| SUBSEQUENT EVENTS | NOTE
11 - SUBSEQUENT EVENTS The
Financial Industry Regulatory Authority, Inc. (“FINRA”) Staff determined that certain securities previously received by each
of Univest Securities, LLC (“Univest”) and Bradley Richmond, a registered representative of Univest, in connection with the
following transactions with the Company constituted underwriting compensation in connection with the Company’s anticipated public
offering pursuant to FINRA Rule 5110, based on the FINRA Staff’s interpretation of such rule: (a) the Company’s Units Private
Placement conducted between May 2021 and August 2022, (b) the My Health Logic acquisition, (c) a consulting agreement that the Company
entered into with Mr. Richmond in September 2020, and (d) a stock option exercisable for 18,249
shares of common stock received by Mr. Richmond
from one of the Company’s former executives in March 2022. Consequently, each of Univest and Mr. Richmond, pursuant to a letter
agreement entered into with the Company (the “October 2022 Letter Agreement”), agreed to forego their applicable rights
to an aggregate of 111,091
To the Board of Directors and Stockholders of Marizyme, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance
sheets of Marizyme, Inc. (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations,
changes in stockholders’ equity, and cash flows, for the years then ended, and the related notes (collectively referred to as the
“consolidated financial statements”). In our opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and
its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Going Concern The accompanying consolidated financial statements
have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements,
the Company has suffered recurring losses from operations, has experienced cash used from operations in excess of its current cash position,
and has an accumulated deficit, that raise substantial doubt about its ability to continue as a going concern. Management’s plans
in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter. Basis for Opinion These consolidated financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards
of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess
the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide
a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are
matters arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated
to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and
(2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter
in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Business Combination Accounting - DuraGraft Critical Audit Matter Description As described in Note 2 to the consolidated financial
statements, in 2021, the Company finalized its purchase price allocation related to the 2020 acquisition of DuraGraft including
the total purchase consideration of $23.6 million. The total purchase consideration includes the estimated fair value of contingent consideration
totaling $9.6 million, which DuraGraft’s former security holders may receive, subject to the acquired business’s achievement
of certain revenue targets and achievement of certain FDA milestones within its development stage in the future. We identified the evaluation
of the acquisition date fair value measurement of the contingent consideration as a critical audit matter. There was a high degree of
complex auditor judgment in evaluating the key assumptions used to estimate the fair value of the contingent consideration. In particular,
the fair value measurement was sensitive to the significant assumptions underlying the estimated amount of future sales of the acquired
products. Management utilized its expertise within the industry, including commercial dynamics, trends and utilization, as well as knowledge
of clinical development and regulatory approval processes to determine certain of these assumptions. Valuation professionals with specialized
skills and knowledge were needed to assist in performing certain fair value calculations. At December 31, 2021, the Company increased
its contingent consideration liabilities to $11.3 million utilizing a consistent valuation methodology with the initial fair value. The DuraGraft acquisition was accounted for
as a business combination and the identifiable assets acquired and liabilities assumed were recorded at their fair values as of the acquisition
date. The acquisition date fair values for the identifiable intangible assets are $18.1 million. We identified the evaluation of the
acquisition date fair value measurement of certain intangible assets, including customer relationships, market-related, patents, and
in-process research and development as a critical audit matter. There was a high degree of complex auditor judgment in evaluating the
key assumptions used to estimate the fair value of certain intangible assets. Specifically, key assumptions included the forecasted revenue
growth rates. Valuation professionals with specialized skills and knowledge were needed to assist in performing certain fair value calculations. How the Critical Matter was Addressed in the Audit To test the estimated fair value of contingent consideration
liabilities at the acquisition date and year end, our audit procedures included inspecting the terms of the executed agreement, assessing
the Monte Carlo simulation model used and testing the key contractual inputs and significant assumptions discussed above. We evaluated
the assumptions and judgments considering observable industry and economic trends and standards, external data sources and regulatory
factors. Estimated amounts of future revenues were evaluated for reasonableness in relation to internal and external analyses, clinical
development progress and timelines, probability of success benchmarks, and regulatory notices. Our procedures included evaluating the
data sources used by management in determining its assumptions and, where necessary, included an evaluation of available information that
either corroborated or contradicted management’s conclusions. We also assessed the professional competence, experience, and objectivity
of the Company’s external valuation specialist. We involved a valuation specialist to assess the Company’s Monte Carlo simulation
model and to perform corroborative fair value calculations. To test the fair value of the Company’s purchase
price allocation and corresponding intangible assets, our audit procedures included evaluating the Company’s valuation model, the
method and significant assumptions used and testing the completeness and accuracy of the underlying data supporting the significant assumptions
and estimates. We evaluated the forecasted revenues and corresponding gross margins assigned to these intangible assets and compared to
relevant industry data as well as management’s assumptions utilized. We reconciled the discount rates to the projected internal
rate of return for the acquisition and compared the royalty rates to industry data. We also assessed the professional competence, experience,
and objectivity of the Company’s external valuation specialist. We involved our valuation specialists to assist with our evaluation
of the valuation model and certain significant assumptions as well as the performance of a parallel calculation. Business Combination Accounting -
My Health Logic Inc. Critical Audit Matter Description As described in Note 2 to the consolidated financial
statements, On December 22, 2021, the Company completed its acquisition of My Health Logic Inc. (“MHL”) for total consideration
of 306,740 common shares, as disclosed in Note 2 to the consolidated financial statements. The acquisition is accounted for
as a business combination and the Company allocated $6,600,000 of the purchase price to the fair value of intangible assets including
trade names, biotechnology and software. The Company is in the process of finalizing the estimated values of all assets acquired and
liabilities assumed including finalizing certain intangible assets and the determination of certain tax basis balances; therefore, the
allocation of the purchase price is preliminary and subject to revision as of December 31, 2021. Auditing management’s preliminary allocation
of purchase price for its acquisition of MHL involved especially subjective and complex judgements due to the significant estimation required
in determining the fair value and allocation of intangible assets. The significant estimation was primarily due to the complexity of the
valuation models used to measure that fair value as well as the sensitivity of the respective fair values to the underlying significant
assumptions. The significant assumptions used to estimate the fair value of the intangible assets and subsequent amortization expense
included forecasted revenues, discount rates, and economic lives. These significant assumptions are forward-looking and could be affected
by future economic and market conditions. How the Critical Matter Was Addressed in the Audit The following are the primary procedures we performed
to address this critical audit matter. To test the fair value of the Company’s purchase price allocation and corresponding intangible
assets, our audit procedures included evaluating the Company’s valuation model, the method and significant assumptions used and
testing the completeness and accuracy of the underlying data supporting the significant assumptions and estimates. We reconciled the discount
rates to the projected internal rate of return for the acquisition and compared the royalty rates to industry data. We also assessed the
professional competence, experience, and objectivity of the Company’s external valuation specialist. We involved our valuation specialists
to assist with our evaluation of the valuation model and certain significant assumptions as well as the performance of a parallel calculation. WithumSmith+Brown, PC We have served as the Company’s auditor since 2020. Whippany, New Jersey March 31, 2022, except for the effects of the reverse stock split described in Note 12, as to which the date is February , 2023 PCAOB ID Number 100 The foregoing report is in the form that will be signed upon the completion of the reverse stock split described in Note 12 to the consolidated financial statements. /s/ WithumSmith+Brown,
PC Whippany, New Jersey March 31, 2022 Consolidated
Balance Sheets
December
31, 2021 December
31, 2020
ASSETS:
Current
Cash $ 4,072,339 $ 2,902,762
Accounts receivable 8,650 40,585
Other receivables 41,307 -
Prepaid expense 257,169 106,390
Inventory 22,353 56,340
Total current assets 4,401,818 3,106,077
Non-current
Property, plant and equipment,
net 12,817 7,122
Operating lease right-of-use
assets, net 1,158,776 1,317,830
Intangible assets, net 52,866,192 42,278,211
Prepaid royalties, non-current 339,091 344,321
Deposits 30,000 30,000
Goodwill 7,190,656 -
Total
non-current assets 61,597,532 43,977,484
Total assets $ 65,999,350 $ 47,083,561
LIABILITIES AND STOCKHOLDERS’
EQUITY:
Current
Accounts payable and accrued
expenses $ 1,596,147 $ 478,103
Note payable 127,798 -
Due to related parties 1,132,634 -
Operating
lease obligations 277,142 243,292
Total current liabilities 3,133,721 721,395
Non-current
Operating lease obligations,
net of current portion 881,634 1,074,538
Notes payable, net of
current portion 469,252 -
Convertible notes 26,065 -
Derivative liabilities 2,485,346 -
Contingent
liabilities 11,313,000 -
Total
non-current liabilities 15,175,297 1,074,538
Total liabilities $ 18,309,018 $ 1,795,933
Commitments and contingencies (Note 9) - -
Stockholders’
equity:
Preferred stock, $ 0.001 25,000,000 no - -
Common stock, par value
$ 0.001 , 20,000,000 shares
authorized, issued and outstanding shares - 2,702,070 and 2,395,330 at
December 31, 2021 and 2020 respectively 2,702 2,395
Additional paid-in capital 95,511,193 82,110,867
Accumulated
deficit (47,823,563 ) (36,825,634 )
Total stockholders’
equity 47,690,332 45,287,628
Total liabilities and
stockholders’ equity $ 65,999,350 $ 47,083,561 The
accompanying notes are an integral part of these consolidated financial statements. Consolidated
Statements of Operations
2021 2020
Years
ended December 31,
2021 2020
Revenue $ 210,279 $ 197,136
Operating expenses:
Direct costs of revenue 80,354 58,292
Professional fees (includes
related party amounts of $ 410,400 180,000 2,269,756 1,153,731
Salary expenses 2,887,309 915,210
Research and development 1,681,899 687,734
Stock-based compensation 898,444 1,833,292
Depreciation and amortization 43,871 591,458
Other
general and administrative expenses 1,170,029 757,022
Total operating expenses 9,031,662 5,996,739
Total operating loss $ (8,821,383 ) $ (5,799,603 )
Other expense
Interest and accretion
expenses (126,024 ) (45,450 )
Change in fair value of
contingent liabilities (1,387,000 ) -
Loss
on debt extinguishment (663,522 ) -
Total other expense (2,176,546 ) (45,450 )
Net loss $ (10,997,929 ) $ (5,845,053 )
Loss per share - basic
and diluted $ (4.58 ) $ (3.31 )
Weighted average number of shares of common
stock outstanding - basic and diluted 2,402,893 1,767,484 The
accompanying notes are an integral part of these consolidated financial statements. Consolidated
Statements of Stockholders’ Equity
Common
Stock Additional
Paid-in Accumulated Total
Stockholders’
Shares Amount Capital Deficit Equity
Balance,
December 31, 2019 1,324,041 $ 1,324 $ 59,322,129 $ (30,980,581 ) $ 28,342,872
Common
shares issued in lieu of payables 16,940 17 261,436 - 261,453
Common
stock issued for services 14,335 14 237,486 - 237,500
Sale
of common stock 373,347 373 6,274,791 - 6,275,164
Warrants
issued for acquisition
Warrants
issued
Issuance
of common stock for acquisition 666,667 667 12,499,333 - 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 - - 1,329,643 - 1,329,643
Net
loss - - - (5,845,053 ) (5,845,053 )
Balance,
December 31, 2020 2,395,330 $ 2,395 $ 82,110,867 $ (36,825,634 ) $ 45,287,628
Warrants
issued for acquisition - - (732,300 ) - (732,300 )
Issuance
of common stock for acquisition 306,740 307 7,773,693 - 7,774,000
Warrants
issued - - 5,493,821 - 5,493,821
Stock-based
compensation expense - - 865,112 - 865,112
Net
loss - - - (10,997,929 ) (10,997,929 )
Balance,
December 31, 2021 2,702,070 $ 2,702 $ 95,511,193 $ (47,823,563 ) $ 47,690,332 The
accompanying notes are an integral part of these consolidated financial statements. Consolidated
Statements of Cash Flows
2021 2020
Years
Ended December 31,
2021 2020
Cash flows from operating
activities:
Net loss $ (10,997,929 ) $ (5,845,053 )
Adjustments to reconcile
net loss to net cash used in operations:
Depreciation and amortization 43,871 591,459
Stock-based compensation 865,112 1,329,643
Stock-based compensation
- restricted common stock 33,332 -
Interest and accretion
on convertible notes 126,024 -
Issuance of common stock
for services - 237,500
Issuance of warrants
for services 368,287 253,749
Change in fair value of
contingent liabilities 1,387,000 -
Loss on debt extinguishment 663,522 -
Change in operating assets
and liabilities:
Accounts receivable 36,298 (40,585 )
Prepaid expense (184,112 ) 307,983
Inventory 33,987 127,129
Deposits - (30,000 )
Accounts
payable and accrued expenses 968,788 (155,661 )
Due to related parties 868,725 -
Net cash used in operating
activities (5,787,095 ) (3,223,836 )
Cash flows used in investing
activities:
Purchase
of intangible assets - (148,656 )
Net
cash used in investing activities - (148,656 )
Cash flows from financing
activities:
Proceeds from promissory
notes 263,907 -
Proceeds from financing,
net of issuance costs 6,692,765 -
Shares
issued for cash, net of offering costs - 6,275,164
Net
cash provided by financing activities 6,956,672 6,275,164
Net change in cash 1,169,577 2,902,672
Cash at beginning of year 2,902,762 90
Cash
at end of year $ 4,072,339 $ 2,902,762
Supplemental disclosure
of cash flow information:
Cash
paid for interest $ - $ 45,449
Cash
paid for taxes $ - $ -
Non-cash investing and financing
activities:
Derivative
liabilities and debt discount issued in connection with convertible notes $ 2,485,346 $ -
Warrants
and debt discount issued in connection with convertible notes $ 5,125,534 $ -
Contingent
liabilities $ 9,926,000 $ -
Issuance
of common stock in lieu of payables $ - $ 261,453
Issuance
of common stock in connection with business combination $ 7,774,000 $ 12,500,000
Notes
payable assumed in connection with business combination $ 468,137 $ -
Issuance
of warrants in connection with business combination $ - $ 1,932,300
Initial
adoption of ROU asset and lease liability $ - $ 1,317,830 The
accompanying notes are an integral part of these consolidated financial statements. Notes
to the Consolidated Financial Statements December
31, 2021 | 11.
Subsequent Events SUBSEQUENT EVENTS We
evaluated subsequent events through the date on which the consolidated financial statements were issued and except as noted below, no
events require recognition or disclosure. Subsequent
to the year ended December 31, 2021, we conducted the following additional closings of our units private placement in which we
accepted the indicated non-cash forms of consideration in exchange for units in the private placement:
● On
January 13, 2022, we issued to a consultant 1,523 units
at a price of $ 26.25 per
unit in exchange for their services. The units consist of Convertible Notes in the aggregate principal amount of $ 40,000 and
Class C warrants for the purchase of 3,047 shares
of our common stock.
● On
January 24, 2022, we issued to two unrelated investors a total of 10,615 units
at a price of $ 26.25 per
unit in exchange for the assumption, cancellation, and conversion of principal notes of our subsidiary My Health Logic. The units
consist of Convertible Notes in the aggregate principal amount of $ 278,678 and
Class C warrants for the purchase of 21,231 shares
of our common stock.
● On
January 24, 2022, we issued to the representative and its designee, Bradley Richmond, our former licensing and market advisor
and former Acting Vice President of Finance, a total of 11,428 units
at a price of $ 26.25 per
unit in exchange for services provided to us in connection with our acquisition of My Health Logic. The units consist of
Convertible Notes in the aggregate principal amount of $ 300,000 and
Class C warrants for the purchase of 22,856 shares
of our common stock.
● On
January 26 and February 14, 2022, in exchange for services of Mr. Richmond, we granted to him 20,000
warrants to purchase an aggregate 20,000
shares of our common stock at an exercise
price of $ 0.15
per share. On March 15, 2022, Mr. Richmond
exercised 20,000
of warrants issued to him subsequently
to the year end, upon which Marizyme issued to Mr. Richmond 20,000
shares of common stock. |
