UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,WASHINGTON, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)10-Q
x(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2013
¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: June 30, 2019
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 000-53223
GBS ENTERPRISES INCORPORATEDMARIZYME, INC.
(Exact name of registrant as specified in its charter)
Nevada | 82-5464863 | |
(State or Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
| ||
109 Ambersweet Way, #401 Davenport, Florida 33897 | ||
(Address of principal executive offices) (Zip Code) | ||
(925) 400-3123 | ||
( |
(404) 891-1711
(Registrant’s telephone number, including area code)
With a copy to:
Philip Magri, Esq.
The Magri Law Firm, PLLC
2642 NE 9th Avenue
Fort Lauderdale, FL 33334
T: (646) 502-5900
F: (646) 826-9200
pmagri@magrilaw.com
www.MagriLaw.com
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrantregistrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No ¨[X] No[ ]
Indicate by check mark whether the registrantRegistrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrantRegistrant was required to submit and post such files).
Yes x[X] No ¨[ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large“large accelerated filer," "accelerated filer"” “accelerated filer,” and "smaller“smaller reporting company"company” in Rule 12b-2 of the Exchange ct.Act. (Check one):
[ ] | Large accelerated filer | [ ] | Accelerated filer |
[ ] | |||
Non-accelerated filer | [X] | Smaller reporting company | |
[X] | Emerging growth company |
Indicate by checkmarkcheck mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No[X]
Yes ¨ No xIf an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [X]
APPLICABLE ONLY TO CORPORATE REGISTRANTSSecurities registered pursuant to Section 12(b) of the Act:
Indicate the number of shares outstanding
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Not applicable. |
The number of the registrant’s classes of common stock, as of the latest practicable date.
As of May 15, 2014 , there were 31,904,291 shares of common stock par value $0.001 per share,outstanding was 19,858,939as of the Registrant issued and outstanding.July 03. 2019.
DOCUMENTS INCORPORATED BY REFERENCETable of Contents
None
EXPLANATORY NOTEMARIZYME, INC.
GBS Enterprises Incorporated, a Nevada corporation (the “Company”), is filing this Amendment No. 1 (this “Amendment No. 1”) to itsFORM 10-Q
Page | ||||||
PART I—FINANCIAL INFORMATION | ||||||
Item 1. | Financial Statements | 3 | ||||
Condensed Balance Sheets as of June 30, 2019 (unaudited) and December 31, 2018 | 3 | |||||
Condensed Statements of Operations for the Three and Six Months Ended June 30, 2019 (unaudited) and the Three and Six Months Ended June 30, 2018 (unaudited) | 4 | |||||
Condensed Statements of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2019 (unaudited) and the Six Months Ended June 30, 2018 (unaudited) | 5 | |||||
Condensed Statements of Cash Flows for the Six Months Ended June 30, 2019 (unaudited) and the Six Months Ended June 30, 2018 (unaudited) | 6 | |||||
Notes to Condensed Financial Statements (unaudited) | 7 | |||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 10 | ||||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 13 | ||||
Item 4. | Controls and Procedures | 14 | ||||
PART II—OTHER INFORMATION | ||||||
Item 1 | Legal Proceedings | 15 | ||||
Item 1A | Risk Factors | 15 | ||||
Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 15 | ||||
Item 3 | Defaults Upon Senior Securities | 15 | ||||
Item 4 | Mine Safety Disclosures | 15 | ||||
Item 5 | Other Information | 15 | ||||
Item 6. | Exhibits | 16 | ||||
SIGNATURES | 17 |
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q for Marizyme Inc. may contain forward-looking statements within the fiscal quartermeaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are characterized by future or conditional verbs such as “may,” “will,” “expect,” “intend,” “anticipate,” believe,” “estimate” and “continue” or similar words. You should read statements that contain these words carefully because they discuss future expectations and plans, which contain projections of future results of operations or financial condition or state other forward-looking information. Such statements are only predictions and our actual results may differ materially from those anticipated in these forward-looking statements. We believe that it is important to communicate future expectations to investors. However, there may be events in the future that we are not able to accurately predict or control. Factors that may cause such differences include, but are not limited to, those discussed under Item 1A. Risk Factors and elsewhere in the audited financial statements as of and for the period ended September 30, 2013 (the “Form 10-Q”December 31, 2018 contained in the Company’s form for registration of securities on Form 10-K (“Form 10K”), originally filed with the Securities and Exchange Commission (“SEC”) on November 14, 2013 (the “Original Filing”),March 6, 2019. These factors include the uncertainties associated with product development, the risk that products that appeared promising in early clinical trials do not demonstrate safety and efficacy in larger-scale clinical trials, the risk that we will not obtain approval to market our products, the risks associated with dependence upon key personnel and the need for the following purposes:additional financing. We do not assume any obligation to update forward-looking statements as circumstances change and thus you should not unduly rely on these statements.
Other than the foregoing, no additional material changes have been made to the Company’s Form 10-Q. This Amendment No.
ITEM 1 to the Form 10-Q speaks as of the date of the Original Filing does not reflect events that may have occurred subsequent to the Original Filing date and does not modify or update in any way disclosures made in the Original Filing.- FINANCIAL STATEMENTS
The certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002, filed as Exhibits 31 and 32, respectively, to the Original Filing, have been re-executed and re-filed as of the date of this Amendment No. 1.
MARIZYME, INC.
GBS Enterprises IncorporatedINTERIM BALANCE SHEETS
Interim Consolidated Balance Sheets
SeptemberAs at June 30, 2013 (Unaudited)2019 and December 31, 2012 (Audited and Restated)2018
(Unaudited)
Restated | ||||||||
September 30, | December 31, | |||||||
2013 | 2012 | |||||||
$ | $ | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents - Note 6 | 259,614 | 1,154,602 | ||||||
Accounts Receivable - Note 7 | 3,528,260 | 4,143,448 | ||||||
Inventory - Note 3 | 21,684 | - | ||||||
Prepaid expenses - Note 8 | 207,811 | 84,304 | ||||||
Other current receivables - Note 9 | 276,856 | 676,976 | ||||||
Assets held for sale | - | 384,862 | ||||||
Total current assets | 4,294,224 | 6,444,192 | ||||||
Non-Current Assets | ||||||||
Assets held for sale | - | 1,846,645 | ||||||
Property, plant and equipment - Note 11 | 282,601 | 332,839 | ||||||
Other non-current receivables - Note 12 | 1,217 | 428,422 | ||||||
Deferred tax assets non-current - Note 10 | 1,076,010 | 1,132,103 | ||||||
Goodwill - Note 13 | 31,260,500 | 34,254,881 | ||||||
Software - Note 14 | 10,232,633 | 12,207,031 | ||||||
Other assets - Note 15 | 132,489 | 156,379 | ||||||
Total non-current assets | 42,985,450 | 50,358,300 | ||||||
Total assets | 47,279,675 | 56,802,492 | ||||||
Liabilities and stockholders' equity | ||||||||
Current liabilities | ||||||||
Notes payable | 1,775,010 | 2,313,572 | ||||||
Liabilities to banks - Note 16 | 3,887,764 | 6,774 | ||||||
Accounts payables and accrued liabilities - Note 17 | 3,946,070 | 6,241,733 | ||||||
Deferred income - Note 18 | 6,846,920 | 6,099,570 | ||||||
Other short term liabilities - Note 19 | 242,252 | 860,032 | ||||||
Due to related parties | - | 2,115,869 | ||||||
Liabilities held for sale | - | 589,634 | ||||||
Total current liabilities | 16,698,017 | 18,227,184 | ||||||
Non-Current liabilities | ||||||||
Liabilities to banks | - | 3,716,102 | ||||||
Retirement benefit obligation | 172,414 | 165,876 | ||||||
Liabilities held for sale | - | 159,898 | ||||||
Total non-current liabilities | 172,414 | 4,041,876 | ||||||
Total liabilities | 16,870,431 | 22,269,060 | ||||||
Stockholders' equity | ||||||||
Capital stock - Note 20 | ||||||||
Authorized: | ||||||||
75,000,000 common shares of $.001 par value each | ||||||||
25,000,000 preferred shares of $.001 par value each | ||||||||
Issued and outstanding: | ||||||||
30,837,624 shares of common stock | ||||||||
(29,461,664 shares of common stock at December 31, 2012) | 30,838 | 29,462 | ||||||
Additional paid in capital | 50,009,107 | 49,691,195 | ||||||
Subscription Receivable | 50,000 | - | ||||||
Accumulated deficit | (21,646,422 | ) | (18,974,582 | ) | ||||
Other comprehensive income | (299,034 | ) | 442,841 | |||||
28,144,489 | 31,188,916 | |||||||
Noncontrolling interest in subsidiaries | 2,264,754 | 3,344,516 | ||||||
Total stockholders' equity | 30,409,243 | 34,533,432 | ||||||
Total stockholders' equity and liabilities | 47,279,675 | 56,802,492 |
| 30-Jun |
| 31-Dec |
| 2019 |
| 2018 |
| $ |
| $ |
ASSETS |
|
|
|
Current Assets: |
|
|
|
Cash | 4,382 |
| 104 |
Prepaid Expenses | 5,000 |
| 20,000 |
Total Current Assets | 9,382 |
| 20,104 |
|
|
|
|
Long Term Assets: |
|
|
|
Intangible Assets – Note 5 | 28,600,000 |
| 28,600,000 |
|
|
|
|
TOTAL ASSETS | 28,609,382 |
| 28,620,104 |
|
|
|
|
LIABILITIES |
|
|
|
Current Liabilities: |
|
|
|
Accounts Payable and Accrued Liabilities | 212,660 |
| 42,780 |
|
|
|
|
Total Liabilities | 212,660 |
| 42,780 |
|
|
|
|
STOCKHOLDERS' EQUITY |
|
|
|
Capital Stock - Note 7 |
|
|
|
Authorized: |
|
|
|
75,000,000 common shares of $.001 par value each |
|
|
|
25,000,000 preferred shares of $.001 par value each |
|
|
|
Issued and outstanding: |
|
|
|
19,858,939 shares of common stock |
|
|
|
(19,740,302 shares at December 31, 2018) | 19,859 |
| 19,740 |
Donated Capital | 41,422 |
| 41,422 |
Additional Paid-in Capital | 58,579,585 |
| 58,454,704 |
Treasury Stock | (16,000) |
| (16,000) |
Accumulated Deficit | (30,228,144) |
| (29,922,542) |
Total Equity | 28,396,722 |
| 28,577,324 |
|
|
|
|
TOTAL LIABILITIES AND EQUITY | 28,609,382 |
| 28,620,104 |
|
|
|
|
Subsequent events - Note 251 – Going concern assumption
GBS Enterprises Incorporated
Interim Consolidated Statements of Operations and Comprehensive Income/(Loss)MARIZYME, INC.
INTERIM STATEMENTS OF OPERATIONS
For the threeThree and nine month periods ended SeptemberSix Months Ended June 30, 20132019 and September2018
(Unaudited)
| Three Months Ended June 30 |
| Six Months Ended June 30 | ||||
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| $ |
| $ |
| $ |
| $ |
Total Revenue | - |
| 17,107 |
| - |
| 22,660 |
Total Cost of Goods Sold | - |
| 19,548 |
| - |
| 19,548 |
Gross Profit | - |
| (2,441) |
| - |
| 3,112 |
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
Audit and Accounting fees | 1,125 |
| 19,500 |
| 3,425 |
| 19,500 |
Consulting fees | 139,261 |
| 8,390 |
| 173,953 |
| 37,498 |
Director and Officer insurance | 5,000 |
| 20,460 |
| 20,000 |
| 30,460 |
Filing charges | 1,057 |
| 1,142 |
| 2,280 |
| 1,842 |
General, office and miscellaneous | - |
| 699 |
| 330 |
| 1,624 |
Investor Relations | 15,242 |
| - |
| 15,242 |
| - |
Legal and Professional fees | 49,840 |
| 13,549 |
| 63,474 |
| 23,549 |
Registrations and dues | 9,000 |
| - |
| 9,000 |
| - |
Travel and entertainment | 16,837 |
| 2,555 |
| 17,898 |
| 2,554 |
Total Expenses | 237,362 |
| 66,295 |
| 305,602 |
| 117,027 |
|
|
|
|
|
|
|
|
Net Operating Loss | (237,362) |
| (68,736) |
| (305,602) |
| (113,915) |
|
|
|
|
|
|
|
|
Other Income | - |
| 2,792 |
| - |
| - |
|
|
|
|
|
|
|
|
Net Loss and comprehensive loss |
|
|
|
|
|
|
|
for the period | (237,362) |
| (65,944) |
| (305,602) |
| (113,915) |
|
|
|
|
|
|
|
|
Net Loss per share, basic and diluted | (0.01) |
| (0.06) |
| (0.02) |
| (0.10) |
|
|
|
|
|
|
|
|
Weighted average of number of shares |
|
|
|
|
|
|
|
of common stock outstanding, | 19,763,769 |
| 1,101,074 |
| 19,746,153 |
| 1,101,074 |
basic and diluted |
| ||||||
|
|
|
|
|
|
|
|
MARIZYME, INC.
INTERIM STATEMENTS OF EQUITY
For the Six Months Ended June 30, 2012 (Restated)2019 and June 30, 2018
(Unaudited)
| Common Stock |
| Additional |
|
|
|
|
|
| |||||||||
|
|
|
|
| Paid in |
| Donated |
| Treasury |
| Accumulated |
|
| |||||
| Shares |
| Amount |
| Capital |
| Capital |
| Stock |
| Deficit |
| Equity | |||||
| # |
| $ |
| $ |
| $ |
| $ |
| $ |
| $ | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Balance, December 31, 2017 | 1,101,074 |
| 1,101 |
| 29,793,728 |
| 41,422 |
| (16,000) |
| (27,653,439) |
| 2,166,812 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net loss and comprehensive loss, period ended June 30, 2018 | - |
| - |
| - |
| - |
| - |
| (113,915) |
| (113,915) | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Balance, June 30, 2018 | 1,101,074 |
| 1,101 |
| 29,793,728 |
| 41,422 |
| (16,000) |
| (27,767,354) |
| 2,052,897 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Balance, December 31, 2018 | 19,740,302 |
| 19,740 |
| 58,454,704 |
| 41,422 |
| (16,000) |
| (29,922,542) |
| 28,577,324 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Issuance of Shares | 118,637 |
| 119 |
| 124,881 |
| - |
| - |
| - |
| 125,000 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net loss and comprehensive loss period ended June 30, 2019 | - |
| - |
| - |
| - |
| - |
| (305,602) |
| (305,602) | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Balance, June 30, 2019 | 19,858,939 |
| 19,859 |
| 58,579,585 |
| 41,422 |
| (16,000) |
| (30,228,144) |
| 28,396,722 |
MARIZYME, INC.
INTERIM STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2019 and June 30, 2018
(Unaudited)
| 30-Jun |
| 30-Jun |
| 2019 |
| 2018 |
| $ |
| $ |
Cash Flow from Operating Activities: |
|
|
|
Net loss for the period | (305,602) |
| (113,915) |
Changes in assets and liabilities: |
|
|
|
Prepaid Expenses | 15,000 |
| (23,333) |
Accounts Receivable | - |
| (6,983) |
Accounts Payable and Accrued Liabilities | 169,880 |
| (858) |
Assets/Liabilities Held for Resale | - |
| 99,277 |
Net Cash used by Operating Activities | (120,722) |
| (45,812) |
|
|
|
|
Net cash Provided by Financing Activities: |
|
|
|
Capital Paid-In | 125,000 |
| - |
|
|
|
|
Net cash increase (decrease) for period | 4,278 |
| (45,812) |
Cash - Beginning of the period | 104 |
| 51,608 |
|
|
|
|
Cash - End of period | 4,382 |
| 5,796 |
|
|
|
|
Supplementary Information: |
|
|
|
|
|
|
|
Interest Paid: | - |
| - |
Taxes Paid: | - |
| - |
|
|
|
|
MARIZYME, INC.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)
For the three months ended | For the nine months ended | |||||||||||||||
Restated | Restated | |||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
$ | $ | $ | $ | |||||||||||||
Revenues - Note 21 | ||||||||||||||||
Products | 4,133,565 | 4,719,446 | 13,170,113 | 15,247,883 | ||||||||||||
Services | 932,091 | 990,333 | 2,442,935 | 3,516,745 | ||||||||||||
5,065,656 | 5,709,778 | 15,613,048 | 18,764,628 | |||||||||||||
Cost of goods sold | ||||||||||||||||
Products | 563,950 | 922,839 | 2,738,549 | 3,833,550 | ||||||||||||
Services | 1,709,105 | 2,289,927 | 4,951,817 | 6,616,975 | ||||||||||||
2,273,055 | 3,212,767 | 7,690,366 | 10,450,525 | |||||||||||||
Gross profit | 2,792,601 | 2,497,011 | 7,922,682 | 8,314,103 | ||||||||||||
Operating expenses | ||||||||||||||||
Selling expenses | 2,033,242 | 2,625,773 | 6,627,311 | 9,990,170 | ||||||||||||
Administrative expenses | 1,145,304 | 1,229,281 | 3,922,440 | 3,940,092 | ||||||||||||
General expenses | 120,364 | 318,350 | 392,329 | 711,227 | ||||||||||||
3,298,910 | 4,173,403 | 10,942,080 | 14,641,489 | |||||||||||||
Operating income (loss) | (506,309 | ) | (1,676,392 | ) | (3,019,398 | ) | (6,327,386 | ) | ||||||||
Other Income (expense) - Note 22 | ||||||||||||||||
Other Income (expense) | 44,726 | 892,702 | 566,430 | 52,543 | ||||||||||||
Interest income | - | 209 | 420 | 2,866 | ||||||||||||
Interest expense | (140,213 | ) | (133,741 | ) | (546,333 | ) | (241,405 | ) | ||||||||
(95,487 | ) | 759,169 | 20,517 | (185,996 | ) | |||||||||||
Income (loss) before income taxes | (601,796 | ) | (917,223 | ) | (2,998,882 | ) | (6,513,382 | ) | ||||||||
Income tax (income) expense | 487 | (287,718 | ) | 13,807 | (1,409,759 | ) | ||||||||||
Income (loss) before discontinued operations | (602,283 | ) | (629,504 | ) | (3,012,689 | ) | (5,103,623 | ) | ||||||||
Discontinued operations - Note 4 | - | (33,125 | ) | - | 63,246 | |||||||||||
Net income (loss) | (602,283 | ) | (662,629 | ) | (3,012,689 | ) | (5,040,377 | ) | ||||||||
Net Loss Attributable to noncontrolling Interest | 535,588 | (271,574 | ) | (340,849 | ) | (1,699,550 | ) | |||||||||
Net income (loss) attributable to stockholders | (1,137,871 | ) | (391,055 | ) | (2,671,840 | ) | (3,340,827 | ) | ||||||||
Net earnings (loss) per share, basic and diluted | $ | (0.0373 | ) | $ | (0.0137 | ) | $ | (0.0879 | ) | $ | (0.1168 | ) | ||||
Weighted average number of common stock outstanding, basic and diluted | 30,492,650 | 28,611,701 | 30,379,612 | 28,611,701 | ||||||||||||
Statement of Comprehensive Income (Loss): | ||||||||||||||||
Net Income (Loss) | (602,283 | ) | (662,629 | ) | (3,012,689 | ) | (5,040,377 | ) | ||||||||
Foreign currency Translation Adjustment | (365,488 | ) | (2,503,497 | ) | (1,480,788 | ) | (116,135 | ) | ||||||||
Comprehensive income (loss) | (967,771 | ) | (3,166,126 | ) | (4,493,477 | ) | (5,156,512 | ) | ||||||||
Less: Net Income (Loss) attributable to noncontrolling interest | 535,588 | (271,574 | ) | (340,849 | ) | (1,699,550 | ) | |||||||||
Less: Other Comprehensive Income (Loss) attributable to noncontrolling interest | (182,378 | ) | (1,223,936 | ) | (738,913 | ) | (32,642 | ) | ||||||||
Total Comprehensive income (loss) attributed to stockholders | (1,320,981 | ) | (1,670,617 | ) | (3,413,715 | ) | (3,424,320 | ) |
GBS Enterprises Incorporated
Interim Consolidated Statements of Cash Flows
For the nine months ended September 30, 2013 and September 30, 2012 (Restated)
(Unaudited)
Restated | ||||||||
September 30, 2013 | September 30, 2012 | |||||||
$ | $ | |||||||
Cash flow from operating activities | ||||||||
Net loss / net income | (3,012,689 | ) | (5,103,623 | ) | ||||
Adjustments | ||||||||
Deferred income taxes | 56,093 | (1,421,720 | ) | |||||
Depreciation and amortization | 3,399,200 | 3,289,383 | ||||||
Write-down of Goodwill and Intangibles | - | 3,079,168 | ||||||
Consulting expense | 74,000 | - | ||||||
Interest Expense | 195,288 | - | ||||||
Gains (Losses) on Sale of Assets | - | (1,566,119 | ) | |||||
Gains (Losses) from equity investment | - | (26,751 | ) | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable, prepaid assets, other current receivables | 3,574,403 | 1,471,490 | ||||||
Other Assets | - | (37,398 | ) | |||||
Retirement benefit obligation | 6,538 | - | ||||||
Inventories | (21,684 | ) | 119,245 | |||||
Accounts payable and other liabilities | (2,915,625 | ) | (2,438,073 | ) | ||||
Net cash provided (used) by operating activities | 1,355,523 | (2,634,397 | ) | |||||
Net cash provided (used) by discontinued | - | 63,246 | ||||||
Cash flow from investing activities | ||||||||
Sale (Purchase) of intangible assets | 487,309 | (2,527,077 | ) | |||||
Sale (Purchase) of property, plant and equipment | - | (579,206 | ) | |||||
Increase (Decrease) in Financial assets | - | 614,480 | ||||||
Net cash provided (used) in investing activities | 487,309 | (2,491,803 | ) | |||||
Cash flow from financing activities | ||||||||
Net borrowings - banks | 164,889 | 1,067,397 | ||||||
Other borrowings | (538,562 | ) | (2,074,044 | ) | ||||
Capital paid-in | 100,000 | 3,583,176 | ||||||
Loans from related party | (2,115,869 | ) | (28,432 | ) | ||||
Net cash provided (used) in financing activities | (2,389,541 | ) | 2,548,096 | |||||
Effect of exchange rate changes on cash | (348,280 | ) | 6,991 | |||||
Net increase (decrease) in cash | (894,988 | ) | (2,507,867 | ) | ||||
Cash and cash equivalents - Beginning of the year | 1,154,602 | 3,250,821 | ||||||
Cash and cash equivalents - End of Quarter | 259,614 | 742,954 |
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Note 1COMPANY AND BACKGROUND
GBS Enterprises Incorporated, a Nevada corporation, through its subsidiaries, is a global provider of technology solutions for businesses and government agencies. We focus on developing and delivering solutions that help our customers to gain value and reduce cost in the development, deployment and management of the applications used in the course of conducting their business (“business applications”). We do this by building software and providing services that aid in:
Our customers include corporate and government IT departments, solutions integrators (“SIs”) and independent software vendors (“ISVs”). Our corporate customers are from a variety of industries, including insurance, financial services, pharmaceuticals, healthcare, manufacturing, logistics, and education. The install-base of our software products spans more than 5,000,000 users in 38 countries on four continents. We principally market and sell our products and services directly in the United States, Canada, United Kingdom, Germany, Austria, Switzerland, the Nordics and India; and indirectly through local distributors and resellers representing Australia, South America and regionally in Europe.
Our software and services are designed to mainly serve organizations that have investments in IBM’s Lotus® Notes and Domino platform. The IBM Lotus® Notes and Domino platform is both a system for enterprise email as well as an application platform, meaning that it can be used as both an email system and an environment in which business applications can be deployed and used. This platform was originally brought to market by Lotus Development Corp. in 1989, and was subsequently acquired by IBM in 1995. According to Radiate, in 2011, IBM Lotus Domino will have a worldwide installed base of 189 million mailboxes. Currently, the installed base for On-Premises IBM Lotus Domino mailboxes represents the majority of worldwide IBM Lotus Domino mailboxes, accounting for 87% of worldwide IBM Lotus Domino mailboxes. By 2015, this percentage is expected to decrease to 80%, as hosted email grows in popularity. (The Radiate Group Inc., April 2011, “IBM Lotus Notes/Domino Market Analysis, 2011-2015“)
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
We, through our subsidiaries, have executed our strategy to acquire companies, which have developed software and specialized services for the Lotus Notes and Domino market. This growth by acquisition strategy has resulted in less competition for our software products; a large concentration of highly skilled employees with unique expertise in the area of Lotus Notes and Domino; staff and physical offices on three continents providing greater access to a global market; significant market awareness and greater market share amongst organizations that use Lotus Notes and Domino; and a comprehensive portfolio of solutions specific to the needs and requirements of organizations which use Lotus Notes and Domino.
While our products and services remain in use and demand, over the last several years, the market itself has been undergoing a paradigm shift. New technologies, especially in the areas of Cloud Computing and Mobile applications, have grown in popularity due to the potential cost savings and operational efficiencies they can offer. As organizations make investments in these new technologies, they are faced with highly complex and costly projects to migrate (“migration”) or replace their existing systems that don’t operate in the cloud or on mobile devices (“modernization”) – this includes their existing email and business applications that run on Lotus Notes and Domino.
To that end, we have acquired and developed technologies that help organizations reduce the time, cost, resources and risks associated with these highly complex migration and modernization projects.
General Corporate HistoryOverview
We were incorporated inMarizyme, Inc., a Nevada on March 20, 2007corporation formerly known as SWAVGBS Enterprises Ltd.Incorporated (the “Company,” “Marizyme”, “GBS,” “GBSX,” “MRZM,”, “we,” “us,” “our” or similar expressions), conducted its primary business through its majority owned subsidiary, GBS Software AG (“SWAV”GROUP”). SWAV was an importer and wholesaler of Chinese manufactured goods., a German-based public-company.
By December 31, 2016, we sold the controlling interest in GROUP and other subsidiaries, keeping only a minority interest in GROUP. On April 26, 2010, SWAV purchased certain technology assets of Lotus Holdings Ltd. (“Lotus”) in exchange for 2,265,240March 21, 2018, we 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, we exchanged the shares of SWAV common stock. Also on April 26, 2010, Lotus (on behalfGROUP and all the intercompany assets and liabilities for 100% of the SPPEF Members as discussed below) purchased an aggregate of 11,984,770 of the outstanding shares of common stock fromX-Assets Enterprises, Inc, a Nevada Corporation. As part of a type-D business restructuring on September 5, 2018, we then distributed the sellingX-Assets shares to our own shareholders of SWAVon a 1 for an aggregate of $370,000. As a result of1 basis.
Marizyme refocused on the two sets of transactions, Lotus owned an aggregate of 14,250,010 shares of common stock of SWAV, representing approximately 95.0% of the 15,000,000 shares of SWAV common stock outstanding on April 26, 2010.
Noteslife sciences and seeks technologies to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unauditedacquire.
On September 6, 2010, SWAV’s name12, 2018 we 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 Company’s common stock was changed to GBS Enterprises Incorporated. On October 14, 2010, the Company’s trading symbolhistorically quoted on the OTC Bulletin Board was changed from SWAV to GBSX.
About Lotus Holdings, Ltd.
Lotus is a holding company which was formedMarkets’ OTCQB under the laws of Gibraltar forticker symbol “MRZM.” However, because the purpose of financing merger and acquisition projects, specifically in the niche market of small or microcap companies listed on the Frankfurt Stock Exchange with complex shareholder structures and whose stock is trading below one Euro (€1.00) per share.
SPPEFs
Lotus typically financesCompany failed to file its merger and acquisition projects through the use of Special Purpose Private Equity Funds (“SPPEFs”). Typically, SPPEFs are funded by a company’s major shareholders (the “Major Shareholders”) seeking to raise capital for projects and who fund at least 50% of the SPPEF,2014 Annual Report with the remaining portion being provided through the investment communitySecurities and network of investors in Lotus. Each SPPEF is co-managed by a representative of the company’s Major ShareholdersExchange Commission (the “Representative Secretary”) and an attorney appointed by Lotus (the “Lotus Representative”).
On February 25, 2010, a group of shareholders (the “GROUP Major Shareholders”) of GROUP Business Software AG, a German public company trading on the Frankfurt Stock Exchange under the symbol “INW” (“GROUP”“SEC”), engaged Lotus to provide financial consulting and advisory services, on a non-exclusive basis, for the primary task of establishing a SPPEF. On March 12, 2010, the GROUP Major Shareholders and Lotus established and funded a SPPEF with $1,400,000, consisting of $1,000,000 from the GROUP Major Shareholders and $400,000 from a Lotus investor (collectively, the “SPPEF Members”).
In early April 2010, the SPPEF Members decided to acquire SWAV. As disclosed above, on April 26, 2010, Lotus, on behalf of the SPPEF Members, acquired an aggregate of 11,984,770 shares of SWAV common stock from the selling shareholders of SWAV for an aggregate purchase price of $370,000. The 11,984,770 shares of SWAV common stock represented approximately 79.9% of the 15,000,000 outstanding shares of SWAV common stock on April 26, 2010. Upon the consummation of the acquisition, the then executive officers and directors of SWAV resigned and Mr. Joerg Ott, the Chief Executive Officer of GROUP and a GROUP Major Shareholder, was appointed the Chief Executive Officer of SWAV and sole member of SWAV’s Board of Directors.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Transactions following the acquisition
On November 1, 2010, the Company repurchased an aggregate of 3,043,985 of the 11,984,770 shares of the Company’s common stock originally purchased by Lotussince that time has been quoted on April 26, 2010. In consideration for the 3,043,985 shares ofOTC Pink sheets. The Company Filed a Form 10 with the Company’s common stock, the Company issued to Lotus a Secured Demand Note, dated November 1, 2010 (the “First Demand Note”), for the principal amount of $300,000 bearing interest at the rate of 5% per annum. The First Demand Note was repaid inSEC on September 2011.12, 2018 and is now current with its SEC periodic filings.
Effective December 30, 2010, pursuant to securities purchase agreements between the Company and six GROUP Major Shareholders, the Company purchased an aggregate of 7,115,500 shares of GROUP common stock from the six GROUP Major Shareholders in consideration for an aggregate for 3,043,985 shares of the Company’s common stock (the “December Transaction”). As a result the Company owned approximately 28.2% of the outstanding common stock of GROUP.
Reverse Merger
After the December Transaction was completed, the additional GROUP Major Shareholders accepted the share swap offer from the Company and effectuated a reverse merger of GROUP and the Company. To effectuate the reverse merger, on January 5, 2011, the Company repurchased from Lotus an aggregate of 2,361,426 of the 11,984,770 shares of the Company’s common stock originally purchased by Lotus on April 26, 2010. In consideration for these 2,361,426 shares, the Company issued to Lotus a Secured Demand Note, dated January 5, 2011 (the “Second Demand Note”), for the principal amount of $200,000 bearing interest at the rate of 5% per annum. The Second Demand Note was repaid in November 2011.
Effective January 6, 2011, pursuant to securities purchase agreements between the Company and the remaining GROUP Major Shareholders, the Company purchased an aggregate of 5,525,735 shares of GROUP common stock from the remaining GROUP Major Shareholders in consideration for an aggregate of 2,361,426 shares of the Company’s common stock (the “January Transaction”). The 5,525,735 GROUP shares represented approximately 21.9% of the outstanding shares of common stock of GROUP. As a result of the December Transaction and January Transaction, the Company purchased an aggregate of 12,641,235 shares of GROUP from the GROUP Major Shareholders in consideration for an aggregate of 5,405,411 shares of the Company’s common stock, resulting in the Company owning approximately 50.1% of the outstanding common stock of GROUP and effectuating a reverse merger of the Company and GROUP whereby GROUP became the accounting acquirer.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Additional Acquisition
On February 27, 2012, the Company acquired an additional 883,765 shares of common stock of GROUP from GAVF LLC for an average purchase price of $.070 per share, or approximately $619,000, after an outstanding loan of GROUP was converted into an aggregate of 1,750,000 shares of GROUP common stock, thereby increasing GROUP’s outstanding common stock to 26,982,000 shares. By acquiring the new shares, the Company increased its ownership of GROUP common stock to an aggregate of 13,525,000 shares, representing approximately 50.1% of the outstanding common stock of GROUP.
Acquisition/Dissolution of Subsidiary Companies
Pavone AG
Effective April 1, 2011, the Company acquired 100% of the outstanding common shares of Pavone AG, a German corporation, for $350,000 in cash and 1,000,000 shares of its common stock. The fair value of the common stock was determined to be $4.90 per share, representing the market value at the end of trading on the date of the acquisition. The total value of the investment, including the assumption of $ 583,991 in debt was $5,843,991. Pavone’s extensive workflow software for Lotus Notes and Domino along with their large customer base is well suited to GBS Enterprises portfolio strategy. The acquisition of Pavone complements GBS's majority ownership in GROUP and the Company believes that it further strengthens their leading industry position on the IBM Lotus Platforms and expands their cloud computing technology offerings beyond the IBM Lotus market. Pavone currently has offices in Germany and the UK. They have over 2,500 customers and over 150,000 users worldwide.
GroupWare, Inc.
Effective June 1, 2011, the Company acquired 100% of the outstanding common shares of GroupWare, Inc., a Florida corporation (“GroupWare”). As consideration the Company paid $250,000 and issued 250,000 shares of its common stock. The fair value of the common stock was determined to be $4.34 per share, representing the market value at the end of trading on the date of the acquisition. The total value of the investment, including the assumption of $ 694,617 in debt was $ 2,029,617. Upon the consummation of the acquisition, the management and board of GroupWare resigned and Joerg Ott, the Company’s Chief Executive Officer and sole director, was appointed as the Chief Executive Officer and sole director of GroupWare. GroupWare is based in Lubeck, Germany with offices in St. Petersburg, Florida. GroupWare's ePDF server delivers centralized, network-wide PDF solutions for messaging, workflow, document, content and data management. The Company believes that the acquisition strengthens the GBS Modernizing/Migrating offering, which helps bring IBM Lotus Notes client applications to the web, by substituting traditional printing methods provided by the Notes client with simple-to-use print-to-PDF capabilities in the browser.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
IDC Global, Inc.
On July 25, 2011, the Company acquired 100% of the issued and outstanding shares of common stock of IDC Global, Inc., a Delaware corporation (“IDC”). Pursuant to the acquisition agreement, dated July 15, 2011, the Company agreed to issue the shareholders an aggregate of 800,000 shares of common stock and made a cash payment of $750,000. The agreement required an additional payment to the management shareholders of 80,000 shares of common stock and signing bonuses to personnel of $35,000. The Company also agreed to reimburse IDC up to $25,000 for incurred accounting and legal fees related to the transaction. The fair value of the common stock was determined to be $3.70 per share, representing the market value at the end of trading on the date of the agreement. The total value of the investment, including $883,005 of debt assumption, was $4,066,000. IDC was a privately held company that provides nationwide network and data center services. IDC delivers customized, high availability technology solutions for WAN, Wireless Services, Co-location & Hosting, Managed Services, and Network Security. IDC includes two Data Center facilities located in the downtown Chicago area and Colocation facilities in three other Data Centers in New York, London, England and Frankfurt, Germany. IDC provides internet infrastructure Services (IaaS) to the business community helping customers make the transition from large, static and expensive on-premise computing to dynamic, flexible and cost-effective off-premise computing. IDC is helping customers make the transition from large, static and expensive on-premise computing to dynamic, flexible and cost-effective off-premise computing.
Due to the Company’s perceived increase in the demand for Modernization, Mobility and Optimization offerings, the Company made a strategic decision in 2012 to focus on its core offerings in the IBM Notes and Domino market and to divest its non-core businesses, including IDC.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
On February 1, 2013, GBS entered into a Stock Purchase Agreement, dated February 1, 2013 (the “Agreement”), with IDC and Global Telecom & Technology Americas, Inc., a Virginia corporation (“GTT). Pursuant to the Stock Purchase Agreement, we sold 100% of the issued and outstanding capital stock of IDC to GTT for an aggregate purchase price of $4,600,000 (the “Purchase Price”), subject to certain holdback provisions amounting to $1.093 million as described more fully in the Stock Purchase Agreement. The Purchase Price is also subject to adjustment on a dollar-for-dollar basis for adjustments the Net Working Capital (defined as Current Assets minus Current Liabilities) of IDC by GTT within 90 days of closing.
SD Holdings, Ltd.
On September 27, 2011, the Company entered into an acquisition agreement with SD Holdings, Ltd. (“SYN”), a Mauritius corporation, and the shareholders of SYN owning 100% of issued and outstanding shares of SYN. SYN owns 100% of all issued and outstanding shares of Synaptris, Inc., a California corporation (“Synaptris”), and 100% of all issued and outstanding shares of Synaptris Decisions Private Limited, a company formed in India (“Synaptris India”). Pursuant to the acquisition agreement, the Company purchased one hundred percent (100%) of the issued and outstanding shares of SYN (“SYN Shares”) effective November 1, 2011 in consideration for $525,529 and agreed to issue 700,000 shares of common stock, subject to adjustment. Actual shares issued were 612,874. The fair value of the common stock was determined to be $2.05 per share, representing the market value at the end of trading on the date of the agreement.
On April 1, 2012, the Company sold SYN, Synaptris and Synaptris India for $1,877,232 to Lotus Holding, Ltd. in an effort to restructure the Company’s multilevel subsidiary - structure derived from the historical mergers and acquisitions, and to reduce overhead and administrative costs.
GBS India Private Limited
Pursuant to an existing transfer agreement, effective July 1, 2012, the Company entered into a purchase agreement with SYN for $1,877,232, which transferred all assets, including intellectual property rights, and liabilities of the IntelliPRINT and FewClix product lines, customer contracts and certain employees for operations in a new subsidiary, GBS India Private Limited, an incorporated entity formed under the Indian Companies Act 1956 (“GBS India”). A royalty fee in the amount of approximately $350,000 has been agreed upon for the benefit the Company. Additionally a profit based fee of up to $700,000 may be earned based on license and revenue recognized from the sold IntelliVIEW and IntelliVIEW NXT products.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
On August 1, 2012, the Company acquired 100% of the outstanding shares of capital stock of GBS India. We anticipate GBS India’s presence in India to accelerate our plan to expand our product development team particularly for our strategic offerings in India.
Pavone AG/Groupware AG
On July 6, 2012 and August 9, 2012, wholly-owned subsidiaries Pavone AG and Groupware AG, respectively, were merged into Pavone GmbH. The mergers were consummated solely for administrative purposes. Pavone GmbH is a wholly-owned subsidiary of the Company.
Pavone, Ltd.
The Company serves the UK market with GROUP’s subsidiary GBS, Ltd. Therefore, subsidiary Pavone, Ltd, as being a shell company, was dissolved on July 8, 2012.
EbVokus, GmbH.
On October 1, 2012, GROUP Business Software AG sold all of the software and operational assets (constituting substantially all of the assets) of its wholly-owned subsidiary, ebVokus GmbH, along with the associated maintenance and project agreements to a non-affiliated third party for a purchase price of approximately $459,000, approximately $258,000 (200,000 Euros: 1 EUR = $1.29 USD on October 1, 2012) was paid at closing and the remaining $201,000 was paid on February 15, 2013 (150,000 Euro: 1EUR = $1.35 USD on February 15, 2013).
B.E.R.S. AD
On November 23, 2012, GROUP Business Software AG sold its entire participation (50%) in B.E.R.S AD for a total of 25,000 BGN.
Group Live, N.V.
Group Live N.V. operating under the laws of the Netherlands and a 100% subsidiary of GROUP declared its end of business May 31, 2012, registered in the commercial register June 22, 2012. Following the local procedures the company has been dissolved from the register as per April 5, 2013, registered April 16, 2013.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Note 2 INTERIM REPORTING
The accompanying unaudited interim consolidatedThese financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for interimits next twelve months. Realization values may be substantially different from carrying values as shown and these financial statements prepared underdo not give effect to adjustments that would be necessary to the accrual basiscarrying values and classifications of accounting in accordance with accounting principles generally acceptedassets and liabilities should the Company be unable to continue as a going concern. At June 30, 2019, the Company had not yet achieved profitable operations and had accumulated losses of $30,128,144 since its inception, all of which casts substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management is in the United Statesprocess of America. They do not include allexecuting a strategy based upon a new strategic direction in the life sciences space. We have several technologies in the commercialization phase and in development. We are seeking acquisitions of biotechnology assets in support of this direction. There can be no assurances that management will be successful in executing this strategy.
Note 2INTERIM REPORTING
While the information and footnotes required by generally accepted accounting principles for completepresented in the accompanying interim three-month financial statements. However, except as disclosed herein, they includestatements is unaudited, it includes all adjustments, which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in accordance with accounting principles generally accepted in the United States of America. These interim financial statements follow the same accounting policies and methods of their application as the Company’s auditedDecember 31, 2018 annual financial statements. All adjustments are of a normal recurring nature.
It is suggested that these interim financial statements be read in conjunction with the Company’s December 31, 2018 annual financial statements. Operating results for the ninesix months ended SeptemberJune 30, 20132019 are not necessarily indicative of the results that can be expected for the year endingended December 31, 2013.2019.
Note 3SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
TheThere have been no changes in the accounting policies that effect these interim financial statements and accompanying notes are prepared in accordance withfrom the accounting principles generally acceptedpolicies disclosed in the United States of America,notes to the more significant of which are as follows:
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity 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 date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Segment Reporting
The Financial Accounting Standards Board (“FASB”) authoritative guidance regarding segment reporting establishes standards for the way that public business enterprises report information about operating segments inaudited annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. It also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company has determined that it operates in only one segment – the development and maintenance of computer software programs and support products.year ended December 31, 2018.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Comprehensive Income (Loss)MARIZYME, INC.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)
Note 4RECENT ACCOUNTING PRONOUNCEMENTS
The Company adopts new pronouncements relating to generally accepted accounting principles applicable to the Company as they are issued, which may be in advance of their effective date. Management does not believe that any pronouncement not yet effective but recently issued would, if adopted, have a material effect on the FASB Codification topic (“ASC”) 220, “Reporting Comprehensive Income”, which establishes standards for the reporting and display of comprehensive income and its components in theaccompanying financial statements. Comprehensive income consists of net income and other gains and losses affecting stockholder's equity that are excluded from net income, such as unrealized gains and losses on investments available for sale, foreign currency translation gains and losses and minimum pension liability. Since inception, the Company’s other comprehensive income represents foreign currency translation adjustments and small net actuarial losses on pension plans.
Net Income per Common ShareNote 5INTANGIBLE ASSETS
ASC 260, “Earnings per share,” requires dual presentation of basic and diluted earnings per share (EPS) with a reconciliation of the numerator and denominator of the EPS computations. Basic earnings per share amounts are based on the weighted average shares of common stock outstanding. If applicable, diluted earnings per share would assume the conversion, exercise or issuance of all potential common stock instruments such as options, warrants and convertible securities, unless the effect is to reduce a loss or increase earnings per share. Diluted net income (loss) per share on the potential exercise of the equity-based financial instruments is not presented where anti-dilutive. Accordingly, although the diluted weighted average number of common stock outstanding is disclosed on the statements of operation, the calculated net loss per share is the same for both the basic and diluted as both are based on the basic weighted average of common stock outstanding. There were no adjustments required to net income for the period presented in the computation of diluted earnings per share.
Financial Instruments
Financial instruments consist of cash and cash equivalents, accounts and other receivable, financial assets, notes payable, liabilities to banks, accounts payable, accrued liabilities and other liabilities, due to related parties and retirement benefit obligations. Financial assets and liabilities are measured upon first recognition and reviewed at the financial statement date. Changes in fair value are recognized through profit and loss. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments.
Notes to the Interim Financial Statements
On September 30, 2013
GBS Enterprises Incorporated
Unaudited
Currency Risk
We use the US dollar as our reporting currency. The functional currencies of our significant foreign subsidiaries are the local currency, which includes the Euro, the British Pound, the Indian Rupee, and the Bulgarian Lev. Accordingly, some assets and liabilities are incurred in those currencies and12, 2018 we are subject to foreign currency risks.
Fair Value Measurements
The Company follows ASC 820, “Fair Value Measurements and Disclosures”, for all financial instruments and non-financial instruments accounted for at fair value on a recurring basis. This new accounting standard establishes a single definition of fair value and a framework for measuring fair value, sets out a fair value hierarchy to be used to classify the source of information used in fair value measurement and expands disclosures about fair value measurements required under other accounting pronouncements. It does not change existing guidance as to whether or not an instrument is carried at fair value. The Company defines fair value as the price that would be received from sellingconsummated an asset or paidacquisition with ACB Holding AB, Reg. No. 559119-5762, a Swedish corporation to transfer a liabilityacquire all right, title and interest in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk.
The Company has adopted ASC 825, Financial Instruments, which allows companies to choose to measure eligible financial instruments and certain other items at fair value that are not required to be measured at fair value. The Company has not elected the fair value option for any eligible financial instruments.
Cash and cash equivalents
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.
Inventories
Pursuant to ASC 330 (Inventories), inventories held for sale are recognized under inventories. Inventories were measured at the lower of cost or market. Cost is determined on a first-in-first out basis, without any overhead component.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Goodwill and other Intangible Assets
Intangible assets predominately comprise goodwill, acquired software and capitalized software development services. Intangible assets acquiredtheir Krillase technology in exchange for payment are reflected16.98 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 acquisition costs. If the development costs can be capitalized per ASC 985-20-25, these are reflected as ascribable personnel and overhead costs.
Company created software can be intended for sale to third parties or used by the Company itself. If the conditions for capitalization are not met, the expenses are recorded with their effect on profit in the year in which they were incurred.
The Company amortizes intangible assets with a limited useful life to the estimated residual book value in accordance with ASC regulations. In addition, in special circumstances according to ASC 350-30, a recoverability test is performed and, if applicable, unscheduled amortization is considered.
The useful life of acquired software is between three and five years and three years for Company created software.
Intangible assets obtained as part of an acquisition which do not meet the criteria for a separate entry are identified as goodwill. Goodwill is reviewed once a year during an impairment test, whereby the appraised fair value of the invested capital of the reporting unit, is compared with the carrying (book) value of its invested capital amount (including goodwill.) Use value is generally applied in order to determine the recoverability of goodwill and intangible assets with an indefinite useful life. The projected financial plan prepared by the management serves as the basis for this determination of use value and the planning assumptions are each adjusted for the current state of knowledge. Reasonable assumptions regarding macroeconomic trends and historical developments are taken into account in making these adjustments. Future estimated cash flows are determined based on the expected growth rates of the markets in question.
If the carrying amount of the reporting unit exceeds the appraised fair value, the impairment based on use value measures the amount of loss, if any, and an unscheduled amortization expense is recorded. If the appraised value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered to be impaired.
Property, Plant and Equipment
Property, plant and equipment are valued at acquisition or manufacturing costs reduced by scheduled and, if necessary, unscheduled depreciation. Fixed assets are depreciated on a straight-line basis, prorated over their expected useful life. Scheduled depreciation for property, plant and equipment is based on useful lives of 3 to 10 years. Leasehold Improvements are depreciated up to 40 years.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
If fixed assets are sold, retired or scrapped, the profit or loss arising from the difference between the net sales proceeds and the residual book value are included under other operating earnings and expenses.
Impairment or Disposal of Long-Lived Assets
The Company evaluates the recoverability of its fixed assets and other assets in accordance with ASC topic, 360.10. This guidance requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds its’ expected cash flows or appraised value In this instance, the asset is considered to be impaired and is written down to fair value.
Revenue Recognition
Sources of Revenues:
License revenues
Our license revenues consist of revenues earned from the licensing of our software products. These products are generally licensed on a perpetual basis. Pricing models have generally been based either upon the physical infrastructure, such as the number of physical desktop computers or servers, on which our software runs or on a per user basis. License revenues are recognized when the elements of revenue recognition for the licensed software are complete, generally upon electronic shipment of the software and the software key to provide full access to all functionalities for our customers. In general, our invoices reflect license, service and maintenance components. In the case of multi element contracts, the revenues allocated to the software license in most cases represent the residual amount of the contract after the fair value of the other elementsshares. No amortization has been determined. Certain products of our software offeringrecorded as the patents are licensed onnot yet in a subscription basis.position to produce cash flows.
Software maintenance revenuesNote 6CONVERTIBLE NOTE PAYABLE
Software maintenance revenues are recognized ratably onOn July 7, 2018 the Company issued a pro-rata basis overconvertible note for $75,000. The note accrued interest at 12% interest, calculated monthly, due January 3, 2019 and convertible into common stock at the rangediscretion of the contract period. Our contract periods typically range from one to five years. Vendor-specific objective evidence (“VSOE”) of fair value for software maintenance services is established by the rates charged in stand-alone sales of software maintenance contracts or the stated renewal rate for software maintenance. Customers who are party to software maintenance agreements with us are entitled to receive support, product updates and upgrades on a when-and-if-available basis.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unauditednoteholder at $0.50 per share.
Professional services revenues
Professional services include pre-project consulting, software design, customization, project management, implementationOn December 30, 2018, the noteholder converted the principal and training. Professional services are not considered essential to the functionalityinterest owing of our products, as these services do not alter the product capabilities and may be performed by our customers or by other vendors. Professional services engagements performed for a fixed fee, for which we are able to make reasonably dependable estimates of progress toward completion, are recognized on a proportional performance basis based on hours incurred and estimated hours of completion. Professional services engagements that are on a time and materials basis are recognized based on hours incurred. Revenues on all other professional services engagements are recognized upon completion. Our professional services may be sold with software products or on a stand-alone basis. Vendor Specific Objective Evidence (VSOE) of fair value for professional services is based upon the standard rates we charge for such services when sold separately.
Foreign Currency Translation
The functional currency of the Company is US dollars. For financial reporting purposes, the financial statements of the subsidiary companies whose functional currency is other than US dollars were translated$79,614 into US dollars using the current rate method. Assets and liabilities were translated at the exchange rates at the balance sheet dates, revenue and expenses were translated at the average exchange rates and stockholders’ equity was translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income but are included in foreign exchange adjustment to other comprehensive income, a component of stockholders’ equity.
Other Provisions
According to FASB ASC 450 “Contingencies”, provisions are made whenever there is a current obligation to third parties resulting from a past event which is likely in the future to lead to an outflow of resources and of which the amount can be reliably estimated. Provisions not already resulting in an outflow of resources in the following year are recognized at their discounted settlement amount on the financial statement date. The discount taken is based on market interest rates. The settlement amount also includes the expected cost increases. Provisions are not set off against contribution claims. If the amended estimate leads to a reduction of the obligatory amount, the provision is proportionally reversed and the earnings are recognized in other operating earnings.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Deferred Taxes
Income taxes are provided in accordance with FASB Codification topic 740, “Accounting for Income Taxes”. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss-carry forwards.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that, that some portion or all of the deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.
Recent Accounting Pronouncements
In July 2012, the FASB issued ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment. With the objective of reducing the cost and complexity of performing an impairment test for indefinite-lived intangible assets by simplifying how an entity tests those assets for impairment and to improve consistency in impairment testing guidance among long-loved asset categories. The amendments permit an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles – Goodwill and Other – General Intangibles Other than Goodwill. The more-likely-than-not threshold is defined as having the likelihood of more than 50 percent. The amendments are effective for annual and interim impairment tests performed beginning April 1, 2013. Adoption of this new standard is not expected to have significant impact to the Company’s financial statement.
Off - Balance Sheet Arrangements
We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Principles of Consolidation and Reverse Acquisition
As previously disclosed, the Company has exchanged a total of 5,405,411159,228 shares of common stock in exchange for 50.1% of the outstanding common shares of GROUP. Although the Company was the legal acquirer, the transaction was accounted for as a recapitalization of GROUP in the form of a reverse merger, whereby GROUP becomes the accounting acquirer and is deemed to have retroactively adopted the capital structure of the Corporation. Accordingly, the accompanying consolidated financial statements reflect the historical consolidated financial statements of GROUP for periods presented prior to January 6, 2011. All costs associated with the reverse merger transaction were expensed as incurred. Those expenses totaled approximately $300,000 and were included in professional fees in administrative expenses.stock.
The Company has based its financial reporting for the consolidation with GROUP in accordance with the FASB ASC 805-40 as it relates to reverse acquisitions. Goodwill has been measured as the excess of the fair value of the consideration effectively transferred by the Company, the acquiree, for financial reporting purposes, over the net amount of the Company’s recognized identifiable assets and liabilities.
We have recorded the acquired assets and liabilities of Group Business Software Enterprises, Inc. on the acquisition date of January 6, 2011, at their fair value and the operations of Group Business Software Enterprises, Inc. have been included in the consolidated financial statements since the acquisition date.
The assets and liabilities of GROUP, the acquirer for financial reporting purposes, are measured and recognized in the consolidated financial statements at their precombination carrying amounts in accordance with ASC 805-40-45-2(a). Therefore, the non-controlling interest reflects the non-controlling shareholders’ proportionate interest in the pre-combination carrying amounts of GROUP’s net assets even though the non-controlling interests in other acquisitions are measured at their fair values at the acquisition date.
NOTE 4 DISCONTINUED OPERATIONS
Due to the Company’s perceived increase in the demand for Modernization, Mobility and Optimization offerings, the Company made a strategic decision in 2012 to focus on its core offerings in the IBM Notes and Domino market and to divest its non-core businesses. As a result, on February 1, 2013, GBS entered into a Stock Purchase Agreement, dated February 1, 2013 (the “Agreement”), with IDC Global, Inc., a Delaware corporation and a wholly-owned subsidiary of GBS (“IDC”), and Global Telecom & Technology Americas, Inc., a Virginia corporation (“GTT). Pursuant to the Stock Purchase Agreement, we sold 100% of the issued and outstanding capital stock of IDC to GTT for an aggregate purchase price of $4,600,000 (the “Purchase Price”),
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Discontinued Operations and their results of operations, financial positions and cash flows are shown separately for the nine months ended on September 30, 2012 for comparative purposes. Summarized financial information for discontinued operations is set forth as follows:
Note 5 SUBSIDIARY COMPANIES
The subsidiaries listed below were included in the basis of consolidation (KUSD = 1,000’s of US Dollars):
Stockholders' Equity as of 9/30/2013 | Percentage of Subscribed Capital | Profit of the consolidated quarter | Date of the First | |||||||||||||||||||
Headquarters | KUSD | KUSD | in % | Ownership | KUSD | Consolidation | ||||||||||||||||
GROUP Business Software (UK) Ltd. | Manchester | -1,236 | 23 | 50,1 | % | I | 93 | 12/31/2005 | ||||||||||||||
GROUP Business Software Corp. | Woodstock | -15,601 | 1 | 50,1 | % | I | 225 | 12/31/2005 | ||||||||||||||
GROUP LIVE N.V. | Den Haag | 1,274 | 134 | 50,1 | % | I | -3 | 12/31/2005 | ||||||||||||||
Permessa Corporation | Waltham | 10 | 0 | 50,1 | % | I | 0 | 9/22/2010 | ||||||||||||||
Relavis Corporation | Woodstock | -842 | 2 | 50,1 | % | I | -23 | 1/8/2007 | ||||||||||||||
GROUP Business Software AG | Eisenach | 9,973 | 36,107 | 50,1 | % | I | 291 | 6/1/2011 | ||||||||||||||
Pavone GmbH | Boeblingen | -863 | 47 | 100.0 | % | D | 334 | 1/4/2011 | ||||||||||||||
Groupware Inc. | Woodstock | -482 | 1 | 100.0 | % | D | 0 | 1/6/2011 | ||||||||||||||
GBS India | Chennai | 191 | 12 | 100.0 | % | D | 46 | 9/30/2012 |
D - Direct Subsidiary
I - Indirect Subsidiary
Indirect Subsidiaries are owned 50.1% through GROUP Business Software AG
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Note 6 CASH AND CASH EQUIVALENTS
As of the financial statement date, the Company’s cash and cash equivalents totaled 259 KUSD (December 31, 2012 restated year end: 1,155 KUSD). Included in that amount are cash equivalents of 3 KUSD (December 31, 2012 restated year end: 3 KUSD).
Note 7 ACCOUNTS RECEIVABLE
As of the financial statement date, Accounts Receivable was 3,528 KUSD (December 31, 2012 restated year end: 4,143 KUSD). Receivables are generally measured at their nominal value and taking into account all foreseeable risks. Probable default risks are handled with specific allowances for bad debts. With regard to the trade receivables which are neither impaired nor delinquent, there are no indications as of the financial statement date that the debtors will not meet their payment obligations.
Note 8 PREPAID EXPENSES
Prepaid expenses in the amount of 208 KUSD were primarily recorded for prepaid rent, insurance and advance on technological collaboration events (December 31, 2012 restated year end: 84 KUSD).
Note 9 OTHER RECEIVABLES - CURRENT
Other Receivables as of the financial statement date were 277 KUSD (December 31, 2012 restated year end: 677 KUSD) which includes tax deposits (248 KUSD), benefit credits (14 KUSD), other deposits (4K USD) and other miscellaneous receivables (11 KUSD).
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Note 10 DEFERRED TAX ASSETS
Deferred tax assets as of the financial statement date were 1,076 KUSD (December 31, 2012 restated year end: 1,132 KUSD). All deferred tax assets are long term.
Deferred Tax Assets | KUSD | KUSD | ||||||
9/30/2013 | 12/31/2012 | |||||||
Deferred Tax Assets – Current | 0 | 0 | ||||||
Deferred Tax Assets – Non-current | 1,076 | 1,132 | ||||||
Balance | 1,076 | 1,132 |
Note 11 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are measured at cost less scheduled straight-line depreciation. Depreciation of the computer hardware listed as office equipment is distributed over a period of three to five years. The depreciation period for other office equipment is three to ten years. Office furnishings are depreciated over a period of eight to ten years. Leasehold Improvements are depreciated up to 40 years.
Property, Plant and Equipment kUSD | Development of the cost | Development of accumulated depreciation | Balance | |||||||||
12/31/2012 | 7,219.4 | 6,893.7 | 325.7 | |||||||||
Additions | 42 | 12 | ||||||||||
Disposals | 33 | 6 | ||||||||||
Currency differences | 8 | 3 | ||||||||||
Reclassifications | 0 | 0 | ||||||||||
9/30/2013 | 7,219.4 | 6,893.7 | 325.7 |
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Note 12 OTHER RECEIVABLES NON-CURRENT
The major components of the Non-current Receivables include the following:
KUSD Restated | KUSD Restated | |||||||
9/30/2013 | 12/31/2012 | |||||||
Cooperative shares | 1 | 0 | ||||||
Intercompany Loan Values during the quarter | 0 | 0 | ||||||
Other long term receivables | 0 | 428 | ||||||
Balance | 1 | 428 |
Note 13 GOODWILL
Goodwill derives from the following business acquisitions:
30-Sep-13 | Date of first Consolidation | 12/31/2012 | Additions | Adjustments | Written off | 9/30/2013 | ||||||||||||||||
GROUP Business Software AG | 1/6/2011 | 18,425.6 | - | - | - | 18,425.60 | ||||||||||||||||
GROUP Business Software (UK) Ltd. | 12/31/2005 | 2,765.1 | - | - | - | 2,765.10 | ||||||||||||||||
IDC Global, Inc. | 7/25/2011 | 2,994.4 | (2,994.4 | ) | 0.00 | |||||||||||||||||
Permessa Corporation | 9/22/2011 | 2,387.4 | - | - | - | 2,387.40 | ||||||||||||||||
Pavone GmbH | 1/4/2011 | 5,950.5 | - | - | - | 5,950.50 | ||||||||||||||||
GBS India | 8/1/2012 | 1,731.9 | - | - | - | 1,731.90 | ||||||||||||||||
34,254.9 | - | - | - | 31,260.50 |
Note 14 SOFTWARE
Development costs
The costs of developing new software products and updating products already marketed by the Company are generally recognized as expenses in the period in which they arise. Provided they meet the conditions for capitalization as per FASB ASC 985-20-25, they are capitalized. Capitalized development costs can be attributed to the defined products. These products are technically realizable and there is a target market for them.
The development costs arising in the reporting period result from the personnel costs attributed to the development work as well as overhead costs, provided that these are related to the development work and do not represent general administrative costs. The ascribable overhead costs are directly recognized.
Capitalized development costs are generally amortized over a period of three years starting with the date of marketability of the new products or major releases.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Concessions, Industrial Property Rights, Licenses
The intangible financial assets carried in this item are licenses acquired in exchange for payment.
These financial assets are measured at acquisition cost less scheduled straight-line amortization. The assets added in the scope of the cost price allocation of the business divisions acquired this year.
The useful life spans were based uniformly throughout the Company according to those used by the parent company. Scheduled amortization is performed over a period from three to ten years.
The useful life of the domain “gbs.com”, was estimated as unlimited. This is because no other legal, contractual or other factors exist which would limit its useful life. It is not systematically amortized, but rather annually. Should there exist signs indicating towards impairment it is tested for recoverability and, if necessary, written down to the amount which could be obtained for it if sold.
Amortization of concessions, industrial property and similar rights and assets, as well as licenses to such rights and assets are presented in the Statement of Operations and Comprehensive Income/Loss within Cost of Goods Sold.
Concessions and licenses kUSD | Development of the cost | Development of accumulated depreciation | Balance | |||||||||
12/31/2012 | 31,913.9 | 21,341 | 10572.9 | |||||||||
Additions | 907 | 159 | ||||||||||
Disposals | 1,018 | 122 | ||||||||||
Currency differences | 143 | 126 | ||||||||||
Reclassifications | 0 | 0 | ||||||||||
9/30/2013 | 31,913.9 | 21,341.0 | 10,572.9 |
Note 15 OTHER ASSETS
The balance of this account of 132 KUSD primarily includes rent and other security deposits (December 31, 2012 restated year end: 156 KUSD).
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Note 16 LIABILITIES TO BANKS – CURRENT
Included in this account of 3,888 KUSD (December 31, 2012 restated year end: 7 KUSD) is primarily an operating line of creditof GROUP AG.
Note 17 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Trade payables
As of the financial statement date, trade accounts payable amounted to 2,061 KUSD (December 31, 2012 restated year end: 3,095 KUSD). Trade payables are carried at their repayment amount and all have a residual term of up to one year.
Other Accrual
Other provisions are created as of the financial statement date in an amount necessary according to a reasonable commercial appraisal, to cover future payment obligations, perceivable risks and uncertain liabilities of the Company. Amounts deemed to be most likely to occur, in careful assessment, are accrued.
12/31/2012 | 9/30/2013 | |||||||
KUSD | KUSD | |||||||
Tax provision | 53 | 21 | ||||||
Salary | 861 | 599 | ||||||
Vacation | 315 | 247 | ||||||
Workers Compensation Insurance Association | 25 | 20 | ||||||
Compensation Levy for Non-Employment of Severely Handicapped Persons | 19 | 13 | ||||||
Outstanding Invoices | 1,059 | 196 | ||||||
Annual accounting and consulting | 128 | 109 | ||||||
Other Provisions | 446 | 465 | ||||||
Warranties | 96 | 82 | ||||||
Provision for Legal Costs | 73 | 68 | ||||||
Severance | 70 | 64 | ||||||
Total | 3,147 | 1,885 |
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Provisions for salaries of 599 KUSD (December 31, 2012 restated year end: 861 KUSD) include the provisions created for the variable salaries of the sales staff for the sales objectives reached in this business period.
Vacation provisions of 247 KUSD (December 31, 2012 restated year end: 315 KUSD) include the obligations of GROUP’s companies to their employees for remaining vacation claims from the reporting period. The amount of the provision is calculated on the gross salary of the individual employee plus the employer contribution to social security/Medicare and based on the unused vacation days as of the financial statement date.
Other employment of 97 KUSD (December 31, 2012 restated year end: 114 KUSD) were accrued for severance and compensation insurance and compensation levy.
For liabilities not yet settled, a provision totaling 196 KUSD (December 31, 2012 restated year end: 1059 KUSD) was created.
Other Provisions of 465 KUSD (December 31, 2012 restated year end: 446 KUSD) include miscellaneous provisions.
Expenses of accounting and other external consulting of the Company were recognized at 109 KUSD (December 31, 2012 restated year end: 128 KUSD).
A provision for anticipated legal consulting of 68 KUSD was recorded (December 31, 2012 restated year end: 73 KUSD).
For warranty claims, a provision of 82 KUSD (December 31, 2012 restated year end: 96 KUSD) was created determined by service income.
Note 18 DEFERRED INCOME
Accruals for future periods leading to realization of sales after the financial statement date are reported under deferred income. The deferred income items listed as of the financial statement date in the amount of 6,847 KUSD (December 31, 2012 restated year end: 6,100 KUSD) primarily include maintenance income collected in advance for the period after the end of the financial statement date. They are amortized on a straight-line basis over their respective contract terms.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Note 19 OTHER SHORT TERM LIABILITIES
Other short-term liabilities of 242 KUSD (December 31, 2012 restated year end: 860 KUSD) and includes miscellaneous short term obligations including amounts due on business assets
Note 20 COMMONCAPITAL STOCK
The Company has authorized capital of 75,000,000 shares of common stock and 25,000,000 shares of “blank check” preferred stock, each with a par value of $0.001. No classOn July 27, 2018 we completed a 1:29 reverse split of preferredour common stock has been designated or issued.resulting in a total of 1,101,074 shares of Common stock outstanding. As of SeptemberJune 30, 2013,2019, there were shares 30,837,624 of common stock outstanding. At the time of the Reverse Merger of the Company by GROUP on January 6, 2011, there were 16,500,00019,858,939 shares of common stock of the Company outstanding and, as the Reverse Merger was accounted for as a recapitalization and applied retroactively, this balance is recorded as the balance outstanding since inception.outstanding.
Transactions occurring in 2012On May 14 ,2018, 1,000 shares of preferred stock were issued to the CEO for services valued at $1. The preferred stock had voting rights of 80% at shareholder meetings.
On July 27, 2018, the Company completed a reverse stock split of 1 new share for 29 shares of the Company’s issued and outstanding common stock. These financial statements give retroactive effect to this transaction.
NotesOn September 12, 2018, 16,980,000 common shares were issued to acquire patents and all rights, title and interest in Krillase technology and 1,500,000 shares were issued to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
UnauditedCEO in exchange for the 1,000 shares of preferred stock.
Notes to the Interim Financial Statements
SeptemberOn December 30, 2013
GBS Enterprises Incorporated
Unaudited
The Note was convertible in full at $0.50 per share into common stock of the Company if this conversion was exercised on or before September 30, 2012. If not exercised, Mr. Shihadah would receive a 3-year warrant to purchase shares at 50,0002018, 159,228 shares of common stock at $1.00 per share.was issued on conversion of convertible debt of $79,614.
The conversion was not exercised by September 30, 2012, therefore,On June 12, 2019, the Company sold $125,000 of its common stock to three investors in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Regulation D under the Securities Act. In this private placement, the Company sold 118,637 shares priced at $1.10 per the termsof the Loan Agreement Mr. Shihadah was issuedshare and included a 3-yearthree-year warrant to purchase shares at 50,000 shares of common stock at $1.00 per share.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
The Note was convertible in full at $0.50 per share into common stock of the Company if this conversion was exercised on or before September 30, 2012. If not exercised, K Group Ltd. would receive a 3-year warrant to purchase shares at 250,000 shares of common stock at $1.00 per share.
The conversion was not exercised by September 30, 2012, therefore, as per the terms of the Loan Agreement K Group was issued a 3-year warrant to purchase shares at 250,000 shares of common stock at $1.00 per share.
The Note was convertible in full at $0.50 per share into common stock of the Company if this conversion was exercised on or before September 30, 2012. If not exercised Vitamin B Venture GmbH would receive a 3-year warrant to purchase shares at 250,000 shares of common stock at $1.00 per share.
The conversion was not exercised by September 30, 2012, therefore, as per the terms of the Loan Agreement Vitamin B Venture GmbH was issued a 3-year warrant to purchase shares at 250,000 shares of common stock at $1.00 per share.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
In connection with the execution of the Loan Agreement, on October 26, 2012, the Company issued the Lender a common stock purchase warrant (the “Warrant”), pursuant to which the Lender is entitled to purchase 100,000 shares of common stockprivate placement at an exercise price of $0.35 until$3.00 per share. If the third anniversary dateprice of the dateCompany’s common stock reaches $4.00 for 20 consecutive days, the company has the right to buy back the warrant for $0.01 per share if the investor elects not to exercise the warrant to acquire the additional shares.
Options and warrants.
165,000 Options to purchase Common Stock at a strike price of issuance. $1.50 were outstanding as of June 30, 2019.
MARIZYME, INC.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
JUNE 30, 2019
(Unaudited)
Note 8COMMITMENTS
On September 14, 2018, the Company signed a 3-year employment agreement with its CEO, Mr. Handley, with a base salary of $490,000 and bonuses of up to 55% of his base salary at the sole discretion of the Board of Directors. However, he resigned on March 28, 2019 and the agreement is no longer in force.
Note 9SUBSEQUENT EVENTS
None
ITEM 2. - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Warrantfollowing discussion should be read in conjunction with our condensed financial statements and other financial information appearing elsewhere in this quarterly report on Form 10-Q. In addition to historical information, the following discussion and other parts of this quarterly report contain forward-looking statements. You can identify these statements by forward-looking words such as “plan,” “may,” “will,” “expect,” “intend,” “anticipate,” believe,” “estimate” and “continue” or similar words. Forward-looking statements include information concerning possible or assumed future business success or financial results. You should read statements that contain these words carefully because they discuss future expectations and plans, which contain projections of future results of operations or financial condition or state other forward-looking information. We believe that it is important to communicate future expectations to investors. However, there may be events in the future that we are not able to accurately predict or control. Accordingly, we do not undertake any obligation to update any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.
The forward-looking statements included herein are based on current expectations that involve a number of risks and uncertainties set forth under “Risk Factors” in our Form 10-K filed with the Securities and Exchange Commission on March 3, 2019. Accordingly, to the extent that this Report contains forward-looking statements regarding the financial condition, operating results, business prospects or any other aspect of us, please be advised that our actual financial condition, operating results and business performance may differ materially from that projected or estimated by us in forward-looking statements, and you should not unduly rely on such statements.
Overview
Marizyme, Inc., a Nevada corporation formerly known as GBS Enterprises Incorporated, conducted its primary business through its minority owned subsidiary, GBS Software AG, or GROUP, a German-based public-company whose stock trades on the Frankfurt Exchange. GROUP’s software and consulting business was issuedfocused on serving IBM’s Lotus Notes and Domino market. On March 21, 2018, GBS formed a wholly owned subsidiary named Marizyme, Inc., a Nevada Corporation and merged it with GBS Enterprises and renamed the Company Marizyme.
Marizyme currently is focused on bringing early stage biotechnology assets to market and on September 12, 2018, consummated an asset purchase agreement with ACB Holding AB, Reg. No. 559119-5762, a Swedish corporation.
The Company’s Common Stock is currently quoted on the OTC Markets’ Pink tier under the symbol “MRZM.” Upon the filing of this Annual Report, or shortly thereafter, we intend to solicit a market maker to apply to have our Common Stock quoted on the OTC Markets’ OTCQB tier, although no assurances can be given that we will be successful in soliciting a market maker or if we are, that its application with FINRA, or our application with the OTCQB, will be approved. We may also examine our options with respect to the listing of our Common Stock on the Nasdaq Stock market or the NYSE.
Going forward, the Company is focusing on the life sciences business and currently has acquired its first biotechnology assets. Marizyme is also seeking other assets to acquire.
Other than planning activities, Marizyme has not yet begun any active business activities with respect to the development, testing or marketing of any of the four product candidates that we purchased from ACB Holding AB.
Recent Events
The Company sold $125,000 of its common stock to three investors in a private transaction between the Company and the Lender and wasplacement exempt from the registration underrequirements of the Securities and Exchange Act of 1933, as amended pursuant to Section 4(a)(2) (formerly Section 4(2)) thereof.
In connection with the Loan Agreement, on February 22, 2013, the Company and Mr. Moore amended the Note pursuant to which Mr. Moore agreed to convert the interest due under the Note into shares of GBSX common stock at a rate of $0.30 per share. Pursuant to the amendment, the Company issued 450,960 shares of Common Stock to Mr. Moore. The Company issued the shares in reliance on Section 4(a)(2) (formerly Section 4(2)) of the Securities Act due to the fact that the issuance was isolated and did not involve a public offering of securities.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
In connection with the execution of the Loan Agreement, on October 26, 2012, the Company issued the Lender a common stock purchase warrant (the “Warrant”“Securities Act”), pursuant to whichRegulation D under the Lender is entitledSecurities Act. In this private placement, the Company sold 118,637 shares priced at $1.10 per share and included a three-year warrant to purchase 500,000 shares of common stockone additional share for each share purchased in the private placement at an exercise price of $0.20$3.00 per share. If the price of the Company’s common stock reaches $4.00 for 20 consecutive days, the company has the right to buy back the warrant for $0.01 per share if the investor elects not to exercise the warrant to acquire the additional shares.
FINANCIAL OPERATIONS OVERVIEW
As of June 30, 2019, our accumulated deficit is approximately $30.23 million. We expect to incur additional losses to perform further research and development activities and do not currently have any commercial biopharmaceutical products. We do not expect to have such for several years, if at all.
Our product development efforts are thus in their early stages and we cannot make estimates of the costs or the time they will take to complete. The risk of completion of any program is high because of the many uncertainties involved in bringing new drugs to market including the long duration of clinical testing, the specific performance of proposed products under stringent clinical trial protocols, the extended regulatory approval and review cycles, our ability to raise additional capital, the nature and timing of research and development expenses and competing technologies being developed by organizations with significantly greater resources.
CRITICAL ACCOUNTING POLICIES
Financial Reporting Release No. 60 requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. Our accounting policies are described in ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA of our Form 10-K (“Form 10-K”) as of and for year ended December 31, 2018, filed with the SEC on March 6, 2019. There have been no changes to our critical accounting policies since December 31, 2018.
OFF-BALANCE SHEET ARRANGEMENTS
We had no off-balance sheet arrangements as of June 30, 2019.
RECENT ACCOUNTING PRONOUNCEMENTS
RESULTS OF OPERATIONS
Comparison of Three Months Ended June 30, 2019 and 2018
Three Months ended June 30, 2019 compared to Three Months ended June 30, 2018
Revenues
The Company generated revenue from Services and Other Revenue. Total revenue decreased to $-0- for the three months ended June 30, 2019 from $17,107 for the three months ended June 30, 2018. The decrease resulted from diminished sales in services revenues.
Cost of Goods Sold
For the three months ended June 30, 2019, our Cost of Goods Sold were $-0- from $19,548 for the three months ended June 30, 2018. Cost of Goods Sold consists of Cost for Services.
The Company achieved a gross profit of $-0- for the three months ended June 30, 2019, from the gross loss for three months ended June 30, 2018 of $(2,441).
Operating Expenses
Operating Expenses includes Selling, General and Administrative Expenses.
For the three months ended June 30, 2019, the Company’s Operating Expense increased to $237,362 from $66,295 for the three months ended June 30, 2018. The increase was primarily due to increased consulting, legal, filing and investor expenses.
Net Other Income (Expense)
For the three months ended June 30, 2019 the Company had Net Other Income (Expense) of $-0- compared to Net Other Income of $2,792 for the three months ended June 30, 2018
Six Months ended June 30, 2019 compared to the Six Months ended June 30, 2018
Revenues
The Company generated revenue from Services and Other Revenue. Total revenue decreased to $-0- for the six months ended June 30, 2019 from $22,660 for the six months ended June 30, 2018. The decrease resulted from diminished sales in services revenues.
Cost of Goods Sold
For the six months ended June 30, 2019, our Cost of Goods Sold were $-0- from $19,548 for the six months ended June 30, 2018. Cost of Goods Sold consists of Cost for Services.
The Company achieved a gross profit of $-0- for the six months ended June 30, 2019, from the gross profit for six months ended June 30, 2018 of $3,112.
Operating Expenses
Operating Expenses includes Selling, General and Administrative Expenses.
For the six months ended June 30, 2019, the Company’s Operating Expense increased to $305,603 from $117,027 for the six months ended June 30, 2018. The increase was primarily due to increased consulting, legal, filing and investor expenses.
Net Other Income (Expense)
For the six months ended June 30, 2019 the Company had Net Other Income (Expense) of $-0- compared to Net Other Expenses of $-0- for the six months ended June 30, 2018.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2019, we had $4,382 in cash, compared to $104 at December 31, 2018. At June 30, 2019, our accumulated stockholders’ deficit was $30,228,144 compared to $29,922,542 at December 31, 2018. There is substantial doubt as to our ability to continue as a going concern.
The Company's cash flow depended on the timely and successful market entry of its strategic offerings. Future cash flows from software products and services are expected to be very small as the company changed its strategic focus to life sciences and biotechnology.
Especially for strategic offerings for paradigm shifting technologies, the management's budget plan is based on a series of assumptions regarding regulatory approval, market acceptance, readiness and pricing. While management's assumptions are based on market research, assumptions bear the risk of being incorrect and may result in a delay in projects, delays in regulatory approvals and consequently a delay or a reduction in the related strategic offerings. In case these delays have an impact on the Company's liquidity and therefore its ability to support its operations with the necessary cash flow, the Company depends on its ability to generate cash flow from other resources, such as debt financing from related or independent resources or as equity financing from existing stockholders or through the stock market.
During the entire fiscal year 2018 and for the first half of 2019 the Company sought other strategic assets in the biotechnology space. The Company will look to utilize internal and external sources for financing future projects. These sources may provide the necessary funds to support the working capital needs of the Company. There can be no assurances, however, that the Company will be able to obtain additional funds from these or any other sources or that such funds will be sufficient to permit the Company to implement its intended business strategy. In the event, the Company is not able to generate additional funds, management will postpone any planned or proposed acquisitions until the third anniversary dateavailable financing for such projects will be sufficient. Management believes, in accordance with the above-mentioned statement, the Company will need to raise money to support its standard operations for the current fiscal period.
We sold $125,000 of the date of issuance. The Warrant was issuedour common stock to three investors in a private transaction between the Company and the Lender and wasplacement exempt from the registration underrequirements of the Securities and Exchange Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) (formerly Section 4(2)) thereof. On February 12, 2013, Mr. Baksa exercisedRegulation D under the Securities Act. In this private placement, we sold 118,637 shares priced at $1.10 per share and we included a three-year warrant to purchase one additional share for each share purchased in the private placement at an exercise price of $3.00 per share. If the price of our common stock reaches $4.00 for 20 consecutive days, we have the right to purchase 500,000 sharesbuy back the warrant for $0.01 per share if the investor elects not to exercise the warrant to acquire the additional shares.
Operating and Capital Expenditure Requirements
We believe our cash balance as reported in our financial statements is not sufficient to fund our growth plan for any period of time. In order to fully implement our plan of operations for the next 12-month period, we will need to raise a significant amount of capital through one or more future offerings. The discussion below is based on the assumption that we will be able to raise significant capital in the third and fourth quarters of 2019. We will need to raise $1.5 million to fund operations for the next 12 months, including up to $100,000 for governance and administrative purposes (assuming we hire a new Chief Executive Officer). After the next 12-month period, we most likely will need to raise additional financing. We do not currently have any arrangements for any such financing and there can be no assurances that we will be able to raise the required capital on acceptable terms, if at all.
We have generated minimal revenues to date and, although we expect to raise significant capital in the future, there can be no assurances that we will be successful in these endeavors. We believe that the actions presently being taken to further implement our business plan and generate revenues will provide the opportunity for us to develop into a successful business operation.
We will be required to raise additional capital within the next year to continue the development and commercialization of current product candidates and to continue to fund operations at the current cash expenditure levels. We cannot be certain that additional funding will be available on acceptable terms, or at all. Recently worldwide economic conditions and the international equity and credit markets have significantly deteriorated and may remain difficult for the foreseeable future. These developments will make it more difficult to obtain additional equity or credit financing, when needed. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that impact our ability to conduct delay, scale back or discontinue the development and/or commercialization of one or more product candidates; (ii) seek collaborators for product candidates at an earlier stage than otherwise would be desirable and on terms that are less favorable than might otherwise be available; or (iii) relinquish or otherwise dispose of rights to technologies, product candidates or products that we would otherwise seek to develop or commercialize its self on unfavorable terms.
ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. - CONTROLS AND PROCEDURES
Our Executive Chairman and acting principal executive and financial officer, James Sapirstein, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2019. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Based on that evaluation, as of June 30, 2019, our acting principal executive and financial officer identified the following material weaknesses:
We do not have sufficient and skilled accounting personnel with an appropriate level of technical accounting knowledge and experience in the application of accounting principles generally accepted in the United States commensurate with our financial reporting requirements. To mitigate the current limited resources and limited employees, we rely heavily on the use of external legal and accounting professionals.
Our management has identified the steps necessary to address the material weaknesses, and as soon as we have available funds, we will implement the following remedial procedures:
We will hire personnel with technical accounting expertise to further support our current accounting personnel. As necessary, we will continue to engage consultants or outside accounting firms in order to ensure proper accounting for our financial statements.
We intend to complete the remediation of the material weaknesses discussed above as soon as practicable but we can give no assurance that we will be able to do so. Designing and implementing an effective disclosure controls and procedures is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to devote significant resources to maintain a financial reporting system that adequately satisfies our reporting obligations. The remedial measures that we have taken and intend to take may not fully address the material weaknesses that we have identified, and material weaknesses in our disclosure controls and procedures may be identified in the future. Should we discover such conditions, we intend to remediate them as soon as practicable. We are committed to taking appropriate steps for remediation, as needed.
Changes in Internal Control over Financial Reporting
As required by Rule 13a-15(d) of the Exchange Act, our management, including our acting principal executive and financial officer, James Sapirstein, conducted an evaluation of the internal control over financial reporting to determine whether any changes occurred during the quarter ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, our acting principal executive and financial officer concluded there were no such changes during the quarter ended June 30, 2019.
From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.
For information regarding risk factors, please refer to our Form 10-K filed with the SEC on March 6, 2019, which may be accessed via EDGAR through the Internet at www.sec.gov.
ITEM 2. - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
During the three-month period ended June 30, 2019, we did not repurchase any of our common stock.
On June 12, 2019, we sold $125,000 of our common stock atto three investors in a private placement exempt from the exercise price of $0.20.
In connection with the Loan Agreement, on February 22, 2013, the Company and Mr. Baksa amended the Note pursuant to which Mr. Baksa agreed to convert the interest due under the Note into shares of GBSX common stock at a rate of $0.30 per share. Pursuant to the amendment, the Company issued 200,000 shares of Common Stock to Mr. Baksa. The Company issued the shares in reliance on Section 4(a)(2) (formerly Section 4(2))registration requirements of the Securities Act, duepursuant to Regulation D under the fact thatSecurities Act. In this private placement, we sold 118,637 shares priced at $1.10 per share and included a three-year warrant to purchase one additional share for each share purchased in the issuance was isolated and did not involve a public offeringprivate placement at an exercise price of securities
Transactions occurring in 2013
Notes to$3.00 per share. If the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Asprice of March 31, 2013, these shares had not yet been issued and remain as Subscriptions Receivable.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Other changes inour common stock are disclosed in Note 23, Supplementary Cash Flow Disclosures.
Options
The Company has not issued any options, so that none are outstanding as of September 30, 2013.
Warrants
The Company has issued warrants in four different manners. In each instance,reaches $4.00 for 20 consecutive days, we have the right to buy back the warrant allows the holder to purchase a commonfor $0.01 per share within a three year period from issuance at a specific price per share. In the first instance, warrants have been issued as part of a private placement offering whereinif the investor purchases a common share, and a warrant. The fair value of those warrants has been determined (and is shown below) by utilizingelects not to exercise the residual method, wherebywarrant to acquire the current market value of the stock is deducted from the unit price and the remainder is allocated to the warrant. The valuation of the warrants issued is for disclosure purposes only and has no impact to the financial statements. A description of those warrants has been described above under commonadditional shares.
The second manner in which warrants are issues is in respect to financing by way of the issuance of notes payable or the conversion of debt into shares. In these instances, the fair value of the warrant has been determined using the effective interest rate method whereby the note is discounted when the interest rate is less than other similar notes and discount is allocated to the warrant and credited to additional paid in capital. The corresponding charge to discount is then amortized over the life of the note. Where there is no difference in interest terms, no value is attributable to the warrant.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
UnauditedITEM 3. - DEFAULTS UPON SENIOR SECURITIES.
The Company has also sold warrants at nominal value to certain investors. In this instance the fair value of the warrants has been determined using a Black-Scholes option pricing model with volatility, equity value and interest rate inputs noted below. The valuation of the warrants issued is for disclosure purposes only and has no impact to the financial statements.None.
Lastly, the Company has issued warrants to outside consultants in payments for services. The warrants are issued as “cashless” warrants and have been valued using a Black-Scholes option pricing model with volatility, equity value and interest rate inputs noted below.. The fair value of warrants issued for financing are determined for disclosure purposes as there is no impact to the financial statements. The fair value for other services, namely legal, and consulting have been recorded in the financial statements with a charge to the corresponding expense account and a credit to additional paid in capital.ITEM 4. - MINE SAFETY DISCLOSURES.
Black Scholes assumptions for warrants issued were as follows:Not applicable.
For the Period Ending September 30, | ||||||||
2013 | 2012 | |||||||
Annualized Volatility | 120.26 | % | 118.64 | % | ||||
Risk Free Interest Rate | 0.66 | % | 0.40 | % | ||||
Expected Life | 3 years | 3 years | ||||||
Dividend Rate | Nil | Nil |
None.
ITEM 6. - EXHIBITS
The following share purchase warrant transactions have not been disclosed elsewhere.
On April 1, 2011, the former CFO was issued 100,000 share purchase warrants, which gave him the option of purchasing 100,000 shares of common stock for a period of 3 years at a price of $1.50 per common share. The valueexhibits are filed as part of this issuance, using the Black Scholes pricing model was determined to $34,000 and this amount was recorded as a consulting expense.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
In March 2012, the Company issued an aggregate of 2,020,000 warrants to five “accredited investors” pursuant to Section 4(a)(2) (formerly Section 4(2)) of the Securities Act. Each investor warrant is exercisable for the three-year period commencing from the date of issuance for $0.50 per share of Common Stock and has the same terms as the Private Placement Warrants. As noted above investors immediately exercised warrants and purchased 900,000 shares of common stock for $450,000.On March 27, 2012, the Company issued an aggregate of 250,000 warrants to 3 outside consultants pursuant to Section 4(a)(2) (formerly Section 4(2)) of the Securities Act. Each warrant is exercisable for the three-year period commencing from the date of issuance for $1.10 per share of Common Stock and has the same terms as the Private Placement Warrants. The value of this issuance, using the Black Scholes pricing model was determined to $270,208 and this amount was recorded as a professional expense.
In December 2012, The Company issued 16,875 warrants to an outside consultant pursuant to Section 4(a)(2) (formerly Section 4(2)) of the Securities Act. Each warrant is exercisable for the three-year period commencing from the date of issuance for $0.21 per share of Common Stock and has the same terms as the Private Placement Warrants. The value of this issuance, using the Black Scholes pricing model was determined to $2,624 and this amount was recorded as a consulting expense.
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
# of shares | Fair value | Balance | ||||||||||||||||||||||||||
allowed to | Issue | Expiry | Strike | at | End of | |||||||||||||||||||||||
purchase | Date | Date | Price | Issuance | Issued | Exercised | Period | |||||||||||||||||||||
$ | $ | # | # | # | ||||||||||||||||||||||||
Opening - Jan 1, 2012 | 6,846,280 | 5,000 | 6,841,280 | |||||||||||||||||||||||||
Amended | (2,000,000 | ) | 10/1/2010 | 6/1/2013 | 4.00 | - | - | - | - | |||||||||||||||||||
Reissued | 2,000,000 | 6/1/2012 | 6/1/2015 | 1.00 | 556,785 | - | - | - | ||||||||||||||||||||
Issued for legal services | 3/31/2012 | 3/31/2012 | 1.10 | 270,208 | (2) | 250,000 | - | 250,000 | ||||||||||||||||||||
Issued for nominal value | 3/28/2012 | 3/28/2015 | 0.50 | 2,457,662 | 2,020,000 | 900,000 | 1,120,000 | |||||||||||||||||||||
Sold with share units | 4/16/2012 | 4/16/2015 | 1.50 | 90,000 | 120,000 | - | 120,000 | |||||||||||||||||||||
Issued with debt conversion | 4/28/2012 | 4/28/2015 | 1.75 | - | 550,000 | - | 550,000 | |||||||||||||||||||||
Issued with debt conversion | 4/30/2012 | 4/30/2015 | 1.75 | - | 500,000 | - | 500,000 | |||||||||||||||||||||
Sold with share units | 5/10/2012 | 5/10/2015 | 1.50 | 25,800 | 30,000 | - | 30,000 | |||||||||||||||||||||
Issued with debt | 7/5/2012 | 7/5/2012 | 0.50 | 26,500 | 550,000 | - | 550,000 | |||||||||||||||||||||
Issued with debt | 8/13/2012 | 8/13/2015 | 0.35 | - | 100,000 | 100,000 | 100,000 | |||||||||||||||||||||
Issued with debt | 10/26/2012 | 10/29/2015 | 0.20 | - | 500,000 | 500,000 | - | |||||||||||||||||||||
Issued with debt | 11/30/2012 | 11/30/2015 | 0.20 | - | 500,000 | 250,000 | 250,000 | |||||||||||||||||||||
Issued for consulting services | 12/21/2012 | 12/21/2015 | 0.21 | 2,624 | (1) | 16,875 | - | 16,875 | ||||||||||||||||||||
Closing - Dec 31, 2012 | 5,136,875 | 1,755,000 | 10,328,155 | |||||||||||||||||||||||||
Opening - Jan 1, 2013 | 10,328,155 | 10,328,155 | ||||||||||||||||||||||||||
Transfer (3/11/2011) | 739,000 | 2/6/2013 | 3/11/2014 | 1.50 | - | - | - | 739,000 | ||||||||||||||||||||
Closing - Mar 31, 2013 | 5,136,875 | 1,755,000 | 11,067,155 | |||||||||||||||||||||||||
Issued with debt | 4/26/2013 | 4/26/2016 | 0.25 | - | 400,000 | - | 400,000 | |||||||||||||||||||||
Closing - Jun 30, 2013 | 5,536,875 | 1,755,000 | 11,467,155 | |||||||||||||||||||||||||
Closing - September 30, 2013 | 5,536,875 | 1,755,000 | 11,467,155 |
(1) recorded as consulting expense
(2) recorded as legal expense
Note 21 REVENUE ALLOCATION
Gross revenue may be broken downreport or incorporated by the following products for the nine months ended September 30, 2013 are as follows:
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Revenues by geographical area for the nine months ended September 30, 2013 are as follows:
Note 22 OTHER INCOME/EXPENSE
At the financial statement date, Other income was 20 KUSD (December 31, 2012 year end: Other Expense 33 KUSD).
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Note 23 SUPPLEMENTAL CASH FLOW DISCLOSURES
The significant non-cash transactions through September 30, 2013 were as follows:reference:
No. |
Notes to the Interim Financial Statements
September 30, 2013
GBS Enterprises Incorporated
Unaudited
Description | ||
Articles of Incorporation Filed as an exhibit to Form SB-2 (File No: 333-146748) filed January 14, 2008 | ||
Certificate of Amendment to Articles of Incorporation, effective September 6, 2010 (Filed as an exhibit to Form 10-K filed July 16, 2012) | ||
Certificate of Amendment to Articles of Incorporation, effective November 22, 2010 (Filed as an exhibit to Form 10-K/A filed July 15, 2011) | ||
Certificate of Amendment to the Articles of Incorporation regarding 1-for-29 Reverse Stock Split filed March 20, | ||
Articles of | ||
Series A Non-Convertible Preferred Certificate of | ||
Bylaws (Filed as an exhibit to |
Certification of |
Note 24 SUBSEQUENT EVENTS
On July 10, 2013, the Board of Directors of the Company reappointed Joerg Ott as the Chief Executive Officer (Principal Executive Officer) of the Company, effective immediately. Mr. Ott replaced Mr. Gary D. MacDonald who had been serving as the Company’s Interim Chief Executive Officer since July 11, 2012.
On August 2, 2013, Gary D. MacDonald resigned as member of the Board of Directors of the Company and as, Managing Director of GBS-UK. From March 1, 2012 to the date of his resignation, Mr. MacDonald also served as member of the Board’ Audit Committee. Mr. MacDonald’s resignation was not due to any disagreement with the Company or the Board.
On August 13, 2012, the Company entered into a note purchase and security agreement (the “Loan Agreement”) with John A. Moore, a member of the Board. Pursuant to the Loan Agreement, the Company issued a secured promissory note, dated October 26, 2012 (the “Note”), to Mr. Moore for the principal amount of $1,000,000, bearing interest at a rate of 20% per year and maturing on the earlier of the first anniversary date of the date of issuance or such other time as described in more detail in the Note, without any penalty for prepayment. To secure the obligations of the Company under the Note, the Company granted Mr. Moore a secured priority security interest in the Company’s Accounts Receivable and its subsidiaries located in the United States of America, as more fully described in the full text of the document.
Form of Common Stock Purchase Warrant for 2019 Common Stock and Warrant Private Placement | ||
Form of Subscription Agreement for 2019 Common Stock and Warrant Private Placement | ||
Certifications of Acting Principal Executive Financial Officer furnished pursuant to | ||
101 | Interactive data files pursuant to Rule 405 of Regulation S-T (furnished herewith). |
On October 23, 2013, the Company filed a lawsuit (GBS Enterprises, Inc. v. Reliance Globalcom, Inc.) in the Superior Court of the State of California, County of San Francisco, seeking a declaratory judgment that the Company has no obligation to Reliance Globalcom Inc. (“Reliance”) for any claims or liabilities in connection with a Master Services Agreement (“MSA”) executed by Reliance and IDC Global Inc. (“IDC”) a then wholly owned subsidiary of the Company in March 2010. On February 1, 2013, GBS sold IDC to Global Telecom & Technology Inc. (“GTT”). Pursuant to the governing Stock Purchase Agreement (SPA), GTT gained all right, title and interest in 100% of all of IDC’s stock, all of which had been owned by GBS. Pursuant to the Stock Purchase Agreement, GTT withheld $528,777.93 of the purchase price from payment to GBS to cover potential exposure due to the Identified Dispute described herein between IDC and Reliance. The Stock Purchase Agreement requires that, within three days of notice to GTT that the Identified Dispute described herein has been resolved, GTT will release the $528,777.93 to GBS. The Company is seeking declaratory relief from the Court stating the Company is not liable to Reliance and that GTT may release the $528,777.93 in funds owed to the Company. There were no material developments in this case since the filing of the lawsuit.
The Company intends to vigorously defend its interests in this matter.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrantRegistrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MARIZYME, INC. | ||
(Registrant) | ||
Date: | ||
By: | /s/ JAMES SAPIRSTEIN | |
James Sapirstein | ||
Executive | ||
| ||
(Acting Principal Financial and Accounting Officer) |
17