of the unaudited condensed 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, 2021 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. Our management intends to continue the current business strategy, to the extent possible, to finance their clinical development pipeline through revenue (cash in-flows) generated through the marketing and sales of unique educational and training services, animal health products and distribution of products in the industry as well as 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. 7
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2021 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.
Fair Value
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.
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.
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 statement 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, 2021 andDecember 31, 2020 , the allowance for doubtful accounts was$13,203 . 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. 8
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2021
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 ownerships of U.S. Stem Cell Clinic, LLC and
Regenerative Wellness Clinic, LLC , respectively, and its 49% member interest
ownership of U.S. Stem Cell Clinic of the Villages utilizing the equity method
of accounting (See Note 5).
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards
Codification 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.
This ASC also requires additional disclosure about the nature, amount, timing,
and uncertainty of revenue and cash flows arising from customer purchase orders,
including significant judgments.
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 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 period presented.
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2021
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.
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
"treasury stock" and/or "if converted" methods as applicable.
The computation of basic and diluted income (loss) per share as of
Potentially dilutive securities excluded from the computation of basic and diluted net loss per share are as follows:
March 31,
2021 2020
Options 110,644,914 111,120,414
Warrants 1,110,468 1,110,468
Convertible note 32,699,044 7,820,647Total potentially dilutive shares 144,454,426 120,051,529
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).
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2021 Recent Accounting Pronouncements
FASB Accounting Standards Updates ("ASU") 2017-04 (Topic 350), "Intangibles -
Goodwill and Others" - Issued in January 2017 , ASU 2017-04 simplifies how an
entity is required to test goodwill for impairment by eliminating Step 2 from
the goodwill impairment test. Step 2 measures a goodwill impairment loss by
comparing the implied fair value of a reporting unit's goodwill with the
carrying amount of that goodwill. This guidance was effective for the Company in
the first fiscal quarter of 2020. The adoption of this standard did not have a
material impact on the Company's financial statements and related disclosures.
In August 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 provisions
of ASU 2020-06 are applicable for fiscal years beginning after December 15,
2021 , with early adoption permitted no earlier than fiscal years beginning after
December 15, 2020 . The Company is currently evaluating the impact of ASU 2020-06
on its financial statements.
In August 2018 , the FASB issued Accounting Standards Update ("ASU") 2018-13,
"Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the
Disclosure Requirements for Fair Value Measurement" ("ASU 2018-13"). ASU 2018-13
removes certain disclosure requirements, including the amount of and reasons for
transfers between Level 1 and Level 2 of the fair value hierarchy, the policy
for timing of transfers between levels, and the valuation processes for Level 3
fair value measurements. ASU 2018-13 also adds disclosure requirements,
including changes in unrealized gains and losses for the period included in
other comprehensive income for recurring Level 3 fair value measurements, and
the range and weighted average of significant unobservable inputs used to
develop Level 3 fair value measurements. The amendments on changes in unrealized
gains and losses, and the range and weighted average of significant unobservable
inputs used to develop Level 3 fair value measurements, should be applied
prospectively for only the most recent interim or annual period presented in the
initial fiscal year of adoption. All other amendments should be applied
retrospectively to all periods presented upon their effective date. This
guidance was effective for the Company in the first fiscal quarter of 2020. The
adoption of this standard did not have a material impact on the Company's
financial statements and related disclosures.
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.
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).
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment as ofMarch 31, 2021 andDecember 31, 2020 is summarized as follows: March 31, December 31, 2021 2020 Furniture, fixtures and equipment$ 5,598 $ 5,598 Computer equipment 1,809 1,809 Property and equipment, cost 7,407 7,407 Less: accumulated depreciation and amortization (7,407 ) (7,407 ) Property and equipment, net $ - $ - 11
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2021
As a consequence of the Court Order (see Note 12 "Government Claim"), the
Company resolved to divest itself of certain equipment and other assets (the
"Equipment Assets") used in connection with the Company's human tissue banking
business, but consistent however with the requirements of the Court Order, and
to adjust the business plan and operations to accommodate this potential
divesture. To facilitate the above, the Company entered into a Termination and
Release Agreement and a Letter Agreement intended to divest itself of certain
equipment and other assets underlying the related equipment lease transaction.
In addition, on October 24, 2019 , the Company entered into an Assignment and
Assumption of Lease by and between the Company, American Cell Technology, LLC ,
and Sawgrass Business Plaza, LLC . Subsequently, the Company relocated to a new
location within the same city and entered into a month-to-month lease. As part
of the termination of the operating lease, the Company left certain property and
equipment (all of which had been fully depreciated) at the old location.
In connection with the sale of the lab, medical and other equipment, the Company
realized a gain on sale of equipment of $386,535 . The gain is recognized
ratably over the term of the lease to operations. During the three months ended
March 31, 2021 and 2020, the Company recognized $0 and $21,474 , respectively, as
gain on sale of equipment. As of March 31, 2021 and December 31, 2020 , deferred
gain on sale of equipment was $0 .
Depreciation expense was
NOTE 5 - INVESTMENTSU.S. Stem Cell Clinic, LLC The investment inU.S. Stem Cell Clinic, LLC was comprised of a 49.9% (increased from 33.3% onJanuary 29, 2019 ) member interest ownership and is accounted for using the equity method of accounting. The Company's income (loss) earned byU.S. Stem Cell Clinic, LLC member interest was$0 and ($23,539 ) for the three months endedMarch 31, 2021 and 2020, respectively (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 endedMarch 31, 2021 and 2020, the Company received distributions totaling$0 fromU.S. Stem Cell Clinic, LLC (inception to date of$663,870 ). OnFebruary 10, 2021 , as part of a settlement agreement, the Company transferred its entire member interest inU.S. Stem Cell, LLC to Dr.Kristen Comella as settlement for$100,000 of accrued interest owed toDr. Comella (See Note 6, Note 7 and Note 12 "Litigation"). The carrying value of the investment atMarch 31, 2021 andDecember 31, 2020 is$0 . AtMarch 31, 2021 andDecember 31, 2020 , accounts receivable for sales of product and services toU.S. Stem Cell Clinic, LLC was$28,763 (prior to divesture onFebruary 10, 2021 ). Revenues earned from sales toU.S. Stem Clinic, LLC for the three months endedMarch 31, 2021 and 2020 were$2,281 (prior to divesture onFebruary 10, 2021 ) and$1,441 , respectively.
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 "LLC") 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 of the LLC. Currently, Knutson holds a 51% member interest in the LLC and the Company holds a 49% member interest. The Company will provide, if requested, operating assistance as well as management services, the latter to be compensated at fee of five percent (5%) of the LLC 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 in theU.S. Stem Cell of theVillages, LLC . The Company's 49% income (loss) incurred byU.S. Stem Cell of theVillages LLC member interest was$0 for the three months endedMarch 31, 2021 and 2020 (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, 2021 and 2020, the Company received distributions totaling$0 fromU.S. Stem Cell of theVillages LLC . The carrying value of the investment atMarch 31, 2021 andDecember 31, 2020 is$0 . 12
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2021
At March 31, 2021 and December 31, 2020 , accounts receivable for sales of
products and services to U.S. Stem Cell of the Villages LLC was $0 . Revenues
earned from sales to U.S. Stem Cell of the Villages LLC for the three months
ended March 31, 2021 and 2020 was $0 .
As of the date of this filing,
NOTE 6 - ACCRUED EXPENSES Accrued expenses consisted of the following as ofMarch 31, 2021 andDecember 31, 2020 : March 31, December 31, 2021 2020 Interest and fees payable to the Guarantors of the Company's loan agreement with Seaside Bank$ 570,904 $ 549,628 Accrued interest payable 895,586 882,515 Vendor accruals and other 79,138 79,138
Accrued expenses and other current liabilities
1,511,281 OnFebruary 10, 2021 , as part of a settlement agreement, the Company transferred its entire member interest inU.S. Stem Cell, LLC to Dr.Kristen Comella as settlement for$100,000 of accrued interest owed toDr. Comella (See Note 5, Note 7 and Note 12 "Litigation"). NOTE 7 - NOTES PAYABLE Notes payable were comprised of the following as ofMarch 31, 2021 andDecember 31, 2020 : March 31, December 31, 2021 2020 Seaside Bank note payable$ 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 384,500 386,000 Weider note payable 438,280 450,477 Mallard note payable 239,500 241,750 EIDL note payable 150,000 150,000 Total notes payable 3,347,859 3,363,806 Less unamortized debt discount (38,908 ) (41,237 ) Total notes payable net of unamortized debt discount 3,308,951 3,322,569 Less current portion (2,560,255 ) (2,562,149 ) Long-term portion$ 748,696 $ 760,420
*
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 withBank 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 . 13
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2021 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, 2021 andDecember 31, 2020 , 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, 2021 andDecember 31, 2020 , 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, 2021 andDecember 31, 2020 , 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, 2021 andDecember 31, 2020 , the remaining carrying value of the note was$300,000 . OnFebruary 10, 2021 , as part of a settlement agreement, the Company transferred its entire member interest inU.S. Stem Cell, LLC to Dr.Kristen Comella as settlement for$100,000 of accrued interest owed toDr. Comella (See Note 5, Note 6 and Note 12 "Litigation"). AtMarch 31, 2021 andDecember 31, 2020 , accrued interest on the notes was$122,892 and$208,645 , 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 2010 , 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 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. AtSeptember 30, 2019 , the Company was in default and renegotiating the payment structure. Thus, the remaining unamortized debt discount was charged to interest expense atSeptember 30, 2019 . As ofMarch 31, 2021 andDecember 31, 2020 , the remaining carrying value of the note was$384,500 and$386,000 , respectively. 14
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2021
Weider
The Company, as one of the parties entered into a Settlement Agreement and
General Release (the "Agreement") dated June 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, dated
June 15, 2019 , in the principal amount of $500,000 , payable in monthly
increments of $5,000 per month, with a final balloon payment due on June 15,
2024 . Accordingly, the Company recognized Pre-litigation expense of $500,000 . As
of March 31, 2021 and December 31, 2020 , the remaining carrying value of the
note was $438,280 and $450,477 , respectively.
Mallard
The Company, as one of the parties entered into a Settlement Agreement and
General Release (the "Agreement") dated December 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, dated December 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 on January 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 ended March 31, 2021 and 2020, the Company amortized $2,330 and
$2,252 , respectively, of debt discount to interest expense. As of March 31, 2021
and December 31, 2020 , the remaining carrying value of the note was $200,592 and
$200,513 , net of debt discount of $38,908 and $41,237 , respectively.
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 . The balance of principal and interest is payable thirty years from the date of the SBA Loan Agreement. As ofMarch 31, 2021 andDecember 31, 2020 , the remaining carrying value of the note was$150,000 . AtMarch 31, 2021 andDecember 31, 2020 , accrued interest on the note was$4,377 and$2,990 , respectively, and is included in accrued expenses on the accompanying balance sheet.
NOTE 8 - 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. For the three months endedMarch 31, 2021 and 2020, the Company amortized$0 and 17,424, respectively of debt discount to interest expense. As ofMarch 31, 2021 andDecember 31, 2020 , the remaining carrying value of the note was$1,397,762 . 15
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2021 NOTE 9 - CONVERTIBLE NOTE PAYABLE
OnFebruary 5, 2020 , the Company issued an unsecured convertible promissory note in the principal amount of$35,000 that matures 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. The debt discount was amortized to interest expense using the effective interest method. For the three months endedMarch 31, 2021 and 2020, the Company amortized$1,874 and$1,755 , respectively, of debt discount to interest expense. As ofMarch 31, 2021 andDecember 31, 2020 , the remaining carrying value of the note was$35,000 and$33,126 , net of debt discount of$0 and$1,874 , respectively. AtMarch 31, 2021 andDecember 31, 2020 , accrued interest on the note was$2,014 and$1,582 , respectively, and is included in accrued expenses on the accompanying balance sheet. As ofFebruary 5, 2021 , the maturity date, the note is in default. OnSeptember 8, 2020 , the Company issued an unsecured convertible promissory note in the principal amount of$10,000 that is due on demand 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 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. As ofMarch 31, 2021 andDecember 31, 2020 , the remaining carrying value of the note was$10,000 . As ofMarch 31, 2021 andDecember 31, 2020 , accrued interest on the note was$279 and$156 , respectively, and is included in accrued expenses on the accompanying balance sheet. FromFebruary 17, 2021 throughFebruary 26, 2021 , the Company issued unsecured convertible promissory notes in the aggregate principal amount of$619,000 that mature 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 . 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 is being amortized to interest expense using the effective interest method. OnApril 8, 2021 , one of the holders, a related party, converted a convertible note with a face value of$200,000 , datedFebruary 26, 2021 , having a net book value of$54,887 at the date of conversion, into 7,518,797 shares of the Company's common stock, having a fair value of$375,940 , resulting in a loss on conversion of$321,053 . For the three months endedMarch 31, 2021 , the Company amortized$5,252 of debt discount to interest expense. As ofMarch 31, 2021 , the remaining carrying value of the notes was$47,515 , net of debt discount of$371,485 . OnMarch 24, 2021 , the Company issued an unsecured convertible promissory note in the principal amount of$110,000 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$0.0070 . 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,$110,000 of debt discount was recognized with a corresponding increase in additional paid-in capital. The debt discount is being amortized to interest expense using the effective interest method. As ofMarch 31, 2021 , the remaining carrying value of the note was$0 , net of debt discount of$110,000 .
NOTE 10 - RELATED PARTY TRANSACTIONS
Advances - Related Parties As ofMarch 31, 2021 andDecember 31, 2020 , 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, 2021 and 2020, the Company received aggregate proceeds from advances of$30,000 and$103,417 , respectively. As ofMarch 31, 2021 andDecember 31, 2020 , the Company owed$891,432 and$861,432 , respectively, for related party advances. 16
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2021 Notes Payable - Related Parties
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. In addition, the Company grantedNorthstar a perpetual license on products as described for resale, relicensing, and commercialization outsidethe 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. 17
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2021
On September 17, 2014 , the limited waiver and forbearance agreement entered into
on October 1, 2012 to provide that the perpetual license on products as
described for resale, relicensing and commercialization outside the United
States was amended as such on the condition that Northstar provide certain
financing, which financing the Company, in its sole discretion, could decline
and retain the license.
On October 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 due October 1, 2014
per the forbearance agreement.
On April 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 due April 1, 2015 per
the forbearance agreement.
On October 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 due October 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. OnMarch 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, aNorthstar designee,Greg Knutson , was appointed as a member of the Board of Directors of the Company and two Company directors,Michael Tomas andKristin Comella , each exercised their priorNorthstar options to each receive a five percent (5%) member interest inNorthstar . The parties agreed to a mutual release andNorthstar agreed to terminate any UCC lien on the Company assets previously filed for the benefit ofNorthstar . OnMarch 9, 2017 andApril 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
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2021
On October 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 .
As of March 31, 2021 and December 31, 2020 , the remaining carrying value of the
note was $262,000 . At March 31, 2021 and December 31, 2020 , 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, 2021 andDecember 31, 2020 , 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, 2021 andDecember 31, 2020 , the remaining carrying value of the note was$500,000 . OnJuly 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 dueNovember 7, 2019 . As ofMarch 31, 2021 andDecember 31, 2020 , the remaining carrying value of the note was$500,000 . OnDecember 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 ofMarch 31, 2021 andDecember 31, 2020 , the remaining carrying value of the note was$178,077 . OnMarch 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 ofMarch 31, 2021 andDecember 31, 2020 , the remaining carrying value of the note was$187,500 . OnJune 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 ofMarch 31, 2021 andDecember 31, 2020 , the remaining carrying value of the note was$187,500 . OnJuly 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 ofMarch 31, 2021 andDecember 31, 2020 , the remaining carrying value of the note was$500,000 . OnSeptember 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 ofMarch 31, 2021 andDecember 31, 2020 , the remaining carrying value of the note was$100,962 . OnDecember 31, 2020 , the Company issued a$143,653 promissory note in exchange for compensation earned. The promissory note bears interest of 5% per annum and is due on demand. As ofMarch 31, 2021 andDecember 31, 2020 , the remaining carrying value of the note was$143,653 . OnMarch 31, 2021 , the Company issued a$90,991 promissory note in exchange for compensation earned. The promissory note bears interest of 5% per annum and is due on demand. As ofMarch 31, 2021 , the remaining carrying value of the note was$90,991 . 19
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2021
At March 31, 2021 and December 31, 2021 , accrued interest on the notes was
$512,790 and $482,468 , respectively, and is included in accrued expenses on the
accompanying balance sheet.
March 31, December 31,
2021 2020
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 143,653 143,653
Note payable, Mr. Tomas 90,991 -
Total notes payable - related parties
Notes Payable -
OnFebruary 26, 2021 ,Dr. Murphy purchased an unsecured convertible promissory notes in the aggregate principal amount of$200,000 that mature 12 months after the respective issuance date (See Note 9). The note was non-interest bearing andDr. Murphy retained 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 . OnApril 8, 2021 ,Dr Murphy converted the full value of the note into 7,518,797 shares of the Company's common stock.
NOTE 11 - 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 aresignificant 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, 2021 As of
As of
NOTE 12 - COMMITMENTS AND CONTINGENCIES
Leases OnOctober 24, 2019 , the Company entered into an Assignment and Assumption of Lease by and between the Company,American Cell Technology, LLC , andSawgrass Business Plaza, LLC . Subsequently, the Company relocated to a new location within the same city and entered into a month-to-month lease. Accordingly, the right of use assets and lease liabilities were eliminated. During the three months endedMarch 31, 2021 and 2020, lease expense was comprised of the following: For the Three Months Ended March 31, 2021 2020 Operating lease expense $ 1,432 $ 807 Total lease expense $ 1,432 $ 807
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 deferred revenue and amortized over the term of the agreement. The carrying balance as ofMarch 31, 2021 andDecember 31, 2020 was$61,750 and$62,500 , 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$27,650 and$28,850 as ofMarch 31, 2021 andDecember 31, 2020 , respectively, and is included in accounts payable. 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 ofMarch 31, 2021 other than that described above. OnFebruary 10, 2021 , as part of a settlement agreement, the Company transferred its entire member interest inU.S. Stem Cell, LLC to Dr.Kristen Comella as settlement for$100,000 of accrued interest owed toDr. Comella (See Note 5, Note 6 and Note 7). 21
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2021
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 did not challenge the district court's judgment
upon any other ground. 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 divesting 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.
Since 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.
NOTE 13 - STOCKHOLDERS' DEFICIT
Common Stock During the three months endedMarch 31, 2021 , the Company issued an aggregate of 3,363,871 shares of its common stock, having a fair value of$137,919 , in settlement of outstanding accounts payable. In connection with the issuances, the Company incurred a$116,823 net loss on settlement.
During the three months ended
OnFebruary 26, 2021 , a convertible note with a face value of$200,000 , having a net book value of$54,887 at the date of conversion, was converted into 7,518,797 shares of the Company's common stock, having a fair value of$375,940 , resulting in a loss on conversion of$321,053 (See Note 9 and 10). Stock Options OnApril 1, 2013 , the Board of Directors approved, subject to subsequently received stockholder approval, the establishment of the Bioheart 2013 Omnibus Equity Compensation Plan, or the "2013 Omnibus Plan" (replacing the 1999 Officers and Employees Stock Option Plan, or the Employee Plan, and the 1999 Directors and Consultants Stock Option Plan). The 2013 Omnibus Plan initially reserved up to fifty thousand (50,000) shares of common stock for issuance. OnAugust 4, 2014 , the Board of Directors approved to set the reserve to one hundred thousand (100,000) shares of common stock for issuance and to close the 1999 Officers and Employees Stock Option Plan. OnFebruary 2, 2015 , at the annual meeting of stockholders, the 2013 Omnibus Equity Compensation Plan was approved. 22
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2021
On November 2, 2015 , the Company increased the shares reserved under the 2013
Omnibus Plan to five hundred million (500,000,000) shares of common stock for
issuance. Effective September 16, 2016 , the Company approved an additional
twenty five million (25,000,000) shares of common stock to the reserve;
effective April 21, 2017 , the Company approved an additional twenty five million
(25,000,000) shares of common stock to the reserve; effective August 7, 2017 ,
the Company approved an additional thirty million (30,000,000) shares of common
stock to the reserve; and effective May 7, 2018 , the Company approved an
addition of one hundred million (100,000,000) shares of common stock to reserve.
A summary of the stock option activity for the three months ended March 31, 2021
is as follows:
Weighted Weighted
Average Average
Number of Exercise Remaining Life Intrinsic
Options Price In Years Value
Outstanding,
7.2$ 296,636 Granted - Exercised - Forfeited/Expired (475,000 )$ 0.0296 Outstanding, March 31, 2021 110,644,914$ 0.0247 7.0$ 2,916,289 Exercisable, March 31, 2021 78,162,414$ 0.0247 6.7$ 2,060,466 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 7.8 24,325,000$ 0.0048 $0.011 to$0.020 16,250,000$ 0.0196 5.5 16,250,000$ 0.0196 $0.021 to$0.030 9,510,000$ 0.0252 7.6 8,505,000$ 0.0252 $0.0363 22,635,000$ 0.0363 6.4 18,632,500$ 0.0363 $0.0536 20,000,000$ 0.0536 7.1 10,000,000$ 0.0536 $0.1540 449,914$ 0.1540 4.5 449,914$ 0.1540 110,644,914$ 0.0247 7.0 78,162,414$ 0.0247 The aggregate intrinsic value of outstanding stock options was$2,916,289 , based on options with an exercise price less than the Company's stock price of$0.0500 as ofMarch 31, 2021 , 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 endedMarch 31, 2021 and 2020 was$175,398 and$158,337 , respectively. As ofMarch 31, 2021 , the Company had$571,276 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 0.73 years. 23
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2021
Warrants
A summary of the warrant activity for the three months ended March 31, 2021 is
as follows:
Weighted
Weighted Average
Average Remaining
Number of Exercise Life Intrinsic
Warrants Price In Years Value
Outstanding, December 31, 2020 1,110,468 $ 12.84 7.1 $ -
Granted -
Exercised -
Expired -
Outstanding, March 31, 2021 1,110,468 $ 12.84 6.9 $ 22,867
Exercisable, March 31, 2021 1,108,923 $ 2.14 6.9 $ 22,867
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
$0.03 to
$20.00 1,086,536 $ 1.27 7.0 1,086,536 $ 1.27
$20.01 to
$30.00 19,543 $ 25.06 2.9 19,543 $ 25.06
$40.01 to
$50.00 2,253 $ 48.83 1.5 2,253 $ 48.83
$50.01 to
$60.00 543 $ 60.00 0.3 543 $ 60.00
>$60.00 1,593 $ 7,690.00 5.6 48 $ 7,690.00
1,110,468 $ 12.84 6.9 1,108,923 $ 2.14
The aggregate intrinsic value of the issued and exercisable warrants of $22,867
represents the total pretax intrinsic value, based on warrants with an exercise
price less than the Company's stock price of $0.0500 as of March 31, 2021 , which
would have been received by the warrant holders had those warrants holders
exercised their warrants as of that date.
NOTE 14 - 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,
2021 2020
Customer 1 47 % -
Customer 2 12 % -
Customer 3 - 29 %
Customer 4 - 11 %
Totals 59 % 40 %
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U.S. STEM CELL, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2021 Concentrations of Accounts Receivable
As of
March 31, December 31,
2021 2020
Customer 1 70 % 44 %
Customer 2 27 % 50 %
Totals 97 % 94 %
Customer 2 is
NOTE 15 - SUBSEQUENT EVENTS OnApril 8, 2021 , a noteholder, also a related party, converted a convertible note with a face value of$200,000 , datedFebruary 26, 2021 , having a net book value of$54,887 at the date of conversion, into 7,518,797 shares of the Company's common stock, having a fair value of$375,940 , resulting in a loss on conversion of$321,053 (See Note 9 and Note 10). 25
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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, 2020 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. 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, 2019 . 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. 26
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Our Ability to Continue as a Going Concern
Our independent registered public accounting firm has issued its report datedJuly 15, 2021 , in connection with the audit of our annual financial statements as ofDecember 31, 2019 , 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, 2020 also describes the existence of conditions that raise substantial doubt about our ability to continue as a going concern. 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. During fiscal 2019, we had interests inUS Stem Cell Clinic, LLC , ("SCC"),Regenerative Wellness Clinic, LLC , andUS Stem Cell Clinic of theVillages, LLC as partially owned investments of our company (in which we had a 49.9%, 49.9% and 49% respectively member interests), which were physician run regenerative medicine/cell therapy clinics providing cellular treatments for patients afflicted with neurological, autoimmune, orthopedic and degenerative diseases. During the last quarter of 2019 (and in early 2021 in the case of SCC), we divested ourselves of our Member Interests inSCC and Regenerative Wellness Clinic, LLC , andUS Stem Cell Clinic of theVillages, LLC is currently dormant.
Our comprehensive map of products and services:
As ofMarch 31, 2021 :
As of the date of this filing:
[[Image Removed: usstem20210331_10qimg001.gif]]
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.
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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.
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 12), 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$84,380 for the three months endedMarch 31, 2021 . These revenues were generated from the sales of laboratory supplies and equipment, and services. We recognized revenues of$57,492 for the three months endedMarch 31, 2020 from the sale of MyoCath catheters, physician training, patient studies and laboratory services. Due to the Injunction, as described in our Note 12 to our financial statements, our revenue for 2021 has been severely reduced. Cost of Sales
Cost of sales consists of the costs associated with the production of MyoCath, laboratory supplies necessary for laboratory services, and physician course materials.
Cost of sales were$15,521 and$18,097 in in the three-month periods endedMarch 31, 2021 and 2020, respectively. Associated gross margins were$68,859 (81.6%) and$39,395 (31.4%) for the three months periods endedMarch 31, 2021 and 2020, respectively. 28
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Table of Contents 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, 2021 , the same as the research and development expenses of$0 in the three-month period endedMarch 31, 2020 . 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$556,015 for the three-month period endedMarch 31, 2021 compared to$537,535 for the three-month period endedMarch 31, 2020 , an decrease of$18,480 . The decrease in costs are primarily due to reduction in operations due to the Court Order. 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, 2021 , we incurred a net loss of$337,875 primarily related to accounts payable and debt restructured during the current period as compared to a net aggregate loss of$5 ,868for the same period last year. Gain on sale of equipment
In
In
connection with the sale/leaseback, we realized a gain on sale of equipment of$0 , which we will recognize to operations over the term of the lease (36 months). During the three months endedMarch 31, 2021 and 2020, we recognized$0 and$21,474 in current period operations.
Income from equity investment
Our investment of a 49.9% (33.3% in 2018) member interest ownership ofU.S. Stem Cell Clinic, LLC andRegenerative Wellness Clinic as well as 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 income (loss) from equity investments for the period. For the year endedDecember 31, 2020 and 2019, our pro rata share of income (loss) was$0 and$(23,539) , respectively. We divested ourselves of our member interests inRegenerative Wellness Clinic, LLC andU.S. Stem Cell Clinic, LLC inOctober 2019 andMarch 2021 , respectively.U.S. Stem Cell Clinic of theVillages, LLC is currently dormant. Interest Expense Interest expenses during the three months endedMarch 31, 2021 were$154,725 compared to$81,454 for the three months endedMarch 31, 2020 . 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. 29
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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. 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.
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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.
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
For the three month ended
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.
Liquidity and Capital Resources
In the three months endedMarch 31, 2021 , we incurred negative cash flow from operations of$487,156 and 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, 2021 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$743 ,053in the three-month period endedMarch 31, 2021 as compared to cash used of$125,447 in the three-month period ended inMarch 31, 2020 . 31
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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
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 . The balance of principal and interest is payable thirty years from the date of the SBA Loan Agreement. As ofMarch 31, 2021 , the remaining carrying value of the note was$150,000 . AtMarch 31, 2021 , accrued interest on the note was$0 and is included in accrued expenses on the accompanying balance sheet. 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 12 of the Financial Statements) 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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