RenovaCare (RCAR): Multiple Catalysts, Untold Downside
Nobody picked up RenovaCare’s phone yesterday, when TheStreetSweeper called.
It seems like this half-a-billion-dollar company would have a secretary or assistant … or janitor … or somebody … around to answer the phone.
RenovaCare ( RCAR ) is an over-the-counter stock whose stock market valuation now approaches $600 million.
This is a 35 -year-old company led by a part-time CEO.
And the ~60% majority owner is a Canadian entrepreneur/promoter who’s settled up with the SEC twice over his stock promotions.
So, naturally, we have lots of questions.
The company’s attorney Joseph Sierchio, also on the board of directors, did pick up the phone in his New York office. RenovaCare filings list his office as their corporate headquarters. He said, as the company attorney, he didn’t feel qualified to answer for RenovaCare but would make sure the company got our emailed questions.
The company hasn’t responded to our requests for comment, but the company website is here .
Meanwhile, before we jump into the details of one of the more dangerous stocks we’ve covered, consider this executive summary on RenovaCare:
*This ~$600-million market cap company is operated by 1 full-time employee and three part-time contractors … including the CEO.
*The sole experimental product was acquired on the cheap and has not been presented to the FDA for approval.
*No sales; little cash; big operating losses; auditors doubt the company can continue as a going concern.
*The stock is fueled by heavy, sometimes questionable promotions, which have come under questioning by the OTC (Over-The-Counter Bulletin Board).
*Controlling stock ownership by a foreign stock promoter, formerly in trouble with the SEC.
*The company has been renamed and reinvented six times over 35 years … and still makes no money.
*Rival company Avita generates revenue, has sought FDA approval for its skin gun system and offers a market valuation one-tenth of RenovaCare’s.
Let’s start with our concerns about the company’s sole device called “SkinGun,” which blasts skin cells onto burn wounds. The company strives to convince investors that the skin blast system is as good or better than the standard skin graft method…
*Concern No. 1: Cheap Candidate Doesn’t Support Market Valuation
RenovaCare acquired its only candidate, the CellMist system including the SkinGun, (pg. 28 ) five years ago for just $400,000.
That’s right … only $400,000.
CellMist is not Food and Drug Administration-approved for human use.
In fact, there’s been no 510(k) application sent to the FDA thus far, for CellMist.
(RenovaCare)
But chief competitor, Avita Medical (AVMXY) filed for FDA approval last September for its spray-on skin replacement system, ReCell.
(Avita Medical )
US approval is anticipated between April and September, with a full launch hoped for this year. The California company states that, through clinical trials and so forth, ReCell is already used in 16% of US burn centers.
The chart below shows company comparisons.
(Source: Yahoo, RenovaCare, Avita, TheStreetSweeper)
Meanwhile, RenovaCare has moved no products to market; and has not ever generated meaningful revenue … despite attempting at least six businesses ranging from “American Alliance” to “Whatsonline.com” after first opening up shop as “Far West Gold,” back in 1983.
*Concern No. 2: Who’s Running This Thing?
RenovaCare president and CEO, Thomas Bold, is a part-time contractor .
Thomas Bold
Mr. Bold has experience as CEO of StemCell Systems in Germany, however at just 105,000 shares , he has very, very little RenovaCare ownership compared to the 76.15-million shares out.
The company’s sole full-time employee is Andrew “Drew” Danielson, operations director.
(Source: LinkedIn)
His bio is missing from RenovaCare filings, but his only company experience, according to his LinkedIn profile, is with RenovaCare.
Unfortunately, Mr. Danielson’s prior grant writing experience with the University of Pittsburgh may be somewhat wasted on RenovaCare.
That’s because RenovaCare’s majority ownership is foreign – majority owner Harmel Rayat lives in Vancouver - and many US federal grants require companies to have at least 50% US ownership.
* Concern No. 3: Majority Stockholder’s Previous Issues
RenovaCare’s biggest shareholder is the handsome Canadian entrepreneur and promoter, Harmel Rayat.
Harmel Rayat
Mr. Rayat owns about 44.55 million shares in his own name and through his entity Kalen Capital Corp., or around 59% ownership.
He has held leadership or major shareholder roles in the company since 1999, as it gyrated through various business ventures including American Alliance, Entheos Technologies, Janus Resources, WhatsOnLine .
Mr. Rayat had a company called EquityAlert , which attracted unwanted attention from The Wall Street Journal in 1999.
The WSJ writer noted that three small companies (EquityAlert, WhatsOnLine, MedCare Technologies) … each with Mr. Rayat as chairman … received bullish comments, all from the same commentator.
The commenting analyst worked for “Oxford Barnes Equities,” which Mr. Rayat described to WSJ as “a small brokerage firm. ”
But, as it turns out, the “analyst” was actually a college student. Rather than a brokerage firm, Oxford Barnes was the college student’s one-man operation he ran in his spare time.
Four years later, Mr. Rayat and his firm landed in the hot seat again.
In 2000, the SEC alleged Mr. Rayat and EquityAlert failed to disclose compensation received for promoting ~18 companies on their website and in over 1 million daily e-mail messages .
In 2003, he was hit with a cease-and-desist order. The SEC charged him and EquityAlert with unregistered sales of stock in two companies that had hired the firm to do their promotions. Without denying or admitting wrong-doing, he and his entities paid around $70,000 to settle the issues
These incidents don’t directly affect RenovaCare, but investors and potential investors should be aware of them.
*Concern No. 4: Knock-Knock. Who’s There? OTC
RenovaCare’s recent activities and one particular statement probably should have invited an SEC investigation.
First a little background. It seems RenovaCare had come under questioning by the OTC Markets Group over … guess what? … promotional activity.
The exchange over which the stock trades came knocking at RenovaCare’s door on Jan. 3 about “promotional activities concerning the company.”
The OTC had noticed notorious promoters StreetAuthority and Stockhead said some really, really nice things about RenovaCare.
A huge spike in trading volume and stock price followed those pumps, OTC noted.
StreetAuthority, for example, opined about “The most spectacular medical breakthrough of 2018.”
The promoter added “RenovaCare has submitted a 510(k) filing to the FDA…Now it’s just a matter of waiting on the FDA.”
But wait. The application has not been submitted.
RenovaCare could have requested that StreetAuthority fix the error, but there’s no evidence that has happened. Instead, RenovaCare seemed to climb onto its high horse over the matter…
*Concern No. 5: Insulting OTC, Investors
In a Jan. 12 filing, the company basically said it couldn’t imagine how professional promoters came up with so much good stuff about RenovaCare.
In that same 8-K filing , RenovaCare arguably insults, in our opinion, the intelligence of the OTC and the public by making the statement below:
“The Company was not involved in the creation, or directing the dissemination, of the report .
“Through its investor relations agencies, the Company paid $90,005.25 between October 24th, 2017 and January 2rd, 2018, as part of its contractual agreement to pay for out of pocket costs, including reimbursement of dissemination related costs, incurred by the investor relations agency.”
So, RenovaCare had no influence on creating the promoter’s report … even though it paid $90,000 for that report?
*Concern No. 6: RenovaCare: Read About Us In This Paid Promo
Despite the previous trouble caused by promotions, the paid ads just keep on coming.
Here’s a snippet from the “shocking” promotional report dated February 7, 2018:
(Source: StreetAuthority)
The promoter’s fine-print disclosure shows that plenty of cash is wrapped up in these paid advertisements … through Damaak, the company RenovaCare hired on Jan. 1.
"Accordingly, please be advised that with respect to the paid advertisements for RenovaCare contained in this Annual Investment Predictions report:
- Third Party Payors
. We have been advised that RenovaCare has (i) engaged Damaak Group LLC ("Damaak"), a third-party market access provider, to provide it with website development and maintenance; investor relations; name branding and other consulting services (the "Damaak RCAR Services") for a monthly retainer of $3,750 for the three month period ending March 31, 2018, $5,000 for the three month period ending June 30, 2018, and $6,250 monthly thereafter, plus (ii) any out of pocket expenses in connection with Damaak’s services, which include advertising expenses for the dissemination of this Annual Investment Predictions report containing paid advertisements for RenovaCare.
For the twelve-month period beginning January 1, 2018, SA expects to receive monthly from Damaak $50,000 for RenovaCare for the publication and dissemination of this Annual Investment Predictions report containing paid advertisements for RenovaCare.
- Equity Ownership . Mr. Lou Betancourt, the President of SA, owns 2,100 shares of RenovaCare common stock, which were acquired for $3.14 per share.
This year alone, those payments include $50,000 per month for “investment predictions” reports. That total of $600,000 could surely be better used for product development and advancement.
We just love companies that shell out 100s of thousands for paid promotions. As we’ve said before, real companies don’t do that.
*Conclusion
We’re dying to hear from RenovaCare regarding the hefty market valuation, promotions, insults and pending string of potentially dilutive capital raises. Hmm. The company just sent us a cheery note saying they’d like to add us to their mailing list. Funny, RenovaCare. Very funny.
We do have grave concerns about this company’s future and expect to share management’s answers with investors. We’ll keep digging. Right now, we’re having a very hard time justifying even a $20 million valuation for this company, which would leave the stock trading around 30 cents per share.
* Important Disclosure: The owners of TheStreetSweeper hold a short position in RCAR and stand to profit on any future declines in the stock price.
* Editor's Note: As a matter of policy, TheStreetSweeper prohibits members of its editorial team from taking financial positions in the companies that they cover. To contact Sonya Colberg, the author of this story, please send an email to streetsweepereditor@yahoo.com.
