UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

Regenicin, Inc.
(Exact name of registrant as specified in its charter)

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 [X] 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 (§232.405 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 [X] 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.

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

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 143,377,001 as of May 11, 2015.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Our consolidated financial statements included in this Form 10-Q are as follows:

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended March 31, 2015 are not necessarily indicative of the results that can be expected for the full year.

 REGENICIN, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

See Notes to Consolidated Financial Statements.

REGENICIN, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)       

See Notes to Consolidated Financial Statements.

REGENICIN, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)

See Notes to Consolidated Financial Statements.

REGENICIN, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED) 

              See Notes to Consolidated Financial Statements.  

REGENICIN, INC. AND SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 - THE COMPANY  

The Company’s business plan is to develop and commercialize a potentially lifesaving technology by the introduction of tissue-engineered skin substitutes to restore the qualities of healthy human skin for use in the treatment of burns, chronic wounds and a variety of plastic surgery procedures

The Company entered into a Know-How License and Stock Purchase Agreement (the “Know-How SPA”) with Lonza Walkersville, Inc. (“Lonza Walkersville”) on July 21, 2010. Pursuant to the terms of the Know-How SPA, the Company paid Lonza Walkersville $3,000,000 and, in exchange, the Company was to receive an exclusive license to use certain proprietary know-how and information necessary to develop and seek approval by the U.S. Food and Drug Administration (“FDA”) for the commercial sale of technology held by the Cutanogen Corporation (“Cutanogen”), a subsidiary of Lonza Walkersville. Additionally, pursuant to the terms of the Know-How SPA, the Company was entitled to receive certain related assistance and support from Lonza Walkersville upon payment of the $3,000,000. Under the Know-How SPA, once FDA approval was secured for the commercial sale of the technology, the Company would be entitled to acquire Cutanogen, Lonza Walkersville’s subsidiary, for $2,000,000 in cash.  

After prolonged attempts to negotiate disputes with Lonza Walkersville failed, on September 30, 2013, the Company filed a lawsuit against Lonza Walkersville, Lonza Group Ltd. (“Lonza Group”) and Lonza America, Inc. (“Lonza America”) (collectively, the “Defendant”) in Fulton County Superior Court in the State of Georgia.

On November 7, 2014, the Company entered into an Asset Sale Agreement (the “Sale Agreement”) with Amarantus Bioscience Holdings, Inc., (“Amarantus”). Under the Sale Agreement, the Company agreed to sell to Amarantus all of its rights and claims in the litigation currently pending in the United States District Court for the District of New Jersey against Lonza Walkersville and Lonza America, Inc. (the “Lonza Litigation”). This includes all of the Cutanogen intellectual property rights and any Lonza manufacturing know-how technology. In addition, the Company agreed to sell the PermaDerm® trademark and related intellectual property rights associated with it. The purchase price paid by Amarantus was: (i) $3,600,000 in cash, and (ii) shares of common stock in Amarantus having a value of $3,000,000. See Note 4 for a further discussion.

The Company intends to use the net proceeds of the transaction to fund development of cultured cell technology and to pursue approval of the products through the U.S. Food and Drug Administration. We have been developing our own unique cultured skin substitute since we received Lonza’s termination notice. 

NOTE 2 - BASIS OF PRESENTATION

Interim Financial Statements:

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and note disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended March 31, 2015 are not necessarily indicative of the results that may be expected for the year ending September 30, 2015. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 2014, as filed with the Securities and Exchange Commission.

Going Concern:

The Company's consolidated financial statements have been prepared assuming that the Company will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Although the Company has received cash flows from the Sale Agreement, it does not have a source of revenue and is incurring routine expenses. The Company expects to incur further losses in the development of its business and has been dependent on funding operations through the issuance of convertible debt and private sale of equity securities. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans include continuing to finance operations through the private or public placement of debt and/or equity securities. However, no assurance can be given at this time as to whether the Company will be able to achieve these objectives. The consolidated financial statements do not include any adjustment relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. 

Financial Instruments and Fair Value Measurement:

The Company measures fair value of its financial assets on a three-tier value hierarchy, which prioritizes the inputs, used in the valuation methodologies in measuring fair value:

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The carrying value of cash, prepaid expenses and other current assets, accounts payable, accrued expenses and all loans and notes payable in the Company’s consolidated balance sheets approximated their values as of March 31, 2015 and September 30, 2014 due to their short-term nature.

Common stock of Amarantus represents equity investments in common stock that the Company classifies as available for sale. Such investments are carried at fair value in the accompanying consolidated balance sheets. Fair value is determined under the guidelines of GAAP which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Realized gains and losses, determined using the first-in, first-out (FIFO) method, are included in net income. Unrealized gains and losses are reported as other comprehensive income and are included in equity.

The common stock of Amarantus is restricted from sale for six months from acquisition pursuant to Security and Exchange Commission Rule 144. Accordingly, the stock is valued at the closing price reported on the active market on which the security is traded less a discount for the restrictions. This valuation methodology is considered to be using Level 2 inputs. The total value of Amarantus common stock at March 31, 2015 is $1,500,000. The unrealized loss for the six months ended March 31, 2015 was $1,500,000 net of income taxes, and was reported as a component of comprehensive income.

The Company issued notes payable that contained conversion features which were accounted for separately as derivative liabilities and measured at fair value on a recurring basis. Changes in fair value are charged to other income (expenses) as appropriate. The fair value of the derivate liabilities was determined based on Level 2 inputs utilizing observable quoted prices for similar instruments in active markets and observable quoted prices for identical or similar instruments in markets that are not very active. Derivative liabilities totaled $-0- and $5,164 as of March 31, 2015 and September 30, 2014, respectively. See Note 6 - Notes Payable - Convertible Promissory Notes for additional information.

Recent Pronouncements:

Management does not believe that any of the recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying consolidated financial statements. 

NOTE 3 - INCOME (LOSS) PER SHARE

Basic income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the period. Diluted loss per share gives effect to dilutive convertible securities, options, warrants and other potential common stock outstanding during the period; only in periods in which such effect is dilutive. The following table summarizes the components of the income (loss) per common share calculation:

The following securities have been excluded from the diluted per share calculation for the six and three months ended March 31, 2015 because the exercise price was greater than the average market price of the common shares:   

The following securities have been excluded from the calculation of net loss per share for the six and three months ended March 31, 2014, as their effect would be anti-dilutive:

NOTE 4 - SALE OF ASSET

On November 7, 2014, the Company entered into a Sale Agreement with Amarantus, Clark Corporate Law Group LLP ("CCLG") and Gordon & Rees, LLP (“Gordon & Rees”). Under the Sale Agreement, the Company agreed to sell to Amarantus all of its rights and claims in the litigation currently pending in the United States District Court for the District of New Jersey against Lonza Walkersville and Lonza America, Inc. These include all of the Cutanogen intellectual property rights and any Lonza manufacturing know-how technology. In addition, the Company has agreed to sell its PermaDerm® trademark and related intellectual property rights associated with it. The purchase price to be paid by Amarantus was of: (i) $3,500,000 in cash, and (ii) shares of common stock in Amarantus having a value of $3,000,000. A portion of the cash purchase price is allocated to repay debt. On January 30, 2015, the agreement was amended whereby the cash portion of the purchase price was increased by $100,000 to $3,600,000 and the final payment was extended to February 20, 2015. The final payment of $2,500,000 was made on February 24, 2015.

The cash portion of the sale price was paid as follows:

The payments to CCLG, satisfied in full the obligations owed to CCLG under its secured promissory note. The $3,000,000 in Amarantus common stock was satisfied by the issuance of 37,500,000 shares of Amarantus common stock from Amarantus to the Company. In addition to the sale price, Amarantus paid Gordon & Rees $450,000 at closing. The payment to Gordon & Rees was to satisfy in full all contingent litigation fees and costs owed to Gordon & Rees in connection with the Lonza Litigation.

The Company recorded a gain on sale of $6,604,431 for the six months ended March 31, 2015 with $2,500,000 of the gain recognized in the three months ended March 31, 2015. In addition, as a result of the Sale Agreement, the Company determined that it is no longer liable for accounts payable to Lonza in the amount of $973,374. The amount has been written-off and is included in operating expenses.

The Company also granted to Amarantus an exclusive five (5) year option to license any engineered skin designed for the treatment of patients designated as severely burned by the FDA developed by the Company. Amarantus can exercise this option at a cost of $10,000,000 plus a royalty of 5% on gross revenues in excess of $150 million.  

NOTE 5 - INTANGIBLE ASSETS

As discussed in Note 1, the Company paid $3,000.000 to Lonza in 2010 to purchase an exclusive know-how license and assistance in gaining FDA approval. The $3,000,000 payment was recorded as an intangible asset. Due to ongoing disputes and pending any settlement of the lawsuit, the Company subsequently determined that the value of the intangible asset and related intellectual property had been fully impaired. As a result, the Company wrote down the value of the intangible asset to $0 during the year ended September 30, 2013.

The Company paid $7,500 in August 2010 and $10,000 in November 2014 to obtain the rights to the trademarks PermaDerm® and TempaDerm® from KJR-10 Corp.

As discussed in Note 4, the Company sold all its intangible assets on November 7, 2014. At September 30, 2014, intangible assets totaled $7,500. 

NOTE 6 - LOANS – RELATED PARTIES

Loan Payable:

In February 2011, an investor advanced $10,000. The loan does not bear interest and is due on demand. At both March 31, 2015 and September 30, 2014, the loan payable totaled $10,000.

Loans Payable - Related Parties:

In October 2011, Craig Eagle, a director of the Company, made advances to the Company. The loan bears interest at 5% and is due on demand. At both December 31, 2014 and September 30, 2014, the loan balance was $38,221.

John Weber, the Company’s Chief Financial Officer, has made advances to the Company. The loan bears interest at 5% and is due on demand. At March 31, 2015 and September 30, 2014, the loan balance was $141,430 and $122,100, respectively.

In March through September 2014, the Company received other advances from related parties totaling $35,696. The loan bears interest at 5% and is due on demand. At March 31, 2015 and September 30, 2014 the loan balances were $29,956 and $45,496, respectively. 

At March 31, 2015 and September 30, 2014, loans payable - related parties totaled $209,607 and $205,817, respectively. 

NOTE 7 - NOTES PAYABLE

Insurance Financing Note: 

In September 2014, the Company financed certain insurance premiums totaling $51,613. The note requires an initial down payment of $10,322 and is payable over a nine-month term with interest at 6.45%. At March 31, 2015 and September 30, 2014, the balance owed under the note was $12,387 and $51,613, respectively.

Bridge Financing:

On December 21, 2011, the Company issued a $150,000 promissory note (“Note 2”) to an individual. Note 2 bears interest so that the Company would repay $175,000 on the maturity date of June 21, 2012, which correlated to an effective rate of 31.23%. Additional interest of 10% will be charged on any late payments. Note 2 was not paid at the maturity date and the Company is incurring additional interest described above. At both March 31, 2015 and September 30, 2014, the Note 2 balance was $175,000.

In May 2013, the Company issued a convertible promissory note (“Note 29”) totaling $25,000 to an individual. Note 29 bore interest at the rate of 8% per annum and was due in November 2013. Note 29 and accrued interest thereon were convertible into shares of common stock at the rate of $0.05 per share and automatically converted on the maturity date unless paid sooner by the Company. The Company did not record a discount for the conversion feature as the conversion price was greater than the price of the common stock on the issuance date. At maturity, the principal and interest were scheduled to convert to 520,055 shares of common stock but the individual waived the conversion of the principal and accrued interest. At September 30, 2014 the Note 29 balance was $25,000. In February 2015 the loan was repaid full.

In August 2013, the Company issued convertible promissory notes (“Note 35-36”) totaling $250,000 to two individuals. The notes bore interest at the rate of 8% per annum and were due in August 2014. The principal and accrued interest thereon were convertible into shares of common stock at the rate of $0.03 per share and automatically convert on the maturity dates unless paid sooner by the Company. The Company did not record discounts for the conversion features as the conversion prices were greater than the prices of the common stock on the issuance dates. At maturity, the principal and interest were scheduled to automatically convert into 4,500,000 shares of common stock but the individuals waived the conversion of the principal and accrued interest. In November 2014 the Company repaid $25,000 of principal on each note. At September 30, 2014, the balance of Notes 35-36 was $250,000. In February 2015 the remaining $225,000 of principal was repaid.

Convertible Promissory Note:

In October 2012, the Company issued a promissory note to a financial institution (the “Lender”) to borrow up to a maximum of $225,000. The note bears interest so that the Company would repay a maximum of $250,000 at maturity, which correlated to an effective rate of 10.59%. From inception until February 2014, the Company received $175,000. Material terms of the note include the following:

1. The Lender may make additional loans in such amounts and at such dates at its sole discretion.

2. The maturity date of each loan is one year after such loan is received.

3. The original interest discount is prorated to each loan received.

4. Principal and accrued interest is convertible into shares of the Company’s common stock at the lesser of $0.069 or 65%-70% (as defined) of the lowest trading price in the 25 trading days previous to the conversion.

5. Unless otherwise agreed to in writing by both parties, at no time can the Lender convert any amount of the principal and/or accrued interest owed into common stock that would result in the Lender owning more than 4.99% of the common stock outstanding.

6. There is a one-time interest payment of 10% of amounts borrowed that is due at the maturity date of each loan.

7. At all times during which the note is convertible, the Company shall reserve from its authorized and unissued common stock to provide for the issuance of common stock under the full conversion of the promissory note. The Company will at all times reserve at least 13,000,000 shares of its common stock for conversion.

8. The Company agreed to include on its next registration statement it files, all shares issuable upon conversion of balances due under the promissory note. Failure to do so would result in liquidating damages of 25% of the outstanding principal balance of the promissory note but not less than $25,000.

In October 2014, the remaining balance due on these notes of $9,592 plus accrued interest of $1,499 was converted into 7,920,291 shares of the Company’s common stock.

The conversion feature contained in the promissory note is considered to be an embedded derivative. The Company bifurcated the conversion feature and recorded a derivative liability on the consolidated balance sheet. The Company recorded the derivative liability equal to its estimated fair value. Such amount was also recorded as a discount to the convertible promissory note and is being amortized to interest expense using the effective interest method. For the six months ended March 31, 2015 and 2014, amortization of the debt discount amounted to $7,675 and $34,748, respectively. At March 31, 2015 and September 30, 2014, the unamortized discount was $0 and $7,675, respectively.

The Company is required to mark-to-market the derivative liability at the end of each reporting period. For the six and three months ended March 31, 2015, the Company recorded a gain on the change in fair value of the conversion option of $5,163 and $-0-, respectively. For the six and three months ended March 31, 2014, the Company recorded a gain on the change in fair value of the conversion option of $75,174 and $26,252, respectively. As of March 31, 2015 and September 30, 2014 the fair value of the conversion option was $0 and $5,164, respectively.

In May 2013, the Company issued a convertible promissory note totaling $293,700 to CCLG in lieu of amounts payable. The note bears interest at the rate of 12% per annum and was originally due November 21, 2013. The maturity date of the note was extended to August 31, 2014. The note is secured by all of the assets of the Company. The note and accrued interest are convertible into shares of common stock at a conversion rate of the lower of $0.04 per share or 80% of the average of the lowest three trading prices in the 20 trading days previous to the conversion but the number of shares that can be issued is limited as defined in the note agreement. In addition, the Company issued a five-year warrant to purchase an additional 50,000 shares of common stock at a per share exercise price of the lower of $0.04 per share or 80% of the average of the lowest three trading prices in the 20 trading days previous to the conversion. The note was not paid at the maturity date but no action was taken by CCLG. During the period from October 1, 2014 through February 25, 2015, the Company repaid the total amount outstanding.

The conversion features contained in the promissory note and the warrant were considered to be embedded derivatives. The Company bifurcated the conversion features and recorded derivative liabilities on the consolidated balance sheet. The Company recorded the derivative liabilities equal to their estimated fair value. Such amount was also recorded as a discount to the convertible promissory note and was amortized to interest expense using the effective interest method. For the six months ended March 31, 2014, amortization of the debt discount amounted to $82,638. The debt discount was fully amortized as of September 30, 2014.

The Company is required to mark-to-market the derivative liabilities at the end of each reporting period. For the six and three months ended March 31, 2015, the Company recorded a gain (loss) on the change in fair value of the conversion option of $(363,158) and $165,072, respectively. For the six and three months ended March 31, 2014, the Company recorded a gain on the change in fair value of the conversion option of $151,550 and $87,446, respectively. As of March 31, 2015 and September 30, 2014, the fair value of the conversion option was $-0- and $5,164, respectively.

At March 31, 2015 and September 30, 2014, the balance of the convertible note was $-0- and $293,700, respectively.

NOTE 8 - INCOME TAXES

The Company did not incur current tax expense for both the six months ended March 31, 2015 and 2014. The provision for income taxes of $2,829,000 for the six months ended March 31, 2015 represents deferred taxes. There was no provision for the six months ended March 31, 2014.

At March 31, 2015, the Company had available approximately $3 million of net operating loss carry forwards which expire in the years 2028 through 2033. 

Significant components of the Company’s deferred tax assets at March 31, 2015 and September 30, 2014 are as follows:

Due to the uncertainty of their realization, a valuation allowance has been established for a portion of the income tax benefit for these deferred tax assets.

At both March 31, 2015 and September 30, 2014, the Company had no material unrecognized tax benefits and no adjustments to liabilities or operations were required. The Company does not expect that its unrecognized tax benefits will materially increase within the next twelve months. The Company recognizes interest and penalties related to uncertain tax positions in general and administrative expense. As of March 31, 2015 and 2014, the Company has not recorded any provisions for accrued interest and penalties related to uncertain tax positions.

The Company files its federal income tax returns under a statute of limitations. The 2011 through 2014 tax years generally remain subject to examination by federal tax authorities. The Company has not filed any of its state income tax returns since inception. Due to recurring losses, management believes that once such returns are filed, the Company would incur state minimum tax liabilities that were not deemed material to accrue.  

NOTE 9 - STOCKHOLDERS’ DEFICIENCY

Preferred Stock:

Series A

Series A Preferred pays a dividend of 8% per annum on the stated value and have a liquidation preference equal to the stated value of the shares. Each share of Preferred Stock has an initial stated value of $1 and was convertible into shares of the Company’s common stock at the rate of 10 for 1.

The dividends are cumulative commencing on the issue date whether or not declared. Dividends amounted to $35,303 and $17,458 for both the six and three months March 31, 2015, and 2014 respectively. At March 31, 2015 and September 30, 2014, dividends payable total $286,545 and $251,242, respectively, and are included in accrued expenses.

At both March 31, 2015 and September 30, 2014, 885,000 shares of Series A Preferred were outstanding.

Series B

On January 23, 2012, the Company designated a new class of preferred stock called Series B Convertible Preferred Stock (“Series B Preferred”). Four million shares have been authorized with a liquidation preference of $2.00 per share. Each share of Series B Preferred is convertible into ten shares of common stock. Holders of Series B Convertible Preferred Stock have a right to a dividend (pro-rata to each holder) based on a percentage of the gross revenue earned by the Company in the United States, if any, and the number of outstanding shares of Series B Convertible Preferred Stock, as follows: Year 1 - Total Dividend to all Series B holders = .03 x Gross Revenue in the U.S. Year 2 - Total Dividend to all Series B holders = .02 x Gross Revenue in the U.S. Year 3 - Total Dividend to all Series B holders = .01 x Gross Revenue in the U.S. At March 31, 2015, no shares of Series B Preferred are outstanding.

Common Stock Issuances:

In October 2014, the Company issued 7,920,291 shares of its common stock for the conversion of principal and accreted interest owed to the Lender. $7,920 was credited to common stock and $3,171 to additional paid in capital.

On March 31, 2015, the Company issued 9,486,430 shares of its common stock that had previously been classified as common stock to be issued upon conversion of principal and accrued interest owed to a lender. $9,512 was credited to common stock and $348,586 was credited to additional paid in capital.

Stock-Based Compensation:

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 505, “Equity ”. Costs are measured at the estimated fair value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services as defined by ASC 505.

On January 6, 2011, the Company approved the issuance of 885,672 options to each of the four members of the board of directors at an exercise price of $0.62 per share that expire on December 22, 2015. On December 10, 2013, the exercise price of the options was changed to $0.035 per share. As a result, the Company revalued the options as required under generally accepted accounting principles and recognized an expense of $27,556. The options were revalued utilizing the Black-Scholes option pricing model with the following assumptions: exercise price: $0.035 - $0.62; expected volatility: 20.71%; risk-free rate: 0.13% - 0.14%; expected term: 1 year.

On January 15, 2015, the Company entered into a stock option agreement with an officer of the Company. The agreement grants the Officer an option to purchase 10 million shares of common stock at $0.02 per share. The agreement expires on January 15, 2019. The options were valued utilizing the Black-Scholes option pricing model with the following assumptions: exercise price: $0.02; expected volatility: 22.16%; risk-free rate: .75%; expected term: 3 years. The grant date fair value was $0.02 and the options vest immediately.

The expected life is the number of years that the Company estimates, based upon history, that warrants will be outstanding prior to exercise or forfeiture. Expected life is determined using the “simplified method” permitted by Staff Accounting Bulletin No. 107. The stock volatility factor is based on the Nasdaq Biotechnology Index. The Company did not use the volatility rate for Company’s common stock as the Company’s common stock had not been trading for the sufficient length of time to accurately compute its volatility when these options were issued.

Stock based compensation amounted to $32,365 for both the six and three months ended March 31, 2015, respectively and $27,556 and $0 for the six and three months ended March 31, 2014, respectively. Stock based compensation is included in general and administrative expenses.

NOTE 10 - RELATED PARTY TRANSACTIONS

The Company’s principal executive offices are located in Little Falls, New Jersey. The headquarters is located in the offices of McCoy Enterprises LLC, an entity controlled by Mr. McCoy.

The Company also maintains an office in Pennington, New Jersey, which is the materials and testing laboratory. An employee of the Company is an owner of Materials Testing Laboratory.

No rent is charged for either premise.

NOTE 11 - SUBSEQUENT EVENTS

Management has evaluated subsequent events through the date of this filing.

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

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Overview 

In September 2010, Regenicin purchased a worldwide know-how license from our exclusive manufacturing partner, Swiss pharmaceutical company Lonza Group LTD. After being unable to reconcile differences, in September of 2013, we filed a lawsuit against Lonza for breach of contract and other related claims (“Lonza Litigation”).

In November 2014, the Company entered into an Asset Purchase Agreement with Amarantus Bioscience Holdings, Inc. (“Amarantus”) to sell all of our rights title and interest to the Lonza Litigation and the PermaDerm trademark, among other assets, as more particularly described in our 8-K and 8-K/A filings on November 17, 2014 and February 13, 2015. In February 2015, the Asset Purchase Agreement was completed. We valued the agreement at $8.023 million, comprised of cash, Amarantus restricted stock, payment of notes and liabilities and forgiveness of debt. Management believes that this transaction will provide us with adequate funding to continue product development under our current business plan. The proceeds of this agreement greatly enhanced the financial condition of the Company and provides adequate funding to prepare for FDA clinical trials for our new regenerative cell therapy product, NovaDerm™.

Our Business Moving Forward

We intend to continue to develop and seek FDA approval of cell therapy and biotechnology products.

We intend to use some of the proceeds from the Asset Purchase Agreement with Amarantus to develop and commercialize a new cultured skin substitute, NovaDerm™. We began developing this unique cultured skin substitute in 2013 and expect it to be valuable as a biologic in the treatment of burn victims.

We are continuing to work with various manufacturers to secure reliable sources for our closed herd proprietary collagen components. This propriety collagen scaffold, which is the starting structure for our product, is designed to promote cellular growth, adhesion and assembly of multiple types of human cells. As developed, we will initially work to gain FDA commercialization approval for our NovaDerm™ cultured skin product utilizing autologous (patient’s own) cells to produce a multilayered living skin. We expect our cultured skin substitute for the treatment of burns will be available in sufficient quantity for a surgeon to do an initial graft about 4 weeks after we receive the first viable healthy skin tissue from the patient. Realizing that the patient may not be able to be scheduled for an exact grafting day a month in advance, we are making efforts to ensure the cultured skin substitute will have an adequate shelf life to meet the variable needs of the patient.

We are currently in the process of validating our proprietary collagen scaffold to demonstrate safety and ensure a consistent fully FDA cGMP compliant starting material. FDA regulations now require that any animal component being used for medical applications must have traceability and be obtained from closed herd animals. The FDA has stated that “You should derive source animals only from closed herds with documented health screening programs.” You need to supply this information to FDA as part of the application to FDA (e.g., IND). Therefore, it is essential while qualifying our collagen manufacturer that we only accept fully compliant material in the production of NovaDerm™. As noted, we are working to establish a cGMP compliant manufacturer of closed herd collagen.

We are also currently working to qualify a cell therapy manufacturer of NovaDerm™ our cultured skin substitute. It is necessary to establish a long-term commitment with a manufacturer while going through the FDA approval process. It is mandatory to ensure continuous support from the biologic manufacturer during the approval process, clinical trials and ultimately, supply of commercial product after FDA approval. It is important, while going through the approval process of the FDA, to use the same manufacturer to produce clinical trial material and the commercialized product.

We expect our first cultured skin substitute product to be a multi-layered tissue-engineered skin prepared by utilizing autologous (patient’s own) skin cells. It is a graftable collagen based cultured epithelium implant that produces a skin substitute containing both epidermal and dermal components with a collagen base. Clinically, we expect our Cultured Skin substitute self-to-self skin graft product will behave the same as allograft tissue. Our Autologous cultured skin substitute should not be rejected by the immune system of the patient, unlike with porcine or cadaver grafts. Immune system rejection is a serious concern in Xeno-transplant procedures. The use of our cultured skin substitute does not require any specialized physician training because it is applied the same as a standard allograft procedure.

Clinically speaking, a product designed to treat a life threatening condition must be available for the patient when needed. Our Culture skin substitute is being developed to be ready to apply to the patient when the patient is ready for grafting. Regenicin’s NovaDerm™ Cultured Skin Substitute is being designed to be available within the first month of the patient being admitted. Patients with these serious burn injuries may not be in a condition to be grafted on a predefined schedule made more than a month in advance. Therefore, in order to accommodate the patient’s needs, we are striving to ensure that NovaDerm™ will be designed with a shelf life and manufacturing schedule to ensure it is available whether the patient needs it the first month, or any day after, until the patient’s wound is completely covered and closed.

We intend to work with the FDA for the development of cell therapy products. We are preparing documentation RFD (Request for Designation) for submission to the FDA to determine which part(s) of the agency (Biologics, Devices, Drugs or a combination) will be evaluating NovaDerm™ for product approval. Once we have this designation, we will apply for Orphan Designation for the USA and worldwide orphan designation using our internal expertise. We will submit the request when we have qualified our cell therapy manufacturer. In order to obtain Orphan designation we will work with the Office of Orphan products to demonstrate that NovaDerm™ is safe and the probable benefit of using NovaDerm™ for burns outweighs the risks. There are less than 50,000 patients affected per year in the US with full thickness burns affecting greater than 30 percent of the Total Body Surface Area. (TBSA) We hope to obtain Orphan Designation of NovaDerm™ for burns in 2015.  

Having NovaDerm™ approved as an Orphan Product would have significant benefits, including 7 years exclusivity with the FDA, 11 years exclusivity after NovaDerm™ is approved as an Orphan product with the European Union generating revenue from sales of product used during the clinical trials and being able to utilize the data from patients from many different hospitals to gain Commercialization Approval. Orphan approval allows the product to be used to treat people a lot earlier than waiting for extensive clinical trials to gain Biological License Approval. The major difference between Orphan Product Approval and a full Biological License Approval is that the Orphan Product has additional FDA reporting requirements and additional procedural administration steps. Orphan Product patient’s data must be reported to the FDA annually. There is a difference between Orphan Designation and Orphan Product Approval. Orphan Designation qualifies your product to get special assistance from the FDA such as grants, and additional guidance in designing your trials and what the FDA expects you to do to gain Orphan Approval. Orphan designation does not give you the ability to sell the product. Orphan Approval is granted when you have demonstrated that your product is safe and has a probable benefit to a patient affected with the specific indication. Orphan Approval means you can begin selling the product.

We are also assembling our Investigative New Drug (IND) Biologic application for NovaDerm™ utilizing our internal expertise. This will allow us to move the product through the FDA pipeline with minimal expense. As we approach the clinical trials, we may need to obtain additional outside funding. We hope to receive the approval from the FDA to initiate clinical trials in 2016. We intend to apply for Biological License Approval in 2016.  

Our second product is anticipated to be TempaDerm®. TempaDerm® uses cells obtained from human donors to develop banks of cryo-preserved (frozen) cells and cultured skin substitute to provide a continuous supply of non-allogenic skin substitutes to treat much smaller wound areas on patients, such as ulcers. This product has applications in the treatment of chronic skin wounds such as diabetic ulcers, decubitus ulcers and venous stasis ulcers. This product is similar to our burn indication product except for the indications and TempaDerm® does not depend totally on autologous cells. In fact, it could be possible to use the excess cultured skin that was originally produced for use on the patient that donated the cells used to grow the skin. TempaDerm® could take this original cultured skin and use it on a patient other than the original donor. TempaDerm® has the possibility of using banked cells, or even frozen cultured skin substitutes, to carry inventory to satisfy unknown needs or large volumes to meet the demands created in large scale disasters.  

We believe this technology has many different uses beyond the burn indication. The other uses include chronic wounds, reconstructive surgery, other complex organs and tissues. Some of the individual components of our cultured skin substitute technology will be developed for devices, such as tendon wraps made of collagen or collagen temporary coverings of large area wounds to protect the patients from infections while waiting for the permanent skin substitute. The collagen technology used for cultured skin substitutes can be used for many different applications in wound healing and stem cell technology and even drug delivery systems.

We could pursue any or all of the indications simultaneously if financing permitted, but for now we will seek approval for burns first as an Orphan Biologic Product to establish significant safety data and then Biological License Approval.

Results of Operations for the Three and Six Months Ended March 31, 2015 and 2014 

We generated no revenues from September 6, 2007 (date of inception) to December 31, 2014. We do not expect to generate revenues until we are able to obtain FDA approval of cell therapy and biotechnology products and thereafter successfully market and sell those products.

Our operating expenses for the three months ended March 31, 2015 were $332,296, and consisted of general and administrative expenses $266,531, research and development of $33,400, and stock based compensation of $32,365. We experienced other expenses in the amount of $9,057 for interest expense. In addition, we booked other income in the amount of $2,500,000 representing gain on our sale of assets to Amarantus. We also recorded a $863,300 provision for income taxes and $17,458 for preferred stock dividends. For the three months ended March 31, 2015, our net income attributable to common shareholders was $1,277,889.

By comparison, during the three months ended March 31, 2014, we incurred expenses and a net loss from operations of $288,230. Our expenses consisted entirely of general and administrative expenses. We experienced other expenses in the amount of $86,033 for interest expense and a gain on derivative liabilities of $30,995. We also recorded preferred stock dividends of $17,458. Our net loss attributable to common shareholders for the three months ended March 31, 2014 was $360,726.

Our operating expenses for the six months ended March 31, 2015 consisted of general and administrative expenses $406,817, research and development of $33,400, and stock based compensation of $32,365. In addition, due to the settlement of the Lonza Litigation, we booked a reversal of our account payable to Lonza in the amount of $973,374. As a result, we experienced income from operations of $500,792. We experienced other expenses in the amount of $40,001 for interest expense and a $528,230 loss on derivative liabilities. In addition, we booked other income in the amount of $6,604,431 representing gain on our sale of assets to Amarantus. We also recorded a $2,829,00 provision for income taxes and $35,303 for preferred stock dividends. For the six months ended March 31, 2015, our net income attributable to common shareholders was $3,672,689.

By comparison, during the six months ended March 31, 2014, we incurred expenses and a net loss from operations of $487,500, with expenses consisting of general and administrative expenses of $459,944 and stock based compensation of $27,556. We experienced other expenses in the amount of $129,981 for interest expense and a gain on derivative liabilities of $226,724. We also recorded preferred stock dividends of $35,303. Our net loss attributable to common shareholders for the six months ended March 31, 2014 was $426,060.

Our net income for the three and six months ended March 31, 2015 was primarily the result of gains recorded as a result of our sale of intellectual property rights to Amarantus.

Liquidity and Capital Resources 

As of March 31, 2015, we had cash of $2,123,382 and total current assets of $3,725,338. As of March 31, 2015, we had current liabilities of $2,492,493. We had working capital of $1,232,845.

Operating activities used a net $1,156,674 in cash for the six months ended March 31, 2015. Investing activities provided a net $3,590,000 primarily due to the sale of assets to Amarantus. Financing activities used $310,436, primarily as a result of repayments of certain loans and notes.

We have issued various promissory notes to meet our short term demands, the terms of which are provided in the notes to the consolidated financial statements accompanying this report. While this source of bridge financing has been helpful in the short term to meet our financial obligations, we will need additional financing to fund our operations, continue with the FDA approval process, and implement our business plan. Our long term financial needs are estimated at $8 to $10 million.

Based upon our current financial condition, we do not have sufficient cash to operate our business at the current level for the next twelve months. We intend to fund operations through increased sales and debt and/or equity financing arrangements, which may be insufficient to fund expenditures or other cash requirements. We plan to seek additional financing in a private equity offering to secure funding for operations. There can be no assurance that we will be successful in raising additional funding. If we are not able to secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.

Off Balance Sheet Arrangements

As of March 31, 2015, there were no off balance sheet arrangements.

Going Concern

Our consolidated financial statements have been prepared assuming that we will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have incurred operating losses from inception, expect to incur further losses in the development of our business, and have been dependent on funding operations through the issuance of convertible debt and private sale of equity securities. These conditions raise substantial doubt about our ability to continue as a going concern. Management’s plans include continuing to finance operations through the private or public placement of debt and/or equity securities and the reduction of expenditures. However, no assurance can be given at this time as to whether we will be able to achieve these objectives. The consolidated financial statements do not include any adjustment relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

A smaller reporting company is not required to provide the information required by this Item.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31, 2015. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2015, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of March 31, 2015, our disclosure controls and procedures were not effective: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting

Our company plans to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending September 30, 2015: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

We are unable to remedy our controls related to the inadequate segregation of duties and ineffective risk management until we receive financing to hire additional employees. 

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended March 31, 2015 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings 

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

Item 1A. Risk Factors

A smaller reporting company is not required to provide the information required by this Item.

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

The information set forth below relates to our issuances of securities without registration under the Securities Act of 1933 during the reporting period which were not previously included in a Quarterly Report on Form 10-Q or Current Report on Form 8-K.

For the three months ended March 31, 2015, we issued 9,486,430 shares of common stock for the conversion of principal issued under our bridge financing and accrued interest.

These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None

Item 6. Exhibits

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.