The Overvaluation Of RenovaCare Should Make Investors' Head Spin!
Feb.22.18 | About: RenovaCare, Inc. (RCAR)
Short only, contrarian, research analyst, mid-cap
If history is any lesson RCAR is a failure that shouldn't be expected to change..
Controlled by same majority shareholder for two decades. He was once fined by the SEC for illegal promotions.
Outrageous market capitalization as compared to its financial position.
RenovaCare, Inc. (OTC:OTCQB:RCAR), formerly Far West Gold, Inc., was incorporated in 1983. The earliest public filings that are available date back to 1999. Those financials reveal numerous and continuous unprofitable ventures spanning over two decades without generating any profitability for its shareholders'. Meanwhile the only aspect that is constant is the majority shareholder and a former executive Harmel S. Rayat.
A Lesson in RCAR's History
In 1999 RCAR was an American Alliance Corporation established in 1998 with plans to enter internet brokerage services business but did not, instead it acquired Whatsonline.com for $50,000 and entered an Internet streaming business.
Meanwhile, Hamel S. Rayat was its Chairman and a holder of 34.7 percent of the company and until 1998 was its President and Chief Executive.
At that early point in the company’s history this is how it described itself:
“The Company is a development stage company, as defined in Financial Accounting Standards Board No. 7. The Company is devoting substantially all of its present efforts in securing and establishing its business, and although its planned operations have commenced there have been no significant revenues derived therefrom”
So zero revenue, needs cash.
By year 2000, Whatsonline.com to which RCAR changed its name in 1999 was in the same condition as before, mainly,
“The Company did not generate revenues for the year ended December 31, 1999” and,
“Due to the "startup" nature of the Company's businesses, the Company expects to incur losses as it expands. The Company expects to raise additional funds through private or public equity investment in order to expand the range and scope of its business operations. The Company will seek access to private or public equity but there is no assurance that such additional funds will be available for the Company to finance its operations on acceptable terms, if at all”
Same year the board approved changing RCAR’s name from Whatsonline.com to Entheos Technologies, Inc. and sell its online assets.
At the time Entheos Technologies, Inc. was in business as an Application Service Provider (ASP) that developed real time, high volume outsourced email services through its wholly owned subsidiary Email Solutions, Inc.
According to annual report dated 3/30/2001 the new venture had only one revenue generating client, EquityAlert.com.
“Dependence on One Customer: In 2000, 100% of our total ASP revenues were generated from services provided to EquityAlert.com. The Company and EquityAlert.com have a common Director and majority shareholder. Our business, results of operations and financial condition could be materially adversely affected by the loss of this one customer, and such a loss could be concentrated in a single quarter. Further, if we do not continue to attract other customers, our business, results of operations and financial condition could be materially adversely affected.”
SEC commission in 2003 have issued a cease-and-desist proceedings against Entheos only client: EquityAlert.com and its Director and Chairman Harmel S. Rayat. EquityAlert.com, Inc., Innotech Corporation, Bhupinder S. Mann, Harmel S. Rayat, T&G
That was not the first time EquityAlert.com and Harmel S. Rayat were on SEC list, in 2000 the entity and Mr. Rayat were fined $20,000 for not disclosing payments for distribution of paid promotional matterial.
Entheos Technology operated for about ten years, (company states that it was operating from 2002 to 2008 but financials filed from 2000 to 2010) and keeping up with its predecessors did not generated any significant revenues or profits.
“ From 2002 until September 2008, through our wholly-owned subsidiary Email Solutions, Inc., we served as an Application Service Provider (“ASP”) providing outsourced email and search engine optimization services. Due to the limited success of our ASP business, management decided that it was in the best interest of our stockholders to abandon the Application Service Provider business and focus on identifying undervalued oil and gas opportunities for acquisition, development and exploration. The assets and liabilities, the results of operations and cash flows related to the ASP business were not classified as discontinued operations as the amounts were not significant. Email Solutions, Inc. was dissolved during 2008. “
Again, changing nature of its business and name, RCAR ventured into oil and natural gas business.
And again, Mr. Rayat was in control of it through a private corporation 1420525 Alberta Ltd., based in Vancouver, BC.
Still in control but no longer as an executive, he resigned in 2008, but as a majority shareholder of Entheos owning fifty-two percent.
From 2011 to 2014, RCAR was Janus Resources, Inc., an oil and gas developer with zero revenue and no profit, depending on capital raises to stay afloat. By the time Janus started to get out of exploring oil and gas business, their assets were worthless, and the company gave it away receiving only $3000 for it.
“ We entered into an Assignment Agreement with Leexus Oil LLC, the wells operator, whereby we assigned our right, title and interest in the oil, gas and mineral leases and the oil and gas wells. Payment for the assignment was the assumption of all outstanding liabilities and assumption of all future payments for any and all work performed on the wells. On February 19, 2013, we completed the sale of our working interest in the Cooke #6 well. We entered into an Assignment Agreement with Millennium Petro-Physics, the well operator, whereby we assigned our right, title and interest in the oil, gas and mineral leases and the oil and gas wells. Payment for the assignment was $3,000 cash.”
From here on the company became what we now know of as RCAR after its acquisition of TheCellMist System for $400,000.
Here is what the company had to say about its liquidity right before it went from Janus Resource to the current RenoveCare, Inc.;
“We currently finance our activities primarily by the private placement of our equity securities. There is no assurance that equity funding will be accessible to us at the times and in the amounts required to fund our ongoing operations. There are many conditions beyond our control which have a direct bearing on the level of investor interest in the purchase of our securities. We do not have any agreements or understandings with any person as to additional financing.”
Somewhere in between 2010 and 2012, Kalen Capital Corporation emerged as a new majority owner of Janus Resources, Inc. whose owner was Mr. Harmel Rayat, a holder of 63.9 percent.
And here is what today’s RCAR has to say about its business prospects, while Mr. Harmel Rayat and Kalen Capital holds 66.06 percent of its shares.
“The Company's ability to fund the development of its cellular therapies will depend on the amount and timing of cash receipts from future financing activities”
“However, the Company has experienced and continues to experience negative cash flows from operations, as well as an ongoing requirement for substantial additional capital investment. The Company expects that it will need to raise additional capital to accomplish its business plan. The Company expects to seek to obtain additional funding through the sale of its securities.”
In my opinion the valuation of RCAR is zero. The valuation is based on current asset values, as due to the lack of profitability in the last two decades it is impossible to value it in any other way.
RCAR generate no revenue thus revenue per share is zero. Working capital per share, a measure of liquidity, is also zero. With book value per share as a zero as well.