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 March 31, 2022
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ______ to _______
Commission File Number:000-53223
000-53223
MARIZYME, 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)
(561) 935-9955
(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. Yes ☐ No ☒
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 30,837,624May 16, 2022, 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 | ||||
Condensed Consolidated Financial Statements | 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 | 6 | |||
Notes to Unaudited Condensed Consolidated Financial Statements | 7 | |||
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 | 25 | |||
ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |||
Defaults Upon Senior Securities | ||||
Exhibits | 27 | |||
28 |
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
March 31, 2022 | December 31, 2021 | |||||||
(unaudited) | ||||||||
ASSETS: | ||||||||
Current | ||||||||
Cash | $ | 3,172,967 | $ | 4,072,339 | ||||
Accounts receivable | 8,650 | 8,650 | ||||||
Other receivables | 20,806 | 41,307 | ||||||
Prepaid expense | 469,913 | 257,169 | ||||||
Inventory | 15,535 | 22,353 | ||||||
Total current assets | 3,687,871 | 4,401,818 | ||||||
Non-current | ||||||||
Property, plant and equipment, net | 12,749 | 12,817 | ||||||
Operating lease right-of-use assets, net | 1,098,059 | 1,158,776 | ||||||
Intangible assets, net | 52,655,899 | 52,866,192 | ||||||
Prepaid royalties, non-current | 339,091 | 339,091 | ||||||
Deposits | 30,000 | 30,000 | ||||||
Goodwill | 7,190,656 | 7,190,656 | ||||||
Total non-current assets | 61,326,454 | 61,597,532 | ||||||
Total assets | $ | 65,014,325 | $ | 65,999,350 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY: | ||||||||
Current | ||||||||
Accounts payable and accrued expenses | $ | 822,556 | $ | 1,596,147 | ||||
Note payable | 284,918 | 127,798 | ||||||
Due to related parties | 271,371 | 1,132,634 | ||||||
Operating lease obligations | 277,142 | 277,142 | ||||||
Total current liabilities | 1,655,987 | 3,133,721 | ||||||
Non-current | ||||||||
Operating lease obligations, net of current portion | 820,917 | 881,634 | ||||||
Note payable, net of current portion | - | 469,252 | ||||||
Convertible notes | 318,062 | 26,065 | ||||||
Derivative liabilities | 3,821,564 | 2,485,346 | ||||||
Contingent liabilities | 13,143,000 | 11,313,000 | ||||||
Total non-current liabilities | 18,103,543 | 15,175,297 | ||||||
Total liabilities | 19,759,530 | 18,309,018 | ||||||
Commitments and contingencies (Note 10) | - | - | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $ | par value, shares authorized, shares issued and outstanding as of March 31, 2022 and December 31, 2021- | - | ||||||
Common stock, par value $ | , shares authorized, issued and outstanding shares - and at March 31, 2022 and December 31, 2021, respectively40,828 | 40,528 | ||||||
Additional paid-in capital | 99,162,415 | 95,473,367 | ||||||
Accumulated deficit | (53,948,448 | ) | (47,823,563 | ) | ||||
Total stockholders’ equity | 45,254,795 | 47,690,332 | ||||||
Total liabilities and stockholders’ equity | $ | 65,014,325 | $ | 65,999,350 |
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 March 31, | ||||||||
2022 | 2021 | |||||||
Revenue | $ | - | $ | 73,952 | ||||
Operating expenses: | ||||||||
Professional fees (includes related party amounts of $103,200, and $Nil, respectively) | 544,040 | 529,073 | ||||||
Salary expenses | 915,640 | 884,041 | ||||||
Research and development | 1,218,296 | 391,504 | ||||||
Stock-based compensation | 716,432 | 367,718 | ||||||
Depreciation and amortization | 210,361 | 416,595 | ||||||
Other general and administrative expenses | 390,572 | 295,572 | ||||||
Total operating expenses | 3,995,341 | 2,884,503 | ||||||
Total operating loss | (3,995,341 | ) | (2,810,551 | ) | ||||
Other expense | ||||||||
Interest and accretion expenses | (299,544 | ) | - | |||||
Change in fair value of contingent liabilities | (1,830,000 | ) | - | |||||
Total other expense | (2,129,544 | ) | - | |||||
Net loss | $ | (6,124,885 | ) | $ | (2,810,551 | ) | ||
Loss per share – basic and diluted | $ | (0.15 | ) | $ | (0.08 | ) | ||
Weighted average number of shares of common stock outstanding – basic and diluted | 40,628,188 | 35,928,188 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4 |
MARIZYME, INC.
Condensed Consolidated Statements of Stockholders’ Equity
For the Three Months Ended March 31, 2022 and2021
(Unaudited)
Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
Balance, December 31, 2020 | 35,928,188 | $ | 35,928 | $ | 82,077,334 | $ | (36,825,634 | ) | $ | 45,287,628 | ||||||||||
Stock-based compensation expense | - | - | 334,385 | - | 334,385 | |||||||||||||||
Net loss | - | - | - | (2,810,551 | ) | (2,810,551 | ) | |||||||||||||
Balance, March 31, 2021 | 35,928,188 | $ | 35,928 | $ | 82,411,719 | $ | (39,636,185 | ) | $ | 42,811,462 |
Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
Balance, December 31, 2021 | 40,528,188 | $ | 40,528 | $ | 95,473,367 | $ | (47,823,563 | ) | $ | 47,690,332 | ||||||||||
Stock-based compensation expense | - | - | 716,432 | - | 716,432 | |||||||||||||||
Issuance warrants | - | - | 2,969,916 | - | 2,969,916 | |||||||||||||||
Exercise of warrants | 300,000 | 300 | 2,700 | - | 3,000 | |||||||||||||||
Net loss | - | - | - | (6,124,885 | ) | (6,124,885 | ) | |||||||||||||
Balance, March 31, 2022 | 40,828,188 | $ | 40,828 | $ | 99,162,415 | $ | (53,948,448 | ) | $ | 45,254,795 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5 |
MARIZYME, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (6,124,885 | ) | $ | (2,810,551 | ) | ||
Adjustments to reconcile net loss to net cash used in operations: | ||||||||
Depreciation and amortization | 210,361 | 416,595 | ||||||
Stock-based compensation | 716,432 | 334,385 | ||||||
Stock-based compensation - restricted common stock | - | 33,333 | ||||||
Interest and accretion on convertible notes and notes payable | 299,544 | - | ||||||
Issuance of warrants for services | 568,679 | - | ||||||
Change in fair value of contingent liabilities | 1,830,000 | - | ||||||
Change in operating assets and liabilities: | ||||||||
Accounts and other receivable | 20,501 | 4,802 | ||||||
Prepaid expense | (212,744 | ) | 43,290 | |||||
Inventory | 6,818 | 11,700 | ||||||
Accounts payable and accrued expenses | (767,187 | ) | (98,584 | ) | ||||
Due to related parties | (861,263 | ) | - | |||||
Net cash used in operating activities | (4,313,744 | ) | (2,065,030 | ) | ||||
Cash flows used in investing activities: | ||||||||
Purchase of intangible assets | - | (2,775 | ) | |||||
Net cash used in investing activities | - | (2,775 | ) | |||||
Cash flows from financing activities: | ||||||||
Proceeds from convertible promissory notes, net of issuance cost | 3,411,372 | - | ||||||
Shares issued for exercise of warrants | 3,000 | - | ||||||
Net cash provided by financing activities | 3,414,372 | - | ||||||
Net change in cash | (899,372 | ) | (2,067,805 | ) | ||||
Cash at beginning of period | 4,072,339 | 2,902,762 | ||||||
Cash at end of period | $ | 3,172,967 | $ | 834,957 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | - | $ | - | ||||
Cash paid for taxes | $ | - | $ | - | ||||
Non-cash investing and financing activities: | ||||||||
Derivative liabilities and debt discount issued in connection with convertible notes | $ | 1,336,218 | $ | - | ||||
Warrants and debt discount issued in connection with convertible notes | $ | 2,401,237 | $ | - | ||||
Settlement of notes payable with convertible notes | $ | 326,083 | $ | - |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6 |
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 accountingusing principles 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 $53,948,448 at March 31, 2022 (December 31, 2021 - $47,823,563). Additionally, the Company has working capital of $2,031,884(December 31, 2021 - $1,268,097) and $3,172,967(December 31, 2021 - $4,072,339) of cash on hand, which may not be sufficient to fund operations for the next twelve months. 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 filings 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 private or public offerings. 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 public or private offerings.
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: My Health Logic Inc. (“My Health Logic” or “MHL”), Somahlution, Inc. (“Somahlution”), Somaceutica, Inc. (“Somaceutica”), (collectively – “Somah”), 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 March 31, 2022 (the “2021 Form 10-K”). The balance sheet as of December 31, 2021 was derived from audited consolidated financial statements included in the 2021 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 1 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.
7 |
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 condensed consolidated financial statements and the reported amounts of revenuesrevenue and expenses during the 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.
The carrying amounts of certain accounts and other receivable, accounts payable and accrued expenses, notes payable, and amounts due to related parties approximate fair value due to the short-term nature of these instruments.
The 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.
The contingent liabilities assumed on the acquisition of Somah in 2020 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.
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 months ended March 31, 2022, changes in these assumptions resulted in a $806,000 increase in fair value of these liabilities. At March 31, 2022 the fair market value of performance warrants and pediatric vouchers warrants liabilities was $5,158,000. | |
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 months ended March 31, 2022, changes in these assumptions resulted in a $1,065,000 increase in fair value of these liabilities. At March 31, 2022 the fair market value of royalty payments was $5,053,000. | |
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 months ended March 31, 2022, changes in these assumptions resulted in a $41,000 decrease in fair value of this liability. At March 31, 2022 the fair market value of rare pediatric vouchers was $1,109,000. | |
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 months ended March 31, 2022. At March 31, 2022 the fair market value of liquidation preference was $1,823,000. |
The derivative liabilities consist of optional and automatic conversion features and the share redemption feature attached to the convertible notes, issued pursuant to the Unit Purchase Agreement (Note 7).
8 |
The Company has no financial assets measured at fair value on a recurring basis. None of the Company’s non-financial assets or liabilities are recorded at fair value on a non-recurring basis. No transfers between levels have occurred during the periods presented.
Marizyme measures the following financial instruments at fair value on a recurring basis. As at March 31, 2022 and December 31, 2021, the fair values of these financial instruments were as follows:
SCHEDULE OF FAIR VALUES OF FINANCIAL INSTRUMENTS
Fair Value Hierarchy | ||||||||||||
March 31, 2022 | Level 1 | Level 2 | Level 3 | |||||||||
Liabilities | ||||||||||||
Derivative liabilities | $ | - | $ | - | $ | 3,821,564 | ||||||
Contingent liabilities | - | - | 13,143,000 | |||||||||
Total | $ | - | $ | - | $ | 16,964,564 |
Fair Value Hierarchy | ||||||||||||
December 31, 2021 | Level 1 | Level 2 | Level 3 | |||||||||
Liabilities | ||||||||||||
Derivative liabilities | $ | - | $ | - | $ | 2,485,346 | ||||||
Contingent liabilities | - | - | 11,313,000 | |||||||||
Total | $ | - | $ | - | $ | 13,798,346 |
The following table provides a rollforward of all liabilities measured at fair value using Level 3 significant unobservable inputs:
RECONCILIATION OF LIABILITIES AT FAIR VALUE
Derivative and Contingent Liabilities | ||||
Balance at December 31, 2021 | $ | 13,798,346 | ||
Change in fair value of contingent liabilities | 1,830,000 | |||
Derivative liabilities issued pursuant to Unit Purchase Agreement | 1,336,218 | |||
Balance at March 31, 2022 | $ | 16,964,564 |
The Company did not have any derivative or contingent liabilities in the three months ended March 31, 2021.
Research and Development Expenses and Accruals
All research and development costs are expensed in the period incurred and consist primarily of salaries, payroll taxes, and employee benefits, for those individuals involved in research and development efforts, external research and development costs incurred under agreements with contract research organizations and consultants to conduct and support the Company’s ongoing clinical trials of Duragraft, and costs related to manufacturing Duragraft for clinical trials. The Company has entered into various research and development contracts with various organizations and other companies. Payments of these activities are based on the terms of the individual agreements which matches to the pattern of costs incurred. Payments made in advance are reflected in the accompanying balance sheets as prepaid expenses. The Company records accruals for estimated costs incurred for ongoing research and development activities. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the services, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates may be required in determining the prepaid or accrued balances at the end of any reporting period. Actual results could differ from thosethe Company’s estimates.
The Financial Accounting Standards Board (“FASB”) authoritative guidance regarding segment reporting establishes standardsStock-based compensation expense for the way that public business enterprises report information about operating segments in annual financial statementsemployees 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 maintenance 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 componentsdirectors is recognized in the financial statements. Comprehensive income consistsCondensed Consolidated Statements of net incomeOperations based on estimated amounts, including the grant date fair value and other gainsthe expected service period. For stock options, we estimate the grant date fair value using a Black-Scholes valuation model, which requires the use of multiple subjective inputs including estimated future volatility, expected forfeitures 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 reconciliationexpected term of the numerator and denominator ofawards. We estimate the EPS computations. Basic earnings per share amounts areexpected future volatility based on the weighted average shares of common stock outstanding. If applicable, diluted earnings per share would assumestock’s historical price volatility. The stock’s future volatility may differ from 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 of cash and cash equivalents, accounts and other receivable, financial assets, notes payable, liabilities to banks, accounts payable, accrued liabilities and other liabilities, due to related parties and retirement benefit obligations. Financial assets and liabilities are measured upon first recognition and reviewedestimated volatility at the financial statementgrant date. Changes inFor restricted stock unit (“RSU”) equity awards, we estimate the grant date 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.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Currency Risk
We use the US dollar asusing our reporting currency. The functional currencies of our significant foreign subsidiaries are the local currency, which includes the Euro, the British Pound, the Indian Rupee, and the Bulgarian Lev. Accordingly, some assets and liabilities are incurred in those currencies and we are subject to foreign currency risks.
Fair Value Measurements
The Company follows 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 theclosing stock 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.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Goodwill and other Intangible Assets
Intangible assets predominately comprise goodwill, acquired software and capitalized software development services. 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 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 value 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 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 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 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.grant. We recognize the effect of forfeitures in compensation expense when the forfeitures occur. The estimated forfeiture rates may differ from actual forfeiture rates which would affect the amount of expense recognized during the period. We recognize the value of the awards over the awards’ requisite service or performance periods. The requisite service period is generally the time over which our share-based awards vest.
Recent Accounting PronouncementsComparative Information
In July 2012,To conform with the FASB issued ASU 2011-08, Intangibles – Goodwillcurrent period’s financial statement presentation, the Company reclassified certain professional fees, salaries, and Other (Topic 350): Testing Goodwillrent expenses related to research and development activities for Impairment. With the objectiveperiod ended March 31, 2021 into research and development expenses line item on the Condensed Consolidated Statements of reducing the costOperations. Such reclassifications were not considered material 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 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. 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 toeffect on 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 reportingCompany’s net loss 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 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.period ended March 31, 2021.
We have recorded the acquired assets and liabilities of Group Business Software Enterprises, Inc. 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 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, 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).
NotesNOTE 4 – ACQUISITION
My Health Logic Inc.
On November 1, 2021, Marizyme entered into a definitive arrangement agreement with Health Logic Interactive Inc. (“HLII”) pursuant to which the Company would acquire all of the issued and outstanding common shares of My Health Logic, a wholly owned subsidiary of HLII, in exchange for common shares of Marizyme (the “Marizyme Shares”).
Marizyme is dedicated to the Interim Financial Statementsacceleration, development and commercialization of medical technologies that promote patient health, therefore a strategic decision was made to acquire My Health Logic, which have provided Marizyme with access to MHL’s lab-on-chip technology platform and its patient-centric, digital point-of-care diagnostic device, MATLOC 1; and allowed for further growth and development of Marizyme’s portfolio of medical products.
September 30, 2013
GBS Enterprises IncorporatedOn December 22, 2021, Marizyme received the necessary regulatory, court and stock exchange approval to complete the acquisition of MHL resulting in a total of 4,600,000 Common Shares issued to HLII; 230,000 of these shares are being held and administered by Marizyme to be released to HLII, less any amounts claimed by Marizyme or its affiliates for any losses arising out of certain breaches as set out in the acquisition agreement. This resulted in HLII holding approximately 11.35% of the total number of issued and outstanding Marizyme Shares (based on Marizyme Shares issued and outstanding immediately after closing).
Unaudited
Note 10 DEFERRED TAX ASSETS
Deferred taxIn accordance with ASC 805-10 the substance of a transaction constitutes a business combination as the business of My Health Logic Inc. meets the definition of a business under the standard. Accordingly, the transaction was accounted for in accordance with the acquisition method of accounting, and the assets acquired, and the liabilities assumed have been recorded at their respective estimated fair values as 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. Depreciationacquisition date. The purchase price was based on management’s estimate of fair value of the computer hardware listed as office equipment is distributed overcommon shares issued.
According to ASC 805 the acquirer has 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 derivesyear 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 marketed by the Company are generally recognized as expenses in 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 work as well as overhead costs, provided that these are related to the development work and do not represent general administrative costs. The ascribable overhead costs are directly recognized.
Capitalized development costs are generally amortized over a period of three years starting with the date of marketabilityacquisition to recognize measurement period adjustments. While Marizyme does not expect the carrying amount and the fair value of identifiable assets and liabilities acquired, provided below, to change, the new products or major releases.
Notes toestimates surrounding 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 scope of the cost price allocation of the business divisions acquired this year.
The useful life spans were based uniformly throughoutof intangible assets acquired may differ from the Company according toinitial values determined. As at March 31, 2022, those used by the parent company. Scheduled amortization is performed over a period from three to ten years.
estimates remain preliminary. The change in useful life of the domain “gbs.com”, was estimated as unlimited. Thisintangible assets will not have a material impact on the net loss for the periods ended March 31, 2022 and 2021. Additionally, the Company is because no other legal, contractual or other factors existin the process of finalizing the tax basis related to these intangible assets which would limit its useful life. It is not systematically amortized, but rather annually. Should there exist signs indicating towards impairment it is tested for recoverabilityfinal as of March 31, 2022.
Details of the carrying amount and if necessary, written down to the amount which could be obtained for it if sold.fair value of identifiable assets and liabilities acquired and purchase consideration paid were as follows:
SCHEDULE OF PRELIMINARY ALLOCATION OF CONSIDERATION
Consideration given up | ||||
Common shares | $ | 7,774,000 | ||
Total consideration given up | $ | 7,774,000 | ||
Fair value of identifiable assets acquired, and liabilities assumed | ||||
Net working deficit | $ | (613,156 | ) | |
Property, plant, and equipment | 12,500 | |||
Intangible assets | 6,600,000 | |||
Goodwill | 1,774,656 | |||
Total identifiable assets | $ | 7,774,000 |
AmortizationAs a result of concessions, industrial property and similar rights and assets,the My Health Logic acquisition, we acquired its lab-on-chip technology platform, its patient-centric, digital point-of-care diagnostic device - MATLOC 1 as well as licenses to suchpatents rights and assets are presentedtrademarks relating to it. In addition, we acquired ownership rights to MATLOC patents issued in the StatementEuropean Union, Canada, and the United States.
The intangible assets acquired include:
● | Trade name, with estimated remaining economic life of 14 years, | |
● | Software, which enables customers to track and update their test results, with economic life of 15 years, and | |
● | Biotechnology intangible assets related to lab-on-chip technology, with estimated remaining economic life of 17 years. |
As part of Operationsthe acquisition, Marizyme assumed an aggregate of $468,137 in notes payable, the notes are unsecured, bear interest at a rate of 9% per annum and Comprehensive Income/Loss within Cost mature on August 12, 2022. For the three months ended March 31, 2022, Marizyme recognized $6,085 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
interest expense on the notes payable (March 31, 2021 - $Nil). The Company settled an aggregate of $278,678 of these notes payable as part of Unit Purchase Agreement issuances during the three months ended March 31, 2022 (Note 7). As at March 31, 2022, balance of this accountnotes payable, net of 132 KUSD primarily includes rent and other security depositscurrent portion was $204,525 (December 31, 2012 restated year end: 156 KUSD)2021 - $469,252).
Notes
Goodwill is attributed 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
Asworkforce and profitability of the financial statement date, trade accounts payable amountedacquired business and is not deductible for tax purposes. A residual method methodology was used to 2,061 KUSD (December 31, 2012 restatedestimate the fair market value goodwill. A pre-tax discount rate based on weighted average cost of capital of 37.5% was used in the fair value assumptions for the assembled workforce acquired.
Pro-forma revenue, net income /(loss), and earnings per share are not presented for this acquisition as they are not material.
10 |
NOTE 5 – LEASES
On December 11, 2020, the Company entered into a 5.5 - year end: 3,095 KUSD). Trade payables are carriedlease agreement for administrative office and laboratories, which commenced in December 2020 at their repayment amount and all have a residual termmonthly rent of up to one year.
Other Accrual
Other provisions are created asapproximately $10,800, increasing by 2.5% annually beginning in the second year 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 consulting of the Company were recognized at 109 KUSD (December 31, 2012 restated year end: 128 KUSD).
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 leading to realization of sales after the financial statement date are reported under deferred income. The deferred income items listed as of the financial statement date in the amount of 6,847 KUSD (December 31, 2012 restated year end: 6,100 KUSD) primarily include maintenance income collected in advance for the period afterlease until the end of the financial statement date. They are amortized on a straight-line basis over their respective contract terms.
Notesterm. Additionally, pursuant to the Interim Financial Statementsagreement, the Company will pay approximately $12,000 per month in operating expenses. As at March 31, 2022, the remaining lease term was 4.17 years. The lease had been classified as an operating lease.
September 30, 2013
GBS Enterprises IncorporatedThe assets and liabilities from the lease were recognized at the lease commencement date based on the present value of remaining lease payments over the lease term using the discount rate of 3.95%, which is the average commercial interest available at the time.
Unaudited
The total rent expense for the three months ended March 31, 2022 and 2021 was approximately $110,900 and $35,600, respectively.
The following table summarizes supplemental balance sheet information related to the operating lease as of March 31, 2022 and December 31, 2021.
SCHEDULE OF RIGHT-OF-USE ASSET AND RELATED LEASE LIABILITIES
March 31, 2022 |
| December 31, 2021 | ||||||
Right-of-use asset | $ | 1,098,059 | $ | 1,158,776 | ||||
Operating lease liabilities, current | $ | 277,142 | $ | 277,142 | ||||
Operating lease liabilities, non-current | 820,917 | 881,634 | ||||||
Total operating lease liabilities | $ | 1,098,059 | $ | 1,158,776 |
As at March 31, 2022, the maturities of the lease liabilities for the periods ending December 31 are as follows:
SCHEDULE OF MATURITIES OF THE LEASE LIABILITIES
2022 | 207,857 | |||
2023 | 277,142 | |||
2024 | 277,142 | |||
2025 | 277,142 | |||
Thereafter | 130,950 | |||
Total lease payments | 1,170,233 | |||
Less: present value discount | (72,174 | ) | ||
Total | $ | 1,098,059 |
Note 19 OTHER SHORT TERM LIABILITIES
11 |
NOTE 6 – INTANGIBLE ASSETS
Other short-term liabilities
Krillase
As part of 242 KUSD (December 31, 2012 restated year end: 860 KUSD)the asset acquisition of ACB Holding AB, Reg. No. 559119-5762, completed on September 12, 2018, Marizyme acquired all rights, titles, and includes miscellaneous short term obligations including amounts dueinterest in the Krillase technology, a group of intangible assets worth $28,600,000. Krillase is a naturally occurring enzyme that acts to break protein bonds and has applications in wound debridement, wound healing, dental care and thrombosis. The useful lives of the intangible assets are based on business assets
Note 20 COMMON STOCK
the life of the patent and related technology. The patents and related technology for Krillase have not been amortized since the acquisition, as they have not yet been put into operations. The Company has authorized capitalexpects to put Krillase into operations and establish the first stream of 75,000,000revenue from the sale of the product in 2023.
DuraGraft
As part of Somahlution acquisition in 2020, Marizyme purchased $18,170,000 of intangible assets related to the DuraGraft® technology.
My Health Logic
As part of My Health Logic acquisition (Note 4), Marizyme purchased MHL’s lab-on-chip technology platform and its patient-centric, digital point-of-care diagnostic device, MATLOC, fair valued at an aggregate amount of $6,600,000.
SCHEDULE OF INTANGIBLE ASSETS AMORTIZATION EXPENSE
Intangible Assets | March 31, 2022 | December 31, 2021 | ||||||||||||||||||||||
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 | ||||||||||||
Patents in process | 122,745 | - | 122,745 | 122,745 | - | 122,745 | ||||||||||||||||||
DuraGraft patent | 5,256,000 | (673,845 | ) | 4,582,155 | 5,256,000 | (572,768 | ) | 4,683,232 | ||||||||||||||||
Duragraft - Distributor relationship | 308,000 | (51,333 | ) | 256,667 | 308,000 | (43,633 | ) | 264,367 | ||||||||||||||||
Duragraft IPR&D - Cyto Protectant Life Sciences | 12,606,000 | - | 12,606,000 | 12,606,000 | - | 12,606,000 | ||||||||||||||||||
My Health Logic - Trade name | 450,000 | (8,840 | ) | 441,160 | 450,000 | (804 | ) | 449,196 | ||||||||||||||||
My Health Logic - Biotechnology | 4,600,000 | (74,412 | ) | 4,525,588 | 4,600,000 | (6,765 | ) | 4,593,235 | ||||||||||||||||
My Health Logic - Software | 1,550,000 | (28,416 | ) | 1,521,584 | 1,550,000 | (2,583 | ) | 1,547,417 | ||||||||||||||||
Total intangibles | $ | 53,492,745 | $ | (836,846 | ) | $ | 52,655,899 | $ | 53,492,745 | $ | (626,553 | ) | $ | 52,866,192 |
SCHEDULE OF GOODWILL
DuraGraft | My Health Logic | Total | ||||||||||
Goodwill | ||||||||||||
Balance, December 31, 2020 | $ | - | $ | - | $ | - | ||||||
Additions on acquisitions | 5,416,000 | 1,774,656 | 7,190,656 | |||||||||
Impairment | - | - | - | |||||||||
Balance, December 31, 2021 and March 31, 2022 | $ | 5,416,000 | $ | 1,774,656 | $ | 7,190,656 |
The following changes to the Company’s intangible assets had taken place in the periods indicated:
SCHEDULE OF INTANGIBLE ASSETS
Balance, December 31, 2020 | $ | 42,278,211 | ||
Acquired in Somah Transaction | 4,022,271 | |||
Acquired in My Health Logic Transaction | 6,600,000 | |||
Additions | 2,775 | |||
Amortization expense | (37,065 | ) | ||
Balance, December 31, 2021 | $ | 52,866,192 | ||
Amortization expense | (210,293 | ) | ||
Balance, March 31, 2022 | $ | 52,655,899 |
Future amortizations for Duragraft and My Health Logic intangible assets for the next five years will be $841,172 for each year from 2023 through 2027 and $7,121,292 for 2028 and thereafter. Amortization related to in process research and development will be determined upon the Company achieving commercialization.
12 |
NOTE 7 - CONVERTIBLE PROMISSORY NOTES AND WARRANTS
May 2021 Unit Purchase Agreement
On May 27, 2021, Marizyme entered into a Unit Purchase Agreement to sell up to Each Unit is comprised of (i) a convertible promissory note convertible into common stock of the Company, (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”). units (the ‘Units’) at a price per Unit of $ .
In May 2021, the Company issued and sold 74,945, consisting of 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 which will be amortized over the term of the Notes. 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 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. Units under the Unit Purchase Program for gross proceeds of $
November 2021 Amended Unit Purchase Agreement
On November 29, 2021, due to a lower common stock price, 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, which resulted in the following significant changes to the offering:
(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. | |
(iii) | Cancelled all Class A Warrants and Class B Warrants and replaced them with Class C Warrants. |
On December 2, 2021, the Company issued and sold to new investors 222,500. These units consisted of convertible notes in the aggregate principal amount of $222,500 and Class C Warrants for the purchase of shares of common stock. additional units for gross proceeds of $
December 2021 Unit Purchase Agreement
On December 21, 2021, the Company entered into a Unit Purchase Agreement (the “December UPA”) to sell up to Each Unit is comprised of (i) a convertible promissory note convertible into common stock of the Company at an initial conversion price of $1.75 and, (ii) a warrant to purchase two shares of Common Stock at an initial purchase price of $2.25 per share (the new Class C Warrant). Under this December UPA, the Company issued and sold Units at a per unit purchase price of $ , for gross proceeds of $6,000,000. Coinciding with this December UPA, the Company also entered into an Exchange Agreement with the existing Unit holders (the December 2021 Exchange Agreements, as further described below). Units at a price per unit of $ .
December 2021 Exchange Agreements
On December 21, 2021, in conjunction with a $6.0 million investment, the Company and the existing Unit holders agreed to exchange the original securities (“Old Securities”) held by the current investors/unit holders for New Securities, consisting of (i) a New Note in the principal amount equal to the original principal amount of the Original Note, plus all accrued interest through the day prior to December 21, 2021, and (ii) a New Warrant (new Class C Warrants) in exchange for the original Class C Warrants. The Exchange of the Original Securities for the New Securities included the following significant changes:
(i) | Decreased the offering price under the Unit Purchase Agreement from $ per Unit to $ per Unit. Outstanding principal and accrued interest were used to purchase Units at the new per unit price. | |
(ii) | Extended the maturity date of the notes to December 21, 2023 for all existing notes. | |
(iii) | Decreased the conversion price from $2.25 per share to $1.75 per share for the New Units. | |
(iv) | Original Class C Warrants were exchanged for New Class C warrants with an exercise price of $2.25 per share (unchanged) and a five-year life measured from the date of the Exchange Agreement. The decrease in the Unit price also resulted in additional number of New Class C Warrants being issued in exchange for the Original Class C Warrants due to the 200% warrant coverage provided for in the Unit Purchase Agreement. |
The Company determined that the terms of the New Securities were substantially different from the Original Securities, and, as such the exchange of the Original Securities for the New Securities was accounted for as an extinguishment of debt on December 21, 2021, and the New Securities accounted for as a new debt issuance.
As a result of this substantial modification, the total of 621,087 Units previously issued were replaced with an aggregate of 832,022 pro-rata Units.
During the three months ended March 31, 2022, the Company issued additional 4,008,653. Of the total Units issued: (i) Units were issued to settle notes payable assumed on acquisition of My Health Logic (Note 4), (ii) Units were issued to settle accounts payable, and Units were issued in exchange for services rendered to the Company in the three months ended March 31, 2022. units under the New Securities agreement for the gross proceeds of $
13 |
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 fair value of the warrants issued in the three months ended March 31, 2022, of $2,401,237 (December 31, 2021 - $4,299,649) and the fair value of derivative liabilities of $1,336,218 issued (December 31, 2021 - $2,485,346) 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.
During the three months ended March 31, 2022, the Company recognized interest and accretion expense of $291,997 (March 31, 2021 - $Nil) in the condensed consolidated statements of operations.
SCHEDULE OF CONVERTIBLE NOTES
Convertible Notes, Net of Debt Discount | ||||
Balance, December 31, 2021 | $ | 26,065 | ||
Convertible notes issued - new securities | 4,008,653 | |||
Issuance costs | (271,198 | ) | ||
Debt discount | (3,737,455 | ) | ||
Debt accretion | 291,997 | |||
Balance, March 31, 2022 | $ | 318,062 |
As of March 31, 2022 and December 31, 2021, the Company had the following convertible notes, net of debt discount outstanding:
SCHEDULE OF CONVERTIBLE NOTES NET OF DEBT DISCOUNT
March 31, 2022 | December 31, 2021 | |||||||
Convertible notes - total principal | $ | 11,464,692 | $ | 7,482,104 | ||||
Unamortized issuance costs and discount | (11,146,630 | ) | (7,456,039 | ) | ||||
Convertible notes, net of debt discount | $ | 318,062 | $ | 26,065 |
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 $1.75 per share (previously $2.25 per the September 2021 Amendment and originally $2.50 per the May Unit Purchase Agreement).
The Convertible Notes issued or reissued in exchanged for the cancellation of previously-issued Convertible Notes from May 2021 until March 24, 2022 provide that in the event the Company consummates a qualified financing of at least $10 million of equity or equity equivalents, and provided that the Company is listed on a trading market that is a senior exchange such as Nasdaq or the New York Stock Exchange and the shares into which the Convertible Notes may be converted may be issued or resold under an effective registration statement, then all outstanding principal, together with all unpaid accrued interest, under the convertible notes, would 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 otherwise applicable conversion price. In addition, if at any time following the sixty (60) day anniversary of the final closing date or termination of this private placement, and if there is an effective registration statement permitting the issuance or resale of the shares of common stock into which the convertible notes may be converted, (A) the Company’s common stock is listed on a senior national securities exchange, (B) the daily volume-weighted average price for the prior twenty (20) consecutive trading days is $6.00 or more (adjusted for splits and similar distributions) and (C) the daily trading volume is at least $1,000,000 during such twenty (20)-day period, then the Company would have the right to require the convertible notes to convert all or any portion of the principal and accrued interest then remaining under the note into shares of common stock at the above conversion price in effect on the mandatory conversion date.
In addition, the Convertible Notes provide that more favorable terms under subsequent equity issuances will become part of the Convertible Notes. The Convertible Notes also include certain customary antidilution provisions and registration rights under a Registration Rights Agreement with the investors.
The Convertible Notes in our March 24, 2022 and subsequent closings were also modified to provide that upon the occurrence of certain qualified financings of $10 million or more as described above, such Convertible Notes would be voluntarily, not automatically, convertible at the lower of 75% of the price per equity security in such financing and the otherwise applicable conversion price. The conversion provision was also modified to remove the requirement that an effective registration statement allow for the issuance or resale of shares of common stock into which the convertible notes may be converted in order for the conversion price of the Convertible Notes to be subject to the reduction to 75% of the price per equity security in a qualified financing.
The Convertible Notes are secured by a first priority security interest in all assets of the Company. They also have certain registration requirements for the shares of common stock underlying the Convertible Notes upon the final closing under the unit purchase agreement between the Company and the investors in this private placement.
New Class C Warrants Terms
● | 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 a 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 8 – STOCKHOLDERS’ EQUITY
a) Preferred stock
The Company is authorized to issue a total number of each with a par value of $0.001. No class$ . As of March 31, 2022, and December 31, 2021, there were shares of preferred stock has been designatedissued or issued. Asoutstanding. shares of “blank check” preferred stock
b) Common stock
The Company is authorized to issue a total number of September 30, 2013, there were shares 30,837,624 of common stock outstanding. At the time of the Reverse Merger of the Company by GROUP on January 6, 2011, there were 16,500,000 shares of common stock with a par value of the Company outstanding$ .
As of March 31, 2022 and as the Reverse Merger was accounted for as a recapitalizationDecember 31, 2021, there were and applied retroactively, this balance is recorded as the balance outstanding since inception.
Transactions occurring in 2012
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
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 to purchase shares at 50,000 shares of common stock at $1.00 per share.
The conversion was not exercised by September 30, 2012, therefore, as perissued and outstanding, respectively. During the termsofthree months ended March 31, 2022, the Loan Agreement Mr. Shihadah wasCompany issued a 3-year warrant to purchase shares at 50,000 shares of common stock at $1.00 per share.for exercise of warrants.
14 |
c) Options
On May 18, 2021, our Board of Directors approved the Marizyme, Inc. Amended and Restated 2021 Stock Incentive Plan (“SIP”), and our shareholders ratified it on September 20, 2021. The SIP incorporates stock options issued prior to May 18, 2021. The SIP authorized options for issuance. As of March 31, 2022, there remains options available for issuance (December 31, 2021 – ).
During the three months ended March 31, 2022, the company granted (December 31, 2021 – ) share purchase options to directors, officers, employees, and consultants of the Company.
SCHEDULE OF STOCK OPTION ACTIVITY
Number of Options | Weighted Average Exercise Price | Weighted Average Contractual Life | Total Intrinsic Value | |||||||||||||
Outstanding at December 31, 2020 | 3,800,943 | $ | 1.36 | |||||||||||||
Granted | 1,532,500 | 1.51 | ||||||||||||||
Forfeited | (1,682,500 | ) | 1.36 | |||||||||||||
Outstanding at December 31, 2021 | 3,650,943 | $ | 1.24 | $ | 1,951,117 | |||||||||||
Granted/forfeited | - | |||||||||||||||
Outstanding at March 31, 2022 | 3,650,943 | 1.24 | 2,571,777 | |||||||||||||
Exercisable at March 31, 2022 | 2,561,023 | $ | 1.10 | $ | 2,160,932 |
SCHEDULE OF OPTIONS OUTSTANDING AND EXERCISABLE
Exercise Price | Number of Options Outstanding | Number of Options Exercisable | Weighted Average Remaining Contractual Years | Intrinsic Value | ||||||||||||||
$ | 1.01 | 1,985,943 | 1,985,943 | $ | 1,846,927 | |||||||||||||
1.25 | 665,000 | 265,080 | 458,850 | |||||||||||||||
1.37 | 200,000 | 190,000 | 114,000 | |||||||||||||||
1.75 | 800,000 | 120,000 | 152,000 | |||||||||||||||
$ | 1.24 | 3,650,943 | 2,561,023 | $ | 2,571,777 |
d) Restricted Share Units
As of March 31, 2022, we determined that the following performance condition attached to the restricted share awards granted in the fiscal 2021 were more likely than not to be achieved:
● | ||
● | The Company will complete valuation reports for acquisition of |
Notes to
Therefore, compensation cost of $295,750 for the Interim Financial Statementsrestricted share awards was recognized in stock-based compensation the period ended March 31, 2022 (March 31, 2021 - $Nil).
September 30, 2013
GBS Enterprises Incorporatede) Warrants
Unaudited
As of March 31, 2022 and December 31, 2021, there are 16,726,157 and 12,144,838 warrants outstanding, respectively.
The Note was convertible in full at $0.50 per share into common stock ofSCHEDULE OF WARRANTS OUTSTANDING
Number | Weighted Average Price | |||||||
December 31, 2020 | 3,393,651 | $ | 2.13 | |||||
Issued pursuant to Unit Purchase Agreement | 8,521,187 | 2.25 | ||||||
Issued | 230,000 | 1.39 | ||||||
December 31, 2021 | 12,144,838 | $ | 2.20 | |||||
Issued pursuant to Unit Purchase Agreement | 4,581,319 | 2.25 | ||||||
Issued | 300,000 | 0.01 | ||||||
Exercised | (300,000 | ) | 0.01 | |||||
March 31, 2022 | 16,726,157 | $ | 2.21 |
During 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 exercised 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,three months ended March 31, 2022, the Company issued the Lender a common stock purchase warrant (the “Warrant”), pursuant to which the Lender is entitledfollowing:
On January 26 and February 14, 2022, in exchange for services of Mr. Richmond, we granted him 100,000an aggregate shares of Marizyme’s common stock at an exercise price of $0.35 until$0.01 per share. The warrants issued had an average term of 5 years, were fair valued at $568,677 and recorded in salary expense in the third anniversary datecondensed consolidated statements of operations for the date of issuance. The Warrant wasthree months ended March 31, 2022. On March 15, 2022, Mr. Richmond exercised warrants issued in a private transaction between the Companyto him. warrants to purchase
On January 14, January 24 and the Lender and was exempt from registration under the Securities and Exchange Act of 1933, as amended,March 24, 2022 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 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 500,000 shares 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 those warrants has been determined (and is shown below) by utilizing the residual method, whereby the current market value of the stock is deducted from the unit price 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 note is discounted when the interest rate is less than other similar notes and discount is allocated to the warrant and credited to additional paid in capital. The corresponding charge to discount is then amortized over the life of the note. Where there is no difference 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 of the warrants has been determined using a Black-Scholes option pricing model with volatility, equity value and interest rate inputs noted below. The valuation of the warrants issued is for disclosure purposes only and has no impact to the financial statements.
Lastly, the Company has issued warrants to outside consultants in payments for services. The warrants are issued as “cashless” warrants and have been valued using a Black-Scholes option pricing model with volatility, equity value and interest rate inputs noted below.. The fair value of warrants issued for financing are determined for disclosure purposes as there is no impact to 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, using the Black Scholes pricing model was determined to $34,000 and this amount was recorded as a consulting expense.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
In March 2012, the Company issued an aggregate of 2,020,0004,581,319 additional New Class C warrants to five “accredited investors” pursuant to Section 4(a)(2) (formerly Section 4(2))with an exercise price of the Securities Act. Each investor warrant is exercisable for the three-year period commencing from the date of issuance for $0.50$2.25 per share and a term of Common Stock and hasfive years.
f)Stock-based compensation
During the same terms as the Private Placement Warrants. As noted above investors immediately exercised warrants and purchased 900,000 shares of common stock for $450,000.Onthree months ended March 27, 2012,31, 2022, 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. 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 non-cash share-based compensation (March 31, 2021 - $).
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 consulting 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:
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Revenues by geographical area for the nine months ended September 30, 2013 are as follows:
Note 22 OTHER INCOME/EXPENSE
At the financial statement date, Other income was 20 KUSD (December 31, 2012 year end: Other Expense 33 KUSD).
NotesNOTE 9 – RELATED PARTY TRANSACTIONS
As at March 31, 2022, the Company owed an aggregate of $271,371 (December 31, 2021 - $1,132,634) to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Note 23 SUPPLEMENTAL CASH FLOW DISCLOSURES
The significant non-cash transactions through September 30, 2013 were as follows:
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Note 24 SUBSEQUENT EVENTS
On July 10, 2013, the Board of Directorsrelated parties of the Company reappointed Joerg Ott as the Chief Executive Officer (Principal Executive Officer) of the Company, effective immediately.Company. The full balance is owed to Mr. Ott replaced Mr. Gary D. MacDonald who had been serving as the Company’s Interim Chief Executive Officer since July 11, 2012.
On August 2, 2013, Gary D. MacDonald resigned as member of the Board of DirectorsFrank Maresca, a related party and shareholder of the Company, and comprised of the following:
● | The Company received consulting services from Mr. Maresca and pursuant to the agreement incurred $60,000 in professional expenses in the three months ended March 31, 2022 (March 31, 2021 - $Nil). At March 31, 2022, the company owes a total of $271,371 for consulting services provided and service-related expenses incurred by Mr. Maresca during the period ended March 31, 2022 and the year ended December 31, 2021. |
In the three months ended March 31, 2022, the Company incurred and settled additional $43,200 in professional services rendered by related parties of the Company and settled $96,744 in various Company-related expenses incurred by these parties.
Additionally, as Managing Directorpart of GBS-UK. From March 1, 2012the Somah acquisition in 2020, the Company recorded a prepaid royalty to the dateshareholders of his resignation, Mr. MacDonald also served as memberSomahlution. The primary beneficial owner is Dr. Vithal Dhaduk, currently a director, and significant shareholder of the Board’ Audit Committee.Company. As at March 31, 2022, the company had $339,091 in prepaid royalties (December 31, 2021 - $339,091) which had been classified as non-current in the condensed consolidated balance sheets.
NOTE 10 – COMMITMENTS AND CONTINGENCIES
Legal Matters
On August 19, 2021, Dr. Neil Campbell, former President, Chief Executive Officer and director of the Company, and Bruce Harmon, former Chief Financial Officer and Secretary of the Company, each filed a Complaint and Demand for Jury Trial against the Company and Insperity Peo Services, L.P., a Delaware limited partnership (“Insperity”), a joint employer of Dr. Campbell and Mr. MacDonald’s resignation was not due to any disagreementHarmon with the Company under a Client Service Agreement, dated November 30, 2020 (collectively, the “Campbell/Harmon Complaints”). Both Campbell/Harmon Complaints allege that the Company and Insperity violated Section 448.105 of the Florida Private Whistleblower Act as a result of the constructive terminations of Dr. Campbell and Mr. Harmon after the occurrence of violations federal and state law, including federal securities law, at the Company that exposed Dr. Campbell and Mr. Harmon to civil and criminal forms of liability and that the Company was not addressing to their satisfaction. Both Campbell/Harmon Complaints demand approximately $30,000 - $50,000 in back pay and benefits, interest on back pay, front pay and/or lost earning capacity, compensatory damages, costs and attorney’s fees, and such other relief as the Board.court deems equitable. We intend to vigorously defend against these claims. As of March 31, 2022, these cases were in arbitration. Subsequently to the quarter end, in April 2022, both cases were dismissed with prejudice and without any financial impact on the Company.
On January 28, 2022, we filed a Complaint in the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida (the “Florida Circuit Court”), case number 50-2022-CA-000859-XXX-MB, against Amy Chandler (the “Chandler Complaint”). The Chandler Complaint seeks damages for breach of fiduciary duty, breach of contract, negligence, conversion, and civil theft. The Chandler Complaint alleged that, approximately two months before her resignation in September 2021, Ms. Chandler intentionally and recklessly took affirmative actions to cancel the CE certificate required by European Union regulations in order for Marizyme and its subsidiary, Somahlution, LLC, to ship and distribute certain products to/within the European Union, and disregarded her fiduciary duty to Marizyme and responsibilities as its former Executive Vice President for Regulatory Affairs and Quality Management Systems. As a result, the Chandler Complaint alleged that Ms. Chandler’s actions caused significant disruption and damage to Marizyme’s business, including, but not limited to, financial damages and damage to Marizyme’s reputation and business relationships. The Chandler Complaint further alleged that prior to her last day, Ms. Chandler stole confidential, proprietary files governing Marizyme’s quality management system, which were required for essential internal business operations, and that Marizyme incurred significant costs to recreate these files. The Chandler Complaint alleged damages in excess of thirty thousand dollars ($30,000.00), exclusive of interest, attorneys’ fees, and costs.
On August 13, 2012,February 28, 2022, Ms. Chandler filed a Answer, Affirmative Defenses and Counterclaim to Plaintiff’s Complaint with the Florida Circuit Court (the “Chandler Countercomplaint”). The Chandler Countercomplaint denied the claims in the Chandler Complaint and most of the factual allegations regarding her alleged actions. The Chandler Countercomplaint also included a counterclaim of defamation per se against the Company entered into a note purchase and security agreement (the “Loan Agreement”) with John A. Moore, a member ofbased on certain statements regarding this litigation that were included in the Board. PursuantRegistration Statement. As to the Loan Agreement,claims in the Chandler Complaint, the Chandler Countercomplaint demanded an award of attorneys’ fees and costs, court costs on all counts, and such further relief the court deems just and proper. As to the counterclaim of defamation, the Chandler Countercomplaint requested monetary damages, punitive damages, court costs, and any other relief the court deems just and proper. The Chandler Countercomplaint also demanded trial by jury on all triable issues.
On March 18, 2022, the Company issuedfiled a secured promissory note, dated October 26, 2012Motion to Dismiss Counterclaim with the Florida Circuit Court (the “Note”),“Motion to Mr. MooreDismiss”). The Motion to Dismiss stated that the Chandler Countercomplaint for defamation per se should be dismissed with prejudice because the principal amount of $1,000,000, bearing interest at a rate of 20% per year and maturing onCompany has not made any statements about Chandler outside the earlier of the first anniversary date of the date of issuance or such other time as described in more detailallegations in the Note, without any penalty for prepayment. To secureChandler Complaint. The Motion to Dismiss stated that the obligations of the Company under the Note, the Company granted Mr. Moore a secured priority security intereststatements regarding this litigation that were included in the Company’s Accounts Receivable and its subsidiaries locatedRegistration Statement were as a matter of law not false because they all accurately reproduced the allegations in the United States of America, as more fully describedChandler Complaint and such statements were prefaced by the words “The Chandler Complaint alleged”. The Motion to Dismiss further stated that allegations in the full textlitigation are subject to Florida’s litigation privilege and cannot serve as a basis for a defamation claim as a matter of the document.law. As of [*], 2022, this case was pending.
Contingencies
● | $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 product. During the three months ended March 31, 2022, no revenues were derived from sales of Krillase product. |
b. | As part of the DuraGraft Acquisition, completed on July 31, 2020, the Company entered into the Agreement with Somah stockholders, whereby Marizyme is legally obligated to pay royalties on all net sales for Somahlution, Inc. The royalties associated with the Agreement are calculated as follows: |
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. During the three months ended March 31, 2022, 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.
Upon receiving FDA approval for the Duragraft product, the Company will:
● | Issue performance warrants with a strike price determined based on the average of the closing prices of the Company’s common stock for the 30 calendar days following the date of the | |
● | Upon liquidation of all or substantially all of the assets relating to DuraGraft, the Company |
16 |
c. | The Company has entered into arrangements for office and laboratories spaces. As at March 31, 2022, minimum lease payments in relation to lease commitments are payable as described in Note 5. |
Risks and Uncertainties
On October 23, 2013,
Starting in late 2019, a novel strain of the Company filed a lawsuit (GBS Enterprises, Inc. v. Reliance Globalcom, Inc.)coronavirus, or COVID-19, began to rapidly spread around the world and every state in the Superior CourtUnited States. At this time, there continues to be significant volatility and uncertainty relating to the full extent to which the COVID-19 pandemic and the various responses to it will impact our business, operations and financial results.
Most states and cities have at various times instituted quarantines, restrictions on travel, “stay at home” rules, social distancing measures and restrictions on the types of businesses that could continue to operate, as well as guidance in response to the pandemic and the need to contain it. As a result, the COVID-19 pandemic may affect the operations of the StateFDA and other health authorities, including such authorities in Europe, which could result in delays of California, Countyreviews and approvals. While there have been no specific notices of San Francisco, seekingdelay from federal or foreign government authorities, potential interruptions, delays, or changes to the 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.
In addition, we are dependent upon certain contract manufacturers and suppliers and their ability to reliably and efficiently fulfill our orders is critical to our business success. The COVID-19 pandemic has impacted and may continue to impact certain of our manufacturers and suppliers. As a declaratory judgment thatresult, we have faced and may continue to face delays or difficulty sourcing certain products, which could negatively affect our business and financial results.
The spread of COVID-19 has also adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets. The pandemic has resulted, and may continue to result, in a significant disruption of global financial markets, which may reduce our ability to access capital in the future, which could negatively affect our liquidity.
If the COVID-19 pandemic does not continue to slow and the spread of COVID-19 is not contained, our business operations, including those of contract manufacturers, could be further delayed or interrupted. The duration of any business disruption cannot be reasonably estimated at this time but may materially affect our ability to operate our business and result in additional costs. It is not possible to reliably measure or quantify the impact COVID-19 has had on the financial results of the Company. If the COVID-19 pandemic continues for an extended period, it may materially adversely impact business operations and, consequently, future financial results.
NOTE 11 - SUBSEQUENT EVENTS
Effective April 1, 2022 the Company has no obligationamended their lease agreement for administrative office and laboratories currently leased to Reliance Globalcom Inc. (“Reliance”) for any claims or liabilities in connection with a Master Services Agreement (“MSA”) executedadd additional space. The monthly cost of additional space is approximately $4,510 increasing to $8,682 on July 1, 2022 and continue to increase by Reliance and IDC Global Inc. (“IDC”) a then wholly owned subsidiary2.5% annually thereafter until the end of the term. The term of the lease remains unchanged.
Effective May 1, 2022, the Company in March 2010. On February 1, 2013, GBS sold IDC to Global Telecom & Technology Inc. (“GTT”)has leased additional laboratory space. The term of the lease is for 4.3 years expiring on July 30, 2026. PursuantThe monthly cost of laboratory space is approximately $3,757, increasing by 6% annually. Additionally, pursuant to the governing Stock Purchase Agreement (SPA), GTT gained all right, titleagreement, the Company will pay approximately $3,344 per month in operating expenses.
On May 11, 2022, the Company issued and interestsold to new investors additional units for gross proceeds of $1,306,485. These units consisted of convertible notes in 100%the aggregate principal amount 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$1,306,485 and Class C Warrants for 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 shares of the lawsuit.common stock.
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 consolidated financial statements and notes thereto for the year ended December 31, 2021 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, 2021 (“2021 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, 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 basedsubject to a number of risks, uncertainties and assumptions, including those described under Item 1A “Risk Factors” in our annual report on reasonable assumptions within the bounds ofForm 10-K. 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 contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
OVERVIEW
Marizyme is a multi-technology life science company dedicated to conform these statementsthe acceleration, development and commercialization of medical technologies that promote patient health and present potential for rapid revenue growth.
Key elements of our strategy include:
● | Advancing development of three medical technology platforms – DuraGraft, MATLOC and Krillase – each of which is clinically tested and backed by a portfolio of patented or patent-pending assets; | |
● | Advancing DuraGraft, our endothelial damage inhibitor, or “EDI”, and MATLOC 1, our “CKD” screening and diagnostic device, for the Food and Drug Administration De Novo classification process and 510(k) application, respectively. We filed a pre-submission letter for DuraGraft with the FDA in November 2021 and we expect to submit the De Novo request for DuraGraft to the FDA in 2022; | |
● | Progressing the development of Krillase by planning an animal clinical study which will be conducted in 2022, and which we expect will facilitate our entry into the pet health market and generate revenue through the sale of Krillase-based canine dental hygiene products. |
We have incurred losses for each period from inception. Our net loss was approximately $6.1 million and $2.8 million for the three months ended March 31, 2022 and 2021, respectively. We expect to actual results. Readers are urgedincur significant expenses and operating losses over the next several years. Accordingly, we will need additional financing to carefully reviewsupport 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 consider the various disclosures made throughout the entirety of this quarterly report, which attemptlicensing arrangements. Adequate additional financing may not be available to advise interested parties of the risksus on acceptable terms, or at all. Our failure to raise capital as and factors that may affectwhen needed would impact our ability to continue as a going concern, and would have a negative impact on our financial condition and our ability to pursue our business financial condition, results of operations,strategy. We will need to generate significant revenues to achieve profitability, and prospects.we may never do so.
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 GROUP 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:
KEY Q1 2022 HIGHLIGHTS
Financing
SD Holdings, Ltd./GBS India Private Limited. On April 1, 2012, we sold SYNIn 2021, the Company offered up to 4,000,000 units (the “Units Offering”), comprised of convertible notes and warrants, with the intent to raise up to $10,000,000 on a rolling basis. Certain terms and conditions of the Units Offering were amended and as a result, during the year ended December 31, 2021, the Company issued an aggregate of 4,260,594 units for net proceeds of $6,692,765.
During Q1 2022, the Company issued additional 2,290,659 units for gross proceeds of $4,008,653. The proceeds from the Units Offering were used to settle certain debt obligations and will be used to sustain the Company’s growth and meet its wholly-owned subsidiaries, Synaptris and Synaptris India, to Lotus for $1,877,232. On July 1, 2012,capital obligations.
In 2021 the Company entered into a purchasean agreement with SYNan investor for $1,877,232, which transferred all SYN’s assets, including intellectual property rights, and liabilitiesan investment 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).$6,000,000. Pursuant to the Agreement, we sold 100%agreement, the investor agreed to up to two additional closings in which it would invest (i) $2,000,000 upon the Company’s filing of a registration statement on Form S-1 with the SEC (filed on February 14, 2022 and $2,000,000 were received as part 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 monthsproceeds from the closing date or, if after 18 months,Units Offering in Q1 2022), and (ii) an additional $2,000,000 upon the holdback will be used to offset any indemnifications by GBS under the Agreement. The Purchase Price was also subject to adjustment onCompany’s responding in a dollar-for-dollar basis for adjustmentssatisfactory manner to the Net Working Capital (defined as Current Assets minus Current Liabilities)first round of IDC by GTT.SEC comments relating to the filed Form S-1 (no comments were received from SEC on the filed S-1 form). As of date of this 10-Q Form the second closing for $2,000,000 is in process of completion.
Group Live N.V.Operational operating under
In 2021 Marizyme underwent a corporate restructuring, whereby 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 processkey officers, directors, 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 sets 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 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. 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’s common stock is currently quoted on the OTC Market OTCQB under the ticker symbol 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 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, 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 shares represented approximately 79.9% 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, 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 these 3,043,985 shares, 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 the 3,043,985 shares of GBS common stock (the “December 2010 Transaction”). As a result, the Company owned approximately 28.2% of the outstanding common stock of GROUP.
Reverse Merger
After the December 2010 Transaction 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. As a result of the December 2010 Transaction and January 2011 Transaction, the Company had acquired an aggregate of 12,641,235 shares 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% of the outstanding GROUP common stock and effectuating a reverse merger of the Company and GROUP whereby GROUP became 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 order to maintain our 50.1% majority ownership of GROUP due to an increase in the outstanding common stock of GROUP.
Executive Offices
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 maintain a website at www.gbsx.us. GROUP maintains a website at www.gbs.com. The information contained inaccelerate the Company’s progress toward meeting its key objectives and GROUP’s websites is not incorporated by reference herein.
Changesdeliver on its strategy and to be in Financial Condition
Assets:
Total Assets decreased from $56,802,492 at December 31, 2012a better position to $47,279,675 at September 30, 2013. Total Assets consists of Total Current Assetsaddress certain material weaknesses in its disclosure controls and Total Non-Current Assets.
procedures and internal control over financial reporting. In Q1 2022, the executive and management team continued this process while also focusing on meeting and delivering on the Company’s objectives to commercialize its key products and advance in its search for more life science assets. However, as discussed in Part II—Other Information, Item 4. “Total Current AssetsControls and Procedures
At September 30, 2013, Total Current Assets”, no further significant steps were $4,294,224 as comparedtaken to $6,444,192 at December 31, 2012. Total Current Assets consist of: Cashremediate the material deficiency in our disclosure controls and Cash Equivalents, Accounts Receivable, Inventory, Prepaid Expenses,procedures and Other Receivables-current.
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 consists 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, 2012
Revenues
For the three months ended September 30, 2013,March 31, 2022.
FINANCIAL OPERATIONS REVIEW
Component of Results of Operations
Revenue
Revenue represents gross product sales less service fees and product returns. For our totalDistribution Partner channel, we recognize revenue decreasedfor product sales at the time of delivery of the product to $5,065,656 from $ 5,709,778 forour Distribution Partner. As our products have an expiration date, if a product expires, we will replace the three months ended September 30, 2012, a declineproduct at no charge. Currently, all of $644,122 or 11%. The Company generatesour revenue from two divisions. The Product division of Revenues includes revenueis generated from the sale of Licenses, Maintenance, Third-Party Products,DuraGraft in European and Other revenues. The Service division includes revenue generated from services rendered.Asian markets where the product has the required regulatory approvals.
The Product division decreased to $4,133,565 for the three months ended September 30, 2013 from $4,719,446 for the three months ended September 30, 2012, a decrease of $585,881 or 12%. The primary contributing factors were decreases in License revenues of approximately $655,000, Third Party Product revenues of $350,000, increases in Maintenance revenues of approximately $490,000Research and decreases in Other revenues of approximately $65,000 for the three months ended September 30, 2013 compared to the three months ended September 30, 2012. This is mainly as a result of economic conditions causing an increaseDevelopment
All research and development costs are expensed in the sales cycles, whereby strategic customers are giving greater consideration towardsperiod incurred and consist primarily of salaries, payroll taxes, and employee benefits, those individuals involved in research and development efforts, external research and development costs incurred under agreements with contract research organizations and consultants to conduct and support the modernization/migrationCompany’s ongoing clinical trials of their current application platform.
The Service division of revenue decreased $56,634 or 6% from $990,333 for the three months ended September 30, 2012 to $932,091 for the three months ended September 30, 2013, primarily as a result of the sale of subsidiary companies that were contributors to the Service division of revenue.
Cost of Goods Sold
For the three months ended September 30, 2013, total Cost of Goods Sold decreased to $2,273,055 from $3,212,767 for the three months ended September 30, 2012, a cost reduction of $_939,712 or 29%.
The Company’s Cost of Goods Sold is segmented into two divisions. The first areDuragraft, and costs related to the Product division of revenue which includes the total cost of materials.manufacturing Duragraft for clinical trials. The second are the costsCompany has entered into various research and development contracts with various organizations and other companies.
Professional Fees
Professional fees include legal fees relating to intellectual property development, due diligence 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 our application to be listed on the Service divisionNasdaq Capital Market tier of revenue which includes; other operating expenses, depreciation & amortization expense,The Nasdaq Stock Market LLC and related ongoing stock exchange and SEC requirements.
Salaries and Stock-Based Compensation
Salaries consists of compensation and related personnel expenses.
Withincosts. Stock-based compensation represents the Costsfair value of Goods Sold related to the Product division,equity-settled share awards on stock options granted by the Company saw a $358,890 or 39% decrease from $ 922,839 forto its employees, officers, directors, and consultants. The fair value of awards is calculated using the three months ended September 30, 2012 to $_563,950 forBlack-Scholes option pricing model, which considers the three months ended September 30, 2013. The primary factors contributing tofollowing factors: exercise price, current market price of the Company’s lower Costsunderlying 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 Goods Sold related to the Product division of revenues was a reduction of $282,639 in product materialmarketing and selling expenses, facility costs, administrative 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, the Company had a reduction of $580,822 or 25%, in the total costs of services from $ 2,289,927 for the three months ended September 30, 2012 to $ 1,709,105 for the three 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 renderedoffice expenses, director and a reduction in personnel costs, depreciationofficer insurance premiums, and amortizationinvestor relations costs associated with operating a public company.
Other Expenses
Other expenses consist of mark to market adjustments on contingent liabilities assumed on the saleacquisition of subsidiary companies. Additional personnel costs relatingthe Somahlution assets and interest and accretion expenses related to Services are includedour convertible notes issued in Selling Expenses and these were also reduced from the quarter ending September 30, 2012 as indicated below.an ongoing private placement since May 2021 pursuant to our Unit Purchase Agreement.
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.
ForRESULTS OF OPERATIONS
Comparison of the three months ended September 30, 2013, General Expense decreased $197,986 to $120,364 from $318,350Three Months Ended March 31, 2022 and 2021
The following table summarizes our results of operations for the three months ended September 30, 2012. This was primarily due decreases of $50,011 in other operating incomeMarch 31, 2022 and in personnel expense of $16,282, and other operating expense of $231,541. Depreciation of approximately $22,000 was at the same level as2021:
Three Months Ended March 31, | ||||||||||||
2022 | 2021 | Change | ||||||||||
Revenue | $ | - | $ | 73,952 | $ | (73,952 | ) | |||||
Operating expenses: | ||||||||||||
Professional fees | 544,040 | 529,073 | 14,967 | |||||||||
Salary expenses | 915,640 | 884,041 | 31,599 | |||||||||
Research and development | 1,218,296 | 391,504 | 826,792 | |||||||||
Stock-based compensation | 716,432 | 367,718 | 348,714 | |||||||||
Depreciation and amortization | 210,361 | 416,595 | (206,234 | ) | ||||||||
Other general and administrative expenses | 390,572 | 295,572 | 95,000 | |||||||||
Total operating expenses | 3,995,341 | 2,884,503 | 1,110,838 | |||||||||
Total operating loss | $ | (3,995,341 | ) | $ | (2,810,551 | ) | $ | (1,184,790 | ) | |||
Other expenses: | ||||||||||||
Interest and accretion expenses | (299,544 | ) | - | (299,544 | ) | |||||||
Change in fair value of contingent liabilities | (1,830,000 | ) | - | (1,830,000 | ) | |||||||
Net loss | $ | (6,124,885 | ) | $ | (2,810,551 | ) | $ | (3,314,334 | ) |
Revenue
We recognized no revenue for the three months ended September 2012.
Other Income (Expense)
For the three months ended September 30, 2013, net Other Expenses of $95,487 increased from net Other Income of $759,169for the three months ended September 30, 2012. This change is primarily dueMarch 31, 2022 compared to a decrease in Other Income of $847,976 and an increase in net Interest Expense of $6,472$0.07 million for the three months ended September 30, 2013March 31, 2021. No revenues were generated in Q1 2022 due to the COVID-19 pandemic’s ongoing impact on the Company’s supply chain and its lapsed ability to produce and market Duragraft inventory. In Q1 2022, the executive and management teams have been working on re-establishing the Company’s business relationships with its trusted manufacturing and distribution partners and expect the production of Duragraft inventory and sales to resume in Q2 2022.
Professional Fees
Professional fees increased by $0.01 million or 3% to $0.54 million for the quarter ended March 31, 2022 compared to $0.53 million for the same period ended March 31, 2021. The spend remained relatively flat period over period - professional fees in Q1 2022 can be attributed to legal support with preparation and filling of the Company’s Form S-1 filed with the SEC on February 14, 2022, and audit fees in connection with the audit of the 2021 Form 10-K.
Salary Expenses
Salary expenses for the quarter ended March 31, 2022, were $0.92 million, a $0.03 million or 4% increase from the comparative period. The increase in salary cost is attributable to the restructuring and growth of the organization as the Company continued to restructure its executive and management teams and seek to expand into new markets and work towards commercialization of DuraGraft in the United States.
Research and Development
Research and development expenses for the quarter ended March 31, 2022, were $1.22 million, a $0.83 million or 211% increase from the comparative period. The increase in research and development expenses can be mainly attributed to its expanded research and development program due the Company’s acquisition of the MATLOC 1 assets in late 2021, and its focus on development and advancement of its other products – DuraGraft and Krillase – towards commercialization.
Other General and Administrative Expenses
Other general and administrative expenses increased $0.1 million or 32% to $0.39 million in the three months ended September 30, 2012.
Nine Months Ended September 30, 2013 ComparedMarch 31, 2022. The increase was due to the Nine Months Ended September 30, 2012
Revenues
For the nine months ended September 30, 2013, our total revenue decreased $3,151,581 or 16.8% to $15,613,048 from $ 18,764,628 for the nine months ended September 30, 2012. 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 $15,247,833 for the nine months ended September 30, 2012 The primary factors contributing 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 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 $1,073,810 or 31%, from $3,516,745 for the nine months ended September 30, 2012 to $ 2,442,935 for the nine months ended September 30, 2013, primarily as a result of a reduction in service staff.
Cost of Goods Sold
For the nine months ended September 30, 2013, total Cost of Goods Sold decreased $ 2,760,159 or 26% to $ 7,690,366 from $ 10,450,525 for the nine months ended September 30, 2012.
The Company’s Cost of Goods Sold is segmented into two divisions. The first are costsnon-legal fees related to the Product divisionfiling of revenue which includes the total cost of materials. The second areCompany’s Form S-1 filed with the costs relatedSEC on February 14, 2022, preparation toward its anticipated public offering, and expenses associated with running a public company. Due to the Service divisionplanned continued buildout of revenue which includes; other operatingadministrative and commercial functions we expect general and administrative expenses depreciation & amortization expense, and personnel expenses.to increase in future periods.
WithinOther Expenses
During the Costs of Goods Sold related to the Product divisionquarter ended March 31, 2022, 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 Costsincurred $0.30 million of Goods Sold related to the Product division of revenues was a reduction of $863,080 in product material costsinterest 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 amortizationaccretion costs associated with convertible notes issued at discount as part of the cost reduction program.Units Offering agreements. Additionally, the Company recognized $1.83 million of fair value loss from mark to market adjustments on the contingent liabilities assumed on the acquisition of Somah due to the change of the fair value of the contingent consideration.
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Operating ExpensesLIQUIDUTY AND CAPITAL RESOURCES
The Company’s total operating expense consistTo date, we have incurred significant net losses and negative cash flows from operations. As of three segments; selling, administrativeMarch 31, 2022, we had available cash of $3,172,967 and general expenses. Foran accumulated deficit of $53,948,448. We fund our operations through capital raises.
Private Placements
Unit Purchase Agreement
During the ninethree months ended September 30, 2013,March 31, 2022, the Company issued an additional 2,290,659 units under its Unit Purchase Agreement for gross proceeds of $4,008,653. Of the total 2,290,659 Units issued: (i) 159,245 Units were issued to settle notes payable assumed on acquisition of My Health Logic, (ii) 22,857 Units were issued to settle accounts payable, and 171,428 Units were issued in exchange for services rendered to the Company in the three months ended March 31, 2022. The remaining proceeds from this offering will be used to sustain the Company’s growth and meet its capital obligations.
Public Offering
On February 14, 2021, Marizyme filed a registration on Form S-1 with the SEC with intention to raise up to an estimated $15,000,000, or $17,250,000 including the underwriter’s over-allotment option. The proceeds from the offering will be used by the Company (i) to develop its DuraGraft, MATLOC, and Krillase platforms; (ii) to commercialize and produce its products, and (iii) for general working capital and other corporate purposes.
Funding Requirements and Other Liquidity Matters
Marizyme expects to continue to incur expenses and operating expenses decreased $ 3,703,409 or 25 % to $ 10,938,080 from $14,641,489losses 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 slightforeseeable future. We anticipate that our expenses will 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 plan 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 delays 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 purchasedfollowing operational and soldbusiness 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; | |
● | Increase in research and development and legal expenses as we continue to develop our products, conduct clinical trials and pursue FDA approvals; | |
● | 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 date, in accordance with the above-mentioned statement,support our cost structure, the Company will be ablecontinue to provide sufficient cash flowhave to supportraise funds beyond its standard operations for the next 9 months.
From timecurrent working capital balance in order to time, the Company has issued promissory notes to fundfinance future development of products, potential acquisitions, and meet 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 infuture 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 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 located 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 strategyextent 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 securitiesfinancings when needed, we may be required to delay, limit, reduce or through shortterminate our product development or long term loans. However, there can be no assurancesfuture commercialization efforts or grant rights to develop and market product candidates that the Company will be successful in consummating any such financings on favorable terms, if at all.we would otherwise prefer to develop and market ourselves.
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Cash Flows
The following table sets forth a summary of the net cash flow activity for each of the periods indicated:
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 |
Three Months Ended March 31, | ||||||||||||
2022 | 2021 | $ Change | ||||||||||
Net Cash provided by/(used in): | ||||||||||||
Operating activities | $ | (4,313,744 | ) | $ | (2,065,030 | ) | $ | (2,248,714 | ) | |||
Investing activities | - | (2,775 | ) | 2,775 | ||||||||
Financing activities | 3,414,372 | - | 3,414,372 | |||||||||
Net increase/(decrease) in cash | $ | (899,372 | ) | $ | (2,067,805 | ) | $ | 1,168,433 |
Operating Activities
Net cash provided byused in operating activities was approximately $4.31 million and $2.07 million for the nine month periodthree months ended September 30, 2013 was $ 1,355,523 compared toMarch 31, 2022 and 2021, respectively. The net cash used in operating activities of $2,634,397 and net cash provided by discontinued operation of $63,246 for the nine month periodthree months 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 increaseMarch 31, 2022, was due to cash provided by the Sale of Intangible Assets of approximately $ 4,146,894,$0.54 million spent on professional fees, $0.92 million spent on salaries and cash provided by the Sale of property plantrelated compensation expenses and equipment of $ 579,206 as offset by a change$1.22 million spent on research and development activities. The increase in Financial Assets of approximately $ (1,928,988).
Net cashnet case used in financingoperating activities duringprimarily related to a $1.63 million increase in accounts payable, accrued expenses, and amounts due to related parties in support of the nine month period ended September 30, 2013 was $ 2,389,541 compared to netgrowth of our operating activities.
Financing Activities
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 periodthree months ended September 30, 2013. This changeMarch 31, 2022 was due to a $ 3,483,175 reduction$3.74 million of funds raised from the issuance of convertible promissory notes pursuant to the Unit Purchase Agreement. The Company also settled an aggregate of $0.33 million in capital paid-in, couplednotes payable as part of the Unit Purchase agreement issuances during the three months ended March 31, 2022.
Contractual Obligations and Commitments
Other than disclosed below, there were no material changes outside the ordinary course of our business during the three months ended March 31, 2022 to the information regarding our contractual obligations that was disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our 2021 Form 10-K.
Royalties and Other Commitments
Upon receiving the FDA approval for the DuraGraft and other key intellectual products, the Company will:
● | Grant performance warrants to Somahlution, for 4,000,000 restricted common shares of the Company, 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; | |
● | Pay royalties on all net sales of the product acquired from Somah of 6% on the first $50 million of international net sales (and 5% on the first $50 million of U.S. net sales), 4% for greater than $50 million up to $200 million, and 2% for greater than $200 million; | |
● | Pay 10% of cash value of the rare pediatric voucher sales following the FDA approval and subsequent sale to an unaffiliated third party of a rare pediatric voucher based on Somah’s DuraGraft product; | |
● | Grant rare pediatric voucher warrants to purchase an aggregate of 250,000 commons shares with a term of five years and 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 | |
● | Pay a liquidation preference, up to a maximum of $20 million upon the sale by the Company of all or substantially all of the assets relating to the Somah products. Upon the sale of either or both of the DuraGraft or Somah derived solid organ transplant products, the Company will pay 15% of the net sale proceeds towards the liquidation preference maximum amount. |
Lease Commitments
The Company has entered into arrangements for office and laboratories spaces. As of March 31, 2022, minimum lease payments in relation to lease commitments were payable as outlined in Note 5 to the interim consolidated financial statements included with cash usedthis report.
Recent Developments
Effective April 1, 2022 the Company has amended its lease agreement for administrative office and laboratories currently leased to add additional space. The monthly cost of additional space is approximately $4,510 increasing to $8,682 on July 1, 2022 and continue to increase by net borrowings from banks2.5% annually thereafter until the end of $ 902,508the term. The term of the lease remains unchanged.
In addition, effective May 1, 2022, the Company has leased additional laboratory space. The term of the lease is for 4.3 years expiring on July 30, 2026. The monthly cost of laboratory space is approximately $3,757, increasing by 6% annually. Additionally, pursuant to the agreement, the Company will pay approximately $3,344 per month in operating expenses.
On May 11, 2022, the Company issued and payments towards related party loanssold to new investors 746,563 additional units for gross proceeds of $ 2,087,437. Other borrowings provided approximately$ 1,535,482.$1,306,485. These units consisted of convertible notes in the aggregate principal amount of $1,306,485 and Class C Warrants for the purchase of 1,493,126 shares of common stock.
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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Critical Accounting Policies and Significant Judgments and Estimates
The preparationOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in conformityaccordance with generally accepted accounting principles generally accepted in the United States, or GAAP. The preparation of Americaour financial statements 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.
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 2021 Form 10-K. There have not been any material changes to the critical accounting policies discussed therein during the three months ended March 31, 2022.
Off-Balance Sheet Arrangements
As of March 31, 2022, the Company as certain assets, customer lists for example, must be amortized and chargedhas no off-balance sheet arrangements that have or are reasonably likely to operations over time, while other assets, notably goodwill, does not.
iii. Impairment testing 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 of 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) withhave 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, exercisecurrent 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 bother 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 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 Risk
We use the US dollar as our reporting currency. The functional currencies of our significant foreign subsidiaries are the local currency, which includes 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 theirfuture material 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-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 value 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 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 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 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 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 reduction 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 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, some portion or all of the deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effect ofcondition, changes in tax laws and rates on the datefinancial condition, revenues or expenses, results of enactment.operations, liquidity, capital expenditures or capital resources.
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.
Principles of Consolidation and Reverse Acquisition
As previously disclosed, 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 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.
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ItemITEM 3. Quantitative and Qualitative Disclosures about Market Risk.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
N/ANot applicable.
ItemITEM 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 disclosure controls and procedures pursuant to Rule 13a-15(b) promulgatedas defined by Rules 13a-15(e) and 15d-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 Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Based upon this evaluation, our CEO and CFO concluded that as of September 30, 2013,March 31, 2022, our disclosure controls and procedures were not effective in ensuringineffective due to the material weakness described below.
Disclosure controls and procedures means controls and other procedures of an issuer that theare designed to ensure that information required to be disclosed by the issuer in the reports that we fileit files or submitsubmits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’sSEC’s rules and forms, including ensuringforms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such material information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to ourthe issuer’s management, including our Chief Executive Officerits principal executive and our Chief Financial Officer,principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. A material weakness in disclosure controls and procedures includes a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the registrant’s annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.
As previously reported in our annual report on Form 10-K for the year ended December 31, 2021, management concluded that, as of such date, our disclosure controls and procedures were not effective due to the existence of a material weakness in the design and operating effectiveness of internal controls related to inadequate internal technical staffing levels and lack of board or management oversight. In connection with our preparation of our interim condensed consolidated financial statements for the three months ended March 31, 2021, we identified a material weakness in our disclosure controls and procedures due to the material weakness in internal control over financial reporting related to the following:
● | We did not maintain a sufficient complement of internal personnel with appropriate knowledge, experience and/or training commensurate with our financial reporting requirements. We relied on outside consulting technical experts and did not maintain adequate internal qualified personnel to properly supervise and review the information provided by the outside consulting technical experts to ensure certain significant complex transactions and technical matters were properly accounted for. | |
● | In addition, we did not have proper segregation of duties in certain areas of our financial reporting process. The areas where we had a lack of segregation of duties include cash receipts and disbursements, approval of purchases and approval of accounts payable invoices for payment. | |
● | We did not have adequate policies and procedures in place to ensure the timely, effective review of assumptions used in measuring the fair value of certain financial instruments. We did not have adequate policies and procedures in place to ensure the timely, effective review of compliance with contractual covenants in certain financial instruments, and | |
● | We did not have an independent audit committee to oversee the financial reporting processes and reporting. |
To remediate the material weaknesses described above, management will continue to add controls to further enhance and revise the design of the existing controls including:
● | Establishing policies and procedures to ensure timely review, by qualified personnel, of assumptions used in measuring fair value of certain financial instruments. | |
● | Reassessing the design and operation of internal controls over financial reporting and review procedures over the preparation of our financial statements. | |
● | Hiring permanent accounting personnel and used consultants to provide support during our quarterly and annual preparation, review, and reporting of our financial statements. | |
● | Maintaining adequate internal qualified personnel to properly supervise and review the information provided by the outside consulting technical experts to ensure certain significant complex transactions and technical matters were properly accounted for. |
We believe these measures will remediate the material weakness in internal control over financial reporting and disclosure controls and procedures described above by the 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 withremediating 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 in internal control over financial reporting identified above, 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, during the quarter ended September 30, 2013, there were no changesmaterial deficiency in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.during the three months ended March 31, 2022.
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PART II-OTHERII. OTHER INFORMATION
ItemITEM 1. Legal Proceedings.LEGAL PROCEEDINGS.
From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. 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. Other than the legal proceedings described below, we are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.
On October 23, 2013,August 19, 2021, Dr. Neil Campbell, former President, Chief Executive Officer and director of the Company, and Bruce Harmon, former Chief Financial Officer and Secretary of the Company, each filed a Complaint and Demand for Jury Trial against the Company and Insperity Peo Services, L.P., a Delaware limited partnership (“Insperity”), a joint employer of Dr. Campbell and Mr. Harmon with the Company under a Client Service Agreement, dated November 30, 2020 (collectively, the “Campbell/Harmon Complaints”). Both Campbell/Harmon Complaints allege that the Company and Insperity violated Section 448.105 of the Florida Private Whistleblower Act as a result of the constructive terminations of Dr. Campbell and Mr. Harmon after the occurrence of violations federal and state law, including federal securities law, at the Company that exposed Dr. Campbell and Mr. Harmon to civil and criminal forms of liability and that the Company was not addressing to their satisfaction. Both Campbell/Harmon Complaints demand approximately $30,000 - $50,000 in back pay and benefits, interest on back pay, front pay and/or lost earning capacity, compensatory damages, costs and attorney’s fees, and such other relief as the court deems equitable. We intend to vigorously defend against these claims. As of March 31, 2022, these cases were in arbitration. Subsequently to the quarter end, in April 2022, both cases were dismissed with prejudice and without any financial impact on the Company.
On January 28, 2022, we filed a Complaint in the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida (the “Florida Circuit Court”), case number 50-2022-CA-000859-XXX-MB, against Amy Chandler (the “Chandler Complaint”). The Chandler Complaint seeks damages for breach of fiduciary duty, breach of contract, negligence, conversion, and civil theft. The Chandler Complaint alleged that, approximately two months before her resignation in September 2021, Ms. Chandler intentionally and recklessly took affirmative actions to cancel the CE certificate required by European Union regulations in order for Marizyme and its subsidiary, Somahlution, LLC, to ship and distribute certain products to/within the European Union, and disregarded her fiduciary duty to Marizyme and responsibilities as its former Executive Vice President for Regulatory Affairs and Quality Management Systems. As a result, the Chandler Complaint alleged that Ms. Chandler’s actions caused significant disruption and damage to Marizyme’s business, including, but not limited to, financial damages and damage to Marizyme’s reputation and business relationships. The Chandler Complaint further alleged that prior to her last day, Ms. Chandler stole confidential, proprietary files governing Marizyme’s quality management system, which were required for essential internal business operations, and that Marizyme incurred significant costs to recreate these files. The Chandler Complaint alleged damages in excess of thirty thousand dollars ($30,000.00), exclusive of interest, attorneys’ fees, and costs.
On February 28, 2022, Ms. Chandler filed a Answer, Affirmative Defenses and Counterclaim to Plaintiff’s Complaint with the Florida Circuit Court (the “Chandler Countercomplaint”). The Chandler Countercomplaint denied the claims in the Chandler Complaint and most of the factual allegations regarding her alleged actions. The Chandler Countercomplaint also included a counterclaim of defamation per se against the Company based on certain statements regarding this litigation that were included in the Registration Statement. As to the claims in the Chandler Complaint, the Chandler Countercomplaint demanded an award of attorneys’ fees and costs, court costs on all counts, and such further relief the court deems just and proper. As to the counterclaim of defamation, the Chandler Countercomplaint requested monetary damages, punitive damages, court costs, and any other relief the court deems just and proper. The Chandler Countercomplaint also demanded trial by jury on all triable issues.
On March 18, 2022, the Company filed a lawsuit (GBS Enterprises, Inc. v. Reliance Globalcom, Inc.) inMotion to Dismiss Counterclaim with the SuperiorFlorida Circuit Court of(the “Motion to Dismiss”). The Motion to Dismiss stated that the State of California, County of San Francisco, seeking a declaratory judgment thatChandler Countercomplaint for defamation per se should be dismissed with prejudice because the Company has no obligationnot made any statements about Chandler outside the allegations in the Chandler Complaint. The Motion 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 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 GTTDismiss stated that the Identified Dispute described herein has been resolved, GTT will releasestatements regarding this litigation that were included in the $528,777.93Registration Statement were as a matter of law not false because they all accurately reproduced the allegations in the Chandler Complaint and such statements were prefaced by the words “The Chandler Complaint alleged”. The Motion to GBS. The Company is seeking declaratory relief fromDismiss further stated that allegations in the Court stating the Company is not liablelitigation are subject to RelianceFlorida’s litigation privilege and that GTT may release the $528,777.93 in funds owed to the Company. There were no material developments incannot serve as a basis for a defamation claim as a matter of law. As of [*], 2022, this case since the filing of the lawsuit.was pending.
The Company intends to vigorously defend its interests in this matter.
ITEM 1A. RISK FACTORS.
Item 1A. Risk Factors.
Not applicable.
The disclosure required under this item is not required to be reported by small reporting companies; as such term is defined by Item 503(e) of Regulation S-K.
ItemITEM 2. Unregistered SalesUNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
During the three-month period ended March 31, 2022, we did not conduct any unregistered sales of Equityour equity securities that were not previously disclosed in a current report of Form 8-K and we did not repurchase any of our common stock, other than as described below.
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On January 13, 2022, we conducted an additional closing of our unit private placement, in which we sold to a consultant 22,857 units at a price of $1.75 per unit in exchange for services, the units consisting of convertible notes in the aggregate principal amount of $40,000 and Class C warrants for the purchase of 45,714 shares of our common stock.
On January 24, 2022, we conducted an additional closing of our unit private placement, in which we sold to two investors a total of 159,245 units at a price of $1.75 per unit in exchange for the assumption, cancellation, and conversion of principal notes of our subsidiary My Health Logic, the units consisting of convertible notes in the aggregate principal amount of $278,678 and Class C warrants for the purchase of 218,490 shares of our common stock.
On January 24, 2022, we conducted an additional closing of our unit private placement, in which we sold to the representative and its designee Bradley Richmond a total of 171,429 units at a price of $1.75 per unit in exchange for services, the units consisting of convertible notes in the aggregate principal amount of $300,000 and Class C warrants for the purchase of 342,857 shares of our common stock.
On March 24, 2022, we conducted an additional closing of the unit private placement in which we issued a number of investors a total of 1,937,129 units at a price of $1.75 per unit for a total cash payment of $3,389,975, of which we received $3,118,777 after placement agent fees. The units consist of Convertible Notes in the aggregate principal amount of $3,389,975 and Class C Warrants for the purchase of 3,874,257 shares of common stock. The Convertible Notes in this and subsequent closings were also modified to provide that upon the occurrence of certain qualified financings of $10 million or more as described above, such Convertible Notes would be voluntarily, not automatically, convertible at the lower of 75% of the price per equity security in such financing and the otherwise applicable conversion price. The conversion provision was also modified to remove the requirement that an effective registration statement allow for the issuance or resale of shares of common stock into which the convertible notes may be converted in order for the conversion price of the Convertible Notes to be subject to the reduction to 75% of the price per equity security in a qualified financing.
The Company engaged Univest Securities, LLC as the Company’s placement agent for this private placement. The Company paid Univest a cash placement fee equal to 8.0% of the gross proceeds from the sale of the units and Usewill pay Univest 8.0% of Proceedsthe gross proceeds from the exercise of the Class C warrants. In addition, in exchange for a $100 payment by Univest, the Company has agreed to issue warrants to Univest to purchase an aggregate of 8.0% of the total number of shares of common stock issuable upon conversion of the convertible notes issued in the private placement, with an exercise price equal to $1.75. These warrants, which may be exercised on a cashless basis, will be exercisable starting on the final closing date of this offering and will be exercisable for a period of five years from that date.
NoneAll of the securities issued in the private placement were sold pursuant to an exemption from the registration requirements of the Securities Act pursuant to Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated thereunder.
ItemITEM 3. Defaults Upon Senior Securities.DEFAULTS UPON SENIOR SECURITIES.
NoneNone.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ItemITEM 5. Other Information.OTHER INFORMATION.
NoneNone.
Item
ITEM 6. Exhibits.EXHIBITS
The following exhibits are filed as part of this report or incorporated by reference:
* Filed herewith
** Furnished herewith
+ Indicates management contract or compensatory plan.
SIGNATURES
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: May 16, 2022 | MARIZYME, INC. | |
/s/ David Barthel | ||
Name: | David Barthel | |
Title: | Chief Executive Officer | |
(Principal Executive Officer) | ||
/s/ George Kovalyov | ||
Name: | George Kovalyov | |
Title: | Chief Financial Officer | |
(Principal Accounting and Financial |