UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
For the transition period from ______ to _______
Commission
File Number:
(Exact name of registrant as specified in its charter)
| (State or Other Jurisdiction of | (I.R.S. Employer | |
| Incorporation or Organization) | Identification No.) |
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Not applicable. |
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
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has been subject to such filing requirements for the past 90 days.
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).
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 |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
Indicate
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As of August 14, 2024, the registrant had shares of common stock ($ par value) outstanding.
MARIZYME, INC.
FORM 10-Q
TABLE OF CONTENTS
| Page | ||
| PART I - FINANCIAL INFORMATION | ||
| ITEM 1. | Condensed Consolidated Financial Statements. | 3 |
| ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 19 |
| ITEM 3. | Quantitative and Qualitative Disclosures About Market Risk. | 28 |
| ITEM 4. | Controls and Procedures. | 29 |
| PART II - OTHER INFORMATION | ||
| ITEM 1. | Legal Proceedings. | 30 |
| ITEM 1A. | Risk Factors. | 30 |
| ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 30 |
| ITEM 3. | Defaults Upon Senior Securities. | 30 |
| ITEM 4. | Mine Safety Disclosures. | 30 |
| ITEM 5. | Other Information. | 30 |
| ITEM 6. | Exhibits. | 31 |
| Signatures | 32 | |
| 2 |
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MARIZYME, INC.
Condensed Consolidated Balance Sheets
| June 30, 2024 | December 31, 2023 | |||||||
| (unaudited) | ||||||||
| ASSETS: | ||||||||
| Current | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Other receivables | ||||||||
| Prepaid expenses | ||||||||
| Inventory | ||||||||
| Total current assets | ||||||||
| Non-current | ||||||||
| Property, plant and equipment, net | ||||||||
| Operating lease right-of-use assets, net | ||||||||
| Intangible assets, net | ||||||||
| Prepaid royalties, non-current | ||||||||
| Deposits | ||||||||
| Goodwill | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT): | ||||||||
| Current | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Notes payable | ||||||||
| Due to related parties | ||||||||
| Convertible notes, net - Units Private Placement | ||||||||
| Convertible notes, net - OID | ||||||||
| Operating lease obligations | ||||||||
| Total current liabilities | ||||||||
| Non-current | ||||||||
| Operating lease obligations, net of current portion | ||||||||
| Agreement obligation | ||||||||
| Contingent liabilities | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 10) | ||||||||
| Stockholders’ equity (deficit): | ||||||||
| Preferred stock, $ par value, shares authorized, shares issued and outstanding as of June 30, 2024 and December 31, 2023 | ||||||||
| Common stock, par value $, shares authorized, issued and outstanding shares - at June 30, 2024 and December 31, 2023 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity (deficit) | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ equity (deficit) | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
MARIZYME, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Direct cost of revenue | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Professional
fees (includes related party amounts of $ | ||||||||||||||||
| Salary expenses | ||||||||||||||||
| Research and development | ||||||||||||||||
| Stock-based compensation | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Royalty expense | ||||||||||||||||
| Other general and administrative expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Total operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest and accretion expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income | ||||||||||||||||
| Change in fair value of contingent liabilities | ( | ) | ||||||||||||||
| Gain (loss) on debt extinguishment | ( | ) | ( | ) | ||||||||||||
| Borrowing costs | ( | ) | ( | ) | ||||||||||||
| Loss on issuance of debt | ( | ) | ( | ) | ||||||||||||
| Total other expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per share – basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average number of shares of common stock outstanding – basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
MARIZYME, INC.
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
Three and Six Months Ended June 30, 2024 and 2023
(Unaudited)
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock-based compensation expense | - | |||||||||||||||||||
| Issuance of shares | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, March 31, 2023 (unaudited) | ( | ) | ||||||||||||||||||
| Stock-based compensation expense | - | |||||||||||||||||||
| Issuance of shares | ||||||||||||||||||||
| Exercise of warrants | ||||||||||||||||||||
| Issuance of warrants on debt extinguishment | - | |||||||||||||||||||
| Issuance of warrants on promissory note | - | |||||||||||||||||||
| Warrants cancelled in debt extinguishment | - | ( | ) | ( | ) | |||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, June 30, 2023 (unaudited) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ Equity | |||||||||||||||||
| Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Stock-based compensation expense | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, March 31, 2024 (unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Stock-based compensation expense | - | |||||||||||||||||||
| Modification of warrants | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance, June 30, 2024 (unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
MARIZYME, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of ROU asset | ||||||||
| Stock-based compensation | ||||||||
| Interest and accretion on convertible notes and notes payable | ||||||||
| Change in fair value of contingent liabilities | ( | ) | ||||||
| Gain (loss) on debt extinguishment | ( | ) | ||||||
| Loss on issuance of debt | ||||||||
| Shares issued as part of the Confidential Settlement Agreement | ||||||||
| Shares issued for services | ||||||||
| Warrants issued as part of promissory note agreement | ||||||||
| Borrowing costs | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts and other receivable | ( | ) | ||||||
| Prepaid expenses | ( | ) | ||||||
| Inventory | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Due to related parties | ||||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of OID Convertible Notes, net of issuance cost | ||||||||
| Proceeds from shares issued for exercise of warrants | ||||||||
| Proceeds from promissory notes | ||||||||
| Repayments of promissory notes | ( | ) | ( | ) | ||||
| Proceeds from agreement | ||||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ( | ) | ( | ) | ||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Debt discount issued in connection with warrants modification | $ | $ | ||||||
| Derivative liabilities and debt discount issued in connection with convertible notes | $ | $ | ||||||
| Warrants and debt discount issued in connection with convertible notes | $ | $ | ||||||
| Settlement of notes payable with convertible notes | $ | $ | ||||||
| Warrants cancelled in debt extinguishment | $ | $ | ||||||
| Shares issued on conversion of convertible notes | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
MARIZYME, INC.
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
NOTE 1 – DESCRIPTION OF BUSINESS
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”.
NOTE 2 – GOING CONCERN
The
Company’s unaudited condensed consolidated financial statements are prepared using accounting principles generally accepted in
the United States of America 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, which requires the Company to rely on investing and financing activities in order 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
$
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, meet its debt obligations until such time future profitable revenues are achieved, and raise funds beyond its working capital balance in order to finance future development of its intangible assets.
During
the next twelve months from the date the unaudited condensed 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 filings with the Securities and Exchange Commission (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. In July 2024, the Company executed a promissory note in favor of Qualigen Therapeutics, Inc.,
which had previously engaged in an agreement with the Company to advance the commercialization of DuraGraft™ (see Note 11).
Under the terms of the promissory note, Qualigen lent the Company $
The unaudited condensed 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.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the consolidated accounts of the Company and its wholly owned subsidiaries: My Health Logic Inc (“My Health Logic” or “MHL”), Somahlution, Inc. (“Somahlution”), Somaceutica, Inc. (“Somaceutica”), (collectively – “Somahlution”), Marizyme Sciences, Inc. (“Marizyme Sciences”), and DuraGraft, Inc. All intercompany 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 accounting principles generally accepted in the United States of America (“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 May 13, 2024 (the “2023 Form 10-K”). The condensed consolidated balance sheet as of December 31, 2023 was derived from audited consolidated financial statements included in the 2023 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 1 to those consolidated financial statements.
Interim results may not be indicative of the results that may be expected for the full year or any future periods. 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 to fairly present the results of operations, financial condition, cash flows and stockholders’ equity (deficit) for the periods indicated. Except as otherwise disclosed, all such adjustments are of a normal recurring nature.
| 7 |
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 unaudited condensed 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 recoverability of long-term assets including intangible assets and goodwill, amortization expense, valuation of warrants, stock-based compensation, and contingent liabilities.
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 and considers counterparty credit risk in its assessment of fair value.
The carrying amounts of certain accounts and other receivables, accounts payable and accrued expenses, note 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.
Contingent Liabilities
The contingent liabilities assumed on the acquisition of Somahlution in 2020 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 %, expected volatility of %, expected dividend of $, and expected life
of years. For the three and six months ended June 30, 2024, changes in these assumptions resulted in a $ | |
| 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. 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 | |
| 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 – | |
| 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 %, expected volatility of %, expected dividend of
$, and expected life of years. |
Warrants
The
detachable warrants attached to the OID Convertible Notes (as such term is hereinafter defined, see Note 7) are classified as equity.
These warrants were valued using the Black-Scholes pricing model. The following weighted average assumptions were used in the Black-Scholes
model: a risk-free rate of %,
expected volatility of %,
expected dividend yield of $,
and an expected life of 0.17 years. During the three and six months ended June 30, 2024, the Company extended the maturity dates of certain
OID Warrants (as such term is hereinafter defined, see Note 7), as part of modification of OID Convertible Notes that resulted in a substantive
modification and extinguishment of old debt. As a result, the Company recognized an incremental fair value increase of $
Goodwill, Intangible Assets and Impairment
The Company’s Level 3 measurements include the fair value assessment of assets such as IPR&D intangibles, goodwill, and particularly when considering potential impairments. The significant unobservable inputs used in the fair value measurements of these assets primarily include management’s assumptions regarding future cash flows and discount rates.
| 8 |
As
part of the acquisition of Somahlution in 2020, the Company
acquired Goodwill attributed to the workforce and profitability of the acquired business. A residual method methodology was used to estimate
the fair market value goodwill. A pre-tax discount rate based on weighted average cost of capital of
Additionally,
as part of the acquisition of Somahlution in 2020, the Company acquired IPR&D
intangible asset “Cyto Protectant Life Sciences” with indefinite economic life. The fair value of IRP&D was determined
based on Multi-Period Excess Earning Method valuation approach, using discount rate of
For impairment testing, the Company uses a discounted cash flow (DCF) model to estimate the fair value of IPR&D intangibles and goodwill. The key assumptions used in the DCF model include projected cash flows, discount rate and terminal value growth rate. These inputs are highly subjective and require significant management judgment. Changes in these assumptions could have a significant impact on the fair value and any resulting impairment charge.
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. As of June 30, 2024, and December 31, 2023, the fair values of these financial instruments were as follows:
| Fair Value Hierarchy | ||||||||||||
| June 30, 2024 | Level 1 | Level 2 | Level 3 | |||||||||
| Liabilities | ||||||||||||
| Contingent liabilities | $ | $ | $ | |||||||||
| Total | $ | $ | $ | |||||||||
| Fair Value Hierarchy | ||||||||||||
| December 31, 2023 | Level 1 | Level 2 | Level 3 | |||||||||
| Liabilities | ||||||||||||
| Contingent liabilities | $ | $ | $ | |||||||||
| Total | $ | $ | $ | |||||||||
The following table provides a roll forward of all liabilities measured at fair value using Level 3 significant unobservable inputs:
| Contingent Liabilities | ||||
| Balance at December 31, 2023 | $ | |||
| Change in fair value of contingent liabilities | ||||
| Balance at June 30, 2024 | $ | |||
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, for 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. Payments of these activities are based on the terms of the individual agreements which matches to the pattern of costs incurred. Payments made in advance are reflected in the accompanying condensed consolidated 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 required in determining the prepaid or accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates.
| 9 |
Stock-based compensation expense for employees and directors is recognized in the unaudited condensed consolidated statements 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 share-based awards vest.
New Accounting Standards and Updates from the Securities and Exchange Commission
In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”). ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (i) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (ii) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 will be effective for the Company for fiscal years beginning after December 15, 2023. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company has fully adopted ASU 2020-06 as of January 1, 2023, and this adoption does not have a material impact on the way the Company is accounting for its debt.
NOTE 4 – LEASES
On
December 11, 2020, the Company entered into a
Effective
April 1, 2022, the Company amended its lease agreement for administrative office and laboratories to add an additional
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
The
total rent expense for the three and six months ended June 30, 2024 was $
The following table summarizes supplemental condensed consolidated balance sheet information related to the operating leases as of June 30, 2024, and December 31, 2023:
| June 30, 2024 | December 31, 2023 | |||||||
| Right-of-use asset | $ | $ | ||||||
| Operating lease liabilities, current | $ | $ | ||||||
| Operating lease liabilities, non-current | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
As of June 30, 2024, the maturities of the lease liabilities for the periods ending December 31, are as follows:
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| Total lease payments | $ | |||
| Less: Present value discount | ( | ) | ||
| Total | $ |
NOTE 5 – 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 valued at $
At
December 31, 2023, management determined that the carrying value of Krillase exceeded its estimated recoverable amount of $ as of
December 31, 2023. Impairment of $
| 10 |
DuraGraft
As
part of the Somahlution acquisition in 2020, Marizyme purchased of intangible assets valued at $
At
December 31, 2023, management determined that the carrying value of DuraGraft intangible assets exceeded its recoverable amount. Impairment
of $
My Health Logic
As
part of the My Health Logic (“MHL”) acquisition in 2021, Marizyme purchased
MHL’s lab-on-chip technology platform and its patient-centric, digital point-of-care diagnostic device, MATLOC, fair valued at
an aggregate amount of $
Additionally,
as part of the My Health Logic acquisition in 2021, the Company recognized goodwill of $
| June 30, 2024 | ||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||
| Patents in process | $ | $ | $ | |||||||||
| DuraGraft patent | ( | ) | ||||||||||
| DuraGraft - Distributor relationship | ( | ) | ||||||||||
| DuraGraft IPR&D - Cyto Protectant Life Sciences | ||||||||||||
| $ | $ | ( | ) | $ | ||||||||
| December 31, 2023 | ||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Impairment | Net Carrying Amount | |||||||||||||
| Krillase intangible assets | $ | $ | $ | ( | ) | $ | ||||||||||
| Patents in process | ||||||||||||||||
| DuraGraft patent | ( | ) | ||||||||||||||
| DuraGraft - Distributor relationship | ( | ) | ||||||||||||||
| DuraGraft IPR&D - Cyto Protectant Life Sciences | ( | ) | ||||||||||||||
| My Health Logic - Trade name | ( | ) | ( | ) | ||||||||||||
| My Health Logic - Biotechnology | ( | ) | ( | ) | ||||||||||||
| My Health Logic - Software | ( | ) | ( | ) | ||||||||||||
| Total intangibles | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||
| Goodwill | DuraGraft | My Health Logic | Total | |||||||||
| Balance, December 31, 2023 and June 30, 2024 | $ | $ | $ | |||||||||
The following changes to the Company’s intangible assets had taken place in the periods indicated:
| Balance, December 31, 2022 | $ | |||
| Impairment | ( | ) | ||
| Amortization expense | ( | ) | ||
| Balance, December 31, 2023 | $ | |||
| Amortization expense | ( | ) | ||
| Balance, June 30, 2024 | $ |
| 11 |
Future
amortizations for DuraGraft intangible assets for the next five years will be $
NOTE 6 – NOTES PAYABLE
a)
On October 23, 2023, the Company issued a note payable
to Hub International for $
b)
On December 28, 2022, the Company issued a promissory note to Hexin for the principal amount of $
c)
On February 2, 2023, the Company issued an unsecured promissory note to Walleye Opportunities Master Fund Ltd. (the “Walleye Promissory
Note”) for $
d)
As part of the My Health Logic Inc. acquisition, completed in November 2021, Marizyme assumed an aggregate of $
e)
As of June 30, 2024, the Company has outstanding borrowings under notes payable to Mr. Richmond in the principal amount of $
f)
As of June 30, 2024, the Company has outstanding borrowings under a note payable to Santander Bank: Sullivan & Worcester LLP in the
principal amount of $
g)
As of June 30, 2024, the Company has outstanding borrowings under a note payable in the principal amount of $
h)
As of June 30, 2024, the Company has outstanding borrowings under a note payable to Dr. Vithalbhai Dhaduk in the principal amount of
$
| 12 |
NOTE 7 - CONVERTIBLE PROMISSORY NOTES AND WARRANTS
From May 2021 to August 2022, the Company conducted a private placement (the “Units Private Placement”) of units (the “Units”) consisting of 10% secured convertible promissory notes (the “Convertible Notes”) and accompanying warrants (the “Class C Warrants”), as were modified or amended from time to time.
In
2021, the Company issued an aggregate of Units for the proceeds of $
In
2023, the Company amended the conversion price of the Convertible Notes and the exercise price of the Class C Warrants to $
The
Company determined that the terms of the new securities were substantially different from the original securities, and, as such the transaction
was accounted for as an extinguishment of debt and the new securities accounted for as a new debt issuance. As a result of this substantial
modification, a total of Units outstanding were replaced with an aggregate of pro rata Units, and a loss on debt
extinguishment of $
Additionally,
in 2023 due to the non-repayment of the initial principal amount of $
Additionally,
in 2023, the Company issued an aggregate of Units for the proceeds of $
During
the three and six months ended June 30, 2024, the Company amended certain Convertible Note with original maturity dates of March 24, 2024 and
June 17, 2024, to extend their term until March 24, 2025 and June 17, 2025, respectively. In connection with the extension of the maturity
date for the outstanding Convertible Notes, the Company executed a substantial modification that led to the extinguishment of the existing
Convertible Notes and the issuance of new Convertible Notes. This modification resulted in a gain on extinguishment of $
During
the three and six months ended June 30, 2024, the Company recognized interest and accretion expense of $
The Company determined that the optional conversion feature attached to the Convertible Notes did not meet the definition of derivative liability and that the detachable warrants issued did not meet the definition of a liability and therefore was accounted for as an equity instrument.
The fair value of the warrants issued have been recorded as debt discount and is being amortized to interest and accretion expense using the effective interest method over the term of the Convertible Notes.
The following table summarizes supplemental balance sheet information related to the convertible notes, net of debt discount outstanding, as of June 30, 2024 and December 31, 2023:
| Balance, December 31, 2022 | $ | |||
| Debt accretion on Original securities | ||||
| Debt extinguishment | ( | ) | ||
| Convertible notes issued - new securities | ||||
| Debt discount | ( | ) | ||
| Debt accretion on New Securities | ||||
| Mandatory Default Amount | ||||
| Conversion of debt | ( | ) | ||
| Extinguishment of debt | ( | ) | ||
| Convertible notes issued with extended maturity date | ||||
| Debt discount | ( | ) | ||
| Debt accretion | ||||
| Balance, December 31, 2023 | $ | |||
| Debt accretion | ||||
| Extinguishment of debt | ( | ) | ||
| Convertible notes issued with extended maturity date | ||||
| Debt discount | ( | ) | ||
| Balance, June 30, 2024 | $ |
| 13 |
June 30, 2024 | December 31, 2023 | |||||||
| Convertible notes - total principal | $ | $ | ||||||
| Unamortized issuance costs and discount | ( | ) | ( | ) | ||||
| Convertible Notes, Net of Debt Discount | $ | $ | ||||||
| June 30, 2024 | December 31, 2023 | |||||||
| Current portion | $ | $ | ||||||
| Non-current portion | ||||||||
| Convertible Notes, Net of Debt Discount | $ | $ | ||||||
2023 Convertible Notes and Warrants
In
2023, the Company conducted five separate closings (the “2023 OID Units Closings”) of a private placement of up to $
Pursuant
to the 2023 OID Units Closings, the Company issued OID Units in aggregate, for the total proceeds of $
The
Company determined that the optional conversion feature attached to the OID Convertible Notes did not meet the definition of derivative
liability and that the detachable warrants originally issued met the definition of a liability and therefore was accounted for as a derivative
liability instrument. The warrants were fair valued at $
During
the three and six months ended June 30, 2024, the Company extended the maturity date of certain OID Convertible Notes. While some
extensions were deemed minor, the majority of the extended contracts were deemed substantive. This triggered the extinguishment of
the existing OID Convertible Notes and the issuance of new OID Convertible Notes. Additionally, the detachable warrants attached to
the OID Convertible Notes had their maturity extended by two years. As a result, for the three and six months ended June 30, 2024,
the Company recognized an incremental fair value increase of $
During
the three and six months ended June 30, 2024, the Company recognized interest and accretion expense of $
| 14 |
The following table summarizes supplemental balance sheet information related to the OID Convertible Notes, net of debt discount outstanding, as of June 30, 2024 and December 31, 2023:
| OID Convertible Notes, Net of Debt Discount | ||||
| Balance, December 31, 2022 | $ | |||
| Issuance of convertible notes | ||||
| Issuance cost | ( | ) | ||
| Debt discount | ( | ) | ||
| Debt accretion | ||||
| Balance, December 31, 2023 | $ | |||
| Debt accretion | ||||
| Extinguishment of debt | ( | |||