Unless stated otherwise, the words "we," "us," "our," the "Company" or
"Organicell" in this Quarterly Report on Form 10-Q refer to Organicell
Regenerative Medicine, Inc., a Nevada corporation, and its subsidiaries.
Cautionary Note Regarding Forward- Looking Statements
The statements contained in this Quarterly Report on Form 10-Q that are not
historical facts are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 (the "Securities Act") and Section 21E
of the Securities Exchange Act of 1934 (the "Exchange Act"). These
forward-looking statements are identified as any statement that does not relate
strictly to historical or current facts. Statements using words such as "may,"
"could," "should," "expect," "plan," "project," "strategy," "forecast,"
"intend," "anticipate," "believe," "estimate," "predict," "potential," "pursue,"
"target," "continue," or similar expressions help identify forward-looking
statements.
The forward-looking statements contained in this Quarterly Report on Form 10-Q
are largely based on our expectations, which reflect estimates and assumptions
made by our management. These estimates and assumptions reflect our best
judgment based on currently known market conditions and other factors. Although
we believe such estimates and assumptions to be reasonable, they are inherently
uncertain and involve a number of risks and uncertainties that are beyond our
control. In addition, management's assumptions about future events may prove to
be inaccurate. Management cautions all readers that the forward-looking
statements contained in this Quarterly Report on Form 10-Q are not guarantees of
future performance, and management cannot assure any reader that such statements
will be realized or the forward-looking events and circumstances will in fact
occur. The Company's actual results may differ materially from those
anticipated, estimated, projected or expected by management.
All forward-looking statements speak only as of the date of this Quarterly
Report on Form 10-Q. We do not intend to publicly update or revise any
forward-looking statements as a result of new information, future events or
otherwise.
Business Overview
We are a clinical-stage biopharmaceutical company principally focusing on the
development of innovative biological therapeutics for the treatment of
degenerative diseases and regenerative medicine. The Company's proprietary
products are derived from perinatal sources and manufactured to retain the
naturally occurring extracellular vesicles, hyaluronic acid, and proteins
without the addition or combination of any other substance or diluent ("RAAM
Products"). Our RAAM Products and related services are principally used in the
health care industry administered through doctors and clinics ("Providers").
Organicell operates an extracellular vesicle processing laboratory in Davie,
Florida, and Basalt, Colorado each for the purpose of performing research and
development and the manufacturing and processing of the anti-aging and cellular
therapy derived products that we sell and distribute to our customers.
The Company's leading product, Zofin™ (also known as Organicell™ Flow), is an
acellular, biologic therapeutic derived from perinatal sources and is
manufactured to retain naturally occurring microRNAs, without the addition or
combination of any other substance or diluent. This product contains over 300
growth factors, cytokines, chemokines, and 102 unique microRNAs as well as other
exosomes/nanoparticles derived from perinatal tissues.
To date, the Company has obtained certain Investigational New Drug ("IND"), and
18 emergency IND ("eIND") approvals from the FDA, including applicable
Institutional Review Board ("IRB") approvals which authorized the Company to
commence clinical trials or treatments in connection with the use of Zofin™ and
related treatment protocols. The Company is pursuing efforts to complete its
already approved clinical studies as well as obtaining approval to commence
additional studies for other specific indications it has identified that the use
of its products will provide more favorable and desired health related benefits
for patients seeking alternative treatment options than are currently available.
The ability of the Company to succeed in these efforts is subject to among other
things, the Company having sufficient available working capital to fund the
substantial costs of completing clinical trials, which the Company currently
does not have, and ultimately, obtaining approval from the FDA.
20
New FDA guidance which was announced in November 2017 and which became effective
in May 2021 (postponed from November 2020 due to the COVID-19 pandemic) requires
that the sale of products that fall under Section 351 of the Public Health
Services Act pertaining to marketing traditional biologics and human cells,
tissues and cellular and tissue based products ("HCT/Ps") can only be sold
pursuant to an approved biologics license application ("BLA").
We have not obtained any opinion or ruling regarding the Company's operations
and whether the processing, sales and distribution of the products we currently
produce would be subject to the FDA's previously announced intended enforcement
policies regarding HCT/P's. However, we do not believe that our products fall
within these guidelines and intend to vigorously defend against any adverse
interpretation by the FDA on the classification of our products that may be
deemed as falling under this defined regulation, if any. Notwithstanding the
foregoing, we are undertaking efforts on an ongoing basis to mitigate any
potential risks associated with an adverse ruling by the FDA and the subsequent
limitations on our ability to continue to generate revenues from the sale of our
products in the United States until the Company obtains the required licenses.
The efforts include continuing with clinical trials, expanding sales
internationally and developing new product offerings and/or designations of
products that would not fall under these regulations.
In June 2021, the Company announced that it was launching a service platform for
its first autologous product called Patient Pure XTM (PPXTM). PPXTM is a
non-manipulated biologic containing the nanoparticle fraction from a patient's
own peripheral blood. The Company began to accept minimal orders for this
service in October 2021 and to date revenues from PPXTM continue to be
immaterial.
COVID-19 impact on Economy and Business Environment
The adverse public health developments and economic effects of the ongoing
COVID-19 outbreak in the United States have adversely affected the demand for
our products and services by our customers and from patients of our customers as
a result of quarantines, facility closures and social distancing measures put
into effect. These restrictions have adversely affected the Company's sales,
results of operations and financial condition. In response to the COVID-19
outbreak, the Company (a) has accelerated its research and development
activities; (b) has secured and is continuing to seek additional debt and/or
equity financing to support working capital requirements; and (c) continues to
take steps to stabilize and increase revenues from the sale of its products.
There is no assurance as to when the adverse impact to the United States and
worldwide economies resulting from the COVID-19 outbreak will be eliminated, if
at all, and whether any new or recurring pandemic outbreaks will occur again in
the future causing a similar or worse devastating impact to the United States
and worldwide economies or our business.
The following discussion of the Company's results of operations and liquidity
and capital resources should be read in conjunction with our unaudited
consolidated financial statements and related notes thereto appearing in Item 1.
of this Quarterly Report on Form 10-Q.
Results of Operations
Three months ended January 31, 2023 as compared to three months ended
January 31, 2022
Revenues. Our revenues for the three months ended January 31, 2023 were
$1,070,219, compared to revenues of $1,599,147 for the three months ended
January 31, 2022. The decrease in revenues during the three months ended
January 31, 2023 of $528,928 or 33.1%, was primarily the result of a decrease of
approximately 20.8% (approximately $274,500) in the overall unit sales of its
products during the three months ended January 31, 2023 compared with the three
months ended January 31, 2022, a decrease of approximately 15.0% (approximately
$232,400) in the average sales prices for the products sold during the three
months ended January 31, 2023 compared with the average sales prices realized on
products sold during the three months ended January 31, 2023 and a decrease of
approximately $22,000 of new revenues associated with its recently launched
PPXTM service platform during the three months ended January 31, 2023 compared
with the three months ended January 31, 2022. The decrease in the average sales
prices realized on products sold during the three months ended January 31, 2023
compared with the three months ended January 31, 2022, was due to decreases in
sales of higher priced medical grade products, partially offset from the
increase in the sales of the Company's aesthetic product offerings, which are
sold at lower prices than the Company's medical grade product offerings.
21
Cost of Revenues. Our cost of revenues for the three months ended January 31,
2023 were $104,313, compared with cost of revenues of $149,120 for the three
months ended January 31, 2022. The decrease in the cost of revenues during the
three months ended January 31, 2023 of $44,807 or 30.1%, compared with the three
months ended January 31, 2022, was due to a decrease in the amount of units sold
of 20.1% (approximately $27,400) during the three months ended January 31, 2023,
compared with the three months ended January 31, 2022 and a decrease in the cost
of units sold of 11.7% (approximately ($17,400) during the three months ended
January 31, 2023, compared to costs of units sold during the three months ended
January 31, 2022. The decrease in the cost of units sold was primarily the
result of the Company's decrease in sales of higher cost medical grade product
offerings, partially offset from the increased in sales of lower cost aesthetic
product offerings.
Gross Profit. Our gross profit for the three months ended January 31, 2023 was
$965,906 (90.3% of revenues), compared with gross profit of $1,450,027 (90.7% of
revenues) for the three months ended January 31, 2022. The decrease in gross
profit during the three months ended January 31, 2023 of $484,121 was the result
decreases in the average sales prices for the products sold during the three
months ended January 31, 2023 and decreases in overall unit sales of its
products during the three months ended January 31, 2023 compared to the three
months ended January 31, 2022.
General and Administrative Expenses. General and administrative expenses for the
three months ended January 31, 2023 were $3,142,211, compared with $3,091,459
for the three months ended January 31, 2022, an increase of $50,752 or 1.6%. The
increase in the general and administrative expenses for the three months ended
January 31, 2023 compared with the three months ended January 31, 2022, was
primarily the result of an increase in stock-based compensation costs to
advisors, consultants and administrative staff totaling approximately $446,200,
increases in insurance costs of approximately $117,800, increased laboratory
related costs of approximately $132,500 and increased investor relations costs
of approximately $188,900, partially offset by decreased payroll and consulting
fees of approximately $378,000, decreases in commissions from sales of the
Company's products and travel and entertainment costs of approximately $266,200,
decreased professional fees of approximately $98,200 and decreased research and
development costs of approximately $81,600. The increase in stock-based
compensation costs during the three months ended January 31, 2023 compared with
the three months ended January 31, 2022 was principally the result of the
amortization of costs from warrants issued as stock-based compensation to
consultants in connection with the Restructuring in August 2022, stock issued as
payment for services, and warrants issued to outside directors. The increase in
insurance costs during the three months ended January 31, 2023 compared with the
three months ended January 31, 2022 was principally the result of the Company's
newly obtained directors & officers insurance policy in November 2023. The
decrease in payroll and consulting fees during the three months ended
January 31, 2023 compared with the three months ended January 31, 2022 was
principally the result of the Executives' agreement to a reduction in salary and
other compensation in connection with the Restructuring and reductions in fees
paid to consultants. The decreases in commissions on from sales of the Company's
products and travel and entertainment costs was principally the result of lower
unit sales and overall revenues from the sale of the Company's products during
the three months ended January 31, 2023 compared with the three months ended
January 31, 2022.
Other Expense. Other expense for the three months ended January 31, 2023 was
$110,351, compared with other expense of $52,304 for the three months ended
January 31, 2022. The increase in other expense of $58,047 during the three
months ended January 31, 2023 compared to the three months ended January 31,
2022, was principally the result of the increase in the Commitment Fee Shortfall
Obligation of approximately $37,400 under our Securities Purchase Agreement
("SPA 22") with AJB Capital Investments, LLC ("AJB") during the three months
ended January 31, 2023 compared with the three months ended January 31, 2022 and
increased interest costs of approximately $20,700 in connection with the
$600,000 promissory note ("$600,000 Note") issued and sold by the Company to AJB
in January 2022 during the three months ended January 31, 2023 compared with the
three months ended January 31, 2022.
22
Liquidity and Capital Resources
Cash and Cash Equivalents
The following table summarizes the sources and uses of cash for the periods
stated. The Company held no cash equivalents for any of the periods presented.
For the
Three Months Ended
January 31,
2023 2022
Cash, beginning of year $ 3,753,097 $ 108,570
Net cash used in operating activities (1,282,724 ) (559,994 )
Net cash used in investing activities (16,117 ) (155,134 )
Net cash (used in) provided by financing activities (1,031,755 ) 756,878
Cash, end of period
$ 1,422,501 $ 150,320
During the three months ended January 31, 2023, the Company used cash in
operating activities of $1,282,724, compared to $559,994 for the three months
ended January 31, 2022, an increase in cash used of $772,730. The increase in
cash used in operating activities was due to the decrease in revenues and gross
profit, payment of past due accounts payable and accrued expenses, the decrease
in accrued liabilities to management and the increase in inventory balances
during the three months ended January 31, 2023 as compared to the three months
ended January 31, 2022.
During the three months ended January 31, 2023, the Company had cash used in
investing activities of $16,117, compared to cash used in investing activities
of $155,134 for the three months ended January 31, 2022, a decrease in cash used
of $139,017. The decrease in cash used in investing activities was primarily due
to the reduction in payments made for leasehold improvements associated with the
new lab facility in Basalt, CO of approximately $102,000 and a decrease in
laboratory equipment purchased for the Company's laboratory facilities of
approximately $37,000 during the three months ended January 31, 2023 as compared
to the three months ended January 31, 2022.
During the three months ended January 31, 2023, the Company had cash used in
financing activities of $1,031,755 compared to cash provided by financing
activities of $756,878 for the three months ended January 31, 2022. The decrease
in cash provided by financing activities of $1,788,633 was due to decreases in
proceeds of $540,000 from the issuance of the $600,000 Note to AJB, increases in
the escrow deposit for the share purchase of $500,000, increases in repayment of
notes payable of $429,000, increases in payments on finance leases of
approximately $19,600 and the reduction in the sale of equity securities of
approximately $300,000 during the three months ended January 31, 2023 as
compared to the three months ended January 31, 2022.
Capital Resources
The Company has historically relied on the sale of debt or equity securities,
the restructuring of debt obligations and/or the issuance and/or exchange of
equity securities to meet the shortfall in cash to fund its operations.
Put Request
Pursuant to the Purchase Agreement entered into with Tysadco Partners LLC, on
December 2, 2022, the Company submitted a put request to Tysadco to purchase
4,456,326 registered shares at a purchase price (as calculated pursuant to the
Purchase Agreement) of $0.02244, for a total of $100,000 ("Put Request"). On
December 5, 2022, Tysadco funded the Put Request and the Company issued
4,456,326 shares to Tysadco. The proceeds from the share sale are being used for
working capital and general corporate purposes.
23
SPA 23
On March 6, 2023, the Company entered into a Securities Purchase Agreement ("SPA
23") with AJB Capital, pursuant to which we sold a Promissory Note in the
principal amount of $530,000 ("$530,000 Note") to AJB Capital in a private
transaction to for a purchase price of $519,400 (giving effect to original issue
discount of $10,600). In connection with the sale of the $530,000 Note, the
Company also paid AJB Capital's legal fees and due diligence costs of $15,000,
resulting in net proceeds to the Company of $504,400, which will be used for
working capital and other general corporate purposes.
Going Concern Consideration
The accompanying unaudited consolidated financial statements have been prepared
in conformity with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. The Company has had limited
revenues since its inception. The Company incurred net losses of $2,286,656 for
the three months ended January 31, 2023. In addition, the Company had an
accumulated deficit of $52,807,962 at January 31, 2023. The Company had a
working capital deficit of $773,385 at January 31, 2023.
United States Food and Drug Administration ("FDA") regulations which were
announced in November 2017 and which became effective beginning in May 2021
(postponed from November 2020 due to the COVID-19 pandemic) require that the
sale of products that fall under Section 351 of the Public Health Services Act
pertaining to marketing traditional biologics and human cells, tissues and
cellular and tissue based products ("HCT/Ps") can only be sold pursuant to an
approved biologics license application ("BLA"). The Company has not obtained any
opinion or ruling regarding the Company's operations and whether the processing,
sales and distribution of the products it currently produces would be subject to
the FDA's previously announced intended enforcement policies regarding HCT/P's.
In addition to the above, the adverse public health developments associated with
the ongoing COVID-19 pandemic combined with the downturn in the overall United
States and global economies have adversely affected the demand for our products
and services by our customers and from patients of our customers and which
currently still continue to have a negative impact to our business and the
economy.
As a result of the above, the Company's efforts to establish a stabilized source
of sufficient revenues to cover operating costs has yet to be achieved and
ultimately may prove to be unsuccessful unless (a) the Company's ability to
process, sell and distribute the products currently being produced or developed
in the future are not restricted; (b) the United States economy returns to
pre-COVID-19 conditions; and/or (c) additional sources of working capital
through operations or debt and/or equity financings are realized. These
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.
Management anticipates that the Company will remain dependent, for the near
future, on additional investment capital to fund ongoing operating expenses and
research and development costs related to development of new products and to
perform required clinical studies in connection with the sale of its products.
The Company does not have any assets to pledge for the purpose of borrowing
additional capital. In addition, the Company relies on its ability to produce
and sell products it manufactures that are subject to changing technology and
regulations that it currently sells and distributes to its customers. The
Company's current market capitalization, common stock liquidity and available
authorized shares may hinder its ability to raise equity proceeds. The Company
anticipates that future sources of funding, if any, will therefore be costly and
dilutive, if available at all.
In view of the matters described in the preceding paragraphs, recoverability of
the recorded asset amounts shown in the accompanying consolidated balance sheet
assumes that (a) the Company is able to continue to produce products or obtain
products under supply arrangements which are in compliance with current and
future regulatory guidelines; (b) the United States economy returns to
pre-COVID-19 market conditions; (c) the Company will be able to establish a
stabilized source of revenues, including efforts to expand sales internationally
and the development of new product offerings and/or designations of products;
(d) obligations to the Company's creditors are not accelerated; (e) the
Company's operating expenses remain at current levels and/or the Company is
successful in restructuring and/or deferring ongoing obligations; (f) the
Company is able to continue its research and development activities,
particularly in regards to remaining compliant with the FDA and ongoing safety
and efficacy of its products; and/or (g) the Company obtains additional working
capital to meet its contractual commitments and maintain the current level of
Company operations through debt or equity sources.
24
There is no assurance that the products we currently produce will not be subject
to the FDA's previously announced intended enforcement policies regarding
HCT/P's and/or the Company will be able to complete its revenue growth strategy.
There is no assurance that the Company's research and development activities
will be successful or that the Company will be able to timely fund the required
costs of those activities. Without sufficient cash reserves, the Company's
ability to pursue growth objectives will be adversely impacted. Furthermore,
despite significant effort since July 2015, the Company has thus far been
unsuccessful in achieving a stabilized source of revenues.
If revenues do not increase and stabilize, if the Company's ability to process,
sell and/or distribute the products currently being produced or developed in the
future are restricted, and/or if additional funds cannot otherwise be raised,
the Company might be required to seek other alternatives which could include the
sale of assets, closure of operations and/or protection under the U.S.
bankruptcy laws. As of January 31, 2023, based on the factors described above,
the Company concluded that there was substantial doubt about its ability to
continue to operate as a going concern for the 12 months following the issuance
of these financial statements.
Off-Balance Sheet Arrangements
Our liquidity is not dependent on the use of off-balance sheet financing
arrangements (as that term is defined in Item 303(a) (4) (ii) of Regulation S-K)
and as of January 31, 2023 and through the date of this report, we had no such
arrangements.
Recently Issued Financial Accounting Standards
There were no recently issued financial accounting standards that would have an
impact on the Company's financial statements.
Critical Accounting Policies
Our unaudited consolidated financial statements reflect the selection and
application of accounting policies which require us to make significant
estimates and judgments. See Note 2 to our audited consolidated financial
statements included in our Annual Report on Form 10-K for the fiscal year ended
October 31, 2022, "Summary of Significant Accounting Policies".
© Edgar Online, source Glimpses
ZEO SCIENTIFIX, INC. 
