MARIZYME, INC. You should read the following discussion and analysis of our financial condition
and results of operations in conjunction with the unaudited interim financial
statements and notes thereto included in this Quarterly Report on Form 10-Q and
with our audited financial statements and notes thereto for the year ended
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements other than statements of historical facts contained in this quarterly report, including statements regarding our future results of operations and financial position, business strategy, research and development plans and costs, the impact of COVID-19, the timing and likelihood of regulatory filings and approvals, commercialization plans, pricing and reimbursement, the potential to develop future product candidates, the timing and likelihood of success of the plans and objectives of management for future operations, and future results of anticipated product development efforts, are forward-looking statements. These statements are often identified by the use of words such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "should," "estimate," or "continue," and similar expressions or variations. The forward-looking statements in this quarterly report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, operating results, business strategy, short-term and long-term business operations and objectives. These forward-looking statements speak only as of the date of this quarterly report and are subject to a number of risks, uncertainties and assumptions, including those described in the Part II, Item 1A under the heading "Risk Factors." The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
OVERVIEW
Our Products
Krillase - through our acquisition of the Krillase technology from
We have acquired a Krillase-based product pipeline that is focused on developing products that treat several conditions across the critical care market. Itemized below is a breakdown of our projected Krillase development pipeline:
? MB101 - Therapy for complex wounds and burns, ? MB102 - Therapy for acute ischemic stroke, ? MB104 - Therapy for deep vein thrombosis, and ? MB105 - Therapy for dissolving plaque and biofilms on teeth.
Krillase received medical device status in the
As of the date of this filing, the Company continues to evaluate commercial, clinical, research, and regulatory considerations involved in marketing our Krillase-based product line. Our commercial strategy in developing this product line is two-fold:
? First, leverage and maximize near-term revenue generating opportunities with
products for commercial or clinical applications that have low regulatory
risk, and
? Second, develop products for applications of the Krillase platform that
address unmet medical needs or address medical market needs better than
existing products in the marketplace, in clinical applications that have
higher regulatory risk, but significant commercial potential.
We anticipate finalizing our development, operation, and commercial strategy for the Krillase platform by 2022 and expect the first stream of revenue from sale of the product to be generated in 2023.
19
DuraGraft - through our acquisition of Somah in
DuraGraft is an "endothelial damage inhibitor" indicated for cardiac bypass,
peripheral bypass, and other vascular surgeries. It is CE marked and is approved
for marketing in 33 countries worldwide on 4 continents including, but not
limited to the
According to market analysis reports, the size value of the coronary artery
bypass graft market globally was approximately
In 2017, the number of peripheral vascular surgeries, which include angioplasty
and bypass of peripheral arteries, vein removal, thrombectomy, and
endarterectomy operations, were approximately 3.7 million worldwide. The number
of peripheral vascular procedures is forecasted to increase at a CAGR of 3.9% in
years 2017 to 2022 and is expected to exceed 4.5 million procedures by 2022
(
The Company is currently working with local distributors of cardiovascular
disease-related products, in accordance with local regulatory requirements, to
sell and increase the market share of DuraGraft in
In anticipation of the filing of the de novo 510k application for DuraGraft, the company plans to submit a pre-submission document to the FDA that describes the strategy for demonstrating the clinical safety and efficacy of the product. FDA application for the use of DuraGraft in CABG procedures is expected to take place in 2022.
DuraGraft commercialization plan with CE Mark and existing distribution partners
in select European and
Key Elements of our Strategy
? Continue to grow the core of our business through the current market channels
for DuraGraft and expand the sale of DuraGraft into additional markets
globally as well as explore further use of the cytoprotective platform for new
research and clinical applications,
? Continue the integration of the Somah assets and begin the marketing and
distribution of the Somah products in Europe and other global markets, which
will allow the Company to continue its growth and international product
rollout,
? Focus our efforts and resources on continuous development, seek regulatory
approval and commercialization of DuraGraft and related Somah Products in the
United States ,
? Begin to commercialize our Krillase platform through the development of
manufacturing and distribution in Europe and South America of a Krillase wound
healing product, and
? Expand our product portfolio through the identification and acquisition of
additional life science assets in areas of innovative medicine.
We have incurred losses for each period from our inception. For the nine months
ended
20 KEY 2021 HIGHLIGHTS
Acquisition of My Health Logic
On
The Transaction will be effected by way of a plan of arrangement under the
Business Corporations Act (
The acquisition will provide
With the completion of the transaction, the Company will acquire MHL's digital diagnostic device MATLOC1. MATLOC 1 is the proprietary diagnostic platform technology in development for the testing of different biomarkers, with a current focus on the urine-based biomarkers albumin and creatinine for chronic kidney disease screening and eventual diagnosis. The Company anticipates MATLOC 1 device will be submitted for FDA approval in late 2022 and the management is optimistic that the approval will be received by mid-2023.
Financing
In
Operational
During the nine months ended
FINANCIAL OPERATIONS REVIEW
Component of Results of Operations
Revenue
Revenue represents gross product sales less service fees and product returns. For our Distribution Partner channel, we recognize revenue for product sales at the time of delivery of the product to our Distribution Partner. As our products have an expiration date, if a product expires, we will replace the product at no charge. Currently, all of our revenue is generated from the sale of DuraGraft in European and Asian markets where the product met the required regulatory approvals.
Direct Costs of Revenue
Direct costs of revenue include primarily product costs, which include all costs directly related to the purchase of raw materials, charges from our contract manufacturing organizations, and manufacturing overhead costs, as well as shipping and distribution charges. Direct costs of revenue also include losses from excess, slow-moving or obsolete inventory and inventory purchase commitments, if any.
Professional Fees
Professional fees include legal fees relating to intellectual property
development and corporate matters, and consulting fees for accounting, finance,
and valuation services. We anticipate increased expenses related to audit,
legal, regulatory, and tax-related services associated with maintaining
compliance with exchange listing and
Salaries and Stock-Based Compensation
Salaries consists of compensation and related personnel costs. Stock-based compensation represents the fair value of equity-settled share awards on stock options granted by the Company to its employees, officers, directors, and consultants. The fair value of awards is calculated using the Black-Scholes option pricing model, which considers the following factors: exercise price, current market price of the underlying shares, expected life, risk-free interest rate, expected volatility, dividend yield, and forfeiture rate.
Other General and Administrative Expenses
Other general and administrative expenses consist principally of marketing and selling expenses, facility costs, administrative and office expenses, director and officer insurance premiums, and investor relations costs associated with operating a public company.
21 Other Income and Expenses
Other income and expenses consists of mark to market adjustments on contingent liabilities assumed on the acquisition of Somah and interest and accretion expenses related to our convertible notes issued pursuant to the Unit Purchase Agreement.
RESULTS OF OPERATIONS
Comparison of the Nine Months Ended
The following table summarizes our results of operations for the nine months
ended
Nine Months Ended
September 30,
2021 2020 Change
Revenue $ 271,952 $ 124,985 $ 146,967
Operating expenses:
Direct costs of revenue 168,419 25,714 142,705
Professional fees 1,808,093 494,295 1,313,798
Salary expenses 2,478,357 433,318 2,045,039
Stock-based compensation 626,449 1,674,200 (1,047,751 )
Other general and administrative expenses 1,071,017 468,782 602,235
Total operating expenses 6,152,335 3,096,309 3,056,026
Total operating loss $ (5,880,383 ) $ (2,971,324 ) $ (2,909,059 )
Other income (expenses):
Interest and accretion expenses (74,410 ) - (74,410 )
Change in fair value of contingent liabilities 472,000 - 472,000
Net loss $ (5,482,793 ) $ (2,971,324 ) $ (2,511,469 )
Revenue
We recognized revenue of
Direct Costs of Revenue
During the nine months ended
Professional Fees
Professional fees increased by
Salary Expenses
Salary expenses for the period ended
Other General and Administrative Expenses
Other general and administrative expenses increased
22 Other Income and Expenses
During the nine months ended
Additionally, the company recognized
Comparison of the Three Months Ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended
September 30,
2021 2020 Change
Revenue $ 37,215 $ 124,985 $ (87,770 )
Operating expenses:
Direct costs of revenue 18,356 25,714 (7,358 )
Professional fees 556,254 170,753 385,501
Salary expenses 617,826 433,318 184,508
Stock-based compensation 64,074 1,107,085 (1,043,011 )
Other general and administrative expenses 536,483 453,158 83,325
Total operating expenses 1,792,993 2,190,028 (397,035 )
Total operating loss $ (1,755,778 ) $ (2,065,043 ) $ 309,265
Other income (expenses):
Interest and accretion expenses (70,221 ) - (70,221 )
Change in fair value of contingent liabilities 194,000 - -
Net loss $ (1,631,999 ) $ (2,065,043 ) $ 239,044 Revenue and Direct Cost of Revenue
We recognized revenue of
COVID-19 pandemic resulted in shortage of the raw materials and interruptions in
global supply chains. Additionally, during 2021,
Professional Fees
Professional fees increased by
Salary Expenses
Salary expenses for the three months ended
Other General and Administrative Expenses
Other general and administrative expenses increased
Other Income and Expenses
During the three months ended
23
During the three months ended
LIQUIDUTY AND CAPITAL RESOURCES
We have incurred net losses and negative cash flows from operations since our
inception and anticipate we will continue to incur net losses for the
foreseeable future. As of
The Offering
In May of 2021,
In the nine months ended
On
(iv) Decreased the offering price under the Unit Purchase Agreement from$2.50 per Unit to$2.25 per Unit for all future sales under the Unit Purchase Agreement. No proceeds from the initial investment were returned, (v) Decreased the conversion price from$2.50 per share to$2.25 per share for all current Unit holders and all future investors, and (vi) Cancelled all Class A Warrants and ClassB Warrants and replaced them with ClassC Warrants .
The Company determined that the modifications of the Unit Purchase Agreement were not significant enough to be considered substantial, therefore the values of original instruments issued were not adjusted. As a result of this modification, the total of 469,978 Units previously issued were replaced with an aggregate of 522,198 pro-rata Units.
The Company intends to raise up to
Funding Requirements and Other Liquidity Matters
? Increase our expertise and knowledge through hiring and retaining qualified
operational, financial and management personnel, who will build efficient
infrastructure to support development and commercialization of therapies and
devices,
? Expand our product portfolio through the identification and acquisition of
additional life science assets, and
? Seek to increase awareness about our products to boost sales and distributions
internationally.
Until such time, if ever, as we can generate substantial product revenues to support our cost structure, the Company will continue to have to raise funds beyond its current working capital balance in order to finance future development of products, potential acquisitions, and meet its debt obligations until such time as future profitable revenues are achieved.
We expect to finance our cash needs through a combination of private and public equity offerings, debt financings, government or other third-party funding, and collaborations arrangements or acquisitions. To the extent that we raise additional capital through the sale of common stock, convertible securities or other equity securities, the ownership interest of our stockholders may be materially diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights of our common stockholders. Debt financing and preferred equity financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business. Securing additional financing could require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from day-to-day activities, which may adversely affect our management's ability to oversee the development or acquisition of product.
If we raise additional funds through collaborations, strategic alliances or marketing, distribution, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
24 Impact of the Coronavirus
On
In addition, the COVID-19 pandemic may affect the operations of the FDA and
other health authorities, including such authorities in
Cash Flows
The following table sets forth a summary of the net cash flow activity for each
of the periods indicated:
Nine Months Ended
September 30,
2021 2020 Change
Net cash provided by/(used in):
Operating activities $ (4,313,038 ) $ (948,305 ) $ (3,364,733 )
Investing activities - (130,333 ) 130,333
Financing activities 1,426,949 6,275,064 (4,848,115 )
Net increase/(decrease) in cash
Operating Activities
Net cash used in operating activities was approximately
Financing Activities
Net cash provided by financing activities for the nine months ended
Contractual Obligations and Commitments
Other than disclosed below, there were no material changes outside the ordinary
course of our business during the nine months ended
Royalties and Other Commitments
Upon receiving the FDA approval for the DuraGraft and other key intellectual products, the Company:
? Will pay royalties on net sales of all products obtained through acquisition
of Somah's assets,
? Issue performance warrants with a strike price determined based on the average
of the closing prices of the common shares for the 30 calendar days following
the date of the public announcement of FDA approval, and
? Upon liquidation of all or substantially all of the assets relating to the
Somah products, we will pay 15% of the net sale proceeds up to a maximum of
$20 million .
Critical Accounting Policies and Significant Judgments and Estimates
Our management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with generally accepted accounting principles in
25
For a description of our critical accounting policies, please see the section
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Critical Accounting Policies and Estimates" contained in
our 2020 Form 10-K. There have not been any material changes to the critical
accounting policies discussed therein during the nine months ended
Other Company Information JOBS Act
As an emerging growth company under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, we can, and intend to, take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We also intend to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of Sarbanes-Oxley.
We will remain an emerging growth company until the earliest of (i) the last day
of the fiscal year following the fifth anniversary of the consummation of our
IPO, (ii) the last day of the fiscal year in which we have total annual gross
revenue of at least
OFF-BALANCE SHEET ARRANGEMENTS
During the periods presented we did not have, nor do we currently have, any
off-balance sheet arrangements as defined under
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