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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2023

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to _________

 

Commission File Number 000-55575

 

SIGYN THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   47-2573116
(State or other jurisdiction of incorporation)   (IRS Employer File Number)
     
2468 Historic Decatur Road Ste., 140, San Diego, California   92106
(Address of principal executive offices)   (zip code)

 

(619) 353-0800

(Registrant’s telephone number, including area code)

 

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

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
None        

 

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

Common Stock, $0.0001 Par Value

 

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

 

Indicate by checkmark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
    Emerging Growth Company

 

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.

 

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

 

As of May 15, 2023, there were 42,981,659 shares of common stock outstanding.

 

 

 

 
 

 

SIGYN THERAPEUTICS, INC.

 

TABLE OF CONTENTS

 

Heading Page
   
PART I – FINANCIAL INFORMATION  
   
Item 1. Financial Statements 4
     
  Unaudited Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022 4
     
  Unaudited Condensed Consolidated Statements of Operations for the Three months ended March 31, 2023 and 2022 5
     
  Unaudited Condensed Consolidated Statements of Stockholders’ Deficit for the Three months ended March 31, 2023 and 2022 6
     
  Unaudited Condensed Consolidated Statements of Cash Flows for the Three months ended March 31, 2023 and 2022 7
     
  Notes to the Unaudited Condensed Consolidated Financial Statements 8
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 27
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk 40
   
Item 4. Controls and Procedures 40
     
PART II – OTHER INFORMATION  
   
Item 1. Legal Proceedings 41
   
Item1A. Risk Factors 41
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 42
   
Item 3. Defaults Upon Senior Securities 42
   
Item 4. Mine Safety Disclosure 42
   
Item 5. Other Information 42
     
Item 6. Exhibits 43
     
SIGNATURES 44

 

2
 

 

DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

 

This report contains forward-looking statements. The forward-looking statements are contained principally in the sections entitled “Description of Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “seeks,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “would” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. The following factors, among others, could cause actual results to differ materially from those described in these forward-looking statements: the ability of Sigyn to meet its financial and strategic goals, due to, among other things, competition; the ability of Sigyn to grow and manage growth profitability and retain its key employees; the possibility that the Sigyn may be adversely affected by other economic, business, and/or competitive factors; risks relating to the successful development of Sigyn’s product candidates; the ability to successfully complete planned clinical studies of its product candidates; the risk that we may not fully enroll our clinical studies or enrollment will take longer than expected; risks relating to the occurrence of adverse safety events and/or unexpected concerns that may arise from data or analysis from our clinical studies; changes in applicable laws or regulations; expected initiation of the clinical studies, the timing of clinical data; the outcome of the clinical data, including whether the results of such study is positive or whether it can be replicated; the outcome of data collected, including whether the results of such data and/or correlation can be replicated; the timing, costs, conduct and outcome of our other clinical studies; the anticipated treatment of future clinical data by the FDA, the EMA or other regulatory authorities, including whether such data will be sufficient for approval; the success of future development activities for its product candidates; potential indications for which product candidates may be developed; the expected duration over which Sigyn’s balances will fund its operations; and other risks and uncertainties described herein, as well as those risks and uncertainties discussed from time to time in other reports and other public filings with the SEC by Sigyn.

 

Also, forward-looking statements represent our estimates and assumptions only as of the date of this report. You should read this report and the documents that we reference and filed as exhibits to this report completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.

 

USE OF CERTAIN DEFINED TERMS

 

Except as otherwise indicated by the context, references in this report to “we,” “us,” “our,” “our Company,” or “the Company” is of Sigyn Therapeutics, Inc.

 

In addition, unless the context otherwise requires and for the purposes of this report only:

 

  “Sigyn” refers to Sigyn Therapeutics, Inc., a Delaware corporation;
  “Commission” refers to the Securities and Exchange Commission;
  “Exchange Act” refers to the Securities Exchange Act of 1934, as amended; and
  “Securities Act” refers to the Securities Act of 1933, as amended.

 

3
 

 

PART 1. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

SIGYN THERAPEUTICS, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

   March 31,   December 31, 
   2023   2022 
         
ASSETS          
Current assets:          
Cash  $322,327   $8,356 
Inventories   50,000    50,000 
Other current assets   40,161    11,942 
Total current assets   412,488    70,298 
           
Property and equipment, net   20,337    22,052 
Intangible assets, net   1,200    2,100 
Operating lease right-of-use assets, net   205,711    217,718 
Other assets   20,711    20,711 
Total assets  $660,447   $332,879 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
Current liabilities:          
Accounts payable  $265,085   $327,517 
Accrued payroll and payroll taxes   41,124    30,124 
Short-term convertible notes payable, less unamortized debt issuance costs of $778,415 and $642,660, respectively   2,471,101    1,636,656 
Current portion of operating lease liabilities   55,099    53,200 
Other current liabilities   1,039    1,197 
Total current liabilities   2,833,448    2,048,694 
Long-term liabilities:          
Operating lease liabilities, net of current portion   173,037    187,425 
Total long-term liabilities   173,037    187,425 
Total liabilities   3,006,485    2,236,119 
           
Stockholders’ deficit:          
Preferred stock, $0.0001 par value, 10,000,000 shares authorized; no shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively   -    - 
Common stock, $0.0001 par value, 1,000,000,000 shares authorized; 42,804,825 and 38,263,813 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively   4,281    3,826 
Additional paid-in capital   6,186,293    5,288,510 
Accumulated deficit   (8,536,612)   (7,195,576)
Total stockholders’ deficit   (2,346,038)   (1,903,240)
Total liabilities and stockholders’ deficit  $660,447   $332,879 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

4
 

 

SIGYN THERAPEUTICS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

   2023   2022 
   Three Months Ended March 31, 
   2023   2022 
         
Net revenues  $-   $- 
           
Gross Profit   -    - 
           
Operating expenses:          
Marketing expenses   184    250 
Stock based compensation   37,500    - 
Research and development   147,843    228,342 
General and administrative   335,731    380,644 
Total operating expenses   521,258    609,236 
Loss from operations   (521,258)   (609,236)
           
Other expense:          
Modification of warrants   (15,806)   - 
Interest expense   1,139    31 
Interest expense - debt discount   791,708    52,257 
Interest expense - original issuance costs   42,737    16,522 
Total other expense   819,778    68,810 
           
Loss before income taxes   (1,341,036)   (678,046)
Income taxes   -    - 
           
Net loss  $(1,341,036)  $(678,046)
           
Net loss per share, basic and diluted  $(0.03)  $(0.02)
           
Weighted average number of shares outstanding          
Basic and diluted   38,465,636    37,295,813 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

5
 

 

SIGYN THERAPEUTICS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

 

   Shares   Amount   in Capital   Deficit   Deficit 
   Common Stock   Additional Paid   Accumulated   Total Stockholders’ 
   Shares   Amount   in Capital   Deficit   Deficit 
Balance as of December 31, 2021   37,295,803   $3,730   $3,997,445   $(4,265,759)  $(264,584)
Warrants issued to third parties in conjunction with debt issuance   -    -    162,362    -    162,362 
Amortization of warrants issued in connection with a debt modification   -    -    48,699    -    48,699 
Net loss   -    -    -    (678,046)   (678,046)
Balance as of March 31, 2022   37,295,803   $3,730   $4,208,506   $(4,943,805)  $(731,569)
                          
Balance as of December 31, 2022   38,263,813   $3,826   $5,288,510   $(7,195,576)  $(1,903,240)
Warrants issued to third parties in conjunction with debt issuance   -    -    578,016    -    578,016 
Beneficial conversion feature in conjunction with debt issuance   -    -    303,984    -    303,984 
Stock based compensation   -    -    37,500    -    37,500 
Issuance of common stock in conjunction with modification of warrants   4,541,012    455    (16,261)   -    (15,806)
Fees associated with filing of Form S-1   -    -    (5,456)   -    (5,456)
Net loss   -    -    -    (1,341,036)   (1,341,036)
Balance as of March 31, 2023   42,804,825   $4,281   $6,186,293   $(8,536,612)  $(2,346,038)

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

6
 

 

SIGYN THERAPEUTICS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   2023   2022 
   Three Months Ended March 31, 
   2023   2022 
         
Cash flows from operating activities:          
Net loss  $(1,341,036)  $(678,046)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation expense   1,715    1,704 
Amortization expense   900    900 
Stock based compensation   37,500    - 
Accretion of debt discount   791,708    52,257 
Accretion of original issuance costs   42,737    16,522 
Modification of warrants   (15,806)   - 
Changes in operating assets and liabilities:          
Other current assets   (28,219)   (10,170)
Accounts payable   (62,432)   156,473 
Accrued payroll and payroll taxes   11,000    - 
Other current liabilities   (640)   789 
Net cash used in operating activities   (562,573)   (459,571)
           
Cash flows from investing activities:          
None   -    - 
Net cash used in investing activities   -    - 
           
Cash flows from financing activities:          
Proceeds from short-term convertible notes   882,000    200,000 
Fees associated with filing of Form S-1   (5,456)   - 
Net cash provided by financing activities   876,544    200,000 
           
Net (decrease) increase in cash   313,971    (259,571)
           
Cash at beginning of period   8,356    340,956 
Cash at end of period  $322,327   $81,385 
           
Supplemental disclosures of cash flow information:          
Cash paid during the period for:          
Interest  $-   $- 
Income taxes  $-   $- 
           
Non-cash investing and financing activities:          
Beneficial conversion feature in conjunction with debt issuance  $303,984   $- 
Warrants issued to third parties in conjunction with debt issuance  $578,016   $162,362 
Original issue discount issued in conjunction with debt  $88,200   $20,000 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

7
 

 

SIGYN THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES

 

Corporate History and Background

 

Sigyn Therapeutics, Inc. (“Sigyn”, the “Company”, “we,” “us,” or “our”) is a development-stage company focused on creating therapeutic solutions that address unmet needs in global health.

 

Sigyn Therapy™, our lead product candidate, is a broad-spectrum blood purification technology designed to treat pathogen-associated inflammatory disorders that are not addressed with approved drug therapies. Candidate treatment indications include endotoxemia and inflammation in end-stage renal disease (dialysis) patients, sepsis (a leading cause of hospital deaths), community acquired pneumonia (a leading cause of death among infectious diseases), and emerging pandemic threats.

 

Our development pipeline includes a cancer treatment system comprised of ChemoPrep™ to enhance the tumor site delivery of chemotherapy, and ChemoPure™ to reduce treatment toxicity and inhibit the spread of cancer metastasis.

 

Merger Transaction

 

On October 19, 2020, Sigyn Therapeutics, Inc, a Delaware corporation (the “Registrant”) formerly known as Reign Resources Corporation, completed a Share Exchange Agreement (the “Agreement”) with Sigyn Therapeutics, Inc., a private entity incorporated in the State of Delaware on October 19, 2019.

 

In the Share Exchange Agreement, we acquired 100% of the issued and outstanding shares of privately held Sigyn Therapeutics common stock in exchange for 75% of the fully paid and nonassessable shares of our common stock outstanding (the “Acquisition”). In conjunction with the transaction, we changed our name from Reign Resources Corporation to Sigyn Therapeutics, Inc. pursuant to an amendment to our articles of incorporation that was filed with the State of Delaware. Subsequently, our trading symbol was changed to SIGY. The Acquisition was treated by the Company as a reverse merger in accordance with accounting principles generally accepted in the United States of America (“GAAP”). For accounting purposes, Sigyn is considered to have acquired Reign Resources Corporation as the accounting acquirer because: (i) Sigyn stockholders own 75% of the combined company, on an as-converted basis, immediately following the Closing Date, (ii) Sigyn directors hold a majority of board seats in the combined company and (iii) Sigyn management held all key positions in the management of the combined company. Accordingly, Sigyn’s historical results of operations will replace Reign Resources Corporation’s historical results of operations for all periods prior to the Acquisition and, for all periods following the Acquisition, the results of operations of the combined company will be included in the Company’s financial statements. The Acquisition was treated as a “tax-free exchange” under Section 368 of the Internal Revenue Code of 1986 and resulted in the private Sigyn Therapeutics corporate entity (established on October 29, 2019) to become a wholly owned subsidiary of Reign Resources Corporation. Among the conditions for closing the acquisition, the Reign Resources Corporation extinguished all previously reported liabilities, its preferred class of shares, and all stock purchase options. As a result, the reported liabilities totaling $3,429,516 were converted into a total of 7,907,351 common shares. Additionally, assets held on the books of Reign Resources Corporation, such as Gem inventory, was kept in the Company and therefore recorded as assets on the Share Exchange date. Upon the closing of the Acquisition, we appointed James A. Joyce and Craig P. Roberts to serve as members of our Board of Directors.

 

8
 

 

NOTE 2 – BASIS OF PRESENTATION

 

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include all adjustments necessary for the fair presentation of the Company’s financial position and results of operations for the periods presented.

 

The Company currently operates in one business segment. The Company is not organized by market and is managed and operated as one business. A single management team reports to the chief operating decision maker, the Chief Executive Officer, who comprehensively manages the entire business. The Company does not currently operate any separate lines of businesses or separate business entities.

 

Going Concern

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. The Company had an accumulated deficit of $8,536,612 at March 31, 2023, had a working capital deficit of approximately $2,420,960 at March 31, 2023, had net losses of $1,341,036 and $678,046 for the three months ended March 31, 2023 and 2022, respectively, and net cash used in operating activities of $562,573 and $459,571 for the three months ended March 31, 2023 and 2022, respectively, with no revenue earned since inception, and a lack of operational history. These matters raise substantial doubt about the Company’s ability to continue as a going concern.

 

While the Company is attempting to expand operations and increase revenues, the Company’s cash position may not be significant enough to support the Company’s daily operations. Management intends to raise additional funds by way of a public offering or an asset sale transaction. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern. While management believes in the viability of its strategy to generate revenues and in its ability to raise additional funds or transact an asset sale, there can be no assurances to that effect or on terms acceptable to the Company. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate revenues.

 

The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern for a year from the date of issuance.

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to GAAP and have been consistently applied in the preparation of the financial statements.

 

Use of Estimates

 

The preparation of these financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements and the reported amounts of net sales and expenses during the reported periods. Actual results may differ from those estimates and such differences may be material to the financial statements. The more significant estimates and assumptions by management relate to common stock valuation. The current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions.

 

Cash

 

The Company’s cash is held in bank accounts in the United States and is insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. The Company has not experienced any cash losses.

 

9
 

 

Income Taxes

 

Income taxes are accounted for under an asset and liability approach. This process involves calculating the temporary and permanent differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The temporary differences result in deferred tax assets and liabilities, which would be recorded on the Balance Sheets in accordance with ASC 740, which established financial accounting and reporting standards for the effect of income taxes. The likelihood that its deferred tax assets will be recovered from future taxable income must be assessed and, to the extent that recovery is not likely, a valuation allowance is established. Changes in the valuation allowance in a period are recorded through the income tax provision in the consolidated Statements of Operations.

 

ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an entity’s consolidated financial statements and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under ASC 740-10, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC 740-10 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the implementation of ASC 740-10 and currently, the Company does not have a liability for unrecognized income tax benefits.

 

Advertising and Marketing Costs

 

Advertising expenses are recorded as general and administrative expenses when they are incurred. The Company had $184 and $250 of advertising expenses for the three months ended March 31, 2023 and 2022, respectively.

 

Research and Development

 

All research and development costs are expensed as incurred. The Company incurred research and development expense of $147,843 and $228,342 for the three months ended March 31, 2023 and 2022, respectively.

 

Inventories

 

In conjunction with the October 19, 2020 Share Exchange Agreement, the Company kept the gem inventory of Reign Resources Corporation. Inventories are stated at the lower of cost or market (net realizable value) on a lot basis each quarter. A lot is determined by the cut, clarity, size, and weight of the sapphires. Inventory consists of sapphire jewels that meet rigorous grading criteria and are of cuts and sizes most commonly used in the jewelry industry. As of March 31, 2023 and December 31, 2022, the Company carried primarily loose sapphire jewels, jewelry for sale on our website, and jewelry held as samples. Samples are used to show potential customers what the jewelry would look like. Promotional items given to customers that are not expected to be returned will be removed from inventory and expensed. There have been no promotional items given to customers as of March 31, 2023. The Company performs its own in-house assessment based on gem guide and the current market price for metals to value its inventory on an annual basis or if circumstances dictate sooner to determine if the estimated fair value is greater or less than cost. In addition, the inventory is reviewed each quarter by the Company against industry prices from gem-guide and if there is a potential impairment, the Company would appraise the inventory. The estimated fair value is subject to significant change due to changes in popularity of cut, perceived grade of the clarity of the sapphires, the number, type and size of inclusions, the availability of other similar quality and size sapphires, and other factors. As a result, the internal assessed value of the sapphires could be significantly lower from the current estimated fair value. Loose sapphire jewels do not degrade in quality over time.

 

10
 

 

Property and Equipment

 

Property and equipment are carried at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets, generally five years. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition.

 

Intangible Assets

 

Intangible assets consist primarily of website development costs. Our intangible assets are being amortized on a straight-line basis over a period of three years.

 

Impairment of Long-lived Assets

 

We periodically evaluate whether the carrying value of property, equipment and intangible assets has been impaired when circumstances indicate the carrying value of those assets may not be recoverable. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value is not recoverable, the impairment loss is measured as the excess of the asset’s carrying value over its fair value.

 

Our impairment analyses require management to apply judgment in estimating future cash flows as well as asset fair values, including forecasting useful lives of the assets, assessing the probability of different outcomes, and selecting the discount rate that reflects the risk inherent in future cash flows. If the carrying value is not recoverable, we assess the fair value of long-lived assets using commonly accepted techniques, and may use more than one method, including, but not limited to, recent third-party comparable sales and discounted cash flow models. If actual results are not consistent with our assumptions and estimates, or our assumptions and estimates change due to new information, we may be exposed to an impairment charge in the future. As of March 31, 2023 and December 31, 2022, the Company had not experienced impairment losses on its long-lived assets.

 

Fair Value of Financial Instruments

 

The provisions of accounting guidance, FASB Topic ASC 825 requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value, and defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. As of March 31, 2023 and December 31, 2022, the fair value of cash, accounts payable, accrued expenses, and notes payable approximated carrying value due to the short maturity of the instruments, quoted market prices or interest rates which fluctuate with market rates.

 

Fair Value Measurements

 

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:

 

  Level 1 – Quoted prices in active markets for identical assets or liabilities.

 

  Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
     
  Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities

 

11
 

 

The carrying value of financial assets and liabilities recorded at fair value are measured on a recurring or nonrecurring basis. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. There were no financial assets or liabilities carried and measured on a nonrecurring basis during the reporting periods. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. There have been no transfers between levels.

 

Debt

 

The Company issues debt that may have separate warrants, conversion features, or no equity-linked attributes.

 

Embedded Conversion Features

 

The Company evaluates embedded conversion features within convertible debt under ASC 815, Derivatives and Hedging, to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20, Debt with Conversion and Other Options, for consideration of any beneficial conversion feature.

 

Derivative Financial Instruments

 

The Company evaluates all of it financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income.

 

For option-based simple derivative financial instruments, the Company uses the Monte Carlo simulations to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. There were no derivative financial instruments as of March 31, 2023 and December 31, 2022 and no charges or credits to income for the three months ended March 31, 2023 and 2022.

 

Debt Issue Costs and Debt Discount

 

The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash or equity (such as warrants). These costs are amortized to interest expense through the maturity of the debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately expensed. Any unamortized debt issue costs and debt discount are presented net of the related debt on the consolidated balance sheets.

 

Original Issue Discount

 

For certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The original issue discount would be recorded to debt discount, reducing the face amount of the note and is amortized to interest expense through the maturity of the debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately expensed. Any unamortized original issue discounts are presented net of the related debt on the consolidated balance sheets.

 

If the conversion feature does not qualify for either the derivative treatment or as a beneficial conversion feature, the convertible debt is treated as traditional debt.

 

Basic and diluted earnings per share

 

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted earnings (loss) per share are computed on the basis of the weighted average number of common shares (including common stock subject to redemption) plus dilutive potential common shares outstanding for the reporting period. In periods where losses are reported, the weighted-average number of common stock outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.

 

12
 

 

Basic and diluted earnings (loss) per share are the same since net losses for all periods presented and including the additional potential common shares would have an anti-dilutive effect.

 

Stock Based Compensation

 

In accordance with ASC No. 718, Compensation – Stock Compensation (“ASC 718”), we measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.

 

Non-Employee Stock-Based Compensation

 

In accordance with ASC 505, Equity Based Payments to Non-Employees, issuances of the Company’s common stock or warrants for acquiring goods or services are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for the fair value of the equity instruments issued to consultants or vendors is determined at the earlier of (i) the date at which a commitment for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance is complete. Although situations may arise in which counter performance may be required over a period of time, the equity award granted to the party performing the service is fully vested and non-forfeitable on the date of the agreement. As a result, in this situation in which vesting periods do not exist as the instruments fully vested on the date of agreement, the Company determines such date to be the measurement date and will record the estimated fair market value of the instruments granted as a prepaid expense and amortize such amount to general and administrative expense in the accompanying statement of operations over the contract period. When it is appropriate for the Company to recognize the cost of a transaction during financial reporting periods prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is measured at the then-current fair values at each of those interim financial reporting dates.

 

Concentrations, Risks, and Uncertainties

 

Business Risk

 

Substantial business risks and uncertainties are inherent to an entity, including the potential risk of business failure.

 

The Company is headquartered and operates in the United States. To date, the Company has generated no revenues from operations. There can be no assurance that the Company will be able to raise additional capital and failure to do so would have a material adverse effect on the Company’s financial position, results of operations and cash flows. Also, the success of the Company’s operations is subject to numerous contingencies, some of which are beyond management’s control. Currently, these contingencies include general economic conditions, price of components, competition, and governmental and political conditions.

 

Interest rate risk

 

Financial assets and liabilities do not have material interest rate risk.

 

Credit risk

 

The Company is exposed to credit risk from its cash in banks. The credit risk on cash in banks is limited because the counterparties are recognized financial institutions.

 

13
 

 

Seasonality

 

The business is not subject to substantial seasonal fluctuations.

 

Major Suppliers

 

Sigyn Therapy is comprised of components that are supplied by various industry vendors. Additionally, the Company is reliant on third-party organizations to conduct clinical development studies that are necessary to advance Sigyn Therapy toward the marketplace.

 

Should the relationship with an industry vendor or third-party clinical development organization be interrupted or discontinued, it is believed that alternate component suppliers and third-party clinical development organizations could be identified to support the continued advancement of Sigyn Therapy.

 

Recent Accounting Pronouncements

 

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, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. This ASU is effective for annual reporting periods beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The Company adopted ASU No. 2020-06 in the first quarter of fiscal 2021, coinciding with the standard’s effective date, and had an immaterial impact from this standard.

 

Other recently issued accounting updates are not expected to have a material impact on the Company’s consolidated financial statements.

 

NOTE 4 – PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following as of:

      March 31,   December 31, 
   Estimated Life  2023   2022 
            
Office equipment  5 years  $29,041   $29,041 
Computer equipment  3 years   3,157    3,157 
Accumulated depreciation      (11,861)   (10,146)
      $20,337   $22,052 

 

Depreciation expense was $1,715 and $1,704 for the three months ended March 31, 2023 and 2022, respectively, and is classified in general and administrative expenses in the Consolidated Statements of Operations.

 

NOTE 5 – INTANGIBLE ASSETS

 

Intangible assets consisted of the following as of:

   Estimated life  March 31,
2023
   December 31,
2022
 
Website  3 years  $10,799   $10,799 
Accumulated amortization      (9,599)   (8,699)
Intangible assets, net     $1,200   $2,100 

 

14
 

 

As of March 31, 2023, estimated future amortization expenses related to intangible assets were as follows:

   Intangible Assets 
2023  $1,200 
Intangible assets, net  $1,200 

 

The Company had amortization expense of $900 and $900 for the three months ended March 31, 2023 and 2022, respectively.

 

NOTE 6 – CONVERTIBLE PROMISSORY DEBENTURES

 

Convertible notes payable consisted of the following:

 

  

March 31,

2023

  

December 31,

2022

 
         
January 28, 2020 ($457,380) – 0% interest per annum outstanding principal and interest due October 20, 2022 (“Note 1”)  $457,380   $457,380 
January 28, 2020 ($457,380) – 0% interest per annum outstanding principal and interest due October 20, 2022 (“Note 1”)  $457,380   $457,380 
June 23, 2020 ($60,500) – 0% interest per annum outstanding principal and interest due October 20, 2022 (“Note 2”)   60,500    60,500 
September 17, 2020 ($182,936) – 0% interest per annum outstanding principal and interest due October 20, 2022. On October 28, 2021, Osher elected to convert $16,714 of the aggregate principal amount of the Note of $199,650, into 42,857 common shares (“Note 3”).   182,936    182,936 
March 23, 2022 ($220,000) – 0% interest per annum outstanding principal and interest due March 23, 2023 (“Note 4”)   220,000    220,000 
April 28, 2022 ($110,000) – 0% interest per annum outstanding principal and interest due April 28, 2023 (“Note 5”)   110,000    110,000 
May 10, 2022 ($110,000) – 0% interest per annum outstanding principal and interest due May 10, 2023 (“Note 6”)   110,000    110,000 
June 1, 2022 ($55,000) – 0% interest per annum outstanding principal and interest due June 1, 2023 (“Note 7”)   55,000    55,000 
June 22, 2022 ($82,500) – 0% interest per annum outstanding principal and interest due June 22, 2023 (“Note 8”)   82,500    82,500 
July 2022 ($341,000) – 0% interest per annum outstanding principal and interest due various dates July 2023 (“Note 9”)   341,000    341,000 
August 31, 2022 ($110,000) – 0% interest per annum outstanding principal and interest due August 31, 2023 (“Note 10”)   110,000    110,000 
September 9, 2022 ($82,500) – 0% interest per annum outstanding principal and interest due September 9, 2023 (“Note 11”)   82,500    82,500 
September 20, 2022 ($110,000) – 0% interest per annum outstanding principal and interest due September 20, 2023 (“Note 12”)   110,000    110,000 
October 20, 2022 ($110,000) – 0% interest per annum outstanding principal and interest due October 20, 2023 (“Note 13”)   110,000    110,000 
November 9, 2022 ($82,500) – 0% interest per annum outstanding principal and interest due November 9, 2023 (“Note 14”)   82,500    82,500 
November 14, 2022 ($55,000) – 0% interest per annum outstanding principal and interest due November 14, 2023 (“Note 15”)   55,000    55,000 
December 22, 2022 ($110,000) – 0% interest per annum outstanding principal and interest due December 22, 2023 (“Note 16”)   110,000    110,000 
During the three months ended March 31, 2023 ($970,200) – 0% interest per annum outstanding principal and interest due on various dates from January 2024 through March 27, 2024 (“Note 17”)   970,200    - 
           
Total convertible notes payable   3,249,516    2,279,316 
Original issue discount   (119,965)   (74,502)
Beneficial conversion feature   (398,528)   (175,275)
Debt discount   (259,922)   (392,883)
           
Total convertible notes payable  $2,471,101   $1,636,656 

 

15
 

 

Principal payments on convertible promissory debentures are due as follows:

 

Year ending December 31,    
2023 (9 months remaining)  $2,279,316 
2024  $970,200 
Long-Term Debt  $3,249,516 

 

Changes in convertible notes were as follows:

 

   Note 1   Note 2   Note 3   Note 4   Note 5   Note 6   Note 7   Note 8   Note 9   Note 10   Note 11   Note 12   Note 13   Note 14   Note 15   Note 16   Note 17   Other   Totals 
Convertible notes payable, net, as of December 31, 2021   457,380    60,500    182,936    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    700,816 
                                                                                                
Convertible notes payable issued in 2022   -    -    -    220,000    110,000    110,000    55,000    82,500    341,000    110,000    82,500    110,000    110,000    82,500    55,000    110,000    -    -    1,578,500 
Convertible notes payable as of December 31, 2022  $457,380   $60,500   $182,936   $220,000   $110,000   $110,000   $55,000   $82,500   $341,000   $110,000   $82,500   $110,000   $110,000   $82,500   $55,000   $110,000   $-   $-   $2,279,316 
                                                                                                
Convertible notes payable issued in 2023   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    970,200    -    970,200 
Convertible notes payable as of March 31, 2023  $457,380   $60,500   $182,936   $220,000   $110,000   $110,000   $55,000   $82,500   $341,000   $110,000   $82,500   $110,000   $110,000   $82,500   $55,000   $110,000   $970,200   $-   $3,249,516 

 

16
 

 

Changes in note discounts were as follows:

 

   Note 1   Note 2   Note 3   Note 4   Note 5   Note 6   Note 7   Note 8   Note 9   Note 10   Note 11   Note 12   Note 13   Note 14   Note 15   Note 16   Note 17   Other   Totals 
Note discounts as of December 31, 2021   34,176    4,521    14,917    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    53,614 
                                                                                                
Note discounts issued in conjunction with debt in 2022   -    -    -    113,418    44,786    44,787    22,794    34,861    140,289    64,104    82,500    110,000    110,000    82,500    55,000    110,000    -    -    1,015,039 
2022 accretion of note discounts   (34,176)   (4,521)   (14,917)   (87,938)   (30,308)   (28,836)   (13,301)   (18,336)   (70,720)   (32,316)   (39,994)   (49,874)   (23,671)   (12,822)   (7,726)   (6,537)   -    50,000    (425,993)
Note discounts as of December 31, 2022  $-   $-   $-   $25,480   $14,478   $15,951   $9,493   $16,525   $69,569   $31,788   $42,506   $60,126   $86,329   $69,678   $47,274   $103,463   $-   $50,000   $642,660 
                                                                                                
Note discounts issued in conjunction with debt in 2023   -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    -    970,200    -    970,200 
2023 accretion of note discounts   -    -    -    (25,480)   (11,043)   (11,044)   (5,621)   (8,596)   (61,527)   (15,807)   (22,192)   (29,590)   (29,590)   (22,191)   (14,794)   (29,589)   (547,381)   -    (834,445)
Note discounts as of March 31, 2023  $-   $-   $-   $-   $3,435   $4,907   $3,872   $7,929   $8,042   $15,981   $20,314   $30,536   $56,739   $47,487   $32,480   $73,874   $422,819   $50,000   $778,415 
                                                                                                
Convertible notes payable, net, as of December 31, 2021  $423,204   $55,979   $168,019   $-   $-   $-   $-   $-   $-   $-   $-   $-   $-   $-   $-   $-   $-   $-   $647,202 
Convertible notes payable, net, as of December 31, 2022  $457,380   $60,500   $182,936   $194,520   $95,522   $94,049   $45,507   $65,975   $271,431   $78,212   $39,994   $49,874   $23,671   $12,822   $7,726   $6,537   $-   $(50,000)  $1,636,656 
Convertible notes payable, net, as of March 31, 2023  $457,380   $60,500   $182,936   $220,000   $106,565   $105,093   $51,128   $74,571   $332,958   $94,019   $62,186   $79,464   $53,261   $35,013   $22,520   $36,126   $547,381   $(50,000)  $2,471,101 
                                                                                                
2021 Effective interest rate   11%   11%   12%   -%    -%    -%    -%    -%    -%    -%    -%    -%    -%    -%    -%    -%    -%    -%    -% 
2022 Effective interest rate   7%   7%   8%   40%   28%   26%   24%   22%   21%   29%   48%   45%   22%   16%   14%   6%   -%    -%    19%
2023 Effective interest rate   -%    -%    -%    12%   10%   10%   10%   10%   18%   14%   27%   27%   27%   27%   27%   27%   56%   -%    26%

 

Current Noteholders

 

2023 Notes – $970,200 (Note 17)

 

During the three months ended March 31, 2023, the Company entered into an Original Issue Discount Senior Convertible Debentures (the “2023 Notes”) with a third party investors totaling (i) $970,200 aggregate principal amount of Note due on various dates from January 2024 through March 27, 2024 based on $1.00 for each $0.90909 paid by the previous noteholder and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 6,468,000 shares of the Company’s Common Stock at an exercise price of $0.25 per share. The aggregate cash subscription amount received by the Company from the previous noteholder for the issuance of the Note and Warrants was $882,000 which was issued at a $88,200 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.15 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

Osher – $110,000 (Note 16)

 

On December 22, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”) of (i) $110,000 aggregate principal amount of Note due December 22, 2023 based on $1.00 for each $0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 733,333 shares of the Company’s Common Stock at an exercise price of $0.25 per share. The aggregate cash subscription amount received by the Company from Osher for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.15 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

17
 

 

Osher – $55,000 (Note 15)

 

On November 14, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”) of (i) $55,000 aggregate principal amount of Note due November 14, 2023 based on $1.00 for each $0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 366,667 shares of the Company’s Common Stock at an exercise price of $0.25 per share. The aggregate cash subscription amount received by the Company from Osher noteholder for the issuance of the Note and Warrants was $50,000 which was issued at a $5,000 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.15 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

Brio – $82,500 (Note 14)

 

On November 9, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect to the sale and issuance to institutional investor Brio Capital Master Fund Ltd (“Brio”) of (i) $82,500 aggregate principal amount of Note due November 9, 2023 based on $1.00 for each $0.90909 paid by Brio and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 550,000 shares of the Company’s Common Stock at an exercise price of $0.25 per share. The aggregate cash subscription amount received by the Company from Brio for the issuance of the Note and Warrants was $75,000 which was issued at a $7,500 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.15 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

Osher – $110,000 (Note 13)

 

On October 20, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”) of (i) $110,000 aggregate principal amount of Note due October 20, 2023 based on $1.00 for each $0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 733,333 shares of the Company’s Common Stock at an exercise price of $0.25 per share. The aggregate cash subscription amount received by the Company from Osher for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.15 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

Osher – $110,000 (Note 12)

 

On September 20, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”) of (i) $110,000 aggregate principal amount of Note due September 20, 2023 based on $1.00 for each $0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 733,333 shares of the Company’s Common Stock at an exercise price of $0.25 per share. The aggregate cash subscription amount received by the Company from Osher for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.15 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

Brio – $82,500 (Note 11)

 

On September 9, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect to the sale and issuance to institutional investor Brio Capital Master Fund Ltd. (“Brio”) of (i) $82,500 aggregate principal amount of Note due September 9, 2023 based on $1.00 for each $0.90909 paid by Brio and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 550,000 shares of the Company’s Common Stock at an exercise price of $0.25 per share. The aggregate cash subscription amount received by the Company from Brio for the issuance of the Note and Warrants was $75,000 which was issued at a $7,500 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.15 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

18
 

 

Osher – $110,000 (Note 10)

 

On August 31, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”) of (i) $110,000 aggregate principal amount of Note due August 31, 2023 based on $1.00 for each $0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 733,333 shares of the Company’s Common Stock at an exercise price of $0.25 per share. The aggregate cash subscription amount received by the Company from Osher for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.15 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

Other – $341,000 (Note 9)

 

In July 2022, the Company entered into an Original Issue Discount Senior Convertible Debentures (the “July 2022 Notes”) totaling (i) $341,000 aggregate principal amount of Note (total of $310,000 cash was received) due in various dates in July 2023 based on $1.00 for each $0.90909 paid by the noteholder and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 676,936 shares of the Company’s Common Stock at an exercise price of $0.50 per share. The conversion price for the principal in connection with voluntary conversions by the holders of the convertible notes is $0.50 per share.

 

Osher – $82,500 (Note 8)

 

On June 22, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”) of (i) $82,500 aggregate principal amount of Note due June 22, 2023 based on $1.00 for each $0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 165,000 shares of the Company’s Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from Osher for the issuance of the Note and Warrants was $75,000 which was issued at a $7,500 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

Osher – $55,000 (Note 7)

 

On June 1, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”) of (i) $55,000 aggregate principal amount of Note due June 1, 2023 based on $1.00 for each $0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 110,000 shares of the Company’s Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from Osher for the issuance of the Note and Warrants was $50,000 which was issued at a $5,000 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

Brio – $110,000 (Note 6)

 

On May 10, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect to the sale and issuance to institutional investor Brio Capital Master Fund Ltd. (“Brio”) of (i) $110,000 aggregate principal amount of Note due May 10, 2023 based on $1.00 for each $0.90909 paid by Brio and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 220,000 shares of the Company’s Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from Brio for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

The Company has not repaid this convertible note and the convertible note is now in default. The Company is currently in discussions to restructure the terms of the note.

 

19
 

 

Osher – $110,000 (Note 5)

 

On April 28, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”) of (i) $110,000 aggregate principal amount of Note due April 28, 2023 based on $1.00 for each $0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 220,000 shares of the Company’s Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from Osher for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

The Company has not repaid this convertible note and the convertible note is now in default. The Company is currently in discussions to restructure the terms of the note.

 

Osher – $110,000 (Note 4)

 

On March 23, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”) of (i) $110,000 aggregate principal amount of Note due March 23, 2023 based on $1.00 for each $0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 220,000 shares of the Company’s Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from Osher for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

The Company has not repaid this convertible note and the convertible note is now in default. The Company is currently in discussions to restructure the terms of the note.

 

Brio – $110,000 (Note 4)

 

On March 23, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect to the sale and issuance to institutional investor Brio Capital Master Fund Ltd. (“Brio”) of (i) $110,000 aggregate principal amount of Note due March 23, 2023 based on $1.00 for each $0.90909 paid by Brio and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 220,000 shares of the Company’s Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from Brio for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

The Company has not repaid this convertible note and the convertible note is now in default. The Company is currently in discussions to restructure the terms of the note.

 

Osher – $182,936 (Note 3)

 

On September 17, 2020 (the “Original Issue Date”), the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with respect to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”) of (i) $181,500 aggregate principal amount of Original Issue Discount Senior Convertible Debenture (the “Note”) due September 30, 2021, based on $1.00 for each $0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 8,250 shares of the Company’s Common Stock at an exercise price of $30.00 per share. The aggregate cash subscription amount received by the Company from Osher for the issuance of the Note and Warrants was $165,000 which was issued at a $16,500 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.39 per share, as amended on October 20, 2020, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

20
 

 

The Company and Osher amended the convertible debt agreement as follows on October 20, 2020:

 

  The parties amended the Warrants dated September 17, 2020, for the number of warrant shares from 8,250 warrant shares to 465,366 warrant shares at an exercise price of $0.59 per share.
  The parties amended the Note for the maturity date from September 30, 2021 to October 20, 2021.

 

On October 22, 2021, the Company and Osher amended convertible debt agreements as follows:

 

  The parties amended the October 20, 2020 Notes for the maturity date from October 20, 2021 to October 20, 2022.
     
  The parties amended the October 20, 2020 Notes for the aggregate principal amount and accrued interest from $652,300 to $717,530 which is issued at a $65,230 original issue discount from the face value of the October 20, 2020 Notes now due October 20, 2022.
     
  In exchange for the extension of the Note, the Company issued Osher five-year warrants to purchase an aggregate of 450,000 shares of the Company’s common stock at an exercise price of $1.00 per share.

 

On October 28, 2021, Osher elected to convert $16,714 of the aggregate principal amount of the Note of $199,650, into 42,857 common shares.

 

The Company has not repaid this convertible note and the convertible note is now in default. The Company is currently in discussions to restructure the terms of the note.

 

Osher – $60,500 (as amended on October 20, 2020 to $55,000) (Note 2)

 

On June 23, 2020 (the “Original Issue Date”), the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with respect to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”) of (i) $50,000 aggregate principal amount of Original Issue Discount Senior Convertible Debenture (the “Note”) due June 23, 2021, based on $1.00 for each $0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants (“Warrants”) to purchase up to an aggregate of 10,000 shares of the Company’s Common Stock at an exercise price of $30.00 per share. The aggregate cash subscription amount received by the Company from Osher for the issuance of the Note and Warrants was $50,005 which was issued at a $0 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.39 per share, as amended on October 20, 2020, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

The Company and Osher amended the convertible debt agreement as follows on October 20, 2020:

 

  The parties amended the Note for the aggregate principal amount from $50,000 to $55,000. The aggregate cash subscription amount received by the Company from Osher for the issuance of the Note and Warrants was $50,005 which was issued at an amended $4,995 original issue discount from the face value of the Note.
  The parties amended the Warrants dated June 23, 2020, for the number of warrant shares from 10,000 warrant shares to 141,020 warrant shares at an exercise price of $0.59 per share.
  The parties amended the Note for the maturity date from June 23, 2021 to October 20, 2021.

 

21
 

 

On October 22, 2021, the Company and Osher amended convertible debt agreements as follows (see Note 12):

 

  The parties amended the October 20, 2020 Notes for the maturity date from October 20, 2021 to October 20, 2022.
     
  The parties amended the October 20, 2020 Notes for the aggregate principal amount and accrued interest from $652,300 to $717,530 which is issued at a $65,230 original issue discount from the face value of the October 20, 2020 Notes now due October 20, 2022.
     
  In exchange for the extension of the Note, the Company issued Osher five-year warrants to purchase an aggregate of 450,000 shares of the Company’s common stock at an exercise price of $1.00 per share.

 

The Company has not repaid this convertible note and the convertible note is now in default. The Company is currently in discussions to restructure the terms of the note.

 

Osher – $457,380 (Note 1)

 

On January 28, 2020 (the “Original Issue Date”), the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with respect to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”) of (i) $385,000 aggregate principal amount of Original Issue Discount Senior Convertible Debenture due January 26, 2021, based on $1.00 for each $0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants to purchase up to an aggregate of 80,209 shares of the Company’s Common Stock at an exercise price of $7.00 per share. The aggregate cash subscription amount received by the Company from Osher for the issuance of the note and warrants was $350,005 which was issued at a $34,995 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.094 per share, as amended on October 20, 2020, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

The Company and Osher amended the convertible debt agreement as follows on October 20, 2020:

 

  The parties amended the Warrants dated January 28, 2020, for the number of warrant shares from 80,209 warrant shares to 4,113,083 warrant shares at an exercise price of $0.14 per share.
  The parties amended the Note to provide for interest at 8% per annum.
  The parties amended the Note for the maturity date from June 23, 2021 to October 20, 2021.

 

On October 22, 2021, the Company and Osher amended convertible debt agreements as follows:

 

  The parties amended the October 20, 2020 Notes for the maturity date from October 20, 2021 to October 20, 2022.
     
  The parties amended the October 20, 2020 Notes for the aggregate principal amount and accrued interest from $652,300 to $717,530 which is issued at a $65,230 original issue discount from the face value of the October 20, 2020 Notes now due October 20, 2022.
     
  In exchange for the extension of the Note, the Company issued Osher five-year warrants to purchase an aggregate of 450,000 shares of the Company’s common stock at an exercise price of $1.00 per share.

 

The Company has not repaid this convertible note and the convertible note is now in default. The Company is currently in discussions to restructure the terms of the note.

 

Previous Noteholders

 

Other – $145,200

 

On November 21, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with a third party investor of (i) $145,200 aggregate principal amount of Note due November 21, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 968,000 shares of the Company’s Common Stock at an exercise price of $0.25 per share. The aggregate cash subscription amount received by the Company from the previous noteholder for the issuance of the Note and Warrants was $132,000 which was issued at a $13,200 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.15 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

22
 

 

On November 23, 2022, third party investor elected to convert the aggregate principal amount of the Note, $145,200, into 968,000 common shares.

 

All other previous notes were detailed in our Form 10-K filed on March 31, 2023. No changes occurred related to these notes during the period covered by this Form 10-Q.

 

NOTE 7 – STOCKHOLDERS’ DEFICIT

 

Preferred Stock

 

The Company authorized 10,000,000 shares of par value $0.0001 preferred stock, of which none are issued and outstanding at March 31, 2023 and December 31, 2022, respectively.

 

Common Stock

 

The Company has authorized 1,000,000,000 shares of par value $0.0001 common stock, of which 42,804,825 and 38,263,813 shares are outstanding as of March 31, 2023 and December 31, 2022, respectively.

 

Restricted Stock Units

 

Effective October 10, 2022, the Company’s Board of Directors appointed Ms. Richa Nand, Mr. Jim Dorst, and Mr. Chris Wetzel as non-executive members to the Company’s Board of Directors (“Director”). Each Director shall receive a grant of restricted stock units of $50,000 (see Note 11).

 

Warrants

 

In accordance with ASC 718-20, Compensation – Stock Compensation, a modification of a stock award is treated as an exchange of the original award for a new award incurring additional compensation cost for any incremental value resulting from the modification. Incremental compensation cost shall be measured as the excess of the fair value of the modified award over the fair value of the original award immediately before its terms are modified and recognized over the vesting period. A short-term inducement shall be accounted for as a modification of the terms of only those that accept the inducement.

 

In March 2023, the Company offered a short-term inducement to the Company’s warrant holders in which the Company will issue one share of the Company’s common stock in exchange for each two warrants returned to the Company to be cancelled. All other terms of the original grants remain the same. A total of 9,082,024 warrants were exchanged for 4,541,012 shares of the Company’s common stock through March 31, 2023. The Company recognized $15,806 as modification of warrants in the three months ended March 31, 2023 as a result of the modification.

 

On October 22, 2021, the Company and Osher amended convertible debt agreements for the maturity date from October 20, 2021 to October 20, 2022. In exchange for the extension of the Note, the Company issued Osher 450,000 warrants to purchase an aggregate of 450,000 shares of the Company’s common stock, valued at $197,501 (based on the Black Scholes valuation model on the date of grant) (see Note 6). The warrants are exercisable for a period of five years at $1.00 per share in whole or in part, as either a cash exercise or as a cashless exercise, and fully vest at grant date. The Company accreted the value of the warrants ratably through October 20, 2022. The Company recorded $0 and $48,699 for the three months ended March 31, 2023 and 2022, respectively, and is classified in other expenses in the consolidated Statements of Operations. See Notes 6 for further warrant discussions.

 

23
 

 

NOTE 8 – OPERATING LEASES

 

On May 27, 2021, the Company entered into a sixty-three month lease for its corporate office at $5,955 per month commencing June 15, 2021 maturing September 30, 2026. The Company accounts for this lease in accordance with ASC 842. Adoption of the standard resulted in the initial recognition of operating lease ROU asset of $290,827 and operating lease liability of $290,827 as of June 15, 2021.

 

Operating lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Generally, the implicit rate of interest in arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The operating lease ROU asset includes any lease payments made and excludes lease incentives. Our variable lease payments primarily consist of maintenance and other operating expenses from our real estate leases. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

 

We have lease agreements with lease and non-lease components. We have elected to account for these lease and non-lease components as a single lease component. We are also electing not to apply the recognition requirements to short-term leases of twelve months or less and instead will recognize lease payments as expense on a straight-line basis over the lease term.

 

The components of lease expense and supplemental cash flow information related to leases for the period are as follows:

 

In accordance with ASC 842, the components of lease expense were as follows:

 

   2023   2022 
   Three Months ended March 31, 
   2023   2022 
Operating lease expense  $17,919   $17,919 
Short term lease cost  $-   $- 
Total lease expense  $17,919   $17,919 

 

In accordance with ASC 842, other information related to leases was as follows:

 

Three Months ended March 31,  2023   2022 
Operating cash flows from operating leases  $18,402   $17,866 
Cash paid for amounts included in the measurement of lease liabilities  $18,402   $17,866 
           
Weighted-average remaining lease term—operating leases   3.42 years     4.67 years 
Weighted-average discount rate—operating leases   10%   10%

 

24
 

 

In accordance with ASC 842, maturities of operating lease liabilities as of March 31, 2023 were as follows:

 

   Operating 
Year ending:  Lease 
2023 (remaining 9 months)  $56,493 
2024   77,142 
2025   79,456 
2026   54,225 
Total undiscounted cash flows  $267,316 
      
Reconciliation of lease liabilities:     
Weighted-average remaining lease terms   3.42 years  
Weighted-average discount rate   10%
Present values  $228,136 
      
Lease liabilities—current   55,099 
Lease liabilities—long-term   173,037 
Lease liabilities—total  $228,136 
      
Difference between undiscounted and discounted cash flows  $39,180 

 

Operating lease cost was $17,919 and $17,919 for the three months ended March 31, 2023 and 2022, respectively.

 

NOTE 9 – RELATED PARTY TRANSACTIONS

 

Other than as set forth below, and as disclosed in Note 7, there have not been any transaction entered into or been a participant in which a related person had or will have a direct or indirect material interest.

 

Employment Agreements

 

Mr. Joyce receives an annual base salary of $455,000, plus bonus compensation not to exceed 50% of salary. Mr. Joyce’s employment also provides for medical insurance, disability benefits and one year of severance pay if his employment is terminated without cause or due to a change in control. Additionally, the Company has agreed to maintain a beneficial ownership target of