UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q/A10-Q
(Amendment No. 1)

 

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended JuneSeptember 30, 2021

 

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ______ to _______

 

Commission File Number: 000-53223

 

MARIZYME, INC.INC.

(Exact name of registrant as specified in its charter)

 

Nevada 82-5464863
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

 

555 Heritage Drive, Suite 205, Jupiter, Florida33458

555 Heritage Drive, Suite 205, Jupiter, Florida33458

(Address of principal executive offices) (Zip Code)

 

(561)935-9955
(Registrant’s telephone number)

(925)400-3123

(Registrant’s telephone number)

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes ☒ 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 definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

☐Large accelerated filer☐Accelerated filer
☒Non-accelerated filer☒Smaller reporting company
  ☒Emerging growth company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

If 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. ☒

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each classTrading Symbol(s)Name of each exchange on which registered
Not applicable.  

 

As of November 22, 2021, the registrant had 35,928,188 shares of common stock ($0.001 par value) outstanding.

 

 

 

 

EXPLANATORY NOTE

Reason for this Amendment

This Amendment No. 1 to the Quarterly Report on Form 10-Q of Marizyme, Inc. (the “Company”) for the three and six months ended June 30, 2021 (the “Original Report”), originally filed on August 23, 2021 (the “Original Filing”) with the U.S. Securities and Exchange Commission (the “SEC”)is to restate the Company’s unaudited condensed consolidated financial statements as of and for the three and six months ended June 30, 2021 and 2020 (the “Consolidated Financial Statements), and related note disclosure, as described in Notes 5 and 12 to the Consolidated Financial Statements. The amendment relates to the change in the valuation of assets purchased in the acquisition of Somahlution, LLC., Somahlution, Inc., and Somaceutica, LLC (collectively, “Somah”) in July 2020. The accounting for the Somah acquisition was not reviewed in compliance with SEC Rules by the external audit firm in the Original Filing. In addition, in Note 13 to the Consolidated Financial Statements the Company disclosed a subsequent event which occurred on November 1, 2021. Lastly, in this Amendment No. 1, the Company has amended language in the discussion of the Controls and Procedures; these changes were for accuracy only and did not change any conclusions reached in the Original Repot.

Description of Restatement

As reported in the Original Report, the Company had not fully completed the accounting for the July 2020 acquisition of Somah. The delay in the accounting was due to the valuation of certain assets purchased with the transaction, specifically valuation of the contingent consideration related to the future royalty payments, performance warrants and pediatric voucher warrants, future rare pediatric voucher sales, and liquidation preference.Subsequent to the Company’s Original Filing on August 23, 2021, the valuation of the transaction was finalized. See “Note 5 – Acquisitions” and “Note 12 – Restatement” for the detailed break-down of the changes resulted from the finalized valuation of the transaction.

The Company has also updated the report for subsequent events. On November 1, 2021, the Company entered into a definitive arrangement agreement with Health Logic Interactive Inc. (“HLII”) pursuant to which the Company will acquire My Health Logic Inc., a wholly owned subsidiary of HLII. See “Note 13 – Subsequent Events” for the details on the transaction.

Items Amended in this Form 10-Q/A

This Form 10-Q/A presents the Original Report, amended and restated with modifications as necessary to reflect the restatements. The following items have been amended to reflect the restatement:

Part I – Item 1 – Financial Statements

Part I – Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

Part I – Item 4 - Controls and Procedures

In addition, the Company’s Interim Chief Executive Officer has provided new certification dated as of the date of this filing in connection with this Form 10-Q/A.

In addition, an independent public accounting firm has reviewed the 10-Q/A in accordance with professional standards and in compliance with SEC Rules.

Except as described above, this Form 10-Q/A does not amend, update or change any other items or disclosures in the Original Report and does not purport to reflect any information or events subsequent to the filing thereof. As such, this Form 10-Q/A speaks only as of the Original Report was filed, and we have not undertaken herein to amend, supplement or update any information contained in the Original Report to give effect to any subsequent events. Accordingly, this Form 10-Q/A should be read in conjunction with our filings made with the SEC subsequent to the filing of the Original Report, including any amendment to those filings.

 2

 

MARIZYME, INC.

FORM 10-Q

TABLE OF CONTENTS

 

  Page
PART I—I - FINANCIAL INFORMATION 
   
ITEM 1.Consolidated Financial Statements (unaudited)3
Condensed Consolidated Balance Sheets3
Condensed Consolidated Statements of Operations4
Condensed Consolidated Statements of Stockholders’ Equity5
Condensed Consolidated Statements of Cash Flows7
Notes to Unaudited Condensed Consolidated Financial Statements8
ITEM 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations2419
ITEM 3.Quantitative and Qualitative Disclosures About Market Risk3026
ITEM 4.Controls and Procedures3026
   
PART II—II - OTHER INFORMATION 
   
ITEM 1.Legal Proceedings3228
ITEM 1A.Risk Factors3228
ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds3228
ITEM 3.Defaults Upon Senior Securities3228
ITEM 4.Mine Safety Disclosures3228
ITEM 5.Other Information3228
ITEM 6.Exhibits3229
 Signatures3531

23
 

PART I – FINANCIAL INFORMATION

 

TABLE OF CONTENTSITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Index to Financial StatementsPage
Condensed Consolidated Balance Sheets as of June 30, 2021 (unaudited) and December 31, 20205
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2021 (unaudited) and the Three and Six Months Ended June 30, 2020 (unaudited)6
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2021 (unaudited) and the Three and Six Months Ended June 30, 2020 (unaudited)7
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 (unaudited) and the Six Months Ended June 30, 2020 (unaudited)8
Notes to Condensed Consolidated Financial Statements (unaudited)9

4

 

ITEM 1. FINANCIAL STATEMENTS

MARIZYME, INC.

and Subsidiaries

Condensed Consolidated Balance Sheets

(Restated)

 June 30, 2021  December 31, 2020  September 30, 2021  December 31, 2020 
Restatement - Notes 5 and 12 

Unaudited and

Restated		    
 

(Unaudited)

    
ASSETS:                
Current        
Cash $2,104  $2,902,762  $16,673  $2,902,762 
Accounts receivable  119,271   40,585   96,291   40,585 
Prepaid expense  28,356   106,390   35,000   106,390 
Inventory  16,740   56,340   15,390   56,340 
Total current assets  166,471   3,106,077   163,354   3,106,077 
        
Fixed assets, net  2,698   7,122 
Non-current        
Property, plant and equipment, net  1,273   7,122 
Operating lease right-of-use assets, net  1,228,648   1,317,830   1,163,159   1,317,830 
Intangible assets, net  46,493,897   42,278,211   46,385,121   42,278,211 
Prepaid royalties, non-current  340,969   344,321   340,969   344,321 
Deposits  30,000   30,000   30,000   30,000 
Goodwill  5,416,000   -   5,416,000   - 
Total non-current assets  53,512,212   43,977,484   53,336,522   43,977,484 
Total assets $53,678,683  $47,083,561  $53,499,876  $47,083,561 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY:                
Current        
Accounts payable and accrued expenses $1,209,110  $478,103  $1,396,945  $478,103 
Due to related party  265,000   - 
Operating lease obligations, current portion  243,070   243,292 
Due to related parties  638,530   - 
Operating lease obligations  260,106   243,292 
Total current liabilities  1,717,180   721,395   2,295,581   721,395 
        
Operating lease obligations, non-current portion  1,001,492   1,074,538 
Derivative liability  24,982   - 
Warrant liability  49,963   - 
Convertible promissory note, net of debt discount  3,491   - 
Non-current        
Operating lease obligations, net of current potion  941,732   1,074,538 
Convertible notes, net of debt discount  179,457   - 
Derivative liabilities  391,648   - 
Contingent liabilities  9,648,000   -   9,454,000   - 
Total non-current liabilities  10,727,928   1,074,538   10,966,837   1,074,538 
Total liabilities  12,445,108   1,795,933  13,262,418  1,795,933 
                
Commitments and contingencies (see Note 6)  -    - 
Commitments and contingencies (Note 12)  -   - 
                
Stockholders’ equity:                
Preferred stock, $0.001 par value, 25,000,000 shares authorized, 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020  -   -   -   - 
Common stock, par value $0.001, 75,000,000 shares authorized, 35,928,188 shares issued and outstanding as of September 30, 2021 and December 31, 2020  35,928   35,928   35,928   35,928 
Additional paid in-capital  81,874,076   82,077,334 
Additional paid-in capital  82,509,957   82,077,334 
Accumulated deficit  (40,676,429)  (36,825,634)  (42,308,427)  (36,825,634)
Total stockholders’ equity  41,233,575   45,287,628   40,237,458   45,287,628 
Total liabilities and stockholders’ equity $53,678,683  $47,083,561  $53,499,876  $47,083,561 

 

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

35
 

MARIZYME, INC.

and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited and Restated)(Unaudited)

                            
 Three Months Ended Six Months Ended  Three Months Ended Nine Months Ended 
 June 30,  June 30,  September 30,  September 30, 
 2021  2020  2021  2020  2021  2020  2021  2020 
Restatement - Notes 5 and 12 Restated     Restated    
Revenue $160,785  $-  $234,737  $-  $37,215  $124,985  $271,952  $124,985 
                                
Operating expenses:                                
Direct costs of revenue  119,221   -   150,063   -   18,356   25,714   168,419   25,714 
Professional fees  592,781   203,992   1,251,839   438,835 
Professional fees (includes related party amounts of $90,000, $90,000, $270,000, and $90,000, respectively)  556,254   170,753   1,808,093   494,295 
Salary expenses  824,074   -   1,860,531   -   617,826   433,318   2,478,357   433,318 
Stock-based compensation  194,657   221,058   562,375   442,116   64,074   1,107,085   626,449   1,674,200 
Other general and administrative expenses  342,791   9,861   534,535   25,330   536,483   453,158   1,071,017   468,782 
Total operating expenses  2,073,524   434,911   4,359,343   906,281   1,792,993   2,190,028   6,152,335   3,096,309 
Total operating loss  (1,912,739)  (434,911)  (4,124,606)  (906,281)  (1,755,778)  (2,065,043)  (5,880,383)  (2,971,324)
                                
Other expense                
Interest expense  (4,189)  -   (4,189)  - 
Other income (expense):                
Interest and accretion expenses  (70,221)  -   (74,410)  - 
Change in fair value of contingent liabilities  278,000  -   278,000  -   194,000   -   472,000   - 
Total other expense  273,811  -   273,811  - 
Total other income  123,779   -   397,590   - 
                                
Net loss $(1,638,928) $(434,911) $(3,850,795) $(906,281) $(1,631,999) $(2,065,043) $(5,482,793) $(2,971,324)
                                
Loss per share – basic and diluted $(0.05) $(0.02) $(0.11) $(0.05)
Net loss per share – basic and diluted $(0.05) $(0.07) $(0.15) $(0.13)
                                
Weighted average number of shares of common stock outstanding – basic and diluted  35,928,188   20,027,062   35,928,188   19,961,309   35,928,188   29,288,226   35,928,188   23,161,329 

 

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

46
 

 

MARIZYME, INC.

and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited and Restated)(Unaudited)

              1        
     Additional Paid-in  Treasury  Accumulated    
  Shares  Amount  Capital  Stock  Deficit  Total 
Restatement - Notes 5 and 12       Restated     Restated    
Balance, December 31, 2020  35,928,188  $35,928  $82,077,334   -  $(36,825,634) $45,287,628 
Common stock issued  for services              -         
Common stock issued  for services, shares                        
Common shares issued in lieu of AP                        
Common shares issued in lieu of AP, shares                        
Exercise of options                        
Exercise of options, shares                        
Adjustment of warrants value in connection with finalizing the business combination                        
Stock-based compensation  -   -   334,385       -   334,385 
Net loss - restated  -   -   -            (2,211,867)  (2,211,867)
Balance, March 31, 2021  35,928,188  $35,928  $82,411,719   -  $(39,037,501) $43,410,146 
Stock-based compensation  -   -   194,657   -   -   194,657 
Adjustment of warrants value in connection with finalizing the business combination  -   -   (732,300)      -   (732,300)
Net loss - restated  -   -   -       (1,638,928)  (1,638,928)
Balance, June 30, 2021  35,928,188  $35,928  $81,874,076   -  $(40,676,429) $41,233,575 

 Shares  Amount  Capital  Stock  Deficit  Total             
    Additional Paid-in  Treasury  Accumulated     Common Stock  Additional Paid-in  Accumulated    
 Shares  Amount  Capital  Stock  Deficit  Total  Shares  Amount  Capital  Deficit  Total 
             
Balance, December 31, 2019  19,858,939  $19,859  $59,319,594  $(16,000) $(30,980,581) $28,342,872 
Balance, December 31, 2020  35,928,188  $35,928  $82,077,334 -$(36,825,634) $45,287,628 
Sale of common stock                    
Sale of common stock, shares                    
Issuance of common stock for acquisition                    
Issuance of common stock for acquisition, shares                    
Issuance of warrants for acquisition                    
Issuance of warrants for services                    
Common shares issued in lieu of AP                    
Common shares issued in lieu of AP , shares                    
Exercise of options                    
Exercise of options, shares                    
Common stock issued for services  125,000   125   124,875   -   -   125,000                     
Common stock issued for services, shares                    
Stock-based compensation  -   -   221,058   -   -   221,058   -   -   334,385   -   334,385 
Issuance of common stock for services                    
Issuance of common stock for services, shares                    
Warrants issued                    
Net loss  -   -   -   -   (471,370)  (471,370)  -   -   - - (2,211,866)  (2,211,866)
Balance, March 31, 2020  19,983,939  $19,984  $59,665,527  $(16,000) $(31,451,951) $28,217,560 
Common shares issued in lieu of AP  195,000   195   184,665   -   -   184,860 
Exercise of options  5,000   5   5,045       -   5,050 
Balance, March 31, 2021  35,928,188  35,928  82,411,719 -(39,037,500) 43,410,147 
Stock-based compensation  -   -   221,057   -   -   221,057   -   -   194,657   -   194,657 
Adjustment of warrants value in connection with finalizing the business combination  -   -   (732,300)  -   (732,300)
Net loss  -   -   -   -   (434,911)  (434,911)  -   -   - - (1,638,928)  (1,638,928)
Balance, June 30, 2020  20,183,939  $20,184  $60,076,294  $(16,000) $(31,886,862) $28,193,616 
Balance, June 30, 2021  35,928,188  35,928  81,874,076 -(40,676,428) 41,233,576 
Stock-based compensation  -   -   64,074   -   64,074 
Warrants issued in connection with convertible notes  -   -   571,807   -   571,807 
Net loss  -   -   - - (1,631,999)  (1,631,999)
Balance, September 30, 2021  35,928,188  $35,928  $82,509,957 -$(42,308,427) $40,237,458 

 

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

57
 

MARIZYME, INC.

and SubsidiariesCondensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

                   
     Additional
Paid-in		  Treasury  Accumulated    
  Shares  Amount  Capital  Stock  Deficit  Total 
Balance, December 31, 2019  19,858,939  $19,859  $59,319,594  $(16,000) $(30,980,581) $28,342,872 
Common stock issued for services  125,000   125   124,875   -   -   125,000 
Stock-based compensation  -   -   221,058   -   -   221,058 
Net loss  -   -   -   -   (471,370)  (471,370)
Balance, March 31, 2020  19,983,939  19,984  59,665,527  (16,000) (31,451,951) 28,217,560 
Common shares issued in lieu of AP  195,000   195   184,665   -   -   184,860 
Exercise of options  5,000   5   5,045       -   5,050 
Stock-based compensation  -   -   221,057   -   -   221,057 
Net loss  -   -   -   -   (434,911)  (434,911)
Balance, June 30, 2020  20,183,939  20,184  60,076,294  (16,000) (31,886,862) 28,193,616 
Sale of common stock  5,600,192   5,600   6,269,464   -   -   6,275,064 
Issuance of common stock for acquisition  10,000,000   10,000   12,490,000   -   -   12,500,000 
Issuance of warrants for acquisition  -   -   1,932,300   -   -   1,932,300 
Issuance of warrants for services  -   -   253,749   -   -   253,749 
Stock-based compensation  -   -   802,926   -   -   802,926 
Issuance of common stock for services  50,000   50   62,450   -   -   62,500 
Exercise of options for common stock  54,057   54   59,399   -   -   59,453 
Net loss  -   -   -   -   (2,065,043)  (2,065,043)
Balance, September 30, 2020  35,888,188  $35,888  $81,946,582  $(16,000) $(33,951,905) $48,014,565 

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

6

MARIZYME, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited and Restated)(Unaudited)

              
 Six Months Ended June 30,  Nine Months Ended September 30, 
 2021 2020  2021  2020 
Restatement - Notes 5 and 12 Restated   
     
Cash flows from operating activities:                
Net loss $(3,850,795) $(906,281) $(5,482,793) $(2,971,324)
Adjustments to reconcile net loss to net cash used in operations:                
Depreciation and amortization  (186,216)  -   (76,013)  342,583 
Stock-based compensation  529,042   567,115   593,116   1,420,451 
Stock-based compensation – restricted common stock  

33,333

   - 
Stock-based compensation - restricted common stock  33,333   - 
Interest and accretion  74,410   - 
Issuance of warrants for services  -   253,749 
Change in fair value of contingent liabilities  (278,000)   -   (472,000)  - 
Change in operating assets and liabilities:                
Accounts receivable  (78,686)  -   (55,706)  (93,010)
Prepaid expense  44,701   -   38,057   (62,487)
Inventory  39,600   -   40,950   21,500 
Accounts payable and accrued expenses  506,418   152,620   721,078   140,233 
Due to related party  265,000   - 
Due to related parties  272,530   - 
Net cash used in operating activities  (2,975,603)  (186,546)  (4,313,038)  (948,305)
                
Cash flows used in investing activities:        
Purchase of intangible assets  -   (130,333)
Net cash used in investing activities  -   (130,333)
        
Cash flows from financing activities:                
Proceeds from short term loan  -   1,000 
Proceeds from convertible promissory note  74,945   - 
Paid-in capital  -   189,910 
Proceeds from promissory notes due to related parties  366,000   - 
Proceeds from convertible notes, net of issuance cost  1,060,949   - 
Shares issued for cash, net of offering costs  -   6,275,064 
Net cash provided by financing activities  74,945   190,910   1,426,949   6,275,064 
                
Net (decrease)/ increase in cash  (2,900,658)  4,364   (2,886,089)  5,196,426 
        
Cash at beginning of period  2,902,762   90   2,902,762   90 
        
Cash at end of period $2,104  $4,454  $16,673  $5,196,516 
                
Non-cash investing and financing activities:                
Derivative liabilities $24,982  $-  $391,648  $- 
Warrant liabilities $49,963  $- 
Contingent liabilities $

9,648,000

  $-  $9,926,000  $- 
Warrants issued in connection with convertible notes $571,807   - 
Issuance of common stock in lieu of payables $-  $261,453 
Issuance of common stock in connection with business combination $-  $12,500,000 
Issuance of warrants in connection with business combination $-  $1,932,300 

 

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

7
 8

MARIZYME, INC.

AND SUBSIDIARIES 

NOTES TO THEUNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021

(Unaudited and Restated)

 

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Overview

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

By December 31, 2016,Nevada corporation originally incorporated on March 20, 2007, under the name SWAV Enterprises, Ltd. On September 6, 2010, the Company had sold the controlling interest in GROUPname was changed to GBS Enterprises Inc. and other subsidiaries, keeping only a minority interest in GROUP. On March 21,from 2010 to September 2018 the Company formed a wholly owned subsidiary named Marizyme, Inc., a Nevada corporation,was in the software products and merged with it, effectively changing the Company’s name to Marizyme, Inc. On June 1,advisory services business for email and instant messaging applications. The Company divested that business between December 2016 and September 2018 the Company exchanged the shares of GROUP and all the intercompany assets and liabilities for 100% of the shares of X-Assets Enterprises, Inc, a Nevada Corporation. As part of a type-D business restructuring on September 5, 2018, the Company then distributed the X-Assets shares to its stockholders on a 1 for 1 basis.

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

 

On September 12,March 21, 2018, the Company consummated an asset acquisition with ACB Holding AB, Reg. No. 559119-5762, a Swedish corporationCompany’s name was changed to acquire all rights, title, and interest in their Krillase technology in exchange for 16.98 million shares of Common Stock. Krillase is a naturally occurring enzyme that actsMarizyme, Inc., to break protein bonds and has applications in dental care, wound healing, and thrombosis.

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

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

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

The Company’snew life sciences focus. Marizyme’s common stock $0.001 par value per share (the “Common Stock”), is currently quoted on the OTC MarketsMarkets’ QB Tiertier under the ticker symbol “MRZM.”“MRZM”.

 

Change in Management and the Board of Directors

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

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

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

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

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

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

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

On June 24, 2021, James Saperstein, our Interim Chief Executive Officer resigned, and Vithal Dhaduk was appointed as our Chairman of the Company’s board of directors.

On July 6, 2021, Vithal Dhaduk was appointed as Interim Chief Executive Officer.

On July 12, 2021, Bruce Harmon resigned as Interim Chief Financial Officer.

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NOTE 2 -– GOING CONCERN

 

The accompanyingCompany’s unaudited condensed consolidated financial statements have beenare prepared onusing principals generally accepted in the United States of America applicable to a going concern, basis, which contemplates the realization of assets and the satisfactionliquidation of liabilities in the normal course of businessbusiness. However, the Company does not have an established source of revenues sufficient to cover its operating costs and the ability of the Companyto allow it to continue as a going concern for a reasonable period of time.concern. The Company, had a net loss of $3,850,795 since its inception, has incurred recurring operating losses and negative cash used in operating activities of $2,975,603 for the six months ended June 30, 2021flows from operations and has an accumulated deficit of $40,676,42942,308,427 at JuneSeptember 30, 2021. The Company’s continuation as a going concern is dependent upon its ability to generate revenuesAdditionally, the Company has negative working capital of $2,132,227 and its ability to continue receiving investment capital and loans from third parties to sustain its current level$16,673 of operations.cash on hand. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

Under the going concern assumption, an entity is ordinarily viewed as continuing its business for the foreseeable future with neither the intention or necessity of liquidation, ceasing trading, or seeking protection from creditors pursuant to the laws and regulations. Accordingly, assets and liabilities are recorded on the basis that the entity will be able to realize its assets and discharge its liabilities in the normal course of business.

The ability of the Company to continue as a going concern is dependent upon its ability to continue to successfully develop its intangible assets, receive an approval from the U.S. Federal and Drug Administration (the “FDA”) to extend the selling of the products into the U.S. market which will allow the Company to attain profitable operations.

During the next twelve months, the Company’s foreseeable cash requirements will relate to continuous operations of its business, maintaining its good standing and making the required filing with the Securities and Exchange Commission (the “SEC”), and the payment of expenses associated with its product development. The Company ismay experience a cash shortfall and be required to raise additional capital. Management intends to raise additional funds by way of a private or public offering. While the Company believes in the processviability of securing working capital from investors for common stock, convertible notes payable, and/or strategic partnerships. No assuranceits strategy to continue to develop and expand its products and generate sufficient revenue and in its ability to raise additional funds, there can be givenno assurances to that effect. The ability of the Company will be successful in these efforts. to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.

The unaudited condensed consolidated financial statements do not include any adjustments relatingrelated to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

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

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

Principles of Consolidation

 

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

 

The accompanying unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared in conformity with generally accepted accounting principles in the U.S. (“U.S. GAAP”). The unaudited condensed consolidated financial statements presented in this Quarterly Report should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K filed with the SEC on April 15, 2021 (the “2020 Form 10-K”). The balance sheet as of December 31, 2020 was derived from audited consolidated financial statements included in the 2020 Form 10-K but does not include all disclosures required by U.S. GAAP for complete financial statements. The Company’s significant accounting policies are described in Note 3 to those consolidated financial statements.

Interim results may not be indicative of the results that may be expected for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from these interim financial statements. The unaudited condensed consolidated financial statements reflect all adjustments which in the opinion of management are necessary for a fair statement of results of operations, financial condition, cash flows and stockholders’ equity for the periods presented. Except as otherwise disclosed, all such adjustments are of a normal recurring nature.

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Use of Estimates

 

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

 

Business Combinations

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

Stock-Based Compensation

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

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Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. At June 30, 2021 and December 31, 2020, the Company had $2,104 and $2,902,762 in cash, respectively, and 0 cash equivalents.

Reclassifications

Certain amounts in the prior year’s unaudited condensed consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported losses, total assets, or stockholders’ equity as previously reported. The reclassifications were for the Statement of Operation which combined its expenses into two categories whereas, for comparison purposes for the six months ended June 30, 2021 to June 30, 2020, professional fees and stock-based compensation was segregated.

Allowance for Doubtful Accounts

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

Inventory

Inventory consisted of primarily finished goods and is valued at the lower of cost or net realizable value. Inventory is held in a third-party warehouse in foreign countries. Cost is determined using the FIFO method. The Company decreases the value of inventory for estimated obsolescence equal to the difference between the cost of inventory and the estimated market value, based upon an aging analysis of the inventory on hand, specifically known inventory-related risks, and assumptions about future demand and market conditions. The Company has determined that 0 inventory reserve was necessary as of June 30, 2021 and December 31, 2020.

Fair Value of Financial InstrumentsMeasurements

 

The Company uses the fair value hierarchy to measure the value of its financial instruments. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based upon its own market assumptions. The basis for fair value measurements for each level within the hierarchy is described below:

 

 ●Level 1 – Quoted prices for identical assets or liabilities in active markets.
 ●Level 2 – Quoted prices for identical or similar assets and liabilities in markets that are not active; or other model-derived valuations whose inputs are directly or indirectly observable or whose significant value drivers are observable.
 ●Level 3 – Valuations derived from valuation techniques in which one or more significant inputs to the valuation model are unobservable and for which assumptions are used based on management estimates.

 

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.


The carrying amounts of certain cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, and amounts due to related parties approximate fair value due to the short-term nature of these instruments.

 

The fair value of lease obligations is determined using discounted cash flows based on the expected amounts and timing of the cash flows discounted using a market rate of interest adjusted for appropriate credit risk.

 

The contingent liabilities assumed on the acquisition of Somah (Note 4) consist of present values of royalty payments, performance warrants and pediatric voucher warrants, future rare pediatric voucher sales, and liquidation preference. Management measured these contingencies in accordance with Level 3 of the fair value hierarchy.

 

 i.The performance warrants and pediatric vouchers warrants liabilities were valued using a Monte Carlo simulation model utilizing the following weighted average assumptions: risk free rate of 1.121.19%, expected volatility of 72.6669.62%, expected dividend of $0, and expected life of 6.46 6.21 yearsyears. In. For the sixthree and nine months ended JuneSeptember 30, 2021, changes in these assumptions resulted in $1,296,000574,000 and $1,870,000 decrease in fair value of these liabilities.liabilities, respectively. At JuneSeptember 30, 2021 the fair market value of performance warrants and pediatric vouchers warrants liabilities was $3,473,0002,899,000.

 ii
ii.The present value of royalty payments was measured using the scenario-based methodology. In assessing the value attributed to the royalty payments, the estimated future cash flows were discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the revenue from net sales of the product. The cash flows derived from the Company’s fifteen-year strategic plan are based on managements’ expectations of market growth, industry reports and trends, and past performances. These projections are inherently uncertain due to the evolving impact of the COVID-19 pandemic. The discounted cash flow model included projections surrounding revenue, discount rates, and growth rates. The discount rates used to calculate the present value of royalty payments reflect specific risks of the Company and market conditions and the mid-range was estimated at 20.8%20.6%. InFor the sixthree and nine months ended JuneSeptember 30, 2021, changes in these assumptions resulted in $1,016,000380,000 and $1,396,000 increase in fair value of these liabilities.liabilities, respectively. At JuneSeptember 30, 2021 the fair market value of royalty payments was $3,202,0003,582,000.

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iii.Rare pediatric voucher sales liability was valued based on the scenario-based methodology where the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset – 20.8%20.6%. InFor the sixthree and nine months ended JuneSeptember 30, 2021, changes in these assumptions resulted in $Nil and $2,000 increase in fair value of this liability. liability, respectively. At JuneSeptember 30, 2021 the fair market value of the rare pediatric voucher sales liabilityvouchers was $1,150,000.
  
iv.The present value of liquidation preference liability, included in the contingent consideration, was determined using the Black-Scholes option pricing method and represents the fair value of the maximum payment amount according to the Agreement. The following assumptions were used in the Black-Scholes option pricing model: risk free rate of 0.21%, expected volatility of 78.93%, expected dividend of $0, and expected life of 5years. No changes to the fair value of liquidation preference liability were recorded in the periodthree and nine months ended JuneSeptember 30, 2021. At JuneSeptember 30, 2021 the fair market value of the liquidation preference was $1,823,000.

 

The derivative liabilities consisted of optional and automatic conversion features and the share redemption feature attached to the convertible notes, issued pursuant to the Unit Purchase Agreement (Note 9).

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The Company has no financial assets measured at fair value on a recurring basis. None of the Company’s non-financial assets or liabilities are recorded at fair value on a non-recurring basis. No transfers between levels have occurred during the periods presented.

 

TheMarizyme measures the following table summarizes our financial instruments that are measured at fair value on a recurring basisbasis. As at September 30, 2021, the fair values of these financial instruments were as of June 30, 2021:follows:

 SCHEDULE OF FAIR VALUES OF FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE ON A RECURRING BASIS

  Fair Value Hierarchy    
June 30, 2021 Level 1  Level 2  Level 3  December 31, 2020 
Liabilities                
Warrant liability $-  $-  $49,963  $- 
Derivative liability  -   -   24,982   - 
Contingent liability  -   -   9,648,000   - 
Total $-  $-  $9,722,945  $- 
  Fair Value Hierarchy    
September 30, 2021 Level 1  Level 2  Level 3  December 31, 2020 
Liabilities                
Derivative liabilities $-  $-  $391,648  $- 
Contingent liabilities  -   -   9,454,000   - 
Total $-  $-  $9,845,648  $- 

 

The following table provides a reconciliationrollforward of all liabilities measured at fair value using Level 3 significant unobservable inputs:

 SCHEDULE OF RECONCILIATION OF ALL LIABILITIES MEASURED AT FAIR VALUE USING LEVEL 3 SIGNIFICANT UNOBSERVABLE INPUTS

June 30, 2021 Contingent Liabilities 
Balance at December 31, 2020    - 
Initial valuation of contingent liabilities assumed on Somah acquisition1 $9,926,000 
Change in fair value  (278,000)
Balance at June 30, 2021 $9,648,000 
September 30, 2021 Contingent Liabilities 
Balance at December 31, 2020  - 
Derivative liabilities $391,648 
Initial valuation of contingent liabilities in connection with the Somah acquisition1 9,926,000 
Change in fair value of contingent liabilities  (472,000)
Balance at September 30, 2021 $9,845,648 

1Measured as at Somah acquisition date of July 31, 2020, see Note 5.4.

Fixed

Intangible Assets and Goodwill

 

FixedIntangible assets are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method over the assets estimated useful life. Upon the sale or retirement of property and equipment, the related cost less accumulated amortization and accumulated depreciationimpairment losses. Intangible assets acquired as a result of an acquisition or in a business combination are removed from the accounts and any gain or loss is reflected in consolidated statements of operations.

SCHEDULE OF USEFUL LIFE OF FIXED ASSETS

ClassificationEstimated Useful Lives
Equipment5 to 7 years
Furniture and fixtures4 to 7 years

Intangible Assets

Costs incurred to file patent applications and acquired intangibles are capitalized when the Company believes that there is a high likelihood that the patent will be issued and there will be future economic benefit associated with the patent. These costs will be amortized on a straight-line basis over a 20-year life from the date of patent filing. All costs associated with abandoned patent applications are expensed. In addition, the Company will review the carrying value of patents and other intangible assets for indicators of impairment at least annually and if it determines that the carrying value is impaired, it values the patent and any other intangible assetsmeasured at fair value. As of June 30, 2021, $122,746 has been capitalized for patents which have not been amortized.

Impairment of Long-lived Assetsvalue at the acquisition date.

 

The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortized over the estimated useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimates being accounted for on a prospective basis.

Goodwill represents the excess of the purchase price paid for the acquisition of subsidiaries over the fair value of the net assets acquired. Following the initial recognition, goodwill is measured at cost less any accumulated impairment losses.

In-Process Research and Development

The Company follows ASC 360 for its long-lived assets. evaluates whether acquired intangible assets are a business under applicable accounting standards. Additionally, the Company evaluates whether the acquired assets have a future alternative use. Intangible assets that do not have future alternative use are considered acquired in-process research and development. When the acquired in-process research and development assets are not part of a business combination, the value of the consideration paid is expensed on the acquisition date. Future costs to develop these assets are recorded to research and development expense as they are incurred.

Impairment of Long-Lived Assets

The Company’sCompany reviews long-lived assets, such as intellectualincluding property, are required to be reviewedplant and equipment, for impairment annually, or whenever events or changes in business circumstances indicate that the carrying amount of the assetassets may not be fully recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are less than the carrying amount. The impairment loss, if recognized, would be based on the excess of the carrying value of the impaired asset over its respective fair value. NaN impairment losses have been recorded through September 30, 2021.

Segment Reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker in making decisions on how to allocate resources and assess performance. The Company views its operations and manages its business as 1 operating segment.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding for the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and dilutive common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods. Dilutive common stock equivalents are comprised of unvested common stock, options and warrants. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding as inclusion of the potentially dilutive securities (warrants, stock options, and common shares subject to repurchase) would be antidilutive.

Recently Adopted Accounting Standards

There are no recently adopted accounting standards and recent accounting standards not yet adopted that the Company believes will have a material impact on the Company’s unaudited condensed consolidated financial statements.

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Recently Issued Accounting Pronouncements

 

The Company assesses the recoverabilityadoption impacts of its long-lived assetsrecently issued accounting standards by comparing the projected undiscounted net cash flows associated withFinancial Accounting Standards Board or other standard setting bodies on the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment,Company’s financial statements as well as material updates to previous assessments, if any, from the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. There were no new material accounting standards issued in the nine months ended September 30, 2021, that impacted the Company.

COVID-19

Since December 31, 2019, the outbreak of the novel strain of coronavirus, specifically identified as “COVID-19”, has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and physical distancing, have caused material disruptions to businesses globally resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. The duration and impact of the COVID-19 outbreak is basedunknown at this time, as is the efficacy of the government and central bank interventions. It is not possible to reliably estimate the length and severity of these developments and the impact on the excessfinancial results and condition of the carrying amount overCompany in future periods.

Marizyme continues to maintain business continuity during the fair value of those assets. Fair value is generally determined usingCOVID-19 pandemic and takes its cues from the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determinedU.S. government and public health officials to be recoverable, butkeep employees and business partners safe and healthy. Although the newly determined remaining estimated useful lives are shorter than originally estimated,financial results for three and nine months ended September 30, 2021 were not significantly impacted by COVID-19, Marizyme experienced decrease in sales due to a slow-down in the net book valuesproduct manufacturing. During 2021, Marizyme’s business partners were focused on addressing specific manufacturing needs of the long-lived assets are depreciated overU.S. government in battling COVID-19 pandemic. Additionally, during 2021, demand for elective surgeries have decreased due to overloaded medical systems and potential risks related to patients’ recovery during the newly determined remaining estimated useful lives.pandemic.

 

The Company determined that there were 0 impairments of long-lived assets at June 30, 2021 and December 31, 2020.

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Revenue Recognition

We recognize revenue under Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers” (“ASC 606”). The core principlecannot predict the impact of the revenue standard is thatprogression of COVID-19 on future results or the Company’s ability to raise capital due to a company should recognize revenue to depict the transfervariety of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. We only apply the five-step model to contracts when it is probable that we will collect the consideration to which we are entitled in exchange for the goods and services transferredfactors, including but not limited to the customer. The following five steps are appliedcontinued good health of Company employees, the ability of suppliers to achieve that core principle:

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

We have identified one performance obligation which is relatedcontinue to our DuraGraft product sales for our Distribution Partner channel, we recognize revenue for product sales atoperate and deliver, the time of deliveryability of the productCompany to our Distribution Partner (customer). The customer is invoiced,maintain operations, any further government and/or public actions taken in response to the pandemic and Payment Terms are Net 30. As our products have an expiration date, if a product expires before use, we will replaceultimately the product on the shelf at no charge. Revenue disaggregation for three months ended June 30, 2021 amounted to $2,586 in Spain, $1,920 in Singapore, and $17,313 in Switzerland and for the six months ended June 30, 2021 amounted to $80,180 in Spain, $8,650 in Singapore, $25,969 in Switzerland, $17,376 in Philippines, and $28,610 in Austria.

Direct Cost of Revenue

Cost of sales includes the actual cost of merchandise sold; the cost of transportation of merchandise from our third-party vendor to our distributer.

Net Income (Loss) per Share

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

Income Taxes

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

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

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

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

Segment Information

In accordance with the provisions of ASC 280-10, “Disclosures about Segments of an Enterprise and Related Information,” the Company is required to report financial and descriptive information about its reportable operating segments. The Company has 1 operating segment as of June 30, 2021 and December 31, 2020.

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Value of Warrants Issued with Debt

The Company estimates the grant date value of certain warrants issued with debt using a valuation method, such as the Black-Scholes option pricing model, or, if the terms are more complex - the Monte Carlo option lattice model. We record the amounts as interest expense or debt discount, depending on the terms of the agreement. These estimates involve multiple inputs and assumptions, including the market price of the Company’s common stock, stock price volatility and other assumptions as deemed appropriate. These inputs and assumptions are subject to management’s judgment and can vary materially from period to period.

Derivative Liabilities

The Company records the estimated fair value of the warrants as of the date of issuance and at each balance sheet reporting date thereafter. As of June 30, 2021, none of the convertible notes or warrants that resulted in the recording of the related derivative liabilities had a change in estimated value as they were granted at the end of May 2021 and any change at June 30, 2021 was deemed immaterial.

Effect of Recent Accounting Pronouncements

Recently Issued Accounting Standards Not Yet Adopted

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

Concentration of Credit Risk

The Company places its temporary cash investments with financial institutions insured by the Federal Deposit Insurance Corporation (“FDIC”). The Company has amounts over insured limits.

Amounts on deposit may at times exceed the FDIC insurance limit. The Company has not experienced any losses in such accounts.

Customer Concentrations

For the three and six months ended June 30, 2021, four customers/distributors selling to end customers made up 100% of the revenues. As of June 30, 2021, three customers/distributors made up 100% of accounts receivable.

Research and Development

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

NOTE 4 – LEASE

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

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

Right-Of-Use Asset and Lease Liability:

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

SCHEDULE OF RIGHT-OF-USE ASSET AND RELATED LEASE LIABILITY

  June 30,  December 31, 
  2021  2020 
Right-of-use asset $1,228,648  $1,317,830 
         
Total lease liability $1,244,562  $1,317,830 
Less: Current portion  243,070   243,292 
Lease liability, net of current portion $1,001,492  $1,074,538 

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The maturities of the lease liabilities are as follows as of June 30, 2021 for the periods ended December 31:

SCHEDULE OF MATURITIES OF LEASE LIABILITIES

     
2021 $104,498 
2022  277,142 
2023  277,142 
2024  277,142 
2025  277,142 
Thereafter  130,950 
Total lease payments  1,344,016 
Less: Present value discount  (99,454)
Total $1,244,562 

For the three and six months ended June 30, 2021, operating cash flows paid in connection with operating leases amounted to $12,008 and $47,576, respectively.

NOTE 5 – ACQUISITIONS

 

Krillase

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

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

DuraGraft®

 

On December 15, 2019, the Company entered into a contingent asset purchase agreement (the “Agreement”), as amended on March 31, 2020 and May 29, 2020, with Somahlution, LLC, Somahlution, Inc., and Somaceutica, LLC, companies duly organized under the laws of Delaware (collectively, “Somah” or “Seller”) to acquire all of the assets and none of the liabilities of Somah (the “Acquisition”), including DuraGraft®, a one-time intraoperative vascular graft treatment for use in vascular and bypass surgeries that maintains endothelial function and structure, and other related properties.

 

On July 31, 2020, the Company and Somah entered into Amendment No. 3 to the Agreement and the Agreement was finalized. Pursuant to the terms of this amendment, it was agreed that, as part of the Acquisition, the Company would acquire the outstanding capital stock of Somahlution, Inc., held by Somahlution, LLC, rather than the assets of Somahlution, Inc. This change to the Agreement was made to accommodate the European Union (“EU”) requirements with respect to the future manufacturing under Somahlution, Inc. of CE marked products for sale in the EU. In Amendment No. 3, the Company agreed to assume certain payables of Somah related to clinical and medical expenses. It was agreed that the payments on the assumed debts would be recorded as a prepaid royalty against future royalties. As of JuneSeptember 30, 2021 and December 31, 2020, prepaid royalties were $340,969and $344,321, respectively, and were recorded as a non-current asset. See Note 9.

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Pursuant to the Agreement and in consideration of the outstanding capital stock of Somahlution, Inc., the Company agreed to issue to Somah:

 

●10,000,00010 ,000,000 restricted shares of common stock of the Company;
●Warrants to purchase 3,000,000 restricted common shares of the Company with a strike price of $5.00 per common share and a term of five years years;;
●The Company, on a pro rata basis, shall grant the Seller the following contingent consideration upon receiving the U.S. Federal Drug Administration (“FDA”)FDA final approval and insurance reimbursement approval on the product:

 ○Grant of performance warrants for 4,000,000 restricted common shares of the Company, with a strike price determined based on the average of the closing prices of the common shares for the 30 calendar days following the date of the public announcement of FDA approval;
 ○Royalties to be paid on all net sales of the product acquired from Somah of 6%6% on the first $50 million of international net sales (and 5%5% on the first $50 million of U.S. net sales), 4%4% for greater than $50 million up to $200 million, and 2%2% for greater than $200 million;
 ○Payment of 10% of cash value of the rare pediatric voucher sales following the U.S. Federal Drug AdministrationFDA approval and subsequent sale to an unaffiliated third party of a rare pediatric voucher based on Somah’s DuraGraft product;
 ○Grant of rare pediatric voucher warrants to purchase an aggregate of 250,000 commons shares with a term of five years and a strike price determined based on the average of the closing prices of the common shares for the 30 calendar days following the date of the public announcement of FDA approval, and
 ○Liquidation preference, up to a maximum of $20 million upon the sale by the Company of all or substantially all of the assets relating to the Somah products. Upon the sale of either or both of the DuraGraft or Somah derived solid organ transplant products, the Company will pay 15% of the net sale proceeds towards the liquidation preference maximum amount.

11

 

On July 30, 2020, the Company completed the acquisition of Somah (the “Somah Transaction”). The acquisition of Somah provides the Company with access to DuraGraft and other related intangible assets, which upon approval by FDA, will further the Company’s continued growth and international-wide product rollout.

 

In accordance with ASC 805-10 the substance of a transaction constitutes a business combination as the business of Somah meets the definition of a business under the standard. TheAccordingly, the transaction was accounted for in accordance with the acquisition method of accounting, and the assets acquired, and the liabilities assumed have been recorded at their respective estimated fair values as of the acquisition date. The purchase price is based on management’s estimate of fair value of the common shares and warrants issued as well as contingent consideration and liquidation preference given up. The final allocation of the purchase price consideration to the assets acquired and liabilities assumed has been completed and finalized.

 

Details of the carrying amount and the fair value of identifiable assets and liabilities acquired and purchase consideration paid isare as follows:

 SCHEDULE OF PRELIMINARY ALLOCATION OF CONSIDERATION

 As previously reported Amendment As restated 
Consideration given up            
Consideration    
Common shares $12,500,000  $-  $12,500,000  $12,500,000 
Warrants  1,932,300   (732,300)  1,200,000   1,200,000 
Contingent consideration1  -   9,926,000   9,926,000   9,926,000 
Total consideration given up $14,432,300  $9,193,700  $23,626,000 
Total consideration $23,626,000 
                
Fair value of identifiable assets acquired, and liabilities assumed                
Net working capital $275,480  $(244,572) $30,908  $30,908 
Property, plant, and equipment  9,092   -   9,092   9,092 
Intangible assets  14,147,728   4,022,272   18,170,000   18,170,000 
Goodwill  -   5,416,000   5,416,000   5,416,000 
Total identifiable assets $14,432,300  $9,193,700  $23,626,000  $23,626,000 

 

1Contingent consideration, for the purposes of the final allocation of the purchase price consideration, was measured as at the date of Somah acquisition – July 31, 2020. During the sixnine months ended JuneSeptember 30, 2021, the fair market value of the contingent consideration,liabilities, measured in accordance with Level 3 of the fair value hierarchy, has decreased by $278,000 472,000(Note (Note 3).

 

The intangible assets acquired include:

 

●DuraGraft patent, with estimated remaining economic life of 13 years,,
●“Distribution Relationships”relationships” intangible asset related to DuraGraft product,products, with estimated remaining economic life of 10 years,, and
●In-process research and development intangible asset – “Cyto Protectant Life Sciences” with indefinite economic life.

 

See Note 8Goodwill is attributed to the workforce and profitability of the acquired business and is not deductible for a detailed descriptiontax purposes. A residual method methodology was used to estimate the fair market value goodwill. A pre-tax discount rate based on weighted average cost of amortization recorded on DuraGraft related intangible assets.capital of 33.8% was used in the fair value assumptions for the assembled workforce acquired.

Pro-forma revenue, net income, and earnings per share are not presented for this acquisition as they are not material.

 

1216
 

 

Dr. Vithal D. Dhaduk,NOTE 5 – LEASES

On December 11, 2020, the Company entered into a co-founder5.5 - year lease agreement for administrative office and laboratories, which commenced in December 2020 at a monthly rent of Somahlution, LLC (“Dhaduk”)approximately $10,817, increasing by 2.5% annually beginning in the second year of the lease until the end of the term. Additionally, pursuant to the agreement, the Company will pay approximately $12,000 per month in operating expenses. As at September 30, 2021, the remaining lease term was 4.67 years. The lease had been classified as an operating lease.

The assets and liabilities from the lease were recognized at the lease commencement date based on the present value of remaining lease payments over the lease term using the discount rate of 3.95%, which is the subjectaverage commercial interest available at the time.

The total rent expense for the three months ended September 30, 2021 and 2020 was approximately $77,357 and $Nil, respectively. The total rent expense for the nine months ended September 30, 2021 and 2020 was approximately $168,769 and $Nil, respectively.

The following table summarizes supplemental balance sheet information related to the operating lease as of a complaint filed inSeptember 30, 2021 and December 31, 2020.

SCHEDULE OF RIGHT-OF-USE ASSET AND RELATED LEASE LIABILITY

  September 30, 2021  December 31, 2020 
Right-of-use asset $1,163,159  $1,317,830 
         
Operating lease liabilities, current $260,106  $243,292 
Operating lease liabilities, non-current  941,732   1,074,538 
Total operating lease liabilities $1,201,838  $1,317,830 

As at September 30, 2021, the United States District Court, Middle Districtmaturities of Pennsylvania, Civil Action No. 3:17 cv 02243 inthe lease liabilities for the periods ended December 2017 by Mukeshkkumar B. Patel (“Patel”), a former business partner of Dhaduk, which complaint makes claims of breach of contract, promissory estoppel and unjust enrichment regarding a Memorandum of Understanding, dated July 16, 2015, between Patel and Dhaduk (“MOU”). The MOU provided that Dhaduk would pay Patel $9.45 million31 were as consideration for Patel’s agreement to, among other things, (i) exit certain legal entities that were purportedly jointly owned by certain affiliates of Dhaduk and Patel, including Somahlution LLC, and (ii) relinquish his ownership interests in such entities. On December 2, 2019, the court granted Patel’s motion for summary judgment on his breach of contract claim, which judgment Dhaduk is currently appealing (such legal proceedings, collectively referred to as the “Dhaduk Litigation”). The Company is not a named defendant in the Dhaduk Litigation, and the court’s summary judgment is against Dhaduk in his personal capacity.follows:

SCHEDULE OF MATURITIES OF LEASE LIABILITIES

      
2021  $52,249 
2022   277,142 
2023   277,142 
2024   277,142 
2025   277,142 
Thereafter   130,950 
Total lease payments   1,291,767 
Total lease payments   1,291,767 
Less: present value discount   (89,929)
Total  $1,201,838 

 

NOTE 6 – COMMITMENTSPROPERTY, PLANT AND CONTINGENCIESEQUIPMENT, NET

 

Legal Matters

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of June 30, 2021, there were no pending or threatened lawsuits.

Contingencies

On July 13, 2019, the Company signed a consulting agreement with an individual to advise the Board of Directors. The individual receives $30,000 per month through July 13, 2022Property, plant and received an option to purchase 250,000 shares of common stock at a strike price of $1.50, which vest monthly through July 13, 2021. The vesting of these options was acceleratedequipment, summarized by the Board on September 2, 2020. See Note 10. The agreement also provided for royalties derived directly from the assets related to wound healing, debridement, grafting, dental applications for both human and pet, and thrombosis (see Note 5 – Krillase). The royalties associated with the acquisition of Krillase will be calculated as follows:

Royalties on sales equal to:

10% on net sales

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

Royalties on U.S. sales equal to:

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

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

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

Royalties on sales outside of the U.S.:

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

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

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

The royalties are in perpetuity. As of June 30, 2021, there has been no revenue related to the above royalties.

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

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Employment and Consulting Agreements

On September 1, 2020, Bruce Harmon executed a consulting agreement and was named as chief financial officer. He is compensated $120,000 annually, received 40,000 shares of common stock vesting over one year. On October 22, 2020, Mr. Harmon received 120,000 options for common stock vesting over three years with an exercise price of $1.25. See Note 10. On November 1, 2020, Mr. Harmon became an employee of the Company thereby cancelling the consulting agreement. On March 5, 2021, Mr. Harmon executed a letter of understanding for employment. See Note 1.

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

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

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

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

Risks and Uncertainties

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

NOTE 7 – FIXED ASSETS

Fixed assets,major category, stated at cost, less accumulated depreciation at JuneSeptember 30, 2021 and December 31, 2020 consisted of the following:

 SCHEDULE OF PROPERTY PLANT AND& EQUIPMENT

 June 30, December 31, 
 2021 2020  September 30, 2021  December 31, 2020 
Furniture and equipment $701  $701  $701  $701 
Computer related  7,220   7,220   7,220   7,220 
Machinery and equipment  1,171   1,171   1,171   1,171 
Total  9,092   9,092  $9,092  $9,092 
Less: accumulation depreciation  (6,394)  (1,970)
Property and equipment, net $2,698  $7,122 
Less: accumulated amortization  (7,819)  (1,970)
Property, plant and equipment, net $1,273  $7,122 

 

Depreciation expense for the three months ended JuneSeptember 30, 2021 and 2020 was $1,1251,425 and $01,313, respectively, and for the sixnine months ended JuneSeptember 30, 2021 and 2020 was $4,4255,849 and $01,313, respectively.

NOTE 7 – INTANGIBLE ASSETS

Krillase

As part of the asset acquisition of ACB Holding AB, Reg. No. 559119-5762, completed on September 12, 2018, Marizyme acquired all rights, titles, and interest in the Krillase technology, a group of intangible assets worth $28,600,000. Krillase is a naturally occurring enzyme that acts to break protein bonds and has applications in wound debridement, would healing, dental care and thrombosis. The useful lives of the intangible assets are based on the life of the patent and related technology. The patents and related technology for Krillase have not been amortized since the acquisition, as they have not yet been put into operations.

The Company anticipates Krillase being placed into service in 2023. The Company has evaluated this asset for impairment and has determined that due to COVID-19 delaying the next steps for roll out of this technology, along with the associated value of the research and development, the status of the clinical trials, and other pertinent proprietary technology, there is no impairment required.

13

DuraGraft

As part of Somah acquisition (Note 4), Marizyme purchased $18,170,000 of intangible assets related to the DuraGraft® technology.

SUMMARY OF INTANGIBLE ASSETS AMORTIZATION EXPENSE

  September 30, 2021  December 31, 2020 
  Gross Carrying Amount  Accumulated Amortization  Net Carrying Amount  Gross Carrying Amount  Accumulated Amortization  Net Carrying Amount 
Krillase intangible assets $  28,600,000  $-  $  28,600,000  $  28,600,000  $-  $  28,600,000 
DuraGraft patent  5,256,000   (471,691)  4,784,309   14,147,729   (589,489)  13,558,240 
Distributor relationship  308,000   (35,933)  272,067   -   -   - 
IPR&D - Cyto Protectant Life Sciences  12,606,000   -   12,606,000   -   -   - 
Patents in process  122,745   -   122,745   119,971   -   119,971 
Total intangibles $46,892,745  $(507,624) $46,385,121  $42,867,700  $(589,489) $42,278,211 

The following changes to the Company’s intangible assets had taken place in the periods indicated:

SCHEDULE OF INTANGIBLE ASSETS

Balance, December 31, 2019 $28,613,000 
Acquired in asset purchase agreement  14,147,729 
Additions  106,971 
Amortization expense  (589,489)
Balance, December 31, 2020  42,278,211 
Acquired in Somah Transaction1  4,022,271 
Additions  2,775 
Amortization expense1  81,864 
Balance, September 30, 2021 $46,385,121 

1To account for Somah Transaction measurement period adjustments, the Company restated the Quarterly Report on Form 10-Q for the three and six month ended June 30, 2021, originally filed on August 23, 2021. As a result of the restatement, the value of DuraGraft intangibles purchased with the Somah Transaction increased by $4,022,271 and related overestimated amortization of the intangibles decreased by $898,026.

The Company has recorded amortization expense of $108,777 and $326,331 for the three and nine months ended September 30, 2021, respectively and $341,270 for the three and nine months ended September 30, 2020.

Future amortizations for DuraGraft related intangible assets for the next five years will be $435,108 for each year from 2021 through 2026 and $2,880,836 for 2027 and thereafter. Amortization related to in process research and development will be determined upon the Company achieving commercialization.

NOTE 8 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses, summarized by major category, as of September 30, 2021 and December 31, 2020 consists of the following:

SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

  September 30, 2021  December 31, 2020 
Trade accounts payable $1,117,517  $325,830 
Accrued expenses  180,846   21,555 
Accrued compensation expenses  98,582   130,718 
Total accounts payable and accrued expenses $1,396,945  $478,103 

 

NOTE 89 - CONVERTIBLE PROMISSORY NOTES AND WARRANTS

On May 27, 2021, the Company entered into a Unit Purchase Agreement (“Unit Purchase Agreement”) to sell up to 4,000,000 units (the ‘Units’) at a price per Unit of $2.50. Each Unit is comprised of (i) a convertible promissory note (the “Convertible Note”) convertible into common stock of the Company at a price per share of $2.50, (ii) a warrant to purchase one share of common stock of the Company (the ‘Class A Warrant’); and (iii) a second warrant to purchase common stock of the Company (the “Class B Warrant”).

In May 2021, the Company issued and sold 29,978 Units at a price of $2.50 per Unit for gross proceeds of $74,945, consisting of Convertible Notes of $74,945, Class A Warrants for the purchase of 29,978 shares of common stock and Class B Warrants for the purchase of 29,978 shares of common stock. The Company incurred related issuance costs of $6,745.

In July 2021, the Company issued and sold 440,000 Units under the Unit Purchase Program for gross proceeds of $1,100,000. The Units included the Convertible Notes for $1,100,000, Class A Warrants for 440,000 shares of common stock and Class B Warrants for 440,000 shares of common stock. The Company incurred related issuance costs of $99,000.

14

On September 29, 2021, the Company, with the consent of all Unit holders, amended the May 2021 Unit Agreements. By rescinding their investment, the Unit holders agreed to amend the Unit Purchase Agreement resulted in the following changes to the offering:

(i)Decreased the offering price under the Unit Purchase Agreement from $2.50 per Unit to $2.25 per Unit for all future sales under the Unit Purchase Agreement. No proceeds from the initial investment were returned,
(ii)Decreased the conversion price from $2.50 per share to $2.25 per share for all current Unit holders and all future investors, and
(iii)Cancelled all Class A Warrants and Class B Warrants and replaced them with Class C Warrants.

The Company determined that the modifications of Unit Purchase Agreement were not significant enough to be considered substantial, therefore the values of original instruments issued were not adjusted. As a result of this modification, the total of 469,978 Units previously issued were replaced with an aggregate of 522,198 pro-rata Units.

The Company determined that the optional and automatic conversion feature and the share redemption feature attached to the convertible notes meet the definition of derivative liabilities and that the detachable warrants issued do not meet the definition of a liability and therefore will be accounted for as an equity instrument.

The initial $571,807fair value of the warrants and $391,648fair value of derivative liabilities issued have been recorded as debt discount and are being amortized to interest and accretion expense using the effective interest method over the term of the Convertible Notes.

 SCHEDULE OF CONVERTIBLE NOTES

  September 30, 2021  December 31, 2020 
Convertible notes issued $1,174,945  $        - 
Issuance costs  

(105,745

)  - 
Debt discount  (964,153)  - 
Debt accretion  74,410   - 
Convertible notes, net of debt discount $179,457  $- 

During the three and nine months ended September 30, 2021, the Company recognized interest and accretion expense of $70,221 and $74,410, respectively (September 30, 2020 - $Nil and $Nil) in the condensed consolidated statements of operations.

Convertible Notes Terms

The Convertible Notes mature in 24 months from the initial closing date and accrue 10% of simple interest per annum on the outstanding principal amount.The Convertible Notes principal and accrued interest can be converted at any time at the option of the holder at a conversion price of $2.25 per share (before the modification - $2.50 per share). In the event the Company consummates, while the Convertible Note is outstanding, an equity financing with a gross aggregate amount of securities sold of not less than $10,000,000 (“Qualified Financing”), then all outstanding principal, together with all unpaid accrued interest under the Convertible Notes, shall automatically convert into shares of the equity financing at the lesser of (i) 75% of the cash price per share paid in the financing and the conversion price of $2.25 per unit. The Convertible Notes are secured by a first priority security interest in all assets of the Company.

Warrants Terms

Class A

●Exercise price is the lower of (i) $3.13 per share, or (ii) the Automatic Conversion Price (the lesser of (i) 75% of the cash price per share paid by the other purchasers of next round securities in the Qualified Financing and (ii) the Conversion Price ($2.50, subject to Customary Antidilution Adjustments).
●Exercisable for a period of 5 years from issuance.
●Warrant Coverage: 100%.

Class B

●Exercise price is $5.00 per share,
●Exercisable for a period of 5 years from issuance.
●Warrant Coverage: 100%.

Class C

●Exercise price is the lower of (i) $2.25 per share, or (ii) the Automatic Conversion Price (the lesser of (i) 75% of the cash price per share paid by the other purchasers of next round securities in the Qualified Financing and (ii) the Conversion Price ($2.25, subject to Customary Antidilution Adjustments).
●Exercisable for a period of 5 years from issuance.
●Warrant Coverage: 200%.

NOTE 10 – INTANGIBLE ASSETSSTOCKHOLDERS’ EQUITY

a) Preferred stock

The Company is authorized to issue a total number of 25,000,000 shares of “blank check” preferred stock with a par value of $0.001. As of September 30, 2021, and December 31, 2020, there were 0 shares of preferred stock issued or outstanding.

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b) Common stock

The Company is authorized to issue a total number of 75,000,000 shares of common stock with a par value of $0.001.

As of September 30, 2021 and December 31, 2020, there were 35,928,188 shares of common stock issued and outstanding. The company did not issue any common stock during the three and nine months ended September 30, 2021.

c) Options

On January 13, 2021, the Board of Directors approved the Marizyme’s 2021 Stock Incentive Plan (“SIP”). The SIP incorporates stock options issued prior to January 13, 2021. The SIP authorized 5,300,000 options for issuance. As of September 30, 2021, there remains 1,527,183 options available for issuance.

During the nine months ended September 30, 2021, the company granted 732,500 (December 31, 2020 – 1,340,000) share purchase options to directors, officers, employees, and consultants of the Company. The weighted-average assumptions used to estimate the fair value of stock options using the Black-Scholes option valuation model were as follows:

SCHEDULE OF SHARE BASED STOCK OPTION VALUATION ASSUMPTIONS

  2021  2020 
Risk-free interest rate  0.69%  0.93%
Volatility  232.69%  241.88%
Exercise price $1.25  $1.37 
Dividend yield  0%  0%
Forfeiture rate  0%  0%
Expected life (years)  3   10 

The Company recognizes forfeitures as they occur.

The summary of option activity for the nine months ended September 30, 2021 is as follows:

SCHEDULE OF STOCK OPTION ACTIVITY

  Number of
Options		  Weighted
Average
Exercise Price		  Weighted
Average
Contractual Life		  Total Intrinsic
Value		 
Outstanding at December 31, 2019  2,715,000  $1.50   9.48  $N/A1
Granted  1,340,000   1.25         
Exercised  (254,057)  1.02         
Outstanding at December 31, 2020  3,800,943  $1.36   8.82  $123,600 
Granted  732,500   1.25         
Forfeited  (760,626)  1.25         
Outstanding at September 30, 2021  3,772,817  $1.37   8.13  $97,850 
Exercisable at September 30, 2021  3,074,476  $1.39   3.77  $97,850 

1Total intrinsic value for stock options outstanding as at December 31, 2019 is not available as it was not disclosed in the previous years filings.

d) Warrants

The warrant activity for the periods presented is as follows:

Schedule of Options Outstanding and Issued

  Number  Weighted Average
Exercise Price		 
December 30, 2019  113,637  $3.00 
Issued on Somah acquisition (Note 4)  3,000,000   5.00 
Issued  280,014   1.38 
December 30, 2020  3,393,651  $2.13 
Issued  1,044,396   2.25 
September 30, 2021  4,438,047  $2.16 

During the three and nine months ended September 30, 2021, the Company issued the following:

On May 27, 2021, pursuant to the Unit Purchase Agreement (Note 9) the Company issued Class A Warrants for the purchase of 29,978 shares of common stock and Class B Warrants for the purchase of 29,978 shares of common stock. The Class A warrants had a strike price of $3.13 per share and a term of five years. The Class B warrants had a strike price of $5.00 per share and a term of five years.

In July 2021 pursuant to the May Unit Purchase Agreement the Company issued Class A Warrants for 440,000 shares of common stock and Class B Warrants for 440,000 shares of common stock.

 

On September 12, 2018,29, 2021, pursuant to the Company consummatedmodification to the Unit Purchase Agreement as described in Note 9, all Class A and Class B warrants were replaced with an asset acquisition with ACB Holding AB, Reg. No. 559119-5762,aggregate of 1,044,396 pro-rata Class C warrants. The warrants have a Swedish corporation to acquire all right, titlestrike price of 2.25 per share and interest in their Krillase technology in exchangea term of five years. The detachable warrants issued were accounted for 16.98 million shares of common stock. Krillase is a naturally occurring enzyme that acts to break protein bondsas an equity instrument and has applications in dental care, wound healing and thrombosis. The transaction was recorded atwere ascribed the fair market value of $571,807 using the shares. No amortization has been recorded as the patents and patent applications are not yet in a position to produce cash flows.residual fair value allocation method.

 

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During the year end December 31, 2020, the Company incurred legal and filing fees of $17,801 associated with a patent application for pharmaceutical compositions and methods forissued the treatment of thrombosis. The patents are pending. The Company capitalized these costs.following:

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On July 31, 2020, the Company completed the Somah Transaction and acquired DuraGraft® technology in exchange forAcquisition (Note 4) whereas 10,000,000 shares of common stock and 3,000,000 warrants were issued. The warrants have a strike price of $5.00 per share and certain contingent considerations (Note 5). Somah is engaged in developing products to prevent ischemic injury to organs and tissues and DuraGraft® is a one-time intraoperative vascular graft treatment for use in vascular and bypass surgeries that maintains endothelial function and structure, and other related properties.

SUMMARY OF INTANGIBLE ASSETS AMORTIZATION EXPENSE

  June 30, 2021    
  Restated  December 31, 2020 
  Gross Carrying Amount  Accumulated Amortization  Net Carrying Amount  Gross Carrying Amount  Accumulated Amortization  Net Carrying Amount 
Krillase intangible assets $28,600,000  $-  $28,600,000  $28,600,000  $-  $28,600,000 
DuraGraft, patent  5,256,000   (370,615)  4,885,385   14,147,729   (589,489)  13,558,240 
Distributor Relationship  308,000   (28,233)  279,767   -    -    -  
IPR&D - Cyto Protectant Life Sciences  12,606,000   -   12,606,000   -    -    -  
Patents in Process  122,745   -   122,745   119,971   -    119,971 
Total Intangibles $46,892,745  $(398,848) $46,493,897  $42,867,700  $(589,489) $42,278,211 

SCHEDULE OF INTANGIBLE ASSETS

Balance, December 31, 2019 $28,613,000 
Acquired in asset purchase agreement  14,147,729 
Additions  106,971 
Amortization expense  (589,489)
Balance, December 31, 2020 42,278,211 
Acquired in Somah Transaction (amended)  4,022,271 
Additions  2,775 
Amortization expense (amended)  190,640 
Balance, June 30, 2021 $46,493,897 

As a resultterm of restatement to account for measurement period adjustments, described in Notes 5 and 12, the value of DuraGraft intangibles purchased with the Somah Transaction increased by $4,920,298five years. The intangible assets acquired included:

●DuraGraft patent, with estimated remaining economic life of 13 years,
●“Distribution Relationships” intangible asset related to DuraGraft product, with estimated remaining economic life of 10 years, and
●In-process research and development intangible asset – “Cyto Protectant Life Sciences” with indefinite economic life.

The useful livesvaluation of the intangible assets are based onwarrants granted was completed in the life ofsix months ended June 30, 2021, and the patent and related technology. The patents and related technology for Krillase are not currently being amortized as they have not yet been put into operations.fair market value was determined to be $0.40 per share or $1,200,000.

 

Future amortizationsOn September 25, 2020, the Company issued two warrants for DuraGraft related intangible assetsservices. The warrants were to purchase for the next 168,008 and 112,006 shares with a strike price of $1.375 and a term of five years will. The fair market value was determined to be $435,108 0.9062 per share or $152,249for each year from 2021 through 2026 and $2,989,613 101,500, respectively, or $253,749for 2027 and thereafter., collectively. Amortization related to in process research and development will be determined upon the Company achieving commercialization.

 

NOTE 9 – RELATED PARTY TRANSACTIONSe) Stock-based compensation

The Company has recorded a prepaid royalty to the shareholders of Somahlution, LLC in regard to the acquisition (see Note 5). The primary beneficial owner is Dr. Vithal Dhaduk, currently the CEO (appointed in June 2021, and previously a director appointed in 2021) and significant shareholder of the Company. Prepaid royalties were $340,969 at June 30, 2021 and $344,321 at December 31, 2020.

During the three and nine month ended September 30, 2021, the Company recorded $64,074 and $593,116, respectively, in non-cash share-based compensation (September 30, 2020 - $1,107,085 and $1,674,200 respectively). Additionally, the Company recognized $33,333of stock-based compensation on restricted common stock in the nine months ended JuneSeptember 30, 2021, a shareholder and consultant of the Company loaned the Company $215,000 at an interest rate of 0%, which is included on the balance sheet at June 30, 2021 as Due to Related Party. The payment terms are undefined and as such the Company determined to classify the balance owed as a current liability.2021.

 

In June 2021, the former CEO loaned the Company $20,000 at an interest rateAs of 0%. Upon termination of the CEO’s employment in JuneSeptember 30, 2021, the Company agreedhad $652,932 of unrecognized stock-based compensation expense, which is expected to repay the loanbe recognized over a weighted-average period of $20,0002.44 plus an additional $30,000, for a total of $50,000 included in Due to Related Party on the balance sheet at June 30, 2021. The Company paid the $50,000 in July 2021.years.

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NOTE 10 - CONVERTIBLE PROMISSORY NOTES AND WARRANTS

On May 27, 2021, the Company entered into a Unit Purchase Agreement to sell up to 4,000,000 units (the “Units”) at a price per Unit of $2.50 (the “Price Per Unit”). Each Unit is comprised of (i) a convertible promissory note (the “Note”) convertible into common stock of the Company, (ii) a warrant to purchase one share of common stock of the Company (the “Class A Warrant”); and (iii) a second warrant to purchase common stock of the Company (the “Class B Warrant”).

In May 2021, the Company issued and sold 29,978 Units at a price of $2.50 per Unit for gross proceeds of $74,945, consisting of Notes of $74,945, Class A Warrants for the purchase of 29,978 shares of common stock and Class B Warrants for the purchase of 29,978 shares of common stock. The Company incurred related issuance costs of $6,745 which will be amortized over the term of the Notes.

In July 2021, the Company issued and sold 440,000 Units under the Unit Purchase Program for gross proceeds of $1,100,000. The Units included Notes for $1,100,000, Class A Warrants for 440,000 shares of common stock and Class B Warrants for 440,000 shares of common stock.

The Company made the preliminary conclusion that the Notes had an embedded derivative related to the automatic conversion feature discount which requires bifurcation. The Company estimated the value of this derivative as $24,982 and recorded this derivative as a liability on the balance sheet as of June 30, 2021.

The Company estimated the value of the Class A Warrants and Class B Warrants and ascribed this value to the remainder of the proceeds at the issuance date of the Units as this estimated value exceeded the remainder of the gross proceeds, recording the warrants as a liability on the balance sheet of $49,963 as of June 30, 2021.

As all the Unit proceeds were allocated to the estimated values of the derivative and the warrants, the Company recorded the value of the Notes as $0 on issuance of the Units and will accrete to the face value of the Notes through maturity date. During the three and six months ended June 30, 2021, the Company recognized $3,491 of interest expense related to this accretion. At June 30, 2021, total future maturities of principal for the Notes was $74,945, all of which matures in May 2023. At June 30, 2021, this principal balance is reduced by the remaining debt discount ascribed to the derivative and warrants of $71,454, with a Note balance of $3,491 on the balance sheet at June 30, 2021.

Notes

The terms of the Notes are as follows:

Term - The Notes will mature 24 months from the initial closing date unless earlier converted or prepaid.

Interest - Interest shall accrue on the outstanding principal amount of the Notes at a simple rate of 10% per annum. Interest shall be paid at maturity or converted along with principal at the time of conversion of the Notes.

Optional Conversion - The outstanding principal amount of the Notes and all accrued, but unpaid interest shall be convertible at any time at the option of the holder at an initial conversion price of $2.50 (the “Conversion Price”).

Automatic Conversion - In the event the Company consummates, while the Note is outstanding, an equity financing with a gross aggregate amount of securities sold of not less than $10,000,000 (the “Qualified Financing”), then all outstanding principal, together with all unpaid accrued interest under the Notes, shall automatically convert into shares of the equity financing at the lesser of (i) 75% of the cash price per share paid in the Qualified Financing and

(ii)       the conversion price of $2.50 per unit. If preferred stock is issued in the equity financing and the conversion price of the Notes is less than the cash price per share issued in the Qualified Financing, the Company may, solely elect to convert the Notes into shares of a newly created series of capital stock having the identical rights, privileges, preferences and restrictions as the preferred stock issued in the Qualified Financing, and otherwise on the same terms and conditions.

The Notes are secured by a first priority security interest in all assets of the Company.

Warrants

The Class A Warrants entitle the holder to the right, for a period of five (5) years from each closing date, to purchase shares of the Company’s Common stock at an exercise price equal to the lower of (i) $3.13 or (ii) the Automatic Conversion Price (initially $2.50); provided, however, that the exercise price shall not be less than $1.00 (except as the result of antidilution adjustments). Company may force the exercise of the Class A Warrants if, at any time following the sixty day anniversary of the final closing date or termination of the offering, (i) the shares issuable upon exercise of the Class A Warrants are registered or the purchasers otherwise have the ability to trade the underlying shares without restriction, (ii) the 20-day volume-weighted daily average price of the Company’s Common Stock exceeds $6 per share, and (iii) the average daily trading volume is at least $1,000,000 shares during such 20-day period. The Class A Warrants contain customary antidilution adjustments and additionally, if after the issuance date of the Class A Warrants, the Company issues or sells any shares of common stock (other than in the Qualified Financing or exempted securities) or issues any rights, warrants, or options, without consideration or for consideration per share less than the exercise price of the Warrants, then the exercise price of the Warrants shall be reduced to an exercise price equal to the consideration paid per share.

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The Class B Warrants will entitle the Purchasers to the right, for a period of five (5) years from each closing date, to purchase shares of the Company’s common stock at an exercise price equal $5.00 per share. The Company may force the exercise of the Class B Warrants if, at any time following the sixty day anniversary of the initial closing date, (i) the shares issuable upon exercise of the Class B Warrants are registered or the purchasers otherwise have the ability to trade the underlying shares without restriction, (ii) the 20-day volume-weighted daily average price of the Company’s Common Stock exceeds $8 per share, and (iii) the average daily trading volume is at least $1,000,000 during such 20-day period. The Class B Warrants contain customary antidilution adjustments but do not contain price based antidilution protection.

 

NOTE 11 – STOCKHOLDERS’ EQUITYRELATED PARTY TRANSACTIONS

As at September 30, 2021, the Company owed an aggregate of $638,530 (December 31, 2020 - $Nil) to related parties of the Company, comprised of the following:

i.During the three months ended September 30, 2021, the Company entered into a promissory note agreement with a related party of the Company, for the total proceeds of $151,000. The note bears no interest, unsecured, and has no terms of repayment.
ii.During the nine months ended September 30, 2021, the Company entered into another promissory note agreement with a related party and shareholder of the Company, for the total proceeds of $215,000. The note bears no interest, unsecured, and has no terms of repayment.
iii.The Company received consulting services from a shareholder and consultant of the Company, and pursuant to the agreement incurred $30,000 and $270,000 in professional expenses in the three and nine months ended September 30, 2021, respectively (three and nine months ended September 30, 2020 - $90,000). The related party also incurred $2,530 in administrative and general expenses on behalf of the Company. As at September 30, 2021, the Company owes the related party a total of $272,530 for consulting services and expenses reimbursement (December 31, 2020 – $Nil).

Additionally, as part of the Somah transaction in 2020 (Note 4), the Company recorded a prepaid royalty to the shareholders of Somahlution. The primary beneficial owner is Dr. Vithal Dhaduk, currently the Interim CEO, a director, and significant shareholder of the Company. As at September 30, 2021, the company had $340,969 in prepaid royalties (December 31, 2020 - $344,321) which had been classified as non-current in the condensed consolidation balance sheets.

NOTE 12 – COMMITMENTS AND CONTINGENCIES

 

Preferred stockLegal Matters

 

Our ArticlesThe Interim CEO of Incorporation authorizeMarizyme, Dr. Vithal D. Dhaduk, also, a co-founder of Somahlution, LLC (“Dhaduk”), was the issuancesubject of 25,000,000 sharesa complaint filed in the United States District Court, Middle District of “blank check” preferred stock withPennsylvania, Civil Action No. 3:17 cv 02243 in December 2017 by Mukeshkkumar B. Patel (“Patel”), a par valueformer business partner of $0.001Dhaduk, which complaint made claims of breach of contract, promissory estoppel and unjust enrichment regarding a Memorandum of Understanding, dated July 16, 2015, between Patel and Dhaduk (“MOU”). AsThe MOU provided that Dhaduk would pay Patel $9,450,000 as consideration for Patel’s agreement to, among other things, (i) exit certain legal entities that were purportedly jointly owned by certain affiliates of JuneDhaduk and Patel, including Somahlution LLC, and (ii) relinquish his ownership interests in such entities. On December 2, 2019, the court granted Patel’s motion for summary judgment on his breach of contract claim.

The complaint was settled between Dhaduk and Patel in the nine months ended September 30, 2021, and December 31, 2020, there were 0 shares issued and outstanding, respectively.with no financial impact to the Company.

 

Common stockContingencies

 

a.On July 13, 2019, the Company signed a consulting agreement, whereby the individual will receive:

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

●$30,000 per month through July 13, 2022,
●Option to purchase 250,000 shares of common stock at a strike price of $1.50, which vest monthly through July 13, 2021. The vesting of these options was accelerated by the Board of Directors on September 2, 2020.
●Royalties based on sales of Krillase assets, equal to 10% of net sales of the product. During the nine months ended September 30, 2021, no revenues were derived from sales of Krillase product.

 

As of June 30, 2021 and December 31, 2020, there were 35,928,188 shares of common stock issued and outstanding.

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b.As part of the DuraGraft Acquisition, completed on July 31, 2020 (Note 4), the Company entered into the Agreement with Somah stockholders, whereby Marizyme is legally obligated to pay royalties on all net sales for Somahlution, Inc. The royalties associated with the Agreement are calculated as follows:

Royalties on U.S. sales equal to:

●5% on the first $50,000,000 of net sales,
●4% on net sales of $50,000,001 up to $200,000,000, and
●2% on net sales over $200,000,000.

 

Options

On January 13, 2021, the Board of Directors approved the Marizyme, Inc. 2021 Stock Incentive Plan (“SIP”). The SIP incorporates stock options issued prior to January 13, 2021. The SIP authorized 5,300,000 options for issuance. As of June 30, 2021, there remains 512,500 options available for issuance.

The summary of option activity for the six months ended June 30, 2021 is as follows:

SCHEDULE OF STOCK OPTION ACTIVITY

     Weighted  Weighted    
     Average  Average  Total 
  Number of  Exercise  Contractual  Intrinsic 
  Options  Price  Life  Value 
Outstanding at December 31, 2020  3,800,943  $1.36         
Granted  732,500  $1.25         
Exercised  -  $-         
Forfeited  (412,500) $1.25         
Outstanding at June 30, 2021  4,120,943  $1.36   8.82  $388,350 
Exercisable at June 30, 2021  3,082,402  $1.39��        

The fair value of each stock option was estimated using the Black Scholes pricing model which takes into account asRoyalties on sales outside of the grant date the exercise price (ranging from $1.01 to $1.50 per share in the first six months of 2021) and expected life of the stock option (10 years in 2021), the current price of the underlying stock and its expected volatility (ranging from 179.31% to 304.44%) in the first six months of 2021), expected dividends (0%) on the stock and the risk-free interest rate (0.93%) for the term of the stock option. In addition, the Company recognizes forfeitures as they occur.

The fair value of each stock option was estimated using the Black Scholes pricing model which takes into account as of the grant date the exercise price (ranging from $1.01 to $1.37 per share in 2020) and expected life of the stock option (10 years in 2020), the current price of the underlying stock and its expected volatility (ranging from 179.31% to 304.44% in 2020), expected dividends (0%) on the stock and the risk-free interest rate (0.93%) for the term of the stock option. In addition, the Company recognizes forfeitures as they occur.

Warrants

As of June 30, 2021 and December 31, 2020, there are 3,393,651warrants outstanding, not including Class A Warrants or Class B Warrants issued in the March 2021 Unit Purchase Agreement (see Note 10).

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NOTE 12 – RESTATEMENT

According to ASC 805, the measurement period is a reasonable time period after the acquisition date when the acquirer may adjust the provisional amounts recognized for a business combination if the necessary information is not available by the end of the reporting period in which the acquisition occurs. Subsequent to the Original Filing, filed with the SEC on August 23, 2021, the valuation of the assets acquired with the Somah Transaction was finalized, therefore the management of Marizyme chose to amend the Original Filing to disclose the nature and amount of measurement-period adjustments.

As a result, the following items have been adjusted as at and for the three and six months ended June 30, 2021:U.S.:

 

 ●Intangible assets (Notes 5 and 8),6% on the first $50,000,000 of net sales,
 ●Goodwill (Note 5),4% on net sales of $50,000,001 up to $200,000,000, and
 ●Accounts payable2% on net sales over $200,000,000.

The royalties are in perpetuity. As at September 30, 2021, the Company had not earned any revenues from Krillase and did not have any sales of the DuraGraft products in U.S., therefore no royalties have been accrued expenses,or paid in the period.
 ●Contingent liabilities (Notes 3 and 5),
c.●Amortization expense (Note 8).The Company has entered into arrangements for office and laboratories spaces. As at September 30, 2021, minimum lease payments in relation to lease commitments are payable as described in Note 5.

The restatements were made in accordance with the provisions of ASC topic 805. The disclosure provision of ASC 805 stipulates that acquirer must recognize measurement period adjustments during the period in which they determine the amounts, including the effect on earnings of any amounts they would have recorded in previous periods if the accounting had been completed at the acquisition date. As the valuation of the assets acquired, liabilities assumed, and consideration given up on completion of the Somah acquisition had been finalized in the six months ended June 30, 2021, only the current period results were restated to reflect the measurement period adjustments.

The following table reconciles previously reported net income to restated amounts:

SCHEDULE OF RECONCILES PREVIOUSLY REPORTED STATEMENTS

  Three Months Ended June 30,  Six Months Ended
June 30,		 
  2021  2021 
Net loss, as previously reported $(2,460,842) $(5,271,393)
Adjustment to other general and administrative expenses  244,572   244,572 
Adjustment to amortization expense on intangible assets  299,342   898,026 
Change in fair value of contingent liabilities  278,000  278,000
As restated $(1,638,928) $(3,850,795)
Net loss $(1,638,928) $(3,850,795)
Restated loss per share – basic and diluted $(0.05) $(0.11)

Selected Consolidated Balance Sheet information as of June 30, 2021:

  Previously Reported  Increase
(Decrease)		  Restated 
Assets:            
Intangible assets, net $41,573,599  $4,920,298  $46,493,897 
Goodwill  -   5,416,000   5,416,000 
Total Assets $43,342,385  $10,336,298  $53,678,683 
             
Liabilities:            
Contingent liabilities  -   9,648,000   9,648,000 
Total Liabilities $2,797,108  $9,648,000  $12,445,108 
             
Stockholders’ equity:            
Additional paid in capital $82,606,376  $(732,300) $81,874,076 
Accumulated deficit  (42,097,027)  1,420,598   (40,676,429)
Total liabilities and stockholders’ equity $43,342,385  $10,336,298  $53,678,683 

Selected Shareholders’ equity information for the six months ended June 30, 2021:

  Six Months Ended
June 30,		 
  2021 
Balance, June 30, 2021, as reported previously $40,545,277 
Adjustment to net loss  1,420,598 
Adjustment to fair value of warrants issued on acquisition of Somah  (732,300)
As restated $41,233,575 

As a result of all adjustments herein, the total assets increased by $10,336,298, predominately due to the valuation of the intangible assets and goodwill recognized on the Somah acquisition and the total liabilities increased by $9,648,000, mainly due to the recognition of $9,926,000 of contingent liabilities assumed on the Somah acquisition and decrease in contingent liabilities fair value in the six months ended June 30, 2021 by $278,000. The fair market value of warrants given up was revalued and decreased by $732,300. Additionally, the Company overestimated the amortization expense by $898,026 in the period ended June 30, 2021.

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NOTE 13 - SUBSEQUENT EVENTSEVENT

 

The Company has evaluated subsequent events through the date the condensed consolidated financial statements were issued and filed with the Securities and Exchange Commission. The Company has determined that there are no other such events that warrant disclosure or recognition in the condensed consolidated financial statements, except as stated below:

Convertible Promissory Notes and Warrants

In July 2021, the Company issued and sold 440,000 Units under the Unit Purchase Program for gross proceeds of $1,100,000. The Units included Notes for $1,100,000, Class A Warrants for 440,000 shares of common stock and Class B Warrants for 440,000 shares of common stock. See Note 10 for the terms and features of the Units.

Acquisition of My Health Logic Inc.

On November 1, 2021, Marizyme entered into a definitive arrangement agreement with Health Logic Interactive Inc. (“HLII”) pursuant to which the Company will acquire My Health Logic Inc., a wholly-owned subsidiary of HLII (the “Transaction”).

 

The Transaction will be effected by way of a plan of arrangement under the Business Corporations Act (British Columbia). In connection with the plan of arrangement, Marizyme will issue an aggregate of 4,600,000 shares of its common stock to HLII, which will be subject to certain terms and restrictions. Upon closing, My Health Logic Inc. will be a wholly-owned subsidiary of Marizyme.

 

The acquisition is subject to, among other things, the approval of the Supreme Court of British Columbia, the approval of the NEX board of the TSX Venture Exchange, and requires the approval of at least two-thirds of the votes cast by HLII shareholders at the upcoming annual and special meeting of HLII shareholdersshareholders. The Transaction is expected to close in December 2021.

 

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ITEM 2.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENT

 

We believe that it is important to communicateYou should read the following discussion and analysis of our future expectations tofinancial condition and results of operations in conjunction with the unaudited interim financial statements and notes thereto included in this Quarterly Report on Form 10-Q and with our security holdersaudited financial statements and tonotes thereto for the public. This report, therefore, contains statements about future eventsyear ended December 31, 2020 and expectations which are “forward-looking statements” within the meaning of Sections 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934, including the statements about our plans, objectives, expectations and prospects under the heading “Management’srelated Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You can expectOperations, both of which are contained in our Annual Report on Form 10-K for the year ended December 31, 2020 (“2020 Form 10-K”).

FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains forward-looking statements made pursuant to identify thesethe safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements other than statements of historical facts contained in this quarterly report, including statements regarding our future results of operations and financial position, business strategy, research and development plans and costs, the impact of COVID-19, the timing and likelihood of regulatory filings and approvals, commercialization plans, pricing and reimbursement, the potential to develop future product candidates, the timing and likelihood of success of the plans and objectives of management for future operations, and future results of anticipated product development efforts, are forward-looking statements. These statements are often identified by forward-lookingthe use of words such as “may,” “might,“will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “will,” “anticipate,” “believe,” “plan,“should,” “estimate,” “project,or “continue,” “expect,” “intend,” “seek” and other similar expressions. Any statement containedexpressions or variations. The forward-looking statements in this quarterly report that is not a statement of historical fact may be deemed to be aare only predictions. We have based these forward-looking statement. Althoughstatements largely on our current expectations and projections about future events and financial trends that we believe thatmay affect our financial condition, operating results, business strategy, short-term and long-term business operations and objectives. These forward-looking statements speak only as of the plans, objectives, expectationsdate of this quarterly report and prospectsare subject to a number of risks, uncertainties and assumptions, including those described in the Part II, Item 1A under the heading “Risk Factors.” The events and circumstances reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertaintiesmay not be achieved or occur and other factors that may cause our actual results performancecould differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or achievements to be materially different fromrevise any future results, performance or achievements expressed or implied by these forward-looking statements and we can give no assurance that our plans, objectives, expectations and prospects will be achieved.

contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

Company Overview

OVERVIEW

We are

Marizyme is a Nevada corporation originally incorporated on March 20, 2007, under the name SWAV Enterprises, Ltd. On September 6, 2010, we changed our namemulti-technology platform life science company with clinically tested and patented product platforms for myocardial and vein graft preservation, protein enzyme therapeutics for wound healing, thrombosis and pet health. Marizyme is dedicated to GBS Enterprises Incorporated and from 2010 to September 2018 we were in the software products and advisory services business for email and instant messaging applications. We divested that business between December 2016 and September 2018 and, since that time, we have begun to focus on the acquisition, development and commercialization of life science technologies.

We changed our name to Marizyme, Inc. on March 21, 2018, to reflect our new life sciences focus,therapies, devices and ourrelated products that maintain cellular viability and support metabolism, thereby promoting cellular health and proper function. Our common stock is currently quoted on the OTC Markets’ QB tier under the symbol “MRZM.” The Company is actively working toward listing its common stock on the NASDAQ Stock Market within the next twelve months from the date of this report. We may also examine our options with respect to the listing of our common stock on the NasdaqNew York Stock market or the NYSE.

In the second half of 2018, we acquired the protease-based therapeutic platform called Krillase® from ACB Holding AB.Exchange (“NYSE”).

 

Recent EventsOur Products

Somahlution Asset Acquisition

Pursuant to the terms of the Acquisition, the majority shareholder of Somah is entitled to appoint two members to our board of directors, one of whom must be independent. Additionally, Dr. Satish Chandran, Somah’s co-founder and Chief Executive Officer, has become our Chief Technical Officer and Dr. Catherine Pachuk, Somah’s Chief Science Officer, has become our Chief Science Officer.

Pursuant to the terms of the Acquisition, Somah is entitled to appoint two members to our board of directors, one of whom must be independent. Additionally, Dr. Satish Chandran, Somah’s co-founder and Chief Executive Officer, has become our Chief Technical Officer and Dr. Catherine Pachuk, Somah’s Chief Science Officer, has become our Chief Science Officer.

Private Placement

On August 3, 2020, we conducted an initial closing of a private placement (the “Private Placement”) in which we sold to a number of accredited investors an aggregate of 4,609,984 shares of our common stock, par value $0.001 per share, at a purchase price of $1.25 per share for an aggregate amount of $5,762,480. On September 25, 2020, we conducted a second closing of the Private Placement and sold an additional 990,208 shares of our common stock for an aggregate amount of $1,237,760, for a total Private Placement offering amount of $7,000,240. The offering costs were $725,176, leaving net proceeds of $6,275,064.

Unit Purchase Agreement

On May 27, 2021, we sold 29,978 Units at a price of $2.50 per Unit for gross proceeds of $74,945, consisting of Notes of $74,945, Class A Warrants for the purchase of 29,978 shares of common stock and Class B Warrants for the purchase of 29,978 shares of common stock. In July 2021, we sold 440,000 Units under the Unit Purchase Program for gross proceeds of $1,100,000. The Units included Notes for $1,100,000, Class A Warrants for 440,000 shares of common stock and Class B Warrants for 440,000 shares of common stock.

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Our Products

Krillase

ThroughKrillase - through our acquisition of the Krillase technology from ACB Holding AB in 2018, we have purchased a European Union researched and evaluated protease therapeutic platform that has the potential for use in the treatment of chronic wounds/wounds and burns, and other clinical applications. Krillase may be classified asis a biological drug however, itwhich has been classified as a Class III medical device in Europe for treating chronic wounds.

Krillase, derived from Antarctic krill, shrimp-like crustaceans, is a combination of endo and exopeptidases that safely and efficiently breaks down organic material. The mix of proteinases and peptidases in Krillase helps the Antarctic krill digest and break down its food in the extremely cold Antarctic environment. As a result, this specialized collection of enzymes provides a unique biochemical “cutting” capability. As a “biochemical knife,”knife”, Krillase can potentially break down organic matter, such as necrotic tissue, thrombogenic material, and biofilms produced by microorganisms. As such, it may be useful in the mitigation or treatment of multiple disease states in humans. For example, Krillase may dissolve arterial thrombogenic plaque safely and efficiently, promote faster healing and support the grafting of skin for the treatment of chronic wounds and burns, and reduce bacterial biofilms associated with poor oral health in humans and animals.

 

We have acquired a Krillase-based product pipeline that is focused on developing products that treat several conditions across the critical care market.

Itemized below is a breakdown of our projected Krillase development pipeline:

 

●MB101 – Therapy for complex wounds and burns,
●MB102 – Therapy for acute ischemic stroke,
●MB104 – Therapy for deep vein thrombosis, and
●MB105 – Therapy for dissolving plaque and biofilms on teethteeth.

Krillase received medical device status in the European Union for debridement of deep partial and full-thickness wounds in hospitalized patients, on July 19, 2005.

 

As of the date of this filing, the Company continues to evaluate commercial, clinical, research, and regulatory considerations involved in marketing our

Krillase-based product line. Our commercial strategy in developing this product line is two-fold:

 

●First, leverage and maximize near-term revenue generating opportunities with products for commercial or clinical applications that have low regulatory risk, and
●Second, develop products for applications of the Krillase platform that address unmet medical needs or address medical market needs better than existing products in the marketplace, in clinical applications that have higher regulatory risk, but significant commercial potential.

 

We anticipate finalizing our development, operation, and commercial strategy regardingfor the Krillase platform by 2022.2022 and expect the first stream of revenue from sale of the product to be generated in 2023.

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DuraGraft®

On July 31, 2020, Marizyme closed the– through our acquisition of Somahlution’s product, DuraGraft.

The DuraGraft Product

Somahlution has been engagedSomah in developingJuly 2020, we acquired its key intellectual products, based on its cytoprotective platform technology, to prevent ischemic injury to organs and tissues in grafting and transplantation surgeries. Its products and product candidates, which are referred to as the Somah Products, include DuraGraft, a one-time intraoperative vascular graft treatment for use in vascular and bypass surgeries that maintains endothelial function and structure, thereby reducing the incidence and complications of graft failure and improving clinical outcomes post bypass surgery.

DuraGraft Indications

 

DuraGraft is an “endothelial damage inhibitor” indicated for cardiac bypass, peripheral bypass, and other vascular surgeries. It is CE marked and is approved for marketing in 33 countries worldwide on 4 continents including, but not limited to the European Union, Turkey, Singapore, Hong Kong, India, the Philippines, and Malaysia. Somahlution has also been focused on developing products to mitigate the effects of ischemia reperfusion injury in other grafting and transplantation surgeries and other indications in which ischemic injury can cause disease. Multiple products derived from the cytoprotective platform technology for several indications are under various stages of development.

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●DuraGraft is a CE-marked endothelial damage inhibitor that protects free vascular grafts and endothelium against ischemic injury.
●DuraGraft is approved in Europe for graft protection and preservation during bypass (cardiac and peripheral) and other vascular surgeries.
●DuraGraft protects graft tissue from harvesting through anastomosis and is used during coronary artery bypass grafting, or CABG, (and other vascular surgeries) as a treatment to maintain the structural and functional integrity of the endothelium of isolated vascular grafts.
●The use of DuraGraft is associated with the reduction of post-CABG complications associated with graft disease and failure; myocardial infarction, repeat revascularization, and major adverse cardiovascular events, or MACE.

Unmet Clinical Needs

●CABG remains the standard treatment for multi-vessel coronary artery disease or left main artery disease.
●Benefits of CABG are, however, limited by high patient level of vein graft failure (VGF) rates (50%) that have not changed in decades.
●“The Early Promise of Coronary Bypass Grafting has not been fulfilled and an insidiously deadly variety of atherosclerosis progressively chokes vein grafts and extinguishes their benefits,” Fitzgibbons, 1996.
●“VGF remains one of the leading causes of poor in-hospital and long-term outcomes after CABG,” Harskamp, 2013.
●“The Issue of Low Patency Rates Owing to VGF Needs Urgent Attention,” de Vries, 2016.
●Vein graft failure is result of damage to graft endothelium that occurs during CABG surgery.
●Ischemic reperfusion injury is the primary cause of endothelial damage.
●Vein graft failure post-CABG is associated with poor clinical outcomes.
●DuraGraft minimizes endothelial damage, reduces graft disease, and improves clinical outcomes.

Commercial Considerations

 

According to market analysis reports, the size value of the coronary artery bypass graft market globally was approximately $16 billion. This market is forecasted to increase at a CAGR of 5.8% from 2017 to 2025 (Grand View Research, March 2017). Globally, it is estimated that approximately 800,000 CABG procedures are performed each year (Grand View Research, March 2017), with procedures performed in the U.S. being a substantial percentage of the total global procedures performed. In the U.S., it is estimated that approximately 340,000 CABG surgeries are performed each year. The number of CABG procedures performed is predicted to decline at a rate of approximately 0.8% per year to less than 330,000 annually by 2026, primarily due to medical and technological advances in the use of percutaneous coronary intervention, also known as “angioplasty” (idata Research, September 2018).

 

In 2017, the number of peripheral vascular surgeries, which include angioplasty and bypass of peripheral arteries, vein removal, thrombectomy, and endarterectomy operations, were approximately 3.7 million worldwide. The number of peripheral vascular procedures is forecasted to increase at a CAGR of 3.9% in years 2017 to 2022 and is expected to exceed 4.5 million procedures by 2022 (Research and Markets, October 2018).

 

The DuraGraft product addresses unmet medical needs in both of these clinical markets. DuraGraft is a CE-marked endothelial damage inhibitor that protects free vascular grafts and endothelium against ischemic injury. The product is approved for use in Europe for graft protection and preservation during bypass (cardiac and peripheral) and other vascular surgeries. The companyCompany is currently working with local distributors of cardiovascular disease-related products, in accordance with local regulatory requirements, to sell and increase the market share of DuraGraft in Europe, South America, Australia, Africa, the Middle East, and the Far East. As of the date of this filing, the Company anticipates that the submission of a de novo 510k application to the U.S. FDA for the use of DuraGraft in CABG proceduresU.S will occur in the 4thsecond quarter of 2021. 2022 and is optimistic that the approval will be granted by the end of 2022.

In anticipation of the filing of the de novo 510k application for DuraGraft, the Company has submittedcompany plans to submit a pre-submission document in April 2021 to the FDA that describes the strategy for demonstrating the clinical safety and efficacy of the product.

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Our Competitive Strength FDA application for the use of DuraGraft in CABG procedures is expected to take place in 2022.

 

We believe thatDuraGraft commercialization plan with CE Mark and existing distribution partners in select European and Asia countries will begin in Q2 2022, with a targeted approach based on market access, existing KOL’s, clinical data and revenue penetration. The company will also begin the following competitive strengths will enable us to compete effectively:process of developing the US CABG market for DuraGraft with the development of KOL’s, existing publications, select clinical studies, digital marketing, and multiple sales channels.

Key Elements of our Strategy

Our Krillase platform provides a significant and substantial competitive advantage as:

●Clinical studies in Europe have shown KrillaseContinue to achieve superior wound healing effects in treatmentgrow the core of necrotic leg ulcers.our business through the current market channels for DuraGraft and expand the sale of DuraGraft into additional markets globally as well as explore further use of the cytoprotective platform for new research and clinical applications,
●Our patent protected unique mixture of highly efficient endo and exopeptidases extracted fromContinue the digestive tract of the Antarctic Krill for use in the removal of dental plaque and other dental applications has not been recreated artificially.
●The DuraGraft platform provides a significant and substantial competitive advantage as:
●DuraGraft, CE marked in Europe, is “first-in-class” as the only approved product for sale in Europe for vein graft preservation.

Our Growth Strategy

Our growth strategy is premised on integrating the acquisition of the Somah assets and the engagement of the Somah personnel in connection with this acquisition and future capital raising offerings, either public or private.

We will strive to grow our business by pursuing the following key growth strategies:

●Complete the integration of the acquisition of the Somah assets and begin (i) the marketing and distribution of the Somah Products, particularly DuraGraft,products in Europe and (ii)other global markets, which will allow the Company to continue its growth and international product rollout,
●Focus our efforts and resources on continuous development, seek regulatory approval and commercialization of DuraGraft and related Somah Products in the United States;States,
●Begin to commercialize our Krillase platform through the development of (i) manufacturing and distribution in Europe and South America of a Krillase wouldwound healing product, and (ii) additional Krillase based applications; and
●Expand our product portfolio through the identification and acquisition of additional life science assets.assets in areas of innovative medicine.

The strategic plans described above will require capital. There can be no assurances that we will be ableWe have incurred losses for each period from our inception. For the nine months ended September 30, 2021 and 2020, our net loss was approximately $5.5 million and $3.0 million, respectively. We expect to raiseincur expenses and operating losses over the capital thatnext several years. Accordingly, we will need additional financing to executesupport our planscontinuing operations. We will seek to fund our operations through public or that capital, in addition to the amount we raised in the Private Placement, whether through securitiesprivate equity offerings, either privatedebt financings, government or public, willother third-party funding, collaborations and licensing arrangements. Adequate additional financing may not be available to us on acceptable terms, ifor at all. An inabilityOur failure to raise sufficient funds could cause uscapital as and when needed would impact our going concern and would have a negative impact on our financial condition and our ability to scale backpursue our business strategy and continue as a going concern. We will need to generate significant revenues to achieve profitability, and we may never do so.

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KEY 2021 HIGHLIGHTS

Acquisition of My Health Logic

On November 1, 2021, Marizyme entered into a definitive arrangement agreement with Health Logic Interactive Inc. (“HLII”) pursuant to which the Company will acquire My Health Logic Inc. (“MHL”), a wholly owned subsidiary of HLII (the “Transaction”).

The Transaction will be effected by way of a plan of arrangement under the Business Corporations Act (British Columbia). In connection with the plan of arrangement, Marizyme will issue an aggregate of 4,600,000 shares of its common stock to HLII, which will be subject to certain terms and restrictions. Upon closing, My Health Logic Inc. will be a wholly owned subsidiary of Marizyme. The transaction is expected to close on or before December 31, 2021.

The acquisition will provide Marizyme with access to consumer-focused handheld point-of-care diagnostic devices that connect to patients’ smartphones and digital continued care platforms, developed by MHL. My Health Logic Inc. plans to use its patent pending lab-on-chip technology to provide rapid results and facilitate the transfer of that data from the diagnostic device to the patient’s smartphone. MHL expects this data collection will allow it to better assess patient risk profiles and provide better patient outcomes. My Health Logic Inc.’s mission is to empower people with the ability to get early detection anytime, anywhere with actionable digital management for chronic kidney disease.

With the completion of the transaction, the Company will acquire MHL’s digital diagnostic device MATLOC1. MATLOC 1 is the proprietary diagnostic platform technology in development for the testing of different biomarkers, with a current focus on the urine-based biomarkers albumin and growth plans or discontinue them altogether.creatinine for chronic kidney disease screening and eventual diagnosis. The Company anticipates MATLOC 1 device will be submitted for FDA approval in late 2022 and the management is optimistic that the approval will be received by mid-2023.

 

Financing

In May 2021, the Company began its offering in a private placement under Rule 506 of Regulation D under the Securities Act up to 4,000,000 units (the “Offering”), comprised of a convertible notes and warrants, with the intent to raise up to $10,000,000 on a rolling basis. The certain terms and conditions of the Offering were amended in September 2021. For the nine-month period ended September 30, 2021, the Company sold and issued an aggregate of 522,198 Units for the total proceeds of $1,060,949. The proceeds from the offering will be used to sustain the Company’s growth and meet its capital obligations.

Operational

During the nine months ended September 30, 2021, Marizyme has been undergoing a corporate restructuring, whereby the key officers, directors, and management team has changed in order to accelerate Company’s progress toward meeting its key objectives and deliver on its strategy. After the closure and completion of MHL transaction, the Company anticipates more changes to its key management team to further streamline and improve the overall performance of the Company.

FINANCIAL OPERATIONS REVIEW

Component of Results of Operations

Revenue

Revenue represents gross product sales less service fees and product returns. For our Distribution Partner channel, we recognize revenue for product sales at the time of delivery of the product to our Distribution Partner. As our products have an expiration date, if a product expires, we will replace the product at no charge. Currently, all of our revenue is generated from the sale of DuraGraft in European and Asian markets where the product met the required regulatory approvals.

Direct Costs of Revenue

Direct costs of revenue include primarily product costs, which include all costs directly related to the purchase of raw materials, charges from our contract manufacturing organizations, and manufacturing overhead costs, as well as shipping and distribution charges. Direct costs of revenue also include losses from excess, slow-moving or obsolete inventory and inventory purchase commitments, if any.


Professional Fees

Professional fees include legal fees relating to intellectual property development and corporate matters, and consulting fees for accounting, finance, and valuation services. We anticipate increased expenses related to audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and Securities and Exchange Commission requirements.

Salaries and Stock-Based Compensation

Salaries consists of compensation and related personnel costs. Stock-based compensation represents the fair value of equity-settled share awards on stock options granted by the Company to its employees, officers, directors, and consultants. The fair value of awards is calculated using the Black-Scholes option pricing model, which considers the following factors: exercise price, current market price of the underlying shares, expected life, risk-free interest rate, expected volatility, dividend yield, and forfeiture rate.

Other General and Administrative Expenses

Other general and administrative expenses consist principally of marketing and selling expenses, facility costs, administrative and office expenses, director and officer insurance premiums, and investor relations costs associated with operating a public company.

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Other Income and Expenses

Other income and expenses consists of mark to market adjustments on contingent liabilities assumed on the acquisition of Somah and interest and accretion expenses related to our convertible notes issued pursuant to the Unit Purchase Agreement.

RESULTS OF OPERATIONS

Comparison of the Nine Months Ended September 30, 2021 and 2020

The following table summarizes our results of operations for the nine months ended September 30, 2021 and 2020:

  Nine Months Ended
September 30,		    
  2021  2020  Change 
          
Revenue $271,952  $124,985  $146,967 
             
Operating expenses:            
Direct costs of revenue  168,419   25,714   142,705 
Professional fees  1,808,093   494,295   1,313,798 
Salary expenses  2,478,357   433,318   2,045,039 
Stock-based compensation  626,449   1,674,200   (1,047,751)
Other general and administrative expenses  1,071,017   468,782   602,235 
Total operating expenses  6,152,335   3,096,309   3,056,026 
Total operating loss $(5,880,383) $(2,971,324) $(2,909,059)
Other income (expenses):            
Interest and accretion expenses  (74,410)  -   (74,410)
Change in fair value of contingent liabilities  472,000   -   472,000 
Net loss $(5,482,793) $(2,971,324) $(2,511,469)

Revenue

We recognized revenue of $0.27 million for the nine months ended September 30, 2021 compared to $0.12 million for the nine months ended September 30, 2020. The increase in revenue over the comparative period can be primarily attributed to the growing sales of DuraGraft, which was acquired as part of the Somah Transaction.

Direct Costs of Revenue

During the nine months ended September 30, 2021, we incurred $0.17 million in direct costs of revenue, representing increase of $0.15 million if compared to $0.03 million of the direct cost of revenue incurred during the nine months ended September 30, 2020. Cost of sales grew at a higher rate if compared to the revenue growth, predominantly due to shortage of the raw materials as a result of COVID-19 pandemic which directly impacted the costs of finding, securing, and acquiring alternative high-quality materials.

Professional Fees

Professional fees increased by $1.3 million or 266% to $1.81 million for the period ended September 30, 2021, compared to $0.49 million for the period ended September 30, 2020. The Company has undergone a number of corporate transactions, including acquisition of the Somah entities and a corporate restructuring, which resulted in legal fees increasing significantly period over period. The increase in professional fees was also a result of the Company’s preparations for the FDA approval and other advancement and development of intellectual property. Additionally, Marizyme relied on number of external consulting firms to oversee multiple facets of the business, including finance and accounting functions of the Company. In the nine months ended September 30, 2021, Marizyme has also initiated the public offering transaction, which further contributed to the professional fees increase in the period.

Salary Expenses

Salary expenses for the period ended September 30, 2021, were $2.48 million, a $2.05 million or 472% increase from the comparative period. The increase in the salary cost is attributable to the restructuring and growth of the organization as the Company continues to expand into the new markets and working towards commercialization of the DuraGraft in the United States.

Other General and Administrative Expenses

Other general and administrative expenses increased $0.6 million or 128% to $1.07 million in the nine months ended September 30, 2021. The increase was due to the Company’s restructuring, growth, and increased marketing and public relations expenses associated with product branding and costs attributed to running a public company. Due to the planned continued buildout of administrative and commercial functions we expect general and administrative expenses to increase in future periods.

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Other Income and Expenses

During the nine months ended September 30, 2021, the Company conducted the Offering, which included multiple closings in tranches on a rolling basis. The interest and accretion costs associated with convertible notes issued at discount as part of the Offering agreements.

Additionally, the company recognized $0.47 million of fair value gain from mark to market adjustments on the contingent liabilities assumed on the acquisition of Somah.

Comparison of the Three Months Ended September 30, 2021 and 2020

The following table summarizes our results of operations for the three months ended September 30, 2021 and 2020:

  Three Months Ended
September 30,		    
  2021  2020  Change 
          
Revenue $37,215  $124,985  $(87,770)
             
Operating expenses:            
Direct costs of revenue  18,356   25,714   (7,358)
Professional fees  556,254   170,753   385,501 
Salary expenses  617,826   433,318   184,508 
Stock-based compensation  64,074   1,107,085   (1,043,011)
Other general and administrative expenses  536,483   453,158   83,325 
Total operating expenses  1,792,993   2,190,028   (397,035)
Total operating loss $(1,755,778) $(2,065,043) $309,265 
Other income (expenses):            
Interest and accretion expenses  (70,221)  -   (70,221)
Change in fair value of contingent liabilities  194,000   -   - 
Net loss $(1,631,999) $(2,065,043) $239,044 

Revenue and Direct Cost of Revenue

We recognized revenue of $0.04 million for the three months ended September 30, 2021 compared to $0.12 million for the three months ended September 30, 2020, which represents a 70% decrease period over period. During the three months ended September 30, 2021, we incurred $0.02 million in direct costs of revenue, representing a decrease of 29% if compared to $0.03 million in the direct cost of revenue incurred during the three months ended September 30, 2020.

COVID-19 pandemic resulted in shortage of the raw materials and interruptions in global supply chains. Additionally, during 2021, Marizyme’s business partners were focused on addressing specific manufacturing needs of the U.S. government in battling COVID-19 pandemic. Moreover, during 2021, demand for elective surgeries have decreased due to overloaded medical systems and potential risks related to patients’ recovery during the pandemic. All of these factors have negatively impacted the Company’s revenue and direct costs of sales for the three months ended September 30, 2021.

Professional Fees

Professional fees increased by $0.39 million to $0.56 million for the three months ended September 30, 2021 compared to $0.17 million for the three months ended September 30, 2020. The increase in professional fees period over period relates to due diligence process associated with My Health Logic Inc.’s acquisition and finalizing of the valuation process of assets acquired and liabilities assumed on completion of the Somah Transaction.

Salary Expenses

Salary expenses for the three months ended September 30, 2021, were $0.62 million, a $0.18 million or 43% increase from the comparative period. The increase in the salary cost is attributable to the growth of the organization as the Company continues to expand into the new markets and works towards commercialization of the DuraGraft in the United States.

Other General and Administrative Expenses

Other general and administrative expenses increased $0.08 million or 18% to $0.5 million in the three months ended September 30, 2021. The increase was predominantly due to the legal, regulatory, and due diligence efforts related to the acquisition of My Health Logic Inc.

Other Income and Expenses

During the three months ended September 30, 2021, the Company completed its second and the biggest tranche of the Offering and issued the highest amount of the convertible notes to date. The interest and accretion costs associated with convertible notes issued at discount as part of the Offering agreements.

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During the three months ended September 30, 2021, the company recognized $0.19 million of fair value gain from mark to market adjustments on the contingent liabilities assumed on the acquisition of Somah

LIQUIDUTY AND CAPITAL RESOURCES

We have incurred net losses and negative cash flows from operations since our inception and anticipate we will continue to incur net losses for the foreseeable future. As of September 30, 2021, we had cash and cash equivalents of $16,673.

The Offering

In May of 2021, Marizyme’s Board of Directors, authorized the Company to initiate the Offering and sell up to 4,000,000 units (the “Units”) at a price per Unit of $2.50. Each Unit was comprised of (i) a convertible promissory note convertible into common stock of the Company at an initial price per share of $2.50, (ii) a warrant to purchase one share of common stock of the Company (the ‘Class A Warrant’); and (iii) a second warrant to purchase a share of common stock of the Company (the “Class B Warrant”).

In the nine months ended September 2021, the Company issued an aggregate of 469,978 Units in connection with the Offering, for the total proceeds of $1,060,949.

On September 29, 2021, the Company, with the consent of all Unit holders, amended the May 2021 Unit Agreements. By rescinding their investment, the Unit holders agreed to amend the Unit Purchase Agreement resulted in the following changes to the offering:

(iv)Decreased the offering price under the Unit Purchase Agreement from $2.50 per Unit to $2.25 per Unit for all future sales under the Unit Purchase Agreement. No proceeds from the initial investment were returned,
(v)Decreased the conversion price from $2.50 per share to $2.25 per share for all current Unit holders and all future investors, and
(vi)Cancelled all Class A Warrants and Class B Warrants and replaced them with Class C Warrants.

The Company determined that the modifications of the Unit Purchase Agreement were not significant enough to be considered substantial, therefore the values of original instruments issued were not adjusted. As a result of this modification, the total of 469,978 Units previously issued were replaced with an aggregate of 522,198 pro-rata Units.

The Company intends to raise up to $10,000,000 on a rolling basis. The proceeds from the offering will be used to sustain the Company’s growth and meet its capital obligations.

Funding Requirements and Other Liquidity Matters

Marizyme expects to continue to incur expenses and operating losses for the foreseeable future. We anticipate that our expenses will increase as a result of the following operational and business development efforts:

●Increase our expertise and knowledge through hiring and retaining qualified operational, financial and management personnel, who will build efficient infrastructure to support development and commercialization of therapies and devices,
●Expand our product portfolio through the identification and acquisition of additional life science assets, and
●Seek to increase awareness about our products to boost sales and distributions internationally.

Until such time, if ever, as we can generate substantial product revenues to support our cost structure, the Company will continue to have to raise funds beyond its current working capital balance in order to finance future development of products, potential acquisitions, and meet its debt obligations until such time as future profitable revenues are achieved.

We expect to finance our cash needs through a combination of private and public equity offerings, debt financings, government or other third-party funding, and collaborations arrangements or acquisitions. To the extent that we raise additional capital through the sale of common stock, convertible securities or other equity securities, the ownership interest of our stockholders may be materially diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights of our common stockholders. Debt financing and preferred equity financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business. Securing additional financing could require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from day-to-day activities, which may adversely affect our management’s ability to oversee the development or acquisition of product.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

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Impact of the Coronavirus

On January 30, 2020, the World Health Organization or WHO,(“WHO”), announced a global health emergency because of a new strain of coronavirus, COVID-19 originating in Wuhan, China and the risks to the international community as the virus spreads globally beyond its point of origin. On March 11, 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The COVID-19 pandemic is affectinghas affected the United States and global economies and may affect our prospective current and future revenues, and our operations and those of third parties with whom we might interact, including by causing disruptions in the development of our product candidates, product marketing efforts and the conduct of current and expected future clinical trials.

 

In addition, the COVID-19 pandemic may affect the operations of the FDA and other health authorities, including such authorities in Europe, which could result in delays of reviews and approvals, including with respect to our product candidates and our plans to submit a Q-sub clinical proposal to the FDA for supporting an additional clinical study if required for the DuraGraft product. While there have been no specific notices of delay from federal or foreign government authorities, potential interruptions, delays or changes to the operations of the FDA, or of any foreign authority with which we might interact, might impact the approval of any applications we plan and will need to file in the future.

 

We have not developedCash Flows

The following table sets forth a COVID-19 contingency plan to address the potential challenges and risks presented by this pandemic. If we were to prepare such a plan, there could be no assurance that it would be effective in mitigating the effectssummary of the COVID-19 virus.net cash flow activity for each of the periods indicated:

  Nine Months Ended
September 30,		    
  2021  2020  Change 
Net cash provided by/(used in):            
Operating activities $(4,313,038) $(948,305) $(3,364,733)
Investing activities  -   (130,333)  130,333 
Financing activities  1,426,949   6,275,064   (4,848,115)
Net increase/(decrease) in cash $(2,886,089) $5,196,426  $(8,082,515)

Operating Activities

Net cash used in operating activities was approximately $4.3 million and $1.0 million for the nine months ended September 30, 2021 and 2020, respectively. The net cash used in operating activities for the nine months ended September 30, 2021 was due to approximately $1.8 million spent on professional fees and $2.5 million spent on salaries and related compensation expenses. The net change in operating assets and liabilities primarily related to a $1.0 million increase in accounts payable, accrued expenses, and amounts due to related parties in support of the growth of our operating activities.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2021 was due to $0.4 million of money obtained from the issuance of promissory notes to related parties of the Company and $1.1 million of proceeds received from the Unit issuances pursuant to the Unit Purchase Agreement.

Contractual Obligations and Commitments

Other than disclosed below, there were no material changes outside the ordinary course of our business during the nine months ended September 30, 2021 to the information regarding our contractual obligations that was disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our 2020 Form 10-K.

Royalties and Other Commitments

Upon receiving the FDA approval for the DuraGraft and other key intellectual products, the Company:

●Will pay royalties on net sales of all products obtained through acquisition of Somah’s assets,
●Issue performance warrants with a strike price determined based on the average of the closing prices of the common shares for the 30 calendar days following the date of the public announcement of FDA approval, and
●Upon liquidation of all or substantially all of the assets relating to the Somah products, we will pay 15% of the net sale proceeds up to a maximum of $20 million.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our financial statements and accompanying notes. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

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Emerging Growth CompanyFor a description of our critical accounting policies, please see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” contained in our 2020 Form 10-K. There have not been any material changes to the critical accounting policies discussed therein during the nine months ended September 30, 2021.

 

We qualify asOther Company Information

JOBS Act

As an “emergingemerging growth company”company under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As a result,Act, we are permitted to,can, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:

●have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
●comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
●submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and
●disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of thean extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards.

In other words, This allows an emerging growth company canto delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have electedalso intend to take advantage ofrely on other exemptions provided by the benefits of this extended transition period. Our financial statements may thereforeJOBS Act, including without limitation, not be comparablebeing required to those of companies that comply with such new or revised accounting standards.the auditor attestation requirements of Section 404(b) of Sarbanes-Oxley.

We will remain an “emergingemerging growth company” for up to five years, orcompany until the earliest of (i) the last day of the firstfiscal year following the fifth anniversary of the consummation of our IPO, (ii) the last day of the fiscal year in which ourwe have total annual gross revenues exceed $1revenue of at least $1.07 billion, (ii)(iii) the date thatlast day of the fiscal year in which we becomeare deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, of 1934, as amended, or the Exchange Act, which would occur if the market value of our shares of common stock that are held by non-affiliates exceeds $700exceeded $700.0 million as of the last business day of our most recently completedthe second fiscal quarter of such year, or (iii)(iv) the date on which we have issued more than $1$1.0 billion in non-convertible debt securities during the preceding three yearprior three-year period.

GOING CONCERN

The accompanying unaudited condensed consolidated financial statements and the factors within it, have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and the ability of the Company to continue as a going concern for a reasonable period of time. The Company had a net loss of $3.9 million and cash used in operating activities of $3.0 million for the six months ended June 30, 2021. The Company’s continuation as a going concern is dependent upon its ability to generate revenues and its ability to continue receiving investment capital and loans from third parties to sustain its current level of operations. The Company is in the process of securing working capital from investors for common stock, convertible notes payable, and/or strategic partnerships. No assurance can be given that the Company will be successful in these efforts. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

FINANCIAL OPERATIONS OVERVIEW

As of June 30, 2021, our accumulated deficit is $40.7 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.

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RESULTS OF OPERATIONS

Comparison of Three and Six Months Ended June 30, 2021 and 2020

Revenues

Our total revenue was $160,785 and $0 for the three months ended June 30, 2021 and 2020 and $234,737 and $0 for the six months ended June 30, 2021 and 2020, respectively. The increase in revenue is due to the acquisition of Somahlution, LLC and Somaceutica, LLC and the acquisition of Somahlution, Inc. on July 31, 2020 (the “Soma Acquisition”).

Direct Costs of Revenue

Our direct costs of revenue were $119,221 and $0 for the three months ended June 30, 2021 and 2020 and $150,063 and $0 for the six months ended June 30, 2021 and 2020, respectively. The increase in direct costs of revenue is due to the Soma Acquisition.

Operating Expenses

For the three months ended June 30, 2021, our operating expenses increased to $2,061,379 from $434,911 for the three months ended June 30, 2020. For the six months ended June 30, 2021, our operating expenses increased to $4,322,909 from $906,281 for the six months ended June 30, 2020. The increase was primarily due to the Soma Acquisition. The increase was primarily professional fees ($592,781 for the three months ended June 30, 2021 compared to $203,992 for the three months ended June 30, 2020) and ($1,251,839 for the six months ended June 30, 2021 compared to $438,835 for the six months ended June 30, 2020), salary expenses ($824,074 for the three months ended June 30, 2021 compared to $0 for the same period in 2020) and ($1,860,531 for the six months ended June 30, 2021 compared to $0 for the same period in 2020), stock-based compensation ($194,657 for the three months ended June 30, 2021 compared to $221,058 for the same period in 2020) and ($562,375 for the six months ended June 30, 2021 compared to $442,116 for the same period in 2020), and other general and administrative expenses ($342,791 for the three months ended June 30, 2021 compared to $9,861 for the same period in 2020) and ($534,535 for the six months ended June 30, 2021 compared to $25,330 for the same period in 2020).

Net Loss

For the three months ended June 30, 2021, we had a net loss of $1,638,928 as compared to $434,911 for the three months ended June 31, 2020. For the six months ended June 30, 2021, we had a net loss of $3,850,795 as compared to $906,281 for the six months ended June 30, 2020.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2021, we had $2,104 in cash, compared to $2,902,762 at December 31, 2020. At June 30, 2021, our accumulated deficit was $40,676,429 compared to $36,825,634 at December 31, 2020. There is substantial doubt as to our ability to continue as a going concern.

We have generated minimal revenues to date and our cash balance as reported above is not sufficient to fund our current and planned operations for any period of time. To fully implement our plan of operations for the next 12-month period, we will need to raise a significant amount of capital through our Private Placement, of which we have conducted an initial closing, and through additional future offerings, either private or public. There can be no assurances, however, that we will be successful in these capital raising efforts.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions and conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.

See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 1, “Summary of Significant Accounting Policies” in our audited financial statements for the year ended December 31, 2020, included in our Annual Report on Form 10-K as filed on April 15, 2021, for a discussion of our critical accounting policies and estimates.

OFF-BALANCE SHEET ARRANGEMENTS

We had noDuring the periods presented we did not have, nor do we currently have, any off-balance sheet arrangements as of June 30, 2021 and December 31, 2020.defined under SEC rules.

RECENT ACCOUNTING PRONOUNCEMENTS

None

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

A smaller reporting company, as definedInterest Rate Risk

Our cash and cash equivalents consist of cash in readily available checking accounts and money market funds. Our long-term debt bears interest at a fixed rate. As a result, the fair value of our portfolio is relatively insensitive to interest rate changes and we do not consider the effects of interest rate movements to be a material risk to our financial condition.

Effects of Inflation

Inflation generally affects us by Item 10increasing our cost of Regulation S-K, islabor and research and development contract costs. We do not required to providebelieve inflation has had a material effect on our results of operations during the information required by this item.periods presented

 

ITEM 4. CONTROLS AND PROCEDURES

EvaluationConclusion Regarding the Effectiveness of Disclosure Controls and Procedures

The SecuritiesWe evaluated the effectiveness of our internal controls over financial reporting as defined by Rules 13a-15(e) and Exchange Commission defines the term “disclosure controls and procedures” to mean a company’s controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits15d-15(e) under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its chief executive and chief financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC’s rules and forms and that information required to be disclosed is accumulated and communicated to the chief executive and interim chief financial officer to allow timely decisions regarding disclosure.

As of the end of the period covered by this quarterly report, we carried out an evaluation,with the participation, and under the supervision, of our management, including our Interim Chief Executive Officer and with the participationVice President of Finance. Based upon this evaluation, our Interim Chief Executive Officer and VP Finance concluded that as of Finance,September 30, 2021, our internal controls over financial reporting were ineffective due to the material weakness described below.

A material weakness is a deficiency, or a combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of the effectiveness ofCompany’s annual or interim consolidated financial statements may not be prevented or detected on a timely basis.

Specifically, during the design and operation of our disclosure controls and procedures. Based on this evaluation, the Interim Chief Executive Officer and VP of Finance have concluded that the Company’s disclosure controls and procedures are not effective as of such date. The Interim Chief Executive Officer and VP of Finance have determined that the Company continues to have the following deficiencies which represent a material weakness:period ended September 30, 2021:

 

●1.The Company’s lackMarizyme did not have appropriate number of independent directors;directors on its Board of Directors,
●
2.LackMarizyme had a shortage of in-house personnel with theappropriate level of technical knowledge required to identify and address some of the reporting issues surrounding certain complex or non-routine transactions. With material, complextransactions and non-routine transactions, managementrelated reporting issues. Management has and will continue to seek guidance from third-party experts and/or consultants to gain a thorough understanding of these transactions;material, complex and non-routine transactions,
●The shortage of in-house finance personnel resulted in inappropriate segregation of duties, and
3.●Insufficient personnel resources within the accounting function to segregate the duties over financial transaction processing and reporting;
4.Insufficientdocumentation of written policies and procedures over accountinginternal controls over financial reporting, transaction processing, and period end financial disclosure and reporting processes. To remediate our internal control weaknesses, management intends to implement the following measures:closing procedures.

 

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We are taking steps to remediate the material weakness identified by:

●The Company will add a number ofAttracting and retaining independent directors to add to the boardBoard of Directors and establish an Audit Committee comprised of the independent directors.
●The Company has added sufficientAttracting, retaining, and enabling external or internal top talent in accounting personneland finance functions to properly segregate duties and to effect aensure timely and accurate preparation of the financial statements..statements.
●The Company has hired staff technically proficient at applying U.S. GAAP to financial transactionsDeveloping, documenting, and reporting.
●The Company will develop and maintainmaintaining adequate written accounting policies and procedures.

 

Additional hiring is contingent uponWe believe these measures will remediate the Company’s efforts to obtain additional funding through equity or debt and the results of its operations.

Management expects to secure fundsmaterial weakness in the coming fiscal year but provides no assurances that it will be able to do so.

Changes in Internal Control over Financial Reporting

As required by Rule 13a-15(d) of the Exchange Act, our management, including our Interim Chief Executive Officer, and our VP of Finance conducted an evaluation of the internal control over financial reporting described above by the second quarter of 2022.

Changes in Internal Control Over Financial Reporting

As discussed above, the management is working on remediation the material weakness but due to determine whether anythe corporate restructuring and multiple changes occurredto our officers and management team, no significant steps have been taken to remediate the material deficiency in our internal controls over financial reporting during the quarternine months ended JuneSeptember 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, our Interim Chief Executive officer and VP of Finance concluded that there were changes during the quarter ended June 30, 2021. The Company hired an VP of Finance and additional accounting staff to facilitate increased internal controls.

 

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Limitations on the Effectiveness of Controls

The Company’s management, including the Interim Chief Executive Officer and VP Finance, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of the control system must reflect that there are resource constraints and that the benefits must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

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PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. 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.

 

ITEM 1A. RISK FACTORS.

 

For information regardingThere have been no material changes to the various risk factors that may affect our business, please refer todisclosed in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on April 15, 2021, which may be accessed via EDGAR through the Internet at www.sec.gov.www.sec.gov.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

During the six-monthnine-month period ended JuneSeptember 30, 2021, we did not conduct any unregistered sales of our equity securities that were not previously disclosed in a current report of Form 8-K and we did not repurchase any of our common stock, except as follows:stock.

As provided to mike and subsequent financing

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

On April 16,July 6, 2021, the Company’s Board of Directors appointed Dr. Vithal Dhaduk as Interim Chief Executive Officer. He will retain his position as Chairman of the Board of Directors of the Company formed the following committees:

Audit Committee: Terry Brostowin (Chair), Dr. Vithal Dhaduk, and Dr. William Hearl

Compensation Committee: Julie Kampf (Chair), Dr. Vithal Dhaduk, and Terry Brostowin

Nomination and Board Governance Committee: Dr. William Hearl (Chair), and Julie Kampf

On June 24, 2021, and in connection with the termination of his employment, James Sapirstein was removed from the audit, compensation and nomination and board governance committees.Directors.

 

On July 12, 2021, and in connection with the termination of his consulting agreement, Bruce Harmon was removed fromresigned as the audit committee.Chief Financial Officer of Marizyme.

 

On November 10, 2021, the Board of Directors appointed David Barthel as Chief Executive Officer of Marizyme. Dr. Vithalbhai Dhaduk, the former Interim Chief Executive Officer, resigned from this position on November 10, 2021 and remains Chairman of the Board.

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ITEM 6. EXHIBITS

 

The following exhibits are filed as part of this report or incorporated by reference:

 

No. Description
2.1Signing of Definitive Agreement with Health Logic (filed as an exhibit 2.1 to Form 8-K filed on November 05, 2021)
3.1.1 Articles of Incorporation (filed as an exhibit to Form SB-2 (File No: 333-146748) filed January 14, 2008)
   
3.1.2 Certificate of Amendment to Articles of Incorporation, effective September 6, 2010 (filed as an exhibit to Form 10-K filed July 16, 2012)
   
3.1.3 Certificate of Amendment to Articles of Incorporation, effective November 22, 2010 (filed as an exhibit to Form 10-K/A filed July 15, 2011)
   
3.1.4 Certificate of Amendment to the Articles of Incorporation regarding 1-for-29 Reverse Stock Split filed March 20, 2018 (filed as an exhibit to Form 10 (File No. 000-53223) filed on September 12, 2018)
   
3.1.5 Articles of Merger between Marizyme, Inc. and GBS Enterprises Incorporated filed May 19, 2018 (filed as an exhibit to Form 10 (File No. 000-53223) filed on September 12, 2018)
   
3.1.6 Series A Non-Convertible Preferred Certificate of Designation filed May 11, 2018 (filed as an exhibit to Form 10 (File No. 000-53223) filed on September 12, 2018)
   
3.2 Bylaws (Filed as an exhibit to Form SB-2 (File No: 333-146748) filed January 14, 2008)
   
4.1 Form of Placement Agent Common Stock Purchase Warrant for 2020 Common Stock and Warrant Private Placement (filed as an exhibit to Form 10-Q filed on August 14, 2020)
   
4.2 Form of Incentive Stock Option Agreement (filed as an exhibit to Form 10-Q filed on November 13, 2019)
   
10.1 Form of Subscription Agreement for 2020 Common Stock Private Placement (filed as an exhibit to Form 10-Q filed on August 14, 2020)

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10.1.1Appointment of David Barthel as the new CEO (filed as an exhibit 10.1 to Form 8-K filed on November 16, 2021)

10.2 Form of Registration Rights Agreement for 2020 Common Stock Private Placement (filed as an exhibit to Form 10-Q filed on August 14, 2020)
   
10.3 Employment Agreement dated November 1, 2020 with Dr. Neil J. Campbell (filed as an exhibit to Form 8-K filed on November 6, 2020)
   
10.4 Indemnification Agreement dated November 1, 2020 with James Sapirstein (filed as an exhibit to Form 10-K filed on April 15, 2021)
   
10.5 Indemnification Agreement dated November 1, 2020 with Terry Brostowin (filed as an exhibit to Form 10-K filed on April 15, 2021)
   
10.6 Indemnification Agreement dated November 1, 2020 with Bruce Harmon (filed as an exhibit to Form 10-K filed on April 15, 2021)
10.7(1)Form of Unit Purchase Agreement, dated May 2021 (filed as an exhibit to Form 10-Q filed on August 23, 2021)
10.71(1)Form of 10% Secured Convertible Promissory Note Agreement (filed as an exhibit to Form 10-Q filed on August 23, 2021)
10.72(1)Form of Class A Common Stock Purchase Warrant (filed as an exhibit to Form 10-Q filed on August 23, 2021)
10.73(1)Form of Class B Common Stock Purchase Warrant (filed as an exhibit to Form 10-Q filed on August 23, 2021)
10.74(1)Form of Placement Agency Agreement (filed as an exhibit to Form 10-Q filed on August 23, 2021)
10.75(1)Form of Placement Agent Warrant Agreement (filed as an exhibit to Form 10-Q filed on August 23, 2021)
   
31.1 (1) Certification of Principal Executive Officer of Marizyme, Inc. required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
31.2(1) Certification of Principal Accounting Officer of Marizyme, Inc. required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
32.1(1) Certification of Principal Executive Officer of Marizyme, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 Of 18 U.S.C. 63
   
32.2(1) Certification of Principal Accounting Officer of Marizyme, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 Of 18 U.S.C. 63
   
101.INS Inline XBRL Taxonomy Extension Instance Document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (embedded within the Inline XBRL document)

(1)Filed herewith

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 MARIZYME, INC.
 (Registrant)
Date: November 22, 2021  
 By:/s/ David Barthel
  David Barthel
  Chief Executive Officer
  (Principal Executive and Accounting and Financial Officer)

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