UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 000-30156

888-398-0202

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company", and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in 12b-2 of the Exchange Act):

Yes ☐ No ☒

As of NovemberMay 10, 2021,2022, the registrant had 87,352,364 shares of its common stock, par value $0.00001 per share, issued and outstanding.

RENOVACARE, INC.

FORM 10-Q

For The Quarter Ended September 30, 2021March 31, 2022

TABLE OF CONTENTS

PART I

Item 1. Financial Statements

RENOVACARE, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(See accompanying notes to unaudited consolidated financial statements)

RENOVACARE, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) 

(See accompanying notes to unaudited consolidated financial statements)

RENOVACARE, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) 

(See accompanying notes to unaudited consolidated financial statements)

RENOVACARE, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONSCASH FLOWS (UNAUDITED)

(See accompanying notes to unaudited consolidated financial statements)

RENOVACARE, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)

(See accompanying notes to unaudited consolidated financial statements)

RENOVACARE, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(See accompanying notes to unaudited consolidated financial statements)

RENOVACARE, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation, Organization, Liquidity and Going Concern, Recent Accounting Standards and Earnings (Loss) Per Share

Basis of Presentation

The accompanying unaudited interim consolidated financial statements of RenovaCare, Inc. and Subsidiary (“RenovaCare” or the “Company”) as of September 30, 2021,March 31, 2022, and for the three and nine months ended September 30,March 31, 2022 and 2021 and 2020 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for  quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. These Consolidated Financial Statements should therefore be read in conjunction with the Consolidated Financial Statements and Notes thereto for the fiscal year ended December 31, 20202021 included in our Annual Report on Form 10-K filed with the SEC on March 31, 2021.30, 2022.

The accompanying unaudited interim Consolidated Financial Statements have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying disclosures. Actual results may differ from those estimates. The accompanying unaudited interim consolidated financial statements have been prepared on the same basis as the audited financial statements and include all adjustments (including normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s consolidated financial position as of September 30, 2021,March 31, 2022, results of operations and stockholders’ equity for the three and nine months ended September 30,March 31, 2022 and 2021, and 2020, and cash flows for the ninethree months ended September 30, 2021March 31, 2022 and 2020.2021. The Company did not record an income tax provision during the periods presented due to net taxable losses. The results of operations for any interim period are not necessarily indicative of the results of operations for the entire year.

Organization

RenovaCare, Inc., formerly Janus Resources, is a Nevada corporation. RenovaCare, Inc. was incorporated under the laws of the State of Utah on July 14, 1983 as Far West Gold, Inc..Inc.

The Company has an authorized capital of 500,000,000 shares of $0.00001 par value common stock, of which 87,352,364 shares are outstanding as of September 30, 2021,March 31, 2022, and 10,000,000 shares of $0.0001 par value preferred stock, of which NaN are outstanding.

RenovaCare, Inc., through its wholly owned subsidiary, RenovaCare Sciences Corp. is a development-stage company focusing on the research, development and commercialization of autologous (using a patient’s own cells) cellular therapies that can be used for medical and aesthetic applications.

On July 12, 2013, the Company completed the acquisition of its flagship technologies (collectively, the “CellMist^TM System”). The CellMist™ System is a cell isolation procedure that enzymatically renders stem cells from the patient’s own skin or other tissues. The resulting stem cell suspension is administered topically from the Company’s novel solution sprayer device (the “SkinGun^TM”) as a cell therapy onto wounds including burns to facilitate healing.

Currently, ourthe Company’s proprietary technologies are the subject of and 43forty-four (44) U.S. and internationalforeign granted or pending patents or patent applications and 14seventeen (17) U.S. and internationalforeign trademarks. Of the issued patents, five (5) are U.S. patents and twelveseventeen (17) have issued or are allowed in Australia, Canada, China, Europe, Germany, France, Italy, Japan, Korea, Netherlands, Spain, Switzerland/Lichenstein,Liechtenstein, and the United Kingdom. The Company has six (6) allowed trademarks in the United States, two (2) European registered trademarks, two (2) United Kingdom trademarks, two (2) Japan trademarks, and two (2) pending in Canada.

On May 6, 2021 the Food and Drug Administration gave full-approval of the Company’s Investigational Device Exemption (IDE) application to proceed with initial clinical testing of the CellMist™ System and SkinGun™ spray device in adult burn patients.

Improvements in the design and efficiency of the CellMist™ System including a closed, automated cell isolation device and the SkinGun™ spray device are in development with StemCell Systems (Berlin, Germany), the Company’s R&D innovation partner. The Company is adapting its core technologies for possible use in other clinical indications. The Company is also developing the cell isolation and spray gun devices as stand-alone 510(k)-cleared products for isolation of cells from other tissues and spraying other solutions of medical importance.

does not have any commercialized products. The Company's activities have consisted principally of performing research and development activities and raising capital to support such activities. The Company has enlisted the assistance of several Contract Manufacturing Organizations (CMO) to manufacture clinical supplies including components of the CellMist System™ and the electronic SkinGun™ spray devices in compliance with FDA’s guidance for current Good Manufacturing Practices (cGMP) and Contract Research Organizations (CRO) to test and validate the Company’s products and processes and to conduct clinical trials that evaluate initially the safety and feasibility of an autologous skin cell therapy using the Company’s products to facilitate burn wound healing. These development activities are subject to significant risks and uncertainties, including possible failure of preclinical and clinical testing. The Company has not generated any revenue and has sustained recurring losses and negative cash flows from operations since inception. The Company expects to incur losses as it continues development of its products and technologies and expects that it will need to raise additional capital through partnerships or the sale of its securities to accomplish its business plan. Failing to secure such additional funding before achieving sustainable revenue and profit from operations poses a significant risk. The Company's ability to fund the development of its cellular therapies depends on the amount and timing of cash receipts from future financing activities. There can be no assurance as to the availability or terms upon which such financing and capital might be available.

Liquidity and Going Concern

The Company has preparednot generated any revenue since inception and has sustained recurring losses and negative cash flows from operations since inception. At March 31, 2022, the Company had approximately $1,870,000 in cash on hand, current liabilities of $1,387,429 and an accumulated deficit of $35,967,238. The Company has historically funded its consolidated financial statements on a “going concern” basis, which presumes that it will be able to realize its assetsoperations through the issuance of convertible notes, the sale of common stock and discharge its liabilitiesissuance of warrants.

The Company evaluated whether there are any conditions and events, considered in the normal course of business for the foreseeable future. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilitiesaggregate, that may result should the Company be unableraise substantial doubt about its ability to continue as a going concern.

Since Inception,concern within one year beyond the Company has incurred net operating lossesfiling of this Quarterly Report on Form 10-Q. Based on such evaluation and operating cash flow deficits. The Company does not currently generate revenues and will continue to incur losses from operations and operating cash flow deficits in the future. The Company's activitiesCompany’s current plans, which are subject to significant riskschange, management believes that the Company’s existing cash as of March 31, 2022 is insufficient to satisfy its operating cash needs for the year after the filing of this Quarterly Report on Form 10-Q.

The Company is responsible to bear the costs to defend itself and uncertainties dueits directors and officers, pursuant to the indemnification clause in the Company’s bylaws, against various Lawsuits (as defined in “Note 7. Commitments and Contingencies—Legal Proceedings” below) currently consisting of a civil action filed by the SEC and two class actions and three derivative actions. See “Note 7. Commitments and Contingencies—Legal Proceedings.” The legal costs to defend the Company against the Lawsuits are expected to be material. During the three months ended March 31, 2022, the Company made legal retainer payments totaling $1,180,000 and incurred $864,000 in legal costs related to the Lawsuits. To assist the Company in paying the costs to defend against the Lawsuits, Kalen Capital Corporation, an Alberta Canada corporation (“Kalen Capital”) which is wholly-owned by the Mr. Harmel S. Rayat (“Mr. Rayat”), the Company’s President, Chief Executive Officer and Chairman, loaned the Company $800,000 on March 18, 2022, as evidenced by the Unsecured Note (as defined in “Note 3. Related Party Convertible Promissory Note” below). Due to the nature and early stage of the development ofLawsuits, the Company's cellular therapies.Company is unable to estimate the total costs to defend itself or the potential costs to the Company in the event that it is not successful in its defense.

At September 30, 2021, the Company had approximately $3,400,000 in cash on hand. The Company estimateshas experienced and continues to experience negative cash will be depleted in less than one yearflows from the date that these financial statements are available to be issued, if the Company does not generate sufficient cash to support operations.

operations, as well as an ongoing requirement for substantial additional capital investment. The future of the Company will depend on its ability to successfully raise capital from external sourcessources. As noted above, management believes that the Company’s existing cash as of March 31, 2022 are insufficient to fund operations.satisfy its operating cash needs for the year after the filing of this Quarterly Report on Form 10-Q. If the Company is unable to maintain sufficient financial resources, its business, financial condition and results of operations will be materially and adversely affected. This could affect future development and business activities and potential future product development and/or other future ventures. There can be no assurance that the Company will be able to obtain adequate funds, or if such funds are not available to itthe needed financing on acceptable terms or at all. Additionally, equity or convertible debt financings will likely have a dilutive effect on the Company'sholdings of the Company’s existing stockholders. Debt financing may involve agreements that include covenants limiting or restricting the Company’s ability to continue its business to develop its cellular therapies willtake specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, and may be significantly impaired and it may causesecured by all or a portion of the Company to curtail operations.

The matters described above raise substantial doubt about the Company's ability to continue as a going concern within one year after the date these condensed consolidated financial statements were issued.Company’s assets.

Recent Accounting StandardsPronouncements

Any reference in these notes to applicable accounting guidance is meant to refer to the authoritative non-governmental US GAAP as found inThe Company evaluates all Accounting Standards Updates (ASUs) issued by the Financial Accounting Standards Board's Accounting Standards Codification.

The Company reviews new accounting standards as issued. Although someBoard (FASB) for consideration of these accounting standards issued or effective after the end oftheir applicability. ASUs not included in the Company’s previous fiscal year maydisclosures were assessed and determined to be either not applicable the Company hasor are not identified any standards that the Company believes merit further discussion other than as discussed above. The Company believes that none of the new standards willexpected to have a significantmaterial impact on the financial statements.its Consolidated Financial Statements.

New Accounting Pronouncements Not Yet Adopted

None.

Accounting Pronouncements Recently Adopted

In August 2020, the FASB issued ASU 2020-06, “Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40),” to address the complexity in accounting for certain financial instruments with characteristics of liabilities and equity. Amongst other provisions, the amendments in this ASU significantly changed the guidance on the issuer’s accounting for convertible instruments and the guidance on the derivative scope exception for contracts in an entity’s own equity such that fewer conversion features will require separate recognition, and fewer freestanding instruments, like warrants, will require liability treatment. For smaller reporting companies, ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The Company adopted the new standard on January 1, 2022, with no impact to its financial statements.

Earnings (Loss) Per Share

The Company presents both basic and diluted earnings per share ("EPS"). Basic EPS is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period presented. Diluted EPS amounts are based upon the weighted average number of common and common equivalent shares outstanding during the period presented. The Company has not included the effects of warrants or stock options on net loss per share because to do so would be antidilutive.

Following is the computation of basic and diluted net loss per share for the three and nine months ended September 30, 2021March 31, 2022 and 2020:2021:

Note 2. Prepaid Expenses

Prepaid expenses and other current assets consist of the following:

Note 3. EquityRelated Party Convertible Promissory Note

2013 Long-Term Incentive Plan

On June 20, 2013,March 18, 2022, the Company’s Board of DirectorsCompany issued an Unsecured Convertible Promissory Note (the “BoardUnsecured Note”) adopted the 2013 Long-Term Incentive Plan (the “2013 Plan”) and on November 15, 2013, a stockholder owning a majority of the Company’s issued and outstanding stock approved adoption to the 2013 Plan.Kalen Capital. Pursuant to the terms of the 2013 Plan,Unsecured Note, Kalen Capital loaned the Company $800,000 at an aggregateannual interest rate of 20,000,0001% per year, compounded daily. The Note, including any interest due thereon, may be prepaid at any time without penalty. The Unsecured Note, and any balance thereunder, automatically converts into securities of the Company upon receipt of an equity financing from third-party(s) of not less than ten million dollars ($10,000,000) at a conversion price equal to 80% of the price paid in such a financing. Also, after June 23, 2023, Kalen Capital may convert all or any portion of the balance into shares of common stock at a conversion price of $0.45 sharesper share, representing a fifty 50% percent premium to the closing price of the Company’s common stock have been reservedon March 17, 2022. There is no commitment from Kalen Capital for issuance to the Company’s officers, directors, employees and consultants in order to attract and hire key technical personnel and management. Options granted to employees under the 2013 Plan, including directors and officers who are employees, may be incentive stock options or non-qualified stock options; options granted to others under the 2013 Plan are limited to non-qualified stock options. As of September 30, 2021, there were 16,618,266 shares available for future grants.

any additional funding.

During the three months ended March 31, 2022, the Company recognized $289 of interest expense.

The 2013 Plan is administered by the Board or a committee designated by the Board. Subject to the provisions

Note 4. Accounts Payable and Accrued Liabilities

Accounts payable and accrued expenses consists of the 2013 Plan, the Board has the authority to determine the officers, employees and consultants to whom options will be granted, the number of shares covered by each option, vesting rights and the terms and conditions of each option that is granted to them; however, no person may be granted options to purchase more than 2,000,000 shares in any one fiscal year under the 2013 Plan, and the aggregate fair market value (determined at the time the option is granted) of the shares with respect to which incentive stock options are exercisable for the first time by an optionee during any calendar year cannot exceed $100,000. Options granted pursuant to the 2013 Plan are exercisable no later than ten years after the date of grant.following:

The exercise price per share of common stock for options granted under the 2013 Plan is the fair market value of the Company's common stock on the date of grant, using the closing price of the Company's common stock on the last trading day prior to the date of grant, except for incentive stock options granted to a holder of ten percent or more of the Company's common stock, for whom the exercise price per share will not be less than 110% of the fair market value.Note 5. Equity No option can be granted under the 2013 Plan after June 20, 2023.

Common Stock

At September 30, 2021,March 31, 2022, the Company had 500,000,000 authorized shares of common stock with a par value of $0.00001 per share and 87,352,364 shares of common stock outstanding.

During the three and nine months ended September 30, 2021 and 2020, the Company did not have any common stock transactions.

Warrants

The Company has issued warrants to purchase common stock at various exercise prices in connection with loan agreements and private placements. The following table summarizes information about warrants outstanding at September 30, 2021March 31, 2022 and December 31, 2020:

During the three months ended September 30, 2021,March 31, 2022, all the Series EF Warrants expired unexercised.

Stock Options

The following table summarizes stock option activity for the sixthree months ended September 30, 2021:March 31, 2022:

The valuation methodology used to determine the fair value of stock options is the Black-Scholes Model. The Black-Scholes Model requires the use of a number of assumptions including volatility of the stock price, the risk-free interest rate, and the expected term of the stock options. The ranges of assumptions used in the Black-Scholes Model during the nine months ended September 30, 2021 and 2020 is set forth in the table below:

The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the expected term. Estimated volatility is a measure of the amount by which the stock price is expected to fluctuate each year during the term of an award. Our calculation of estimated volatility is based on historical stock prices over a period equal to the term of the awards. The average expected life is based on the contractual terms of the stock option using the simplified method. We utilize a dividend yield of zero based on the fact that we have never paid cash dividends and have no current intention to pay cash dividends. Future stock-based compensation may significantly differ based on changes in the fair value of our Common Stock and our estimates of expected volatility and the other relevant assumptions.

The following table sets forth the share-based compensation cost resulting from stock option grants, including those previously granted and vesting over time, that were recorded in the Company’s Statements of Operations for the three and nine months ended September 30, 2021March 31, 2022 and 2020:2021:

Nine Months Ended September 30, 2021

On July 26, 2021, in connection with an Executive Services Consulting Agreement of the same date, the Company granted Justin Frere, the Company’s Chief Financial Officer, an option to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.72 and with a term of 10 years.

During the first half of 2021, certain individuals resigned from the Company resulting in the forfeiture and cancellation of 2,805,571 options. Compensation expense was recorded on some of these options prior to their full vesting. As a result, during the nine months ended September 30, 2021, the Company recognized $1,314,705 of reversals of the prior recognized compensation expense related to the cancelled options. During the three and nine months ended September 30, 2021, the expense recognized on options still in their vesting period totaled $268,000 and $907,541, respectively.

Note 4.6. Leases

In February 2020, the Company entered into a two-year lease for office premises located at 4 Becker Farm Road, Suite 105, Roseland, New Jersey.Jersey (the “Premises”). Monthly base rent in year one of the lease is $4,356; and $4,459 in year 2 of the lease. The term (and payment of the monthly rent) commenced upon completion of the landlord’s work on August 1, 2020. The Company vacated the premises in May of 2021 and relocated its corporate offices to 9375 E. Shea Blvd., Suite 107-A, Scottsdale, AZ 85260.

The Company’s existing Leaselease is not subject to any restrictions or covenants which preclude its ability to pay dividends, obtain financing, or enter into additional Lease’s.

As of September 30, 2021,March 31, 2022, the Company has not entered into any leases which have not yet commenced which would entitle the Company to significant rights or create additional obligations.

The Company does not have any finance leases.

Supplemental lease information:

Supplemental information as of September 30,for the three months ended March 31, 2022 and 2021:

Supplemental cash flow information for the nine months ended September 30, 2021:

The Company leases office space under a non-cancellable operating lease expiring in 2022. Future lease payments included in the measurement of lease liabilities on the balance sheet at September 30, 2021March 31, 2022 for future periods are as follows:

Note 5.7. Commitments and Contingencies

Stem Cell Systems

In connection with the Company’s anticipated future regulatory filings, the Company has engaged StemCell Systems GmbH (“StemCell Systems”) to provide it with medical device prototypes and related design documents and data under various agreements. On July 1, 2020, the Company and StemCell Systems entered into a Strategic R&D Agreement (the “Strategic Agreement”) having an initial term of three years with successive one-year extensions unless earlier terminated. The Strategic Agreement includes a $27,00039,000 monthly fee to be paid to StemCell Systems along with any additional expenses incurred. The Company, StemCell Systems and certain affiliates of StemCell Systems entered into a Rights of First Refusal and Corporate Opportunities Agreement (the “ROFR Agreement”). Pursuant to the ROFR Agreement, (i) in the event a StemCell Systems stockholder receives an offer from a third party to acquire the StemCell Systems stockholders ownership interest, the Company shall have ten business days to purchase such ownership, and (ii) if during the terms of the Strategic Agreement, any StemCell Systems inventions, with respect to skin, burns and wounds, designs, inventions and among other things, whether or not patentable, copyrightable or otherwise legally protectable are discovered by StemCell Systems, the Company shall have the first option to negotiate mutually agreeable terms for the Company’s acquisition or licensing of the StemCell Systems inventions. Pursuant to these engagements the Company incurred expenses of approximately $142,000125,931 and $133,000120,377 during the three months ended September 30,March 31, 2022 and 2021, and 2020, respectively; andrespectively. As of March 31, 2022, the Company had a balance due to StemCell Systems of $391,00083,700 and $401,000 during. On April 28, 2022 the nine months ended September 30, 2021 and 2020, respectively. Pursuant toCompany provided StemCell Systems with notice of termination of the Strategic Agreement, as of September, 30, 2021, the Company is obligated to pay for services totaling approximately $819,000 through July 1, 2023.Agreement. See “Note 8. Subsequent Events.”

Legal Proceedings

SEC Civil Complaint

On May 28, 2021 the SEC filed a civil complaint (the “ComplaintSEC Action”), in the United States District Court for the Southern District of New York, naming the Company and Harmel S. Rayat, RenovaCare Chairmanthe Company’s current President, Chief Executive Officer, Chief Financial Officer and Sole Director as defendants (the “Defendants”) as defendants.. The Complaint chargesSEC Action alleges among other things that Mr. Rayat and the Company with violatingviolated the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and also chargesalleges that Mr. Rayat with aidingaided and abettingabetted the Company's violations of those provisions.provisions by the Company. The complaintSEC Action also chargesalleges that the Company with violatingviolated the reporting provisions of Exchange Act Section 15(d) and Rules 15d-11 and 12b-20 thereunder. The SEC seeks, among other relief, permanent injunctions and civil penalties against the Defendants, and officer-and-director and penny stock bars against Mr. Rayat. On August 31, 2021 the Defendants filed a responsean answer to the Complaint. On September 21, 2021, the SEC filed a motion to strike Defendants equitable affirmative defenses which motion was granted by the court on October 18, 2021.

The Company believes thatcontinues to defend itself and the claims assertednamed individuals against the allegations set forth in the Complaint are without meritSEC Action. Due to the nature and intends to defend this matter vigorously. However, becauseearly stage of the inherent uncertainty as to the outcome of this proceeding,SEC Action, the Company is unable at this time, to estimate the possible impact oftotal costs to defend itself or the outcome of this matter nor provide assurancepotential costs to the Company in the event that the available insurance coverage will be sufficient to see the Complaint through to resolution.it is not successful in its defense.

Class Action Complaints

On July 16, and July 21, 2021, two purported shareholders of the CompanyGabrielle A. Boller filed putativea class actionsaction lawsuit in the United StatesU.S. District Court for the District of New Jersey (the “Boller Lawsuit”), against the Company and certain past and current officers and members of its current and former executive officers (captioned Gabrielle A. Boller, Individually and On Behalfthe Company’s board of All Others Similarly Situated v. RenovaCare, Inc., Harmel Rayat, and Thomas Bold, No. 2:21-cv-13766-SDW-ESK (“Boller”), and Michael Solakian, Individually and On Behalf of All Others Similarly Situated v. RenovaCare, Inc., Harmel Rayat, and Thomas Bold, No. 2:21-cv-13930 (“Solakian”), respectively)(directors (collectively, the “Class Action ComplaintsBoller Defendants”). The Class Action Complaints in Boller and Solakian were brought both individually and on behalf of a putative class of the Company’s stockholders, claimingLawsuit alleges, among other things, that in connection with the facts and circumstances underlying the allegations in the SEC Complaint,Action, the CompanyBoller Defendants engaged in fraudulent conduct and made false and misleading statements of material fact or omitted to state material facts necessary to make the statements made not misleading. The class period identified inplaintiff seeks a determination that the Class Action ComplaintsBoller Lawsuit is August 13, 2017 through May 28, 2021 Both Boller and Solakian seek to declare the action to be a proper class action, compensatory damages in favor of the plaintiff and monetary damages, includingother class members, reasonable costs and expenses incurred in the Boller Lawsuit, including counsel fees and award of reasonable attorneys’ fees, expert fees, and other costs, and such other relief as the Court may deem just and proper.

The Company disputes the plaintiffs’ claims in the Boller Lawsuit and intends to defend these matters vigorously. To that end, the Company has engaged counsel to defend the Boller Defendants. Given the uncertainty of litigation, the preliminary stage of these cases, the legal standards that must be met for, among other things, class certification and success on the merits, the Company cannot estimate the reasonably possible loss or range of loss that may result from these actions.

On July 21, 2021, Michael Solakian, filed a class action lawsuit in the U.S. District Court for the District of New Jersey (the “Solakian Lawsuit”), against the Company and certain past and current officers and members of the Company’s board of directors (collectively, the “Solakian Defendants”). The Solakian Lawsuit alleges, among other things, that in connection with the facts and circumstances underlying the allegations in the SEC Action, the Solakian Defendants engaged in fraudulent conduct and made false and misleading statements of material fact or omitted to state material facts necessary to make the statements made not misleading. The plaintiff seeks a determination that the Solakian Lawsuit is a proper class action, compensatory damages in favor of the plaintiff and other class members, reasonable costs and expenses incurred in the Solakian Lawsuit, including counsel fees and expert fees, and such other relief as the Court may deem proper.

The Company disputes the plaintiffs’ claims in the Solakian Lawsuit and intends to defend these matters vigorously. To that end, the Company has engaged counsel to defend the Solakian Defendants. Given the uncertainty of litigation, the preliminary stage of these cases, the legal standards that must be met for, among other things, class certification and success on the merits, the Company cannot estimate the reasonably possible loss or range of loss that may result from these actions.

Shareholder Derivative Complaints

On December 20, 2021, Melvin Emberland (“Emberland”), derivatively and on behalf of nominal defendant Renovacare, Inc. filed a lawsuit (the “Emberland Lawsuit”) in the United States District Court for the District of New Jersey against the Company and certain of its current and former executive officers (the “Emberland Defendants”). In the complaint, Emberland’s allegations, relating to the facts and circumstances underlying the allegations in the SEC Action include, but are not limited to (i) breach of fiduciary duties by the individual Emberland Defendants, (ii) unjust enrichment and (iii) violation of Section 10(b) and 21D of the Securities Exchange Act of 1934. Emberland did not quantify any alleged damages in his complaint but, in addition to attorneys’ fees and costs, Emberland seeks (i) a declaration that the Emberland Defendants have breached and/or aided and abetted the breach of their fiduciary duties to the Company, (ii) a determination awarding to the Company restitution from the Meyer Defendants, and each of them, and ordering disgorgement of all profits, benefits and other compensation obtained by the Emberland Defendants, (iii) a directive to the Company and the Emberland Defendants to take all necessary actions to reform and improve the Company’s corporate governance and internal procedures to comply with applicable laws, and (iv) Plaintiff is seeking, among other things, restitution from the individual Emberland Defendants and disgorgement of profits, benefits and other compensation obtained by such Emberland Defendants, costs and disbursements of the action including reasonable attorney’s fees, accountants’ and expert fees and expenses, an order directing the taking of certain corporate actions relating to its board of directors and corporate governance.

The Company disputes Emberland’s claims and intends to defend these matters vigorously. To that end, the Company has engaged counsel to defend the Emberland Defendants. Given the uncertainty of litigation, the preliminary stage of the Emberland Lawsuit, the legal standards that must be met for success on the merits, the Company cannot estimate the reasonably possible loss or range of loss that may result from these actions.

On January 6, 2022, Zoser Vargas (“Vargas”), derivatively and on behalf of nominal defendant Renovacare, Inc. filed a lawsuit (the “Vargas Lawsuit”) in the United States District Court for the District of New Jersey against the Company and certain of its current and former executive officers (the “Vargas Defendants”). In the complaint Vargas’ allegations relating to the facts and circumstances underlying the allegations in the SEC Action include but are not limited to, (i) breach of fiduciary duties, (ii) waste of corporate assets, (iii) violation of law, and (iii) unjust enrichment. Vargas did not quantify any alleged damages in his complaint but, in addition to attorneys’ fees and costs, Meyer seeks, in addition to other things, (i) against the Vargas Defendants and in favor of the Company the amount of damages sustained by the Company as a result of the Vargas Defendants’ breaches of fiduciary duties, waste of corporate assets and unjust enrichment, (ii) directive for the Company to take all necessary actions to improve its corporate governance and internal procedures to comply with applicable law and (iii) awarding to the Company restitution from the Vargas Defendants, and each of them, and ordering disgorgement of all profits, benefits and other compensation obtained by the Vargas Defendants.

The Company disputes Vargas’ claims and intends to defend these matters vigorously. To that end, the Company has engaged counsel to defend the Vargas Defendants. Given the uncertainty of litigation, the preliminary stage of these cases, the legal standards that must be met for success on the merits, the Company cannot estimate the reasonably possible loss or range of loss that may result from these actions.

On January 28, 2022, Aviva Meyer (“Meyer”), derivatively and on behalf of nominal defendant Renovacare, Inc. filed a lawsuit (the “Meyer Lawsuit”) in the United States District Court for the District of New Jersey against the Company and certain of its current and former executive officers (the “Meyer Defendants”). In the complaint Meyer’s allegations relating to the facts and circumstances underlying the allegations in the SEC Action include but are not limited to, (i) breach of fiduciary duties, (ii) waste of corporate assets, (iii) violation of law, and (iii) unjust enrichment. Vargas did not quantify any alleged damages in his complaint but, in addition to attorneys’ fees and costs, Meyer seeks, in addition to other things, (i) against the Vargas Defendants and in favor of the Company the amount of damages sustained by the Company as a result of the Vargas Defendants’ breaches of fiduciary duties, waste of corporate assets and unjust enrichment, (ii) directive for the Company to take all necessary actions to improve its corporate governance and internal procedures to comply with applicable law and (iii) awarding to the Company restitution from the Meyer Defendants, and each of them, and ordering disgorgement of all profits, benefits and other compensation obtained by the Meyer Defendants.

The Company disputes Meyer’s claims and intends to defend these matters vigorously. To that end, the Company has engaged counsel to defend the Meyer Defendants Given the uncertainty of litigation, the preliminary stage of these cases, the legal standards that must be met for success on the merits, the Company cannot estimate the reasonably possible loss or range of loss that may result from these actions.

The Company believes that the claims asserted in Boller and Solakian  and any other Class Actions derived from the SEC ComplaintAction, the Boller Lawsuit, the Solakian Lawsuit, the Emberland Lawsuit, the Vargas Lawsuit, and the Meyer Lawsuit (collectively, the “Lawsuits”) are without merit and intends to vigorously defend itself vigorously. Based on the early stages of these legal proceedings, and the inherent uncertainty as to their outcome, at this time, the Company is not able to reasonably estimate a possible range of loss, if any, that may result from the allegations set forth in the Class Action Complaints filed in the Class Actions.each Lawsuit.

Note 6. Transactions with Related Persons

During the three and nine months ended September 30, 2020, Talia Jevan Properties, Inc. made payments totaling $0 and $10,811, respectively, to Stephen Yan-Klassen, former CFO who resigned in 2020, for his salary on behalf of the Company. Talia Jevan Properties, Inc. is a related party of Harmel S. Rayat, Chairman of the Board.

On August 1, 2013, the Company entered into a consulting agreement, as amended on May 1, 2016, with Jatinder Bhogal, an individual owning in excess of 5% of the Company’s issued and outstanding shares of common stock, to provide consulting services to the Company through his wholly owned company, Vector Asset Management, Inc. (“VAMI”). Pursuant to the consulting agreement, VAMI assisted the Company with identifying subject matter experts in the medical device and biotechnology industries and assisted the Company with its ongoing research, development and eventual commercialization of its Regeneration Technology. Pursuant to an amendment dated May 1, 2016, the VAMI monthly consulting fee was increased from $5,000 to $6,800. On June 22, 2018, the Company and VAM entered into an Executive Consulting Agreement (the “ECA”) pursuant to which Mr. Bhogal served as the Company’s Chief Operating Officer. The ECA supersedes the prior consulting agreement. Pursuant to the ECA, VAMI received compensation of $120,000per year. On July 1, 2020 the Company amended the ECA and paid VAMI $4,000 per month through November 30, 2020 and $200 per month thereafter until May 31, 2021 at which time the ECA as amended expired. For consulting services provided by VAMI, during the three months ended September 30, 2021 and 2020, the Company recognized expenses of $0 and $12,000, respectively; and $1,000 and $72,000 during the nine months ended September 30, 2021 and 2020, respectively. Jatinder Bhogal resigned as the Company’s COO effective June 30, 2020.

Note 7.8. Subsequent Events

Management has reviewed material events subsequent of the period ended September 30, 2021March 31, 2022 and prior to the filing of financial statements in accordance with FASB ASC 855 “Subsequent Events”.

On April 21, 2022, the Company made retainer payments to its attorneys in the amount of $1,180,000.

On April 28, 2022, the Company terminated the Strategic Agreement with StemCell Systems.

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

Cautionary Note Regarding Forward-Looking Statements

This discussion and analysis of financial condition and results of operations is based upon and should be read in conjunction with the unaudited interim consolidated financial statements of RenovaCare, Inc. (“RenovaCare”) and its wholly-owned subsidiary (collectively with RenovaCare, “we,” “our,” “us,” or the “Company”), appearing elsewhere in this Quarterly Report on Form 10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis the Company reviews its estimates and assumptions. The estimates were based on historical experience and other assumptions that the Company believes to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions, but we do not believe such differences will materially affect our financial position or results of operations. Critical accounting policies, the policies the Company believes are most important to the presentation of its financial statements and require the most difficult, subjective and complex judgments, are outlined below in “Critical Accounting Policies,” and have not changed significantly since 2020.

This Quarterly Report on Form 10-Q also contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, as well as information relating to the Company that is based on management's exercise of business judgment and assumptions made by and information currently available to management. Although forward-looking statements in this Quarterly Report on Form 10-Q reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. When used in this document and other documents, releases and reports released by us, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “the facts suggest” and words of similar import, are intended to identify any forward-looking statements. You should not place undue reliance on these forward-looking statements. These statements reflect our current view of future events and are subject to certain risks and uncertainties as noted below. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results could differ materially from those anticipated in these forward-looking statements. Actual events, transactions and results may materially differ from the anticipated events, transactions or results described in such statements. Although we believe that our expectations are based on reasonable assumptions, we can give no assurance that our expectations will materialize. Many factors could cause actual results to differ materially from our forward-looking statements and unknown, unidentified or unpredictable factors could materially and adversely impact our future results. We undertake no obligation and do not intend to update, revise or otherwise publicly release any revisions to our forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of any unanticipated events. Several of these factors include, without limitation:

The safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, apply to forward-looking statements made by us. The reader is cautioned that no statements contained in this Form 10-Q should be construed as a guarantee or assurance of future performance or results. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks described in this report and matters described in this report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur.

Overview

We are a development-stage biotechnology and medical device company focusing on the research, development and commercialization of autologous (using a patient's own cells) cellular therapies that can be used for medical and aesthetic applications. The Company does not have any commercialized products. The Company's activities have consisted principally of performing research and development activities, business development efforts, and raising capital to support such activities.

The Company, through its wholly owned subsidiary, RenovaCare Sciences Corp., owns the CellMist™ System which is a cell isolation procedure that enzymatically renders stem cells from the patient’s own skin or other tissues. The resulting stem cell suspension is administered topically with our SkinGun™ spray device as a cell therapy onto wounds including burns to facilitate healing. The CellMist™ System also includes our unique, closed, automated cell isolation device (the “CID”) to harvest stem cells from tissues which is in prototype development.

Currently, our proprietary technologies are the subject of forty-four (44) U.S. and foreign granted or pending patents or patent applications and seventeen (17) U.S. and foreign trademarks. Of the issued patents, five (5) are U.S. patents and seventeen (17) have issued or are allowed in Australia, Canada, China, Europe, Germany, France, Italy, Japan, Korea, Netherlands, Spain, Switzerland/Lichtenstein, and the United Kingdom. The Company has six (6) allowed trademarks in the United States, two (2) European registered trademarks, two (2) United Kingdom trademarks, two (2) Japan trademarks, and two (2) pending in Canada.

In May 2021, the Company announced that the US Food and Drug Administration (FDA) fully approved the Company’s Investigational Device Exemption (IDE) application to conduct a clinical trial, designated CELLMIST 1, that willdesigned to evaluate the safety and feasibility of autologous skin and pluripotent stem cells rendered by its manual CellMist™ System from donor skin and applied topically with the electronic SkinGun™ spray device for treatment of acute burn wounds. The clinical trial protocol is an open-label, single-arm clinical study that is enrollingdesignated to enroll 14 adult human burn subjects with partial-thickness, second-degree deep thermal burn wounds covering between 10% and 30% total body surface area. The Company may engage up to four (4) U.S. burn centers to conduct the clinical study. Currently,

During the three months ended March 31, 2022, the Board decided to stop enrollment of patients into the clinical trial is activated, enrolling and treating patients. The CELLMIST 1take other measures to reduce the Company’s overhead in an effort to conserve financial resources as it continues to defend against the Lawsuits; however, medical evaluation of the treated subjects will continue periodically as scheduled in the clinical protocol at the clinical study is expectedsite until October 2022, when the study concludes. The Company hopes to reach completion in late 2022.restart the clinical trial at a future date upon the occurrence of a favorable outcome against the Lawsuits and additional financing. 

Our unique new closed, automated cell isolation device to harvest stem cells from tissues using the CellMist^TM System is in prototype development. We expect significant timeResearch, development and resources will be devoted to develop our novel technology and determine the commercial feasibility of the product. Research and developmentcommercialization of new technologies involvegenerally requires significant financial resources, involves a high degree of risk, and there is no assurance that our development activities will result in a commercially viable product. The long-term profitability of our operations will be, in part, directly related to the cost and success of our development programs, which may be affected by a number of factors.

In August 2019, the Company was awarded a continuation of a patent allowing the SkinGun^TM to be used to spray all varieties of tissues and cells, thus allowing for its potential application in the regeneration of tissues and organs, beyond skin; and, in November 2020 and October 2021, the Company was issued a total of three new patents encompassing improvements to the SkinGun™, expanding its potential application beyond the surgical setting into the field, and allowing the use of liquid suspension solutions to include drugs, hormones, and other useful agents.

Currently, our proprietary technologies are the subject of and 43 U.S. and international patents or patent applications and 14 U.S. and international trademarks. Of the issued patents, five are U.S. patents and twelve have issued or are allowed in Australia, Canada, Europe, Germany, France, Italy, Japan, Korea, Netherlands, Spain, Switzerland/Lichenstein, and United Kingdom. The Company has six allowed trademarks in the United States, two European registered trademarks, two United Kingdom trademarks, two Japan trademarks, and two pending in Canada.

The Company has not generated any revenue and has sustained recurring losses and negative cash flows from operations since inception. The Company expects to incur losses as it continues development of its products and technologies and expects that itdefends itself against the Lawsuits (as defined in “Part 2-Other Information, Item 1. Legal Proceedings”). The Company will need to raise additional capital through partnerships or the sale of its securities to accomplish its business plan. Failing to secure such additional funding before achieving sustainable revenue and profit from operations poses a significant risk. The Company's ability to meet its financial obligations, including to fund the development of its cellular therapies depends on the amount and timing of cash receipts from future financing activities. There can be no assurance as to the availability or terms upon which such financing and capital might be available.

Additionally, there is significant uncertainty relating to the full impact of the COVID-19 pandemic on the Company’s operations and capital requirements. Should financing when needed be unavailable or prohibitively expensive or the COVID-19 pandemic continue, it may adversely affect the Company’s ability to (i) retain employees and consultants; (ii) obtain additional financing on terms acceptable to the Company, if at all; (iii) delay regulatory submissions and approvals; (iv) delay, limit or preclude the Company from the operation of clinical study sites and testing laboratories; (v) delay, limit or preclude the Company from achieving technology or product development goals, milestones, or objectives; and (vi) preclude or delay entry into joint venture or partnership arrangements. The occurrence of any one or more of such events may affect the Company’s ability to continue its pathway to commercialization of its technology or products.

Although the Company continues to monitor the situation and may adjust policies as more information and public health guidance become available, the COVID-19 pandemic is ongoing, and its dynamic nature, including uncertainties relating to the ultimate spread of the virus, the severity of the disease, the duration of the outbreak and actions that may be taken by governmental authorities to contain the outbreak or to treat its impact, makes it difficult to assess whether there will be further impact on the development and commercialization of the Company’s technology which could have a material adverse effect on the Company’s results of operations and cash flows.

Components of Our Results of Operations

Revenue

To date we have not generated any product revenues and do not expect to generate any revenue for the foreseeable future. Our ability to generate revenue and become profitable depends upon our ability to obtain marketing approval and successfully commercialization of our CellMist^TM System.

Operating Expenses

Research and Development

Research and development (“R&D”) expenses consist primarily of costs incurred for the development of our CellMist^TM System and include:

We do not believe that it is possible at this time to accurately project total expenses required for us to reach commercialization of our CellMist^TM System. In the future, we expect that research and development expenses will increase due to our ongoing product development and approval efforts. We expense research and development costs as incurred.

General and Administrative

General and administrative expenses consist primarily of personnel costs, including non-cash stock-based compensation related to directors and employees, professional service costs including legal, accounting, and other consulting fees and other general and administrative expenses including investor relations, insurance, and facilities costs. We expect general and administrative expenses to increase in the future as we hire personnel and incur additional costs to support the expansion of our research and development activities, and our operation as a public company.company and to defend against the Lawsuits.

Stock-Based Compensation

Expense associated with equity-based transactions is calculated and expensed in our financial statements as required pursuant to various accounting rules and is non-cash in nature. Stock compensation represents the expense associated with the amortization of our stock options.

Other Income (Expense)

Other expense consists of the interest payable under our convertible note. Other income consists of interest income earned on our cash and cash equivalents and the reimbursement of legal fees from our Directors & Officers insurance policy.

Income Taxes

We have yet to generate taxable income. We have historically incurred operating losses resulting in carry forward tax losses totaling approximately $22.3 million$21,945,000 as of December 31, 2020.2021. We anticipate that we will continue to generate tax losses for the foreseeable future and that we will be able to carry forward these tax losses indefinitely to future taxable years. Accordingly, we do not expect to pay taxes until we have taxable income after the full utilization of our carry forward tax losses. We have provided a full valuation allowance with respect to the deferred tax assets related to these carry forward losses.

Results of Operations

Comparison of Three and Nine Months Ended September 30,March 31, 2022 and 2021 and September 30, 2020

Research and Development Expenses

General and Administrative Expenses

Liquidity and Capital Resources

The Company does not have any commercialized products, has not generated any meaningful revenue since inception and has sustained recurring losses and negative cash flows since inception. TheDuring the three months ended March 31, 2022 and 2021, the Company has incurred operating losses of $3.3 million$1,743,000 and $7.1 million during the nine months ended September 30, 2021$517,000, respectively and 2020,has used cash in operating activities of $1,779,000 and $1,805,000, respectively. The Company expects to incur losses as it continues to fund its legal defense and scaled-back development of its products and technologies.

At March 31, 2022, the Company had current and total liabilities of $1,387,000 and $2,188,000, respectively, including $1,176,000 of current liabilities related to its defense against the Lawsuits compared to $2,776,000 of current assets. As of March 31, 2022, the Company’s working capital totaled $1,388,433 not including approximately $1,042,000 in proceeds expected to be realized under its D&O Policy with AIG. In order to preserve its cash resources, the Company has taken measures to streamline operations, including ending enrollment of patients into its clinical trial, renegotiating and terminating certain agreements and service arrangements and entered into a loan agreement with Kalen Capital Corporation, an Alberta Canada corporation (“Kalen Capital”) which is wholly-owned by the Mr. Harmel S. Rayat, the Company’s President, Chief Executive Officer and Chairman, for $800,000 on March 18, 2022. As a result of the actions taken, the Company is in an improved position to maintain its solvency. However, due to the nature and early stage of the Lawsuits, the Company is unable to estimate the total costs to defend itself or the potential costs to the Company in the event that it is not successful in its defense. As a result, the Company estimates cash on hand will be insufficient for the twelve months following the date these financial statements are issued.

Historically, the Company has been funded through the sale of equity securities and debt financings. At September 30, 2021, the Company had approximately $3,400,000 in cash on hand and current liabilities of $713,000. The Company estimates cash will be depleted in less than one year from the date that these financial statements are available to be issued, if the Company does not generate sufficient cash to support operations. The future of the Company will depend on its ability to successfully raise capital from external sources to fund operations. If the Company is unable to obtain adequate funds, or if such funds are not available to it on acceptable terms, the Company's ability to continue its business to develop its cellular therapies will be significantly impaired and it may cause the Company to curtail operations. Although the Company has instituted cost savings measures, it will continue to assess its ongoing expenses.

Net cash used in operating activities was $4.0 million during the nine months ended September 30, 2021, primarily due to operating costs of $3.3 million and the payment of liabilities of approximately $600 thousand.

Net cash used in investing was $0 for the nine months ended September 30, 2021 and $49 thousand for the nine months ended September 30, 2020.

There was no net cash used in financing activities during the nine months ended September 30, 2021 and 2020.

Fair Value of Financial Instruments and Risks

The carrying value of cash, accounts payable and accountsinterest payable approximate their fair value because of the short-term nature of these instruments and their liquidity. It is not practical to determine the fair value of the Company’s notes payable due to the complex terms. Management is of the opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments.

Market Risk Disclosures

We have not entered into derivative contracts either to hedge existing risks or for speculative purposes during the ninethree months ended September 30, 2021March 31, 2022 or year ended December 31, 2020,2021, and the subsequent period through the date of this report.

Off-Balance Sheet Arrangements and Contractual Obligations

WeAs part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities (SPEs), which would have anybeen established for the purpose of facilitating off-balance sheet arrangements or contractual obligations at September 30, 2021, and the subsequent period through the dateother contractually limited purposes. As of this annual report, that are likely to have or are reasonably likely to have a material current or future effect on our financial condition, changesMarch 31, 2022, we were not involved in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that have not been disclosed in our consolidated financial statements.any SPE transactions. 

Recently Accounting Standards

See Note 1 to our Consolidated Financial Statements for more information regarding recent accounting standards and their impact to our consolidated results of operations and financial position.

Transactions with Related Persons

See Note 6 to our Consolidated Financial Statements for more information regarding transactions with related persons and their impact to our consolidated results of operations and financial position.None.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates. We do not hold or issue financial instruments for trading purposes.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined as a process designed by, or underUnder the supervision and with the participation of our principal executivemanagement, including our Interim Chief Executive Officer and principal financial officers, or persons performing similar functions,Interim Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and effected byoperation of our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

The Company maintains “disclosuredisclosure controls and procedures,” as such term is defined under Rulein Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), as of the Exchange Act,end of the period covered by this quarterly report. Based on this evaluation, our Interim Chief Executive Officer and Interim Chief Financial Officer concluded that are designed to provide reasonable assuranceas of March 31, 2022, that our disclosure controls and procedures were effective such that the information required to be disclosed in the Company’s Exchange Act reportsour SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’sSEC rules and forms, and that such information is accumulated and communicated to the Company’sour management, including its Principalour Chief Executive Officer and PrincipalChief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the framework in “Internal Control — Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, management concluded that our internal control over financial reporting was not effective at September 30, 2021 due to inadequate segregation of duties consistent with control objectives. Our Company’s management is comprised of a very small number of individuals resulting in a situation where limitations of segregation of duties exist. In order to remedy this situation, we would need to hire additional staff to provide greater segregation of duties. Management believes that the material weaknesses set forth above were the result of the scale of our operations and are intrinsic to our small size and that this weakness did not have a material effect on our financial statements and results of operations.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controlscontrol over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), or in factors that could materially affect internal controls,occurred during the three months ended September 30, 2021, or subsequent to the dateperiod covered by this report that management completed their evaluation, thathas materially affected, or areis reasonably likely to materially affect, our internal control over financingfinancial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are involved in litigation and other proceedings, including matters related to intellectual property and regulatory claims. See Note 57 to our unaudited consolidated financial statements for information on certain legal proceedings, which is incorporated by reference herein.

Item 1A. Risk Factors

Our results of operations and financial condition could be adversely affected by numerous risks. In addition to the other information in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors discussed in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for Fiscal 2020.2021. These are not the only risks and uncertainties facing us. Additional risks not currently known to us or that we currently believe are immaterial may also negatively impact our business, financial condition, results of operations and future prospects.

We are the subject of an SEC Complaint. Adverse developments in our ongoing proceeding and/or future legal proceedings could have a material adverse effect on our business, reputation, financial condition, results of operations or stock price.

We are currently subject to an SEC Complaint. Refer to Note 5 to our Consolidated Financial Statements of this Quarterly Report for additional information regarding this specific matter. We may be subject to additional investigations, arbitration proceedings, audits, regulatory inquiries and similar actions, including matters related to intellectual property, employment, securities laws, disclosures, tax, accounting, class action and product liability, as well as regulatory and other claims related to our business and our industry, which we refer to collectively as legal proceedings. We cannot predict the outcome of any particular proceeding, or whether ongoing investigations, will be resolved favorably or ultimately result in charges or material damages, fines or other penalties, enforcement actions, bars against serving as an officer or director, or practicing before the SEC, or civil or criminal proceedings against us or members of our senior management.

Legal proceedings in general, and securities and class action litigation and regulatory investigations in particular, can be expensive and disruptive. Our insurance may not cover all claims that may be asserted against us, and we are unable to predict how long the legal proceedings to which we are currently subject will continue. An unfavorable outcome of any legal proceeding may have an adverse impact on our business, financial condition and results of operations or our stock price. Any proceeding could negatively impact our reputation among our stakeholders. Furthermore, publicity surrounding ongoing legal proceedings, even if resolved favorably for us, could result in additional legal proceedings against us, as well as damage our image.

Item 6. Exhibits

_______________

SIGNATURES

Pursuant to the requirements of Sections 13 or 15 (d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

RenovaCare, Inc.

(Registrant)

21