| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 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 accounts of the Company and its wholly owned subsidiaries,
Somahlution, Inc. (“Somahlution”), Somaceutica, Inc. (“Somaceutica”) and Marizyme Sciences, Inc. (“Marizyme
Sciences”). All significant intercompany balances and transactions have been eliminated. Use
of Estimates The
preparation of the unaudited condensed consolidated financial statements in accordance with U.S. GAAP requires management to make use
of certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities as of the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reported
periods. The Company bases its estimates on historical experience and on various other assumptions that management believes are reasonable
under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results could differ from those estimates. Significant estimates are related to the
allocation of the purchase price in a business combination to the underlying assets and liabilities, allowance for doubtful accounts,
recoverability of long-term assets including intangible assets and goodwill, amortization expense, inventory valuation, valuation of
warrants, stock-based compensation, 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. 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
in cash
and no cash
equivalents. Reclassifications Certain
amounts in the prior year’s unaudited condensed consolidated financial statements have been reclassified to conform to the current
period presentation. These reclassifications had no effect on reported losses, total assets, or stockholders’ equity as previously
reported. The reclassifications were for the Statement of Operation which combined its expenses into two categories whereas, for comparison
purposes for the 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 no Fair
Value of Financial Instruments The
Company measures its financial assets and liabilities in accordance with FASB ASC 820 (the “Fair Value Topic”). For certain
of our financial instruments, including cash, accounts payable, accrued expenses, and short-term loans the carrying amounts approximate
fair value due to their short maturities. We
follow accounting guidance for financial and non-financial assets and liabilities. This standard defines fair value, provides guidance
for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather
applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements
related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices),
the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an
asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to
measure fair value into three broad levels. The following is a brief description of those three levels:
Level
1: Observable
inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level
2: Inputs
other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities
in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level
3: Unobservable
inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect
those that a market participant would use. The following table summarizes our financial instruments
that are measured at fair value on a recurring basis as of June 30, 2021: SCHEDULE OF FINANCIAL INSTRUMENTS MEASURED AT
FAIR VALUE ON A RECURRING BASIS
Total Level 1 Level 2 Level 3
June 30, 2021:
Warrant liabilities $ 49,963 $ - $ - $ 49,963
Derivative liabilities $ 24,982 $ - $ - $ 24,982 The
Company had no Fixed
Assets Fixed
assets are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to
operations as incurred. Depreciation is computed by the straight-line method over the assets estimated useful life. Upon the sale or
retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss
is reflected in consolidated statements of operations. SCHEDULE OF USEFUL LIFE OF FIXED ASSETS
Classification Estimated
Useful Lives
Equipment 5 7 years
Furniture
and fixtures 4 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 20 122,746 Impairment
of Long-lived Assets The
Company follows ASC 360 for its long-lived assets. The Company’s long-lived assets, such as intellectual property, are required
to be reviewed for impairment annually, or whenever events or changes in circumstances indicate that the carrying amount of the asset
may not be recoverable. The
Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the
related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying
amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally
determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets
are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the
net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The
Company determined that there were no Revenue
Recognition We
recognize revenue under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, (“ASC
606”). The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods
or services. We only apply the five-step model to contracts when it is probable that we will collect the consideration to which we are
entitled in exchange for the goods and services transferred to the customer. The following five steps are applied to achieve that core
principle:
Step
1: Identify
the contract with the customer
Step
2: Identify
the performance obligations in the contract
Step
3: Determine
the transaction price
Step
4: Allocate
the transaction price to the performance obligations in the contract
Step
5: Recognize
revenue when the company satisfies a performance obligation We
have identified one performance obligation which is related to our DuraGraft product sales for our Distribution Partner channel, we recognize
revenue for product sales at the time of delivery of the product to our Distribution Partner (customer). The customer is invoiced, and
Payment Terms are Net 30. As our products have an expiration date, if a product expires before use, we will replace the product on the
shelf at no charge. Revenue disaggregation for three months ended June 30, 2021 amounted to $ 2,586 1,920 17,313 80,180
8,650
25,969
17,376
28,610
In
the transaction that acquired the assets of Somahlution, LLC, the Company determined that the CE mark for Europe must be in Marizyme,
Inc. in order for Somahlution, Inc. to bill revenue and receive the payments accordingly. The Company has filed in Europe for the CE
mark to be in Marizyme, Inc. but, until the time it is approved by the Notified Body, BSI (British Standards Institution), which is projected
for May 2021, Somahlution, LLC provides the billing and receiver of funds. On a periodical basis, the cash received is transferred to
Somahlution, Inc. Direct
Cost of 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 260 of the FASB Accounting Standards Codification.
Basic loss per share is computed by dividing net loss available to common stockholders, by the weighted average number of shares of common
stock outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted loss per share is computed
by dividing net loss available to common stockholders by the diluted weighted average number of shares of common stock during the period.
The diluted weighted average number of common shares outstanding is the basic weighted number of shares adjusted as of the first day
of the year for any potentially diluted debt or equity. 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 one 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, using an outside
professional valuation firm, which uses 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 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. |
