UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2013
¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
☐TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ______ to _______
Commission File Number:000-53223
000-53223MARIZYME, INC.
GBS ENTERPRISES INCORPORATED
(Exact name of registrant as specified in its charter)
Nevada | ||
(State or | (I.R.S. Employer | |
Incorporation or Organization) | Identification No.) | |
| ||
(404) 891-1711555 Heritage Drive, Suite 205, Jupiter, Florida33458
(Address of principal executive offices) (Zip Code)
(925)400-3123
(Registrant’s telephone number, including area code)number)
With a copy to:
Philip Magri, Esq.
The Magri Law Firm, PLLC
11 Broadway, Suite 615
New York, NY 10004
T: (646) 502-5900
F: (646) 826-9200
pmagri@magrilaw.com
www.MagriLaw.com
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrantregistrant: (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 ☐
Yes x No ¨
Indicate by check mark whether the registrantRegistrant 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 (§ 229.405232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrantRegistrant was required to submit and post such files).Yes ☒ No ☐
Yes ¨ No x
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 the definitions of "large“large accelerated filer," "accelerated filer"” “accelerated filer,” and "smaller“smaller reporting company"company” in Rule 12b-2 of the Exchange ct.Act. (Check one):
☐ | Large accelerated filer | ☐ | Accelerated filer |
☒ | |||
Non-accelerated filer | ☒ | Smaller reporting company | |
☒ | Emerging growth company |
Indicate by checkmarkcheck mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Yes ¨ No x
APPLICABLE ONLY TO CORPORATE REGISTRANTS
IndicateIf an emerging growth company, indicate by check mark if the number of shares outstanding of eachregistrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the registrant’s classes of common stock, asExchange Act. ☒
Securities registered pursuant to Section 12(b) of the latest practicable date. Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Not applicable. |
As of November 14, 2013, there were 30,837,62422, 2021, the registrant had shares of common stock ($0.001 par value $0.001 per share, of the Registrant issued andvalue) outstanding.
MARIZYME, INC.
FORM 10-Q
TABLE OF CONTENTS
Page | ||||
PART I - FINANCIAL INFORMATION | ||||
Consolidated Financial Statements (unaudited) | 3 | |||
Condensed Consolidated Balance Sheets | 3 | |||
Condensed Consolidated Statements of Operations | 4 | |||
Condensed Consolidated Statements of Stockholders’ Equity | 5 | |||
Condensed Consolidated Statements of Cash Flows | 7 | |||
Notes to Unaudited Condensed Consolidated Financial Statements | 8 | |||
ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||
Quantitative and Qualitative Disclosures About Market Risk | ||||
Controls and Procedures | ||||
PART II - OTHER INFORMATION | ||||
Risk Factors | 28 | |||
ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |||
Defaults Upon Senior Securities | ||||
Exhibits | 29 | |||
31 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
GBS Enterprises Incorporated
Interim Consolidated Balance Sheets
September 30, 2013 (Unaudited) and December 31, 2012 (Audited and Restated)
Restated | ||||||||
September 30, | December 31, | |||||||
2013 | 2012 | |||||||
$ | $ | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents - Note 6 | 259,614 | 1,154,602 | ||||||
Accounts Receivable - Note 7 | 3,528,260 | 4,143,448 | ||||||
Inventory - Note 3 | 21,684 | - | ||||||
Prepaid expenses - Note 8 | 207,811 | 84,304 | ||||||
Other current receivables - Note 9 | 276,856 | 676,976 | ||||||
Assets held for sale | - | 384,862 | ||||||
Total current assets | 4,294,224 | 6,444,192 | ||||||
Non-Current Assets | ||||||||
Assets held for sale | - | 1,846,645 | ||||||
Property, plant and equipment - Note 11 | 282,601 | 332,839 | ||||||
Other non-current receivables - Note 12 | 1,217 | 428,422 | ||||||
Deferred tax assets non-current - Note 10 | 1,076,010 | 1,132,103 | ||||||
Goodwill - Note 13 | 31,260,500 | 34,254,881 | ||||||
Software - Note 14 | 10,232,633 | 12,207,031 | ||||||
Other assets - Note 15 | 132,489 | 156,379 | ||||||
Total non-current assets | 42,985,450 | 50,358,300 | ||||||
Total assets | 47,279,675 | 56,802,492 | ||||||
Liabilities and stockholders' equity | ||||||||
Current liabilities | ||||||||
Notes payable | 1,775,010 | 2,313,572 | ||||||
Liabilities to banks - Note 16 | 3,887,764 | 6,774 | ||||||
Accounts payables and accrued liabilities - Note 17 | 3,946,070 | 6,241,733 | ||||||
Deferred income - Note 18 | 6,846,920 | 6,099,570 | ||||||
Other short term liabilities - Note 19 | 242,252 | 860,032 | ||||||
Due to related parties | - | 2,115,869 | ||||||
Liabilities held for sale | - | 589,634 | ||||||
Total current liabilities | 16,698,017 | 18,227,184 | ||||||
Non-Current liabilities | ||||||||
Liabilities to banks | - | 3,716,102 | ||||||
Retirement benefit obligation | 172,414 | 165,876 | ||||||
Liabilities held for sale | - | 159,898 | ||||||
Total non-current liabilities | 172,414 | 4,041,876 | ||||||
Total liabilities | 16,870,431 | 22,269,060 | ||||||
Stockholders' equity | ||||||||
Capital stock - Note 20 | ||||||||
Authorized: | ||||||||
75,000,000 common shares of $.001 par value each | ||||||||
25,000,000 preferred shares of $.001 par value each | ||||||||
Issued and outstanding: | ||||||||
30,837,624 shares of common stock | ||||||||
(29,461,664 shares of common stock at December 31, 2012) | 30,838 | 29,462 | ||||||
Additional paid in capital | 50,009,107 | 49,691,195 | ||||||
Subscription Receivable | 50,000 | - | ||||||
Accumulated deficit | (21,646,422 | ) | (18,974,582 | ) | ||||
Other comprehensive income | (299,034 | ) | 442,841 | |||||
28,144,489 | 31,188,916 | |||||||
Noncontrolling interest in subsidiaries | 2,264,754 | 3,344,516 | ||||||
Total stockholders' equity | 30,409,243 | 34,533,432 | ||||||
Total stockholders' equity and liabilities | 47,279,675 | 56,802,492 |
Subsequent events - Note 25
GBS Enterprises Incorporated
Interim Consolidated Statements of Operations and Comprehensive Income/(Loss)
For the three and nine month periods ended September 30, 2013 and September 30, 2012 (Restated)
(Unaudited)
For the three months ended | For the nine months ended | |||||||||||||||
Restated | Restated | |||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
$ | $ | $ | $ | |||||||||||||
Revenues - Note 21 | ||||||||||||||||
Products | 4,133,565 | 4,719,446 | 13,170,113 | 15,247,883 | ||||||||||||
Services | 932,091 | 990,333 | 2,442,935 | 3,516,745 | ||||||||||||
5,065,656 | 5,709,778 | 15,613,048 | 18,764,628 | |||||||||||||
Cost of goods sold | ||||||||||||||||
Products | 563,950 | 922,839 | 2,738,549 | 3,833,550 | ||||||||||||
Services | 1,709,105 | 2,289,927 | 4,951,817 | 6,616,975 | ||||||||||||
2,273,055 | 3,212,767 | 7,690,366 | 10,450,525 | |||||||||||||
Gross profit | 2,792,601 | 2,497,011 | 7,922,682 | 8,314,103 | ||||||||||||
Operating expenses | ||||||||||||||||
Selling expenses | 2,033,242 | 2,625,773 | 6,627,311 | 9,990,170 | ||||||||||||
Administrative expenses | 1,145,304 | 1,229,281 | 3,922,440 | 3,940,092 | ||||||||||||
General expenses | 120,364 | 318,350 | 392,329 | 711,227 | ||||||||||||
3,298,910 | 4,173,403 | 10,942,080 | 14,641,489 | |||||||||||||
Operating income (loss) | (506,309 | ) | (1,676,392 | ) | (3,019,398 | ) | (6,327,386 | ) | ||||||||
Other Income (expense) - Note 22 | ||||||||||||||||
Other Income (expense) | 44,726 | 892,702 | 566,430 | 52,543 | ||||||||||||
Interest income | - | 209 | 420 | 2,866 | ||||||||||||
Interest expense | (140,213 | ) | (133,741 | ) | (546,333 | ) | (241,405 | ) | ||||||||
(95,487 | ) | 759,169 | 20,517 | (185,996 | ) | |||||||||||
Income (loss) before income taxes | (601,796 | ) | (917,223 | ) | (2,998,882 | ) | (6,513,382 | ) | ||||||||
Income tax (income) expense | 487 | (287,718 | ) | 13,807 | (1,409,759 | ) | ||||||||||
Income (loss) before discontinued operations | (602,283 | ) | (629,504 | ) | (3,012,689 | ) | (5,103,623 | ) | ||||||||
Discontinued operations - Note 4 | - | (33,125 | ) | - | 63,246 | |||||||||||
Net income (loss) | (602,283 | ) | (662,629 | ) | (3,012,689 | ) | (5,040,377 | ) | ||||||||
Net Loss Attributable to noncontrolling Interest | 535,588 | (271,574 | ) | (340,849 | ) | (1,699,550 | ) | |||||||||
Net income (loss) attributable to stockholders | (1,137,871 | ) | (391,055 | ) | (2,671,840 | ) | (3,340,827 | ) | ||||||||
Net earnings (loss) per share, basic and diluted | $ | (0.0373 | ) | $ | (0.0137 | ) | $ | (0.0879 | ) | $ | (0.1168 | ) | ||||
Weighted average number of common stock outstanding, basic and diluted | 30,492,650 | 28,611,701 | 30,379,612 | 28,611,701 | ||||||||||||
Statement of Comprehensive Income (Loss): | ||||||||||||||||
Net Income (Loss) | (602,283 | ) | (662,629 | ) | (3,012,689 | ) | (5,040,377 | ) | ||||||||
Foreign currency Translation Adjustment | (365,488 | ) | (2,503,497 | ) | (1,480,788 | ) | (116,135 | ) | ||||||||
Comprehensive income (loss) | (967,771 | ) | (3,166,126 | ) | (4,493,477 | ) | (5,156,512 | ) | ||||||||
Less: Net Income (Loss) attributable to noncontrolling interest | 535,588 | (271,574 | ) | (340,849 | ) | (1,699,550 | ) | |||||||||
Less: Other Comprehensive Income (Loss) attributable to noncontrolling interest | (182,378 | ) | (1,223,936 | ) | (738,913 | ) | (32,642 | ) | ||||||||
Total Comprehensive income (loss) attributed to stockholders | (1,320,981 | ) | (1,670,617 | ) | (3,413,715 | ) | (3,424,320 | ) |
GBS Enterprises Incorporated
Interim Consolidated Statements of Cash Flows
For the nine months ended September 30, 2013 and September 30, 2012 (Restated)
(Unaudited)
Restated | ||||||||
September 30, 2013 | September 30, 2012 | |||||||
$ | $ | |||||||
Cash flow from operating activities | ||||||||
Net loss / net income | (3,012,689 | ) | (5,103,623 | ) | ||||
Adjustments | ||||||||
Deferred income taxes | 56,093 | (1,421,720 | ) | |||||
Depreciation and amortization | 3,399,200 | 3,289,383 | ||||||
Write-down of Goodwill and Intangibles | - | 3,079,168 | ||||||
Consulting expense | 74,000 | - | ||||||
Interest Expense | 195,288 | - | ||||||
Gains (Losses) on Sale of Assets | - | (1,566,119 | ) | |||||
Gains (Losses) from equity investment | - | (26,751 | ) | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable, prepaid assets, other current receivables | 3,574,403 | 1,471,490 | ||||||
Other Assets | - | (37,398 | ) | |||||
Retirement benefit obligation | 6,538 | - | ||||||
Inventories | (21,684 | ) | 119,245 | |||||
Accounts payable and other liabilities | (2,915,625 | ) | (2,438,073 | ) | ||||
Net cash provided (used) by operating activities | 1,355,523 | (2,634,397 | ) | |||||
Net cash provided (used) by discontinued | - | 63,246 | ||||||
Cash flow from investing activities | ||||||||
Sale (Purchase) of intangible assets | 487,309 | (2,527,077 | ) | |||||
Sale (Purchase) of property, plant and equipment | - | (579,206 | ) | |||||
Increase (Decrease) in Financial assets | - | 614,480 | ||||||
Net cash provided (used) in investing activities | 487,309 | (2,491,803 | ) | |||||
Cash flow from financing activities | ||||||||
Net borrowings - banks | 164,889 | 1,067,397 | ||||||
Other borrowings | (538,562 | ) | (2,074,044 | ) | ||||
Capital paid-in | 100,000 | 3,583,176 | ||||||
Loans from related party | (2,115,869 | ) | (28,432 | ) | ||||
Net cash provided (used) in financing activities | �� | (2,389,541 | ) | 2,548,096 | ||||
Effect of exchange rate changes on cash | (348,280 | ) | 6,991 | |||||
Net increase (decrease) in cash | (894,988 | ) | (2,507,867 | ) | ||||
Cash and cash equivalents - Beginning of the year | 1,154,602 | 3,250,821 | ||||||
Cash and cash equivalents - End of Quarter | 259,614 | 742,954 |
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Note 1 COMPANY AND BACKGROUND
GBS Enterprises Incorporated, a Nevada corporation, through its subsidiaries, is a global provider of technology solutions for businesses and government agencies. We focus on developing and delivering solutions that help our customers to gain value and reduce cost in the development, deployment and management of the applications used in the course of conducting their business (“business applications”). We do this by building software and providing services that aid in:
Our customers include corporate and government IT departments, solutions integrators (“SIs”) and independent software vendors (“ISVs”). Our corporate customers are from a variety of industries, including insurance, financial services, pharmaceuticals, healthcare, manufacturing, logistics, and education. The install-base of our software products spans more than 5,000,000 users in 38 countries on four continents. We principally market and sell our products and services directly in the United States, Canada, United Kingdom, Germany, Austria, Switzerland, the Nordics and India; and indirectly through local distributors and resellers representing Australia, South America and regionally in Europe.
Our software and services are designed to mainly serve organizations that have investments in IBM’s Lotus® Notes and Domino platform. The IBM Lotus® Notes and Domino platform is both a system for enterprise email as well as an application platform, meaning that it can be used as both an email system and an environment in which business applications can be deployed and used. This platform was originally brought to market by Lotus Development Corp. in 1989, and was subsequently acquired by IBM in 1995. According to Radiate, in 2011, IBM Lotus Domino will have a worldwide installed base of 189 million mailboxes. Currently, the installed base for On-Premises IBM Lotus Domino mailboxes represents the majority of worldwide IBM Lotus Domino mailboxes, accounting for 87% of worldwide IBM Lotus Domino mailboxes. By 2015, this percentage is expected to decrease to 80%, as hosted email grows in popularity. (The Radiate Group Inc., April 2011, “IBM Lotus Notes/Domino Market Analysis, 2011-2015“)
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
We, through our subsidiaries, have executed our strategy to acquire companies, which have developed software and specialized services for the Lotus Notes and Domino market. This growth by acquisition strategy has resulted in less competition for our software products; a large concentration of highly skilled employees with unique expertise in the area of Lotus Notes and Domino; staff and physical offices on three continents providing greater access to a global market; significant market awareness and greater market share amongst organizations that use Lotus Notes and Domino; and a comprehensive portfolio of solutions specific to the needs and requirements of organizations which use Lotus Notes and Domino.
While our products and services remain in use and demand, over the last several years, the market itself has been undergoing a paradigm shift. New technologies, especially in the areas of Cloud Computing and Mobile applications, have grown in popularity due to the potential cost savings and operational efficiencies they can offer. As organizations make investments in these new technologies, they are faced with highly complex and costly projects to migrate (“migration”) or replace their existing systems that don’t operate in the cloud or on mobile devices (“modernization”) – this includes their existing email and business applications that run on Lotus Notes and Domino.
To that end, we have acquired and developed technologies that help organizations reduce the time, cost, resources and risks associated with these highly complex migration and modernization projects.
General Corporate History
We were incorporated in Nevada on March 20, 2007 as SWAV Enterprises Ltd. (“SWAV”). SWAV was an importer and wholesaler of Chinese manufactured goods.
On April 26, 2010, SWAV purchased certain technology assets of Lotus Holdings Ltd. (“Lotus”) in exchange for 2,265,240 shares of SWAV common stock. Also on April 26, 2010, Lotus (on behalf of the SPPEF Members as discussed below) purchased an aggregate of 11,984,770 of the outstanding shares of common stock from the selling shareholders of SWAV for an aggregate of $370,000. As a result of the two sets of transactions, Lotus owned an aggregate of 14,250,010 shares of common stock of SWAV, representing approximately 95.0% of the 15,000,000 shares of SWAV common stock outstanding on April 26, 2010.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
On September 6, 2010, SWAV’s name was changed to GBS Enterprises Incorporated. On October 14, 2010, the Company’s trading symbol on the OTC Bulletin Board was changed from SWAV to GBSX.
About Lotus Holdings, Ltd.
Lotus is a holding company which was formed under the laws of Gibraltar for the purpose of financing merger and acquisition projects, specifically in the niche market of small or microcap companies listed on the Frankfurt Stock Exchange with complex shareholder structures and whose stock is trading below one Euro (€1.00) per share.
SPPEFs
Lotus typically finances its merger and acquisition projects through the use of Special Purpose Private Equity Funds (“SPPEFs”). Typically, SPPEFs are funded by a company’s major shareholders (the “Major Shareholders”) seeking to raise capital for projects and who fund at least 50% of the SPPEF, with the remaining portion being provided through the investment community and network of investors in Lotus. Each SPPEF is co-managed by a representative of the company’s Major Shareholders (the “Representative Secretary”) and an attorney appointed by Lotus (the “Lotus Representative”).
On February 25, 2010, a group of shareholders (the “GROUP Major Shareholders”) of GROUP Business Software AG, a German public company trading on the Frankfurt Stock Exchange under the symbol “INW” (“GROUP”), engaged Lotus to provide financial consulting and advisory services, on a non-exclusive basis, for the primary task of establishing a SPPEF. On March 12, 2010, the GROUP Major Shareholders and Lotus established and funded a SPPEF with $1,400,000, consisting of $1,000,000 from the GROUP Major Shareholders and $400,000 from a Lotus investor (collectively, the “SPPEF Members”).
In early April 2010, the SPPEF Members decided to acquire SWAV. As disclosed above, on April 26, 2010, Lotus, on behalf of the SPPEF Members, acquired an aggregate of 11,984,770 shares of SWAV common stock from the selling shareholders of SWAV for an aggregate purchase price of $370,000. The 11,984,770 shares of SWAV common stock represented approximately 79.9% of the 15,000,000 outstanding shares of SWAV common stock on April 26, 2010. Upon the consummation of the acquisition, the then executive officers and directors of SWAV resigned and Mr. Joerg Ott, the Chief Executive Officer of GROUP and a GROUP Major Shareholder, was appointed the Chief Executive Officer of SWAV and sole member of SWAV’s Board of Directors.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Transactions following the acquisition
On November 1, 2010, the Company repurchased an aggregate of 3,043,985 of the 11,984,770 shares of the Company’s common stock originally purchased by Lotus on April 26, 2010. In consideration for the 3,043,985 shares of the Company’s common stock, the Company issued to Lotus a Secured Demand Note, dated November 1, 2010 (the “First Demand Note”), for the principal amount of $300,000 bearing interest at the rate of 5% per annum. The First Demand Note was repaid in September 2011.
Effective December 30, 2010, pursuant to securities purchase agreements between the Company and six GROUP Major Shareholders, the Company purchased an aggregate of 7,115,500 shares of GROUP common stock from the six GROUP Major Shareholders in consideration for an aggregate for 3,043,985 shares of the Company’s common stock (the “December Transaction”). As a result the Company owned approximately 28.2% of the outstanding common stock of GROUP.
Reverse Merger
After the December Transaction was completed, the additional GROUP Major Shareholders accepted the share swap offer from the Company and effectuated a reverse merger of GROUP and the Company. To effectuate the reverse merger, on January 5, 2011, the Company repurchased from Lotus an aggregate of 2,361,426 of the 11,984,770 shares of the Company’s common stock originally purchased by Lotus on April 26, 2010. In consideration for these 2,361,426 shares, the Company issued to Lotus a Secured Demand Note, dated January 5, 2011 (the “Second Demand Note”), for the principal amount of $200,000 bearing interest at the rate of 5% per annum. The Second Demand Note was repaid in November 2011.
Effective January 6, 2011, pursuant to securities purchase agreements between the Company and the remaining GROUP Major Shareholders, the Company purchased an aggregate of 5,525,735 shares of GROUP common stock from the remaining GROUP Major Shareholders in consideration for an aggregate of 2,361,426 shares of the Company’s common stock (the “January Transaction”). The 5,525,735 GROUP shares represented approximately 21.9% of the outstanding shares of common stock of GROUP. As a result of the December Transaction and January Transaction, the Company purchased an aggregate of 12,641,235 shares of GROUP from the GROUP Major Shareholders in consideration for an aggregate of 5,405,411 shares of the Company’s common stock, resulting in the Company owning approximately 50.1% of the outstanding common stock of GROUP and effectuating a reverse merger of the Company and GROUP whereby GROUP became the accounting acquirer.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Additional Acquisition
On February 27, 2012, the Company acquired an additional 883,765 shares of common stock of GROUP from GAVF LLC for an average purchase price of $.070 per share, or approximately $619,000, after an outstanding loan of GROUP was converted into an aggregate of 1,750,000 shares of GROUP common stock, thereby increasing GROUP’s outstanding common stock to 26,982,000 shares. By acquiring the new shares, the Company increased its ownership of GROUP common stock to an aggregate of 13,525,000 shares, representing approximately 50.1% of the outstanding common stock of GROUP.
Acquisition/Dissolution of Subsidiary Companies
Pavone AG
Effective April 1, 2011, the Company acquired 100% of the outstanding common shares of Pavone AG, a German corporation, for $350,000 in cash and 1,000,000 shares of its common stock. The fair value of the common stock was determined to be $4.90 per share, representing the market value at the end of trading on the date of the acquisition. The total value of the investment, including the assumption of $ 583,991 in debt was $5,843,991. Pavone’s extensive workflow software for Lotus Notes and Domino along with their large customer base is well suited to GBS Enterprises portfolio strategy. The acquisition of Pavone complements GBS's majority ownership in GROUP and the Company believes that it further strengthens their leading industry position on the IBM Lotus Platforms and expands their cloud computing technology offerings beyond the IBM Lotus market. Pavone currently has offices in Germany and the UK. They have over 2,500 customers and over 150,000 users worldwide.
GroupWare, Inc.
Effective June 1, 2011, the Company acquired 100% of the outstanding common shares of GroupWare, Inc., a Florida corporation (“GroupWare”). As consideration the Company paid $250,000 and issued 250,000 shares of its common stock. The fair value of the common stock was determined to be $4.34 per share, representing the market value at the end of trading on the date of the acquisition. The total value of the investment, including the assumption of $ 694,617 in debt was $ 2,029,617. Upon the consummation of the acquisition, the management and board of GroupWare resigned and Joerg Ott, the Company’s Chief Executive Officer and sole director, was appointed as the Chief Executive Officer and sole director of GroupWare. GroupWare is based in Lubeck, Germany with offices in St. Petersburg, Florida. GroupWare's ePDF server delivers centralized, network-wide PDF solutions for messaging, workflow, document, content and data management. The Company believes that the acquisition strengthens the GBS Modernizing/Migrating offering, which helps bring IBM Lotus Notes client applications to the web, by substituting traditional printing methods provided by the Notes client with simple-to-use print-to-PDF capabilities in the browser.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
IDC Global, Inc.
On July 25, 2011, the Company acquired 100% of the issued and outstanding shares of common stock of IDC Global, Inc., a Delaware corporation (“IDC”). Pursuant to the acquisition agreement, dated July 15, 2011, the Company agreed to issue the shareholders an aggregate of 800,000 shares of common stock and made a cash payment of $750,000. The agreement required an additional payment to the management shareholders of 80,000 shares of common stock and signing bonuses to personnel of $35,000. The Company also agreed to reimburse IDC up to $25,000 for incurred accounting and legal fees related to the transaction. The fair value of the common stock was determined to be $3.70 per share, representing the market value at the end of trading on the date of the agreement. The total value of the investment, including $883,005 of debt assumption, was $4,066,000. IDC was a privately held company that provides nationwide network and data center services. IDC delivers customized, high availability technology solutions for WAN, Wireless Services, Co-location & Hosting, Managed Services, and Network Security. IDC includes two Data Center facilities located in the downtown Chicago area and Colocation facilities in three other Data Centers in New York, London, England and Frankfurt, Germany. IDC provides internet infrastructure Services (IaaS) to the business community helping customers make the transition from large, static and expensive on-premise computing to dynamic, flexible and cost-effective off-premise computing. IDC is helping customers make the transition from large, static and expensive on-premise computing to dynamic, flexible and cost-effective off-premise computing.
Due to the Company’s perceived increase in the demand for Modernization, Mobility and Optimization offerings, the Company made a strategic decision in 2012 to focus on its core offerings in the IBM Notes and Domino market and to divest its non-core businesses, including IDC.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
On February 1, 2013, GBS entered into a Stock Purchase Agreement, dated February 1, 2013 (the “Agreement”), with IDC and Global Telecom & Technology Americas, Inc., a Virginia corporation (“GTT). Pursuant to the Stock Purchase Agreement, we sold 100% of the issued and outstanding capital stock of IDC to GTT for an aggregate purchase price of $4,600,000 (the “Purchase Price”), subject to certain holdback provisions amounting to $1.093 million as described more fully in the Stock Purchase Agreement. The Purchase Price is also subject to adjustment on a dollar-for-dollar basis for adjustments the Net Working Capital (defined as Current Assets minus Current Liabilities) of IDC by GTT within 90 days of closing.
SD Holdings, Ltd.
On September 27, 2011, the Company entered into an acquisition agreement with SD Holdings, Ltd. (“SYN”), a Mauritius corporation, and the shareholders of SYN owning 100% of issued and outstanding shares of SYN. SYN owns 100% of all issued and outstanding shares of Synaptris, Inc., a California corporation (“Synaptris”), and 100% of all issued and outstanding shares of Synaptris Decisions Private Limited, a company formed in India (“Synaptris India”). Pursuant to the acquisition agreement, the Company purchased one hundred percent (100%) of the issued and outstanding shares of SYN (“SYN Shares”) effective November 1, 2011 in consideration for $525,529 and agreed to issue 700,000 shares of common stock, subject to adjustment. Actual shares issued were 612,874. The fair value of the common stock was determined to be $2.05 per share, representing the market value at the end of trading on the date of the agreement.
On April 1, 2012, the Company sold SYN, Synaptris and Synaptris India for $1,877,232 to Lotus Holding, Ltd. in an effort to restructure the Company’s multilevel subsidiary - structure derived from the historical mergers and acquisitions, and to reduce overhead and administrative costs.
GBS India Private Limited
Pursuant to an existing transfer agreement, effective July 1, 2012, the Company entered into a purchase agreement with SYN for $1,877,232, which transferred all assets, including intellectual property rights, and liabilities of the IntelliPRINT and FewClix product lines, customer contracts and certain employees for operations in a new subsidiary, GBS India Private Limited, an incorporated entity formed under the Indian Companies Act 1956 (“GBS India”). A royalty fee in the amount of approximately $350,000 has been agreed upon for the benefit the Company. Additionally a profit based fee of up to $700,000 may be earned based on license and revenue recognized from the sold IntelliVIEW and IntelliVIEW NXT products.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
On August 1, 2012, the Company acquired 100% of the outstanding shares of capital stock of GBS India. We anticipate GBS India’s presence in India to accelerate our plan to expand our product development team particularly for our strategic offerings in India.
Pavone AG/Groupware AG
On July 6, 2012 and August 9, 2012, wholly-owned subsidiaries Pavone AG and Groupware AG, respectively, were merged into Pavone GmbH. The mergers were consummated solely for administrative purposes. Pavone GmbH is a wholly-owned subsidiary of the Company.
Pavone, Ltd.
The Company serves the UK market with GROUP’s subsidiary GBS, Ltd. Therefore, subsidiary Pavone, Ltd, as being a shell company, was dissolved on July 8, 2012.
EbVokus, GmbH.
On October 1, 2012, GROUP Business Software AG sold all of the software and operational assets (constituting substantially all of the assets) of its wholly-owned subsidiary, ebVokus GmbH, along with the associated maintenance and project agreements to a non-affiliated third party for a purchase price of approximately $459,000, approximately $258,000 (200,000 Euros: 1 EUR = $1.29 USD on October 1, 2012) was paid at closing and the remaining $201,000 was paid on February 15, 2013 (150,000 Euro: 1EUR = $1.35 USD on February 15, 2013).
B.E.R.S. AD
On November 23, 2012, GROUP Business Software AG sold its entire participation (50%) in B.E.R.S AD for a total of 25,000 BGN.
Group Live, N.V.
Group Live N.V. operating under the laws of the Netherlands and a 100% subsidiary of GROUP declared its end of business May 31, 2012, registered in the commercial register June 22, 2012. Following the local procedures the company has been dissolved from the register as per April 5, 2013, registered April 16, 2013.
NotesPART I – FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARIZYME, INC.
Condensed Consolidated Balance Sheets
September 30, 2021 | December 31, 2020 | |||||||
(Unaudited) | ||||||||
ASSETS: | ||||||||
Current | ||||||||
Cash | $ | 16,673 | $ | 2,902,762 | ||||
Accounts receivable | 96,291 | 40,585 | ||||||
Prepaid expense | 35,000 | 106,390 | ||||||
Inventory | 15,390 | 56,340 | ||||||
Total current assets | 163,354 | 3,106,077 | ||||||
Non-current | ||||||||
Property, plant and equipment, net | 1,273 | 7,122 | ||||||
Operating lease right-of-use assets, net | 1,163,159 | 1,317,830 | ||||||
Intangible assets, net | 46,385,121 | 42,278,211 | ||||||
Prepaid royalties, non-current | 340,969 | 344,321 | ||||||
Deposits | 30,000 | 30,000 | ||||||
Goodwill | 5,416,000 | - | ||||||
Total non-current assets | 53,336,522 | 43,977,484 | ||||||
Total assets | $ | 53,499,876 | $ | 47,083,561 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY: | ||||||||
Current | ||||||||
Accounts payable and accrued expenses | $ | 1,396,945 | $ | 478,103 | ||||
Due to related parties | 638,530 | - | ||||||
Operating lease obligations | 260,106 | 243,292 | ||||||
Total current liabilities | 2,295,581 | 721,395 | ||||||
Non-current | ||||||||
Operating lease obligations, net of current potion | 941,732 | 1,074,538 | ||||||
Convertible notes, net of debt discount | 179,457 | - | ||||||
Derivative liabilities | 391,648 | - | ||||||
Contingent liabilities | 9,454,000 | - | ||||||
Total non-current liabilities | 10,966,837 | 1,074,538 | ||||||
Total liabilities | 13,262,418 | 1,795,933 | ||||||
Commitments and contingencies (Note 12) | - | - | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $ | par value, shares authorized, shares issued and outstanding as of September 30, 2021 and December 31, 2020- | - | ||||||
Common stock, par value $ | , shares authorized, shares issued and outstanding as of September 30, 2021 and December 31, 202035,928 | 35,928 | ||||||
Additional paid-in capital | 82,509,957 | 82,077,334 | ||||||
Accumulated deficit | (42,308,427 | ) | (36,825,634 | ) | ||||
Total stockholders’ equity | 40,237,458 | 45,287,628 | ||||||
Total liabilities and stockholders’ equity | $ | 53,499,876 | $ | 47,083,561 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3 |
MARIZYME, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Revenue | $ | 37,215 | $ | 124,985 | $ | 271,952 | $ | 124,985 | ||||||||
Operating expenses: | ||||||||||||||||
Direct costs of revenue | 18,356 | 25,714 | 168,419 | 25,714 | ||||||||||||
Professional fees (includes related party amounts of $90,000, $90,000, $270,000, and $90,000, respectively) | 556,254 | 170,753 | 1,808,093 | 494,295 | ||||||||||||
Salary expenses | 617,826 | 433,318 | 2,478,357 | 433,318 | ||||||||||||
Stock-based compensation | 64,074 | 1,107,085 | 626,449 | 1,674,200 | ||||||||||||
Other general and administrative expenses | 536,483 | 453,158 | 1,071,017 | 468,782 | ||||||||||||
Total operating expenses | 1,792,993 | 2,190,028 | 6,152,335 | 3,096,309 | ||||||||||||
Total operating loss | (1,755,778 | ) | (2,065,043 | ) | (5,880,383 | ) | (2,971,324 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Interest and accretion expenses | (70,221 | ) | - | (74,410 | ) | - | ||||||||||
Change in fair value of contingent liabilities | 194,000 | - | 472,000 | - | ||||||||||||
Total other income | 123,779 | - | 397,590 | - | ||||||||||||
Net loss | $ | (1,631,999 | ) | $ | (2,065,043 | ) | $ | (5,482,793 | ) | $ | (2,971,324 | ) | ||||
Net loss per share – basic and diluted | $ | (0.05 | ) | $ | (0.07 | ) | $ | (0.15 | ) | $ | (0.13 | ) | ||||
Weighted average number of shares of common stock outstanding – basic and diluted | 35,928,188 | 29,288,226 | 35,928,188 | 23,161,329 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4 |
MARIZYME, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
Common Stock | Additional Paid-in | Accumulated | ||||||||||||||||||
Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
Balance, December 31, 2020 | 35,928,188 | $ | 35,928 | $ | 82,077,334 | - | $ | (36,825,634 | ) | $ | 45,287,628 | |||||||||
Sale of common stock | ||||||||||||||||||||
Sale of common stock, shares | ||||||||||||||||||||
Issuance of common stock for acquisition | ||||||||||||||||||||
Issuance of common stock for acquisition, shares | ||||||||||||||||||||
Issuance of warrants for acquisition | ||||||||||||||||||||
Issuance of warrants for services | ||||||||||||||||||||
Common shares issued in lieu of AP | ||||||||||||||||||||
Common shares issued in lieu of AP , shares | ||||||||||||||||||||
Exercise of options | ||||||||||||||||||||
Exercise of options, shares | ||||||||||||||||||||
Common stock issued for services | ||||||||||||||||||||
Common stock issued for services, shares | ||||||||||||||||||||
Stock-based compensation | - | - | 334,385 | - | 334,385 | |||||||||||||||
Issuance of common stock for services | ||||||||||||||||||||
Issuance of common stock for services, shares | ||||||||||||||||||||
Warrants issued | ||||||||||||||||||||
Net loss | - | - | - | - | (2,211,866 | ) | (2,211,866 | ) | ||||||||||||
Balance, March 31, 2021 | 35,928,188 | 35,928 | 82,411,719 | - | (39,037,500 | ) | 43,410,147 | |||||||||||||
Stock-based compensation | - | - | 194,657 | - | 194,657 | |||||||||||||||
Adjustment of warrants value in connection with finalizing the business combination | - | - | (732,300 | ) | - | (732,300 | ) | |||||||||||||
Net loss | - | - | - | - | (1,638,928 | ) | (1,638,928 | ) | ||||||||||||
Balance, June 30, 2021 | 35,928,188 | 35,928 | 81,874,076 | - | (40,676,428 | ) | 41,233,576 | |||||||||||||
Stock-based compensation | - | - | 64,074 | - | 64,074 | |||||||||||||||
Warrants issued in connection with convertible notes | - | - | 571,807 | - | 571,807 | |||||||||||||||
Net loss | - | - | - | - | (1,631,999 | ) | (1,631,999 | ) | ||||||||||||
Balance, September 30, 2021 | 35,928,188 | $ | 35,928 | $ | 82,509,957 | - | $ | (42,308,427 | ) | $ | 40,237,458 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5 |
MARIZYME, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
Additional Paid-in | Treasury | Accumulated | ||||||||||||||||||||||
Shares | Amount | Capital | Stock | Deficit | Total | |||||||||||||||||||
Balance, December 31, 2019 | 19,858,939 | $ | 19,859 | $ | 59,319,594 | $ | (16,000 | ) | $ | (30,980,581 | ) | $ | 28,342,872 | |||||||||||
Common stock issued for services | 125,000 | 125 | 124,875 | - | - | 125,000 | ||||||||||||||||||
Stock-based compensation | - | - | 221,058 | - | - | 221,058 | ||||||||||||||||||
Net loss | - | - | - | - | (471,370 | ) | (471,370 | ) | ||||||||||||||||
Balance, March 31, 2020 | 19,983,939 | 19,984 | 59,665,527 | (16,000 | ) | (31,451,951 | ) | 28,217,560 | ||||||||||||||||
Common shares issued in lieu of AP | 195,000 | 195 | 184,665 | - | - | 184,860 | ||||||||||||||||||
Exercise of options | 5,000 | 5 | 5,045 | - | 5,050 | |||||||||||||||||||
Stock-based compensation | - | - | 221,057 | - | - | 221,057 | ||||||||||||||||||
Net loss | - | - | - | - | (434,911 | ) | (434,911 | ) | ||||||||||||||||
Balance, June 30, 2020 | 20,183,939 | 20,184 | 60,076,294 | (16,000 | ) | (31,886,862 | ) | 28,193,616 | ||||||||||||||||
Sale of common stock | 5,600,192 | 5,600 | 6,269,464 | - | - | 6,275,064 | ||||||||||||||||||
Issuance of common stock for acquisition | 10,000,000 | 10,000 | 12,490,000 | - | - | 12,500,000 | ||||||||||||||||||
Issuance of warrants for acquisition | - | - | 1,932,300 | - | - | 1,932,300 | ||||||||||||||||||
Issuance of warrants for services | - | - | 253,749 | - | - | 253,749 | ||||||||||||||||||
Stock-based compensation | - | - | 802,926 | - | - | 802,926 | ||||||||||||||||||
Issuance of common stock for services | 50,000 | 50 | 62,450 | - | - | 62,500 | ||||||||||||||||||
Exercise of options for common stock | 54,057 | 54 | 59,399 | - | - | 59,453 | ||||||||||||||||||
Net loss | - | - | - | - | (2,065,043 | ) | (2,065,043 | ) | ||||||||||||||||
Balance, September 30, 2020 | 35,888,188 | $ | 35,888 | $ | 81,946,582 | $ | (16,000 | ) | $ | (33,951,905 | ) | $ | 48,014,565 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6 |
MARIZYME, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30, | ||||||||
2021 | 2020 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (5,482,793 | ) | $ | (2,971,324 | ) | ||
Adjustments to reconcile net loss to net cash used in operations: | ||||||||
Depreciation and amortization | (76,013 | ) | 342,583 | |||||
Stock-based compensation | 593,116 | 1,420,451 | ||||||
Stock-based compensation - restricted common stock | 33,333 | - | ||||||
Interest and accretion | 74,410 | - | ||||||
Issuance of warrants for services | - | 253,749 | ||||||
Change in fair value of contingent liabilities | (472,000 | ) | - | |||||
Change in operating assets and liabilities: | ||||||||
Accounts receivable | (55,706 | ) | (93,010 | ) | ||||
Prepaid expense | 38,057 | (62,487 | ) | |||||
Inventory | 40,950 | 21,500 | ||||||
Accounts payable and accrued expenses | 721,078 | 140,233 | ||||||
Due to related parties | 272,530 | - | ||||||
Net cash used in operating activities | (4,313,038 | ) | (948,305 | ) | ||||
Cash flows used in investing activities: | ||||||||
Purchase of intangible assets | - | (130,333 | ) | |||||
Net cash used in investing activities | - | (130,333 | ) | |||||
Cash flows from financing activities: | ||||||||
Proceeds from promissory notes due to related parties | 366,000 | - | ||||||
Proceeds from convertible notes, net of issuance cost | 1,060,949 | - | ||||||
Shares issued for cash, net of offering costs | - | 6,275,064 | ||||||
Net cash provided by financing activities | 1,426,949 | 6,275,064 | ||||||
Net (decrease)/ increase in cash | (2,886,089 | ) | 5,196,426 | |||||
Cash at beginning of period | 2,902,762 | 90 | ||||||
Cash at end of period | $ | 16,673 | $ | 5,196,516 | ||||
Non-cash investing and financing activities: | ||||||||
Derivative liabilities | $ | 391,648 | $ | - | ||||
Contingent liabilities | $ | 9,926,000 | $ | - | ||||
Warrants issued in connection with convertible notes | $ | 571,807 | - | |||||
Issuance of common stock in lieu of payables | $ | - | $ | 261,453 | ||||
Issuance of common stock in connection with business combination | $ | - | $ | 12,500,000 | ||||
Issuance of warrants in connection with business combination | $ | - | $ | 1,932,300 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7 |
MARIZYME, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – DESCRIPTION OF BUSINESS
Maryzime, Inc. (the “Company” or “Marizyme”) is a Nevada corporation originally incorporated on March 20, 2007, under the name SWAV Enterprises, Ltd. On September 6, 2010, the Company name was changed to the Interim Financial Statements
September 30, 2013
GBS Enterprises IncorporatedInc. and from 2010 to September 2018 the Company was in the software products and advisory services business for email and instant messaging applications. The Company divested that business between December 2016 and September 2018 and focused on the acquisition of life science technologies.
Unaudited
On March 21, 2018, the Company’s name was changed to Marizyme, Inc., to reflect the new life sciences focus. Marizyme’s common stock is currently quoted on the OTC Markets’ QB tier under the symbol “MRZM”.
Note
NOTE 2 INTERIM REPORTING– GOING CONCERN
The accompanyingCompany’s unaudited interimcondensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements prepared under the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. They do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, they include all adjustments, which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in accordance with accounting principles generally accepted in the United States of America. These interim financial statements follow the same accounting policies and methods of their application as the Company’s audited financial statements. All adjustments are of a normal recurring nature.
Operating results for the nine months ended September 30, 2013 are not necessarily indicative of the results that can be expected for the year ending December 31, 2013.
Note 3 ACCOUNTING POLICIES
The financial statements and accompanying notes are prepared in accordance with accounting principlesusing principals generally accepted in the United States of America applicable to a going concern, which contemplates the morerealization of assets and liquidation of liabilities in the normal course of business. However, the Company does not have an established source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern. The Company, since its inception, has incurred recurring operating losses and negative cash flows from operations and has an accumulated deficit of $42,308,427 at September 30, 2021. Additionally, the Company has negative working capital of $2,132,227 and $16,673 of cash on hand. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
Under the going concern assumption, an entity is ordinarily viewed as continuing its business for the foreseeable future with neither the intention or necessity of liquidation, ceasing trading, or seeking protection from creditors pursuant to the laws and regulations. Accordingly, assets and liabilities are recorded on the basis that the entity will be able to realize its assets and discharge its liabilities in the normal course of business.
The ability of the Company to continue as a going concern is dependent upon its ability to continue to successfully develop its intangible assets, receive an approval from the U.S. Federal and Drug Administration (the “FDA”) to extend the selling of the products into the U.S. market which will allow the Company to attain profitable operations.
During the next twelve months, the Company’s foreseeable cash requirements will relate to continuous operations of its business, maintaining its good standing and making the required filing with the Securities and Exchange Commission (the “SEC”), and the payment of expenses associated with its product development. The Company may experience a cash shortfall and be required to raise additional capital. Management intends to raise additional funds by way of a private or public offering. While the Company believes in the viability of its strategy to continue to develop and expand its products and generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.
The unaudited condensed consolidated financial statements do not include any adjustments related 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.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the consolidated accounts of the Company and its wholly owned subsidiaries, Somahlution, Inc. (“Somahlution”), Somaceutica, Inc. (“Somaceutica”) and Marizyme Sciences, Inc. (“Marizyme Sciences”). All intercompany transactions have been eliminated on consolidation.
The accompanying unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared in conformity with generally accepted accounting principles in the U.S. (“U.S. GAAP”). The unaudited condensed consolidated financial statements presented in this Quarterly Report should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K filed with the SEC on April 15, 2021 (the “2020 Form 10-K”). The balance sheet as of December 31, 2020 was derived from audited consolidated financial statements included in the 2020 Form 10-K but does not include all disclosures required by U.S. GAAP for complete financial statements. The Company’s significant accounting policies are described in Note 3 to those consolidated financial statements.
Interim results may not be indicative of the results that may be expected for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from these interim financial statements. The unaudited condensed consolidated financial statements reflect all adjustments which in the opinion of management are necessary for a fair statement of results of operations, financial condition, cash flows and stockholders’ equity for the periods presented. Except as follows:otherwise disclosed, all such adjustments are of a normal recurring nature.
8 |
Critical Accounting Policies andUse of Estimates
The preparation of the unaudited condensed consolidated financial statements in conformityaccordance with accounting principles generally accepted in the United States of AmericaU.S. GAAP requires management to make use of certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosuresdisclosure of contingent assets and liabilities atas of the date of the consolidated financial statements and the reported amounts of revenuesrevenue and expenses during the reporting period.reported periods. The Company bases its estimates on historical experience and on various other assumptions that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. Significant estimates are related to the allocation of the purchase price in a business combination to the underlying assets and liabilities, recoverability of long-term assets including intangible assets and goodwill, amortization expense, valuation of warrants, stock-based compensation, derivative liabilities, contingent liabilities and deferred tax valuations.
Fair Value Measurements
The Company uses the fair value hierarchy to measure the value of its financial instruments. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based upon its own market assumptions. The basis for fair value measurements for each level within the hierarchy is described below:
● | Level 1 – Quoted prices for identical assets or liabilities in active markets. | |
● | Level 2 – Quoted prices for identical or similar assets and liabilities in markets that are not active; or other model-derived valuations whose inputs are directly or indirectly observable or whose significant value drivers are observable. | |
● | Level 3 – Valuations derived from valuation techniques in which one or more significant inputs to the valuation model are unobservable and for which assumptions are used based on management estimates. |
The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.
Segment Reporting
The Financial Accounting Standards Board (“FASB”) authoritative guidance regarding segment reporting establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. It also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company has determined that it operates in only one segment – the development and maintenancecarrying amounts of computer software programs and support products.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Comprehensive Income (Loss)
The Company adopted the FASB Codification topic (“ASC”) 220, “Reporting Comprehensive Income”, which establishes standards for the reporting and display of comprehensive income and its components in the financial statements. Comprehensive income consists of net income and other gains and losses affecting stockholder's equity that are excluded from net income, such as unrealized gains and losses on investments available for sale, foreign currency translation gains and losses and minimum pension liability. Since inception, the Company’s other comprehensive income represents foreign currency translation adjustments and small net actuarial losses on pension plans.
Net Income per Common Share
ASC 260, “Earnings per share,” requires dual presentation of basic and diluted earnings per share (EPS) with a reconciliation of the numerator and denominator of the EPS computations. Basic earnings per share amounts are based on the weighted average shares of common stock outstanding. If applicable, diluted earnings per share would assume the conversion, exercise or issuance of all potential common stock instruments such as options, warrants and convertible securities, unless the effect is to reduce a loss or increase earnings per share. Diluted net income (loss) per share on the potential exercise of the equity-based financial instruments is not presented where anti-dilutive. Accordingly, although the diluted weighted average number of common stock outstanding is disclosed on the statements of operation, the calculated net loss per share is the same for both the basic and diluted as both are based on the basic weighted average of common stock outstanding. There were no adjustments required to net income for the period presented in the computation of diluted earnings per share.
Financial Instruments
Financial instruments consist ofcertain cash and cash equivalents, accounts and other receivable, financial assets, notes payable, liabilities to banks, accounts payable and accrued liabilitiesexpenses, and other liabilities,amounts due to related parties and retirement benefit obligations. Financial assets and liabilities are measured upon first recognition and reviewed at the financial statement date. Changes inapproximate fair value are recognized through profit and loss. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments.
Notesdue to the Interim Financial Statementsshort-term nature of these instruments.
September 30, 2013
GBS Enterprises IncorporatedThe fair value of lease obligations is determined using discounted cash flows based on the expected amounts and timing of the cash flows discounted using a market rate of interest adjusted for appropriate credit risk.
Unaudited
The contingent liabilities assumed on the acquisition of Somah (Note 4) consist of present values of royalty payments, performance warrants and pediatric voucher warrants, future rare pediatric voucher sales, and liquidation preference. Management measured these contingencies in accordance with Level 3 of the fair value hierarchy.
Currency Risk
i. | The performance warrants and pediatric vouchers warrants liabilities were valued using a Monte Carlo simulation model utilizing the following weighted average assumptions: risk free rate of 1.19%, expected volatility of 69.62%, expected dividend of $0, and expected life of 6.21 years. For the three and nine months ended September 30, 2021, changes in these assumptions resulted in $574,000 and $1,870,000 decrease in fair value of these liabilities, respectively. At September 30, 2021 the fair market value of performance warrants and pediatric vouchers warrants liabilities was $2,899,000. | |
ii. | The present value of royalty payments was measured using the scenario-based methodology. In assessing the value attributed to the royalty payments, the estimated future cash flows were discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the revenue from net sales of the product. The cash flows derived from the Company’s fifteen-year strategic plan are based on managements’ expectations of market growth, industry reports and trends, and past performances. These projections are inherently uncertain due to the evolving impact of the COVID-19 pandemic. The discounted cash flow model included projections surrounding revenue, discount rates, and growth rates. The discount rates used to calculate the present value of royalty payments reflect specific risks of the Company and market conditions and the mid-range was estimated at 20.6%. For the three and nine months ended September 30, 2021, changes in these assumptions resulted in $380,000 and $1,396,000 increase in fair value of these liabilities, respectively. At September 30, 2021 the fair market value of royalty payments was $3,582,000. | |
iii. | Rare pediatric voucher sales liability was valued based on the scenario-based methodology where the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset – 20.6%. For the three and nine months ended September 30, 2021, changes in these assumptions resulted in $Nil and $2,000 increase in fair value of this liability, respectively. At September 30, 2021 the fair market value of rare pediatric vouchers was $1,150,000. | |
iv. | The present value of liquidation preference liability, included in the contingent consideration, was determined using the Black-Scholes option pricing method and represents the fair value of the maximum payment amount according to the Agreement. The following assumptions were used in the Black-Scholes option pricing model: risk free rate of 0.21%, expected volatility of 78.93%, expected dividend of $0, and expected life of 5 years. No changes to the fair value of liquidation preference liability were recorded in the three and nine months ended September 30, 2021. At September 30, 2021 the fair market value of liquidation preference was $1,823,000. |
We use the US dollar as our reporting currency. The functional currenciesderivative liabilities consisted of our significant foreign subsidiaries are the local currency, which includes the Euro, the British Pound, the Indian Rupee,optional and automatic conversion features and the Bulgarian Lev. Accordingly, some assets and liabilities are incurred in those currencies and we are subjectshare redemption feature attached to foreign currency risks.the convertible notes, issued pursuant to the Unit Purchase Agreement (Note 9).
Fair Value Measurements
9 |
The Company follows ASC 820, “Fair Value Measurements and Disclosures”, for allhas no financial instruments and non-financial instruments accounted forassets measured at fair value on a recurring basis. This new accounting standard establishes a single definitionNone of fair value and a framework for measuring fair value, sets out a fair value hierarchy to be used to classify the source of information used in fair value measurement and expands disclosures about fair value measurements required under other accounting pronouncements. It does not change existing guidance as to whetherCompany’s non-financial assets or not an instrument is carried at fair value. The Company 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 which are required to be recorded at fair value on a non-recurring basis. No transfers between levels have occurred during the Company considersperiods presented.
Marizyme measures the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk.
The Company has adopted ASC 825, Financial Instruments, which allows companies to choose to measure eligiblefollowing financial instruments and certain other items at fair value that are not required to beon a recurring basis. As at September 30, 2021, the fair values of these financial instruments were as follows:
SCHEDULE OF FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair Value Hierarchy | ||||||||||||||||
September 30, 2021 | Level 1 | Level 2 | Level 3 | December 31, 2020 | ||||||||||||
Liabilities | ||||||||||||||||
Derivative liabilities | $ | - | $ | - | $ | 391,648 | $ | - | ||||||||
Contingent liabilities | - | - | 9,454,000 | - | ||||||||||||
Total | $ | - | $ | - | $ | 9,845,648 | $ | - |
The following table provides a rollforward of all liabilities measured at fair value. The Company has not elected the fair value option for any eligible financial instruments.using Level 3 significant unobservable inputs:
RECONCILIATION OF LIABILITIES AT FAIR VALUE
September 30, 2021 | Contingent Liabilities | |||
Balance at December 31, 2020 | - | |||
Derivative liabilities | $ | 391,648 | ||
Initial valuation of contingent liabilities in connection with the Somah acquisition1 | 9,926,000 | |||
Change in fair value of contingent liabilities | (472,000 | ) | ||
Balance at September 30, 2021 | $ | 9,845,648 |
Cash
1 | Measured as at Somah acquisition date of July 31, 2020, see Note 4. |
Intangible Assets and cash equivalentsGoodwill
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.
Inventories
Pursuant to ASC 330 (Inventories), inventories held for sale are recognized under inventories. Inventories were measured at the lower of cost or market. Cost is determined on a first-in-first out basis, without any overhead component.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Goodwill and other Intangible Assets
Intangible assets predominately comprise goodwill, acquired softwareare recorded at cost less accumulated amortization and capitalized software development services.accumulated impairment losses. Intangible assets acquired in exchange for payment are reflected at acquisition costs. If the development costs can be capitalized per ASC 985-20-25, these are reflected as ascribable personnel and overhead costs.
Company created software can be intended for sale to third parties or used by the Company itself. If the conditions for capitalization are not met, the expenses are recorded with their effect on profit in the year in which they were incurred.
The Company amortizes intangible assets with a limited useful life to the estimated residual book value in accordance with ASC regulations. In addition, in special circumstances according to ASC 350-30, a recoverability test is performed and, if applicable, unscheduled amortization is considered.
The useful life of acquired software is between three and five years and three years for Company created software.
Intangible assets obtained as partresult of an acquisition which do not meetor in a business combination are measured at fair value at the criteriaacquisition date.
The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortized over the estimated useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimates being accounted for on a separate entry are identified as goodwill. prospective basis.
Goodwill is reviewed once a year during an impairment test, wherebyrepresents the appraisedexcess of the purchase price paid for the acquisition of subsidiaries over the fair value of the invested capitalnet assets acquired. Following the initial recognition, goodwill is measured at cost less any accumulated impairment losses.
In-Process Research and Development
The Company evaluates whether acquired intangible assets are a business under applicable accounting standards. Additionally, the Company evaluates whether the acquired assets have a future alternative use. Intangible assets that do not have future alternative use are considered acquired in-process research and development. When the acquired in-process research and development assets are not part of a business combination, the value of the reporting unit,consideration paid is compared with the carrying (book) value of its invested capital amount (including goodwill.) Use value is generally applied in order to determine the recoverability of goodwill and intangible assets with an indefinite useful life. The projected financial plan prepared by the management serves as the basis for this determination of use value and the planning assumptions are each adjusted for the current state of knowledge. Reasonable assumptions regarding macroeconomic trends and historical developments are taken into account in making these adjustments. Future estimated cash flows are determined basedexpensed on the expected growth ratesacquisition date. Future costs to develop these assets are recorded to research and development expense as they are incurred.
Impairment of the markets in question.Long-Lived Assets
IfThe Company reviews long-lived assets, including property, plant and equipment, for impairment whenever events or changes in business circumstances indicate that the carrying amount of the reporting unit exceedsassets may not be fully recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the appraised fair value,use of the impairment based on use value measuresasset and its eventual disposition are less than the amount ofcarrying amount. The impairment loss, if any, and an unscheduled amortization expense is recorded. If the appraised value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered torecognized, would be impaired.
Property, Plant and Equipment
Property, plant and equipment are valued at acquisition or manufacturing costs reduced by scheduled and, if necessary, unscheduled depreciation. Fixed assets are depreciated on a straight-line basis, prorated over their expected useful life. Scheduled depreciation for property, plant and equipment is based on useful lives of 3 to 10 years. Leasehold Improvements are depreciated up to 40 years.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
If fixed assets are sold, retired or scrapped, the profit or loss arising from the difference between the net sales proceeds and the residual book value are included under other operating earnings and expenses.
Impairment or Disposal of Long-Lived Assets
The Company evaluates the recoverability of its fixed assets and other assets in accordance with ASC topic, 360.10. This guidance requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds its’ expected cash flows or appraised value In this instance, the asset is considered to be impaired and is written down to fair value.
Revenue Recognition
Sources of Revenues:
License revenues
Our license revenues consist of revenues earned from the licensing of our software products. These products are generally licensed on a perpetual basis. Pricing models have generally been based either upon the physical infrastructure, such as the number of physical desktop computers or servers, on which our software runs or on a per user basis. License revenues are recognized when the elements of revenue recognition for the licensed software are complete, generally upon electronic shipment of the software and the software key to provide full access to all functionalities for our customers. In general, our invoices reflect license, service and maintenance components. In the case of multi element contracts, the revenues allocated to the software license in most cases represent the residual amount of the contract after the fair value of the other elements has been determined. Certain products of our software offering are licensed on a subscription basis.
Software maintenance revenues
Software maintenance revenues are recognized ratably on a pro-rata basis over the range of the contract period. Our contract periods typically range from one to five years. Vendor-specific objective evidence (“VSOE”) of fair value for software maintenance services is established by the rates charged in stand-alone sales of software maintenance contracts or the stated renewal rate for software maintenance. Customers who are party to software maintenance agreements with us are entitled to receive support, product updates and upgrades on a when-and-if-available basis.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Professional services revenues
Professional services include pre-project consulting, software design, customization, project management, implementation and training. Professional services are not considered essential to the functionality of our products, as these services do not alter the product capabilities and may be performed by our customers or by other vendors. Professional services engagements performed for a fixed fee, for which we are able to make reasonably dependable estimates of progress toward completion, are recognized on a proportional performance basis based on hours incurred and estimated hours of completion. Professional services engagements that are on a time and materials basis are recognized based on hours incurred. Revenues on all other professional services engagements are recognized upon completion. Our professional services may be sold with software products or on a stand-alone basis. Vendor Specific Objective Evidence (VSOE) of fair value for professional services is based upon the standard rates we charge for such services when sold separately.
Foreign Currency Translation
The functional currency of the Company is US dollars. For financial reporting purposes, the financial statements of the subsidiary companies whose functional currency is other than US dollars were translated into US dollars using the current rate method. Assets and liabilities were translated at the exchange rates at the balance sheet dates, revenue and expenses were translated at the average exchange rates and stockholders’ equity was translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income but are included in foreign exchange adjustment to other comprehensive income, a component of stockholders’ equity.
Other Provisions
According to FASB ASC 450 “Contingencies”, provisions are made whenever there is a current obligation to third parties resulting from a past event which is likely in the future to lead to an outflow of resources and of which the amount can be reliably estimated. Provisions not already resulting in an outflow of resources in the following year are recognized at their discounted settlement amount on the financial statement date. The discount taken is based on market interest rates. The settlement amount also includes the expected cost increases. Provisions are not set off against contribution claims. If the amended estimate leads to a reduction of the obligatory amount, the provision is proportionally reversed and the earnings are recognized in other operating earnings.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Deferred Taxes
Income taxes are provided in accordance with FASB Codification topic 740, “Accounting for Income Taxes”. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss-carry forwards.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that, that some portion or all of the deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.
Recent Accounting Pronouncements
In July 2012, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment. With the objective of reducing the cost and complexity of performing an impairment test for indefinite-lived intangible assets by simplifying how an entity tests those assets for impairment and to improve consistency in impairment testing guidance among long-loved asset categories. The amendments permit an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles – Goodwill and Other – General Intangibles Other than Goodwill. The more-likely-than-not threshold is defined as having the likelihood of more than 50 percent. The amendments are effective for annual and interim impairment tests performed beginning April 1, 2013. Adoption of this new standard is not expected to have significant impact to the Company’s financial statement.
Off - Balance Sheet Arrangements
We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Principles of Consolidation and Reverse Acquisition
As previously disclosed, the Company has exchanged a total of 5,405,411 shares of common stock in exchange for 50.1% of the outstanding common shares of GROUP. Although the Company was the legal acquirer, the transaction was accounted for as a recapitalization of GROUP in the form of a reverse merger, whereby GROUP becomes the accounting acquirer and is deemed to have retroactively adopted the capital structure of the Corporation. Accordingly, the accompanying consolidated financial statements reflect the historical consolidated financial statements of GROUP for periods presented prior to January 6, 2011. All costs associated with the reverse merger transaction were expensed as incurred. Those expenses totaled approximately $300,000 and were included in professional fees in administrative expenses.
The Company has based its financial reporting for the consolidation with GROUP in accordance with the FASB ASC 805-40 as it relates to reverse acquisitions. Goodwill has been measured as the excess of the faircarrying value of the consideration effectively transferredimpaired asset over its respective fair value. NaN impairment losses have been recorded through September 30, 2021.
Segment Reporting
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker in making decisions on how to allocate resources and assess performance. The Company the acquiree, for financial reporting purposes, overviews its operations and manages its business as 1 operating segment.
Basic net loss per share is computed by dividing the net amountloss by the weighted-average number of common shares outstanding for the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and dilutive common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods. Dilutive common stock equivalents are comprised of unvested common stock, options and warrants. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding as inclusion of the Company’s recognized identifiable assetspotentially dilutive securities (warrants, stock options, and liabilities.common shares subject to repurchase) would be antidilutive.
WeRecently Adopted Accounting Standards
There are no recently adopted accounting standards and recent accounting standards not yet adopted that the Company believes will have recorded the acquired assets and liabilities of Group Business Software Enterprises, Inc.a material impact on the acquisition date of January 6, 2011, at their fair value and the operations of Group Business Software Enterprises, Inc. have been included in theCompany’s unaudited condensed consolidated financial statements since the acquisition date.statements.
The assets and liabilities of GROUP, the acquirer for financial reporting purposes, are measured and recognized in the consolidated financial statements at their precombination carrying amounts in accordance with ASC 805-40-45-2(a). Therefore, the non-controlling interest reflects the non-controlling shareholders’ proportionate interest in the pre-combination carrying amounts of GROUP’s net assets even though the non-controlling interests in other acquisitions are measured at their fair values at the acquisition date.
NOTE 4 DISCONTINUED OPERATIONS
Due to the Company’s perceived increase in the demand for Modernization, Mobility and Optimization offerings, the Company made a strategic decision in 2012 to focus on its core offerings in the IBM Notes and Domino market and to divest its non-core businesses. As a result, on February 1, 2013, GBS entered into a Stock Purchase Agreement, dated February 1, 2013 (the “Agreement”), with IDC Global, Inc., a Delaware corporation and a wholly-owned subsidiary of GBS (“IDC”), and Global Telecom & Technology Americas, Inc., a Virginia corporation (“GTT). Pursuant to the Stock Purchase Agreement, we sold 100% of the issued and outstanding capital stock of IDC to GTT for an aggregate purchase price of $4,600,000 (the “Purchase Price”),
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Discontinued Operations and their results of operations, financial positions and cash flows are shown separately for the nine months ended on September 30, 2012 for comparative purposes. Summarized financial information for discontinued operations is set forth as follows:
Note 5 SUBSIDIARY COMPANIES
The subsidiaries listed below were included in the basis of consolidation (KUSD = 1,000’s of US Dollars):
Stockholders' Equity as of 9/30/2013 | Percentage of Subscribed Capital | Profit of the consolidated quarter | Date of the First | |||||||||||||||||||
Headquarters | KUSD | KUSD | in % | Ownership | KUSD | Consolidation | ||||||||||||||||
GROUP Business Software (UK) Ltd. | Manchester | -1,236 | 23 | 50,1 | % | I | 93 | 12/31/2005 | ||||||||||||||
GROUP Business Software Corp. | Woodstock | -15,601 | 1 | 50,1 | % | I | 225 | 12/31/2005 | ||||||||||||||
GROUP LIVE N.V. | Den Haag | 1,274 | 134 | 50,1 | % | I | -3 | 12/31/2005 | ||||||||||||||
Permessa Corporation | Waltham | 10 | 0 | 50,1 | % | I | 0 | 9/22/2010 | ||||||||||||||
Relavis Corporation | Woodstock | -842 | 2 | 50,1 | % | I | -23 | 1/8/2007 | ||||||||||||||
GROUP Business Software AG | Eisenach | 9,973 | 36,107 | 50,1 | % | I | 291 | 6/1/2011 | ||||||||||||||
Pavone GmbH | Boeblingen | -863 | 47 | 100.0 | % | D | 334 | 1/4/2011 | ||||||||||||||
Groupware Inc. | Woodstock | -482 | 1 | 100.0 | % | D | 0 | 1/6/2011 | ||||||||||||||
GBS India | Chennai | 191 | 12 | 100.0 | % | D | 46 | 9/30/2012 |
D - Direct Subsidiary
I - Indirect Subsidiary
Indirect Subsidiaries are owned 50.1% through GROUP Business Software AG
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Note 6 CASH AND CASH EQUIVALENTS
As of the financial statement date, the Company’s cash and cash equivalents totaled 259 KUSD (December 31, 2012 restated year end: 1,155 KUSD). Included in that amount are cash equivalents of 3 KUSD (December 31, 2012 restated year end: 3 KUSD).
Note 7 ACCOUNTS RECEIVABLE
As of the financial statement date, Accounts Receivable was 3,528 KUSD (December 31, 2012 restated year end: 4,143 KUSD). Receivables are generally measured at their nominal value and taking into account all foreseeable risks. Probable default risks are handled with specific allowances for bad debts. With regard to the trade receivables which are neither impaired nor delinquent, there are no indications as of the financial statement date that the debtors will not meet their payment obligations.
Note 8 PREPAID EXPENSES
Prepaid expenses in the amount of 208 KUSD were primarily recorded for prepaid rent, insurance and advance on technological collaboration events (December 31, 2012 restated year end: 84 KUSD).
Note 9 OTHER RECEIVABLES - CURRENT
Other Receivables as of the financial statement date were 277 KUSD (December 31, 2012 restated year end: 677 KUSD) which includes tax deposits (248 KUSD), benefit credits (14 KUSD), other deposits (4K USD) and other miscellaneous receivables (11 KUSD).
Notes toRecently Issued Accounting Pronouncements
The Company assesses the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Note 10 DEFERRED TAX ASSETS
Deferred tax assets asadoption impacts of the financial statement date were 1,076 KUSD (December 31, 2012 restated year end: 1,132 KUSD). All deferred tax assets are long term.
Deferred Tax Assets | KUSD | KUSD | ||||||
9/30/2013 | 12/31/2012 | |||||||
Deferred Tax Assets – Current | 0 | 0 | ||||||
Deferred Tax Assets – Non-current | 1,076 | 1,132 | ||||||
Balance | 1,076 | 1,132 |
Note 11 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are measured at cost less scheduled straight-line depreciation. Depreciation of the computer hardware listed as office equipment is distributed over a period of three to five years. The depreciation period for other office equipment is three to ten years. Office furnishings are depreciated over a period of eight to ten years. Leasehold Improvements are depreciated up to 40 years.
Property, Plant and Equipment kUSD | Development of the cost | Development of accumulated depreciation | Balance | |||||||||
12/31/2012 | 7,219.4 | 6,893.7 | 325.7 | |||||||||
Additions | 42 | 12 | ||||||||||
Disposals | 33 | 6 | ||||||||||
Currency differences | 8 | 3 | ||||||||||
Reclassifications | 0 | 0 | ||||||||||
9/30/2013 | 7,219.4 | 6,893.7 | 325.7 |
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Note 12 OTHER RECEIVABLES NON-CURRENT
The major components of the Non-current Receivables include the following:
KUSD Restated | KUSD Restated | |||||||
9/30/2013 | 12/31/2012 | |||||||
Cooperative shares | 1 | 0 | ||||||
Intercompany Loan Values during the quarter | 0 | 0 | ||||||
Other long term receivables | 0 | 428 | ||||||
Balance | 1 | 428 |
Note 13 GOODWILL
Goodwill derives from the following business acquisitions:
30-Sep-13 | Date of first Consolidation | 12/31/2012 | Additions | Adjustments | Written off | 9/30/2013 | ||||||||||||||||
GROUP Business Software AG | 1/6/2011 | 18,425.6 | - | - | - | 18,425.60 | ||||||||||||||||
GROUP Business Software (UK) Ltd. | 12/31/2005 | 2,765.1 | - | - | - | 2,765.10 | ||||||||||||||||
IDC Global, Inc. | 7/25/2011 | 2,994.4 | (2,994.4 | ) | 0.00 | |||||||||||||||||
Permessa Corporation | 9/22/2011 | 2,387.4 | - | - | - | 2,387.40 | ||||||||||||||||
Pavone GmbH | 1/4/2011 | 5,950.5 | - | - | - | 5,950.50 | ||||||||||||||||
GBS India | 8/1/2012 | 1,731.9 | - | - | - | 1,731.90 | ||||||||||||||||
34,254.9 | - | - | - | 31,260.50 |
Note 14 SOFTWARE
Development costs
The costs of developing new software products and updating products already marketedrecently issued accounting standards by the Company are generally recognized as expenses inFinancial Accounting Standards Board or other standard setting bodies on the period in which they arise. Provided they meet the conditions for capitalization as per FASB ASC 985-20-25, they are capitalized. Capitalized development costs can be attributed to the defined products. These products are technically realizable and there is a target market for them.
The development costs arising in the reporting period result from the personnel costs attributed to the development workCompany’s financial statements as well as overhead costs, providedmaterial updates to previous assessments, if any, from the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. There were no new material accounting standards issued in the nine months ended September 30, 2021, that these are related toimpacted the development work and do not represent general administrative costs. The ascribable overhead costs are directly recognized.Company.
Capitalized development costs are generally amortized over a period of three years starting withCOVID-19
Since December 31, 2019, the date of marketabilityoutbreak of the new products or major releases.
Notesnovel strain of coronavirus, specifically identified as “COVID-19”, has resulted in governments worldwide enacting emergency measures to combat the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Concessions, Industrial Property Rights, Licenses
The intangible financial assets carried in this item are licenses acquired in exchange for payment.
These financial assets are measured at acquisition cost less scheduled straight-line amortization. The assets added in the scopespread of the cost price allocationvirus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and physical distancing, have caused material disruptions to businesses globally resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. The duration and impact of the business divisions acquiredCOVID-19 outbreak is unknown at this year.
The useful life spans were based uniformly throughouttime, as is the Company according to those used by the parent company. Scheduled amortization is performed over a period from three to ten years.
The useful lifeefficacy of the domain “gbs.com”, was estimated as unlimited. This is because no other legal, contractual or other factors exist which would limit its useful life.government and central bank interventions. It is not systematically amortized, but rather annually. Should there exist signs indicating towards impairment it is tested for recoverabilitypossible to reliably estimate the length and if necessary, written down toseverity of these developments and the amount which could be obtained for it if sold.
Amortization of concessions, industrial property and similar rights and assets, as well as licenses to such rights and assets are presented in the Statement of Operations and Comprehensive Income/Loss within Cost of Goods Sold.
Concessions and licenses kUSD | Development of the cost | Development of accumulated depreciation | Balance | |||||||||
12/31/2012 | 31,913.9 | 21,341 | 10572.9 | |||||||||
Additions | 907 | 159 | ||||||||||
Disposals | 1,018 | 122 | ||||||||||
Currency differences | 143 | 126 | ||||||||||
Reclassifications | 0 | 0 | ||||||||||
9/30/2013 | 31,913.9 | 21,341.0 | 10,572.9 |
Note 15 OTHER ASSETS
The balance of this account of 132 KUSD primarily includes rent and other security deposits (December 31, 2012 restated year end: 156 KUSD).
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Note 16 LIABILITIES TO BANKS – CURRENT
Included in this account of 3,888 KUSD (December 31, 2012 restated year end: 7 KUSD) is primarily an operating line of creditof GROUP AG.
Note 17 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Trade payables
As ofimpact on the financial statement date, trade accounts payable amounted to 2,061 KUSD (December 31, 2012 restated year end: 3,095 KUSD). Trade payables are carried at their repayment amountresults and all have a residual term of up to one year.
Other Accrual
Other provisions are created as of the financial statement date in an amount necessary according to a reasonable commercial appraisal, to cover future payment obligations, perceivable risks and uncertain liabilities of the Company. Amounts deemed to be most likely to occur, in careful assessment, are accrued.
12/31/2012 | 9/30/2013 | |||||||
KUSD | KUSD | |||||||
Tax provision | 53 | 21 | ||||||
Salary | 861 | 599 | ||||||
Vacation | 315 | 247 | ||||||
Workers Compensation Insurance Association | 25 | 20 | ||||||
Compensation Levy for Non-Employment of Severely Handicapped Persons | 19 | 13 | ||||||
Outstanding Invoices | 1,059 | 196 | ||||||
Annual accounting and consulting | 128 | 109 | ||||||
Other Provisions | 446 | 465 | ||||||
Warranties | 96 | 82 | ||||||
Provision for Legal Costs | 73 | 68 | ||||||
Severance | 70 | 64 | ||||||
Total | 3,147 | 1,885 |
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Provisions for salaries of 599 KUSD (December 31, 2012 restated year end: 861 KUSD) include the provisions created for the variable salaries of the sales staff for the sales objectives reached in this business period.
Vacation provisions of 247 KUSD (December 31, 2012 restated year end: 315 KUSD) include the obligations of GROUP’s companies to their employees for remaining vacation claims from the reporting period. The amount of the provision is calculated on the gross salary of the individual employee plus the employer contribution to social security/Medicare and based on the unused vacation days as of the financial statement date.
Other employment of 97 KUSD (December 31, 2012 restated year end: 114 KUSD) were accrued for severance and compensation insurance and compensation levy.
For liabilities not yet settled, a provision totaling 196 KUSD (December 31, 2012 restated year end: 1059 KUSD) was created.
Other Provisions of 465 KUSD (December 31, 2012 restated year end: 446 KUSD) include miscellaneous provisions.
Expenses of accounting and other external consultingcondition of the Company were recognized at 109 KUSD (December 31, 2012 restated year end: 128 KUSD).in future periods.
A provision for anticipated legal consulting of 68 KUSD was recorded (December 31, 2012 restated year end: 73 KUSD).
For warranty claims, a provision of 82 KUSD (December 31, 2012 restated year end: 96 KUSD) was created determined by service income.
Note 18 DEFERRED INCOME
Accruals for future periods leadingMarizyme continues to realization of sales aftermaintain business continuity during the COVID-19 pandemic and takes its cues from the U.S. government and public health officials to keep employees and business partners safe and healthy. Although the financial statement date are reported under deferred income. The deferred income items listed asresults for three and nine months ended September 30, 2021 were not significantly impacted by COVID-19, Marizyme experienced decrease in sales due to a slow-down in the product manufacturing. During 2021, Marizyme’s business partners were focused on addressing specific manufacturing needs of the financial statement dateU.S. government in battling COVID-19 pandemic. Additionally, during 2021, demand for elective surgeries have decreased due to overloaded medical systems and potential risks related to patients’ recovery during the pandemic.
The Company cannot predict the impact of the progression of COVID-19 on future results or the Company’s ability to raise capital due to a variety of factors, including but not limited to the continued good health of Company employees, the ability of suppliers to continue to operate and deliver, the ability of the Company to maintain operations, any further government and/or public actions taken in response to the pandemic and ultimately the length of the pandemic.
NOTE 4 – ACQUISITIONS
DuraGraft®
On December 15, 2019, the Company entered into a contingent asset purchase agreement (the “Agreement”), as amended on March 31, 2020 and May 29, 2020, with Somahlution, LLC, Somahlution, Inc., and Somaceutica, LLC, companies duly organized under the laws of Delaware (collectively, “Somah” or “Seller”) to acquire all of the assets and none of the liabilities of Somah (the “Acquisition”), including DuraGraft®, a one-time intraoperative vascular graft treatment for use in vascular and bypass surgeries that maintains endothelial function and structure, and other related properties.
On July 31, 2020, the Company and Somah entered into Amendment No. 3 to the Agreement and the Agreement was finalized. Pursuant to the terms of this amendment, it was agreed that, as part of the Acquisition, the Company would acquire the outstanding capital stock of Somahlution, Inc., held by Somahlution, LLC, rather than the assets of Somahlution, Inc. This change to the Agreement was made to accommodate the European Union (“EU”) requirements with respect to the future manufacturing under Somahlution, Inc. of CE marked products for sale in the amountEU. In Amendment No. 3, the Company agreed to assume certain payables of 6,847 KUSD (December 31, 2012 restated year end: 6,100 KUSD) primarily include maintenance income collected in advance forSomah related to clinical and medical expenses. It was agreed that the period afterpayments on the end of the financial statement date. They are amortized onassumed debts would be recorded as a straight-line basis over their respective contract terms.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Note 19 OTHER SHORT TERM LIABILITIES
Other short-term liabilities of 242 KUSD (December 31, 2012 restated year end: 860 KUSD) and includes miscellaneous short term obligations including amounts due on business assets
Note 20 COMMON STOCK
The Company has authorized capital of 75,000,000 shares of common stock and 25,000,000 shares of “blank check” preferred stock, each with a par value of $0.001. No class of preferred stock has been designated or issued.prepaid royalty against future royalties. As of September 30, 2013, there2021 and December 31, 2020, prepaid royalties were shares 30,837,624 of common stock outstanding. At$340,969 and $344,321, respectively, and were recorded as a non-current asset.
Pursuant to the timeAgreement and in consideration of the Reverse Mergeroutstanding capital stock of Somahlution, Inc., the Company by GROUP on January 6, 2011, there were 16,500,000 shares of common stock of the Company outstanding and, as the Reverse Merger was accounted for as a recapitalization and applied retroactively, this balance is recorded as the balance outstanding since inception.agreed to issue to Somah:
Transactions occurring in 2012
● |
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
● | Warrants to purchase | |
● | The Company, |
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
○ | Royalties to be paid on all net sales of the |
The Note was convertible in full at $0.50 per share into common stock of the Company if this conversion was exercised on or before September 30, 2012. If not exercised, Mr. Shihadah would receive a 3-year warrant
The conversion was not exercised by September 30, 2012, therefore, as per the termsof the Loan Agreement Mr. Shihadah was issued a 3-year warrant to purchase shares at 50,000 shares of common stock at $1.00 per share.
○ | Liquidation preference, up to a maximum of $20 million upon the |
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
The Note was convertible in full at $0.50 per share into common stock of the Company if this conversion was exercised on or before September 30, 2012. If not exercised, K Group Ltd. would receive a 3-year warrant to purchase shares at 250,000 shares of common stock at $1.00 per share.
The conversion was not exercisedsale by September 30, 2012, therefore, as per the terms of the Loan Agreement K Group was issued a 3-year warrant to purchase shares at 250,000 shares of common stock at $1.00 per share.
The Note was convertible in full at $0.50 per share into common stock of the Company if this conversion was exercised on or before September 30, 2012. If not exercised Vitamin B Venture GmbH would receive a 3-year warrant to purchase shares at 250,000 shares of common stock at $1.00 per share.
The conversion was not exercised by September 30, 2012, therefore, as per the terms of the Loan Agreement Vitamin B Venture GmbH was issued a 3-year warrant to purchase shares at 250,000 shares of common stock at $1.00 per share.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
In connection with the execution of the Loan Agreement, on October 26, 2012, the Company issued the Lender a common stock purchase warrant (the “Warrant”), pursuant to which the Lender is entitled to purchase 100,000 shares of common stock at an exercise price of $0.35 until the third anniversary date of the date of issuance. The Warrant was issued in a private transaction between the Company and the Lender and was exempt from registration under the Securities and Exchange Act of 1933, as amended, pursuant to Section 4(a)(2) (formerly Section 4(2)) thereof.
In connection with the Loan Agreement, on February 22, 2013, the Company and Mr. Moore amended the Note pursuant to which Mr. Moore agreed to convert the interest due under the Note into shares of GBSX common stock at a rate of $0.30 per share. Pursuant to the amendment, the Company issued 450,960 shares of Common Stock to Mr. Moore. The Company issued the shares in reliance on Section 4(a)(2) (formerly Section 4(2)) of the Securities Act due to the fact that the issuance was isolated and did not involve a public offering of securities.
Notes
11 |
On July 30, 2020, the Company completed the acquisition of Somah (the “Somah Transaction”). The acquisition of Somah provides the Company with access to DuraGraft and other related intangible assets, which upon approval by FDA, will further the Interim Financial StatementsCompany’s continued growth and international-wide product rollout.
September 30, 2013
GBS Enterprises Incorporated
Unaudited
In connectionaccordance with ASC 805-10 the substance of a transaction constitutes a business combination as the business of Somah meets the definition of a business under the standard. Accordingly, the transaction was accounted for in accordance with the executionacquisition method of accounting, and the assets acquired, and the liabilities assumed have been recorded at their respective estimated fair values as of the Loan Agreement,acquisition date. The purchase price is based on October 26, 2012, the Company issued the Lender a common stock purchase warrant (the “Warrant”), pursuant to which the Lender is entitled to purchase 500,000 sharesmanagement’s estimate of common stock at an exercise price of $0.20 until the third anniversary date of the date of issuance. The Warrant was issued in a private transaction between the Company and the Lender and was exempt from registration under the Securities and Exchange Act of 1933, as amended, pursuant to Section 4(a)(2) (formerly Section 4(2)) thereof. On February 12, 2013, Mr. Baksa exercised the right to purchase 500,000 shares of common stock at the exercise price of $0.20.
In connection with the Loan Agreement, on February 22, 2013, the Company and Mr. Baksa amended the Note pursuant to which Mr. Baksa agreed to convert the interest due under the Note into shares of GBSX common stock at a rate of $0.30 per share. Pursuant to the amendment, the Company issued 200,000 shares of Common Stock to Mr. Baksa. The Company issued the shares in reliance on Section 4(a)(2) (formerly Section 4(2)) of the Securities Act due to the fact that the issuance was isolated and did not involve a public offering of securities
Transactions occurring in 2013
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
As of March 31, 2013, these shares had not yet been issued and remain as Subscriptions Receivable.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Other changes in common stock are disclosed in Note 23, Supplementary Cash Flow Disclosures.
Options
The Company has not issued any options, so that none are outstanding as of September 30, 2013.
Warrants
The Company has issued warrants in four different manners. In each instance, the warrant allows the holder to purchase a common share within a three year period from issuance at a specific price per share. In the first instance, warrants have been issued as part of a private placement offering wherein the investor purchases a common share, and a warrant. The fair value of thosethe common shares and warrants issued as well as contingent consideration and liquidation preference given up. The final allocation of the purchase price consideration to the assets acquired and liabilities assumed has been determined (and is shown below) by utilizing the residual method, whereby the current market valuecompleted and finalized.
Details of the stock is deducted from the unit pricecarrying amount and the remainder is allocated to the warrant. The valuation of the warrants issued is for disclosure purposes only and has no impact to the financial statements. A description of those warrants has been described above under common shares.
The second manner in which warrants are issues is in respect to financing by way of the issuance of notes payable or the conversion of debt into shares. In these instances, the fair value of the warrant has been determined using the effective interest rate method whereby the noteidentifiable assets and liabilities acquired and purchase consideration paid are as follows:
SCHEDULE OF PRELIMINARY ALLOCATION OF CONSIDERATION
Consideration | ||||
Common shares | $ | 12,500,000 | ||
Warrants | 1,200,000 | |||
Contingent consideration1 | 9,926,000 | |||
Total consideration | $ | 23,626,000 | ||
Fair value of identifiable assets acquired, and liabilities assumed | ||||
Net working capital | $ | 30,908 | ||
Property, plant, and equipment | 9,092 | |||
Intangible assets | 18,170,000 | |||
Goodwill | 5,416,000 | |||
Total identifiable assets | $ | 23,626,000 |
1 | Contingent consideration, for the purposes of the final allocation of the purchase price consideration, was measured as at the date of Somah acquisition – July 31, 2020. During the nine months ended September 30, 2021, the fair market value of the contingent liabilities, measured in accordance with Level 3 of the fair value hierarchy, has decreased by $472,000 (Note 3). |
The intangible assets acquired include:
● | DuraGraft patent, with estimated remaining economic life of 13 years, | |
● | “Distribution relationships” intangible asset related to DuraGraft products, with estimated remaining economic life of 10 years, and | |
● | In-process research and development intangible asset – “Cyto Protectant Life Sciences” with indefinite economic life. |
Goodwill is discounted when the interest rate is less than other similar notes and discount is allocatedattributed to the warrantworkforce and credited to additional paid in capital. The corresponding charge to discount is then amortized over the lifeprofitability of the note. Where thereacquired business and is no differencenot deductible for tax purposes. A residual method methodology was used to estimate the fair market value goodwill. A pre-tax discount rate based on weighted average cost of capital of 33.8% was used in interest terms, no value is attributable to the warrant.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
The Company has also sold warrants at nominal value to certain investors. In this instance the fair value assumptions for the assembled workforce acquired.
Pro-forma revenue, net income, and earnings per share are not presented for this acquisition as they are not material.
12 |
NOTE 5 – LEASES
On December 11, 2020, the Company entered into a 5.5 - year lease agreement for administrative office and laboratories, which commenced in December 2020 at a monthly rent of approximately $10,817, increasing by 2.5% annually beginning in the second year of the warrants has been determined using a Black-Scholes option pricing model with volatility, equity value and interest rate inputs noted below. The valuationlease until the end of the warrants issued is for disclosure purposes only and has no impactterm. Additionally, pursuant to the financial statements.
Lastly,agreement, the Company has issued warrants to outside consultantswill pay approximately $12,000 per month in payments for services.operating expenses. As at September 30, 2021, the remaining lease term was 4.67 years. The warrants are issuedlease had been classified as “cashless” warrantsan operating lease.
The assets and have been valued using a Black-Scholes option pricing model with volatility, equity value and interest rate inputs noted below.. The fairliabilities from the lease were recognized at the lease commencement date based on the present value of warrants issued for financing are determined for disclosure purposes as there is no impact toremaining lease payments over the financial statements. The fair value for other services, namely legal, and consulting have been recorded in the financial statements with a charge to the corresponding expense account and a credit to additional paid in capital.
Black Scholes assumptions for warrants issued were as follows:
For the Period Ending September 30, | ||||||||
2013 | 2012 | |||||||
Annualized Volatility | 120.26 | % | 118.64 | % | ||||
Risk Free Interest Rate | 0.66 | % | 0.40 | % | ||||
Expected Life | 3 years | 3 years | ||||||
Dividend Rate | Nil | Nil |
The following share purchase warrant transactions have not been disclosed elsewhere.
On April 1, 2011, the former CFO was issued 100,000 share purchase warrants, which gave him the option of purchasing 100,000 shares of common stock for a period of 3 years at a price of $1.50 per common share. The value of this issuance,lease term using the Black Scholes pricing model was determined to $34,000 and this amount was recorded as a consulting expense.discount rate of 3.95%, which is the average commercial interest available at the time.
Notes to
The total rent expense for the Interim Financial Statements
three months ended September 30, 2013
GBS Enterprises Incorporated
Unaudited
In March 2012, the Company issued an aggregate of 2,020,000 warrants to five “accredited investors” pursuant to Section 4(a)(2) (formerly Section 4(2)) of the Securities Act. Each investor warrant is exercisable for the three-year period commencing from the date of issuance for $0.50 per share of Common Stock2021 and has the same terms as the Private Placement Warrants. As noted above investors immediately exercised warrants2020 was approximately $77,357 and purchased 900,000 shares of common stock for $450,000.On March 27, 2012, the Company issued an aggregate of 250,000 warrants to 3 outside consultants pursuant to Section 4(a)(2) (formerly Section 4(2)) of the Securities Act. Each warrant is exercisable for the three-year period commencing from the date of issuance for $1.10 per share of Common Stock and has the same terms as the Private Placement Warrants.$Nil, respectively. The value of this issuance, using the Black Scholes pricing model was determined to $270,208 and this amount was recorded as a professional expense.
In December 2012, The Company issued 16,875 warrants to an outside consultant pursuant to Section 4(a)(2) (formerly Section 4(2)) of the Securities Act. Each warrant is exercisable for the three-year period commencing from the date of issuance for $0.21 per share of Common Stock and has the same terms as the Private Placement Warrants. The value of this issuance, using the Black Scholes pricing model was determined to $2,624 and this amount was recorded as a consulting expense.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
# of shares | Fair value | Balance | ||||||||||||||||||||||||||
allowed to | Issue | Expiry | Strike | at | End of | |||||||||||||||||||||||
purchase | Date | Date | Price | Issuance | Issued | Exercised | Period | |||||||||||||||||||||
$ | $ | # | # | # | ||||||||||||||||||||||||
Opening - Jan 1, 2012 | 6,846,280 | 5,000 | 6,841,280 | |||||||||||||||||||||||||
Amended | (2,000,000 | ) | 10/1/2010 | 6/1/2013 | 4.00 | - | - | - | - | |||||||||||||||||||
Reissued | 2,000,000 | 6/1/2012 | 6/1/2015 | 1.00 | 556,785 | - | - | - | ||||||||||||||||||||
Issued for legal services | 3/31/2012 | 3/31/2012 | 1.10 | 270,208 | (2) | 250,000 | - | 250,000 | ||||||||||||||||||||
Issued for nominal value | 3/28/2012 | 3/28/2015 | 0.50 | 2,457,662 | 2,020,000 | 900,000 | 1,120,000 | |||||||||||||||||||||
Sold with share units | 4/16/2012 | 4/16/2015 | 1.50 | 90,000 | 120,000 | - | 120,000 | |||||||||||||||||||||
Issued with debt conversion | 4/28/2012 | 4/28/2015 | 1.75 | - | 550,000 | - | 550,000 | |||||||||||||||||||||
Issued with debt conversion | 4/30/2012 | 4/30/2015 | 1.75 | - | 500,000 | - | 500,000 | |||||||||||||||||||||
Sold with share units | 5/10/2012 | 5/10/2015 | 1.50 | 25,800 | 30,000 | - | 30,000 | |||||||||||||||||||||
Issued with debt | 7/5/2012 | 7/5/2012 | 0.50 | 26,500 | 550,000 | - | 550,000 | |||||||||||||||||||||
Issued with debt | 8/13/2012 | 8/13/2015 | 0.35 | - | 100,000 | 100,000 | 100,000 | |||||||||||||||||||||
Issued with debt | 10/26/2012 | 10/29/2015 | 0.20 | - | 500,000 | 500,000 | - | |||||||||||||||||||||
Issued with debt | 11/30/2012 | 11/30/2015 | 0.20 | - | 500,000 | 250,000 | 250,000 | |||||||||||||||||||||
Issued for consulting services | 12/21/2012 | 12/21/2015 | 0.21 | 2,624 | (1) | 16,875 | - | 16,875 | ||||||||||||||||||||
Closing - Dec 31, 2012 | 5,136,875 | 1,755,000 | 10,328,155 | |||||||||||||||||||||||||
Opening - Jan 1, 2013 | 10,328,155 | 10,328,155 | ||||||||||||||||||||||||||
Transfer (3/11/2011) | 739,000 | 2/6/2013 | 3/11/2014 | 1.50 | - | - | - | 739,000 | ||||||||||||||||||||
Closing - Mar 31, 2013 | 5,136,875 | 1,755,000 | 11,067,155 | |||||||||||||||||||||||||
Issued with debt | 4/26/2013 | 4/26/2016 | 0.25 | - | 400,000 | - | 400,000 | |||||||||||||||||||||
Closing - Jun 30, 2013 | 5,536,875 | 1,755,000 | 11,467,155 | |||||||||||||||||||||||||
Closing - September 30, 2013 | 5,536,875 | 1,755,000 | 11,467,155 |
(1) recorded as consultingtotal rent expense
(2) recorded as legal expense
Note 21 REVENUE ALLOCATION
Gross revenue may be broken down by the following products for the nine months ended September 30, 2013 are as follows:2021 and 2020 was approximately $168,769 and $Nil, respectively.
NotesThe following table summarizes supplemental balance sheet information related to the Interim Financial Statements
operating lease as of September 30, 20132021 and December 31, 2020.
GBS Enterprises IncorporatedSCHEDULE OF RIGHT-OF-USE ASSET AND RELATED LEASE LIABILITY
September 30, 2021 | December 31, 2020 | |||||||
Right-of-use asset | $ | 1,163,159 | $ | 1,317,830 | ||||
Operating lease liabilities, current | $ | 260,106 | $ | 243,292 | ||||
Operating lease liabilities, non-current | 941,732 | 1,074,538 | ||||||
Total operating lease liabilities | $ | 1,201,838 | $ | 1,317,830 |
UnauditedAs at September 30, 2021, the maturities of the lease liabilities for the periods ended December 31 were as follows:
SCHEDULE OF MATURITIES OF LEASE LIABILITIES
2021 | $ | 52,249 | |||
2022 | 277,142 | ||||
2023 | 277,142 | ||||
2024 | 277,142 | ||||
2025 | 277,142 | ||||
Thereafter | 130,950 | ||||
Total lease payments | 1,291,767 | ||||
Total lease payments | 1,291,767 | ||||
Less: present value discount | (89,929 | ) | |||
Total | $ | 1,201,838 |
RevenuesNOTE 6 – PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, summarized by geographical areamajor category, stated at cost, less accumulated depreciation at September 30, 2021 and December 31, 2020 consisted of the following:
SCHEDULE OF PROPERTY PLANT & EQUIPMENT
September 30, 2021 | December 31, 2020 | |||||||
Furniture and equipment | $ | 701 | $ | 701 | ||||
Computer related | 7,220 | 7,220 | ||||||
Machinery and equipment | 1,171 | 1,171 | ||||||
Total | $ | 9,092 | $ | 9,092 | ||||
Less: accumulated amortization | (7,819 | ) | (1,970 | ) | ||||
Property, plant and equipment, net | $ | 1,273 | $ | 7,122 |
Depreciation expense for the three months ended September 30, 2021 and 2020 was $1,425 and $1,313, respectively, and for the nine months ended September 30, 20132021 and 2020 was $5,849 and $1,313, respectively.
NOTE 7 – INTANGIBLE ASSETS
Krillase
As part of the asset acquisition of ACB Holding AB, Reg. No. 559119-5762, completed on September 12, 2018, Marizyme acquired all rights, titles, and interest in the Krillase technology, a group of intangible assets worth $follows:they have not yet been put into operations. . Krillase is a naturally occurring enzyme that acts to break protein bonds and has applications in wound debridement, would healing, dental care and thrombosis. The useful lives of the intangible assets are based on the life of the patent and related technology. The patents and related technology for Krillase have not been amortized since the acquisition, as
The Company anticipates Krillase being placed into service in 2023. The Company has evaluated this asset for impairment and has determined that due to COVID-19 delaying the next steps for roll out of this technology, along with the associated value of the research and development, the status of the clinical trials, and other pertinent proprietary technology, there is no impairment required.
Note 22 OTHER INCOME/EXPENSE
At the financial statement date, Other income was 20 KUSD (December 31, 2012 year end: Other Expense 33 KUSD).
NotesDuraGraft
As part of Somah acquisition (Note 4), Marizyme purchased $18,170,000 of intangible assets related to the Interim Financial StatementsDuraGraft® technology.
September 30, 2013SUMMARY OF INTANGIBLE ASSETS AMORTIZATION EXPENSE
September 30, 2021 | December 31, 2020 | |||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||
Krillase intangible assets | $ | 28,600,000 | $ | - | $ | 28,600,000 | $ | 28,600,000 | $ | - | $ | 28,600,000 | ||||||||||||
DuraGraft patent | 5,256,000 | (471,691 | ) | 4,784,309 | 14,147,729 | (589,489 | ) | 13,558,240 | ||||||||||||||||
Distributor relationship | 308,000 | (35,933 | ) | 272,067 | - | - | - | |||||||||||||||||
IPR&D - Cyto Protectant Life Sciences | 12,606,000 | - | 12,606,000 | - | - | - | ||||||||||||||||||
Patents in process | 122,745 | - | 122,745 | 119,971 | - | 119,971 | ||||||||||||||||||
Total intangibles | $ | 46,892,745 | $ | (507,624 | ) | $ | 46,385,121 | $ | 42,867,700 | $ | (589,489 | ) | $ | 42,278,211 |
GBS Enterprises Incorporated
UnauditedThe following changes to the Company’s intangible assets had taken place in the periods indicated:
Note 23 SUPPLEMENTAL CASH FLOW DISCLOSURESSCHEDULE OF INTANGIBLE ASSETS
Balance, December 31, 2019 | $ | 28,613,000 | ||
Acquired in asset purchase agreement | 14,147,729 | |||
Additions | 106,971 | |||
Amortization expense | (589,489 | ) | ||
Balance, December 31, 2020 | 42,278,211 | |||
Acquired in Somah Transaction1 | 4,022,271 | |||
Additions | 2,775 | |||
Amortization expense1 | 81,864 | |||
Balance, September 30, 2021 | $ | 46,385,121 |
The significant non-cash transactions through September 30, 2013 were as follows:
1 |
Notes to
The Company has recorded amortization expense of $108,777 and $326,331 for the Interim Financial Statements
three and nine months ended September 30, 20132021, respectively and $341,270 for the three and nine months ended September 30, 2020.
GBS Enterprises Incorporated
UnauditedFuture amortizations for DuraGraft related intangible assets for the next five years will be $435,108 for each year from 2021 through 2026 and $2,880,836 for 2027 and thereafter. Amortization related to in process research and development will be determined upon the Company achieving commercialization.
Note 24 SUBSEQUENT EVENTSNOTE 8 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
On July 10, 2013, the BoardAccounts payable and accrued expenses, summarized by major category, as of DirectorsSeptember 30, 2021 and December 31, 2020 consists of the Company reappointed Joerg Ott as the Chief Executive Officer (Principal Executive Officer) of the Company, effective immediately. Mr. Ott replaced Mr. Gary D. MacDonald who had been serving as the Company’s Interim Chief Executive Officer since July 11, 2012.following:
SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
September 30, 2021 | December 31, 2020 | |||||||
Trade accounts payable | $ | 1,117,517 | $ | 325,830 | ||||
Accrued expenses | 180,846 | 21,555 | ||||||
Accrued compensation expenses | 98,582 | 130,718 | ||||||
Total accounts payable and accrued expenses | $ | 1,396,945 | $ | 478,103 |
NOTE 9 - CONVERTIBLE PROMISSORY NOTES AND WARRANTS
On August 2, 2013, Gary D. MacDonald resigned as member of the Board of Directors of the Company and as, Managing Director of GBS-UK. From March 1, 2012 to the date of his resignation, Mr. MacDonald also served as member of the Board’ Audit Committee. Mr. MacDonald’s resignation was not due to any disagreement with the Company or the Board.
On August 13, 2012,May 27, 2021, the Company entered into a note purchase and security agreement (the “LoanUnit Purchase Agreement (“Unit Purchase Agreement”) with John A. Moore,to sell up to units (the ‘Units’) at a memberprice per Unit of $ . Each Unit is comprised of (i) a convertible promissory note (the “Convertible Note”) convertible into common stock of the Board. PursuantCompany at a price per share of $2.50, (ii) a warrant to purchase one share of common stock of the Company (the ‘Class A Warrant’); and (iii) a second warrant to purchase common stock of the Company (the “Class B Warrant”).
In May 2021, the Company issued and sold 74,945, consisting of Convertible Notes of $74,945, Class A Warrants for the purchase of 29,978 shares of common stock and Class B Warrants for the purchase of 29,978 shares of common stock. The Company incurred related issuance costs of $6,745. Units at a price of $ per Unit for gross proceeds of $
In July 2021, the Company issued and sold 1,100,000. The Units included the Convertible Notes for $1,100,000, Class A Warrants for 440,000 shares of common stock and Class B Warrants for 440,000 shares of common stock. The Company incurred related issuance costs of $99,000. Units under the Unit Purchase Program for gross proceeds of $
14 |
On September 29, 2021, the Company, with the consent of all Unit holders, amended the May 2021 Unit Agreements. By rescinding their investment, the Unit holders agreed to amend the Unit Purchase Agreement resulted in the following changes to the Loanoffering:
(i) | Decreased the offering price under the Unit Purchase Agreement from $ per Unit to $ per Unit for all future sales under the Unit Purchase Agreement. No proceeds from the initial investment were returned, | |
(ii) | Decreased the conversion price from $2.50 per share to $2.25 per share for all current Unit holders and all future investors, and | |
(iii) | Cancelled all Class A Warrants and Class B Warrants and replaced them with Class C Warrants. |
The Company determined that the modifications of Unit Purchase Agreement were not significant enough to be considered substantial, therefore the values of original instruments issued were not adjusted. As a result of this modification, the total of 469,978 Units previously issued were replaced with an aggregate of 522,198 pro-rata Units.
The Company determined that the optional and automatic conversion feature and the share redemption feature attached to the convertible notes meet the definition of derivative liabilities and that the detachable warrants issued do not meet the definition of a liability and therefore will be accounted for as an equity instrument.
The initial $571,807fair value of the warrants and $391,648fair value of derivative liabilities issued have been recorded as debt discount and are being amortized to interest and accretion expense using the effective interest method over the term of the Convertible Notes.
SCHEDULE OF CONVERTIBLE NOTES
September 30, 2021 | December 31, 2020 | |||||||
Convertible notes issued | $ | 1,174,945 | $ | - | ||||
Issuance costs | (105,745 | ) | - | |||||
Debt discount | (964,153 | ) | - | |||||
Debt accretion | 74,410 | - | ||||||
Convertible notes, net of debt discount | $ | 179,457 | $ | - |
During the three and nine months ended September 30, 2021, the Company recognized interest and accretion expense of $70,221 and $74,410, respectively (September 30, 2020 - $Nil and $Nil) in the condensed consolidated statements of operations.
Convertible Notes Terms
The Convertible Notes mature in 24 months from the initial closing date and accrue 10% of simple interest per annum on the outstanding principal amount.The Convertible Notes principal and accrued interest can be converted at any time at the option of the holder at a conversion price of $2.25 per share (before the modification - $2.50 per share). In the event the Company consummates, while the Convertible Note is outstanding, an equity financing with a gross aggregate amount of securities sold of not less than $10,000,000 (“Qualified Financing”), then all outstanding principal, together with all unpaid accrued interest under the Convertible Notes, shall automatically convert into shares of the equity financing at the lesser of (i) 75% of the cash price per share paid in the financing and the conversion price of $2.25 per unit. The Convertible Notes are secured by a first priority security interest in all assets of the Company.
Warrants Terms
Class A
● | Exercise price is the lower of (i) $3.13 per share, or (ii) the Automatic Conversion Price (the lesser of (i) 75% of the cash price per share paid by the other purchasers of next round securities in the Qualified Financing and (ii) the Conversion Price ($2.50, subject to Customary Antidilution Adjustments). | |
● | Exercisable for a period of 5 years from issuance. | |
● | Warrant Coverage: 100%. |
Class B
● | Exercise price is $5.00 per share, | |
● | Exercisable for a period of 5 years from issuance. | |
● | Warrant Coverage: 100%. |
Class C
● | Exercise price is the lower of (i) $2.25 per share, or (ii) the Automatic Conversion Price (the lesser of (i) 75% of the cash price per share paid by the other purchasers of next round securities in the Qualified Financing and (ii) the Conversion Price ($2.25, subject to Customary Antidilution Adjustments). | |
● | Exercisable for a period of 5 years from issuance. | |
● | Warrant Coverage: 200%. |
NOTE 10 – STOCKHOLDERS’ EQUITY
a) Preferred stock
The Company is authorized to issue a total number of shares of “blank check” preferred stock with a par value of $ . As of September 30, 2021, and December 31, 2020, there were shares of preferred stock issued or outstanding.
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b) Common stock
The Company is authorized to issue a total number of shares of common stock with a par value of $ .
As of September 30, 2021 and December 31, 2020, there were shares of common stock issued and outstanding. The company did not issue any common stock during the three and nine months ended September 30, 2021.
c) Options
On January 13, 2021, the Board of Directors approved the Marizyme’s 2021 Stock Incentive Plan (“SIP”). The SIP incorporates stock options issued prior to January 13, 2021. The SIP authorized options for issuance. As of September 30, 2021, there remains options available for issuance.
During the nine months ended September 30, 2021, the company granted (December 31, 2020 – ) share purchase options to directors, officers, employees, and consultants of the Company. The weighted-average assumptions used to estimate the fair value of stock options using the Black-Scholes option valuation model were as follows:
2021 | 2020 | |||||||
Risk-free interest rate | 0.69 | % | 0.93 | % | ||||
Volatility | 232.69 | % | 241.88 | % | ||||
Exercise price | $ | 1.25 | $ | 1.37 | ||||
Dividend yield | 0 | % | 0 | % | ||||
Forfeiture rate | 0 | % | 0 | % | ||||
Expected life (years) |
The Company recognizes forfeitures as they occur.
SCHEDULE OF STOCK OPTION ACTIVITY
Number of Options | Weighted Average Exercise Price | Weighted Average Contractual Life | Total Intrinsic Value | |||||||||||||
Outstanding at December 31, 2019 | 2,715,000 | $ | 1.50 | $ | N/A | 1 | ||||||||||
Granted | 1,340,000 | 1.25 | ||||||||||||||
Exercised | (254,057 | ) | 1.02 | |||||||||||||
Outstanding at December 31, 2020 | 3,800,943 | $ | 1.36 | $ | 123,600 | |||||||||||
Granted | 732,500 | 1.25 | ||||||||||||||
Forfeited | (760,626 | ) | 1.25 | |||||||||||||
Outstanding at September 30, 2021 | 3,772,817 | $ | 1.37 | $ | 97,850 | |||||||||||
Exercisable at September 30, 2021 | 3,074,476 | $ | 1.39 | $ | 97,850 |
1 | Total intrinsic value for stock options outstanding as at December 31, 2019 is not available as it was not disclosed in the previous years filings. |
d) Warrants
The warrant activity for the periods presented is as follows:
Schedule of Options Outstanding and Issued
Number | Weighted Average Exercise Price | |||||||
December 30, 2019 | 113,637 | $ | 3.00 | |||||
Issued on Somah acquisition (Note 4) | 3,000,000 | 5.00 | ||||||
Issued | 280,014 | 1.38 | ||||||
December 30, 2020 | 3,393,651 | $ | 2.13 | |||||
Issued | 1,044,396 | 2.25 | ||||||
September 30, 2021 | 4,438,047 | $ | 2.16 |
During the three and nine months ended September 30, 2021, the Company issued the following:
On May 27, 2021, pursuant to the Unit Purchase Agreement (Note 9) the Company issued Class A Warrants for the purchase of 29,978 shares of common stock and Class B Warrants for the purchase of 29,978 shares of common stock. The Class A warrants had a strike price of $3.13 per share and a term of five years. The Class B warrants had a strike price of $5.00 per share and a term of five years.
In July 2021 pursuant to the May Unit Purchase Agreement the Company issued a secured promissory note, dated October 26, 2012 (the “Note”),Class A Warrants for 440,000 shares of common stock and Class B Warrants for 440,000 shares of common stock.
On September 29, 2021, pursuant to Mr. Moore for the principal amount of $1,000,000, bearing interest at a rate of 20% per year and maturing onmodification to the earlier of the first anniversary date of the date of issuance or such other timeUnit Purchase Agreement as described in more detailNote 9, all Class A and Class B warrants were replaced with an aggregate of 1,044,396 pro-rata Class C warrants. The warrants have a strike price of 2.25 per share and a term of five years. The detachable warrants issued were accounted for as an equity instrument and were ascribed the fair market value of $571,807 using the residual fair value allocation method.
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During the year end December 31, 2020, the Company issued the following:
On July 31, 2020, the Company completed the Somah Acquisition (Note 4) whereas 5.00 per share and a term of five years. The valuation of the warrants granted was completed in the Note, without any penaltysix months ended June 30, 2021, and the fair market value was determined to be $ per share or $1,200,000. shares of common stock and warrants were issued. The warrants have a strike price of $
On September 25, 2020, the Company issued two warrants for prepayment. To secureservices. The warrants were to purchase for 168,008 and 112,006 shares with a strike price of $1.375 and a term of five years. The fair market value was determined to be $ per share or $152,249 and $101,500, respectively, or $253,749, collectively.
e) Stock-based compensation
During the obligationsthree and nine month ended September 30, 2021, the Company recorded $and $, respectively, in non-cash share-based compensation (September 30, 2020 - $and $respectively). Additionally, the Company recognized $33,333of stock-based compensation on restricted common stock in the nine months ended September 30, 2021.
As of September 30, 2021, the Company had $652,932 of unrecognized stock-based compensation expense, which is expected to be recognized over a weighted-average period of 2.44 years.
NOTE 11 – RELATED PARTY TRANSACTIONS
As at September 30, 2021, the Company owed an aggregate of $638,530 (December 31, 2020 - $Nil) to related parties of the Company, undercomprised of the Note,following:
i. | During the three months ended September 30, 2021, the Company entered into a promissory note agreement with a related party of the Company, for the total proceeds of $151,000. The note bears no interest, unsecured, and has no terms of repayment. | |
ii. | During the nine months ended September 30, 2021, the Company entered into another promissory note agreement with a related party and shareholder of the Company, for the total proceeds of $215,000. The note bears no interest, unsecured, and has no terms of repayment. | |
iii. | The Company received consulting services from a shareholder and consultant of the Company, and pursuant to the agreement incurred $30,000 and $270,000 in professional expenses in the three and nine months ended September 30, 2021, respectively (three and nine months ended September 30, 2020 - $90,000). The related party also incurred $2,530 in administrative and general expenses on behalf of the Company. As at September 30, 2021, the Company owes the related party a total of $272,530 for consulting services and expenses reimbursement (December 31, 2020 – $Nil). |
Additionally, as part of the Somah transaction in 2020 (Note 4), the Company granted Mr. Moorerecorded a secured priority security interestprepaid royalty to the shareholders of Somahlution. The primary beneficial owner is Dr. Vithal Dhaduk, currently the Interim CEO, a director, and significant shareholder of the Company. As at September 30, 2021, the company had $340,969 in prepaid royalties (December 31, 2020 - $344,321) which had been classified as non-current in the Company’s Accounts Receivable and its subsidiaries locatedcondensed consolidation balance sheets.
NOTE 12 – COMMITMENTS AND CONTINGENCIES
Legal Matters
The Interim CEO of Marizyme, Dr. Vithal D. Dhaduk, also, a co-founder of Somahlution, LLC (“Dhaduk”), was the subject of a complaint filed in the United States District Court, Middle District of America,Pennsylvania, Civil Action No. 3:17 cv 02243 in December 2017 by Mukeshkkumar B. Patel (“Patel”), a former business partner of Dhaduk, which complaint made claims of breach of contract, promissory estoppel and unjust enrichment regarding a Memorandum of Understanding, dated July 16, 2015, between Patel and Dhaduk (“MOU”). The MOU provided that Dhaduk would pay Patel $9,450,000 as more fully describedconsideration for Patel’s agreement to, among other things, (i) exit certain legal entities that were purportedly jointly owned by certain affiliates of Dhaduk and Patel, including Somahlution LLC, and (ii) relinquish his ownership interests in such entities. On December 2, 2019, the court granted Patel’s motion for summary judgment on his breach of contract claim.
The complaint was settled between Dhaduk and Patel in the full text ofnine months ended September 30, 2021, with no financial impact to the document.Company.
Contingencies
a. |
● | $30,000 per month through July 13, 2022, | |
● | Option to purchase | |
● | Royalties based on sales of Krillase assets, equal to 10% of net sales of the |
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b. | As part of the DuraGraft Acquisition, completed on July 31, 2020 (Note 4), the Company |
Royalties on U.S. sales equal to: |
● | 5% on the first $50,000,000 of net sales, | |
● | 4% on net sales of $50,000,001 up to $200,000,000, and | |
● | 2% on net sales over $200,000,000. |
Royalties on sales outside of the U.S.:
● | 6% on the first $50,000,000 of net sales, | |
● | 4% on net sales of $50,000,001 up to $200,000,000, and | |
● | 2% on net sales over $200,000,000. |
The royalties are in perpetuity. As at September 30, 2021, the Company had not earned any revenues from Krillase and did not have any sales of the DuraGraft products in U.S., therefore no royalties have been accrued or paid in the period. | |
c. | The Company has entered into arrangements for office and laboratories spaces. As at September 30, 2021, minimum lease payments in relation to lease commitments are payable as described in Note 5. |
NOTE 13 - SUBSEQUENT EVENT
On October 23, 2013,November 1, 2021, Marizyme entered into a definitive arrangement agreement with Health Logic Interactive Inc. (“HLII”) pursuant to which the Company filedwill acquire My Health Logic Inc., a lawsuit (GBS Enterprises,wholly-owned subsidiary of HLII (the “Transaction”).
The Transaction will be effected by way of a plan of arrangement under the Business Corporations Act (British Columbia). In connection with the plan of arrangement, Marizyme will issue an aggregate of v. Reliance Globalcom, Inc.) inwill be a wholly-owned subsidiary of Marizyme. shares of its common stock to HLII, which will be subject to certain terms and restrictions. Upon closing, My Health Logic Inc.
The acquisition is subject to, among other things, the Superiorapproval of the Supreme Court of British Columbia, the State of California, County of San Francisco, seeking a declaratory judgment that the Company has no obligation to Reliance Globalcom Inc. (“Reliance”) for any claims or liabilities in connection with a Master Services Agreement (“MSA”) executed by Reliance and IDC Global Inc. (“IDC”) a then wholly owned subsidiaryapproval of the Company in March 2010. On February 1, 2013, GBS sold IDC to Global Telecom & Technology Inc. (“GTT”). Pursuant to the governing Stock Purchase Agreement (SPA), GTT gained all right, title and interest in 100% of all of IDC’s stock, all of which had been owned by GBS. Pursuant to the Stock Purchase Agreement, GTT withheld $528,777.93NEX board of the purchase price from payment to GBS to cover potential exposure due toTSX Venture Exchange, and requires the Identified Dispute described herein between IDC and Reliance. The Stock Purchase Agreement requires that, within three daysapproval of notice to GTT that the Identified Dispute described herein has been resolved, GTT will release the $528,777.93 to GBS. The Company is seeking declaratory relief from the Court stating the Company is not liable to Reliance and that GTT may release the $528,777.93 in funds owed to the Company. There were no material developments in this case since the filingat least two-thirds of the lawsuit.votes cast by HLII shareholders at the upcoming annual and special meeting of HLII shareholders. The Transaction is expected to close in December 2021.
The Company intends to vigorously defend its interests in this matter.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2.
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the unaudited interim financial statements and notes thereto included in this Quarterly Report on Form 10-Q and with our audited financial statements and notes thereto for the year ended December 31, 2020 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Note Regarding Forward-Looking Statements
The following discussion and analysis should be readOperations, both of which are contained in conjunction with our financial statements and the notes to those financial statements that are included elsewhere in the Quarterly Report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the “Risk Factors,” “Cautionary Notice Regarding Forward-Looking Statements” and “Description of Business” sections in the Company’s latest Annual Report on Form 10-K for the year ended December 31, 2020 (“2020 Form 10-K”).
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and subsequent filings. WeSection 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements other than statements of historical facts contained in this quarterly report, including statements regarding our future results of operations and financial position, business strategy, research and development plans and costs, the impact of COVID-19, the timing and likelihood of regulatory filings and approvals, commercialization plans, pricing and reimbursement, the potential to develop future product candidates, the timing and likelihood of success of the plans and objectives of management for future operations, and future results of anticipated product development efforts, are forward-looking statements. These statements are often identified by the use of words such as “anticipate,“may,” “estimate,” “plan,” “project,” “continuing,” “ongoing,“will,” “expect,” “believe,” “anticipate,” “intend,” “may,” “will,“could,” “should,” “could,“estimate,” “predict,or “continue,” and similar expressions to identifyor variations. The forward-looking statements. Although we believe the expectations expressedstatements in this quarterly report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, operating results, business strategy, short-term and long-term business operations and objectives. These forward-looking statements speak only as of the date of this quarterly report and are based on reasonablesubject to a number of risks, uncertainties and assumptions, withinincluding those described in the bounds ofPart II, Item 1A under the heading “Risk Factors.” The events and circumstances reflected in our knowledge of our business, ourforward-looking statements may not be achieved or occur and actual results could differ materially from those discussed in these statements. We undertake no obligation to update publicly any forward-looking statements for any reason even if new information becomes available or other events occurprojected in the future.forward-looking statements. Except as required by applicable law, including the securities laws of the United States, we do not intendplan to publicly update or revise any of the forward-looking statements to conform these statements to actual results. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations, and prospects.
OVERVIEW
GBS Enterprises Incorporated, a Nevada corporation (the “Company,” “GBS,” “GBSX,” “we,” “us,” “our” or similar expressions), conducts its primary business through its 50.1% owned subsidiary, GROUP Business Software AG (“GROUP”), a German-based public-company whose stock trades on the Frankfurt Exchange under the stock symbol INW. GROUP’s software and consulting business is focused on serving IBM’s Lotus Notes and Domino market. GROUP caters primarily to mid-market and enterprise-size organizations with over 3,500 customers in thirty-eight countries spanning four continents, representing more than 5,000,000 active users of its products. GROUP’s customers include Abbot, Ernst & Young, Deutsche Bank, Bayer, HBSC, Merck and Toyota. GROUP provides IBM Lotus Notes/Domino Application and Transformation technology. Headquartered in Eisenach, Germany, GROUP has offices throughout Europe and North America. The Company maintains a website at www.gbsx.us. GROUP maintains a website at www.gbs.com. The information contained in the Company’s and GROUP’s websites is not incorporated by reference herein.
Products and Services
GBS has consolidated the fragmented Lotus Software market through the acquisition of companies with complementary product, technology or services offerings. GBS has continuously developed its software and service business to service and support GBS’s IBM Lotus customer base.
Historically, GROUP had achieved growth by acquiring companies with complimentary operations and leveraging GROUP’s expertise to turnaround and integrate these companies. Key success factors for this strategy are: enhanced portfolio, positioning GROUPherein, whether as the ‘one-stop-shop’ for Lotus applications and services, expanded customer support, fast code migration, and cloud enablement/XPages conversion of acquired applications.
In 2012, in order to reduce overhead and administrative costs, we decided to restructure the Company’s multilevel subsidiary-structure. As of the fiscal quarter ended September 30, 2013, we restructured or sold the following subsidiaries:
SD Holdings, Ltd./GBS India Private Limited. On April 1, 2012, we sold SYN and its wholly-owned subsidiaries, Synaptris and Synaptris India, to Lotus for $1,877,232. On July 1, 2012, the Company entered into a purchase agreement with SYN for $1,877,232, which transferred all SYN’s assets, including intellectual property rights, and liabilities of the IntelliPRINT and FewClix product lines, customer contracts and certain employees for operations in a new subsidiary, GBS India Private Limited, an Indian company (“GBS India”). A royalty fee in the amount of approximately $350,000 has been agreed upon for the benefit the Company. Additionally a profit based fee of up to $700,000 may be earned based on license and revenue recognized from the sold IntelliVIEW and IntelliVIEW NXT products. On August 1, 2012, the Company acquired 100% of the outstanding capital stock of GBS India. We anticipate GBS India’s presence in India to accelerate our plan to expand our product development team particularly for our strategic offerings in India.
Pavone AG/Groupware AG. On July 6, 2012 and August 9, 2012, wholly-owned subsidiaries Pavone AG and Groupware AG, respectively, were merged and consolidated into one wholly-owned subsidiary, Pavone GmbH. The mergers were consummated solely for administrative purposes.
Pavone, Ltd. On July 8, 2012, Pavone, Ltd., a subsidiary of Pavone AG and a shell company, was dissolved. The Company serves the United Kingdom market through GROUP’s subsidiary GBS, Ltd.
EbVokus, GmbH. On October 1, 2012, GROUP sold all of the software and operational assets (constituting substantially all of the assets) of its wholly-owned subsidiary, ebVokus GmbH, along with the associated maintenance and project agreements to a non-affiliated third party for a purchase price of approximately $459,000, approximately $258,000 (200,000 Euros: 1 EUR = $1.29 USD on October 1, 2012) was paid at closing and the remaining $201,000 was paid on February 15, 2013 (150,000 Euro: 1EUR = $1.35 USD on February 15, 2013).
B.E.R.S. AD. On November 23, 2012, GBS AG sold its entire participation (50%) in B.E.R.S AD for a total of 25,000 BGN.
IDC Global, Inc. On February 1, 2013, GBS entered into a Stock Purchase Agreement, dated February 1, 2013 (the “Agreement”), with IDC Global, Inc., a Delaware corporation and a wholly-owned subsidiary of GBS (“IDC”), and Global Telecom & Technology Americas, Inc., a Virginia corporation (“GTT). Pursuant to the Agreement, we sold 100% of the issued and outstanding capital stock of IDC to GTT for a purchase price of $4,600,000 (the “Purchase Price”), subject to certain holdback provisions, including a holdback of approximately $217,000 for accounts receivable and which is to be paid by GTT to GBS within one business day of IDC receiving such payment, $334,000 for GroupLive liabilities and liens on IDC which is to be paid by GTT to GBS within three business days that GTT is reasonably satisfied that such liabilities and liens have been removed, less any amounts up to $12,500 which GTT or IDC is required to pay to either satisfy the obligations or purchase replacement equipment; and approximately $528,000 for an outstanding dispute which is to be paid by GTT to GBS within three days that GTT is reasonably satisfied has been resolved, subject however to a term of 18 months from the closing date or, if after 18 months, the holdback will be used to offset any indemnifications by GBS under the Agreement. The Purchase Price was also subject to adjustment on a dollar-for-dollar basis for adjustments to the Net Working Capital (defined as Current Assets minus Current Liabilities) of IDC by GTT.
Group Live N.V. operating under the laws of the Netherlands and a 100% subsidiary of GROUP declared its end of business May 31, 2012, registered in the commercial register June 22, 2012. Following the local procedures the Company has been dissolved from the register as per April 5, 2013, registered April 16, 2013.
The Board of Directors of the Company has approved each of the transactions discussed above.
Messaging and Business Applications Software & Solutions
GBS Messaging and Business Application Software & Solutions product lines include software and advisory services for email and Instant Messaging (IM) Management, Security, Compliance, Archiving and Productivity, CRM Applications, Governance, Risk & Compliance (GRC) Management software, Workflow and Business Process Management software, ePDF Archiving & Document Management.
GBS develops, sells and installs well-known business process and management software suites based on Lotus Notes / Domino and IBM Portal technology, mainly for major international companies and medium-sized customers.
Through GBS’s comprehensive messaging software product lines and associated services, Lotus Notes, Microsoft Exchange or SMTP-based-email customers, as well as Lotus Sametime, customers are able to provide their users with a secure, efficient and centrally administered use of e-mail and IM while maintaining control over their compliance with current legal requirements and corporate guidelines.
Consulting Services
GBS develops, sells and orchestrates customer-specific Lotus Domino strategy and consulting services, such as CIO and IT department leader Strategic Advisory Services, Managed Services, Outsourcing, Administration, Assessments and Implementations, Performance Improvements, Custom Application Development, Governance and Security, Technical Support, and Training, as well as Email Migration Services.
Based on GBS’s unique concentration of industry talent and expertise, mainly in the areas inside and around IBM Lotus Notes/Domino, inside and around corporate messaging (IBM, Microsoft, SMTP) and inside and around IT environmental and application assessment, analysis and reporting, commercial and governmental customers, as well as Software Integrators (SI) and channel partners, are able to rely on the company’s strategic and tactical advisory services for evaluating, planning, staffing and execution of related customer projects. GBS Consulting Services’ global teams of consultants use modern project management techniques, proprietary methodologies and GBS accelerator technologies to complete client projects on time and with reduced risk.
We believe that our focus on recruiting and retaining top Lotus expertise positions our team to offer leading-edge Lotus Notes / Domino subject matter knowledge to our customers.
As a Premier IBM Business Partner, GBS is one of the few partners that can sell and support licenses for all five IBM software brands: Lotus, WebSphere, Rational, Tivoli, and DB2.
Market Trends
As IT departments face continuous budget reductions and constant pressure for higher performance and efficiency, CIOs are focusing on modern technologies to support their need for increased scalability, flexibility and lower costs. GBS has identified this demand as a strategic growth opportunity for the company and has placed a significant focus on expanding its Modernizing/Migrating technology, which will assist client companies as they move to scale and adapt while remaining cost conscious.
GBS Lotus Application Modernization and Migration
GBS Lotus Application Modernization and Migration activities are focused on the IBM Lotus / Domino applications market and the offering spans from expert services and accelerator technologies to modernized, web enabled (also named “cloud” or “cloud computing”) and migrated Lotus applications; and thus ultimately to take the Lotus applications from legacy to the future. The foundation of the Modernizing/Migrating Suite Software offering is GBS’s significant R&D investment in a set of methodologies and key technology accelerators to automate the conversion of traditional Notes based client-server applications, into the IBM XPages framework which enables Domino applications to be run and accessed via the Lotus client, a web browser or on a mobile device. The patent-pended software that underpins Modernizing/Migrating was developed by GBS with assistance and guidance from IBM’s Software Group to ensure alignment with future releases of the IBM Lotus / Domino and XPages technology.
Revenue Model
GBS generates its revenue from the sale of internally created software, third-party developed software and the delivery of related services, including IT systems planning, administration, support, hosting, implementation and integration.
Strategy and Focus Areas
Based on current market demands for modern, Cloud-based and mobile-device capable business applications, we have acquired and developed a set of unique technologies that help organizations reduce the time, cost, resources and risks associated with modernizing or migrating their existing applications.
We generate revenue from subscription and usage fees and related services, including support and strategic consulting services. The subscription period is typically based on a yearly or multi-year contract with our customers. Another sector of our strategic portfolio is a suite of tools and methodologies we have developed to rapidly convert Lotus Notes applications into web and modern mobile applications. This portfolio includes a set of powerful analysis tools known as Insights that identify all of the Lotus Notes applications within an organization and provide metrics about the uses and users of those applications. Because of the nature of Lotus Notes and Domino, the applications within a customer environment tend to be highly distributed and number in the thousands. For many organizations, this fact alone makes it extremely difficult to plan for projects that involve modernizing these applications for use in a browser and on mobile devices or migrating them to another platform. Our technologies help them to dramatically reduce the cost, risk, time and resources associated with these highly complex projects.
We generate revenue with our analysis tools by charging a fee for the use of our technology and for the associated cost of the services to produce a report and set of recommendations for the customer. Additional revenues come from consulting services that result from helping our customers implement those recommendations. For use of our conversion tools, referred to as Modernizing/Migrating, we charge a flat fee for the conversion and additional hourly rates to perform additional supporting development or testing as needed. We also believe there is a significant revenue opportunity in licensing these tools to a network of global partners who also have existing presence and expertise in the Lotus Notes and Domino market. We have established partner agreements for the use of the analysis and conversion tools with partners in several countries and directly with IBM.
General Corporate History
The Company was originally incorporated in the state of Nevada on March 20, 2007 as SWAV Enterprises Ltd. (“SWAV”). SWAV was in a different industry and had a different management team and Board of Directors.
On April 26, 2010, SWAV purchased certain technology assets of Lotus Holdings Ltd. (“Lotus”) in consideration for 2,265,240 shares of SWAV common stock. Also on April 26, 2010, Lotus (on behalf of the SPPEF Members as discussed below) purchased an aggregate of 11,984,770 of the outstanding shares of SWAV common stock from certain selling shareholders of SWAV for an aggregate purchase price of $370,000. As a result of these two setsany new information, future events, changed circumstances or otherwise.
OVERVIEW
Marizyme is a multi-technology platform life science company with clinically tested and patented product platforms for myocardial and vein graft preservation, protein enzyme therapeutics for wound healing, thrombosis and pet health. Marizyme is dedicated to the acquisition, development and commercialization of transactions, Lotus acquired an aggregate of 14,250,010 shares of SWAV common stock which constituted approximately 95.0% of the 15,000,000 outstanding shares of SWAV common stock on April 26, 2010.
Upon the consummation of the April 26, 2010 acquisition, the then executive officerstherapies, devices and directors of SWAV resignedrelated products that maintain cellular viability and Mr. Joerg Ott, the Chief Executive Officer of GROUPsupport metabolism, thereby promoting cellular health and a GROUP Major Shareholder, was appointed the Chief Executive Officer of SWAV and sole member of SWAV’s Board of Directors. Mr. Ott currently serves as the Chairman of the Board of Directors of GBSX and the Chief Executive Officer of GROUP.
On September 6, 2010, SWAV’s name was changed to GBS Enterprises Incorporated. On October 14, 2010, the Company’s trading symbol on the OTC Bulletin Board was changed from SWAV to GBSX. The Company’sproper function. Our common stock is currently quoted on the OTC Market OTCQBMarkets’ QB tier under the ticker symbol GBSX.“MRZM.” The Company is actively working toward listing its common stock on the NASDAQ Stock Market within the next twelve months from the date of this report. We may also examine our options with respect to listing of our common stock on the New York Stock Exchange (“NYSE”).
Our Products
Krillase - through our acquisition of the Krillase technology from ACB Holding AB in 2018, we purchased a European Union researched and evaluated protease therapeutic platform that has the potential for use in the treatment of chronic wounds and burns, and other clinical applications. Krillase is a drug which has been classified as a Class III medical device in Europe for treating chronic wounds. Krillase, derived from Antarctic krill, shrimp-like crustaceans, is a combination of endo and exopeptidases that safely and efficiently breaks down organic material. The mix of proteinases and peptidases in Krillase helps the Antarctic krill digest and break down its food in the extremely cold Antarctic environment. As a result, this specialized collection of enzymes provides a unique biochemical “cutting” capability. As a “biochemical knife”, Krillase can potentially break down organic matter, such as necrotic tissue, thrombogenic material, and biofilms produced by microorganisms. As such, it may be useful in the mitigation or treatment of multiple disease states in humans. For example, Krillase may dissolve arterial thrombogenic plaque safely and efficiently, promote faster healing and support the grafting of skin for the treatment of chronic wounds and burns, and reduce bacterial biofilms associated with poor oral health in humans and animals.
We have acquired a Krillase-based product pipeline that is focused on developing products that treat several conditions across the critical care market. Itemized below is a breakdown of our projected Krillase development pipeline:
● | MB101 – Therapy for complex wounds and burns, | |
● | MB102 – Therapy for acute ischemic stroke, | |
● | MB104 – Therapy for deep vein thrombosis, and | |
● | MB105 – Therapy for dissolving plaque and biofilms on teeth. |
About Lotus Holdings, Ltd.Krillase received medical device status in the European Union for debridement of deep partial and full-thickness wounds in hospitalized patients, on July 19, 2005.
LotusAs of the date of this filing, the Company continues to evaluate commercial, clinical, research, and regulatory considerations involved in marketing our Krillase-based product line. Our commercial strategy in developing this product line is a holding company which was formed under the laws of Gibraltartwo-fold:
● | First, leverage and maximize near-term revenue generating opportunities with products for commercial or clinical applications that have low regulatory risk, and | |
● | Second, develop products for applications of the Krillase platform that address unmet medical needs or address medical market needs better than existing products in the marketplace, in clinical applications that have higher regulatory risk, but significant commercial potential. |
We anticipate finalizing our development, operation, and commercial strategy for the purposeKrillase platform by 2022 and expect the first stream of financing mergerrevenue from sale of the product to be generated in 2023.
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DuraGraft – through our acquisition of Somah in July 2020, we acquired its key intellectual products, based on its cytoprotective platform technology, to prevent ischemic injury to organs and acquisition projects, specificallytissues in grafting and transplantation surgeries. Its products and product candidates, which are referred to as the Somah Products, include DuraGraft, a one-time intraoperative vascular graft treatment for use in vascular and bypass surgeries that maintains endothelial function and structure, thereby reducing the incidence and complications of graft failure and improving clinical outcomes post bypass surgery.
DuraGraft is an “endothelial damage inhibitor” indicated for cardiac bypass, peripheral bypass, and other vascular surgeries. It is CE marked and is approved for marketing in 33 countries worldwide on 4 continents including, but not limited to the European Union, Turkey, Singapore, Hong Kong, India, the Philippines, and Malaysia. Somahlution has also been focused on developing products to mitigate the effects of ischemia reperfusion injury in other grafting and transplantation surgeries and other indications in which ischemic injury can cause disease. Multiple products derived from the cytoprotective platform technology for several indications are under various stages of development.
According to market analysis reports, the size value of the coronary artery bypass graft market globally was approximately $16 billion. This market is forecasted to increase at a CAGR of 5.8% from 2017 to 2025 (Grand View Research, March 2017). Globally, it is estimated that approximately 800,000 CABG procedures are performed each year (Grand View Research, March 2017), with procedures performed in the niche marketU.S. being a substantial percentage of small or microcap companies listed on the Frankfurt Stock Exchange with complex shareholder structurestotal global procedures performed. In the U.S., it is estimated that approximately 340,000 CABG surgeries are performed each year. The number of CABG procedures performed is predicted to decline at a rate of approximately 0.8% per year to less than 330,000 annually by 2026, primarily due to medical and whose stock is trading below one Euro (€1.00) per share.
SPPEFs
Lotus typically finances its merger and acquisition projects throughtechnological advances in the use of Special Purpose Private Equity Funds (“SPPEFs”)percutaneous coronary intervention, also known as “angioplasty” (idata Research, September 2018). Typically, SPPEFs are funded
In 2017, the number of peripheral vascular surgeries, which include angioplasty and bypass of peripheral arteries, vein removal, thrombectomy, and endarterectomy operations, were approximately 3.7 million worldwide. The number of peripheral vascular procedures is forecasted to increase at a CAGR of 3.9% in years 2017 to 2022 and is expected to exceed 4.5 million procedures by 2022 (Research and Markets, October 2018).
The Company is currently working with local distributors of cardiovascular disease-related products, in accordance with local regulatory requirements, to sell and increase the market share of DuraGraft in Europe, South America, Australia, Africa, the Middle East, and the Far East. As of the date of this filing, the Company anticipates that the submission of a company’s major shareholders (the “Major Shareholders”) seekingde novo 510k application to the U.S will occur in the second quarter of 2022 and is optimistic that the approval will be granted by the end of 2022.
In anticipation of the filing of the de novo 510k application for DuraGraft, the company plans to submit a pre-submission document to the FDA that describes the strategy for demonstrating the clinical safety and efficacy of the product. FDA application for the use of DuraGraft in CABG procedures is expected to take place in 2022.
DuraGraft commercialization plan with CE Mark and existing distribution partners in select European and Asia countries will begin in Q2 2022, with a targeted approach based on market access, existing KOL’s, clinical data and revenue penetration. The company will also begin the process of developing the US CABG market for DuraGraft with the development of KOL’s, existing publications, select clinical studies, digital marketing, and multiple sales channels.
Key Elements of our Strategy
● | Continue to grow the core of our business through the current market channels for DuraGraft and expand the sale of DuraGraft into additional markets globally as well as explore further use of the cytoprotective platform for new research and clinical applications, | |
● | Continue the integration of the Somah assets and begin the marketing and distribution of the Somah products in Europe and other global markets, which will allow the Company to continue its growth and international product rollout, | |
● | Focus our efforts and resources on continuous development, seek regulatory approval and commercialization of DuraGraft and related Somah Products in the United States, | |
● | Begin to commercialize our Krillase platform through the development of manufacturing and distribution in Europe and South America of a Krillase wound healing product, and | |
● | Expand our product portfolio through the identification and acquisition of additional life science assets in areas of innovative medicine. |
We have incurred losses for each period from our inception. For the nine months ended September 30, 2021 and 2020, our net loss was approximately $5.5 million and $3.0 million, respectively. We expect to incur expenses and operating losses over the next several years. Accordingly, we will need additional financing to support our continuing operations. We will seek to fund our operations through public or private equity offerings, debt financings, government or other third-party funding, collaborations and licensing arrangements. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital for projectsas and who fund at least 50%when needed would impact our going concern and would have a negative impact on our financial condition and our ability to pursue our business strategy and continue as a going concern. We will need to generate significant revenues to achieve profitability, and we may never do so.
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KEY 2021 HIGHLIGHTS
Acquisition of My Health Logic
On November 1, 2021, Marizyme entered into a definitive arrangement agreement with Health Logic Interactive Inc. (“HLII”) pursuant to which the SPPEF,Company will acquire My Health Logic Inc. (“MHL”), a wholly owned subsidiary of HLII (the “Transaction”).
The Transaction will be effected by way of a plan of arrangement under the Business Corporations Act (British Columbia). In connection with the remaining portion being provided through the investment community and networkplan of investors in Lotus. Each SPPEF is co-managed by a representative of the Major Shareholders (the “Representative Secretary”) and an attorney appointed by Lotus (the “Lotus Representative”).
On February 25, 2010, a group of shareholders (the “GROUP Major Shareholders”) of GROUP Software AG, a German public company trading on the Frankfurt Stock Exchange under the symbol “INW” (“GROUP”), engaged Lotus to provide financial consulting and advisory services, on a non-exclusive basis, for the primary task of establishing a SPPEF. On March 12, 2010, the GROUP Major Shareholders and Lotus established and funded a SPPEF with $1,400,000, consisting of $1,000,000 from the GROUP Major Shareholders and $400,000 from a Lotus investor (collectively, the “SPPEF Members”).
In early April 2010, the SPPEF Members decided to acquire SWAV. As disclosed above, on April 26, 2010, Lotus, on behalf of the SPPEF Members, acquiredarrangement, Marizyme will issue an aggregate of 11,984,7704,600,000 shares of SWAVits common stock to HLII, which will be subject to certain terms and restrictions. Upon closing, My Health Logic Inc. will be a wholly owned subsidiary of Marizyme. The transaction is expected to close on or before December 31, 2021.
The acquisition will provide Marizyme with access to consumer-focused handheld point-of-care diagnostic devices that connect to patients’ smartphones and digital continued care platforms, developed by MHL. My Health Logic Inc. plans to use its patent pending lab-on-chip technology to provide rapid results and facilitate the transfer of that data from the selling shareholders of SWAVdiagnostic device to the patient’s smartphone. MHL expects this data collection will allow it to better assess patient risk profiles and provide better patient outcomes. My Health Logic Inc.’s mission is to empower people with the ability to get early detection anytime, anywhere with actionable digital management for an aggregate purchase price of $370,000. The 11,984,770 shares of SWAV common stock shares represented approximately 79.9%chronic kidney disease.
With the completion of the 15,000,000 outstanding shares of SWAV common stock on April 26, 2010.
Transactions following the April 26, 2010 Transaction
On November 1, 2010,transaction, the Company repurchasedwill acquire MHL’s digital diagnostic device MATLOC1. MATLOC 1 is the proprietary diagnostic platform technology in development for the testing of different biomarkers, with a current focus on the urine-based biomarkers albumin and creatinine for chronic kidney disease screening and eventual diagnosis. The Company anticipates MATLOC 1 device will be submitted for FDA approval in late 2022 and the management is optimistic that the approval will be received by mid-2023.
Financing
In May 2021, the Company began its offering in a private placement under Rule 506 of Regulation D under the Securities Act up to 4,000,000 units (the “Offering”), comprised of a convertible notes and warrants, with the intent to raise up to $10,000,000 on a rolling basis. The certain terms and conditions of the Offering were amended in September 2021. For the nine-month period ended September 30, 2021, the Company sold and issued an aggregate of 3,043,985522,198 Units for the total proceeds of $1,060,949. The proceeds from the offering will be used to sustain the Company’s growth and meet its capital obligations.
Operational
During the nine months ended September 30, 2021, Marizyme has been undergoing a corporate restructuring, whereby the key officers, directors, and management team has changed in order to accelerate Company’s progress toward meeting its key objectives and deliver on its strategy. After the closure and completion of MHL transaction, the Company anticipates more changes to its key management team to further streamline and improve the overall performance of the 11,984,770 sharesCompany.
FINANCIAL OPERATIONS REVIEW
Component of Results of Operations
Revenue
Revenue represents gross product sales less service fees and product returns. For our Distribution Partner channel, we recognize revenue for product sales at the time of delivery of the Company’s commonproduct to our Distribution Partner. As our products have an expiration date, if a product expires, we will replace the product at no charge. Currently, all of our revenue is generated from the sale of DuraGraft in European and Asian markets where the product met the required regulatory approvals.
Direct Costs of Revenue
Direct costs of revenue include primarily product costs, which include all costs directly related to the purchase of raw materials, charges from our contract manufacturing organizations, and manufacturing overhead costs, as well as shipping and distribution charges. Direct costs of revenue also include losses from excess, slow-moving or obsolete inventory and inventory purchase commitments, if any.
Professional Fees
Professional fees include legal fees relating to intellectual property development and corporate matters, and consulting fees for accounting, finance, and valuation services. We anticipate increased expenses related to audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and Securities and Exchange Commission requirements.
Salaries and Stock-Based Compensation
Salaries consists of compensation and related personnel costs. Stock-based compensation represents the fair value of equity-settled share awards on stock originally purchasedoptions granted by Lotus on April 26, 2010. In consideration for these 3,043,985 shares, the Company to its employees, officers, directors, and consultants. The fair value of awards is calculated using the Black-Scholes option pricing model, which considers the following factors: exercise price, current market price of the underlying shares, expected life, risk-free interest rate, expected volatility, dividend yield, and forfeiture rate.
Other General and Administrative Expenses
Other general and administrative expenses consist principally of marketing and selling expenses, facility costs, administrative and office expenses, director and officer insurance premiums, and investor relations costs associated with operating a public company.
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Other Income and Expenses
Other income and expenses consists of mark to market adjustments on contingent liabilities assumed on the acquisition of Somah and interest and accretion expenses related to our convertible notes issued pursuant to Lotus a Secured Demand Note, dated November 1, 2010 (the “First Demand Note”),the Unit Purchase Agreement.
RESULTS OF OPERATIONS
Comparison of the Nine Months Ended September 30, 2021 and 2020
The following table summarizes our results of operations for the principal amountnine months ended September 30, 2021 and 2020:
Nine Months Ended September 30, | ||||||||||||
2021 | 2020 | Change | ||||||||||
Revenue | $ | 271,952 | $ | 124,985 | $ | 146,967 | ||||||
Operating expenses: | ||||||||||||
Direct costs of revenue | 168,419 | 25,714 | 142,705 | |||||||||
Professional fees | 1,808,093 | 494,295 | 1,313,798 | |||||||||
Salary expenses | 2,478,357 | 433,318 | 2,045,039 | |||||||||
Stock-based compensation | 626,449 | 1,674,200 | (1,047,751 | ) | ||||||||
Other general and administrative expenses | 1,071,017 | 468,782 | 602,235 | |||||||||
Total operating expenses | 6,152,335 | 3,096,309 | 3,056,026 | |||||||||
Total operating loss | $ | (5,880,383 | ) | $ | (2,971,324 | ) | $ | (2,909,059 | ) | |||
Other income (expenses): | ||||||||||||
Interest and accretion expenses | (74,410 | ) | - | (74,410 | ) | |||||||
Change in fair value of contingent liabilities | 472,000 | - | 472,000 | |||||||||
Net loss | $ | (5,482,793 | ) | $ | (2,971,324 | ) | $ | (2,511,469 | ) |
Revenue
We recognized revenue of $300,000, bearing interest at the rate of 5% per annum. The First Demand Note was repaid in September 2011.
Effective December 30, 2010, pursuant to securities purchase agreements between the Company and six GROUP Major Shareholders, the Company purchased an aggregate of 7,115,500 shares of GROUP common stock from the six GROUP Major Shareholders in consideration$0.27 million for the 3,043,985 sharesnine months ended September 30, 2021 compared to $0.12 million for the nine months ended September 30, 2020. The increase in revenue over the comparative period can be primarily attributed to the growing sales of GBS common stock (the “December 2010 Transaction”). AsDuraGraft, which was acquired as part of the Somah Transaction.
Direct Costs of Revenue
During the nine months ended September 30, 2021, we incurred $0.17 million in direct costs of revenue, representing increase of $0.15 million if compared to $0.03 million of the direct cost of revenue incurred during the nine months ended September 30, 2020. Cost of sales grew at a higher rate if compared to the revenue growth, predominantly due to shortage of the raw materials as a result of COVID-19 pandemic which directly impacted the costs of finding, securing, and acquiring alternative high-quality materials.
Professional Fees
Professional fees increased by $1.3 million or 266% to $1.81 million for the period ended September 30, 2021, compared to $0.49 million for the period ended September 30, 2020. The Company owned approximately 28.2%has undergone a number of corporate transactions, including acquisition of the outstanding common stock of GROUP.
Reverse Merger
After the December 2010 TransactionSomah entities and a corporate restructuring, which resulted in legal fees increasing significantly period over period. The increase in professional fees was completed, the additional GROUP Major Shareholders decided to accept the share swap offer from the Company and to effectuate a reverse merger of GROUP and the Company. To effectuate the reverse merger, on January 5, 2011, the Company repurchased from Lotus an aggregate of 2,361,426 of the 11,984,770 shares of the Company’s common stock originally purchased by Lotus on April 26, 2010. In consideration for these 2,361,426 shares, the Company issued to Lotus a Secured Demand Note, dated January 5, 2011 (the “Second Demand Note”), for the principal amount of $200,000, bearing interest at the rate of 5% per annum. The Second Demand Note was repaid in November 2011.
Effective January 6, 2011, pursuant to securities purchase agreements between the Company and the remaining GROUP Major Shareholders, the Company purchased an aggregate of 5,525,735 shares of GROUP common stock from the remaining GROUP Major Shareholders in consideration for the 2,361,426 shares of GBS common stock (the “January 2011 Transaction”). These 5,525,735 GROUP shares represented approximately 21.9% of the outstanding shares of common stock of GROUP. Asalso a result of the December 2010 TransactionCompany’s preparations for the FDA approval and January 2011 Transaction, the Company had acquired an aggregateother advancement and development of 12,641,235 sharesintellectual property. Additionally, Marizyme relied on number of GROUP common stock from the GROUP Major Shareholders in consideration for an aggregate of 5,405,411 shares of GBS common stock, resulting in GBS owning approximately 50.1%external consulting firms to oversee multiple facets of the outstanding GROUP common stockbusiness, including finance and effectuating a reverse mergeraccounting functions of the Company and GROUP whereby GROUP becameCompany. In the accounting acquirer.
Additional GROUP Acquisition
On February 27, 2012, we acquired an additional 883,765 shares of GROUP common stock for $619,000 in ordernine months ended September 30, 2021, Marizyme has also initiated the public offering transaction, which further contributed to maintain our 50.1% majority ownership of GROUP due to anthe professional fees increase in the outstanding common stock of GROUP.period.
Executive OfficesSalary Expenses
Our principal executive office is located at 585 Molly Lane, Woodstock, Georgia 30189 and our telephone number is (404) 891-1711. GROUP’s executive offices are located at Hospitalstrasse 6, 99817 Eisenach, Germany. We maintainSalary expenses for the period ended September 30, 2021, were $2.48 million, a website at www.gbsx.us. GROUP maintains a website at www.gbs.com.$2.05 million or 472% increase from the comparative period. The information containedincrease in the Company’ssalary cost is attributable to the restructuring and GROUP’s websites is not incorporated by reference herein.growth of the organization as the Company continues to expand into the new markets and working towards commercialization of the DuraGraft in the United States.
ChangesOther General and Administrative Expenses
Other general and administrative expenses increased $0.6 million or 128% to $1.07 million in Financial Condition
Assets:
Total Assets decreased from $56,802,492 at December 31, 2012 to $47,279,675 atthe nine months ended September 30, 2013. Total Assets consists2021. The increase was due to the Company’s restructuring, growth, and increased marketing and public relations expenses associated with product branding and costs attributed to running a public company. Due to the planned continued buildout of Total Current Assetsadministrative and Total Non-Current Assets.commercial functions we expect general and administrative expenses to increase in future periods.
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Total Current AssetsOther Income and Expenses
AtDuring the nine months ended September 30, 2013, Total Current Assets were $4,294,2242021, the Company conducted the Offering, which included multiple closings in tranches on a rolling basis. The interest and accretion costs associated with convertible notes issued at discount as comparedpart of the Offering agreements.
Additionally, the company recognized $0.47 million of fair value gain from mark to $6,444,192 at December 31, 2012. Total Current Assets consist of: Cash and Cash Equivalents, Accounts Receivable, Inventory, Prepaid Expenses, and Other Receivables-current.market adjustments on the contingent liabilities assumed on the acquisition of Somah.
Total Non-Current Assets
At September 30, 2013, Total Non-Current Assets were $42,985,450 as compared to $50,358,300 at December 31, 2012. Total Non-Current Assets consist of: Property Plant and Equipment, Other Receivables non-current, Deferred Tax Assets non-current, Goodwill, Software, and Other Assets.
Liabilities
Total Liabilities decreased from $22,269,060 at December 31, 2012 to $16,870,431 at September 30, 2013. Total Liabilities consistsComparison of Total Current Liabilities and Total Non-Current Liabilities.
Total Current Liabilities
At September 30, 2013, Total Current Liabilities were $16,698,017, compared to $18,227,184 at December 31, 2012. Total Current Liabilities consist of Notes Payable, Liabilities to Banks, Accounts Payable and Accrued Liabilities, Deferred Income, and Other Liabilities.
Total Non-Current Liabilities
At September 30, 2013, our Total Non-Current Liabilities were $172,414 compared to $4,041,876 at December 31, 2012. Total Non-Current Liabilities consist of Liabilities to Banks, Retirement Benefit Obligation, Liabilities Held for Sale, and Deferred Tax Liabilities non-current.
Results of Operations
Three Months Ended September 30, 2013 Compared to the Three Months Ended September 30, 20122021 and 2020
Revenues
For the three months ended September 30, 2013,The following table summarizes our total revenue decreased to $5,065,656 from $ 5,709,778results of operations for the three months ended September 30, 2012, a decline2021 and 2020:
Three Months Ended September 30, | ||||||||||||
2021 | 2020 | Change | ||||||||||
Revenue | $ | 37,215 | $ | 124,985 | $ | (87,770 | ) | |||||
Operating expenses: | ||||||||||||
Direct costs of revenue | 18,356 | 25,714 | (7,358 | ) | ||||||||
Professional fees | 556,254 | 170,753 | 385,501 | |||||||||
Salary expenses | 617,826 | 433,318 | 184,508 | |||||||||
Stock-based compensation | 64,074 | 1,107,085 | (1,043,011 | ) | ||||||||
Other general and administrative expenses | 536,483 | 453,158 | 83,325 | |||||||||
Total operating expenses | 1,792,993 | 2,190,028 | (397,035 | ) | ||||||||
Total operating loss | $ | (1,755,778 | ) | $ | (2,065,043 | ) | $ | 309,265 | ||||
Other income (expenses): | ||||||||||||
Interest and accretion expenses | (70,221 | ) | - | (70,221 | ) | |||||||
Change in fair value of contingent liabilities | 194,000 | - | - | |||||||||
Net loss | $ | (1,631,999 | ) | $ | (2,065,043 | ) | $ | 239,044 |
Revenue and Direct Cost of $644,122 or 11%. The Company generatesRevenue
We recognized revenue from two divisions. The Product division of Revenues includes revenue generated from the sale of Licenses, Maintenance, Third-Party Products, and Other revenues. The Service division includes revenue generated from services rendered.
The Product division decreased to $4,133,565$0.04 million for the three months ended September 30, 2013 from $4,719,4462021 compared to $0.12 million for the three months ended September 30, 2012,2020, which represents a 70% decrease period over period. During the three months ended September 30, 2021, we incurred $0.02 million in direct costs of revenue, representing a decrease of $585,881 or 12%. The primary contributing29% if compared to $0.03 million in the direct cost of revenue incurred during the three months ended September 30, 2020.
COVID-19 pandemic resulted in shortage of the raw materials and interruptions in global supply chains. Additionally, during 2021, Marizyme’s business partners were focused on addressing specific manufacturing needs of the U.S. government in battling COVID-19 pandemic. Moreover, during 2021, demand for elective surgeries have decreased due to overloaded medical systems and potential risks related to patients’ recovery during the pandemic. All of these factors were decreases in License revenueshave negatively impacted the Company’s revenue and direct costs of approximately $655,000, Third Party Product revenues of $350,000, increases in Maintenance revenues of approximately $490,000 and decreases in Other revenues of approximately $65,000sales for the three months ended September 30, 2013 compared2021.
Professional Fees
Professional fees increased by $0.39 million to the three months ended September 30, 2012. This is mainly as a result of economic conditions causing an increase in the sales cycles, whereby strategic customers are giving greater consideration towards the modernization/migration of their current application platform.
The Service division of revenue decreased $56,634 or 6% from $990,333$0.56 million for the three months ended September 30, 20122021 compared to $932,091$0.17 million for the three months ended September 30, 2013, primarily as a result2020. The increase in professional fees period over period relates to due diligence process associated with My Health Logic Inc.’s acquisition and finalizing of the salevaluation process of subsidiary companies that were contributors toassets acquired and liabilities assumed on completion of the Service division of revenue.Somah Transaction.
Cost of Goods SoldSalary Expenses
For the three months ended September 30, 2013, total Cost of Goods Sold decreased to $2,273,055 from $3,212,767Salary expenses for the three months ended September 30, 2012,2021, were $0.62 million, a $0.18 million or 43% increase from the comparative period. The increase in the salary cost reduction of $_939,712 or 29%.
The Company’s Cost of Goods Sold is segmented into two divisions. The first are costs relatedattributable to the Product divisiongrowth of revenue which includes the total cost of materials. The second are the costs related to the Service division of revenue which includes; other operating expenses, depreciation & amortization expense, and personnel expenses.
Within the Costs of Goods Sold related to the Product division,organization as the Company saw a $358,890continues to expand into the new markets and works towards commercialization of the DuraGraft in the United States.
Other General and Administrative Expenses
Other general and administrative expenses increased $0.08 million or 39% decrease from $ 922,839 for18% to $0.5 million in the three months ended September 30, 20122021. The increase was predominantly due to $_563,950 forthe legal, regulatory, and due diligence efforts related to the acquisition of My Health Logic Inc.
Other Income and Expenses
During the three months ended September 30, 2013. The primary factors contributing to the Company’s lower Costs of Goods Sold related to the Product division of revenues was a reduction of $282,639 in product material costs and of $76,250 in third party product material costs for the three months ended September 30, 2013 compared to the three months ended September 30, 2012.
Within the Costs of Goods Sold related to the Service division,2021, the Company had a reductioncompleted its second and the biggest tranche of $580,822 or 25%, in the total costsOffering and issued the highest amount of services from $ 2,289,927 for the three months ended September 30, 2012convertible notes to $ 1,709,105 for the three months ended September 30, 2013.date. The primary factor contributing to the Company’s reduction in the costs of services was a decrease in the volume of services renderedinterest and a reduction in personnel costs, depreciation and amortizationaccretion costs associated with convertible notes issued at discount as part of the sale of subsidiary companies. Additional personnel costs relating to Services are included in Selling Expenses and these were also reduced from the quarter ending September 30, 2012 as indicated below.Offering agreements.
Operating Expenses
The Company’s total operating expense consists of three segments; selling, administrative and general expenses. For the three months ended September 30, 2013, total operating expenses decreased $878,493 or 21% to $3,294,910 from $4,173,403 for the three months ended September 30, 2012.
For the three months ended September 30, 2013, Selling Expenses decreased $592,531 or 23% to $ 2,033,242 from $2,625,773 for the three months ended September 30, 2012. This was primarily due to decreases in cost of materials of $13,269, personnel expense of $532,914 and in other selling expense of $81,705, coupled with a reduction in other operating income of $9,522 and a slight increase in depreciation expense of $480.
For the three months ended September 30, 2013, Administrative Expense decreased by $83,977 or 7% to $1,145,304 from $1,229,281 for the three months ended September 30, 2012. This was primarily due to a reduction in personnel costs of $55,535 coupled with an increase in other operating income of $1,116 and decreases in other administrative expense of $ 142,207 and depreciation expense of $3,812.
ForDuring the three months ended September 30, 2013, General Expense decreased $197,9862021, the company recognized $0.19 million of fair value gain from mark to $120,364market adjustments on the contingent liabilities assumed on the acquisition of Somah
LIQUIDUTY AND CAPITAL RESOURCES
We have incurred net losses and negative cash flows from $318,350operations since our inception and anticipate we will continue to incur net losses for the three months endedforeseeable future. As of September 30, 2012. This was primarily due decreases2021, we had cash and cash equivalents of $50,011 in other operating income and in personnel expense of $16,282, and other operating expense of $231,541. Depreciation of approximately $22,000 was at the same level as for the three months ended September 2012.$16,673.
Other Income (Expense)The Offering
ForIn May of 2021, Marizyme’s Board of Directors, authorized the three months ended September 30, 2013, net Other ExpensesCompany to initiate the Offering and sell up to 4,000,000 units (the “Units”) at a price per Unit of $95,487 increased from net Other Income$2.50. Each Unit was comprised of $759,169for(i) a convertible promissory note convertible into common stock of the three months ended September 30, 2012. This change is primarily dueCompany at an initial price per share of $2.50, (ii) a warrant to purchase one share of common stock of the Company (the ‘Class A Warrant’); and (iii) a decrease in Other Incomesecond warrant to purchase a share of $847,976 and an increase in net Interest Expensecommon stock of $6,472 for the three months ended September 30, 2013 compared to the three months ended September 30, 2012.Company (the “Class B Warrant”).
Nine Months Ended September 30, 2013 Compared to the Nine Months Ended September 30, 2012
Revenues
ForIn the nine months ended September 2021, the Company issued an aggregate of 469,978 Units in connection with the Offering, for the total proceeds of $1,060,949.
On September 29, 2021, the Company, with the consent of all Unit holders, amended the May 2021 Unit Agreements. By rescinding their investment, the Unit holders agreed to amend the Unit Purchase Agreement resulted in the following changes to the offering:
(iv) | Decreased the offering price under the Unit Purchase Agreement from $2.50 per Unit to $2.25 per Unit for all future sales under the Unit Purchase Agreement. No proceeds from the initial investment were returned, | |
(v) | Decreased the conversion price from $2.50 per share to $2.25 per share for all current Unit holders and all future investors, and | |
(vi) | Cancelled all Class A Warrants and Class B Warrants and replaced them with Class C Warrants. |
The Company determined that the modifications of the Unit Purchase Agreement were not significant enough to be considered substantial, therefore the values of original instruments issued were not adjusted. As a result of this modification, the total of 469,978 Units previously issued were replaced with an aggregate of 522,198 pro-rata Units.
The Company intends to raise up to $10,000,000 on a rolling basis. The proceeds from the offering will be used to sustain the Company’s growth and meet its capital obligations.
Funding Requirements and Other Liquidity Matters
Marizyme expects to continue to incur expenses and operating losses for the foreseeable future. We anticipate that our expenses will increase as a result of the following operational and business development efforts:
● | Increase our expertise and knowledge through hiring and retaining qualified operational, financial and management personnel, who will build efficient infrastructure to support development and commercialization of therapies and devices, | |
● | Expand our product portfolio through the identification and acquisition of additional life science assets, and | |
● | Seek to increase awareness about our products to boost sales and distributions internationally. |
Until such time, if ever, as we can generate substantial product revenues to support our cost structure, the Company will continue to have to raise funds beyond its current working capital balance in order to finance future development of products, potential acquisitions, and meet its debt obligations until such time as future profitable revenues are achieved.
We expect to finance our cash needs through a combination of private and public equity offerings, debt financings, government or other third-party funding, and collaborations arrangements or acquisitions. To the extent that we raise additional capital through the sale of common stock, convertible securities or other equity securities, the ownership interest of our stockholders may be materially diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights of our common stockholders. Debt financing and preferred equity financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business. Securing additional financing could require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from day-to-day activities, which may adversely affect our management’s ability to oversee the development or acquisition of product.
If we raise additional funds through collaborations, strategic alliances or marketing, distribution, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
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Impact of the Coronavirus
On January 30, 2013,2020, the World Health Organization (“WHO”), announced a global health emergency because of a new strain of coronavirus, COVID-19 and the risks to the international community as the virus spreads globally beyond its point of origin. On March 11, 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The COVID-19 pandemic has affected the United States and global economies and may affect our total revenue decreased $3,151,581prospective current and future revenues, and our operations and those of third parties with whom we might interact, including by causing disruptions in the development of our product candidates, product marketing efforts and the conduct of current and expected future clinical trials.
In addition, the COVID-19 pandemic may affect the operations of the FDA and other health authorities, including such authorities in Europe, which could result in delays of reviews and approvals, including with respect to our product candidates and our plans to submit a Q-sub clinical proposal to the FDA for supporting an additional clinical study if required for the DuraGraft product. While there have been no specific notices of delay from federal or 16.8%foreign government authorities, potential interruptions, delays or changes to $15,613,048 from $ 18,764,628the operations of the FDA, or of any foreign authority with which we might interact, might impact the approval of any applications we plan and will need to file in the future.
Cash Flows
The following table sets forth a summary of the net cash flow activity for each of the periods indicated:
Nine Months Ended September 30, | ||||||||||||
2021 | 2020 | Change | ||||||||||
Net cash provided by/(used in): | ||||||||||||
Operating activities | $ | (4,313,038 | ) | $ | (948,305 | ) | $ | (3,364,733 | ) | |||
Investing activities | - | (130,333 | ) | 130,333 | ||||||||
Financing activities | 1,426,949 | 6,275,064 | (4,848,115 | ) | ||||||||
Net increase/(decrease) in cash | $ | (2,886,089 | ) | $ | 5,196,426 | $ | (8,082,515 | ) |
Operating Activities
Net cash used in operating activities was approximately $4.3 million and $1.0 million for the nine months ended September 30, 2012.2021 and 2020, respectively. The Company generates revenue from two divisions. The Product division of Revenues includes revenue generated from the sale of Licenses, Maintenance, Third-Party Products, and Other revenues. The Service division includes revenue generated from services rendered.
The Product division decreased $2,077,770 or 14% to $13,170,113 from $15,247,833net cash used in operating activities for the nine months ended September 30, 20122021 was due to approximately $1.8 million spent on professional fees and $2.5 million spent on salaries and related compensation expenses. The primary factors contributingnet change in operating assets and liabilities primarily related to the decline were decreases in License revenues of $954,414, Maintenance revenues of $116,808, Third Party Product revenues of $897,551 and Other revenues of $ 108,998 compared to the nine months ended September 30, 2012. This is mainly as a result of economic conditions causing an$1.0 million increase in accounts payable, accrued expenses, and amounts due to related parties in support of the sales cycles, whereby strategic customers are giving greater consideration towards the modernization/migrationgrowth of their current application platform.our operating activities.
The Service division of revenue decreased $1,073,810 or 31%, from $3,516,745Financing Activities
Net cash provided by financing activities for the nine months ended September 30, 20122021 was due to $ 2,442,935 for$0.4 million of money obtained from the issuance of promissory notes to related parties of the Company and $1.1 million of proceeds received from the Unit issuances pursuant to the Unit Purchase Agreement.
Contractual Obligations and Commitments
Other than disclosed below, there were no material changes outside the ordinary course of our business during the nine months ended September 30, 2013, primarily as a result2021 to the information regarding our contractual obligations that was disclosed in Management’s Discussion and Analysis of a reductionFinancial Condition and Results of Operations contained in service staff.our 2020 Form 10-K.
Cost of Goods SoldRoyalties and Other Commitments
ForUpon receiving the nine months ended September 30, 2013, total Cost of Goods Sold decreased $ 2,760,159 or 26% to $ 7,690,366 from $ 10,450,525FDA approval for the nine months ended September 30, 2012.DuraGraft and other key intellectual products, the Company:
● | Will pay royalties on net sales of all products obtained through acquisition of Somah’s assets, | |
● | Issue performance warrants with a strike price determined based on the average of the closing prices of the common shares for the 30 calendar days following the date of the public announcement of FDA approval, and | |
● | Upon liquidation of all or substantially all of the assets relating to the Somah products, we will pay 15% of the net sale proceeds up to a maximum of $20 million. |
The Company’s CostCritical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of Goods Sold is segmented into two divisions. The first are costs related to the Product divisionour financial condition and results of revenue which includes the total cost of materials. The second are the costs related to the Service division of revenue which includes; other operating expenses, depreciation & amortization expense, and personnel expenses.
Within the Costs of Goods Sold related to the Product division the Company shows a $1,095,001 or 29% reduction from $3,833,550 for the nine months ended September 30, 2012 to $2,738,549 for the nine months ended September 30, 2013. The primary factors contributing to the Company’s lower Costs of Goods Sold related to the Product division of revenues was a reduction of $863,080 in product material costs and a reduction of $231,921 in third party product material costs, for the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012.
Within the Costs of Goods Sold related to the Service division, the Company had a reduction of $_1,665,158 or 25% in the total costs of services from $6,616,975 for the nine months ended September 30, 2012 to $4,951,817 for the nine months ended September 30, 2013. The primary factor contributing to the Company’s reduction in the costs of services was a decrease in the volume of services rendered and a reduction in personnel costs, depreciation and amortization costs associated with the cost reduction program.
Operating Expenses
The Company’s total operating expense consist of three segments; selling, administrative and general expenses. For the nine months ended September 30, 2013, total operating expenses decreased $ 3,703,409 or 25 % to $ 10,938,080 from $14,641,489 for the nine months ended September 30, 2012.
For the nine months ended September 30, 2013, Selling Expenses decreased $3,362,859 or 34 % to $ 6,627,311 from $ 9,990,170 for the nine months ended September 30, 2012. This was primarily due to decreases in cost of materials of $ 234,736, personnel expense of $ 2,510,500 and in other selling expense of $ 663,892, coupled with a reduction in other operating income of $ 41,904 and a slight increase in depreciation expense of $ 4,365.
For the nine months ended September 30, 2013, Administrative Expense decreased by $ 17,652 or .45% to $3,922,440 from $3,940,092 for the nine months ended September 30, 2012. This was primarily due to an increase in other operating income of $ 76,593, an increase in personnel expenses of $ 211,539, increase in depreciation expense of $ 16,270 offset by a decrease in other operating expenses of $ 168,868
For the nine months ended September 30, 2013, General Expense decreased by $318,898 or 45 % to $392,329 from $711,227 for the nine months ended September 30, 2012. This was primarily due to a decrease in other operating costs of $ 211,603 and a decrease in personnel expenses of $ 67,508, an increase in other operating income of $ 159,480 with an increase in depreciation expense of $ 119,649
Other Income (Expense)
For the nine months ended September 30, 2013, net Other Income of $20,517 increased from net Other Expense of $185,996 for the nine months ended September 30, 2012. This change is primarily due to an increase in Other Income of $513,887 and a net increase in Interest Expense of $307,374 for the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012.
Liquidity & Capital Resources
As September 30, 2013, the Company had $ 259,614 in cash and cash equivalents, compared to $1,154,602 at December 31, 2012.
The Company's cash flow depends on the timely and successful market entry of its strategic offerings. The dependency accounts for revenue generated from direct customers engagements, as well as for revenue generated through the partner channel network.
Especially for strategic offerings for paradigm shifting technologies, management's budget planoperations is based on a series of assumptions regarding market acceptance, readiness and pricing. While management's assumptions are based on market research and customer surveys, assumptions bear the risk of being incorrect and may result in a delay in customer projects and consequently a delay or a reduction in related invoicing. In case these delaysour financial statements, which have an impact on the Company's liquidity and therefore its ability to support its operations with the necessary cash flow, the Company depends on its ability to generate cash flow from other resources, such as debt financing from related or independent resources or as equity financing from existing shareholders or through the stock market.
Since 2012, the Company has been exploring internal and external sources for financing. To date, these sources have provided necessary funds to support the working capital needs of the Company; mainly to finance the Company’s strategic offerings. There can be no assurances, however, that the Company will be able to obtain additional funds from these or any other sources or that such funds will be sufficient to permit the Company to implement its intended business strategy. In the event the Company is not able to secure additional funds, management will postpone any strategic investment until the financing will be sufficient. However, management believes as a result of the assets purchased and sold to date,prepared in accordance with the above-mentioned statement, the Company will be able to provide sufficient cash flow to support its standard operations for the next 9 months.
From time to time, the Company has issued promissory notes to fund its operations. As of September 30, 2013, the Company had an aggregate of $nil.
During the nine-month period ended September 30, 2013, we raised capital by consummating the following transactions:
Subsequent Events:
On August 13, 2012, the Company entered into a note purchase and security agreement (the “Loan Agreement”) with John A. Moore, a member of the Board. Pursuant to the Loan Agreement, the Company issued a secured promissory note, dated October 26, 2012 (the “Note”), to Mr. Moore for the principal amount of $1,000,000, bearing interest at a rate of 20% per year and maturing on the earlier of the first anniversary date of the date of issuance or such other time as described in more detail in the Note, without any penalty for prepayment. To secure the obligations of the Company under the Note, the Company granted Mr. Moore a secured priority security interest in the Company’s Accounts Receivable and its subsidiaries locatedgenerally accepted accounting principles in the United States, of America, as more fully described in the full text of the document.
In the future, the Company may supplement its liquidity to fund its operations or implement its business strategy through the sale of equity or debt securities or through short or long term loans. However, there can be no assurances that the Company will be successful in consummating any such financings on favorable terms, if at all.
Cash Flows
For the Nine Months Ended September 30, | ||||||||
2013 | 2012 | |||||||
Net cash provided (used in) Operating Activities | $ | 1,355,523 | $ | (2,634,297 | ) | |||
Net cash provided (used) by Discontinued | $ | $ | 63,246 | |||||
Net cash provided (used in) Investing Activities | $ | 487,309 | $ | (2,491,803 | ) | |||
Net cash provided (used in) Financing Activities | $ | (2,389,541 | ) | $ | 2,548,096 | |||
Effect of exchange rate changes on cash | $ | (348,280 | ) | $ | 6,991 | |||
Net increase (decrease) in cash and cash equivalents during the period | $ | (894,988 | ) | $ | (2,507,867 | ) | ||
Cash and cash equivalents, beginning of period | $ | 1,154,602 | $ | 3,250,821 | ||||
Cash and cash equivalents, end of period | $ | 259,614 | $ | 742,954 |
Net cash provided by operating activities for the nine month period ended September 30, 2013 was $ 1,355,523 compared to net cash used in operating activities of $2,634,397 and net cash provided by discontinued operation of $63,246 for the nine month period ended September 30, 2012, an increase of approximately $3,989,920. This change is due to the effects of a group wide cost reduction program and due to a reduction in operating Net Loss of approximately $ 2,090,934, decrease in Accounts Receivable, Prepaid Assets and other Non Current Assets of approximately $ 2,140,311, Gains on Sale of Assets of approximately $ 1,566,119, Deferred Income Taxes of approximately $ 1,477,813, shares issued in lieu of Interest and Consulting expense of approximately $ 269,288, Depreciation and Amortization of approximately $109,817, Gains from Equity Investment of approximately $ 26,751 and increase in Retirement Benefit Obligation of $ 6,538. This is offset with a write off of Goodwill of approximately $ (3,079,168). change in Inventory of approximately $ (140,929) and increase in the payment of Accounts Payable and other liabilities of approximately $ (477,522).
Net cash provided by investing activities during the nine month period ended September 30, 2013 was $ 487,309 compared to cash used by investing activities in the comparative period ended September 30, 2012 of $ 2,491,803, increasing by approximately $ 2,797,112. The increase was due to cash provided by the Sale of Intangible Assets of approximately $ 4,146,894,and cash provided by the Sale of property plant and equipment of $ 579,206 as offset by a change in Financial Assets of approximately $ (1,928,988).
Net cash used in financing activities during the nine month period ended September 30, 2013 was $ 2,389,541 compared to net cash provided by financing activities in the comparative period ended September 30, 2012 of $ 2,548,096 decreasing by approximately $ 4,937,637 for the nine month period ended September 30, 2013. This change was due to a $ 3,483,175 reduction in capital paid-in, coupled with cash used by net borrowings from banks of $ 902,508 and payments towards related party loans of $ 2,087,437. Other borrowings provided approximately$ 1,535,482.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Critical Accounting Policies and Estimates
GAAP. The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America requires managementus to make estimates and assumptions that affect the reported amounts of assets, and liabilities and disclosuresexpenses and the disclosure of contingent assets and liabilities at the date ofin our financial statements and the reported amounts of revenuesaccompanying notes. We evaluate these estimates and expenses during the reporting period. Actual results could differ from those estimates. The areas where critical estimates were made that have significant importance to the financial statements are as follows:
i. Allowance for doubtful accounts. The company provides for potential bad debtsjudgments on an account-by-accountongoing basis. Bad debts have not been significantWe base our estimates on historical experience and our allowance has been accurate. Non-trade receivableson various other factors that we believe are also scrutinized and allowedreasonable under the circumstances, the results of which form the basis for based on expected recovery.
ii. Allocation ofmaking judgments about the price paid when acquiring subsidiaries. When the Company acquires subsidiary companies an allocation of the purchase is required. The allocation is based on management’s analysis of thecarrying value of the net assets and is based on estimated future cash flows that each component will produce. Such components might include software, customer lists and other intangible assetsliabilities that are not readily determinable. The allocation hasapparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
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For a significant impact ondescription of our critical accounting policies, please see the future earningssection entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” contained in our 2020 Form 10-K. There have not been any material changes to the critical accounting policies discussed therein during the nine months ended September 30, 2021.
Other Company as certain assets, customer lists for example, must be amortized and charged to operations over time, while other assets, notably goodwill, does not.Information
JOBS Act
iii. Impairment testingAs an emerging growth company under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, we can, and intend to, take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We also intend to rely on intangibles and goodwill. As noted in more detail below, these areas involve numerous estimates as to expected cash flows, expected rates of return and other factors that are difficult to determine and are often out ofexemptions provided by the Company’s direct control.
iv. Valuation of deferred tax credits. The Company provides an allowance for tax recoveries arising from the application of losses carried forward. An allowance is provided where management has determined that it is less than likely that the loss will be applied and income taxes recovered.
Comprehensive Income (Loss)
The Company adopted FASB Codification topic (“ASC”) 220, Reporting Comprehensive Income, which establishes standards for the reporting and display of comprehensive income and its components in the financial statements. Comprehensive income consists of net income and other gains and losses affecting stockholder's equity that are excluded from net income, such as unrealized gains and losses on investments available for sale, foreign currency translation gains and losses and minimum pension liability. Since inception, the Company’s other comprehensive income represents foreign currency translation adjustments and small net actuarial losses on pension plans.
Net Income per Common Share
FASB Codification topic (“ASC”) 260, Earnings per share, requires dual presentation of basic and diluted earnings per share (EPS) with a reconciliation of the numerator and denominator of the EPS computations. Basic earnings per share amounts are based on the weighted average shares of common stock outstanding. If applicable, diluted earnings per share would assume the conversion, exercise or issuance of all potential common stock instruments such as options, warrants and convertible securities, unless the effect is to reduce a loss or increase earnings per share. Diluted net income (loss) per share on the potential exercise of the equity-based financial instruments isJOBS Act, including without limitation, not presented where anti-dilutive. Accordingly, although the diluted weighted average number of common stock outstanding is disclosed on the statements of operation, the calculated net loss per share is the same for bother basic and diluted as both are based on the basic weighted average of common stock outstanding. There were no adjustmentsbeing required to net income forcomply with the period presented in the computationauditor attestation requirements of diluted earnings per share.
Financial Instruments
Financial instruments consistSection 404(b) of cash and cash equivalents, accounts receivable, financial assets, notes payable, liabilities to banks, accounts payable and accrued liabilities and other liabilities. As of the financial statement date, the Company does not hold any derivate financial instruments. Financial assets and liabilities are measured upon first recognition and reviewed at the financial statement date. Changes in fair value are recognized through profit and loss. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments.
Currency RiskSarbanes-Oxley.
We usewill remain an emerging growth company until the US dollar as our reporting currency. The functional currenciesearliest of (i) the last day of the fiscal year following the fifth anniversary of the consummation of our significant foreign subsidiaries areIPO, (ii) the local currency, which includeslast day of the Euro, the British pound, and the Indian rupee. Accordingly, some assets and liabilities are incurred in those currencies and we are subject to foreign currency risks.
Fair Value Measurements
The Company follows FASB Codification topic (ASC”) 820, Fair Value Measurements and Disclosures, for all financial instruments and non-financial instruments accounted for at fair value on a recurring basis. This new accounting standard establishes a single definition of fair value and a framework for measuring fair value, sets out a fair value hierarchy to be used to classify the source of information used in fair value measurement and expands disclosures about fair value measurements required under other accounting pronouncements. It does not change existing guidance as to whether or not an instrument is carried at fair value. The Company 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, which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk.
The Company has adopted (“ASC”) 825, Financial Instruments, which allows companies to choose to measure eligible financial instruments and certain other items at fair value that are not required to be measured at fair value. The Company has not elected the fair value option for any eligible financial instruments.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.
Inventories
Pursuant to ASC 330 (Inventories), inventories held for sale are recognized under inventories. Inventories were measured at the lower of cost or market. Cost is determined on a first-in-first out basis, without any overhead component.
Goodwill and other Intangible Assets
Intangible assets predominately include goodwill, acquired software and capitalized software development. Intangible assets acquired in exchange for payment are reflected at acquisition costs. If the development costs can be capitalized per ASC 985-20-25, these are reflected as ascribable personnel and overhead costs.
Company created software can be intended for sale to third parties or used by the Company itself. If the conditions for capitalization are not met, the expenses are recorded with their effect on profit in thefiscal year in which they were incurred.
The Company amortizes intangible assets with a limited useful life towe have total annual gross revenue of at least $1.07 billion, (iii) the estimated residual book value in accordance with ASC regulations. In addition, in special circumstances according to ASC 350-30, a recoverability test is performed and, if applicable, unscheduled amortization is considered.
The useful life of acquired software is between three and five years and three years for Company-designed software.
Intangible assets obtained as part of an acquisition which do not meet the criteria for a separate entry are identified as goodwill. Goodwill is reviewed once a year during an impairment test, whereby the appraised fair valuelast day of the invested capital of the reporting unit, is compared with the carrying (book) value of its invested capital amount (including goodwill.) Use value is generally appliedfiscal year in order to determine the recoverability of goodwill and intangible assets with an indefinite useful life. The projected financial plan prepared by the management serves as the basis for this determination of use value and the planning assumptions are each adjusted for the current state of knowledge. Reasonable assumptions regarding macroeconomic trends and historical developments are taken into account in making these adjustments. Future estimated cash flows are determined based on the expected growth rates of the markets in question.
If the carrying amount of the reporting unit exceeds the appraised fair value, the impairment based on use value measures the amount of loss, if any, and an unscheduled amortization expense is recorded. If the appraised value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered to be impaired.
Property, Plant and Equipment
Property, plant and equipment are valued at acquisition or manufacturing costs, reduced by scheduled and, if necessary, unscheduled depreciation. Fixed assets are depreciated on a straight-line basis, prorated over their expected useful life. Scheduled depreciation is mainly based on useful lives of 3 to 10 years. Leasehold improvements are depreciated up to 40 years.
If fixed assets are sold, retired or scrapped, the profit or loss arising from the difference between the net sales proceeds and the residual book value are included under other operating earnings and expenses.
Impairment or Disposal of Long-Lived Assets
The Company evaluates the recoverability of its fixed assets and other assets in accordance with ASC topic, 360.10. This guidance requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds its’ expected cash flows or appraised value In this instance, the asset is considered to be impaired and is written down to fair value.
Revenue Recognition
License Revenues
Our license revenues consist of revenues earned from the licensing of our software products. These products are generally licensed on a perpetual basis. Pricing models have generally been based either upon the physical infrastructure, such as the number of physical desktop computers or servers, on which our software runs or on a per user basis. License revenues are recognized when the elements of revenue recognition for the licensed software are complete, generally upon electronic shipment of the software and the software key to provide full access to all functionalities for our customers. In general our invoices reflect license, service and maintenance components. In the case of multi element contracts, the revenues allocated to the software license in most cases represent the residual amount of the contract after the fair value of the other elements has been determined. Certain products of our software offering are licensed on a subscription basis.
Software Maintenance Revenues
Software maintenance revenues are recognized ratably on a pro-rata basis over the range of the contract period. Our contract periods typically range from one to five years. Vendor-specific objective evidence (“VSOE”) of fair value for software maintenance services is established by the rates charged in stand-alone sales of software maintenance contracts or the stated renewal rate for software maintenance. Customers who are party to software maintenance agreements with us are entitled to receive support, product updates and upgrades on a when-and-if-available basis.
Professional Services Revenues
Professional services include pre-project consulting, software design, customization, project management, implementation and training. Professional services are not considered essential to the functionality of our products, as these services do not alter the product capabilities and may be performed by our customers or by other vendors. Professional services engagements performed for a fixed fee, for which we are abledeemed to make reasonably dependable estimatesbe a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of progress toward completion, are recognized on a proportional performance basis based on hours incurred and estimated hours of completion. Professional services engagements that are on a time and materials basis are recognized based on hours incurred. Revenues on all other professional services engagements are recognized upon completion. Our professional services may be sold with software products or on a stand-alone basis. Vendor Specific Objective Evidence (VSOE) of fair value for professional services is based upon the standard rates we charge for such services when sold separately.
Foreign Currency Translation
The functional currencyour common stock held by non-affiliates exceeded $700.0 million as of the Company is US dollars. For financial reporting purposes, the financial statements of GROUP were translated into US dollars. Assets and liabilities were translated at the exchange rates at the balance sheet dates and revenue and expenses were translated at the average exchange rates and stockholders’ equity was translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income but are included in foreign exchange adjustment to other comprehensive income, a component of stockholders’ equity.
Other Provisions
According to FASB ASC 450 Contingencies, provisions are made whenever there is a current obligation to third parties resulting from a past event which is likely in the future to lead to an outflow of resources and of which the amount can be reliably estimated. Provisions not already resulting in an outflow of resources in the following year are recognized at their discounted settlement amount on the financial statement date. The discount taken is based on market interest rates. The settlement amount also includes the expected cost increases. Provisions are not set off against contribution claims. If the amended estimate leads to a reductionlast business day of the obligatory amount, the provision is proportionally reversed and the earnings are recognized in other operating earnings.
Deferred Taxes
Income taxes are provided in accordance with FASB Codification topic 740, Accounting for Income Taxes. A deferred tax assetsecond fiscal quarter of such year, or liability is recorded for all temporary differences between financial and tax reporting and net operating loss-carry forwards.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that, some portion or all of the deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on(iv) the date of enactment.
Recent Accounting Pronouncements
In July 2012, the FASBon which we have issued ASU 2011-08, Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for Impairment. With the objective of reducing the cost and complexity of performing an impairment test for indefinite-lived intangible assets by simplifying how an entity tests those assets for impairment and to improve consistency in impairment testing guidance among long-loved asset categories. The amendments permit an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles - Goodwill and Other - General Intangibles Other than Goodwill. The more-likely-than-not threshold is defined as having the likelihood of more than 50 percent. The amendments are effective for annual and interim impairment tests performed beginning April 1, 2013. Adoption of this new standard is not expected to have significant impact to$1.0 billion in non-convertible debt securities during the Company’s financial statement.prior three-year period.
Principles of Consolidation and Reverse Acquisition
OFF-BALANCE SHEET ARRANGEMENTS
As previously disclosed,
During the Company originally exchanged a total of 5,405,411 shares of common stock in exchange for 50.1% of the outstanding common shares of GROUP (and retained its 50.1% shareholding by acquiring an additional 883,765 shares of GROUP on February 27, 2012). Although the Company was the legal acquirer, the transaction was accounted for as a recapitalization of GROUP in the form of a reverse merger, whereby GROUP became the accounting acquirer and was deemed to have retroactively adopted the capital structure of the Corporation. Accordingly, the accompanying consolidated financial statements reflect the historical consolidated financial statements of GROUP for all periods presented and do not include the historical financial statements of the Company. All costs associated with the reverse merger transaction were expensed as incurred. Those expenses totaled approximately $300,000 and were included in professional fees in administrative expenses.
The Company has based its financial reporting for the consolidation with GROUP in accordance with FASB Accounting Standard Codification (ASC) 805-40 as it relates to reverse acquisitions. Goodwill has been measured as the excess of the fair value of the consideration effectively transferred by the Company, the acquiree, for financial reporting purposes, over the net amount of the Company’s recognized identifiable assets and liabilities.
We have recorded the acquired assets and liabilities of GBSX on the acquisition date of January 6, 2011, at their fair value and the operations of GBSX have been included in the consolidated financial statements since the acquisition date.
The assets and liabilities of GROUP, the acquirer for financial reporting purposes, are measured and recognized in the consolidated financial statements at their precombination carrying amounts in accordance with ASC 805-40-45-2(a). Therefore, in a reverse acquisition, the non-controlling interest reflects the non-controlling shareholders’ proportionate interest in the pre-combination carrying amounts of GROUP’s net assets even though the non-controlling interests in other acquisitions are measured at their fair values at the acquisition date.
.
OFF-BALANCE SHEET ARRANGEMENTS
We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we dodid not have, any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. Wenor do notwe currently have, any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.off-balance sheet arrangements as defined under SEC rules.
ItemITEM 3. QuantitativeQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
Our cash and Qualitative Disclosures about Market Risk.cash equivalents consist of cash in readily available checking accounts and money market funds. Our long-term debt bears interest at a fixed rate. As a result, the fair value of our portfolio is relatively insensitive to interest rate changes and we do not consider the effects of interest rate movements to be a material risk to our financial condition.
N/AEffects of Inflation
Inflation generally affects us by increasing our cost of labor and research and development contract costs. We do not believe inflation has had a material effect on our results of operations during the periods presented
Item
ITEM 4. Controls and Procedures.CONTROLS AND PROCEDURES
EvaluationConclusion Regarding the Effectiveness of Disclosure Controls and Procedures
As of September 30, 2013, our management, with the participation of our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal financial and accounting officer),We evaluated the effectiveness of our disclosureinternal controls over financial reporting as defined by Rules 13a-15(e) and procedures pursuant to Rule 13a-15(b) promulgated15d-15(e) under the Securities Exchange Act as of 1934, as amended (the “Exchange Act”). Based on that evaluation,the end of the period covered by this quarterly report, with the participation, and under the supervision, of our management, including our Interim Chief Executive Officer and Vice President of Finance. Based upon this evaluation, our Interim Chief FinancialExecutive Officer and VP Finance concluded that as of September 30, 2013,2021, our disclosureinternal controls and proceduresover financial reporting were ineffective due to the material weakness described below.
A material weakness is a deficiency, or a combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim consolidated financial statements may not effectivebe prevented or detected on a timely basis.
Specifically, during the period ended September 30, 2021:
● | Marizyme did not have appropriate number of independent directors on its Board of Directors, | |
● | Marizyme had a shortage of in-house personnel with appropriate level of technical knowledge required to identify and address certain complex or non-routine transactions and related reporting issues. Management has and will continue to seek guidance from third-party experts and/or consultants to gain a thorough understanding of material, complex and non-routine transactions, | |
● | The shortage of in-house finance personnel resulted in inappropriate segregation of duties, and | |
● | Insufficient documentation of written policies and procedures over internal controls over financial reporting, transaction processing, and period end closing procedures. |
26 |
We are taking steps to remediate the material weakness identified by:
● | Attracting and retaining independent directors to add to the Board of Directors and establish an Audit Committee comprised of the independent directors. | |
● | Attracting, retaining, and enabling external or internal top talent in accounting and finance functions to properly segregate duties and to ensure timely and accurate preparation of the financial statements. | |
● | Developing, documenting, and maintaining adequate written accounting policies and procedures. |
We believe these measures will remediate the material weakness in ensuring thatinternal control over financial reporting described above by the information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that such material information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.second quarter of 2022.
Changes in Internal Control Over Financial Reporting
As previously reported bydiscussed above, the Companymanagement is working on a Form 8-K filed withremediation the Commission on July 10, 2013, on July 10, 2013, the Board of Directors of the Company reappointed Joerg Ott as the Chief Executive Officer (Principal Executive Officer) of the Company, effective immediately. Mr. Ott replaced Mr. Gary D. MacDonald who had been serving as the Company’s Interim Chief Executive Officer since July 11, 2012.
Also as previously reported by the Company on a Form 8-K filed with the Commission on August 2, 2013, on August 2, 2013, Gary D. MacDonald resigned as member of the Board of Directors of the Company and as, Managing Director of GBS-UK. From March 1, 2012material weakness but due to the date of his resignation, Mr. MacDonald also served as member ofcorporate restructuring and multiple changes to our officers and management team, no significant steps have been taken to remediate the Board’ Audit Committee. Mr. MacDonald’s resignation was not due to any disagreement with the Company or the Board.
Other than the foregoing,material deficiency in our internal controls over financial reporting during the quarternine months ended September 30, 2013, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.2021.
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PART II-OTHERII. OTHER INFORMATION
ItemITEM 1. Legal Proceedings.LEGAL PROCEEDINGS.
On October 23, 2013, the Company filed a lawsuit (GBS Enterprises, Inc. v. Reliance Globalcom, Inc.)From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the Superior Courtordinary course of the Statebusiness. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of California, County of San Francisco, seekingany such legal proceedings or claims that we believe will have a declaratory judgment that the Company has no obligation to Reliance Globalcom Inc. (“Reliance”) for any claimsmaterial adverse effect on our business, financial condition or liabilities in connection with a Master Services Agreement (“MSA”) executed by Reliance and IDC Global Inc. (“IDC”) a then wholly owned subsidiary of the Company in March 2010. On February 1, 2013, GBS sold IDC to Global Telecom & Technology Inc. (“GTT”). Pursuant to the governing Stock Purchase Agreement (SPA), GTT gained all right, title and interest in 100% of all of IDC’s stock, all of which had been owned by GBS. Pursuant to the Stock Purchase Agreement, GTT withheld $528,777.93 of the purchase price from payment to GBS to cover potential exposure due to the Identified Dispute described herein between IDC and Reliance. The Stock Purchase Agreement requires that, within three days of notice to GTT that the Identified Dispute described herein has been resolved, GTT will release the $528,777.93 to GBS. The Company is seeking declaratory relief from the Court stating the Company is not liable to Reliance and that GTT may release the $528,777.93 in funds owed to the Company. There were no material developments in this case since the filing of the lawsuit.operating results.
The Company intends to vigorously defend its interests in this matter.
ITEM 1A. RISK FACTORS.
Item 1A. Risk Factors.
The disclosure required under this item is not requiredThere have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on April 15, 2021, which may be reported by small reporting companies; as such term is defined by Item 503(e) of Regulation S-K.accessed via EDGAR through the Internet at www.sec.gov.
Item
ITEM 2. Unregistered SalesUNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
During the nine-month period ended September 30, 2021, we did not conduct any unregistered sales of Equity Securitiesour equity securities that were not previously disclosed in a current report of Form 8-K and Usewe did not repurchase any of Proceedsour common stock.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Item 3. Defaults Upon Senior Securities.
Not applicable.
None
ItemITEM 5. Other Information.OTHER INFORMATION.
NoneOn July 6, 2021, the Company’s Board of Directors appointed Dr. Vithal Dhaduk as Interim Chief Executive Officer. He will retain his position as Chairman of the Board of Directors.
On July 12, 2021, in connection with the termination of his consulting agreement, Bruce Harmon resigned as the Chief Financial Officer of Marizyme.
On November 10, 2021, the Board of Directors appointed David Barthel as Chief Executive Officer of Marizyme. Dr. Vithalbhai Dhaduk, the former Interim Chief Executive Officer, resigned from this position on November 10, 2021 and remains Chairman of the Board.
Item
ITEM 6. Exhibits.EXHIBITS
The following exhibits are filed as part of this report or incorporated by reference:
SIGNATURES
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrantRegistrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) | ||
Date: November | ||
/s/ David Barthel | ||
David Barthel | ||
Chief Executive Officer | ||
(Principal Executive | ||