| Organization, Basis of Presentation and Summary of Significant Accounting Policies | 1.
Organization, Basis of Presentation and Summary of Significant Accounting Policies Organization Maryzime,
Inc. (the “Company” or “Marizyme”) is a Nevada corporation originally incorporated on March 20, 2007, under the
name SWAV Enterprises, Ltd. On September 6, 2010, the Company name was changed to GBS Enterprises Inc. and from 2010 to September 2018
the Company was in the software products and advisory services business for email and instant messaging applications. The Company divested
that business between December 2016 and September 2018 and focused on the acquisition of life science technologies. On
March 21, 2018, the Company’s name was changed to Marizyme, Inc., to reflect the new life sciences focus. Marizyme’s common
stock is currently quoted on the OTCQB tier of OTC Markets Group, Inc. under the symbol “MRZM”. Basis
of Presentation and Principles of Consolidation The
Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United
States of America (“GAAP”). The accompanying consolidated financial statements include the consolidated accounts of the Company
and its wholly owned subsidiaries, Somahlution, Inc. (“Somahlution”), Somaceutica, Inc. (“Somaceutica”), Marizyme
Sciences, Inc. (“Marizyme Sciences”), and My Health Logic, Inc. (“My Health Logic”). All intercompany transactions
have been eliminated on consolidation. Going
Concern The
Company’s consolidated financial statements are prepared using GAAP as applicable to a going concern, which contemplates the realization
of assets and liquidation of liabilities in the normal course of business. However, the Company does not have an established source of
revenues sufficient to cover its operating costs and to allow it to continue as a going concern. The Company, since its inception, has
incurred recurring operating losses and negative cash flows from operations and has an accumulated deficit of $ 85,989,433 966,464 510,865 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. Food and Drug Administration (“FDA”) to extend the selling of the products into
the U.S. market which may result in the Company attaining profitable operations. During
the next twelve months from the date the consolidated financial statements were issued, 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 SEC, and
the payment of expenses associated with its product development. The Company may 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. On February 14, 2021, Marizyme
completed a preliminary prospectus with intention to raise up to $ 17,250,000 9,600,000 The
consolidated financial statements do not include any adjustments related 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. Use
of Estimates The
preparation of the consolidated financial statements in accordance with 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, derivative liabilities, contingent liabilities,
and deferred tax valuations. Fair
Value Measurements 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, accounts receivable, other receivables, accounts payable and accrued expenses, notes payable, 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 Somahlution 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 1.19 69.62 0 6.21 2,925,000 1,427,000 4,352,000
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 20.6 1,414,000 5,402,000 3,988,000
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 – 20.6 95,000 1,055,000 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 78.93 0 5 years No 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 (see Note 7). 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. Marizyme
measures the following financial instruments at fair value on a recurring basis. At December 31, 2022 and 2021, the fair values of these
financial instruments were as follows: Schedule of Fair Values of Financial
Instruments
December 31, 2022 Level 1 Level 2 Level 3
Fair Value Hierarchy
December 31, 2022 Level 1 Level 2 Level 3
Liabilities
Derivative liabilities $ - $ - $ 4,823,725
Contingent liabilities - - 9,707,000
Total $ - $ - $ 14,530,725
December 31, 2021 Level 1 Level 2 Level 3
Fair Value Hierarchy
December 31, 2021 Level 1 Level 2 Level 3
Liabilities
Derivative liabilities $ - $ - $ 2,485,346
Contingent liabilities - - 11,313,000
Total $ - $ - $ 13,798,346 The
following table provides a roll forward of all liabilities measured at fair value using Level 3 significant unobservable inputs: Schedule of Liabilities Fair Value Measured
Derivative and Contingent Liabilities
Balance at December 31, 2021 $ 13,798,346
Change in fair value of contingent liabilities (1,606,000 )
Derivative liabilities issued pursuant to Unit Purchase Agreement 2,338,379
Balance at December 31, 2022 $ 14,530,725 Cash Cash
includes cash in readily available checking accounts. Concentrations
of Credit Risk The
Company has significant cash balances at financial institutions which throughout the year regularly exceed the federally insured limit
of $ 250,000 Inventory Inventory
consisted of primarily finished goods and is valued at the lower of cost and net realizable value. Cost is determined using the first-in,
first out method. The Company decreases the value of inventory for estimated obsolescence equal to the difference between the cost of
inventory and the estimated market value, based upon an aging analysis of the inventory on hand, specifically known inventory-related
risks, and assumptions about future demand and market conditions. The Company has determined that no inventory reserve was necessary
as of December 31, 2022 and 2021. Accounts
Receivable Trade
receivables are amounts due from customers for goods sold in the ordinary course of business. Accounts receivable are non-interest bearing
and are due for settlement in full within 30 days. Trade receivables are shown net of allowance for bad or doubtful debts. Allowance
for Doubtful Accounts The
Company establishes an allowance for doubtful accounts to ensure trade and other receivables 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 December 31, 2022 or 2021. The Company did not record
any bad debt expense in each of the years ended December 31, 2022 and 2021. Property,
Plant, and Equipment, Net Property,
plant and equipment are recorded at cost, less accumulated depreciation. Depreciation expense is recognized using the straight-line method
over the useful life of the asset. Machinery, computer equipment and related software are depreciated over five to seven years. Furniture
and fixtures are depreciated over four seven years Intangible
Assets and Goodwill Intangible
assets are recorded at cost less accumulated amortization and accumulated impairment losses. Intangible assets acquired as a result of
an acquisition or in a business combination are measured at fair value 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 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 (“IPR&D”). 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
● Impairment
of long-lived assets:
● Goodwill
● In-process
research and development assets: Leases At
the inception of a contractual arrangement, the Company determines whether the contract contains a lease by assessing whether there is
an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration
over a period of time. If both criteria are met, the Company records the associated lease liability and corresponding right-of-use asset
upon commencement of the lease using the implicit rate or a discount rate based on a credit-adjusted secured borrowing rate commensurate
with the term of the lease. The Company additionally evaluates leases at their inception to determine if they are to be accounted for
as an operating lease or a finance lease. A lease is accounted for as a finance lease if it meets one of the following five criteria:
the lease has a purchase option that is reasonably certain of being exercised, the present value of the future cash flows is substantially
all of the fair market value of the underlying asset, the lease term is for a significant portion of the remaining economic life of the
underlying asset, the title to the underlying asset transfers at the end of the lease term, or if the underlying asset is of such a specialized
nature that it is expected to have no alternative uses to the lessor at the end of the term. Leases that do not meet the finance lease
criteria are accounted for as an operating lease. Operating lease assets represent a right to use an underlying asset for the lease term
and operating lease liabilities represent an obligation to make lease payments arising from the lease. Operating lease liabilities with
a term greater than one year and their corresponding right-of-use assets are recognized on the balance sheet at the commencement date
of the lease based on the present value of lease payments over the expected lease term. Certain adjustments to the right-of-use asset
may be required for items such as initial direct costs paid or incentives received. As the Company’s leases do not typically provide
an implicit rate, the Company utilizes the appropriate incremental borrowing rate, determined as the rate of interest that the Company
would have to pay to borrow on a collateralized basis over a similar term and in a similar economic environment. Lease cost is recognized
on a straight-line basis over the lease term and variable lease payments are recognized as operating expenses in the period in which
the obligation for those payments is incurred. Variable lease payments primarily include common area maintenance, utilities, real estate
taxes, insurance, and other operating costs that are passed on from the lessor in proportion to the space leased by the Company. The
Company has elected the practical expedient to not separate between lease and non-lease components. Revenue
Recognition Pursuant
to Topic 606, the Company recognizes revenue to depict the transfer of promised goods or services to a customer in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle,
Topic 606 outlines a five-step process for recognizing revenue from customer contracts that includes i) identification of the contract
with a customer, ii) identification of the performance obligations in the contract, iii) determining the transaction price, iv) allocating
the transaction price to the separate performance obligations in the contract, and v) recognizing revenue associated with performance
obligations as they are satisfied. At
contract inception, the Company assesses the goods or services promised within each contract and assess whether each promised good or
service is distinct and determine those that are performance obligations. The Company then recognizes as revenue the amount of the transaction
price that is allocated to the respective performance obligation when the performance obligation is satisfied. The
Company has identified one performance obligation which is related to DuraGraft product sales. For the Company’s distribution partner
channel, the Company recognizes revenue for product sales at the time of delivery of the product to its distribution partner (customer).
As products have an expiration date, if a product expires, the Company will replace the product at no charge. There were no significant
judgements made in applying this topic. Direct
Cost of Revenue Cost
of sales includes the actual cost of merchandise sold, and the cost of transportation of merchandise from the Company’s third-party
vendor to its distributer. Research
and Development Expenses and Accruals All
research and development costs are expensed in the period incurred and consist primarily of salaries, payroll taxes, and employee benefits,
those individuals involved in research and development efforts, external research and development costs incurred under agreements with
contract research organizations and consultants to conduct and support the Company’s ongoing clinical trials of DuraGraft, and
costs related to manufacturing DuraGraft for clinical trials. The Company has entered into various research and development contracts
with various organizations and other companies. Payments of these activities are based on the terms of the individual agreements which
matches to the pattern of costs incurred. Payments made in advances are reflected in the accompanying balance sheets as prepaid expenses.
The Company records accruals for estimated costs incurred for ongoing research and development activities. When evaluating the adequacy
of the accrued liabilities, the Company analyzes progress of the services, including the phase or completion of events, invoices received
and contracted costs. Significant judgments and estimates may be made in determining the prepaid or accrued balances at the end of any
reporting period. Actual results could differ from the Company’s estimates. Stock-Based
Compensation Share-based
compensation expense for employees and directors is recognized in the Consolidated Statement of Operations based on estimated amounts,
including the grant date fair value and the expected service period. For stock options, the Company estimates the grant date fair value
using a Black-Scholes valuation model, which requires the use of multiple subjective inputs including estimated future volatility, expected
forfeitures and the expected term of the awards. The Company estimates the expected future volatility based on the stock’s historical
price volatility. The stock’s future volatility may differ from the estimated volatility at the grant date. For restricted stock
unit (“RSU”) equity awards, the Company estimates the grant date fair value using its closing stock price on the date of
grant. The Company recognizes the effect of forfeitures in compensation expense when the forfeitures occur. The estimated forfeiture
rates may differ from actual forfeiture rates which would affect the amount of expense recognized during the period. The Company recognizes
the value of the awards over the awards’ requisite service or performance periods. The requisite service period is generally the
time over which the Company’s share-based awards vest. Income
Taxes The
Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax
assets and liabilities are determined on the basis of the differences between the consolidated financial statements and tax basis of
assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of
a change in tax rates on deferred tax assets and liabilities is recognized in the consolidated statements of operations in the period
that includes the enactment date. The
Company recognizes net deferred tax assets to the extent that the Company believes these assets are more likely than not to be realized.
In making such a determination, management considers all available positive and negative evidence, including future reversals of existing
taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If management
determines that the Company would be able to realize its deferred tax assets in the future in excess of their net recorded amount, management
would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. The
Company records uncertain tax positions on the basis of a two-step process whereby (i) management determines whether it is more likely
than not that the tax positions will be sustained on the basis of the technical merits of the position and (ii) for those tax positions
that meet the more-likely-than-not recognition threshold, management recognizes the largest amount of tax benefit that is more than 50
percent likely to be realized upon ultimate settlement with the related tax authority. The Company recognizes interest and penalties
related to unrecognized tax benefits within income tax expense. Any accrued interest and penalties are included within the related tax
liability. There was no interest or penalties as of December 31, 2022 and 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 one 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
Issued Accounting Pronouncements The
Company assesses the adoption impacts of recently issued accounting standards by the Financial Accounting Standards Board or other standard
setting bodies on the Company’s consolidated financial statements as well as material updates to previous assessments. There were
no new material accounting standards issued or adopted in year of 2022 that impacted the Company. |
