8

ITEM 1. FINANCIAL STATEMENTS

MARIZYME, INC.

and Subsidiaries

Condensed Consolidated Balance Sheets

MARIZYME, INC.

and Subsidiaries

Condensed Consolidated Statements of Operations

(unaudited)

MARIZYME, INC.

and Subsidiaries

Condensed Consolidated Statement of Changes in Stockholders' Equity

For the Three and Nine Months Ended September 30, 2020 and 2019

(unaudited)

MARIZYME, INC.

and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the nine months ended September 30,

(unaudited)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MARIZYME, INC.

and Subsidiaries

Condensed Consolidated Statements of Operations

For the Three Months Ended March 31,

(unaudited)

 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.                

MARIZYME, INC.

and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the Three Months Ended March 31, 2021 and 2020

(unaudited)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MARIZYME, INC.

and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 31,

(unaudited)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

MARIZYME, INC.

AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020MARCH 31, 2021

(unaudited)

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

Overview

Marizyme, Inc., a Nevada corporation formerly known as GBS Enterprises Incorporated (the “Company” or “Marizyme”), conducted its primary business through its majority owned subsidiary, GBS Software AG (“GROUP”), a German-based public-company.

By December 31, 2016, the Company had sold the controlling interest in GROUP and other subsidiaries, keeping only a minority interest in GROUP. On March 21, 2018, the Company formed a wholly owned subsidiary named Marizyme, Inc., a Nevada corporation, and merged with it, effectively changing the Company’s name to Marizyme, Inc. On June 1, 2018, the Company exchanged the shares of GROUP and all the intercompany assets and liabilities for 100% of the shares of X-Assets Enterprises, Inc, a Nevada Corporation. As part of a type-D business restructuring on September 5, 2018, the Company then distributed the X-Assets shares to its stockholders on a 1 for 1 basis.

Beginning after the X-Assets share distribution, Marizyme refocused on the life sciences and began to seek technologies to acquire.

On September 12, 2018, the Company consummated an asset acquisition with ACB Holding AB, Reg. No. 559119-5762, a Swedish corporation to acquire all right,rights, title, and interest in their Krillase technology in exchange for 16.98 million shares of Common Stock. Krillase is a naturally occurring enzyme that acts to break protein bonds and has applications in dental care, wound healing, and thrombosis.

On December 15, 2019, the Company entered into a contingent asset purchase agreement (the “Agreement”), as amended on March 31, 2020 and May 29, 2020, with Somahlution, LLC, Somahlution, Inc., and Somaceutica, LLC, companies duly organized under the laws of Delaware (collectively, “Somah”) to acquire all of the assets and none of the liabilities of Somah (the “Acquisition”), including DuraGraft®, a one-time intraoperative vascular graft treatment for use in vascular and bypass surgeries that maintains endothelial function and structure, and other related properties. On July 30, 2020, the Company and Somah entered into Amendment No. 3 to the Agreement which finalized this Agreement. Pursuant to the terms of this amendment, it was agreed that, as part of the Acquisition, the Company would acquire the outstanding capital stock of Somahlution, Inc., held by Somahlution, LLC, rather than the assets of Somahlution, Inc. This change to the Agreement was made to accommodate the European Union (“EU”) requirements with respect to the future manufacturing under Somahlution, Inc. of CE marked products for sale in the EU.

On September 25, 2020, the Company formed Somaceutica, Inc., a Florida corporation.

On September 30, 2020,March 31, 2021, the Company formed Marizyme Sciences, Inc., a Florida corporation.

The Company’s common stock, $0.001 par value per share (the “Common Stock”), is currently quoted on the OTC Markets QB Tier under the ticker symbol “MRZM.”

Change in Management and the Board of Directors

On September 1, 2020, Nicholas DeVito resigned as the Company’s interim chief executive officer and chief financial officer.

On September 1, 2020, Bruce Harmon was appointed as the Company’s chief financial officer.

On September 1, 2020, James Sapirstein, a director of the Company, became the Company’s interim chief executive officer.

On October 30, 2020, Dr. William Hearl was appointed as a Director on the Company’s board of directors.

On November 1, 2020, Dr. Neil J. Campbell was appointed as the Company’s chief executive officer, president, and director.

On November 1, 2020, James Sapirstein relinquished his role as interim chief executive officer.

On December 1, 2020, Dr. Steven Brooks was appointed as the Company’s Chief Medical Officer and Executive Vice President of Medical and Regulatory Affairs.

On December 2, 2020, Dr. Donald Very, Jr. was appointed as the Company’s Executive Vice President of Research and Development.

MARIZYME, INC.

AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)On January 16, 2021, Roger Schaller was appointed as the Company Executive Vice President of Commercial Operations.

On January 29, 2021, Amy Chandler was promoted to Executive Vice President of Regulatory and Quality Affairs.

On February 3, 2021, Julie Kampf was appointed as a Director on the Company’s board of directors.

On February 22, 2021, Dr. Vithal Dhaduk was appointed as a Director on the Company’s board of directors.

On March 18, 2021, Dr. Neil Campbell resigned as Chief Executive Officer, President and Director.

On March 19, 2021, James Sapirstein was appointed as Interim Chief Executive Officer.

On April 2, 2021, Dr. Satish Chandran was terminated as Chief Technology Officer.

NOTE 2 - GOING CONCERN

The accompanying unaudited condensed consolidated financial statements and the factors within it, have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and the ability of the Company to continue as a going concern for a reasonable period of time. The Company had a net loss of $2,971,324$2,810,551 and cash used in operating activities of $948,305$2,065,030 for the ninethree months ended September 30, 2020.March 31, 2021. As of September 30, 2020,March 31, 2021, the Company had a working capital surplus of $5,204,436,$229,297, and accumulated deficit of $33,951,905.$39,636,185. The Company’s continuation as a going concern is dependent upon its ability to generate revenues and its ability to continue receiving investment capital and loans from third parties to sustain its current level of operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company is in the process of securing working capital from investors for common stock, convertible notes payable, and/or strategic partnerships. No assurance can be given that the Company will be successful in these efforts. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company follows the accrual basis of accounting in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP).

The unaudited condensed consolidated financial statements of the Company for the ninethree month periods ended September 30,March 31, 2021 and 2020 and 2019 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the financial position and the results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 20192020 was derived from the audited financial statements included in the Company’s financial statements as of and for the year ended December 31, 20192020 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on April 15, 2020.2021. These financial statements should be read in conjunction with that report.

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include all of the accounts of the Company and its wholly owned subsidiaries, Somahlution, Inc. (“Somahlution”), Somaceutica, Inc. (“Somaceutica”) and Marizyme Sciences, Inc. (“Marizyme Sciences”). All significant intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in accordance with U.S. GAAP requires management to make use of certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expenses during the reported periods. The Company bases its estimates on historical experience and on various other assumptions that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. Significant estimates are related to the allocation of the purchase price in a business combination to the underlying assets and liabilities, allowance for doubtful accounts, recoverability of long-term assets including intangible assets and recoverabilitygoodwill, amortization expense, inventory valuation, valuation of long-term assets including intangible assets and goodwill,warrants, stock-based compensation, and deferred tax valuations.

MARIZYME, INC.

AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)

Business Combinations

The Company accounts for business acquisitions using the acquisition method of accounting based on Accounting Standards Codification (“ASC”) 805 — Business Combinations, which requires recognition and measurement of all identifiable assets acquired and liabilities assumed at their fair value as of the date control is obtained. The Company determines the fair value of assets acquired and liabilities assumed based upon its best estimates of the acquisition-date fair value of assets acquired and liabilities assumed in the acquisition. Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired. Subsequent adjustments to fair value of any contingent consideration are recorded to the Company’s condensed consolidated statements of operations.

Stock-Based Compensation

Stock-based compensation expense is recorded in accordance with FASB ASC Topic 718, Compensation – Stock Compensation, for stock and stock options awarded in return for services rendered. The expense is measured at the grant-date fair value of the award and recognized as compensation expense on a straight-line basis over the service period, which is the vesting period. The Company estimates forfeitures that it expects will occur and records expense based upon the number of awards expected to vest. The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model.

Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. At September 30, 2020March 31, 2021 and December 31, 2019,2020, the Company had no cash equivalents.

Reclassifications

Certain amounts in the prior year’s unaudited condensed consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported losses, total assets, or stockholders’ equity as previously reported. The reclassifications were for the Statement of Operation which combined its expenses into two categories whereas, for comparison purposes for the three months ended March 31, 2021 to March 31, 2020, professional fees and stock-based compensation was segregated.

Allowance for Doubtful Accounts

The Company establishes an allowance for doubtful accounts to ensure trade and notes receivable are not overstated due to non-collectability. The Company’s allowance is based on a variety of factors, including age of the receivable, significant one-time events, historical experience, and other risk considerations. The Company did not have an allowance at September 30, 2020March 31, 2021 or December 31, 2019.2020. The Company haddid not record any bad debt expense in each of $0 and $0 for the ninethree months ended September 30, 2020March 31, 2021 and 2019, respectively. 2020.

Inventory

Inventory

Inventory consisted of primarily finished goods and is valued at the lower of cost or net realizable value. Inventory is held in a third-party warehouse in foreign countries. Cost is determined using the FIFO method. The Company decreases the value of inventory for estimated obsolescence equal to the difference between the cost of inventory and the estimated market value, based upon an aging analysis of the inventory on hand, specifically known inventory-related risks, and assumptions about future demand and market conditions. The Company has determined that no inventory of $161,969 and $0reserve was necessary as of September 30, 2020March 31, 2021 and December 31, 2019, respectively.2020.

Fair Value of Financial Instruments

The Company measures its financial assets and liabilities in accordance with FASB ASC 820 (the “Fair Value Topic”). For certain of our financial instruments, including cash, accounts payable, accrued expenses, and short-term loans the carrying amounts approximate fair value due to their short maturities.

We follow accounting guidance for financial and non-financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

MARIZYME, INC.

AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)

Level 1:Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. 

Level 2:Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. 

Level 3:Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use. 

The Company had no assets or liabilities measured at fair value on a recurring basis at September 30, 2020March 31, 2021 and December 31, 2019.2020.

Fixed Assets

Fixed assets are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method over the assets estimated useful life. Upon the sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in consolidated statements of operations.

Intangible Assets

Costs incurred to file patent applications and acquired intangibles are capitalized when the Company believes that there is a high likelihood that the patent will be issued and there will be future economic benefit associated with the patent. These costs will be amortized on a straight-line basis over a 20-year life from the date of patent filing. All costs associated with abandoned patent applications are expensed. In addition, the Company will review the carrying value of patents for indicators of impairment on a periodic basis and if it determines that the carrying value is impaired, it values the patent at fair value. As of March 31, 2021, $122,746 has been capitalized for patents which have not been amortized.

Impairment of Long-lived Assets

The Company follows ASC paragraph 360-10-05-4 of the FASB Accounting Standards Codification360 for its long-lived assets. The Company’s long-lived assets, such as intellectual property, are required to be reviewed for impairment annually, or whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.

The Company determined that there were no impairments of long-lived assets at September 30, 2020March 31, 2021 and December 31, 2019.

2020.

MARIZYME, INC.

AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)Revenue Recognition

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)

Revenue Recognition

We recognize revenue under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, (“ASC 606”). The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. We only apply the five-step model to contracts when it is probable that we will collect the consideration to which we are entitled in exchange for the goods and services transferred to the customer. The following five steps are applied to achieve that core principle:

Step 1:Identify the contract with the customer 

Step 2:Identify the performance obligations in the contract 

Step 3:Determine the transaction price 

Step 4:Allocate the transaction price to the performance obligations in the contract 

Step 5:

	Step 1:	Identify the contract with the customer
	Step 2:	Identify the performance obligations in the contract
	Step 3:	Determine the transaction price
	Step 4:	Allocate the transaction price to the performance obligations in the contract
	Step 5:	Recognize revenue when the company satisfies a performance obligation

We have identified one performance obligation

We recognize revenue in two ways. Forwhich is related to our DuraGraft product sales for our Distribution Partner channel, we recognize revenue for product sales at the time of delivery of the product to our Distribution Partner (customer). The customer is invoiced, and Payment Terms are Net 30. For online customers, revenue is recognized, and tender is accepted whenAs our products are shipped to customers. The receipt is based on actual customer purchases. Whenhave an expiration date, if a product expires before use, we receive payment before the customer has been shippedwill replace the product ordered,on the shelf at no charge. Revenue disaggregation for three months ended March 31, 2021 amount received is recorded as deferred revenue until the transaction is complete. Our performance obligations for unfulfilled product orders are typically satisfied within one week. Shippingto $54,319 in Spain, $6,730 in Singapore, $8,656 in Switzerland and handling fees charged to customers relate to fulfillment activities and are included$4,247 in net sales with the corresponding costs recorded in cost of sales.India.

In the transaction that acquired the assets of Somahlution, LLC, the Company determined that the CE mark for Europe must be in Somahlution,Marizyme, Inc. in order for Somahlution, Inc. to bill revenue and receive the payments accordingly. The Company has filed in Europe for the CE mark to be in Marizyme, Inc. but, until the time it is approved by the Notified Body, BSI (British Standards Institution), which is projected for fourth quarter 2020,May 2021, Somahlution, LLC provides the billing and receiver of funds. On a periodical basis, the cash received is transferred to Somahlution, Inc.

Direct Cost of SalesRevenue

Cost of sales includes the actual cost of merchandise sold and services performed;sold; the cost of transportation of merchandise from vendorsour third-party vendor to our distribution network, stores, or customers; shipping and handling costs from our stores or distribution network to customers; and the operating cost and depreciation of our sourcing and distribution network and online fulfilment centers.distributer.

Net Income (Loss) per Share

The Company computes basic and diluted income (loss) per share amounts pursuant to section 260-10-45ASC 260 of the FASB Accounting Standards Codification. Basic loss per share is computed by dividing net loss available to common stockholders, by the weighted average number of shares of common stock outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted loss per share is computed by dividing net loss available to common stockholders by the diluted weighted average number of shares of common stock during the period. The diluted weighted average number of common shares outstanding is the basic weighted number of shares adjusted as of the first day of the year for any potentially diluted debt or equity.

The dilutive effect of outstanding convertible securities and preferred stock is reflected in diluted earnings per share by application of the if-converted method.

The following is a reconciliation of basic and diluted earnings (loss) per common share for the three and nine months ended September 30, 2020March 31, 2021 and 2019:2020:

MARIZYME, INC.

AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and loss carryforwards and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income (loss) in the years in which those temporary differences are expected to be recovered or settled.

The effect of a change in tax rules on deferred tax assets and liabilities is recognized in operations in the year of change. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.

Tax benefits of uncertain tax positions are recognized only if it is more likely than not that the Company will be able to sustain a position taken on an income tax return. The Company has no liability for uncertain tax positions as of September 30, 2020March 31, 2021 and December 31, 2019.2020. Interest and penalties, if any, related to unrecognized tax benefits would be recognized as interest expense. The Company does not have any accrued interest or penalties associated with unrecognized tax benefits, nor was any significant interest expense recognized during the three months ended March 31, 2021 and nine month periods ended September 30, 2020 and 2019.2020.

Segment Information

In accordance with the provisions of ASC 280-10, “Disclosures about Segments of an Enterprise and Related Information,” the Company is required to report financial and descriptive information about its reportable operating segments. The Company has one operating segmentssegment as of September 30,March 31, 2021 and December 31, 2020.

Effect of Recent Accounting Pronouncements

Recently Issued Accounting Standards Not Yet Adopted

The Company has reviewed all recently issued, but not yet adopted, accounting standards, in order to determine their effects, if any, on its results of operations, financial position or cash flows. Based on that review, the Company believes that no other pronouncements will have a significant effect on its consolidated financial statements.

MARIZYME, INC.

AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)Concentration of Credit Risk

The Company places its temporary cash investments with financial institutions insured by the FDIC. The Company has amounts over insured limits. Amounts on deposit may at times exceed the FDIC insurance limit. The Company has not experienced any losses in such accounts.

Customer Concentrations

For the three months ended March 31, 2021, four customers/distributors selling to end customers made up 100% of the revenues. As of March 31, 2021, three customers/distributors made up 100% of accounts receivable.

Research and Development

All research and development costs, payments to laboratories and research consultants are expensed when incurred.

NOTE 4 – ACQUISITIONSLEASE

Effective January 1, 2020, the Company adopted the provision of Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). The provisions of this ASU require the Company to record a right-of-use asset and related lease liability related to their leases.

The Company leases its administrative office and laboratories under an operating lease agreement. The Company entered into an agreement in December 2020 for approximately 8,500 square feet which is for a five-and-one-half year period. The base rent is $10,817 per month. In addition, the Company is obligated to pay monthly operating expenses of approximately $12,000 per month. The lease included incentives of waived base rent for certain periods. The base rent will increase by 2.5% for the second year through the end of the term.

Right-Of-Use Asset and Lease Liability:

The Company’s consolidated balance sheets reflect the value of the right-of-use asset and related lease liability. This value was calculated based on the present value of the remaining base rent lease payments. The discount rate used was 3.95% which is the average commercial interest available at the time. As a result, the value of the right-of-use asset and related lease liability is as follows:

For the three months ended March 31, 2021, operating cash flows paid in connection with operating leases amounted to $35,568.

NOTE 5 – ACQUISITIONS

Krillase

On September 12, 2018, the Company consummated an asset acquisition with ACB Holding AB, Reg. No. 559119-5762, a Swedish corporation to acquire all right, title and interest in their Krillase technology in exchange for 16.98 million shares of common stock. Krillase is a naturally occurring enzyme that acts to break protein bonds and has applications in wound debridement, would healing, dental care wound healing and thrombosis. The transaction was recorded at the fair value of the shares, $28,600,000. No amortization has been recorded as all of the patents are not yet in a position to produce cash flows. The Company anticipates Krillase being placed into service in 2023. The Company has evaluated this asset for impairment and has determined that due to COVID-19 delaying the next steps for this technology, along with the associated value of the research and development, the status of the clinical trials, and other pertinent proprietary technology, there is no impairment required.

During 2020, the Company incurred legal and filing fees of $17,801 associated with a patent application for pharmaceutical compositions and methods for the treatment of thrombosis. The patents are pending.

DuraGraft®

On December 15, 2019, the Company entered into a contingent asset purchase agreement (the “Agreement”), as amended on March 31, 2020 and May 29, 2020, with Somahlution, LLC, Somahlution, Inc., and Somaceutica, LLC, companies duly organized under the laws of Delaware (collectively, “Somah”) to acquire all of the assets and none of the liabilities of Somah (the “Acquisition”), including DuraGraft®, a one-time intraoperative vascular graft treatment for use in vascular and bypass surgeries that maintains endothelial function and structure, and other related properties. On July 31, 2020, the Company and Somah entered into Amendment No. 3 to the Agreement and the Agreement was finalized. Pursuant to the terms of this amendment, it was agreed that, as part of the Acquisition, the Company would acquire the outstanding capital stock of Somahlution, Inc., held by Somahlution, LLC, rather than the assets of Somahlution, Inc. This change to the Agreement was made to accommodate the European Union (“EU”) requirements with respect to the future manufacturing under Somahlution, Inc. of CE marked products for sale in the EU. In Amendment No. 2, the Company agreed to assume certain payables of Somah related to clinical and medical expenses. These assumed payables were $344,321. It was agreed that the payments on the assumed debts would be recorded as a prepaid royalty against future royalties. As of March 31, 2021 and December 31, 2020, prepaid royalties were $340,969 and $344,321, respectively, and were recorded as a non-current asset. See Note 9.

The Company compensated the Somah stockholders as follows: (1) 10,000,000 shares of common stock valued at $1.25 per share (the Company’s stock is thinly traded therefore the value per share was determined by the funding completed on August 3, 2020 which sold 4,610,064 shares of common stock at $1.25 per share, which was the first tranche of a total funding of $7,000,240 (5,600,272 shares, August 3, 2020 and September 25, 2020) which all stock was sold at $1.25 per share); (2) 3,000,000 warrants with a strike price of $5.00 per share and a term of five years; and (3) royalties on all net sales for Somahlution, Inc. of 6% on the first $50 million of net sales, 4% for greater than $50 million up to $200 million, and 2% for greater than $200 million.

The Company is in the process of determining the fair value of the royalty component of the total consideration as well as the identifiable intangible assets acquired in business combination. The Company is using a third-party valuation firm and at this time we are unable to estimate the contingent consideration related to the future royalty payment stream amount accurately. The Company is expecting the valuation to be finalized in the Form 10-Q for the period ended June 30, 2021. As such, the following table represents the preliminary consideration in connection with the transaction excluding the fair value of the royalty payment stream:

MARIZYME, INC.

AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

NOTE 4 – ACQUISITIONS (CONTINUED)

The Company anticipates a significant fair value to be assigned to identifiable intangible assets such as in process research and development and patents. Included in the preliminary allocation to the fair value of assets acquired and liabilities assumed is an 100% allocation to intangible assets for the consideration in excess of tangible net assets. The Company utilized a preliminary estimated weighted average amortization period of seven years. As such, the Company recorded amortization expense of $341,270 and $341,270 during$353,693 for the three and nine months ended September 30, 2020, respectively.March 31, 2021 and $0 for the three months ended March 31, 2020.

Dr. Vithal D. Dhaduk, a co-founder of Somahlution, LLC (“Dhaduk”), is the subject of a complaint filed in the United States District Court, Middle District of Pennsylvania, Civil Action No. 3:17 cv 02243 in December 2017 by Mukeshkkumar B. Patel (“Patel”), a former business partner of Dhaduk, which complaint makes claims of breach of contract, promissory estoppel and unjust enrichment regarding a Memorandum of Understanding, dated July 16, 2015, between Patel and Dhaduk (“MOU”). The MOU provided that Dhaduk would pay Patel $9.45 million as consideration for Patel’s agreement to, among other things, (i) exit certain legal entities that were purportedly jointly owned by certain affiliates of Dhaduk and Patel, including Somahlution LLC, and (ii) relinquish his ownership interests in such entities. On December 2, 2019, the court granted Patel’s motion for summary judgment on his breach of contract claim, which judgment Dhaduk is currently appealing (such legal proceedings, collectively referred to as the “Dhaduk Litigation”). The Company is not a named defendant in the Dhaduk Litigation, and the court’s summary judgment is against Dhaduk in his personal capacity.

NOTE 56 – COMMITMENTS AND CONTINGENCIES

Legal Matters

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of November 16, 2020,May 6, 2021, there were no pending or threatened lawsuits.

Contingencies

On July 13, 2019, the Company signed a consulting agreement with an individual to advise the Board of Directors. The individual receives $30,000 per month through July 13, 2022 and received an option to purchase 250,000 shares of common stock at a strike price of $1.50, which vest monthly through July 13, 2021. The vesting of these options werewas accelerated by the Board on September 2, 2020. See Note 9.10. The agreement also provided for royalties derived directly from the assets related to wound healing, debridement, grafting, dental applications for both human and pet, and thrombosis.thrombosis (see Note 5 – Krillase). The royalties associated with the acquisition of Krillase will be calculated as follows:

Royalties on sales equal to:

10% on net sales

On December 15, 2019, the Company entered into the Agreement, as amended on March 31, 2020 and May 29, 2020, with Somah (see Note 5). The royalties associated with the Agreement will be calculated as follows:

Royalties on U.S. sales equal to:

5% on the first $50,000,000 of net sales

4% on net sales of $50,000,001 up to $200,000,000

2% on net sales over $200,000,000

Royalties on sales outside of the U.S.:

6% on the first $50,000,000 of net sales

4% on net sales of $50,000,001 up to $200,000,000

2% on net sales over $200,000,000

The royalties are in perpetuity. As of September 30, 2020,March 31, 2021, there has been no revenue therefore norelated to the above royalties.

On July 31, 2020, the Company executed the acquisition of Somah which provides for royalties as stated herein (see Note 4).

The Company, after the acquisition of Somah, has been leasing the office space on a month-to-month basis with a monthly rate of $10,701. The Company will maintainmaintained this office space through December 31, 2020.

MARIZYME, INC.

AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

NOTE 5 – COMMITMENTS AND CONTINGENCIES (CONTINUED)

Employment and Consulting Agreements

On September 1, 2020, Bruce Harmon executed a consulting agreement and was named as chief financial officer. He is compensated $120,000 annually, received 40,000 shares of common stock vesting over one year. On October 22, 2020, Mr. Harmon received 120,000 options for common stock vesting over three years with an exercise price of $1.25. See Note 9.10. On November 1, 2020, Mr. Harmon became an employee of the Company thereby cancelling the consulting agreement. On March 5, 2021, Mr. Harmon executed a letter of understanding for employment. See Note 1.

On November 1, 2020, Dr. Neil J. Campbell executed an employment agreement and was named as chief executive officer, president and director. He is compensated $375,000 annually, received 500,000 options for common stock vesting over three years, with an exercise price of $1.25. On March 18, 2021, Dr. Campbell resigned all positions. See Note 10.Notes 1 and 12. We expect to enter into a settlement and release agreement with Dr. Campbell but as of the date of this report no such agreement has been finalized.

On November 30, 2020, Dr. Steven Brooks executed a letter of understanding for employment as chief medical officer.

On December 1, 2020, Dr. Donald Very executed a letter of understanding for employment as executive vice president of research and development.

On January 16, 2021, Roger Schaller executed a letter of understanding for employment as executive vice president of commercial operations.

Risks and Uncertainties

The outbreak of the coronavirus (COVID-19) resulted in increased travel restrictions, and shutdown of businesses, which may cause slower recovery of the economy. We may experience impact from quarantines, market downturns and changes in customer behavior related to pandemic fears and impact on our workforce if the virus continues to spread. In addition, one or more of our customers, partners, service providers or suppliers may experience financial distress, delayed or defaults on payment, file for bankruptcy protection, sharp diminishing of business, or suffer disruptions in their business due to the outbreak. The extent to which the coronavirus impacts our results will depend on future developments and reactions throughout the world, which are highly uncertain and will include emerging information concerning the severity of the coronavirus and the actions taken by governments and private businesses to attempt to contain the coronavirus. It is likely to result in a potential material adverse impact on our business, results of operations and financial condition. Wider-spread COVID-19 globally could prolong the deterioration in economic conditions and could cause decreases in or delays in advertising spending and reduce and/or negatively impact our short-term ability to grow our revenues. Any decreased collectability of accounts receivable, bankruptcy of small and medium businesses, or early termination of agreements due to deterioration in economic conditions could negatively impact our results of operations.

NOTE 67 – FIXED ASSETS

Fixed assets, stated at cost, less accumulated depreciation at September 30, 2020March 31, 2021 and December 31, 20192020 consisted of the following:

Depreciation expense for the three and nine months ended September 30,March 31, 2021 and 2020 was $3,000 and 2019 was $1,313.$0, respectively.

NOTE 78 –INTANGIBLE ASSETS

On September 12, 2018, the Company consummated an asset acquisition with ACB Holding AB, Reg. No. 559119-5762, a Swedish corporation to acquire all right, title and interest in their Krillase technology in exchange for 16.98 million shares of common stock. Krillase is a naturally occurring enzyme that acts to break protein bonds and has applications in dental care, wound healing and thrombosis. The transaction was recorded at the fair value of the shares. No amortization has been recorded as the patents and patent applications are not yet in a position to produce cash flows.

During 2020, the Company incurred legal and filing fees of $17,801 associated with a patent application for pharmaceutical compositions and methods for the treatment of thrombosis. The patents are pending. The Company capitalized these costs.

On July 31, 2020, the Company executed an agreement with Somah (see Note 4) for the DuraGraft® technology in exchange for 10,000,000 shares of common stock, 3,000,000 warrants and a royalty as stated herein. Somah is engaged in developing products to prevent ischemic injury to organs and tissues and DuraGraft® is a one-time intraoperative vascular graft treatment for use in vascular and bypass surgeries that maintains endothelial function and structure, and other related properties.

The Company has recorded amortization expense of $353,693 for the ninethree months ended September 30, 2020, changes toMarch 31, 2021 and $0 for the three months ended March 31, 2020.

The useful lives of the intangible assets wereare based on the life of the patent and related technology. The patents and related technology for Krillase are not currently being amortized as follows:

they have not yet been put into operations.

MARIZYME, INC.Future amortizations for DuraGraft related intangible assets for the next five years will be $1,414,773 for each year from 2021 through 2026 and $6,484,375 for 2027 and thereafter.

AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

NOTE 89 – RELATED PARTY TRANSACTIONS

None.The Company has recorded a prepaid royalty to the shareholders of Somahlution, LLC in regard to the acquisition (see Note 5). The primary beneficial owner is Dr. Vithal Dhaduk, a director of the Company (appointed in 2021) and significant shareholder of the Company. Prepaid royalties were $340,969 at March 31, 2021 and $344,321 at December 31, 2020.

NOTE 910 – STOCKHOLDERS’ EQUITY

Preferred stock

Our Articles of Incorporation authorize the issuance of 25,000,000 shares of “blank check” preferred stock with a par value of $0.001. As of September 30, 2020,March 31, 2021, and December 31, 2019,2020, there were no shares issued and outstanding, respectively.

Common stock

Our Articles of Incorporation authorize the issuance of 75,000,000 shares of common stock with a par value of $0.001.

As of September 30,March 31, 2021 and December 31, 2020, there were 51,888,188 shares of common stock issued and issuable, 35,888,188 outstanding and, as of December 31, 2019, 19,858,93935,928,188 shares of common stock issued and outstanding.

The following transactions in the Company’s common stock were completed in the nine months ended September 30, 2020:

On January 9, 2020, the Company issued 125,000 shares to a consultant who exercised 125,000 options in lieu of $126,250 in accounts payable.

On April 6, 2020, the Company issued 160,000 shares of common stock to a consultant who exercised 160,000 options in lieu of $161,600 in accounts payable.Options

On April 6, 2020,January 13, 2021, the Company issued 5,000 sharesBoard of common stock to a director ofDirectors approved the Company who exercised 5,000 options in exchange for $5,050 in cash.

On April 6, 2020, the Company issued 15,000 shares of common stock to a consultant in exchange for services rendered in the amount of $15,150.

On June 8, 2020, the Company issued 20,000 shares of common stock to a consultant who exercised 20,000 options in lieu of $20,200 in accounts payable.

On July 28, 2020, the Company issued 54,057 shares of common stock in the conversion of $59,453 of debt.

On July 28, 2020, the Company issued 10,000 shares of common stock were issued at a value of $12,500 to two consultants.

On July 31, 2020, the Company completed the Soma Acquisition (see Note 3) whereas 10,000,000 shares of common stock and 3,000,000 warrants were issued.

On August 3, 2020, the Company completed an initial closing of a private placement (the “Private Placement”) with certain accredited investors (the “Investors”) pursuant to which the Company sold and issued to the Investors an aggregate of 4,609,984 shares (the “Shares”) of its CommonMarizyme, Inc. 2021 Stock at a purchase price of $1.25 per share. Each of the Investors is an “accredited investor” as that term is defined in Regulation D, Rule 501(a) under the Securities Act of 1933, as amended (the “Securities Act”Incentive Plan (“SIP”). The SharesSIP incorporates stock options issued and sold in the Private Placement were offered and sold by the Company in reliance on an exemption from registration pursuantprior to Section 4(a)(2)January 13, 2021. The SIP authorized 5,300,000 options for issuance. As of the Securities Act, and Rule 506(b) of Regulation D thereunder.

MARIZYME, INC.

AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)

NOTE 9 – STOCKHOLDERS’ EQUITY(CONTINUED)

In considerationMarch 31, 2021, there remains 512,500 options available for services rendered as the placement agent in the Private Placement, on August 2, 2020, the Company paid Univest Securities LLC cash commissions totaling $460,999, or 8% of the gross proceeds of the Private Placement closing, a 1% non-accountable expense allowance totaling $57,625, and the $31,250 balance (of a total of $37,500) due to the placement agent in advisory fees. Additionally, the Company issued to the placement agent a five-year warrant to purchase an aggregate of 229,499 shares of the Company’s Common Stock at an exercise price of $1.375 per share (the “Agent Warrant”). The Agent Warrant, for which the placement agent paid the Company $100, may be exercised on a cashless basis. The exercise price of the Agent Warrant is subject to adjustment for stock splits, stock dividends, recapitalizations, and the like.

On September 1, 2020, the Company issued 40,000 restricted shares of common stock to Bruce Harmon, the chief financial officer of the Company. The shares vest over a one-year period.

On September 25, 2020, the Company closed on the second tranche of funding in the gross amount of $1,237,760 in exchange for 990,208 shares of common stock. The net amount received by the Company was $1,116,566.

Optionsissuance.

The summary of option activity for the ninethree months ended September 30, 2020March 31, 2021 is as follows.follows:

The following stock options were granted during the past two years:three months ended March 31, 2021:

i)Options to purchase 265,000 shares of common stock were granted to directors effective December 6, 2018. The options allowed the recipient to purchase shares at a price of $1.01 for a period of 10 years. The options vested in one year from the date of the grant.  

ii)On July 13, 2019,January 1, 2021, the Company issued 7,500 options to purchase 2,450,000 shares offor common stock to an officer, directors, and a consultant. The options granted the recipient to purchase shares at a price of $1.50 for a period of 10 years. 200,000 options vested at grant. The remaining options vest at the rate of 90,000 options per month. The Company accelerated the vesting to 100% in September 2020 therefore the remaining amortization was recorded as of September 30, 2020. The Company recorded expenses from issuance through September 30, 2020 of $1,345,438.  Two of the recipients exercised a total of 254,057 options using payables to them in the amount of $261,453 for the exercise price. 

iii)On January 9, 2020, the Company issued options to purchase 250,000 shares of common stock to a consultant. The options granted the recipient to purchase shares at a price of $1.01 for a period of 10 years. The options vest at the rate of 25,000 options per month. The Company accelerated the vesting to 100% in September 2020 therefore the remaining amortization was recorded as of September 30, 2020. The Company recorded expenses from issuance through September 30, 2020 of $222,385. 

iv)On August 18, 2020, the Company issued options to purchase 200,000 shares of common stock to a consultant. The options granted the recipient to purchase shares at a price of $1.37 for a period of 10 years.employee. The options vest over a periodthree years, have an exercise price of eighteen months. As of September 30, 2020,$1.25 and expire in 10 years. For the three months ended March 31, 2021, the Company has recorded $33,012$708 in stock-based compensation. The Black-Scholes value was determined to be $1.13. As of March 31, 2021, there is an unamortized amount of $7,792.

On January 12, 2021, the Company issued 20,000 options for common stock to an employee. The options vest over three years, have an exercise price of $1.25 and expire in 10 years. For the three months ended March 31, 2021, the Company has recorded $1,717 in stock-based compensation. The Black-Scholes value was determined to be $1.19. As of March 31, 2021, there is an unamortized amount of $22,083.

On January 16, 2021, the Company issued 40,000 options for common stock to Roger Schaller, the Company’s executive vice president. The options vest over three years, have an exercise price of $1.25 and expire in 10 years. For the three months ended March 31, 2021, the Company has recorded $3,356 in stock-based compensation. The Black-Scholes value was determined to be $1.22. As of March 31, 2021, there is an unamortized amount of $45,640.

On January 29, 2021, the Company issued 40,000 options for common stock to Amy Chandler, the Company’s executive vice president. The options vest over three years, have an exercise price of $1.25 and expire in 10 years. For the three months ended March 31, 2021, the Company has recorded $2,745 in stock-based compensation. The Black-Scholes value was determined to be $1.22. As of March 31, 2021, there is an unamortized amount of $45,727.

On March 5, 2021, the Company issued 125,000 options for common stock to James Sapirstein, a director of the Company. The options vest over three years, have an exercise price of $1.25 and expire in 10 years. For the three months ended March 31, 2021, the Company has recorded $11,003 in stock-based compensation. The Black-Scholes value was determined to be $1.19. As of March 31, 2021, there is an unamortized amount of $137,747.

On March 5, 2021, the Company issued 125,000 options for common stock to Terry Brostowin, a director of the Company. The options vest over three years, have an exercise price of $1.25 and expire in 10 years. For the three months ended March 31, 2021, the Company has recorded $11,003 in stock-based compensation. The Black-Scholes value was determined to be $1.19. As of March 31, 2021, there is an unamortized amount of $137,747.

MARIZYME, INC.

AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(unaudited)On March 5, 2021, the Company issued 125,000 options for common stock to Dr. William Hearl, a director of the Company. The options vest over three years, have an exercise price of $1.25 and expire in 10 years. For the three months ended March 31, 2021, the Company has recorded $11,003 in stock-based compensation. The Black-Scholes value was determined to be $1.19. As of March 31, 2021, there is an unamortized amount of $137,747.

NOTE 9 – STOCKHOLDERS’ EQUITY(CONTINUED)On March 5, 2021, the Company issued 125,000 options for common stock to Julie Kampf, a director of the Company. The options vest over three years, have an exercise price of $1.25 and expire in 10 years. For the three months ended March 31, 2021, the Company has recorded $11,003 in stock-based compensation. The Black-Scholes value was determined to be $1.19. As of March 31, 2021, there is an unamortized amount of $137,747.

On March 5, 2021, the Company issued 125,000 options for common stock to Dr. Vithal Dhaduk, a director of the Company. The options vest over three years, have an exercise price of $1.25 and expire in 10 years. For the three months ended March 31, 2021, the Company has recorded $11,003 in stock-based compensation. The Black-Scholes value was determined to be $1.19. As of September 30,March 31, 2021, there is an unamortized amount of $137,747.

The weighted average grant date fair value of options granted during 2020 was $1.25. As of March 31, 2021, the total unamortized stock-based compensation expense amounted to $1,250,144 and will be expensed through December 2023. As of March 31, 2021, the number of options outstanding and exercisable are as follows including weighted average inputs used in calculating stock-based compensation: