ITEM
1. FINANCIAL STATEMENTS
SIGYN
THERAPEUTICS, INC.
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
See
accompanying notes to unaudited condensed consolidated financial statements.
SIGYN
THERAPEUTICS, INC.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
See
accompanying notes to unaudited condensed consolidated financial statements.
SIGYN
THERAPEUTICS, INC.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
See
accompanying notes to unaudited condensed consolidated financial statements.
SIGYN
THERAPEUTICS, INC.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
See
accompanying notes to unaudited condensed consolidated financial statements.
SIGYN
THERAPEUTICS, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – ORGANIZATION AND PRINCIPAL ACTIVITIES
Corporate
History and Background
Sigyn
Therapeutics, Inc. (“Sigyn” or the “Company”) is a development-stage medical technology company headquartered
in San Diego, California. We are focused on creating therapeutic solutions that address unmet needs in global health.
Sigyn
Therapy™ is a broad-spectrum blood purification technology to address life-threatening infections and inflammatory disorders for
which effective drug therapies are not available. We designed Sigyn Therapy to extract pathogen
sources of life-threatening inflammation in concert with dampening down the dysregulated overproduction of inflammatory cytokines (the
cytokine storm), which plays a prominent role in each of our candidate treatment indications.
We
are advancing Sigyn Therapy as a candidate to treat end-stage renal disease (ESRD) patients with
chronic inflammation and/or endotoxemia, pathogen-associated sepsis (leading cause of hospital deaths), community acquired pneumonia
(a leading cause of death among infectious diseases), and emerging pandemic threats.
Since
initiating the development of Sigyn Therapy in 2020, we completed a series of in vitro studies that demonstrated the ability of
Sigyn Therapy to extract pathogen sources of inflammation from human blood plasma. These include endotoxin (a gram-negative bacterial
toxin), peptidoglycan and lipoteichoic acid (gram-positive bacterial toxins), and viral pathogens, including COVID-19.
We
also completed in vitro studies that demonstrated the ability of Sigyn Therapy to extract inflammatory cytokines from human blood
plasma. These include interleukin-1 beta (IL-1b), interleukin-6 (IL-6), and tumor necrosis factor alpha (TNF-a). In a related study,
we reduced the circulating presence of liposomes as a model system to evaluate the potential of Sigyn Therapy to address CytoVesicles
that transport inflammatory cytokine cargos throughout the bloodstream.
Additionally,
in vitro studies demonstrated the ability of Sigyn Therapy to deplete hepatic (liver) toxins from human blood plasma, which included
ammonia, bile acid and bilirubin. Based on these outcomes, we may further investigate the potential of Sigyn Therapy to address acute
forms of liver failure in future studies.
Subsequent
to our in vitro study results, we completed in vivo animal studies of Sigyn Therapy at the University of Michigan. In
these studies, Sigyn Therapy was administered via standard dialysis machines utilizing conventional blood-tubing sets, for periods up
to six hours in eight porcine (pig) subjects. Important criteria for treatment safety, including hemodynamic parameters, serum chemistries
and hematologic measurements, were stable across all eight subjects.
The
data resulting from our in vivo and in vitro studies is being incorporated into an Investigational Device Exemption (IDE) that
we are drafting for submission to the U.S. Food and Drug Administration (“FDA”) to support the potential initiation of human
feasibility studies in the United States.
Beyond
our focus to clinically advance Sigyn Therapy, we intend to develop a pipeline of extracorporeal blood purification therapies. In this
regard, we have designed a therapeutic system to enhance the benefit of cancer chemotherapy. To support this endeavor, we disclosed on
October 6, 2022, that a patent application entitled: “SYSTEM AND METHODS
TO ENHANCE CHEMOTHERAPY DELIVERY AND REDUCE TOXICITY” had been filed with the United
States Patent and Trademark Office (“USPTO”). On October 13, 2022, we subsequently disclosed that trademark applications
to register ChemoPrepTM and ChemoPureTM were filed with the USPTO”.
Chemotherapeutic
agents are the most commonly administered drugs to treat cancer, which is the second leading cause of death in the United States. Despite
therapeutic advances, treatment toxicity, drug resistance and inadequate tumor site delivery restrict the benefit of chemotherapy.
To
overcome these challenges, our patent submission describes a therapeutic device system whose primary objective is to enhance tumor site
delivery of chemotherapy and reduce its toxicity. A secondary objective of the system is to reduce treatment dosing without sacrificing
patient benefit, or conversely increase chemotherapy dosing without added toxicity. In concert with these objectives, the therapeutic
system offers to inhibit the spread of cancer metastasis reported to be induced by the administration of chemotherapy.
Our
proposed chemotherapy enhancement system is comprised of two blood purification technologies. ChemoPrepTM, administered prior
to chemotherapy to optimize tumor site delivery and improve the benefit of ChemoPureTM, which is deployed post-chemotherapy
to reduce treatment toxicity and inhibit the potential spread of cancer metastasis.
Merger
Transaction
On
October 19, 2020, Sigyn Therapeutics, Inc, a Delaware corporation (the “Registrant”) formerly known as Reign Resources Corporation,
completed a Share Exchange Agreement (the “Agreement”) with Sigyn Therapeutics, Inc., a private entity incorporated in the
State of Delaware on October 19, 2019.
In
the Share Exchange Agreement, we acquired 100% of the issued and outstanding shares of privately held Sigyn Therapeutics common stock
in exchange for 75% of the fully paid and nonassessable shares of our common stock outstanding (the “Acquisition”). In conjunction
with the transaction, we changed our name from Reign Resources Corporation to Sigyn Therapeutics, Inc. pursuant to an amendment to our
articles of incorporation that was filed with the State of Delaware. Subsequently, our trading symbol was changed to SIGY. The Acquisition
was treated by the Company as a reverse merger in accordance with accounting principles generally accepted in the United States of America
(“U.S. GAAP”). For accounting purposes, Sigyn is considered to have acquired Reign Resources Corporation as the accounting
acquirer because: (i) Sigyn stockholders own 75% of the combined company, on an as-converted basis, immediately following the Closing
Date, (ii) Sigyn directors hold a majority of board seats in the combined company and (iii) Sigyn management held all key positions in
the management of the combined company. Accordingly, Sigyn’s historical results of operations will replace Reign Resources Corporation’s
historical results of operations for all periods prior to the Acquisition and, for all periods following the Acquisition, the results
of operations of the combined company will be included in the Company’s financial statements. The
Acquisition was treated as a “tax-free exchange” under Section 368 of the Internal Revenue Code of 1986 and resulted in the
private Sigyn Therapeutics corporate entity (established on October 29, 2019) to become a wholly owned subsidiary of Reign Resources
Corporation. Among the conditions for closing the acquisition, the Reign Resources Corporation extinguished all previously reported liabilities,
its preferred class of shares, and all stock purchase options. As a result, the reported liabilities totaling $3,429,516 were converted
into a total of 7,907,351 common shares. Additionally, assets held on the books of Reign Resources
Corporation, such as Gem inventory, was kept in the Company and therefore recorded as assets on the Share Exchange date. Upon
the closing of the Acquisition, we appointed James A. Joyce and Craig P. Roberts to serve as members of our Board of Directors.
As
of November 14, 2022, we have a total 37,295,813 shares issued and outstanding, of which 11,655,813 shares are held by non-affiliate
stockholders.
NOTE
2 – BASIS OF PRESENTATION
The
accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States
of America and include all adjustments necessary for the fair presentation of the Company’s financial position and results of operations
for the periods presented.
The
Company currently operates in one business segment. The Company is not organized by market and is managed and operated as one business.
A single management team reports to the chief operating decision maker, the Chief Executive Officer, who comprehensively manages the
entire business. The Company does not currently operate any separate lines of businesses or separate business entities.
Going
Concern
The
accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among
other things, the realization of assets and satisfaction of liabilities in the normal course of business. The Company had an accumulated
deficit of $6,336,639 at September 30, 2022 and $4,265,759 at December 31, 2021, had a working capital deficit of $1,817,541 and $341,187
at September 30, 2022 and December 31, 2021, respectively, had a net loss of $2,070,880 and $1,777,447 for the nine months ended September
30, 2022 and 2021, respectively, and net cash used in operating activities of $1,378,475 and $1,221,221 for the nine months ended September
30, 2022 and 2021, respectively, with no revenue earned since inception, and a lack of operational history. These matters raise substantial
doubt about the Company’s ability to continue as a going concern.
While
the Company is attempting to expand operations and increase revenues, the Company’s cash position may not be significant enough
to support the Company’s daily operations. Management intends to raise additional funds by way of a public offering or an asset
sale transaction. Management believes that the actions presently being taken to further implement its business plan and generate revenues
provide the opportunity for the Company to continue as a going concern. While management believes in the viability of its strategy to
generate revenues and in its ability to raise additional funds or transact an asset sale, there can be no assurances to that effect or
on terms acceptable to the Company. 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 revenues.
The
financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This
summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements.
The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and
objectivity. These accounting policies conform to GAAP and have been consistently applied in the preparation of the financial statements.
Use
of Estimates
The
preparation of these financial statements in accordance with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the dates of the financial statements and the reported amounts of net sales and expenses during the reported
periods. Actual results may differ from those estimates and such differences may be material to the financial statements. The more significant
estimates and assumptions by management include among others: common stock valuation, and the recoverability of intangibles. The current
economic environment has increased the degree of uncertainty inherent in these estimates and assumptions.
Cash
The
Company’s cash is held in bank accounts in the United States and is insured by the Federal Deposit Insurance Corporation (FDIC)
up to $250,000. The Company has not experienced any cash losses.
Income
Taxes
Income
taxes are accounted for under an asset and liability approach. This process involves calculating the temporary and permanent differences
between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
The temporary differences result in deferred tax assets and liabilities, which would be recorded on the Balance Sheets in accordance
with ASC 740, which established financial accounting and reporting standards for the effect of income taxes. The likelihood that its
deferred tax assets will be recovered from future taxable income must be assessed and, to the extent that recovery is not likely, a valuation
allowance is established. Changes in the valuation allowance in a period are recorded through the income tax provision in the consolidated
Statements of Operations.
ASC
740-10 clarifies the accounting for uncertainty in income taxes recognized in an entity’s consolidated financial statements and
prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to
be taken on a tax return. Under ASC 740-10, the impact of an uncertain income tax position on the income tax return must be recognized
at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax
position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC 740-10 provides guidance on
derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the implementation
of ASC 740-10 and currently, the Company does not have a liability for unrecognized income tax benefits.
Advertising
and Marketing Costs
Advertising
expenses are recorded as general and administrative expenses when they are incurred. The Company had advertising expenses of $65
and $446 and
$0 and $164,500
for the three and nine months ended September 30, 2022 and 2021, respectively.
Inventories
In
conjunction with the October 19, 2020 Share Exchange Agreement, the Company kept the gem inventory of Reign Resources Corporation. Inventories
are stated at the lower of cost or market (net realizable value) on a lot basis each quarter. A lot is determined by the cut, clarity,
size, and weight of the sapphires. Inventory consists of sapphire jewels that meet rigorous grading criteria and are of cuts and sizes
most commonly used in the jewelry industry. As of September 30, 2022 and December 31, 2021, the Company carried primarily loose sapphire
jewels, jewelry for sale on our website, and jewelry held as samples. Samples are used to show potential customers what the jewelry would
look like. Promotional items given to customers that are not expected to be returned will be removed from inventory and expensed. There
have been no promotional items given to customers as of September 30, 2022. The Company performs its own in-house assessment based on
gem guide and the current market price for metals to value its inventory on an annual basis or if circumstances dictate sooner to determine
if the estimated fair value is greater or less than cost. In addition, the inventory is reviewed each quarter by the Company against
industry prices from gem-guide and if there is a potential impairment, the Company would appraise the inventory. The estimated fair value
is subject to significant change due to changes in popularity of cut, perceived grade of the clarity of the sapphires, the number, type
and size of inclusions, the availability of other similar quality and size sapphires, and other factors. As a result, the internal assessed
value of the sapphires could be significantly lower from the current estimated fair value. Loose sapphire jewels do not degrade in quality
over time.
Based
on the significant advancement of Sigyn Therapy, the Company decided in the 4th quarter of 2021 to assess the value of retail
business operations that were a focus of the Company prior to the merger transaction consummated on October 19, 2020.
Related
to this assessment, management determined the wholesale liquidation value of its sapphire gem inventory to be 5-10% of the previously
reported retail value, based on communications with certified gemologists, the variance between retail and wholesale valuations, and
current market conditions. As a result, the Company has valued the inventory at $50,000 and recorded an impairment of assets of $536,047
in the year ended December 31, 2021.
Property
and Equipment
Property
and equipment are carried at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets, generally
five years. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets
are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are
included in income in the year of disposition.
Intangible
Assets
Intangible
assets consist primarily of website development costs. Our intangible assets are being amortized on a straight-line basis over a period
of three years.
Impairment
of Long-lived Assets
We
periodically evaluate whether the carrying value of property, equipment and intangible assets has been impaired when circumstances indicate
the carrying value of those assets may not be recoverable. The carrying amount is not recoverable if it exceeds the sum of the undiscounted
cash flows expected to result from the use and eventual disposition of the asset. If the carrying value is not recoverable, the impairment
loss is measured as the excess of the asset’s carrying value over its fair value.
Our
impairment analyses require management to apply judgment in estimating future cash flows as well as asset fair values, including forecasting
useful lives of the assets, assessing the probability of different outcomes, and selecting the discount rate that reflects the risk inherent
in future cash flows. If the carrying value is not recoverable, we assess the fair value of long-lived assets using commonly accepted
techniques, and may use more than one method, including, but not limited to, recent third-party comparable sales and discounted cash
flow models. If actual results are not consistent with our assumptions and estimates, or our assumptions and estimates change due to
new information, we may be exposed to an impairment charge in the future. As of September 30, 2022 and December 31, 2021, the Company
had not experienced impairment losses on its long-lived assets.
Fair
Value of Financial Instruments
The
provisions of accounting guidance, FASB Topic ASC 825 requires all entities to disclose the fair value of financial instruments, both
assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value, and defines
fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing
parties. As of September 30, 2022 and December 31, 2021, the fair value of cash, accounts payable, accrued expenses, and notes payable
approximated carrying value due to the short maturity of the instruments, quoted market prices or interest rates which fluctuate with
market rates.
Fair
Value Measurements
Fair
value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal
or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date.
Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.
The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable,
as follows:
| |
● |
Level
1 – Quoted prices in active markets for identical assets or liabilities. |
| |
|
|
| |
● |
Level
2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets
or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable
market data for substantially the full term of the assets or liabilities. |
| |
|
|
| |
● |
Level
3 – Unobservable inputs that are supported by little or no market activity and that are significant to the measurement of the
fair value of the assets or liabilities |
The
carrying value of financial assets and liabilities recorded at fair value are measured on a recurring or nonrecurring basis. Financial
assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. There
were no financial assets or liabilities carried and measured on a nonrecurring basis during the reporting periods. Financial assets and
liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. There
have been no transfers between levels.
Debt
The
Company issues debt that may have separate warrants, conversion features, or no equity-linked attributes.
Embedded
Conversion Features
The
Company evaluates embedded conversion features within convertible debt under ASC 815, Derivatives and Hedging, to determine whether
the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with
changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument
is evaluated under ASC 470-20, Debt with Conversion and Other Options, for consideration of any beneficial conversion feature.
Derivative
Financial Instruments
The
Company evaluates all of it financial instruments, including stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities,
the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair
value reported as charges or credits to income.
For
option-based simple derivative financial instruments, the Company uses the Monte Carlo simulations to value the derivative instruments
at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should
be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. There were no derivative financial instruments
as of September 30, 2022 and December 31, 2021 and no charges or credits to income for the three and nine months ended September 30,
2022.
Debt
Issue Costs and Debt Discount
The
Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs
may be paid in the form of cash or equity (such as warrants). These costs are amortized to interest expense through the maturity of the
debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately
expensed. Any unamortized debt issue costs and debt discount are presented net of the related debt on the consolidated balance sheets.
Original
Issue Discount
For
certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The original issue discount
would be recorded to debt discount, reducing the face amount of the note and is amortized to interest expense through the maturity of
the debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately
expensed. Any unamortized original issue discounts are presented net of the related debt on the consolidated balance sheets.
If
the conversion feature does not qualify for either the derivative treatment or as a BCF, the convertible debt is treated as traditional
debt.
Basic
and diluted earnings per share
Basic
net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period,
without consideration for common stock equivalents. Diluted earnings (loss) per share are computed on the basis of the weighted average
number of common shares (including common stock subject to redemption) plus dilutive potential common shares outstanding for the reporting
period. In periods where losses are reported, the weighted-average number of common stock outstanding excludes common stock equivalents,
because their inclusion would be anti-dilutive.
Basic
and diluted earnings (loss) per share are the same since net losses for all periods presented and including the additional potential
common shares would have an anti-dilutive effect.
Stock
Based Compensation
In
accordance with ASC No. 718, Compensation – Stock Compensation (“ASC 718”), we measure the compensation costs
of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over
the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted
share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured
on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the
option grant.
Non-Employee
Stock-Based Compensation
In
accordance with ASC 505, Equity Based Payments to Non-Employees, issuances of the Company’s common stock or warrants for
acquiring goods or services are measured at the fair value of the consideration received or the fair value of the equity instruments
issued, whichever is more reliably measurable. The measurement date for the fair value of the equity instruments issued to consultants
or vendors is determined at the earlier of (i) the date at which a commitment for performance to earn the equity instruments is reached
(a “performance commitment” which would include a penalty considered to be of a magnitude that is a sufficiently large disincentive
for nonperformance) or (ii) the date at which performance is complete. Although situations may arise in which counter performance may
be required over a period of time, the equity award granted to the party performing the service is fully vested and non-forfeitable on
the date of the agreement. As a result, in this situation in which vesting periods do not exist as the instruments fully vested on the
date of agreement, the Company determines such date to be the measurement date and will record the estimated fair market value of the
instruments granted as a prepaid expense and amortize such amount to general and administrative expense in the accompanying statement
of operations over the contract period. When it is appropriate for the Company to recognize the cost of a transaction during financial
reporting periods prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is
measured at the then-current fair values at each of those interim financial reporting dates.
Reclassifications
Certain
prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on
the reported results of operations. An adjustment has been made to the Unaudited Condensed Consolidated Statements of Operations for
three and nine months ended September, 2021, to reclass $177,844 and $392,496, respectively, of costs to research and development previously
classified in general and administrative. In addition,
an adjustment has been made to the Unaudited Condensed Consolidated Balance Sheets as of December
31, 2021, to reclass $1,072 of other current liabilities previously classified in accrued payroll and payroll taxes.
Concentrations,
Risks, and Uncertainties
Business
Risk
Substantial
business risks and uncertainties are inherent to an entity, including the potential risk of business failure.
The
Company is headquartered and operates in the United States. To date, the Company has generated no revenues from operations. There can
be no assurance that the Company will be able to raise additional capital and failure to do so would have a material adverse effect on
the Company’s financial position, results of operations and cash flows. Also, the success of the Company’s operations is
subject to numerous contingencies, some of which are beyond management’s control. Currently, these contingencies include general
economic conditions, price of components, competition, and governmental and political conditions.
Interest
rate risk
Financial
assets and liabilities do not have material interest rate risk.
Credit
risk
The
Company is exposed to credit risk from its cash in banks. The credit risk on cash in banks is limited because the counterparties are
recognized financial institutions.
Seasonality
The
business is not subject to substantial seasonal fluctuations.
Major
Suppliers
Sigyn
Therapy is comprised of components that are supplied by various industry vendors. Additionally, the Company is reliant on third-party
organizations to conduct clinical development studies that are necessary to advance Sigyn Therapy toward the marketplace.
Should
the relationship with an industry vendor or third-party clinical development organization be interrupted or discontinued, it is believed
that alternate component suppliers and third-party clinical development organizations could be identified to support the continued advancement
of Sigyn Therapy.
Recent
Accounting Pronouncements
In
August 2020, the FASB issued ASU No. 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging
– Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s
Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP.
The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and
it also simplifies the diluted earnings per share calculation in certain areas. This ASU is effective for annual reporting periods beginning
after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal
years beginning after December 15, 2020. The Company adopted ASU No. 2020-06 in the first quarter
of fiscal 2021, coinciding with the standard’s effective date, and had an immaterial impact from this standard.
Other
recently issued accounting updates are not expected to have a material impact on the Company’s unaudited condensed consolidated
financial statements.
NOTE
4 – PROPERTY AND EQUIPMENT
Property
and equipment consisted of the following as of:
SCHEDULE OF PROPERTY AND EQUIPMENT
| | |
| |
September
30, | | |
December
31, | |
| | |
Estimated
Life | |
2022 | | |
2021 | |
| | |
| |
| | |
| |
| Office
equipment | |
5
years | |
$ | 29,041 | | |
$ | 28,181 | |
| Computer
equipment | |
3
years | |
| 3,157 | | |
| 3,157 | |
| Accumulated
depreciation | |
| |
| (8,431 | ) | |
| (3,292 | ) |
| Property and equipment, net | |
| |
$ | 23,767 | | |
$ | 28,046 | |
Depreciation
expense was $1,716 and $5,139 and $432 and $1,279 for the three and nine months ended September 30, 2022 and 2021, respectively, and
is classified in general and administrative expenses in the unaudited condensed consolidated Statements of Operations.
NOTE
5 – INTANGIBLE ASSETS
Intangible
assets consisted of the following as of:
SCHEDULE OF INTANGIBLE ASSETS
| | |
Estimated
life | |
September
30,
2022 | | |
December
31,
2021 | |
| | |
| |
| | | |
| | |
| Website | |
3
years | |
$ | 10,799 | | |
$ | 10,799 | |
| Website | |
3
years | |
$ | 10,799 | | |
$ | 10,799 | |
| Accumulated
amortization | |
| |
| (7,799 | ) | |
| (5,099 | ) |
| Intangible
assets, net | |
| |
$ | 3,000 | | |
$ | 5,700 | |
As
of September 30, 2022, estimated future amortization expenses related to intangible assets were as follows:
SCHEDULE OF ESTIMATED AMORTIZATION EXPENSES RELATED TO INTANGIBLE ASSETS
| | |
| | |
| | |
Intangible
Assets | |
| 2022
(remaining 3 months) | |
$ | 900 | |
| 2023 | |
| 2,100 | |
| Intangible assets, net | |
$ | 3,000 | |
The
Company had amortization expense of $900 and $2,700 and $900 and $15,305 for the three and nine months ended September 30, 2022 and 2021,
respectively.
On
January 8, 2020, James Joyce, the Company’s CEO and Craig Roberts, the Company’s CTO, assigned to the Company the rights
to patent 62/881,740 pertaining to the devices, systems and methods for the broad-spectrum reduction of pro-inflammatory cytokines in
blood.
NOTE
6 – CONVERTIBLE PROMISSORY DEBENTURES
Convertible
notes payable consisted of the following:
SCHEDULE OF CONVERTIBLE NOTES PAYABLE
| | |
September
30, 2022 | | |
December
31, 2021 | |
| | |
| | |
| |
| January
28, 2020 ($457,380) – 0% interest per annum outstanding principal and interest due October 20, 2022 (“Note 1”) | |
$ | 457,380 | | |
$ | 457,380 | |
| January
28, 2020 ($457,380) – 0% interest per annum outstanding principal and interest due October 20, 2022 (“Note 1”) | |
$ | 457,380 | | |
$ | 457,380 | |
| June
23, 2020 ($60,500) – 0% interest per annum outstanding principal and interest due October 20, 2022 (“Note 2”) | |
| 60,500 | | |
| 60,500 | |
| September
17, 2020 ($199,650) – 0% interest per annum outstanding principal and interest due October 20, 2022. On October 28, 2021, Osher
elected to convert $16,714 of the aggregate principal amount of the Note of $199,650, into 42,857 common shares (“Note 3”). | |
| 182,936 | | |
| 182,936 | |
| March
23, 2022 ($220,000) – 0% interest per annum outstanding principal and interest due March 23, 2023 (“Note 4”) | |
| 220,000 | | |
| - | |
| April
28, 2022 ($110,000) – 0% interest per annum outstanding principal and interest due April 28, 2023 (“Note 5”) | |
| 110,000 | | |
| - | |
| May
10, 2022 ($110,000) – 0% interest per annum outstanding principal and interest due May 10, 2023 (“Note 6”) | |
| 110,000 | | |
| - | |
| June
1, 2022 ($55,000) – 0% interest per annum outstanding principal and interest due June 1, 2023 (“Note 7”) | |
| 55,000 | | |
| - | |
| June
22, 2022 ($82,500) – 0% interest per annum outstanding principal and interest due June 22, 2023 (“Note 8”) | |
| 82,500 | | |
| - | |
| July
2022 ($341,000) – 0% interest per annum outstanding principal and interest due various dates July 2023 (“Note 9”) | |
| 341,000 | | |
| - | |
| August
31, 2022 ($110,000) – 0% interest per annum outstanding principal and interest due August 31, 2023 (“Note 10”) | |
| 110,000 | | |
| - | |
| September
9, 2022 ($82,500) – 0% interest per annum outstanding principal and interest due September 9, 2023 (“Note 11”) | |
| 82,500 | | |
| - | |
| September
20, 2022 ($110,000) – 0% interest per annum outstanding principal and interest due September 20, 2023 (“Note 12”) | |
| 110,000 | | |
| - | |
| | |
| | | |
| | |
| Total
convertible notes payable | |
| 1,921,816 | | |
| 700,816 | |
| Original
issue discount | |
| (78,739 | ) | |
| (53,614 | ) |
| Debt
discount | |
| (327,634 | ) | |
| - | |
| | |
| | | |
| | |
| Total
convertible notes payable | |
$ | 1,515,443 | | |
$ | 647,202 | |
Principal
payments on convertible promissory debentures are due as follows:
SCHEDULE OF PRINCIPAL PAYMENTS DUE ON CONVERTIBLE PROMISSORY DEBENTURES
| | |
| 1 | |
| Year
ending December 31, | |
| |
| 2022 | |
$ | 700,816 | |
| 2023 | |
| 1,221,000 | |
| Long-Term Debt | |
$ | 1,921,816 | |
Changes
in convertible notes were as follows:
SCHEDULE OF CHANGES IN CONVERTIBLE NOTES
| | |
Note
1 | | |
Note
2 | | |
Note
3 | | |
Note
4 | | |
Note
5 | | |
Note
6 | | |
Note
7 | | |
Note
8 | | |
Note
9 | | |
Note
10 | | |
Note
11 | | |
Note
12 | | |
Totals | |
| Convertible
notes payable as of January 1, 2021 | |
$ | 385,000 | | |
$ | 50,000 | | |
$ | 181,500 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 616,500 | |
| Extension
of convertible note payable | |
| 72,380 | | |
| 10,500 | | |
| 18,150 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 101,030 | |
| Exchange
of convertible note payable for common stock | |
| - | | |
| - | | |
| (16,714 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (16,714 | ) |
| Convertible
notes payable, net, as of December 31, 2021 | |
| 457,380 | | |
| 60,500 | | |
| 182,936 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 700,816 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Convertible
notes payable issued in 2022 | |
| - | | |
| - | | |
| - | | |
| 220,000 | | |
| 110,000 | | |
| 110,000 | | |
| 55,000 | | |
| 82,500 | | |
| 341,000 | | |
| 110,000 | | |
| 82,500 | | |
| 110,000 | | |
| 1,221,000 | |
| Convertible
notes payable as of September 30, 2022 | |
$ | 457,380 | | |
$ | 60,500 | | |
$ | 182,936 | | |
$ | 220,000 | | |
$ | 110,000 | | |
$ | 110,000 | | |
$ | 55,000 | | |
$ | 82,500 | | |
$ | 341,000 | | |
$ | 110,000 | | |
$ | 82,500 | | |
$ | 110,000 | | |
$ | 1,921,816 | |
Changes
in note discounts were as follows:
SCHEDULE OF CHANGES IN NOTE DISCOUNTS
| | |
Note 1 | | |
Note 2 | | |
Note 3 | | |
Note 4 | | |
Note 5 | | |
Note 6 | | |
Note 7 | | |
Note 8 | | |
Note 9 | | |
Note 10 | | |
Note 11 | | |
Note 12 | | |
Totals | |
| Note discounts as of January 1, 2020 | |
$ | 73,418 | | |
$ | 5,830 | | |
$ | 18,584 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 97,832 | |
| Note discounts in conjunction with extension of convertible note | |
| 41,580 | | |
| 5,500 | | |
| 18,150 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 65,230 | |
| 2021 accretion of note discounts | |
| (80,822 | ) | |
| (6,809 | ) | |
| (21,817 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (109,448 | ) |
| Note discounts as of December 31, 2021 | |
| 34,176 | | |
| 4,521 | | |
| 14,917 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 53,614 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Note discounts issued in conjunction with debt | |
| - | | |
| - | | |
| - | | |
| 113,418 | | |
| 44,786 | | |
| 44,787 | | |
| 22,794 | | |
| 34,861 | | |
| 140,289 | | |
| 64,104 | | |
| 62,370 | | |
| 72,730 | | |
| 600,139 | |
| 2022 accretion of note discounts | |
| (31,100 | ) | |
| (4,113 | ) | |
| (13,575 | ) | |
| (59,350 | ) | |
| (19,019 | ) | |
| (17,547 | ) | |
| (7,556 | ) | |
| (9,550 | ) | |
| (35,360 | ) | |
| (16,158 | ) | |
| (15,720 | ) | |
| (18,332 | ) | |
| (247,380 | ) |
| accretion of note discounts | |
| (31,100 | ) | |
| (4,113 | ) | |
| (13,575 | ) | |
| (59,350 | ) | |
| (19,019 | ) | |
| (17,547 | ) | |
| (7,556 | ) | |
| (9,550 | ) | |
| (35,360 | ) | |
| (16,158 | ) | |
| (15,720 | ) | |
| (18,332 | ) | |
| (247,380 | ) |
| Note discounts as of September 30, 2022 | |
$ | 3,076 | | |
$ | 408 | | |
$ | 1,342 | | |
$ | 54,068 | | |
$ | 25,767 | | |
$ | 27,240 | | |
$ | 15,238 | | |
$ | 25,311 | | |
$ | 104,929 | | |
$ | 47,946 | | |
$ | 46,650 | | |
$ | 54,398 | | |
$ | 406,373 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Convertible notes payable, net, as of December 31, 2021 | |
$ | 423,204 | | |
$ | 55,979 | | |
$ | 168,019 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 647,202 | |
| Convertible notes payable, net, as of September 30, 2022 | |
$ | 454,304 | | |
$ | 60,092 | | |
$ | 181,594 | | |
$ | 165,932 | | |
$ | 84,233 | | |
$ | 82,760 | | |
$ | 39,762 | | |
$ | 57,189 | | |
$ | 236,071 | | |
$ | 62,054 | | |
$ | 35,850 | | |
$ | 55,602 | | |
$ | 1,515,443 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| 2021 Effective interest rate | |
| 11 | % | |
| 11 | % | |
| 12 | % | |
| -% | | |
| -% | | |
| -% | | |
| -% | | |
| -% | | |
| -% | | |
| -% | | |
| -% | | |
| -% | | |
| -% | |
| 2022 Effective interest rate | |
| 7 | % | |
| 7 | % | |
| 7 | % | |
| 27 | % | |
| 17 | % | |
| 16 | % | |
| 14 | % | |
| 12 | % | |
| 10 | % | |
| 15 | % | |
| 19 | % | |
| 17 | % | |
| 13 | % |
| Effective interest rate | |
| 7 | % | |
| 7 | % | |
| 7 | % | |
| 27 | % | |
| 17 | % | |
| 16 | % | |
| 14 | % | |
| 12 | % | |
| 10 | % | |
| 15 | % | |
| 19 | % | |
| 17 | % | |
| 13 | % |
Current
Noteholders
Osher
– $110,000 (Note 12)
On
September 20, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect
to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”)
of (i) $110,000 aggregate principal amount of Note due September 20, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder
and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 733,333 shares of the Company’s
Common Stock at an exercise price of $0.25 per share. The aggregate cash subscription amount received by the Company from the previous
noteholder for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face
value of the Note. The conversion price for the principal in connection with voluntary conversions
by a holder of the convertible notes is $0.15 per share, subject to adjustment as provided therein, such as stock splits and stock
dividends.
Brio
– $82,500 (Note 11)
On
September 9, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect
to the sale and issuance to institutional investor Brio Capital Master Fund Ltd. (“Brio”)
of (i) $82,500 aggregate principal amount of Note due September 9, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder
and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 550,000 shares of the Company’s
Common Stock at an exercise price of $0.25 per share. The aggregate cash subscription amount received by the Company from the previous
noteholder for the issuance of the Note and Warrants was $75,000 which was issued at a $7,500 original issue discount from the face value
of the Note. The conversion price for the principal in connection with voluntary conversions by
a holder of the convertible notes is $0.15 per share, subject to adjustment as provided therein, such as stock splits and stock
dividends.
Osher
– $110,000 (Note 10)
On
August 31, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect
to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”)
of (i) $110,000 aggregate principal amount of Note due August 31, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder
and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 733,333 shares of the Company’s
Common Stock at an exercise price of $0.25 per share. The aggregate cash subscription amount received by the Company from the previous
noteholder for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face
value of the Note. The conversion price for the principal in connection with voluntary conversions
by a holder of the convertible notes is $0.15 per share, subject to adjustment as provided therein, such as stock splits and stock
dividends.
Other
– $341,000 (Note 9)
In
July 2022, the Company entered into an Original Issue Discount Senior Convertible Debentures (the “July 2022 Notes”) totaling
(i) $341,000 aggregate principal amount of Note (total of $310,000 cash was received) due in various dates in July 2023 based on $1.00
for each $0.90909 paid by the previous noteholder and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase
up to an aggregate of 676,936 shares of the Company’s Common Stock at an exercise price of $0.50 per share. The
conversion price for the principal in connection with voluntary conversions by the holders of the convertible notes is $0.50 per share.
Osher
– $82,500 (Note 8)
On
June 22, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect
to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”)
of (i) $82,500 aggregate principal amount of Note due June 22, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder
and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 165,000 shares of the Company’s
Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from the previous
noteholder for the issuance of the Note and Warrants was $75,000 which was issued at a $7,500 original issue discount from the face value
of the Note. The conversion price for the principal in connection with voluntary conversions by
a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock
dividends.
Osher
– $55,000 (Note 7)
On
June 1, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect
to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”)
of (i) $55,000 aggregate principal amount of Note due June 1, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder and
(ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 110,000 shares of the Company’s
Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from the previous
noteholder for the issuance of the Note and Warrants was $50,000 which was issued at a $5,000 original issue discount from the face value
of the Note. The conversion price for the principal in connection with voluntary conversions by
a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock
dividends.
Brio
– $110,000 (Note 6)
On
May 10, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect
to the sale and issuance to institutional investor Brio Capital Master Fund Ltd. (“Brio”)
of (i) $110,000 aggregate principal amount of Note due May 10, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder
and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 220,000 shares of the Company’s
Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from the previous
noteholder for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face
value of the Note. The conversion price for the principal in connection with voluntary conversions
by a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock
dividends.
Osher
– $110,000 (Note 5)
On
April 28, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect
to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”)
of (i) $110,000 aggregate principal amount of Note due April 28, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder
and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 220,000 shares of the Company’s
Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from the previous
noteholder for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face
value of the Note. The conversion price for the principal in connection with voluntary conversions
by a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock
dividends.
Osher
– $110,000 (Note 4)
On
March 23, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect
to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”)
of (i) $110,000 aggregate principal amount of Note due March 23, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder
and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 220,000 shares of the Company’s
Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from the previous
noteholder for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face
value of the Note. The conversion price for the principal in connection with voluntary conversions
by a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock
dividends.
Brio
– $110,000 (Note 4)
On
March 23, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect
to the sale and issuance to institutional investor Brio Capital Master Fund Ltd. (“Brio”)
of (i) $110,000 aggregate principal amount of Note due March 23, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder
and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 220,000 shares of the Company’s
Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from the previous
noteholder for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face
value of the Note. The conversion price for the principal in connection with voluntary conversions
by a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock
dividends.
Osher
– $199,650 (Note 3)
On
September 17, 2020 (the “Original Issue Date”), the Company entered into a Securities Purchase Agreement (the “Purchase
Agreement”) with respect to the sale and issuance to institutional investor Osher Capital
Partners LLC (“Osher”) of (i) $181,500 aggregate principal amount of Original Issue Discount Senior Convertible Debenture
(the “Note”) due September 30, 2021, based on $1.00 for each $0.90909 paid by Osher and (ii) five-year Common Stock Purchase
Warrants (“Warrants’) to purchase up to an aggregate of 8,250 shares of the Company’s Common Stock at an exercise price
of $30.00 per share. The aggregate cash subscription amount received by the Company from Osher for the issuance of the Note and Warrants
was $165,000 which was issued at a $16,500 original issue discount from the face value of the Note. The
conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.39 per share,
as amended on October 20, 2020, subject to adjustment as provided therein, such as stock splits and stock dividends.
The
Company and Osher amended the convertible debt agreement as follows on October 20, 2020:
| |
● |
The
parties amended the Warrants dated September 17, 2020, for the number of warrant shares from 8,250 warrant shares to 465,366 warrant
shares at an exercise price of $0.59 per share. |
| |
● |
The
parties amended the Note for the maturity date from September 30, 2021 to October 20, 2021. |
On
October 22, 2021, the Company and Osher amended convertible debt agreements as follows:
| |
● |
The
parties amended the October 20, 2020 Notes for the maturity date from October 20, 2021 to October 20, 2022. |
| |
|
|
| |
● |
The
parties amended the October 20, 2020 Notes for the aggregate principal amount and accrued interest from $652,300 to $717,530 which
is issued at a $65,230 original issue discount from the face value of the October 20, 2020 Notes now due October 20, 2022. |
| |
|
|
| |
● |
In
exchange for the extension of the Note, the Company issued Osher five-year warrants to purchase an aggregate of 450,000 shares of
the Company’s common stock at an exercise price of $1.00 per share. |
On
October 28, 2021, Osher elected to convert $16,714 of the aggregate principal amount of the Note of $199,650, into 42,857 common shares.
The
Company has not repaid this convertible note and the convertible note is now in default. The Company is currently in discussions to restructure
the terms of the note.
Osher
– $60,500 (as amended on October 20, 2020 to $55,000) (Note 2)
On
June 23, 2020 (the “Original Issue Date”), the Company entered into a Securities Purchase Agreement (the “Purchase
Agreement”) with respect to the sale and issuance to institutional investor Osher Capital
Partners LLC (“Osher”) of (i) $50,000 aggregate principal amount of Original Issue Discount Senior Convertible Debenture
(the “Note”) due June 23, 2021, based on $1.00 for each $0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants
(“Warrants”) to purchase up to an aggregate of 10,000 shares of the Company’s Common Stock at an exercise price of
$30.00 per share. The aggregate cash subscription amount received by the Company from Osher for the issuance of the Note and Warrants
was $50,005 which was issued at a $0 original issue discount from the face value of the Note. The
conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.39 per share,
as amended on October 20, 2020, subject to adjustment as provided therein, such as stock splits and stock dividends.
The
Company and Osher amended the convertible debt agreement as follows on October 20, 2020:
| |
● |
The
parties amended the Note for the aggregate principal amount from $50,000 to $55,000. The aggregate cash subscription amount received
by the Company from Osher for the issuance of the Note and Warrants was $50,005 which was issued at an amended $4,995 original issue
discount from the face value of the Note. |
| |
● |
The
parties amended the Warrants dated June 23, 2020, for the number of warrant shares from 10,000 warrant shares to 141,020 warrant
shares at an exercise price of $0.59 per share. |
| |
● |
The
parties amended the Note for the maturity date from June 23, 2021 to October 20, 2021. |
On
October 22, 2021, the Company and Osher amended convertible debt agreements as follows (see Note 12):
| |
● |
The
parties amended the October 20, 2020 Notes for the maturity date from October 20, 2021 to October 20, 2022. |
| |
|
|
| |
● |
The
parties amended the October 20, 2020 Notes for the aggregate principal amount and accrued interest from $652,300 to $717,530 which
is issued at a $65,230 original issue discount from the face value of the October 20, 2020 Notes now due October 20, 2022. |
| |
|
|
| |
● |
In
exchange for the extension of the Note, the Company issued Osher five-year warrants to purchase an aggregate of 450,000 shares of
the Company’s common stock at an exercise price of $1.00 per share. |
The
Company has not repaid this convertible note and the convertible note is now in default. The Company is currently in discussions to restructure
the terms of the note.
Osher
– $457,380 (Note 1)
On
January 28, 2020 (the “Original Issue Date”), the Company entered into a Securities Purchase Agreement (the “Purchase
Agreement”) with respect to the sale and issuance to institutional investor Osher Capital
Partners LLC (“Osher”) of (i) $385,000 aggregate principal amount of Original Issue Discount Senior Convertible Debenture
due January 26, 2021, based on $1.00 for each $0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants to purchase up
to an aggregate of 80,209 shares of the Company’s Common Stock at an exercise price of $7.00 per share. The aggregate cash subscription
amount received by the Company from Osher for the issuance of the note and warrants was $350,005 which was issued at a $34,995 original
issue discount from the face value of the Note. The conversion price for the principal in connection
with voluntary conversions by a holder of the convertible notes is $0.094 per share, as amended on October 20, 2020, subject to adjustment
as provided therein, such as stock splits and stock dividends.
The
Company and Osher amended the convertible debt agreement as follows on October 20, 2020:
| |
● |
The
parties amended the Warrants dated January 28, 2020, for the number of warrant shares from 80,209 warrant shares to 4,113,083 warrant
shares at an exercise price of $0.14 per share. |
| |
● |
The
parties amended the Note to provide for interest at 8% per annum. |
| |
● |
The
parties amended the Note for the maturity date from June 23, 2021 to October 20, 2021. |
On
October 22, 2021, the Company and Osher amended convertible debt agreements as follows:
| |
● |
The
parties amended the October 20, 2020 Notes for the maturity date from October 20, 2021 to October 20, 2022. |
| |
|
|
| |
● |
The
parties amended the October 20, 2020 Notes for the aggregate principal amount and accrued interest from $652,300 to $717,530 which
is issued at a $65,230 original issue discount from the face value of the October 20, 2020 Notes now due October 20, 2022. |
| |
|
|
| |
● |
In
exchange for the extension of the Note, the Company issued Osher five-year warrants to purchase an aggregate of 450,000 shares of
the Company’s common stock at an exercise price of $1.00 per share. |
The
Company has not repaid this convertible note and the convertible note is now in default. The Company is currently in discussions to restructure
the terms of the note.
Previous
Noteholders
Previous
notes were detailed in our Form 10-K filed on March 31, 2022. No changes occurred related to these notes during the period covered by
this Form 10-Q.
NOTE
7 – STOCKHOLDERS’ DEFICIT
Preferred
Stock
The
Company authorized 10,000,000 shares of par value $0.0001 preferred stock, of which none are issued and outstanding at September 30,
2022, and December 31, 2021, respectively.
Common
Stock
The
Company has authorized 1,000,000,000 shares of par value $0.0001 common stock, of which 37,295,813 shares are outstanding as of September
30, 2022, and December 31, 2021, respectively.
Warrants
On
October 22, 2021, the Company and Osher amended convertible debt agreements for the maturity date from October 20, 2021 to October 20,
2022. In exchange for the extension of the Note, the Company issued Osher 450,000 warrants to purchase an aggregate of 450,000 shares
of the Company’s common stock, valued at $197,501 (based on the Black Scholes valuation model on the date of grant) (see Note 6).
The warrants are exercisable for a period of five years at $1.00 per share in whole or in part, as either a cash exercise or as a cashless
exercise, and fully vest at grant date. The Company is accreting the value of the warrants ratably through October 20, 2022. The Company
recorded $49,781 and $147,720, and $0 and $0 for the three and nine months ended September 30, 2022 and 2021, respectively, and is classified
in other expenses in the consolidated Statements of Operations. See Notes 6 for further warrant discussions.
NOTE
8 – OPERATING LEASES
On
May 27, 2021, the Company entered into a sixty-three month lease for its corporate office at $5,955 per month commencing June 15, 2021
maturing September 30, 2026. The Company accounts for this lease in accordance with ASC 842. Adoption
of the standard resulted in the initial recognition of operating lease ROU asset of $290,827 and
operating lease liability of $290,827 as of June 15, 2021.
Operating
lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease
payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent
our obligation to make lease payments arising from the lease. Generally, the implicit rate of interest in arrangements is not readily
determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Company’s
incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The operating lease
ROU asset includes any lease payments made and excludes lease incentives. Our variable lease payments primarily consist of maintenance
and other operating expenses from our real estate leases. Variable lease payments are excluded from the ROU assets and lease liabilities
and are recognized in the period in which the obligation for those payments is incurred. Our lease terms may include options to extend
or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized
on a straight-line basis over the lease term.
We
have lease agreements with lease and non-lease components. We have elected to account for these lease and non-lease components as a single
lease component. We are also electing not to apply the recognition requirements to short-term leases of twelve months or less and instead
will recognize lease payments as expense on a straight-line basis over the lease term.
The
components of lease expense and supplemental cash flow information related to leases for the period are as follows:
In
accordance with ASC 842, the components of lease expense were as follows:
SCHEDULE OF OPERATING LEASE COST AND SUPPLEMENTAL CASH FLOW INFORMATION
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| | |
Nine
Months ended
September
30, | | |
Three
Months ended September 30, | |
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| Operating
lease expense | |
$ | 53,757 | | |
$ | 24,094 | | |
$ | 17,919 | | |
$ | 18,070 | |
| Short
term lease cost | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
| Total
lease expense | |
$ | 53,757 | | |
$ | 24,094 | | |
$ | 17,919 | | |
$ | 18,070 | |
In
accordance with ASC 842, other information related to leases was as follows:
| Nine
Months Ended September 30 | |
2022 | | |
2021 | |
| Operating
cash flows from operating leases | |
$ | 54,312 | | |
$ | 9,131 | |
| Cash
paid for amounts included in the measurement of lease liabilities | |
$ | 54,312 | | |
$ | 9,131 | |
| | |
| | | |
| | |
| Weighted-average
remaining lease term—operating leases | |
| 3.92
years | | |
| 4.92
years | |
| Weighted-average
discount rate—operating leases | |
| 10 | % | |
| 10 | % |
In
accordance with ASC 842, maturities of operating lease liabilities as of September 30, 2022 were as follows:
SCHEDULE OF MATURITIES OF OPERATING LEASE LIABILITIES
| | |
Operating | |
| Year
ending: | |
Lease | |
| 2022
(remaining 3 months) | |
$ | 18,402 | |
| 2023 | |
| 74,895 | |
| 2024 | |
| 77,142 | |
| 2025 | |
| 79,456 | |
| 2026 | |
| 54,224 | |
| Total
undiscounted cash flows | |
$ | 304,119 | |
| | |
| | |
| Reconciliation
of lease liabilities: | |
| | |
| Weighted-average
remaining lease terms | |
| 3.92
years | |
| Weighted-average
discount rate | |
| 10 | % |
| Present
values | |
$ | 264,691 | |
| | |
| | |
| Lease
liabilities—current | |
| 51,351 | |
| Lease
liabilities—long-term | |
| 201,457 | |
| Lease
liabilities—total | |
$ | 252,808 | |
| | |
| | |
| Difference
between undiscounted and discounted cash flows | |
$ | 51,311 | |
Operating
lease cost was $17,919 and $53,757 and $18,070 and $24,094 for the three and nine months ended September 30, 2022 and 2021, respectively.
NOTE
9 – RELATED PARTY TRANSACTIONS
Other
than as set forth below, and as disclosed in Notes 5 and 7, there have not been any transaction entered into or been a participant in
which a related person had or will have a direct or indirect material interest.
Employment
Agreements
Mr.
Ferrell was hired March 9, 2022 as the Company’s Chief Financial Officer. Mr. Ferrell receives an annual base salary of $250,000,
plus discretionary bonus compensation not to exceed 40% of salary. Mr. Ferrell’s employment also provides for medical insurance,
disability benefits and three months of severance pay if his employment is terminated without cause or due to a change in control. Additionally,
Mr. Ferrell will be granted up to 600,000 options to purchase 600,000 of the Company’s common shares upon the implementation of
a Company employee option plan. As of September 30, 2022, the Company has not implemented an option plan and therefore, no options have
been granted. The Company incurred compensation expense of $71,829 and $145,833 and $0 and $0 and employee benefits of $7,708 and $15,424
and $0 and $0 for the three and nine months ended September 30, 2022 and 2021, respectively.
NOTE
10 – EARNINGS PER SHARE
FASB
ASC Topic 260, Earnings Per Share, requires a reconciliation of the numerator and denominator of the basic and diluted earnings
(loss) per share (EPS) computations.
Basic
earnings (loss) per share are computed by dividing net earnings available to common stockholders by the weighted-average number of common
shares outstanding during the period. Diluted earnings (loss) per share is computed similar to basic earnings per share except that the
denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares
had been issued and if the additional common shares were dilutive. In periods where losses are reported, the weighted-average number
of common stock outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.
The
following potentially dilutive securities were excluded from the calculation of diluted net loss per share because the effects were anti-dilutive
based on the application of the treasury stock method and because the Company incurred net losses during the period:
SCHEDULE
OF ANTI DILUTIVE SECURITIES
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| | |
For
the Nine Months Ended September 30, | | |
For
the Three Months Ended September 30, | |
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| Convertible
notes payable | |
| 9,386,463 | | |
| 5,532,796 | | |
| 9,386,463 | | |
| 5,532,796 | |
| Warrants
to purchase shares of common stock | |
| 11,841,160 | | |
| 7,222,558 | | |
| 11,841,160 | | |
| 7,222,558 | |
| Total
potentially dilutive shares | |
| 21,227,623 | | |
| 12,755,354 | | |
| 21,227,623 | | |
| 12,755,354 | |
The
following table sets forth the computation of basic and diluted net income per share:
SCHEDULE OF COMPUTATION OF BASIC AND DILUTED NET INCOME PER SHARE
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| | |
Nine
Months Ended September 30, | | |
Three
Months Ended September 30, | |
| | |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| | |
| | |
| | |
| | |
| |
| Net
loss attributable to the common stockholders | |
$ | (2,070,880 | ) | |
$ | (1,777,447 | ) | |
$ | (726,509 | ) | |
$ | (665,904 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Basic weighted average
outstanding shares of common stock | |
| 37,295,803 | | |
| 36,138,191 | | |
| 37,295,803 | | |
| 36,721,651 | |
| Dilutive
effect of options and warrants | |
| - | | |
| - | | |
| - | | |
| - | |
| Diluted
weighted average common stock and common stock equivalents | |
| 37,295,803 | | |
| 36,138,191 | | |
| 37,295,803 | | |
| 36,721,651 | |
| | |
| | | |
| | | |
| | | |
| | |
| Loss per share: | |
| | | |
| | | |
| | | |
| | |
| Basic
and diluted | |
$ | (0.06 | ) | |
$ | (0.05 | ) | |
$ | (0.02 | ) | |
$ | (0.02 | ) |
NOTE
11 – COMMITMENTS AND CONTINGENCIES
Legal
From
time to time, various lawsuits and legal proceedings may 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. We are
currently not aware of any legal proceedings or claims that it believes will have a material adverse effect on its business, financial
condition or operating results.
NOTE
12 – SUBSEQUENT EVENTS
The
Company evaluated all events or transactions that occurred after September 30, 2022 up through the date the financial statements were
available to be issued. During this period, the Company did not have any material recognizable subsequent events required to be disclosed
as of and for the period ended September 30, 2022 except for the following:
Effective
October 10, 2022, the Company’s Board of Directors appointed Ms. Richa Nand, Mr. Jim Dorst, and Mr. Chris Wetzel as non-executive
members to the Company’s Board of Directors (“Director”). Each Director shall receive an annual retainer of $30,000
paid in equal quarterly amounts at the end of each quarter. In addition, each Director shall receive a grant of restricted stock units
of $50,000, or at the discretion of the Board of Directors, options to acquire shares of common stock. Restricted stock units will be
valued based on the average of the five trading days preceding and including the date of grant and will vest at a rate determined by
the Board of Directors over one year. If options are granted, the options will be valued at the exercise price based on the average of
the five trading days preceding and including the date of grant, have a ten year term, and will vest at a rate determined by the Board
of Directors.
As
of October 20, 2022, the Company has not repaid three convertible notes totaling $717,530 and the three convertible notes are now in
default. The Company is currently in discussions to restructure the terms of the note.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Special
Note Regarding Forward Looking Statements.
This
quarterly report on Form 10-Q of Sigyn Therapeutics, Inc. for the period ended September 30, 2022 contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, which are intended to be covered by the safe harbors created thereby. To the extent that such statements are not recitations
of historical fact, such statements constitute forward looking statements which, by definition, involve risks and uncertainties. In particular,
statements under the Sections; Description of Business, Management’s Discussion and Analysis of Financial Condition and Results
of Operations contain forward looking statements. Where in any forward-looking statements, the Company expresses an expectation or belief
as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there
can be no assurance that the statement of expectation or belief will result or be achieved or accomplished.
The
following are factors that could cause actual results or events to differ materially from those anticipated and include but are not limited
to: general economic, financial and business conditions; changes in and compliance with governmental regulations; changes in tax laws;
and the cost and effects of legal proceedings.
You
should not rely on forward looking statements in this quarterly report. This quarterly report contains forward looking statements that
involve risks and uncertainties. We use words such as “anticipates,” “believes,” “plans,” “expects,”
“future,” “intends,” and similar expressions to identify these forward-looking statements. Prospective investors
should not place undue reliance on these forward-looking statements, which apply only as of the date of this quarterly report. Our actual
results could differ materially from those anticipated in these forward-looking statements.
Recent
Developments
Members
of the Board of Directors
Effective
October 10, 2022, the Company’s Board of Directors appointed Ms. Richa Nand, Mr. Jim Dorst, and Mr. Chris Wetzel as non-executive
members to the Company’s Board of Directors (“Director”). Each Director shall receive an annual retainer of $30,000
paid in equal quarterly amounts at the end of each quarter. In addition, each Director shall receive a grant of restricted stock units
of $50,000, or at the discretion of the Board of Directors, options to acquire shares of common stock. Restricted stock units will be
valued based on the average of the five trading days preceding and including the date of grant and will vest at a rate determined by
the Board of Directors over one year. If options are granted, the options will be valued at the exercise price based on the average of
the five trading days preceding and including the date of grant, have a ten year term, and will vest at a rate determined by the Board
of Directors.
Convertible
Promissory Debentures
Osher
– $110,000
On
September 20, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect
to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”)
of (i) $110,000 aggregate principal amount of Note due September 20, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder
and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 733,333 shares of the Company’s
Common Stock at an exercise price of $0.25 per share. The aggregate cash subscription amount received by the Company from the previous
noteholder for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face
value of the Note. The conversion price for the principal in connection with voluntary conversions
by a holder of the convertible notes is $0.15 per share, subject to adjustment as provided therein, such as stock splits and stock
dividends.
Brio
– $82,500
On
September 9, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect
to the sale and issuance to institutional investor Brio Capital Master Fund Ltd. (“Brio”)
of (i) $82,500 aggregate principal amount of Note due September 9, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder
and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 550,000 shares of the Company’s
Common Stock at an exercise price of $0.25 per share. The aggregate cash subscription amount received by the Company from the previous
noteholder for the issuance of the Note and Warrants was $75,000 which was issued at a $7,500 original issue discount from the face value
of the Note. The conversion price for the principal in connection with voluntary conversions by
a holder of the convertible notes is $0.15 per share, subject to adjustment as provided therein, such as stock splits and stock
dividends.
Osher
– $110,000
On
August 31, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect
to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”)
of (i) $110,000 aggregate principal amount of Note due August 31, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder
and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 733,333 shares of the Company’s
Common Stock at an exercise price of $0.25 per share. The aggregate cash subscription amount received by the Company from the previous
noteholder for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face
value of the Note. The conversion price for the principal in connection with voluntary conversions
by a holder of the convertible notes is $0.15 per share, subject to adjustment as provided therein, such as stock splits and stock
dividends.
Other
– $341,000
In
July 2022, the Company entered into an Original Issue Discount Senior Convertible Debentures (the “July 2022 Notes”) totaling
(i) $341,000 aggregate principal amount of Note (total of $310,000 cash was received) due in various dates in July 2023 based on $1.00
for each $0.90909 paid by the previous noteholder and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase
up to an aggregate of 676,936 shares of the Company’s Common Stock at an exercise price of $0.50 per share. The
conversion price for the principal in connection with voluntary conversions by the holders of the convertible notes is $0.50 per share.
Osher
– $82,500
On
June 22, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect
to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”)
of (i) $82,500 aggregate principal amount of Note due June 22, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder
and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 165,000 shares of the Company’s
Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from the previous
noteholder for the issuance of the Note and Warrants was $75,000 which was issued at a $7,500 original issue discount from the face value
of the Note. The conversion price for the principal in connection with voluntary conversions by
a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock
dividends.
Osher
– $55,000
On
June 1, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect
to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”)
of (i) $55,000 aggregate principal amount of Note due June 1, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder and
(ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 110,000 shares of the Company’s
Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from the previous
noteholder for the issuance of the Note and Warrants was $50,000 which was issued at a $5,000 original issue discount from the face value
of the Note. The conversion price for the principal in connection with voluntary conversions by
a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock
dividends.
Brio
– $110,000
On
May 10, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect
to the sale and issuance to institutional investor Brio Capital Master Fund Ltd. (“Brio”)
of (i) $110,000 aggregate principal amount of Note due May 10, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder
and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 220,000 shares of the Company’s
Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from the previous
noteholder for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face
value of the Note. The conversion price for the principal in connection with voluntary conversions
by a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock
dividends.
Osher
– $110,000
On
April 28, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect
to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”)
of (i) $110,000 aggregate principal amount of Note due April 28, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder
and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 220,000 shares of the Company’s
Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from the previous
noteholder for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face
value of the Note. The conversion price for the principal in connection with voluntary conversions
by a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock
dividends.
Osher
– $110,000
On
March 23, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect
to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”)
of (i) $110,000 aggregate principal amount of Note due March 23, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder
and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 220,000 shares of the Company’s
Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from the previous
noteholder for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face
value of the Note. The conversion price for the principal in connection with voluntary conversions
by a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock
dividends.
Brio
– $110,000
On
March 23, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect
to the sale and issuance to institutional investor Brio Capital Master Fund Ltd. (“Brio”)
of (i) $110,000 aggregate principal amount of Note due March 23, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder
and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 220,000 shares of the Company’s
Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from the previous
noteholder for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face
value of the Note. The conversion price for the principal in connection with voluntary conversions
by a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock
dividends.
Limited
Operating History; Need for Additional Capital
There
is limited historical financial information about us on which to base an evaluation of our performance. We cannot guarantee we will be
successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including
limited capital resources, and possible cost overruns due to increases in the cost of services. To become profitable and competitive,
we must receive additional capital. We have no assurance that future financing will materialize. If that financing is not available,
we may be unable to continue operations.
Business
Overview
Sigyn
Therapeutics, Inc. (“Sigyn” or the “Company”) is a development-stage medical technology company headquartered
in San Diego, California. We are focused on creating therapeutic solutions that address unmet needs in global health.
Sigyn
Therapy™ is a broad-spectrum blood purification technology to address life-threatening infections and inflammatory disorders for
which effective drug therapies are not available. We designed Sigyn Therapy to extract pathogen
sources of life-threatening inflammation in concert with dampening down the dysregulated overproduction of inflammatory cytokines (the
cytokine storm), which plays a prominent role in each of our candidate treatment indications.
We
are advancing Sigyn Therapy as a candidate to treat end-stage renal disease (ESRD) patients with
chronic inflammation and/or endotoxemia, pathogen-associated sepsis (leading cause of hospital deaths), community acquired pneumonia
(a leading cause of death among infectious diseases), and emerging pandemic threats.
Since
initiating the development of Sigyn Therapy in 2020, we completed a series of in vitro studies that demonstrated the ability of
Sigyn Therapy to extract pathogen sources of inflammation from human blood plasma. These include endotoxin (a gram-negative bacterial
toxin), peptidoglycan and lipoteichoic acid (gram-positive bacterial toxins), and viral pathogens, including COVID-19.
We
also completed in vitro studies that demonstrated the ability of Sigyn Therapy to extract inflammatory cytokines from human blood
plasma. These include interleukin-1 beta (IL-1b), interleukin-6 (IL-6), and tumor necrosis factor alpha (TNF-a). In a related study,
we reduced the circulating presence of liposomes as a model system to evaluate the potential of Sigyn Therapy to address CytoVesicles
that transport inflammatory cytokine cargos throughout the bloodstream.
Additionally,
in vitro studies demonstrated the ability of Sigyn Therapy to deplete hepatic (liver) toxins from human blood plasma, which included
ammonia, bile acid and bilirubin. Based on these outcomes, we may further investigate the potential of Sigyn Therapy to address acute
forms of liver failure in future studies.
Subsequent
to our in vitro study results, we completed in vivo animal studies of Sigyn Therapy at the University of Michigan. In
these studies, Sigyn Therapy was administered via standard dialysis machines utilizing conventional blood-tubing sets, for periods up
to six hours in eight porcine (pig) subjects. Important criteria for treatment safety, including hemodynamic parameters, serum chemistries
and hematologic measurements, were stable across all eight subjects.
The
data resulting from our in vivo and in vitro studies is being incorporated into an Investigational Device Exemption (IDE) that
we are drafting for submission to the U.S. Food and Drug Administration (“FDA”) to support the potential initiation of human
feasibility studies in the United States.
Beyond
our focus to clinically advance Sigyn Therapy, we intend to develop a pipeline of extracorporeal blood purification therapies. In this
regard, we have designed a therapeutic system to enhance the benefit of cancer chemotherapy. To support this endeavor, we disclosed on
October 6, 2022, that a patent application entitled: “SYSTEM AND METHODS
TO ENHANCE CHEMOTHERAPY DELIVERY AND REDUCE TOXICITY” had been filed with the United
States Patent and Trademark Office (“USPTO”). On October 13, 2022, we subsequently disclosed that trademark applications
to register ChemoPrepTM and ChemoPureTM were filed with the USPTO”.
Chemotherapeutic
agents are the most commonly administered drugs to treat cancer, which is the second leading cause of death in the United States. Despite
therapeutic advances, treatment toxicity, drug resistance and inadequate tumor site delivery restrict the benefit of chemotherapy.
To
overcome these challenges, our patent submission describes a therapeutic device system whose primary objective is to enhance tumor site
delivery of chemotherapy and reduce its toxicity. A secondary objective of the system is to reduce treatment dosing without sacrificing
patient benefit, or conversely increase chemotherapy dosing without added toxicity. In concert with these objectives, the therapeutic
system offers to inhibit the spread of cancer metastasis reported to be induced by the administration of chemotherapy.
Our
proposed chemotherapy enhancement system is comprised of two blood purification technologies. ChemoPrepTM, administered prior
to chemotherapy to optimize tumor site delivery and improve the benefit of ChemoPureTM, which is deployed post-chemotherapy
to reduce treatment toxicity and inhibit the potential spread of cancer metastasis.
Sigyn
Therapy Mechanism of Action
To
overcome the limitations of previous drug and device therapies, we designed Sigyn Therapy to have an expansive- mechanism of action.
Pre-clinical invitro studies have measured the ability of Sigyn Therapy the deplete the presence of viral pathogens, bacterial
toxins, and inflammatory mediators from human blood plasma. Such capabilities establish Sigyn Therapy as a candidate to treat pathogen-associated
conditions that precipitate Sepsis, Community Acquired Pneumonia, Emerging Bioterror and Pandemic threats, and End-Stage Renal Disease
with endotoxemia and elevated inflammatory cytokine production.
To
support widespread implementation, Sigyn Therapy is a single-use disposable device that is deployable on the global infrastructure of
hemodialysis and continuous renal replacement therapy (CRRT) machines already located in hospitals and clinics. To reduce the risk of
blood clotting and hemolysis, the anticoagulant heparin is administered, which is the standard-of-care drug administered in dialysis
and CRRT therapies. During animal studies conducted at the University of Michigan, Sigyn Therapy was deployed for use on a hemodialysis
machine manufactured by Fresenius Medical Care, the global leader in the dialysis industry.
Incorporated
with Sigyn Therapy is a “cocktail” of adsorbent components formulated to optimize the broad-spectrum extraction of therapeutic
targets from the bloodstream. In the medical field, the term “cocktail” is a reference to the simultaneous administration
of multiple drugs (a drug cocktail) with differing mechanisms of actions. While drug cocktails are emerging as potential mechanisms to
treat cancer, they are life-saving countermeasures to treat HIV and Hepatitis-C viral infections. However, dosing of multi-drug agent
cocktails is limited by toxicity and adverse events that can result from deleterious drug interactions.
Sigyn
Therapy is not constrained by such limitations as active adsorbent components are maintained within Sigyn Therapy and not introduced
into the body. As a result, we are able to incorporate a substantial quantity of adsorbent components to capture therapeutic targets
outside of the body as they circulate through Sigyn Therapy. Each adsorbent component has differing capture characteristics that contribute
to optimizing the ability of Sigyn Therapy to address a broad-spectrum of pathogenic and inflammatory targets that precipitate the cytokine
storm that underlies sepsis and other life-threatening inflammatory disorders.
The
adsorbent components incorporated within Sigyn Therapy provide more than 200,000 square meters (~50 acres) of surface area on which to
adsorb and remove circulating viruses, bacterial toxins, and inflammatory mediators. Beyond an immense capacity to deplete circulating
therapeutic targets, Sigyn Therapy is also efficient. Based on blood flow rates of 350ml/min, a patient’s entire bloodstream can
pass through Sigyn Therapy more than fifteen times during a single four-hour treatment period.
From
a technical perspective, Sigyn Therapy is a 325mm long polycarbonate column that internally contains polyethersulphone hollow fibers
that have porous walls have a median pore size of ~200 nanometers (nm). As blood flows into Sigyn Therapy, plasma and therapeutic targets
below 200nm travel through the porous walls as a result of blood-side pressure. As the hollow fiber bundle within Sigyn Therapy creates
a resistance to the flow of blood, a pressure drop is created along the length of the device such that the blood-side pressure is higher
at the blood inlet and lower at the blood outlet. This allows for plasma and therapeutic targets to flow away from the blood and into
the extra-lumen space (inside the polycarbonate shell, yet outside the hollow-fiber bundle) to interact with Sigyn Therapy’s adsorbent
components in a low shear force environment. In the distal third of the fiber bundle, the pressure gradient is reversed, which allows
for plasma to flow back through the fiber walls to be reconvened into the bloodstream without the presence of therapeutic targets that
were captured by adsorbent components housed in the extra-lumen space of Sigyn Therapy.
Overview
of Candidate Treatment Indications
Based
on data resulting from in vitro blood purification studies, our candidate treatment indications include, but are not limited to;
pathogen-associated conditions that precipitate Sepsis (leading cause of hospital deaths worldwide), Community Acquired Pneumonia (a
leading cause of death among infectious diseases), Emerging Bioterror and Pandemic threats, and End-Stage Renal Disease (ESRD) patients
with endotoxemia and elevated inflammatory cytokine production. However, there is no assurance that human feasibility and pivotal studies
will demonstrate Sigyn Therapy to be a safe and efficacious treatment for any of our treatment indications.
End-Stage
Renal Disease Endotoxemia and Inflammation
According
to the United States Renal Data System (USRDS), more than 550,000 individuals suffer from end-stage renal disease (ESRD), which results
in approximately 85 million kidney dialysis treatments being administered in the United States each year. Persistent inflammation is
a hallmark feature of ESRD as reflected by the excess production of inflammatory cytokines, including tumor necrosis factor-α (TNF-α),
interleukin-1β (IL-1β) and interleukin-6 (IL-6), which contribute to increased all-cause mortality. ESRD inflammation also
induces intestinal permeability, which allows endotoxin (gram-negative bacterial toxin) to translocate from the gut and into the bloodstream.
Beyond fueling further inflammation, endotoxin is potent activator of sepsis, which can lead to multiple organ failure and death.
Sigyn
Therapy establishes a candidate strategy to improve the health and quality-of-life of ESRD patients. Beyond its ability to deplete endotoxin,
TNF-α, IL-1β, and IL-6 from human blood plasma, Sigyn Therapy can be administered in series with dialysis therapy.
We
are currently drafting an Investigational Device Exemption (IDE) for submission to the U.S. Food and Drug Administration (“FDA”)
related to a human feasibility study of Sigyn Therapy in End-Stage Renal Disease (ESRD) patients with endotoxemia and elevated inflammatory
cytokine production. As per the study protocol, Sigyn Therapy will be administered in combination with the regularly scheduled dialysis
treatments of enrolled subjects. The primary study objective will be to evaluate the safety of Sigyn Therapy in health compromised ESRD
patients. A secondary objective is to quantify changes in circulating levels of endotoxin, tumor
necrosis factor-α (TNF-α), interleukin-1β (IL-1β), and interleukin-6 (IL-6) before and after each Sigyn Therapy
administration. Endotoxin and excess TNF-α, IL-1β, and IL-6 production are commonly
associated with each of our candidate treatment indications, including sepsis and community-acquired pneumonia.
Sepsis
Sepsis
is defined as a life-threatening organ dysfunction caused by a dysregulated host response to infection. In January of 2020, a report
entitled; “Global, Regional, and National Sepsis Incidence and Mortality, 1990-2017: Analysis for the Global Burden of Disease
Study,” was published in the Journal Lancet. The publication reported 48.9 million cases of sepsis and 11 million deaths in
2017. In that same year, an estimated 20.3 million sepsis cases and 2.9 million deaths were among children younger than 5-years old.
The report included a reference that sepsis kills more people around the world than all forms of cancer combined. In the United States,
sepsis was reported to be the most common cause of hospital deaths with an annual financial burden that exceeds $24 billion.
To
date, more than 100 human studies have been conducted to evaluate the safety and efficacy of candidate drugs to treat sepsis. With one
brief exception (Xigris, Eli Lilly), none of these studies resulted in a market cleared therapy.
As
sepsis remains beyond the reach of single-target drugs, there is an emerging interest in multi-mechanism therapies that can target both
inflammatory and pathogen associated targets. Sigyn Therapy addresses a broad-spectrum of pathogen sources and the resulting dysregulated
cytokine production (the cytokine storm) that is the hallmark of sepsis. Additionally, we believe that inflammatory cytokine cargos transported
by CytoVesicles may represent a novel, yet important therapeutic target.
Community
Acquired Pneumonia
Community
Acquired Pneumonia (CAP) represents a significant opportunity for Sigyn Therapy to reduce the occurrence of sepsis. CAP is a leading
cause of death among infectious diseases, the leading cause of death in children under five years of age, and a catalyst for approximately
50% of sepsis and septic shock cases.
In
the United States, more than 1.5 million individuals are hospitalized with CAP each year, resulting in an annual financial burden that
exceeds $10 billion.
Statistically,
a therapeutic strategy that reduced the incidence of CAP related sepsis and septic shock would save thousands of lives each year. In
a study of 4,222 patients, the all-cause mortality for adult patients with CAP was reported to be 6.5% during hospitalization. However,
the mortality of patients with CAP related sepsis and septic shock rose to 51% during hospitalization.
CAP
is further complicated by the fact that the pathogen sources of CAP are identified in only 38% of patients, based on a study of 2,259
subjects whose pneumonia diagnosis was confirmed by chest x-ray. Of the source pathogens identified in the study, ninety seven percent
(97%) were either viral or bacterial in origin.
To
reduce the occurrence of CAP related sepsis and septic shock, Sigyn Therapy offers a broad-spectrum mechanism to reduce the circulating
presence of viral pathogens and bacterial toxins before and if they are identified as the CAP pathogen source. Additionally, Sigyn Therapy
may help to control the excess production of inflammatory cytokines (the cytokine storm) that precipitate sepsis and septic shock.
Emerging
Pandemic Threats
Covid-19
affirmed the use of extracorporeal blood purification as a first-line countermeasures to treat an emerging pandemic threat not addressed
with an approved drug or vaccine at the outset of an outbreak. On March 24, 2020, the U.S. Department of Health and Human Services (HHS)
declared that the emergence of COVID-19 justified the Emergency-Use Authorization (EUA) of drugs, biological products, and medical devices
to combat the pandemic. Within a month of this HHS declaration, FDA awarded an EUA to blood purification therapies from Terumo BCT, ExThera
Medical Corporation, CytoSorbents, Inc., and Baxter Healthcare Corporation. In connection with these authorizations, FDA published a
statement that blood purification devices may be effective at treating patients with confirmed COVID-19 by reducing various pathogens,
cytokines, and other inflammatory mediators from the bloodstream.
Consistent
with FDA’s statement, Sigyn Therapy is designed to address pathogen sources of life-threatening inflammation in concert with the
broad-spectrum depletion of cytokines and other inflammatory mediators from the bloodstream. Based on this mechanism, we believe that
Sigyn Therapy provides a candidate strategy to address future pandemic outbreaks, which are increasingly being fueled by a confluence
of global warming, urban crowding, and intercontinental travel.
Additionally,
as a majority of infectious human viruses are not addressed with a corresponding drug or vaccine, there may be an ongoing need for blood
purification technologies that offer to reduce the severity of infection and mitigate the excess production of inflammatory cytokines
(the cytokine storm) associated with high mortality in non-pandemic viral infections. In this regard, we believe Sigyn Therapy also aligns
with HHS initiatives established through the Public Health Emergency Medical Countermeasure Enterprise (PHEMCE) that support the development
of broad-spectrum medical countermeasures that can mitigate the impact of an emerging pandemic or bioterror threat, yet also have viability
in established disease indications.
Overview
of Presentation
The
following Management’s Discussion and Analysis (“MD&A”) or Plan of Operations includes the following sections:
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Results of Operations |
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Liquidity and Capital Resources |
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Capital Expenditures |
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Going Concern |
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Critical Accounting Policies |
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Off-Balance Sheet Arrangements |
General
and administrative expenses consist primarily of personnel costs and professional fees required to support our operations and growth.
Depending
on the extent of our future growth, we may experience significant strain on our management, personnel, and information systems. We will
need to implement and improve operational, financial, and management information systems. In addition, we are implementing new information
systems that will provide better record-keeping, customer service and billing. However, there can be no assurance that our management
resources or information systems will be sufficient to manage any future growth in our business, and the failure to do so could have
a material adverse effect on our business, results of operations and financial condition.
Reclassifications
Certain
prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on
the reported results of operations. An adjustment has been made to the Unaudited Condensed Consolidated Statements of Operations for
three and nine months ended September, 2021, to reclass $177,844 and $392,496, respectively, of costs to research and development previously
classified in general and administrative. In addition,
an adjustment has been made to the Unaudited Condensed Consolidated Balance Sheets as of December
31, 2021, to reclass $1,072 of other current liabilities previously classified in accrued payroll and payroll taxes.
Results
of Operations
Three
Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021
The
following discussion represents a comparison of our results of operations for the three months ended September 30, 2022 and 2021. The
results of operations for the periods shown in our audited condensed consolidated financial statements are not necessarily indicative
of operating results for the entire period. In the opinion of management, the audited condensed consolidated financial statements recognize
all adjustments of a normal recurring nature considered necessary to fairly state our financial position, results of operations and cash
flows for the periods presented.
| | |
Three Months Ended September 30, | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| Net revenues | |
$ | - | | |
$ | - | |
| Cost of sales | |
| - | | |
| - | |
| Gross Profit | |
| - | | |
| - | |
| Operating expenses | |
| 533,647 | | |
| 573,363 | |
| Other expense | |
| 192,862 | | |
| 92,541 | |
| Net loss before income taxes and discontinued operations | |
$ | (726,509 | ) | |
$ | (665,904 | ) |
Net
Revenues
For
the three months ended September 30, 2022 and 2021, we had no revenues.
Cost
of Sales
For
the three months ended September 30, 2022 and 2021, we had no cost of sales as we had no revenues.
Operating
expenses
Operating
expenses decreased by $39,716, or 6.9%, to $533,647 for three months ended September 30, 2022 from $573,363 for the three months
ended September 30, 2021 primarily due to decreases in research and development costs of $93,733, investor relations costs of
$49,835, consulting fees of $40,048, and rent expenses of $4,413, offset primarily by increases in compensation costs of $54,994,
professional fees of $16,428, depreciation costs of $1,283, marketing costs of $65, insurance costs of $78,852, and general and
administration costs of $3,309, as a result of adding administrative infrastructure for our anticipated business development. In
2022, the Company incurred compensation for its CEO and CTO and hired a CFO resulting in increased compensation costs, has increased
professional fees (primarily legal), and has decreased investor relations costs (primarily the fair value of common stock issued for
services of $47,000 in 2021). Research and development costs consist of a decrease of $45,944 attributed to in house efforts and a
decrease of $47,789 to third parties for developmental services and testing.
For
the three months ended September 30, 2022, we had marketing expenses of $65, research and development costs of $133,770, and general
and administrative expenses of $399,812 primarily due to professional fees of $40,729, compensation costs of $192,315, insurance expense
of $78,852, rent of $19,999, depreciation costs of $1,715, amortization costs of $900, investor relations costs of $19,474, consulting
fees of $41,775, and general and administration costs of $4,053, as a result of adding administrative infrastructure for our anticipated
business development. In 2022, the Company incurred professional fees (primarily legal and audit fees), incurred compensation for its
CEO and CTO and hired a CFO, incurred consulting costs (primarily for public relations and brand awareness), had investor relations costs,
and had rent through the lease of office space. Research and development costs consist of $131,900 attributed to in house efforts and
$1,870 to third parties for developmental services and testing.
For
the three months ended September 30, 2021, we had research and development costs of $227,503, and general and administrative expenses
of $345,860 primarily due to professional fees of $24,301, compensation costs of $137,321, rent of $24,412, depreciation and amortization
costs of $1,332, investor relations costs of $69,309, consulting fees of $81,823, and general and administration costs of $7,362, as
a result of adding administrative infrastructure for our anticipated business development. In 2021, the Company incurred marketing costs
(primarily the fair value of common stock issued for services), has incurred professional fees (primarily legal and audit fees, and consulting
costs), incurred compensation for its CEO and CTO, incurred consulting costs (primarily for public relations and brand awareness), had
investor relations costs (primarily the fair value of common stock issued for services of $47,000 in 2021), and had rent through the
lease of office space beginning in June 2021. Research and development costs consist of $177,844 attributed to in house efforts and $49,659
to third parties for developmental services and testing.
Other
Expense
Other
expense for the three months ended September 30, 2022 totaled $192,862 primarily due to interest expense of $148,372 in conjunction with
accretion of debt discount and interest expense of $44,420 in conjunction with accretion of original issuance discount, compared to other
expense of $92,541 for the three months ended September 30, 2021 primarily due to interest expense of $49,749 in conjunction with accretion
of debt discount and interest expense of $13,697 in conjunction with accretion of original issuance discount.
Net
loss before income taxes
Net
loss before income taxes and discontinued operations for the three months ended September 30, 2022 totaled $726,509 primarily due to
(increases/decreases) in compensation costs, professional fees, marketing costs, investor relations costs, consulting fees, research
and development costs, rent, and general and administration costs compared to a loss of $665,904 for the three months ended September
30, 2021 primarily due to (increases/decreases) in compensation costs, professional fees, investor relations, consulting fees, research
and development costs, rent, and general and administration costs.
Assets
and Liabilities
Assets
were $362,273 as of September 30, 2022. Assets consisted primarily of cash of $28,123, inventories of $50,000, other current assets of
$7,254, equipment of $23,767, intangible assets of $3,000, operating lease right-of-use assets of $229,418, and other assets of $20,711.
Liabilities were $2,104,375 as of September 30, 2022. Liabilities consisted primarily of accounts payable of $306,000, accrued payroll
and payroll taxes of $30,124, convertible notes of $1,515,443, net of $406,373 of unamortized debt discount and debt issuance costs,
and operating lease liabilities of $252,808.
Nine
Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021
The
following discussion represents a comparison of our results of operations for the nine months ended September 30, 2022 and 2021. The
results of operations for the periods shown in our audited condensed consolidated financial statements are not necessarily indicative
of operating results for the entire period. In the opinion of management, the audited condensed consolidated financial statements recognize
all adjustments of a normal recurring nature considered necessary to fairly state our financial position, results of operations and cash
flows for the periods presented.
| | |
Nine Months Ended September 30, | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| Net revenues | |
$ | - | | |
$ | - | |
| Cost of sales | |
| - | | |
| - | |
| Gross Profit | |
| - | | |
| - | |
| Operating expenses | |
| 1,675,677 | | |
| 1,417,278 | |
| Other expense | |
| 395,203 | | |
| 360,169 | |
| Net loss before income taxes and discontinued operations | |
$ | (2,070,880 | ) | |
$ | (1,777,447 | ) |
Net
Revenues
For
the nine months ended September 30, 2022 and 2021, we had no revenues.
Cost
of Sales
For
the nine months ended September 30, 2022 and 2021, we had no cost of sales as we had no revenues.
Operating
expenses
Operating
expenses increased by $258,399, or 18.2%, to $1,675,677 for nine months ended September 30, 2022 from $1,417,278 for the nine months
ended September 30, 2021 primarily due to increases in compensation costs of $199,796, professional fees of $73,893, research and development
costs of $33,041, depreciation costs of $3,859, rent expenses of $27,905, and general and administration costs of $5,267, offset primarily
by a decrease in marketing expenses of $164,054, consulting fees of $12,918, investor relations costs of $78,386, and amortization costs
of $12,606, as a result of adding administrative infrastructure for our anticipated business development. In 2022, the Company has incurred
an increase in professional fees (primarily legal and audit fees), incurred a full year of compensation for its CEO and CTO and hired
a CFO resulting in increased compensation costs, increased consulting costs (primarily for public relations and brand awareness), has
decreased investor relations costs (primarily the fair value of common stock issued for services of $211,500 in 2021), and incurred a
full year of rent from the lease of office space in June 2021. Research and development costs consist of an increase of $46,618 attributed
to in house efforts and a decrease of $13,577 to third parties for developmental services and testing.
For
the nine months ended September 30, 2022, we had marketing expenses of $446, research and development costs of $516,796, and general
and administrative expenses of $1,158,435 primarily due to professional fees of $172,170, compensation costs of $532,643, insurance expense
of $182,689, rent of $56,590, depreciation and amortization costs of $7,839, investor relations costs of $43,465, consulting fees of $144,900,
and general and administration costs of $18,139, as a result of adding administrative infrastructure for our anticipated business development.
In 2022, the Company has incurred professional fees (primarily legal and audit fees), incurred compensation for its CEO and CTO and hired
a CFO, incurred consulting costs (primarily for public relations and brand awareness), had investor relations costs, and had rent through
the lease of office space. Research and development costs consist of $439,116 attributed to in house efforts and $77,680 to third parties
for developmental services and testing.
For
the nine months ended September 30, 2021, we had marketing expenses of $164,500, research and development costs of $483,755, and general
and administrative expenses of $933,523 primarily due to professional fees of $98,277, compensation costs of $332,847, rent of $28,685,
depreciation and amortization costs of $16,586, investor relations costs of $121,851, consulting fees of $157,818, and general and administration
costs of $12,959, as a result of adding administrative infrastructure for our anticipated business development. In 2021, the Company
has incurred professional fees (primarily legal and audit fees, and consulting costs), had investor relations costs (primarily the fair
value of common stock issued for services of $211,500), and incurred compensation for its CEO and CTO. Research and development costs
consist of $392,498 attributed to in house efforts and $91,257 to third parties for developmental services and testing.
Other
Expense
Other
expense for the nine months ended September 30, 2022 totaled $395,203 primarily due to interest expense of $309,226 in conjunction with
accretion of debt discount and interest expense of $85,875 in conjunction with accretion of original issuance discount, compared to other
expense of $360,169 for the nine months ended September 30, 2021 primarily due to interest expense of $286,391 in conjunction with accretion
of debt discount and interest expense of $44,683 in conjunction with accretion of original issuance discount.
Net
loss before income taxes
Net
loss before income taxes and discontinued operations for the nine months ended September 30, 2022 totaled $2,070,880 primarily due to
(increases/decreases) in compensation costs, professional fees, marketing costs, investor relations costs, consulting fees, research
and development costs, rent, and general and administration costs compared to a loss of $1,777,447 for the nine months ended September
30, 2021 primarily due to (increases/decreases) in compensation costs, professional fees, investor relations, consulting fees, research
and development costs, rent, and general and administration costs.
Liquidity
and Capital Resources
Going
Concern
The
accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among
other things, the realization of assets and satisfaction of liabilities in the normal course of business. The Company had an accumulated
deficit of $6,336,639 at September 30, 2022, had a working capital deficit of $1,817,541 and $341,187 at September 30, 2022 and December
31, 2021, respectively, had a net loss of $726,609 and $2,070,880 and $665,904 and $1,777,447 for the three and nine months ended September
30, 2022 and 2021, respectively, and net cash used in operating activities of $1,378,475 and $1,221,221 for the nine months ended September
30, 2022 and 2021, respectively, with no revenue earned since inception, and a lack of operational history. These matters raise substantial
doubt about the Company’s ability to continue as a going concern.
While
the Company is attempting to expand operations and increase revenues, the Company’s cash position may not be significant enough
to support the Company’s daily operations. Management intends to raise additional funds by way of a public offering or an asset
sale transaction. Management believes that the actions presently being taken to further implement its business plan and generate revenues
provide the opportunity for the Company to continue as a going concern. While management believes in the viability of its strategy to
generate revenues and in its ability to raise additional funds or transact an asset sale, there can be no assurances to that effect or
on terms acceptable to the Company. 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 revenues.
The
condensed consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a
going concern.
General
– Overall, we had a decrease in cash flows for the nine months ended September 30, 2022 of $312,833 resulting from cash
used in operating activities of $1,378,475 and cash used in investing activities of $860, offset partially by cash provided by financing
activities of $1,066,502.
The
following is a summary of our cash flows provided by (used in) operating, investing, and financing activities during the periods indicated:
| | |
Nine Months Ended September 30, | |
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| Net cash provided by (used in): | |
| | | |
| | |
| Operating activities | |
$ | (1,378,475 | ) | |
$ | (1,221,221 | ) |
| Investing activities | |
| (860 | ) | |
| (20,205 | ) |
| Financing activities | |
| 1,066,502 | | |
| 1,660,000 | |
| | |
$ | (312,833 | ) | |
$ | 418,574 | |
Cash
Flows from Operating Activities – For the nine months ended September 30, 2022, net cash used in operations was $1,378,475
compared to net cash used in operations of $1,221,221 for the nine months ended September 30, 2021. Net cash used in operations was primarily
due to a net loss of $2,070,880 for nine months ended September 30, 2022 and the changes in operating assets and liabilities of $289,465,
primarily due to the increase in accounts payable of $266,147 and accrued payroll and payroll taxes of $29,052, offset partially by other
current liabilities of $555 and other current assets of $5,179. In addition, net cash used in operating activities includes adjustments
to reconcile net profit from depreciation expense of $5,139, amortization expense of $2,700, accretion of original issuance costs of
$85,875, and accretion of debt discount of $309,226.
For
the nine months ended September 30, 2021, net cash used in operations was $1,221,221. Net cash used in operations was primarily due
to a net loss of $1,777,447 for nine months ended September 30, 2021 and the changes in operating assets and liabilities of $2,932,
primarily due to the increase in accounts payable of $16,869 and other current liabilities of $43,692, offset primarily by other
current assets of $27,509, other assets of $20,711, and accrued payroll and payroll taxes of $15,273. In addition, net cash used in
operating activities includes adjustments to reconcile net profit from depreciation expense of $1,279, amortization expense of
$15,305, stock issued for services of $211,500, accretion of original issuance costs of $44,683, and accretion of debt discount of
$286,391.
Cash
Flows from Investing Activities – For the nine months ended September 30, 2022, net cash used in investing activities was
$860 due to the purchase of property and equipment compared to cash used in investing activities of $20,205 for the nine months ended
September 30, 2021 due to the purchase of property and equipment.
Cash
Flows from Financing Activities – For the nine months ended September 30, 2022, net cash provided by financing was $1,066,502,
due to proceeds from short term convertible notes of $1,110,000 and fees associated with the filing of the Company’s Form S-1 of
$43,498 compared to cash provided by financing activities of $1,660,000 for the nine months ended September 30, 2021 due to proceeds
from common stock issued for cash of $1,465,000 and short term convertible notes $250,000, and repayment of short term convertible notes
of $55,000.
Financing
– We expect that our current working capital position, together with our expected future cash flows from operations will
be insufficient to fund our operations in the ordinary course of business, anticipated capital expenditures, debt payment requirements
and other contractual obligations for at least the next twelve months. As stated above, Management intends to raise additional funds
by way of a public offering or an asset sale transaction, however there can be no assurance that we will be successful in completing
such transactions.
We
have no present agreements or commitments with respect to any material acquisitions of other businesses, products, product rights or
technologies or any other material capital expenditures. However, we will continue to evaluate acquisitions of and/or investments in
products, technologies, capital equipment or improvements or companies that complement our business and may make such acquisitions and/or
investments in the future. Accordingly, we may need to obtain additional sources of capital in the future to finance any such acquisitions
and/or investments. We may not be able to obtain such financing on commercially reasonable terms, if at all. Due to the ongoing global
economic crisis, we believe it may be difficult to obtain additional financing if needed. Even if we are able to obtain additional financing,
it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders,
in the case of equity financing.
Capital
Expenditures
We
expect to purchase approximately $30,000 of equipment in connection with the expansion of our business during the next twelve months.
Fiscal
year end
Our
fiscal year end is December 31.
Critical
Accounting Policies
Refer
to Note 3 in the accompanying notes to the unaudited condensed consolidated financial statements for critical accounting policies.
Recent
Accounting Pronouncements
Refer
to Note 3 in the accompanying notes to the condensed consolidated financial statements.
Off-Balance
Sheet Arrangements
As
of September 30, 2022, we have not entered into any transaction, agreement or other contractual arrangement with an entity unconsolidated
under which it has:
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a retained or contingent
interest in assets transferred to the unconsolidated entity or similar arrangement that serves as credit; |
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liquidity or market risk
support to such entity for such assets; |
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an obligation, including
a contingent obligation, under a contract that would be accounted for as a derivative instrument; or |
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an obligation, including
a contingent obligation, arising out of a variable interest in an unconsolidated entity that is held by, and material to us, where
such entity provides financing, liquidity, market risk or credit risk support to or engages in leasing, hedging, or research and
development services with us. |
Inflation
We
do not believe that inflation has had a material effect on our results of operations.