U.S. Stem Cell, Inc. - Quarter Report: 2016 September (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

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FORM 10-Q

 

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☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2016  OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____

 

Commission File Number: 001-33718

 

(Exact name of registrant as specified in its charter)

 

Florida	65-0945967
(State or other jurisdiction of incorporation or organization	(I.R.S. Employer Identification No.)

 

(Address of principal executive offices) (Zip Code)

 

(Registrant’s telephone number, including area code)

 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.045 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

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

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☒
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

As of November 8, 2016, there were 59,573,684 outstanding shares of the Registrant’s common stock, par value $0.001 per share. 

 

Transitional Small Business Disclosure Format Yes ☐ No ☒

TABLE OF CONTENTS

 

PART I.	FINANCIAL INFORMATION
	ITEM 1.	Financial Statements
		Condensed balance sheets as of September 30, 2016 (unaudited) and December 31, 2015		4
		Condensed statements of operations for the three and nine months ended September 30, 2016 and 2015 (unaudited)		5
		Condensed statement of stockholders’ deficit for the nine months ended September 30, 2016 (unaudited)		6
		Condensed statements of cash flows for the nine months ended September 30, 2016 and 2015 (unaudited)		7
		Notes to condensed financial statements (unaudited)		8-27
	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		28-36
	ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk		37
	ITEM 4.	Controls and Procedures		37
PART II.	OTHER INFORMATION
	ITEM 1.	Legal Proceedings		38
	ITEM 1A.	Risk Factors		38
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds		38
	ITEM 3.	Defaults Upon Senior Securities		38
	ITEM 4.	Mine Safety Disclosures		38
	ITEM 5.	Other Information		38
	ITEM 6.	Exhibits		39
	SIGNATURES			44
EX 31.01	Management Certification
EX 32.01	Sarbanes-Oxley Act

 

PART I — FINANCIAL INFORMATION

Item 1.

Interim Condensed Financial Statements and Notes to Interim Financial Statements

General

The accompanying reviewed condensed interim financial unaudited statements have been prepared in accordance with the instructions to Form 10-Q. Therefore, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders’ deficit in conformity with generally accepted accounting principles. Except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2015. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the three and nine months ended September 30, 2016 are not necessarily indicative of the results that can be expected for the year ending December 31, 2016.

 

U.S. STEM CELL, INC.
CONDENSED BALANCE SHEETS
		September 30,				December 31,
		2016				2015
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	245,991			$	58,372
Accounts receivable, net			33,858				35,032
Inventory			40,414				17,406
Prepaid and other			-				4,832
Total current assets			320,263				115,642
Property and equipment, net			22,827				14,172
Other assets
Investments			60,066				89,139
Deposits			10,160				10,160
Total assets		$	413,316			$	229,113
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable, including $93,932 and $104,089 to related parties, respectively		$	1,362,832			$	1,503,501
Accrued expenses			871,027				726,751
Advances, related party			104,901				106,505
Deferred revenue			98,699				71,961
Deposits			465,286				465,286
Promissory note, short term portion, net of debt discount of $73,032 and $78,864 respectively			76,968				71,136
Notes payable, related party			2,453,696				1,727,022
Notes payable, net of debt discount of $203,021 and $249,205, respectively			753,974				608,502
Derivative liabilities			772,108				423,927
Total current liabilities			6,959,491				5,704,591
Long term debt:
Promissory note, long term portion, net of debt discount of $186,687 and $240,522, respectively			1,211,075				1,232,241
Notes payable, long term portion			982,777				983,727
Note payable, long term portion, related party			-				30,000
Total long term debt			2,193,852				2,245,968
Total liabilities			9,153,343				7,950,559
Commitments and contingencies			-				-
Stockholders'  deficit:
Preferred stock, par value $0.001; 20,000,000 shares authorized, 20,000,000 issued and outstanding			20,000				20,000
Common stock, par value $0.001; 2,000,000,000 shares authorized, 29,213,395 and 1,813,689 shares issued and 29,213,395 and 1,728,478 outstanding as of September 30, 2016 and December 31, 2015, respectively			29,213				1,814
Additional paid in capital			115,683,769				114,555,110
Treasury stock, 85,211 shares			-				(221,996	)
Accumulated deficit			(124,473,009	)			(122,076,374	)
Total stockholders' deficit			(8,740,027	)			(7,721,446	)
Total liabilities and stockholders' deficit		$	413,316			$	229,113
See the accompanying notes to these condensed financial statements

U.S. STEM CELL, INC.
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
		Three months ended September 30,								Nine months ended September 30,
		2016				2015				2016				2015
Revenue:
Products		$	345,274			$	321,129			$	1,211,609			$	949,251
Services			384,539				236,483				907,372				663,225
Total revenue			729,813				557,612				2,118,981				1,612,476
Cost of sales			332,522				243,940				722,276				841,511
Gross profit			397,291				313,672				1,396,705				770,965
Cost and operating expenses:
Research and development			1,847				12,764				9,313				39,696
Marketing, general and administrative			1,413,929				563,676				2,676,415				2,279,288
Depreciation and amortization			1,501				1,328				3,926				3,947
Total operating expenses			1,417,277				577,768				2,689,654				2,322,931
Net loss from operations			(1,019,986	)			(264,096	)			(1,292,949	)			(1,551,966	)
Other income (expenses):
(Loss) gain on settlement of debt			(23,133	)			58,873				49,681				2,097,483
Gain on disposal of equipment			-				-				500				-
(Loss) gain on change of fair value of derivative liability			(413,217	)			374,684				(269,822	)			260,953
Income from equity investment			54,729				11,625				85,927				23,934
Other income			-				10,131				24,741				13,282
Interest expense			(278,798	)			(312,576	)			(994,713	)			(1,126,668	)
Total other income (expenses)			(660,419	)			142,737				(1,103,686	)			1,268,984
Net loss before income taxes			(1,680,405	)			(121,359	)			(2,396,635	)			(282,982	)
Income taxes (benefit)			-				-				-				-
NET LOSS		$	(1,680,405	)		$	(121,359	)		$	(2,396,635	)		$	(282,982	)
Net loss per common share, basic and diluted		$	(0.09	)		$	(0.15	)		$	(0.28	)		$	(0.38	)
Weighted average number of common shares outstanding, basic and diluted			18,289,275				835,113				8,628,866				736,269
See the accompanying notes to these unaudited condensed financial statements

U.S. STEM CELL, INC.
CONDENSED STATEMENT OF STOCKHOLDERS' DEFICIT
NINE MONTHS ENDED SEPTEMBER 30, 2016
(unaudited)
																		Additional
		Preferred stock								Common stock								Paid in				Treasury				Accumulated
		Shares				Amount				Shares				Amount				Capital				Stock				Deficit				Total
Balance, January 1, 2016			20,000,000			$	20,000				1,813,689			$	1,814			$	114,555,110			$	(221,996	)		$	(122,076,374	)		$	(7,721,446	)
Common stock issued in settlement of accounts payable and accrued interest			-				-				1,419,675				1,420				102,096				-				-				103,516
Common stock issued in connection with settlement of other debt			-				-				26,060,886				26,060				919,358				-				-				945,418
Common stock issued in settlement of advances, related party			-				-				14,606				14				6,558				-				-				6,572
Purchase of 10,250 shares of Company's common stock at average cost of $0.76 per share			-				-				-				-				-				(7,817	)			-				(7,817	)
Treasury shares canceled and returned to authorized			-				-				(95,461	)			(95	)			(229,718	)			229,813				-				-
Change in fair value of repriced employee stock options			-				-				-				-				934				-				-				934
Stock based compensation			-				-				-				-				329,431				-				-				329,431
Net loss			-				-				-				-				-				-				(2,396,635	)			(2,396,635	)
Balance, September 30, 2016			20,000,000			$	20,000				29,213,395			$	29,213			$	115,683,769			$	-			$	(124,473,009	)		$	(8,740,027	)
See the accompanying notes to these unaudited condensed financial statements

U.S. STEM CELL, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
		Nine months ended September 30,
		2016				2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(2,396,635	)		$	(282,982	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			3,926				3,947
Bad debt expense			21,204				-
Discount on convertible debt			556,910				612,811
Change in fair value of derivative liability			269,822				(260,953	)
Gain on settlement of debt			(49,681	)			(2,097,483	)
Gain on sale of equipment			(500	)			-
Common stock issued in settlement of litigation			-				59,850
Related party notes payable issued for services rendered			800,000				-
Non-cash payment of interest			193,946				227,396
Income on equity investments			(85,927	)			(23,934	)
Stock based compensation			329,431				341,629
Change in fair value of repriced employee options			934				-
(Increase) decrease in:
Receivables			(20,030	)			1,639
Inventory			(23,008	)			-
Prepaid and other current assets			4,832				100
Increase (decrease) in:
Accounts payable			78,504				324,026
Accrued expenses			176,102				272,322
Deferred revenue			26,738				32,170
Net cash used in operating activities			(113,432	)			(789,462	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from (payments to) equity investments			115,000				(10,000	)
Proceeds from sale of property and equipment			500				-
Purchase of treasury stock			(7,817	)			(157,664	)
Acquisitions of property and equipment			(12,581	)			(894	)
Net cash provided by (used in) investing activities			95,102				(168,558	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net			-				582,808
Proceeds from notes payable			523,089				541,410
Net proceeds from related party advances			15,000				6,604
Repayments of related party notes			(103,326	)			-
Repayments of notes payable			(228,814	)			(143,818	)
Net cash provided in financing activities			205,949				987,004
Net increase in cash and cash equivalents			187,619				28,984
Cash and cash equivalents, beginning of period			58,372				36,674
Cash and cash equivalents, end of period		$	245,991			$	65,658
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid		$	49,214			$	273,883
Income taxes paid		$	-			$	-
Non-cash financing activities:
Common stock issued in settlement of notes payable		$	385,710			$	623,237
Common stock issued in settlement of accounts payable		$	103,516			$	165,412
Common stock issued in settlement of note payable, related party		$	10,000			$	-
Common stock issued in settlement of guarantor fees		$	-			$	170,101
Promissory note issued in exchange for subordinated debt and accrued expenses		$	-			$	1,697,762
See the accompanying notes to these unaudited condensed financial statements

U.S. STEM CELL, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(unaudited)

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the presentation of the accompanying unaudited condensed financial statements follows:

 

The accompanying unaudited condensed financial statements of U.S. Stem Cell, Inc., (the “Company”), have been prepared in accordance with the rules and regulations (Regulation S-X) of the Securities and Exchange Commission (the “SEC”) and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results from operations for the three and nine month periods ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ended December 31, 2016. The unaudited condensed financial statements should be read in conjunction with the December 31, 2015 audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K.

U.S. Stem Cell, Inc. was incorporated under the laws of the State of Florida in August, 1999. The Company is in the cardiovascular sector of the cell technology industry delivering cell therapies and biologics that help address congestive heart failure, lower limb ischemia, chronic heart ischemia, acute myocardial infarctions and other issues. The business includes the development of proprietary cell therapy products as well as revenue generating physician and patient based regenerative medicine/cell therapy training services, cell collection and cell storage services, the sale of cell collection and treatment kits for humans and animals, and the operation of a cell therapy clinic. To date, the Company has not generated significant sales revenues in that they remain less than their total operating expenses, has incurred expenses, and has sustained losses. Consequently, its operations are subject to all the risks inherent in the establishment of a research and development business enterprise.

The Company recognizes revenue in accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”) which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded.

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 and laboratory services, and cell banking. 

Revenues for kits and equipment sold are not recorded until kits and equipment are shipped. Revenues from trainings are recognized when the training occurs. Any cash received as a deposit for trainings are recorded by the company as a liability.

 

U.S. STEM CELL, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(unaudited)

Patient treatments and laboratory services revenue are recognized when those services have been completed or satisfied.

Revenues for cell banking sales are accounted for as Multiple-Element Arrangements under ASC 605-10 which incorporates Accounting Standards Codification subtopic 605-25, Multiple-Element Arrangements (“ASC 605-25”). ASC 605-25 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 vendor-specific objective evidence of fair value (VSOE).

 

At September 30, 2016 and December 31, 2015, the Company had deferred revenues of $98,699 and $71,961, respectively.

 

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 the fair value of the Company’s stock, stock-based compensation, fair values relating to derivative liabilities, debt discounts and the valuation allowance related to deferred tax assets. Actual results may differ from these estimates.

 

Trade receivables are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus trade receivables do not bear interest. Trade accounts receivable are periodically evaluated for collectability based on past credit history with customers and their current financial condition.

 

 

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 of September 30, 2016 and December 31, 2015, allowance for doubtful accounts was $15,306 and $-0-, respectively.

 

 

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.

 

The Company has adopted 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 33 percent ownership of U.S. Stem Cell Clinic, LLC utilizing the equity method of accounting. (See Note 3)

U.S. STEM CELL, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(unaudited)

 

The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. Stock-based compensation expense is recorded by the Company in the same expense classifications in the statements of operations, as if such amounts were paid in cash. As of September 30, 2016, there were outstanding stock options to purchase 23,555,777 shares of common stock, 8,376,579 shares of which were vested.

 

		September 30, 2016				September 30, 2015
Convertible debt			147,287,847				371,441
Series A convertible preferred stock			20,000,000				20,000,000
Options to purchase common stock			23,555,777				73,804
Warrants to purchase common stock			139,145				138,739
Totals			190,982,769				20,583,984

 

The Company uses the cost method when it purchases its own common stock as treasury shares and displays treasury stock as a reduction of shareholders’ equity.

 

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 exceed FDIC insurance limits. The financial stability of these institutions is periodically reviewed by senior management.

As of September 30, 2016, five customers represented 22%, 18%, 13%, 10% and 10%, respectively, representing an aggregate of 73% of the Company’s accounts receivable. As of December 31, 2015, three customers represented 32%, 18% and 16% respectively, representing an aggregate of 66% of the Company’s accounts receivable.

For the three months ended September 30, 2016, the Company’s revenues earned from the sale of products and services were $729,813, of which one customer represented 18% of the Company’s revenues. For the three months ended September 30, 2015, the Company’s revenues earned from the sale of products and services were $557,612, of which one customer represented 11% of the Company’s revenues.

U.S. STEM CELL, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(unaudited)

For the nine months ended September 30, 2016, the Company’s revenues earned from the sale of products and services were $2,097,341, of which one customer represented 13% of the Company’s revenues. For the nine months ended September 30, 2015, the Company’s revenues earned from the sale of products and services were $1,612,476, of which no customers represented 10% or more of the Company’s revenues.

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 incurred research and development expenses of $1,847 and $9,313 for the three and nine months ended September 30, 2016, respectively; and $12,764 and $39,696 for the three and nine months ended September 30, 2015, respectively.

 

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 and 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.

 

The Company accounts for derivative instruments in accordance with ASC 815, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and the types of relationships designated are based on the exposures hedged. At September 30, 2016 and December 31, 2015, the Company did not have any derivative instruments that were designated as hedges.

At September 30, 2016 and December 31, 2015, the Company had outstanding convertible notes and warrants that contained embedded derivatives. These embedded derivatives include certain conversion features and reset provisions. (See Note 6 and Note 8).

 

U.S. STEM CELL, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(unaudited)

 

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.

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.

 

Certain reclassifications have been made to prior periods’ data to conform to the current year’s presentation. These reclassifications had no effect on reported income or losses. 

 

 

The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued.  Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements, except as disclosed.

NOTE 2 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS

 

The accompanying condensed 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 during nine months ended September 30, 2016, the Company incurred net losses of $2,396,635 and used $113,432 in cash for operating activities. These factors among others may indicate that the Company will be unable to continue as a going concern for a reasonable period of time.

The Company's primary source of operating funds in 2015 and 2016 has been from revenue generated from sales with additional cash proceeds from the sale of common stock and the issuance of convertible and other debt. The Company has experienced net losses and negative cash flows from operations since inception, but expects these conditions to improve in 2016 and beyond as it develops its business model. The Company has stockholders' deficiencies at September 30, 2016 and requires additional financing to fund future operations.

U.S. STEM CELL, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(unaudited)

The Company’s existence is dependent upon management’s ability to develop profitable operations and to obtain additional funding sources. There can be no assurance that the Company’s financing efforts will result in profitable operations or the resolution of the Company’s liquidity problems. The accompanying statements do not include any adjustments that might result should the Company be unable to continue as a going concern.

NOTE 3 — INVESTMENTS

 

The investment recorded is comprised of a 33% ownership of U.S. Stem Cell Clinic, LLC, accounted for using the equity method of accounting. The investments in 2014 and 2015 of cash and expenses paid on U.S. Stem Cell Clinic, LLC’s behalf were in aggregate of $59,714. The Company’s 33% income earned by U.S. Stem Cell Clinic, LLC of $54,729 and $85,927 for the three and nine months ended September 30, 2016 respectively; and $11,625 and $23,934 for the three and nine months ended September 30, 2015, respectively, (inception to date income of $115,352) was recorded as other income/expense in the Company’s Statement of Operations in the appropriate periods.  In addition, during the nine months ended September 30, 2016, the Company received distributions totaling $115,000 from U.S. Stem Cell Clinic, LLC.  The carrying value of the investment at September 30, 2016 was $60,066.

At September 30, 2016 and December 31, 2015, accounts receivable for sales of test kits to U.S. Stem Cell Clinic, LLC was $9,280 and $5,946 respectively; revenues earned from sales to U.S. Stem Clinic, LLC for the three and nine months ended September 30, 2016 were $142,774 and $303,625 respectively; and for the three and nine months ended September 30, 2015 were $63,989 and $124,484, respectively.

NOTE 4 — PROPERTY AND EQUIPMENT

 

Property and equipment as of September 30, 2016 and December 31, 2015 is summarized as follows:

		September 30, 2016				December 31, 2015 (audited)
Laboratory and medical equipment		$	342,218			$	353,253
Furniture, fixtures and equipment			130,410				130,410
Computer equipment			48,788				48,788
Leasehold improvements			362,046				362,046
			883,462				894,497
Less accumulated depreciation and amortization			(860,635	)			(880,325	)
		$	22,827			$	14,172

 

Property and equipment are recorded on the basis of cost. For financial statement purposes, property, plant and equipment are depreciated using the straight-line method over their estimated useful lives.  During the nine months ended September 30, 2016, the Company sold fully depreciated equipment for net proceeds (and gain) of $500.

Expenditures for repair and maintenance which do not materially extend the useful lives of property and equipment are charged to operations. When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations. Management periodically reviews the carrying value of its property and equipment for impairment in accordance with the guidance for impairment of long lived assets.

 

U.S. STEM CELL, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(unaudited)

 

NOTE 5 — ACCRUED EXPENSES

Accrued expenses consisted of the following as of September 30, 2016 and December 31, 2015:

		September 30, 2016				December 31, 2015 (audited)
Amounts payable to the Guarantors of the Company’s loan agreement with Bank of America and Seaside Bank, including fees and interest		$	131,506			$	64,199
Interest payable on notes payable			563,174				467,664
Vendor accruals and other			146,429				147,244
Employee commissions, compensation, etc.			29,918				47,644
		$	871,027			$	726,751

During the nine months ended September 30, 2016, the Company issued an aggregate of 1,419,675 shares of its common stock in settlement of outstanding accounts payable and accrued expenses. In connection with the issuance, the Company incurred $134,967 net gain in settlement of debt.

NOTE 6 — NOTES PAYABLE

 

Promissory notes payable were comprised of the following as of September 30, 2016 and December 31, 2015:

		September 30, 2016				December 31, 2015 (audited)
Seaside Bank note payable.		$	980,000			$	980,000
Hunton & Williams notes payable			384,972				384,972
Daniel James Management notes payable			50,000				75,000
Fourth Man, LLC notes payable			100,000				77,450
Magna Group notes payable			179,240				125,000
Power Up Lending Group notes payable			241,650				194,235
Equipment finance lease			3,910				4,777
Total notes payable			1,939,772				1,841,434
Less unamortized debt discount			(203,021	)			(249,205	)
Total notes payable net of unamortized debt discount			1,736,751				1,592,229
Less current portion			(753,974	)			(608,502	)
Long term portion		$	982,777			$	983,727

 

Seaside Bank

 

On October 25, 2010, the Company entered into a Loan Agreement with Seaside National Bank and Trust for a $980,000 loan at 4.25% per annum interest that was used to refinance the Company’s loan with Bank of America. The obligation is guaranteed by certain shareholders of the Company. The Company renewed the loan with Seaside National Bank and Trust during the first quarter of 2016 to extend the maturity date to January 11, 2018.

Hunton & Williams Notes

 

At September 30, 2016 and December 31, 2015, 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 the Northstar (or successor) Loan is paid off.

U.S. STEM CELL, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(unaudited)

Daniel James Management (during this period)

 

2016 Notes

During the nine months ended September 30, 2016, the Company entered into Securities Purchase Agreements with Daniel James Management (“Daniel”) for the sale of 9.5% convertible promissory note in aggregate principal amount of $75,000 (the “Daniel Notes”).

 

The Daniel Notes bear interest at the rate of 9.5% per annum. As of the nine months ended September 30, 2016, all interest and principal must be repaid one year from the issuance date, with the last note being due March 9, 2017. The Daniel Notes are convertible into common stock, at holder’s option, at a 47% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion. The Company has identified the embedded derivatives related to the Daniel Notes. These embedded derivatives included certain conversion features and reset provision. (See Note 8).

 

The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of Daniel Notes and to fair value as of each subsequent reporting date which at September 30, 2016 was $126,304. At the inception of the Daniel Notes, the Company determined the aggregate fair value of $139,691 of the embedded derivatives.

 

During the nine months ended September 30, 2016, $75,000 of promissory notes plus accrued interest that were outstanding at December 31, 2015 and $25,000 of promissory notes plus interest issued in the current period were converted into shares of the Company’s common stock, respectively (see Note 9).

The remaining aggregate promissory notes to Daniel unconverted principle balance as of September 30, 2016 was $50,000.

Fourth Man (during this period)

During the nine months ended September 30, 2016, the Company entered into Securities Purchase Agreements with Fourth Man, LLC (“Fourth Man”) for the sale of 9.5% convertible promissory note in aggregate principal amount of $100,000 (the “Fourth Man Notes”).

 

The Fourth Man Notes bear interest at the rate of 9.5% per annum. As of the nine months ended September 30, 2016, all interest and principal must be repaid one year from the issuance date, with the last note being due September 19, 2017. The Fourth Man Notes are convertible into common stock, at holder’s option, at a 49% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion. The Company has identified the embedded derivatives related to the Fourth Man Notes. These embedded derivatives included certain conversion features and reset provision. (See Note 8).

 

The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of Fourth Man Notes and to fair value as of each subsequent reporting date which at September 30, 2016 was $286,415. At the inception of the Fourth Man Notes, the Company determined the aggregate fair value of $216,050 of the embedded derivatives.

During the nine months ended September 30, 2016, $77,450 of promissory notes plus accrued interest that were outstanding at December 31, 2015 were converted into shares of the Company’s common stock (see Note 9).

The remaining aggregate promissory notes to Fourth Man unconverted principle balance as of September 30, 2016 was $100,000.

U.S. STEM CELL, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(unaudited)

Magna Group (during this period)

 

2015 Note

On December 3, 2015, the Company entered into a Securities Purchase Agreement with Magna Equities II, LLC (“Magna”) for the sale of a 12% convertible promissory note in the principal amount of $262,500 (the “Note”).  The Note was subsequently funded in February 2016 upon effectiveness of the Company’s registration statement (see below). Proceeds from the Note was $250,000 (less an original issue discount of 5% or $12,500).

 

The Note bears interest at the rate of 12% per annum. All interest and principal must be repaid on December 3, 2016. The Note is convertible into common stock, at Magna’s option, at the lower of I) 40% discount to the lowest sales price of the common stock during the 5 trading day period prior to conversion or ii) $0.70. In the event the Company prepays the Note in full, the Company is required to pay off all principal at 140%, interest and any other amounts.

On December 12, 2014, the Company filed a Registration Statement on Form S-1 to register 341,718 shares of common issuable upon the conversion of Magna Equity II, LLC convertible notes dated December 3, 2015 (as restated) for $110,000 and December 3, 2015 for $262,500. The latter note was funded in February 2016.  The Registration Statement on Form S-1 was declared effective on February 12, 2016

The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of Notes to Magna and to fair value as of each subsequent reporting date which at September 30, 2016 was $359,301. At the inception of the Notes, the Company determined the aggregate fair value of $263,204 of the embedded derivatives.

 

During the nine months ended September 30, 2016, $208,260 of the promissory notes were converted into shares of the Company’s common stock (see Note 9).

 

The remaining aggregate Magna Group promissory notes unconverted principle balance as of September 30, 2016 was $179,240.

PowerUp Lending Group, Ltd (during this period)

On March 23, 2016, the Company entered into a revenue based factoring agreement and received an aggregate of $200,000 (less origination fees of $1,650) in exchange for $276,000 of future receipts relating to monies collected from customers or other third party payors. Under the terms of the agreement, the Company is required to make daily payments equal to $1,314 for 210 business days.  The Company received net proceeds of $82,896 along with cancellation of the previous revenue based factoring agreement issued in 2015.  In connection with the cancellation of the December 2015 revenue based factoring agreement, the Company incurred a loss in settlement of debt of $39,449.  

On August 16, 2016, the Company entered into a revenue based factoring agreement and received an aggregate of $210,000 (less origination fees of $2,000) in exchange for $283,500 of future receipts relating to monies collected from customers or other third party payors. Under the terms of the agreement, the Company is required to make daily payments equal to $1,350 for 210 business days.  The Company received net proceeds of $65,193 along with cancellation of the previous revenue based factoring agreement issued on March 23, 2016.  In connection with the cancellation of the March 2016 revenue based factoring agreement, the Company incurred a loss in settlement of debt of $49,264.  

The remaining principle balance of the PowerUp Lending Group promissory note payable at September 30, 2016 is $241,650.

U.S. STEM CELL, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(unaudited)

At September 30, 2016, the Company has recorded interest expense in the amount of $10,775 under the terms of the agreement. The remaining unamortized debt discount at September 30, 2016 is $64,725.

Promissory note

  

On June 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 with four semi-annual payments of $75,000 beginning on December 31, 2015 with the remaining unpaid balance due June 1, 2020.

 

The Company imputed an interest rate of 5% and discounted the promissory note accordingly. The imputed debt discount of $368,615 is amortized to interest expense using the effective interest method. For the three and  nine months  ended September 30, 2016, the Company amortized $19,506 and $59,666 of debt discounts to current period operations as interest expense, respectively.  The unamortized debt discount at September 30, 2016 is $259,719.

During 2016, the Company made principle payments of $75,000 on the promissory note.

As of September 30, 2016, the remaining principle due was $1,547,762.

Summary:

 

The Company has identified the embedded derivatives related to the Daniel, Fourth Man and Magna promissory notes. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of these notes and to fair value as of each subsequent reporting date which at September 30, 2016 was $772,020.

The fair value of the embedded derivatives at issuance of the Daniel, Fourth Man and Magna promissory notes, were determined using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 178.42% to 213.94%, (3) weighted average risk-free interest rate of 0.45% to 0.69%, (4) expected lives of 0.79 to 1.00 years, and (5) estimated fair value of the Company’s common stock from $0.0145 to $0.9342 per share.

 

The initial fair value of the embedded debt derivative of $618,946 was allocated as a debt discount up to the proceeds of the notes ($425,000) with the remainder ($193,946) charged to current period operations as interest expense. For the three and nine months ended September 30, 2016, the Company amortized an aggregate of $138,721 and $497,244 of debt discounts to current period operations as interest expense, respectively.

NOTE 7 — RELATED PARTY TRANSACTIONS

 

 

As of September 30, 2016 and December 31, 2015, the Company’s officers and directors have provided advances in the aggregate of $104,901 and $106,505 respectively, for working capital purposes. The advances are unsecured, due on demand and non-interest bearing.

On February 12, 2016, the Company issued 14,606 shares of its common stock in settlement of $10,000 of the outstanding advances due.  In connection with the settlement, the Company realized a net gain on settlement of debt of $3,427.

U.S. STEM CELL, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(unaudited)

 

Northstar Biotechnology Group, LLC

 

On February 29, 2012, a promissory note issued to BlueCrest Master Fund Limited was assigned to Northstar Biotechnology Group, LLC (“Northstar”), owned partly by certain directors and existing shareholders of the Company, including Dr. William P. Murphy Jr., Dr. Samuel Ahn and Charles Hart. At the date of the assignment, the principal amount of the BlueCrest note was $544,267 the (“Note”).

 

On March 30, 2012, the Company and Northstar agreed to extend until May 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 on May, 2012 and all subsequent payments will be due on a monthly basis thereafter commencing on June 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 and Northstar agreed to suspend the requirement of principal payments by the Company and allow payment of interest-only in common stock.

 

On September 21, 2012, the Company issued 5,000 common stock purchase warrants to Northstar that was treated as additional interest expense upon issuance.

 

On October 1, 2012, the Company and Northstar entered into a limited waiver and forbearance agreement providing a recapitalized new note balance comprised of all sums due Northstar with a maturity date extended perpetually. The Company agreed to issue 5,000,000 shares of Series A Convertible Preferred Stock and 10,000 of common stock in exchange for $210,000 as payment towards outstanding debt, default interest, penalties, professional fees outstanding and due Northstar. In addition, the Company executed a security agreement granting Northstar 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 granted Northstar a perpetual license on products as described for resale, relicensing and commercialization outside the United States. In connection with the granted license, Northstar shall pay the Company a royalty of up to 8% on revenues generated.

 

Effective October 1, 2012, the effective interest rate was 12.85% per annum. The parties agreed, as of February 28, 2013, to reduce the interest rate to 7% per annum.

 

In connection with the consideration paid, Northstar waived, from the effective date through the earlier of termination or expiration of the agreement, satisfaction of the obligations as described in the forbearance agreement.

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 is 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 Series A Convertible Preferred Stock from 20 votes per share on matters to be voted on by the common stock holders to 25 votes per share on matters to be voted on by the common stock holders and all prior and subsequent payments of interest will be in common stock. The Company and the preferred shareholder are in litigation regarding the number of votes currently held by that shareholder (See Note 11). 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.

U.S. STEM CELL, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(unaudited)

As described above, during the year ended December 31, 2013, the Company issued the 5,000,000 shares of Series a Convertible Preferred Stock and the 10,000 of common stock described above in exchange for the $210,000 as payment towards outstanding principle of the debt. In addition, the Company issued 15,000,000 shares of Series A Convertible Preferred Stock as a penalty in settlement of the terms of the forbearance agreement. The fair value of the Preferred Stock of $274,050 was included in interest expense for the year ended December 31, 2013.

On September 30, 2013, the Company issued 8,772 shares of its common stock as payment of $100,000 towards cash advances.

 

On December 24, 2013, the Company issued 3,916 shares of its common stock as payment of accrued interest through June 30, 2013 of $85,447.

 

On April 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 due April 1, 2014 per the forbearance agreement.

 

On September 17, 2014, 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 to condition upon NorthStar providing 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 October 7, 2015, the Company issued 34,522 shares of its common stock in settlement of $100,000 principal payment towards the outstanding debt.

On April 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 due April 1, 2016 per the forbearance agreement.

As of September 30, 2016 and December 31, 2015, the principal of this note was $262,000.

Officer and Director Notes

		September 30, 2016				December 31, 2015 (audited)
Note payable, Beverly Murphy			50,000				50,000
Note payable, Mr. Tomas			184,274				252,250
Note payable, Mr. Tomas			375,000				375,000
Note payable, Mr. Tomas			500,000				500,000
Note payable, Mr. Tomas			500,000				-
Note payable, Ms. Comella			282,422				287,772
Note payable, Ms. Comella			300,000				-
Total		$	2,191,696			$	1,465,022

 

U.S. STEM CELL, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(unaudited)

Note payable, Ms. Murphy

 

At September 30, 2016 and December 31, 2015, the Company has outstanding promissory note payable of $50,000 due to Beverly Murphy with interest at 7% per annum due at maturity at October 15, 2015.

Notes payable, Mr. Tomas

 

In 2013, the Company issued a promissory note payable for previous advances and accrued compensation. The promissory note bears interest of 5% per annum and due on demand. During the nine months ended September 30, 2016, the Company paid off $67,976 of the outstanding promissory note. The principal outstanding balance of this note as of September 30, 2016 is $184,274.

On August 1, 2013, the Company issued a $375,000 promissory note due on demand in settlement of accrued compensation. The promissory note bears interest of 5% per annum and is due on demand. The principal outstanding balance of this note as of September 30, 2016 is $375,000.

 

On July 1, 2014, the Company issued a $500,000 promissory note in settlement of accrued compensation. The promissory note bears interest of 5% per annum and was due on January 1, 2015. The principal outstanding balance of this note as of September 30, 2016 is $500,000.

On September 6, 2016, the Company issued a $500,000 promissory note in settlement of accrued compensation. The promissory note bears interest of 5% per annum and is due upon demand. The principal outstanding balance of this note as of September 30, 2016 is $500,000.

Notes payable, Ms. Comella

 

On July 1, 2014, the Company issued a $300,000 promissory note in settlement of accrued compensation. The promissory note bears interest of 5% per annum and due on January 1, 2015. To date, the Company has paid $17,578 on the outstanding promissory note.  For the nine months ended September 30, 2016, the Company paid off an aggregate of $5,350 of the outstanding promissory note. The principal outstanding balance of this promissory note as of September 30, 2016 is $282,422.

On September 6, 2016, the Company issued a $300,000 promissory note in settlement of accrued compensation. The promissory note bears interest of 5% per annum and was due upon demand. The principal outstanding balance of this note as of September 30, 2016 is $300,000.

 

Transactions with Pavillion

During the three and nine months ended September 30, 2016, the Company purchased $-0- of lab kits from Pavillion, Inc., a related party whose owner is related to an officer of the Company. During the three and nine months ended September 30, 2015, the Company purchased $80,504 and $172,298 lab kits, respectively. As of September 30, 2016 and December 31, 2015, the Company had $69,973 and $242,271, respectively, in accounts payable owed to Pavillion.

 

On May 1, 2016, the Company entered into a consulting agreement with Pavillion.  The agreement is for 12 months and renewable for 6 month periods.  Compensation is at $250 per hour or, at the Company’s discretion, in shares of the Company’s common stock. For the three and nine months ended September 30, 2016, the Company has incurred $30,000 and $50,000 under the agreement, respectively.

U.S. STEM CELL, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(unaudited)

NOTE 8 — DERIVATIVE LIABILITIES

 

Reset warrants

 

On October 1, 2012, in connection with the forbearance agreement with Northstar as discussed in Note 7, the Company issued an aggregate of 15,000 common stock purchase warrants to purchase the Company’s common stock with an exercise price of $14.00 per share for ten years with anti-dilutive (reset) provisions.

 

The Company has identified embedded derivatives related to the issued warrants. These embedded derivatives included certain and anti-dilutive (reset) provisions. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date and to fair value as of each subsequent reporting date.

 

At September 30, 2016, the fair value of the reset provision related to the embedded derivative liability of $88 was determined using the Binomial Option Pricing model with the following assumptions: dividend yield: 0%; volatility: 216.11%; risk free rate: 1.14%; and expected life: 6.00 years. The Company recorded a gain on change in derivative liabilities of $103 and $12,120 during the three and nine months ended September 30, 2016.

 

Convertible notes

 

In fiscal 2015 and the nine months ended September 30, 2016, the Company issued convertible promissory notes.

 

These promissory notes are convertible into common stock, at holders’ option, at a discount to the market price of the Company’s common stock. The Company has identified the embedded derivatives related to these promissory notes relating to certain anti-dilutive (reset) provisions. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of these notes and to fair value as of each subsequent reporting date.

The fair value of the embedded derivatives at September 30, 2016, in the amount of $772,020, was determined using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 216.11%, (3) weighted average risk-free interest rate of 0.29% to 0.59%, (4) expected lives of 0.18 to 0.97 years, and (5) estimated fair value of the Company’s common stock of $0.007 per share. The Company recorded a loss on change in derivative liabilities of $413,320 and $281,942 during the three and nine months ended September 30, 2016.

 

Based upon ASC 840-15-25 (EITF Issue 00-19, paragraph 11) the Company has adopted a sequencing approach regarding the application of ASC 815-40 to its outstanding convertible promissory notes. Pursuant to the sequencing approach, the Company evaluates its contracts based upon earliest issuance date.

NOTE 9 — STOCKHOLDERS’ EQUITY

 

During the nine months ended September 30, 2016, the Company issued an aggregate of 26,060,886 shares of its common stock for the conversion of $404,831 of promissory notes payable and related accrued interest. Upon conversion of the notes, the Company recorded an adjustment to the derivative liability in the amount of $540,587 (see Note 12).

During the nine months ended September 30, 2016, the Company purchased 10,250 shares of the Company’s common stock in the open market at an average cost of $0.76 per share.

U.S. STEM CELL, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(unaudited)

During the nine months ended September 30, 2016, the Company returned and canceled 95,461 shares of the Company’s common stock previously purchased (treasury shares)  at an average cost of $2.41 per share.

NOTE 10 — STOCK OPTIONS AND WARRANTS

 

 

In December 1999, the Board of Directors and shareholders adopted the 1999 Officers and Employees Stock Option Plan, or the Employee Plan, and the 1999 Directors and Consultants Stock Option Plan, or the Director Plan. The Employee Plan and the Director Plan are collectively referred to herein as the Plans. The Plans are administered by the Board of Directors and the Compensation Committee.

 

The objectives of the Plans include attracting and retaining key personnel by encouraging stock ownership in the Company by such persons. In February 2010, the Directors & Consultants Plan was amended to extend the termination date of the Plan to December 1, 2011.

 

On April 1, 2013, the Board of Directors approved, subject to shareholder approval, the establishment of the Bioheart 2013 Omnibus Equity Compensation Plan, or the “2013 Omnibus Plan”. The 2013 Omnibus Plan reserves up to fifty thousand shares of common stock for issuance. On August 4, 2014, the Board of Directors approved to set the reserve to one hundred thousand shares of common stock for issuance and to close the 1999 Officers and Employees Stock Option Plan. On February 2, 2015, at the annual meeting of shareholders, the majority of shareholders approved the 2013 Omnibus Equity Compensation Plan. On November 2, 2015, the Board of Directors approved the increase of the reserve under the 2013 Omnibus Plan to five hundred million shares of common stock for issuance and effective September 16, 2016, approved an addition of twenty five million shares of common stock to the reserve.

A summary of options at September 30, 2016 and activity during the nine months then ended is presented below:

		Shares				Weighted- Average Exercise Price				Weighted- Average Remaining Contractual Term (in years)
Options outstanding at January 1, 2015			66,933			$	56.00				8.9
Granted			489,116			$	1.98				10.0
Exercised			—
Forfeited/Expired			(229	)		$	5,103.28
Options outstanding at December 31, 2015			555,820			$	6.43				9.6
Granted			23,000,000			$	0.02				10.0
Exercised			—
Forfeited/Expired			(43	)		$	1,960.39
Options outstanding at September 30, 2016			23,555,777			$	0.03				9.9
Options exercisable at September 30, 2016			8,376,579			$	0.06				9.9
Available for grant at September 30, 2016			9,383,070

U.S. STEM CELL, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(unaudited)

The following information applies to options outstanding and exercisable at September 30, 2016:

Exercise Price				Number Outstanding				Option Outstanding Options Average Remaining Contractual Life (years)				Weighted Average Exercise price				Number Exercisable				Options Exercisable Weighted Average Exercise price
$	0.0196				22,850,000				9.98			$	0.0196				7,850,000			$	0.0196
	0.15402				705,412				9.01				0.15402				526,326				0.15402
	19.32				150				8.10				19.32				38				19.32
	70.00				100				4.92				70.00				100				70.00
	210.00				40				4.87				210.00				40				210.00
	680.00				40				3.36				680.00				40				680.00
	5,250.00				35				1.55				5,250.00				35				5,250.00
Total					23,555,777				9.95			$	0.3336				8,376,579			$	0.05515

On April 18, 2016, the Company granted an aggregate 150,000 options to purchase the Company’s common stock at $0.15402 per share to key employees, vesting over 4 years, at grant date anniversary and exercisable over 10 years. The aggregate fair value of $10,928, determined using the Black Scholes option pricing model with the following assumptions: Dividend yield: 0%; Volatility: 184.48% and Risk free rate: 1.54%.

 

On April 18, 2016, the Company repriced an aggregate of 555,433 previously issued options with exercise prices from $1.71 to $7,688.83 per share to $0.15402 per share.  All other terms and conditions were unchanged. The aggregate change in fair value of $934, determined using the Black Scholes option pricing model with the following assumptions: Dividend yield: 0%; Volatility: 184.48% and Risk free rate: 0.22% to 1.78%, was charged to current period operations.

 

On September 19, 2016, the Company granted an aggregate 22,850,000 options to purchase the Company’s common stock at $0.0196 per share to officers, directors and key employees with 15,000,000 vesting over 4 years, at grant date anniversary and 7,850,000 vesting immediately; for a term of 10 years. The aggregate fair value of $347,706, determined using the Black Scholes option pricing model with the following assumptions: Dividend yield: 0%; Volatility: 213.30% and Risk free rate: 1.22%.

The fair value of all options vesting during the three and nine months ended September 30, 2016 of $188,009 and $329,814, respectively, was charged to current period operations.

The fair value of all options vesting during the three and nine months ended September 30, 2015 of $73,520 and $345,761, respectively, was charged to current period operations.

As of September 30, 2016, the Company had approximately $519,043 of total unrecognized compensation cost related to non-vested awards granted under the Plan, which the Company expects to recognize over a weighted average period of 1.37 years.

U.S. STEM CELL, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(unaudited)

Warrants

 

A summary of common stock purchase warrants at September 30, 2016 and activity during the nine months ended September 30, 2016 is presented below:

		Shares				Weighted- Average Exercise Price				Weighted- Average Remaining Contractual Term (in years)
Outstanding at January 1, 2015			150,620			$	170.00				6.6
Issued			2,072			$	19.98				8.18
Exercised			-
Expired			(13,325	)		$	24.00
Outstanding at December 31, 2015			139,367			$	182.26				6.3
Issued			-
Exercised			-
Expired			(222	)		$	5,966.40
Outstanding at September 30, 2016			139,145			$	173.03				5.5
Exercisable at September 30, 2016			135,600			$	89.42				5.5

The following information applies to common stock purchase warrants outstanding and exercisable at September 30, 2016:

				Warrants Outstanding												Warrants Exercisable
				Shares				Weighted- Average Remaining Contractual Term				Weighted- Average Exercise Price				Shares				Weighted- Average Exercise Price
$	0.01 – $20.00				94,108				6.0			$	15.54				94,108			$	15.54
$	20.01 – $30.00				29,743				5.3			$	24.52				28,743			$	24.62
$	30.01 – $40.00				628				0.9			$	40.00				628			$	40.00
$	40.01 - $50.00				6,253				2.4			$	48.36				5,253			$	48.41
$	50.01 – $60.00				543				1.2			$	60.00				543			$	60.00
$	>60.00				7,870				3.5			$	2,735.01				6,325			$	1,524.67
					139,145				5.5			$	173.03				135,600			$	89.42

NOTE 11 — COMMITMENTS AND CONTINGENCIES

Leases

 

On February 4, 2016, the Company amended its facility lease to extend the term of the lease until August 31, 2019. Approximate annual future minimum lease obligations under non-cancelable operating lease agreements as of September 30, 2016 are as follows:

 

Period ending December 31,
2016 (three months)		$	21,919
2017			87,674
2018			87,674
2019			58,448
Total		$	255,715

U.S. STEM CELL, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(unaudited)

Litigation

 

On September 17, 2015, a product liability lawsuit was filed in Broward County, specifically Patsy Bade v. Bioheart, Inc. US Stem Cell Clinics LLC, Aleiandro Perez, ARNP, and Shareen Greenbaum, M.D., and on November 30, 2015, a product liability lawsuit was filed in Broward County, specifically Elizabeth Noble v. Bioheart, Inc. US Stem Cell Clinics LLC, Aleiandro Perez, ARNP, and Shareen Greenbaum, M.D. During the nine months ended September 30, 2016, both matters settled by the Company’s insurance policy with no additional cost to the Company.

 

On February 8, 2016, a collection lawsuit was filed in Broward County, specifically Roche Diagnostics Corp. v. U.S. Stem Cell, Inc., demanding judgement against the Company for an aggregate of $42,246 plus interest and costs for alleged unpaid product.  During the nine months ended September 30, 2016, the Company settled all matters for a net payment of $8,500.

 

On August 30^th, 2016 Northstar Biotech Group, LLC (“NorthStar”) filed suit against the Company, of which the Company received notice several weeks later. In its suit, Northstar is seeking  a declaratory judgment from the Court as to whether its preferred shares were the subject of the Company’s reverse stock split effective November 4, 2015 and also seeks the appointment of a receiver. Northstar did not seek money damages. The Company disputes Northstar’s claims and intends to vigorously defend this matter.

NOTE 12 — FAIR VALUE MEASUREMENT

 

The Company adopted the provisions of Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) on January 1, 2008. 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 nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:

 

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 – Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

 

All items required to be recorded or measured on a recurring basis are based upon level 3 inputs.

U.S. STEM CELL, INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2016

(unaudited)

 

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.

 

Upon adoption of ASC 825-10, there was no cumulative effect adjustment to beginning retained earnings and no impact on the financial statements.

The carrying value of the Company’s cash and cash equivalents, accounts receivable, accounts payable, short-term borrowings (including convertible notes payable), and other current assets and liabilities approximate fair value because of their short-term maturity.

As of September 30, 2016 or December 31, 2015, the Company did not have any items that would be classified as level 1 or 2 disclosures.

 

The Company recognizes its derivative liabilities as level 3 and values its derivatives using the methods discussed in notes 6 and 8. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed in Notes 6 and 8 are that of volatility and market price of the underlying common stock of the Company.

 

As of September 30, 2016 and December 31, 2015, the Company did not have any derivative instruments that were designated as hedges.

 

The derivative liability as of September 30, 2016, in the amount of $772,108 has a level 3 classification.

The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities as of September 30, 2016:

		Warrant Liability				Debt Derivative
Balance, December 31, 2014			149,920			$	591,351
Total (gains) losses
Initial fair value of debt derivative at note issuance			—				1,097,379
Mark-to-market at December 31, 2015:			(137,711	)			122,616
Transfers out of Level 3 upon conversion and settlement of notes			—				(1,399,628	)
Balance, December 31, 2015			12,209				411,718
Total (gains) losses
Initial fair value of debt derivative at note issuance			—				618,946
Mark-to-market at September 30, 2016:			(12,121	)			281,943
Transfers out of Level 3 upon conversion or payoff of notes payable			—				(540,587	)
Balance, September 30, 2016		$	88			$	772,020
Net gain (loss) for the period included in earnings relating to the liabilities held at September 30, 2016		$	12,121			$	(281,943	)

Fluctuations in the Company’s stock price are a primary driver for the changes in the derivative valuations during each reporting period. The Company’s stock volatility increased approximately 21% from December 31, 2015 to September 30, 2016. As the stock volatility increases for each of the related derivative instruments, the value to the holder of the instrument generally increases. Stock price volatility is one of the significant unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments.

 

The estimated fair value of these liabilities is sensitive to changes in the Company’s expected volatility. Increases in expected volatility would generally result in a higher fair value measurement.

 

 

 

 

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 ended December 31, 2015 filed with the Securities 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.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not required under Regulation S-K for “smaller reporting companies.”

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures, which are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and Chief Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Based on their evaluation, as of September 30, 2016, our management has concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) are effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, summarized, processed and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure.

Changes In Internal Control Over Financial Reporting

 

There were no changes in the Company’s internal controls over financial reporting during the most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings

 

On September 17, 2015, a product liability lawsuit was filed in Broward County, specifically Patsy Bade v. Bioheart, Inc. US Stem Cell Clinics LLC, Aleiandro Perez, ARNP, and Shareen Greenbaum, M.D., and on November 30, 2015, a product liability lawsuit was filed in Broward County, specifically Elizabeth Noble v. Bioheart, Inc. US Stem Cell Clinics LLC, Aleiandro Perez, ARNP, and Shareen Greenbaum, M.D. During the nine months ended September 30, 2016, both matters are settled by the Company’s insurance policy with no additional cost to the Company.

On February 8, 2016, a collection lawsuit was filed in Broward County, specifically Roche Diagnostics Corp. v. U.S Stem Cell, Inc. demanding judgement against the Company for an aggregate of $42,246 plus interest and costs for alleged unpaid product.  During the nine months ended September 30, 2016, the Company all matters were settled for a net payment of $8,500.

 

Item 1A. Risk Factors

 

Not required under Regulation S-K for “smaller reporting companies.”

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None 

 

Item 3. Defaults Upon Senior Securities

 

There were no defaults upon senior securities during the period ended September 30, 2016

Item 4. Mine Safety Disclosures

Not applicable.

 

Item 5. Other Information

 

None

Item 6. Exhibits

 

Exhibit No.	Exhibit Description
3.1(6)	Amended and Restated Articles of Incorporation of the registrant, as amended
3.2(9)	Articles of Amendment to the Articles of Incorporation of the registrant
3.3(37)	Articles of Amendment to the Articles of Incorporation of the registrant
3.4 (8)	Amended and Restated Bylaws
4.1(5)	Loan and Security Agreement, dated as of May 31, 2007 by and between BlueCrest Capital Finance, L.P. and the registrant
4.2(12)	Notice of Event of Default, from BlueCrest Venture Finance Master Fund Limited to the Company, dated January 28, 2009
4.3(12)	Notice of Acceleration, from BlueCrest Venture Finance Master Fund Limited to the Company, dated February 2, 2009
4.4(13)	Amendment to Loan and Security Agreement, between the Company and BlueCrest Venture Finance Master Fund Limited, dated as of April 2, 2009
4.5(13)	Grant of Security Interest (Patents), between the Company and BlueCrest Venture Finance Master Fund Limited, dated as of April 2, 2009
4.6(13)	Security Agreement (Intellectual Property), between the Company and BlueCrest Venture Finance Master Fund Limited, dated as of April 2, 2009
4.7(13)	Subordination Agreement, by Hunton & Williams, LLP in favor of BlueCrest Venture Finance Master Fund Limited, entered into and effective April 2, 2009
4.8(13)	Amended and Restated Promissory Note, dated April 2, 2009, by the Company to BlueCrest Venture Finance Master Fund Limited
4.9(13)	Warrant to purchase 1,315,542 shares of the registrant’s common stock, dated April 2, 2009, issued to BlueCrest Venture Finance Master Fund Limited
4.10(14)	Warrant to purchase 451,043 shares of the registrant’s common stock, dated April 2, 2009, issued to Rogers Telecommunications Limited
4.11(14)	Warrant to purchase 173,638 shares of the registrant’s common stock, dated April 2, 2009, issued to Hunton & Williams, LLP
4.12(4)	Warrant to purchase shares of the registrant’s common stock issued to Howard J. Leonhardt and Brenda Leonhardt
4.12(19)	10% Convertible Promissory Note Due July 23, 2010, in the amount of $20,000, payable to Dana Smith
4.13(19)	10% Convertible Promissory Note Due July 23, 2010, in the amount of $100,000, payable to Bruce Meyers
4.14(19)	Registration Rights Agreement, dated July 23, 2009
4.15(4)	Warrant to purchase shares of the registrant’s common stock issued to the R&A Spencer Family Limited Partnership
4.15(19)	Subordination Agreement, dated July 23, 2009
4.16(19)	Note Purchase Agreement, dated July 23, 2009
4.17(19)	Closing Confirmation of Conversion Election, dated July 23, 2009
4.20(6)	Warrant to purchase shares of the registrant’s common stock issued to Samuel S. Ahn, M.D.
4.23(7)	Warrant to purchase shares of the registrant’s common stock issued to Howard and Brenda Leonhardt
4.27(11)	Form of Warrant Agreement for October 2008 Private Placement
4.30(19)	10% Convertible Promissory Note Due July 23, 2010, in the amount of $100,000, payable to Bruce Meyers
4.31 (34)	Series A Convertible Preferred Stock
4.32 (35)	Amendment to the Series A Convertible Preferred Stock
10.1**(1)	1999 Officers and Employees Stock Option Plan
10.2**(1)	1999 Directors and Consultants Stock Option Plan
10.3(1)	Form of Option Agreement under 1999 Officers and Employees Stock Option Plan
10.4(3)	Form of Option Agreement under 1999 Directors and Consultants Stock Option Plan

10.5**(4)	Employment Letter Agreement between the registrant and Scott Bromley, dated August 24, 2006.
10.6(1)	Lease Agreement between the registrant and Sawgrass Business Plaza, LLC, as amended, dated November 14, 2006.
10.7(1)	Asset Purchase Agreement between the registrant and Advanced Cardiovascular Systems, Inc., dated June 24, 2003.
10.8(4)	Conditionally Exclusive License Agreement between the registrant, Dr. Peter Law and Cell Transplants International, LLC, dated February 7, 2000, as amended.
10.9(4)	Loan Guarantee, Payment and Security Agreement, dated as of June 1, 2007, by and between the registrant, Howard J. Leonhardt and Brenda Leonhardt
10.10(4)	Loan Guarantee, Payment and Security Agreement, dated as of June 1, 2007, by and between the registrant and William P. Murphy Jr., M.D.
10.11(4)	Loan Agreement, dated as of June 1, 2007, by and between the registrant and Bank of America, N.A.
10.13(4)	Warrant to purchase shares of the registrant’s common stock issued to Howard J. Leonhardt and Brenda Leonhardt
10.14(4)	Warrant to purchase shares of the registrant’s common stock issued to William P. Murphy, Jr., M.D.
10.16(4)	Material Supply Agreement, dated May 10, 2007, by and between the registrant and Biosense Webster
10.17(5)	Warrant to purchase shares of the registrant’s common stock issued to BlueCrest Capital Finance, L.P.
10.18(6)	Loan Guarantee, Payment and Security Agreement, dated as of September 12, 2007, by and between the registrant and Samuel S. Ahn, M.D.
10.19(6)	Loan Guarantee, Payment and Security Agreement, dated as of September 12, 2007, by and between the registrant and Dan Marino
10.21(6)	Loan Guarantee, Payment and Security Agreement, dated as of September 19, 2007, by and between the registrant and Jason Taylor
10.22(7)	Loan Guarantee, Payment and Security Agreement, dated as of October 10, 2007, by and between the registrant and Howard and Brenda Leonhardt
10.24(7)	Second Amendment to Loan Guarantee, Payment and Security Agreement, dated as of October 10, 2007, by and between the registrant and Howard and Brenda Leonhardt
10.25(7)	Second Amendment to Loan Guarantee, Payment and Security Agreement, dated as of October 10, 2007, by and between the registrant and William P. Murphy, Jr., M.D.
10.26**(10)	U.S. Stem Cell, Inc. Omnibus Equity Compensation Plan
10.28(11)	Form of Registration Rights Agreement for October 2008 Private Placement
10.29(19)	10% Convertible Promissory Note Due July 23, 2010, in the amount of $20,000, payable to Dana Smith
10.31(19)	Registration Rights Agreement, dated July 23, 2009
10.32(19)	Subordination Agreement, dated July 23, 2009
10.33(19)	Note Purchase Agreement, dated July 23, 2009
10.34(19)	Closing Confirmation of Conversion Election, dated July 23, 2009
10.35**(20)	Amended and Restated 1999 Directors and Consultants Stock Option Plan
10.36(21)	Preliminary Commitment Letter with Seaside National Bank and Trust, dated September 30, 2010.
10.37(22)	Loan Agreement with Seaside National Bank and Trust, dated October 25, 2010.
10.38(22)	Promissory Note with Seaside National Bank and Trust, dated October 25, 2010.
10.39(22)	Amended and Restated Loan and Security Agreement with BlueCrest Venture Finance Master Fund Limited, dated October 25, 2010.
10.40(23)	Form of Subscription Agreement, executed November 30, 2010.
10.41(23)	Form of Common Stock Purchase Warrant, issued November 30, 2010.
10.42(23)	Form of Registration Rights Agreement, dated November 30, 2010.
10.43(24)	Unsecured Convertible Promissory Note for $25,000, with Magna Group, LLC, dated January 3, 2011.
10.44(24)	Promissory Note for $139,728.82 with Magna Group, LLC, dated January 3, 2011.
10.45(24)	Securities Purchase Agreement with Magna Group, LLC, dated January 3, 2011.
10.46(24)	Subordination Agreement, dated January 3, 2011.
10.47(24)	Notice of Conversion Election, dated January 3, 2011.
10.48(25)	Unsecured Convertible Promissory Note for $34,750, with Magna Group, LLC, dated May 16, 2011.
10.49(25)	Promissory Note for $139,728.82 with Magna Group, LLC, dated May 16, 2011.
10.50(25)	Securities Purchase Agreement with Magna Group, LLC, dated May 16, 2011.

 

10.51(25)	Subordination Agreement, dated May 16, 2011.
10.52(26)	Promissory Note for $139,728.82 with Lotus Funding Group, LLC, dated June 15, 2011.
10.53(26)	Partial Assignment and Modification Agreement, dated June 15, 2011.
10.54(26)	Subordination Agreement, dated June 15, 2011.
10.55(27)	Promissory Note for $140,380.21 with Greystone Capital Partners, dated July 8, 2011.
10.56(27)	Partial Assignment and Modification Agreement, dated July 8, 2011.
10.57 (28)	Subordination Agreement, dated July 8, 2011.
10.58 (29)	Promissory Note for $139,728.82 with Greystone Capital Partners, dated August 1, 2011.
10.59 (29)	Partial Assignment and Modification Agreement, dated August 1, 2011.
10.60 (29)	Subordination Agreement, dated August 1, 2011.
10.61 (30)	Promissory Note for $139,728.82 with Greystone Capital Partners, dated September 1, 2011.
10.62 (30)	Partial Assignment and Modification Agreement, dated September 1, 2011.
10.63 (30)	Subordination Agreement, dated September 1, 2011.
10.64 (31)	Standby Equity Distribution Agreement dated as of November 2, 2011.
10.65 (31)	Registration Rights Agreement dated as of November 2, 2011.
10.66(32)	Promissory Note for $139,728.82 with Greystone Capital Partners, dated January 3, 2012
10.67(32)	Term Note B Promissory Note for $139,728.82 with Greystone Capital Partners, dated January 3, 2012
10.68(32)	Unsecured Convertible Promissory Note for $63,000, with Asher Enterprises, Inc. dated April 2, 2012
10.69(32)	Unsecured Convertible Promissory Note for $125,000, with IBC Funds LLC., dated January 9, 2013
10.70(32)	Unsecured Convertible Promissory Note for $37,500, with Asher Enterprises, Inc. dated February 20, 2013
10.71(32)	Unsecured Convertible Promissory Note for $42,500, with Asher Enterprises, Inc. dated January 9, 2013
10.72**(33)	2013 U.S. Stem Cell, Inc. Omnibus Equity Compensation Plan
10.73 (34)	Securities Purchase Agreement, dated as of October 7, 2014, by and between Magna Holdings I, LLC and U.S. Stem Cell, Inc.
10.74(34)	Registration Rights Agreement, dated as of October 7, 2014, by and between Magna Holdings I, LLC and U.S. Stem Cell, Inc.
10.75(34)	Common Stock Purchase Agreement, dated as of October 23, 2014, by and between Magna Equities II, LLC and U.S. Stem Cell, Inc.
10.76(34)	Registration Rights Agreement, dated as of October 23, 2014, by and between Magna Equities II, LLC and U.S. Stem Cell, Inc.
10.77**(35)	2013 Omnibus Equity Compensation Plan Amendment One.
10.78 (36)	Senior Convertible Note, dated October 1, 2015
10.79 (36)	Securities Purchase Agreement, dated as of October 1, 2015, by and between Magna Equities II, LLC and U.S. Stem Cell, Inc.
10.80(36)	Registration Rights Agreement, dated as of October 1, 2015, by and between Magna Holdings I, LLC and U.S. Stem Cell, Inc.
10.81(38)	Senior Convertible Note, dated December 3, 2015
10.82 (38)	Amended and Restated Senior Convertible Note, dated December 3, 2015.
10.83 (38)	Securities Purchase Agreement, dated as of December 3, 2015, by and between Magna Equities II, LLC and U.S. Stem Cell, Inc.
10.84 (38)	Registration Rights Agreement, dated as of December 3, 2015, by and between Magna Holdings I, LLC and U.S. Stem Cell, Inc.
14.2(2)	Code of Business Conduct and Ethics
31.01	Certification of Chief Executive Officer and Chief Financial Officer (Principal Accounting Officer) pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.01	Certifications of Chief Executive Officer and Chief Financial Officer (Principal Accounting Officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

 

101 INS	XBRL Instance Document
101 SCH	XBRL Taxonomy Extension Schema Document
101 CAL	XBRL Taxonomy Calculation Linkbase Document
101 DEF	XBRL Taxonomy Extension Definition Linkbase Document
101 LAB	XBRL Taxonomy Labels Linkbase Document
101 PRE	XBRL Taxonomy Presentation Linkbase Document
*	Filed herewith
**	Indicates management contract or compensatory plan.

(1)	Incorporated by reference to the Company’s Form S-1 filed with the Securities and Exchange Commission (the “SEC”) on February 13, 2007.
(2)	Incorporated by reference to Amendment No. 1 to the Company’s Form S-1 filed with the SEC on June 5, 2007.
(3)	Incorporated by reference to Amendment No. 2 to the Company’s Form S-1 filed with the SEC on July 12, 2007.
(4)	Incorporated by reference to Amendment No. 3 to the Company’s Form S-1 filed with the SEC on August 9, 2007.
(5)	Incorporated by reference to Amendment No. 4 to the Company’s Form S-1 filed with the SEC on September 6, 2007.
(6)	Incorporated by reference to Amendment No. 5 to the Company’s Form S-1 filed with the SEC on October 1, 2007.
(7)	Incorporated by reference to Post-effective Amendment No. 1 to the Company’s Form S-1 filed with the SEC on October 11, 2007.
(8)	Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on July 3, 2008.
(9)	Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on August 8, 2008.
(10)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 14, 2008.
(11)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2008.
(12)	Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on February 3, 2009.
(13)	Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on April 8, 2009.
(14)	Incorporated by reference to the Company’s Annual Report on Form 10-K filed with the SEC on April 15, 2009.
(15)	Incorporated by reference to the Company’s Annual Report on Form 10-K/A filed with the SEC on April 30, 2009.
(16)	Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on May 18, 2009.
(17)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the SEC on May 20, 2009.
(18)	Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on July 9, 2009.
(19)	Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on August 3, 2009.
(20)	Incorporated by reference to Exhibit 4.6 to the Company’s Post-Effective Amendment to Registration Statement on Form S-8/A, filed with the SEC on June 2, 2010.

(21)	Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 6, 2010.
(22)	Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on October 29, 2010.
(23)	Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on December 6, 2010.
(24)	Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on January 12, 2011.
(25)	Incorporated by reference to the Company Current Report on Form 8-K filed with the SEC on May 25, 2011.
(26)	Incorporated by reference to the Company Current Report on Form 8-K filed with the SEC on June 21, 2011.
(27)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 15, 2011.
(28)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2011.
(29)	Incorporated by reference to the Company Current Report on Form 8-K filed with the SEC on January 13, 2012.
(30)	Incorporated by reference to the Company Current Report on Form 8-K filed with the SEC on January 30, 2012.
(31)	Incorporated by reference to the Company Registration Statement on Form S-1/A filed with the SEC on February 8, 2012.
(32)	Incorporated by reference to the Company Annual Report on Form 10-K filed with the SEC on March 29, 2013.
(33)	Incorporated by reference to the Company Quarterly Report on Form 10-Q filed with the SEC on May 9, 2013.
(34)	Incorporated by reference to the Company’s Registration Statement on Form S-1/A filed with the SEC on December 12, 2014.
(35)	Incorporated by reference to the Company’s Definitive Proxy Statement on Schedule 14A filed with the SEC on December 19, 2014.
(36)	Incorporated by reference to the Company Current Report on Form 8-K filed with the SEC on October 2, 2015.
(37)	Incorporated by reference to the Company Current Report on Form 8-K filed with the SEC on November 4, 2015.
(38)	Incorporated by reference to the Company Current Report on Form 8-K filed with the SEC on December 4, 2015.

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

		U.S. Stem Cell, Inc.
Date: November 8, 2016	By:	/s/ Mike Tomas
		Mike Tomas
		Chief Executive Officer &
		President and Principal Financial
		and Accounting Officer

 

 

 

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