NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNREVIEWED)
NOTE
1 - THE COMPANY
Regenicin,
Inc. ("Regenicin"), formerly known as Windstar, Inc., was incorporated in the state of Nevada on September
6, 2007. On July 19, 2010, the Company
amended its Articles of Incorporation to change the name of the Company to Regenicin, Inc. On August 31, 2022, we filed articles of
continuance with the states of Nevada and Wyoming effectively moving our organizational jurisdiction from Nevada to Wyoming
effective on that date. The Company's business plan is to develop and commercialize a potentially lifesaving technology by the
introduction of tissue-engineered skin substitutes to restore the qualities of healthy human skin for use in the treatment of burns,
chronic wounds and a variety of plastic surgery procedures.
In October 2022, the Company set up a new Nevada Series
LLC called NovaDerm Product Package, LLC (“NPP LLC”). During November and December 2022, consistent with Nevada law governing
this Master Series LLC, the Company established twenty-five (25) individual series LLCs, identifying each with a series letter of A through
T or AA through EE. Thus, each of these sub-entities were named NovaDerm Product Package Series A, LLC through Series T, LLC, and then
Series AA to Series EE, LLC (or NPP-A through NPP-T and NPP-AA through NPP-EE for short).
Into each of these twenty-five individual Series LLCs,
the Company contributed the right and exclusive ownership to a certain amount of the bovine hides and corium that the Company currently
owned and used as key materials in the preparation of its NovaDerm® product, as well as the right to designate: (a) the specific patient
cultured skin to be prepared from these materials; (b) the amount of this cultured skin to be prepared up to a designated amount and (c)
the medical facility to receive the fully prepared and processed NovaDerm® cultured skin from these materials (these materials and
combined designation rights are collectively referred to herein as the “NovaDerm® Product Rights”). For NPP-A through
NPP-T and NPP-AA through NPP-CC the Company designated 33,333 cm2 of these NovaDerm® Product Rights. For NPP-DD they
designated 30,625 cm2 of NovaDerm® Product Rights and for NPP-EE they designated 28,783 cm2 of NovaDerm®
Product Rights. Each contribution of each of the NovaDerm® Product Rights was provided in exchange for 100 membership interests in
the Series LLC which represented 100% of all membership interests issued.
The Company subsequently transferred 99% of their
membership interests (or 99 membership interests) in each of these Series LLC to various Limited Liability Companies, held by individuals
unknown to us, in exchange for a pre-agreed payment. Prior to December 31, 2022, the members of these LLCs voted to donate 100% of the
membership interests to charity.
While the Company retains possession of the materials
transferred in each Series LLC contribution, the Company has a continuing obligation to segregate and manage those materials as well as
to prepare the NovaDerm® cultured skin product as designated by each Series LLC holder or their designate. The identified materials
are currently set apart from other such materials and are being held by the Company pending the identification of the patient and medical
facility as instructed by each NovaDerm® Product Rights holder. Notwithstanding this retention of possession by the Company, the ownership
and legal title to the materials are retained and fully vested in the individual Series LLC or its designate.
The above-described transfers of membership interests
in the Series LLCs generated a substantial amount of cash which we are obligated to use for the completion of our NovaDerm IND and the
administration of our product clinical trials. No assurance, however, can be given as to the success or failure of such IND or clinical
trials, or as to any future FDA decisions made following these trials. Due to the continuing obligation the Company recorded
the amount received as deferred income.
NOTE
2 - BASIS OF PRESENTATION
Interim
Financial Statements:
The
accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles
(“U.S. GAAP”) for interim financial information and with Rule 8-03 of Regulation S-X. Accordingly, they do not include all
of the information and note disclosures required by generally accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting only of those of a recurring nature) considered necessary for a fair presentation
have been included. Operating results for the three months ended December 31, 2022, are not necessarily indicative of the results that may
be expected for the year ending September 30, 2023. These unaudited consolidated financial statements should be read in conjunction with
the unaudited consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the
year ended September 30, 2022, as filed with the Securities and Exchange Commission. The consolidated balance sheet as of September 30,
2022, contained herein has been derived from the unaudited consolidated financial statements as of September 30, 2022, but does not include
all disclosures required by U.S. GAAP.
Going
Concern:
The
Company's consolidated financial statements have been prepared assuming that the Company will continue as a going concern which contemplates
the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred recurring losses
and as of December 31, 2022, has an accumulated deficit of approximately $16.2 million from inception, expects to incur further losses
in the development of its business and has been dependent on funding operations through the issuance of convertible debt, private sale
of equity securities, and recently the certain partnership interest. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. Currently management plans to finance operations through the private or public placement of debt and/or
equity securities. However, no assurance can be given at this time as to whether the Company will be able to obtain such financing. The
consolidated financial statements do not include any adjustment relating to the recoverability and classification of recorded asset amounts
or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Financial
Instruments and Fair Value Measurement:
As
of October 1, 2018, the Company adopted ASU No. 2016-01, “Financial Instruments-Overall: Recognition and Measurement of Financial
Assets and Financial Liabilities”. The new standard principally affects accounting standards for equity investments, financial
liabilities where the fair value option has been elected, and the presentation and disclosure requirements for financial instruments.
Upon the effective date of the new standards, all equity investments in unconsolidated entities, other than those accounted for using
the equity method of accounting, will generally be measured at fair value through earnings. There no longer is an available-for-sale
classification and therefore, no changes in fair value will be reported in other comprehensive income (loss) for equity securities with
readily determinable fair values. As a result of the adoption, the Company recorded a cumulative effect adjustment of a $950 decrease
to accumulated other comprehensive income, and a corresponding decrease to accumulated deficit, as of October 1, 2018.
Common
stock of Amarantus BioScience Holdings, Inc. (“Amarantus”) is carried at fair value in the accompanying consolidated balance
sheets. Fair value is determined under the guidelines of GAAP which defines fair value, establishes a framework for measuring fair value
and expands disclosures about fair value measurements. Realized gains and losses, determined using the first-in, first-out (FIFO) method,
and unrealized gains and losses are included in other income (expense) on the statement of operations.
The
common stock of Amarantus is valued at the closing price reported on the active market on which the security is traded. This valuation
methodology is considered to be using Level 1 inputs. The total value of Amarantus common stock at December 31, 2022 is $425.
The change in unrealized gain (loss) for the three months ended December 31, 2022 and 2021 was $(500)
and $1,350
net of income taxes, respectively, and was reported
as other income (expense).
Recently
Issued Accounting Pronouncements:
Any
recent pronouncements issued by the FASB or other authoritative standards groups with future effective dates are either not applicable
or are not expected to be significant to the consolidated financial statements of the Company.
NOTE
3 - LOSS PER SHARE
Basic
loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted
loss per share gives effect to dilutive convertible securities, options, warrants and other potential common stock outstanding during
the period; only in periods in which such effect is dilutive.
The
following weighted average securities have been excluded from the calculation of net loss per share for the three months ended
December 31, 2022 and 2021 as the exercise price was greater than the average market price of the common shares:
|
2022 |
|
2021 |
|
Options |
|
11,771,344 |
|
|
|
11,771,334 |
|
|
The
following weighted average securities have been excluded from the calculation because the effect of including these potential shares was
anti-dilutive due to the net losses incurred during the three months ended December 31, 2022 and 2021:
|
2022 | |
2021 |
Convertible
Preferred Stock |
| 8,850,000 | | |
| 8,850,000 | |
Convertible
Promissory Note |
| 56,123,437 | | |
| 17,493,789 | |
|
| 64,973,437 | | |
| 26,473,789 | |
NOTE
4 – LOANS PAYABLE
Convertible
Promissory Note – Officer
Through
March 31, 2020, John Weber, the Company's Chief Financial Officer, advanced the Company a total of $335,683.
On March 31, 2020, these advances were converted into a convertible promissory note. Interest on the note is computed at 5% per
annum and accrues from the time of the advances until the maturity date. The original maturity date was September 30, 2020, at which
time all the accrued interest and principal became due. The note has been extended several times and most recently to December
31, 2022. For the three months ended
December 31, 2022 and 2021 interest totaling $984
and $532,
respectively, was incurred. Accrued interest on the note was $70,455 and
$65,471 at
December 31, 2022 and December 31, 2021, respectively, which is included in accrued expenses on the accompanying consolidated balance
sheets. The note is convertible at the option of Mr. Weber into shares of the Company's common stock at the prevailing market rate
on the date of conversion.
Loan
Payable:
In
February 2011, an investor advanced $10,000. The loan does not bear interest and is due on demand. At both December 31, 2022 and
December 31, 2021, the loan payable totaled $10,000.
Loans
Payable - Officer:
Through
September 30, 2020, J. Roy Nelson, the Company’s Chief Science Officer, made net advances to the Company totaling $26,935.
The loans do not bear interest and are due on demand.
In
September 2018, Randall McCoy, the Company’s Chief Executive Officer, advanced to the Company $4,500.
The loan does not bear interest and is due on demand.
From
July 2020 through September 2022, John Weber, the Company’s Chief Financial Officer, advanced to the Company $90,800. The loan
bears interest at 5% per annum and is due on demand.
NOTE
5 - BRIDGE FINANCING
On December
21, 2011, the Company issued a $150,000 promissory
note to an individual. The note bore interest so that the Company would repay $175,000 on the maturity date of June
21, 2012. Additional interest of 10%
was charged on any late payments. The note was not paid at the maturity date and the Company is incurring additional interest as
described above. At both December 31, 2022 and September 30, 2022, the note balance was $175,000.
Interest expense was $4,411 for
both quarters ended December 31, 2022 and 2021. Accrued interest on the note was $184,349
and $179,938
as of December 31, 2022 and September 30, 2022, respectively, and is included in Accrued expenses - other in the accompanying
consolidated balance sheets.
NOTE
6 - INCOME TAXES
The
Company recorded no income tax expense for the three months ended December 31, 2022 and 2021 because the estimated annual effective tax rate
was zero. As of December 31, 2022, the Company continues to provide a valuation allowance against its net deferred tax assets since the
Company believes it is more likely than not that its deferred tax assets will not be realized.
NOTE
7 – STOCKHOLDERS' DEFICIENCY
Preferred Stock:
Series
A
At
both December 31, 2022 and September 30, 2022, 885,000
shares of Series A Preferred Stock (“Series
A Preferred”) were outstanding.
Series
A Preferred pays a dividend of 8%
per annum on the stated value and has a liquidation
preference equal to the stated value of the shares ($885,000 liquidation preference as of December 31, 2022 and September 30, 2022 plus
dividends in arrears as per below). Each share of Series A Preferred Stock has an initial stated value of $1.00
and is convertible into shares of the Company’s
common stock at the rate of 10 for 1.
The
Series A Preferred Stock was marketed through a private placement memorandum that included a reference to a ratchet provision which would
have allowed the holders of the stock to claim a better conversion rate based on other stock transactions conducted by the Company during
the three-year period following the original issuance of the shares. The Certificate of Designation does not contain a ratchet provision.
Certain of the stock related transactions consummated by the Company during this time period may have triggered this ratchet provision,
and thus created a claim by holders of the Series A Preferred Stock who purchased based on this representation for a greater conversion
rate than initially provided. There have been no new developments related to the remaining Series A holders regarding this claim and
the conversion rate of their Series A Preferred Stock. Changes to the preferred stock conversion ratio may result in modification or
extinguishment accounting. That may result in a deemed preferred stock dividend which would reduce net income available to common stockholders
in the calculation of earnings per share. Certain of the smaller Series A holders have already converted or provided notice of conversion
of their shares. In respect of this claim, the Company and its outside counsel determined that it is not possible to offer an opinion
regarding the outcome. An adverse outcome could materially increase the accumulated deficit.
The
dividends are cumulative commencing on the issue date when and if declared by the Board of Directors. As of December 31, 2022, and
September 30, 2022, dividends in arrears were $835,875 ($.94
per share) and $818,030 ($.82
per share), respectively.
Series
B
Four
million (4,000,000)
shares of Series B Convertible Preferred Stock
(“Series B Preferred”) have been authorized with a liquidation preference of $2.00
per share. Each share of Series B Preferred is
convertible into ten shares of common stock. Holders of Series B Preferred have a right to a dividend (pro-rata to each holder) based
on a percentage of the gross revenue earned by the Company in the United States, if any, and the number of outstanding shares of Series
B Preferred, as follows: Year 1 - Total Dividend to all Series B holders = .03 x Gross Revenue in the U.S. Year 2 - Total Dividend to
all Series B holders = .02 x Gross Revenue in the U.S. Year 3 - Total Dividend to all Series B holders = .01 x Gross Revenue in the U.S.
At June 30, 2022, no shares of Series B Preferred are outstanding.
NOTE
8 - STOCK-BASED COMPENSATION
The Company accounts for equity instruments issued
in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 505, “Equity.” Costs
are measured at the estimated fair value of the consideration received or the estimated fair value of the equity instruments issued, whichever
is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the
earlier of a performance commitment or completion of performance by the provider of goods or services as defined by ASC 505.
NOTE
9 - RELATED PARTY TRANSACTIONS
The
Company’s principal executive offices are located in Little Falls, New Jersey. The headquarters is located in the offices of McCoy
Enterprises LLC, an entity controlled by Mr. McCoy. The office is attached to his residence but has its own entrances, restroom and kitchen
facilities.
The
Company also maintains an office at Carbon & Polymer Research Inc. ("CPR") in Pennington, New Jersey, which is the Company's
materials and testing laboratory. An officer of the Company is an owner of CPR.
The Company paid rent no rent for the three months
ended December 31, 2022. No rent was charged for previously.
On
May 16, 2016, the Company entered into an agreement with CPR in which CPR will supply the collagen scaffolds used in the Company's production
of the skin tissue. The contract contains a most favored customer clause guaranteeing the Company prices equal or lower than those charged
to other customers. The Company has not yet made purchases from CPR.
See
Note 4 for loans payable to related parties.
NOTE
10 - SUBSEQUENT EVENTS
Management
has evaluated subsequent events through the date of this filing.