REGENERATIVE MEDICAL TECHNOLOGY GROUP INC. General
The following is a discussion by management of its view of the Company's business, financial condition, and corporate performance for the past year. The purpose of this information is to give management's recap of the past year, and to give an understanding of management's current outlook for the near future. This section is meant to be read in conjunction with the Financial Statements of this Annual Report on Form 10-K. Results of Operations Below is a summary of the results of operations for the years endedDecember 31, 2022 and 2021. For the Years Ended December 31 2022 2021 $ Change % Change Revenue$ 1,530,223 $ 437,887 $ 1,092,336 249.46 % Cost of revenue 653,256 287,750 365,506 127.02 % Gross profit 876,967 150,137 726,830 484.11 % Operating expenses
Advertising and marketing 317,796 133,451
184,345 138.14 %
Professional fees 886,651 966,974 (80,323 ) -8.31 %
Officer compensation 90,000 563,072 (473,072 ) -84.02 %Depreciation and amortization 152,739 40,058 112,681 281.29 % Investor relations 190,382 100,496 89,886 89.44 % General and administrative-related party - 8,116,269 (8,116,269 ) -100.00 % General and administrative 424,258 149,374 274,884 184.02 % Total operating expenses 2,061,826 10,069,694
(8,007,868 ) -79.52 %
Other income (expense)
Interest expense (4,403,774 ) (2,724,351 ) (1,679,423 ) -61.64 %Derivative financial instruments 13,498 3,744 9,754 260.52 % Settlement of lawsuit - (231,109 ) 231,109 100.00 % Loss from continuing operations (5,575,135 ) $ (12,871,273
)
Discontinued operations: Gain (loss) from discontinued operations 68,313 (13,207 ) 81,520 -617.25 % Income (loss) from discontinued operations 68,313 (13,207
) 81,520 -617.25 % Net loss$ (5,506,822 ) $ (12,884,480 ) $ 7,377,658 -57.26 % 17 Revenue Revenue increased by 249.46% in the amount of$1,092,336 for the years endedDecember 31, 2022 , compared to the same period in 2021. The key reason for the increase in revenue was a result of the acquisition ofGlobal Stem Cells Group, Inc. onAugust 18, 2021 .
The following table presents the Company's revenue by product category for the
years ended
For the Years Ended
December 31,
2022 2021
Training $ 279,404 $ 112,970
Product supplies 866,104 209,706
Equipment 163,460 115,211
Patient procedures 221,255 -
Total revenue $ 1,530,223 $ 437,887
Operating expenses
Operating expenses decreased by 79.52% in the amount of $8,007,868 for the years
ended December 31, 2022 , compared to the same period in 2021. Listed below are
the major changes to operating expenses:
Advertising and marketing increased by $184,345 for the years ended December 31,
2022 , compared to the same period in 2021, primarily due to the acquisition of
Global Stem Cells Group, Inc. on August 18, 2021 .
Officer compensation decreased by $473,072 for the years ended December 31,
2022 , compared to the same period in 2021, primarily due to the issuance of 896
shares of Series DD Preferred Stock of the Company in 2021 to Dave Christensen ,
current Director, President, Chief Executive Officer, Chief Financial Officer
and Secretary as compensation pursuant to the Professional Service Consulting
Agreement. The $503,072 value of the 896 shares of Series DD Convertible
Preferred Stock is based on converting into a number of fully paid and
nonassessable shares of common stock determined by multiplying the number of
issued and outstanding shares of common stock of the Company on the date of
conversion by 3.17 conversion price offset by a $30,000 increase in compensation
to Mr. David Christensen in 2022.
Depreciation and amortization increased by $112,681 for the years ended December
31, 2022 , compared to the same period in 2021, primarily due to the acquisition
of Global Stem Cells Group, Inc. on August 18, 2021 along with the buildoutof theCancun clinic in 2022.
General and administrative-related party expense decrease by$8,116,269 for the years endedDecember 31, 2022 , compared to the same period in 2021, primarily due to the issuance of the 1,000 shares of the Company's Series CC Convertible Preferred Stock toLans Holdings Inc. terminated and replaced with a cash payment as consideration. The Company paidLans Holdings Inc. , by delivery in escrow, an amount equal to$8,200,000 , offset by$83,731 the value of the 1,000 shares of the Company's Series CC Convertible Preferred Stock terminated in 2021. General and administrative expense increase by$274,884 for the years endedDecember 31, 2022 , compared to the same period in 2021, primarily due to the acquisition ofGlobal Stem Cells Group, Inc. onAugust 18, 2021 along with the buildout of theCancun clinic in 2022. Other expense Other expense increased by$1,438,650 for the years endedDecember 31, 2022 , compared to the same period in 2021, primarily as a result of an increase in amortization of discounts in 2022 offset by the change in fair market value of the convertible notes in 2022 and settlement of lawsuit in 2021. Discontinued operations
OnOctober 28, 2022 , we completed the disposition of our prior coins, paper currency, bullion and medals business by entering into an Agreement of Conveyance, Transfer and Assignment of Subsidiary with our prior officer and director, Mr.Melvin Pereira , pursuant to which we agreed to sellMr. Pereira 100% of our interest inMeso Numismatics Corp. , aFlorida corporation. In exchange,Mr. Pereira has agreed to assume all of the liabilities ofMeso Numismatics , resulting in a gain of$68,313 in 2022 offset by a loss of$13,207 in 2021. Net Loss
We recorded a net loss of$5,506,822 for the years endedDecember 31, 2022 , as compared with a net loss of$12,884,480 for the same period ended December
31,
2021.
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Liquidity and Capital Resources
Since inception, the Company has financed its operations through private
placements and convertible notes. The following is a summary of the cash and
cash equivalents as of
December 31, December 31,
2022 2021 $ Change % Change
Cash and cash equivalents $ 1,645,185 $ 2,978,525 $ (1,333,340 ) -44.77 %
Summary of Cash Flows
Below is a summary of the Company's cash flows for the years ended December 31,
2022 and 2021.
For the Years
Ended December 31,
2022 2021
Net cash used from operating activities-continued operations $ (1,183,849 ) $ (9,865,457 )
Net cash used from operating activities-discontinued operations 69,713 (13,207 )
Net cash used in operating activities (1,114,136 ) (9,878,664 )
Net cash provided by (used in) investing activities (198,428 ) 666,467
Net cash provided by (used in) financing activities (20,776 ) 12,148,188
Net increase (decrease) in cash and cash equivalents $ (1,333,340 ) $ 2,935,991
Operating activities
Net cash used in operating activities was$1,114,136 during the year endedDecember 31, 2022 and consisted of a net loss of$5,506,822 , which was offset by a net change in operating assets and liabilities of$2,553,594 and non-cash items of$1,837,692 . The primary non-cash items for the year endedDecember 31, 2021 , consisted of amortization of debt discount of$1,756,764 , depreciation and amortization of$152,739 and shares issued for services of$10,000 offset by change in derivative liabilities of$13,498 and gain on discontinued operations of$68,313 . The significant change in operating assets and liabilities was an increase in accounts payable and accounts receivable. Net cash used in operating activities was$9,878,664 during the year endedDecember 31, 2021 and consisted of a net loss of$12,884,480 , which was offset by a net change in operating assets and liabilities of$1,545,861 and non-cash items of$1,459,955 . The primary non-cash items for the year endedDecember 31, 2021 , consisted of amortization of debt discount of$893,959 and shares issued for services and settlement of debt of$494,645 . The significant change in operating assets and liabilities was an increase in accounts payable and accrued liabilities. Investing activities
Net cash used investing activities was
Financing activities Net cash used in financing activities was$20,776 consisted of principle payment on debt for the year endedDecember 31, 2022 , as compared to net cash provided by financing activities was$12,148,188 consisted of proceeds received from the issuance of promissory notes offset by principle payment on debt and loan to non-affiliate for$250,000 for the year endedDecember 31, 2021 . Going Concern The financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred losses since inception, resulting in an accumulated deficit of approximately$52,176,465 and a working capital deficit of$10,304,670 as ofDecember 31, 2022 and future losses are anticipated. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue its operations as a going concern is dependent on management's plans, which include the raising of capital through debt and/or equity markets with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements. 19 The Company will require additional funding to finance the growth of its current and expected future operations as well to achieve its strategic objectives. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Off-Balance Sheet Arrangements
As of
Critical Accounting Policies Our critical accounting policies have not materially changed during the year endedDecember 31, 2022 . Furthermore, the preparation of our financial statements is in conformity with generally accepted accounting principles inthe United States of America , or GAAP. The preparation of our financial statements requires management to make judgments and estimates that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting period. Our management believes that we consistently apply these judgments and estimates, and the financial statements fairly represent all periods presented. However, any differences between these judgments and estimates and actual results could have a material impact on our statements of income and financial position. Derivative Instruments
The derivative instruments are accounted for as liabilities, the derivative instrument is initially recorded at its fair market value and is then re-valued at each reporting date, with changes in fair value recognized in operations for each reporting period. The Company uses theMonte Carlo option pricing model to value the derivative instruments. Stock Based Compensation
Share-based compensation issued to employees is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period. The Company measures the fair value of the share-based compensation issued to non-employees at the grant date using the stock price observed in the trading market (for stock transactions) or the fair value of the award (for non-stock transactions), which were considered to be more reliably determinable measures of fair value than the value of the services being rendered.
New Accounting Pronouncements
InMarch 2020 , the FASB issued optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting and subsequently issued clarifying amendments. The guidance provides optional expedients and exceptions for accounting for contracts, hedging relationships, and other transactions that reference theLondon Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform. The optional guidance is effective upon issuance and can be applied on a prospective basis at any time betweenJanuary 1, 2020 throughDecember 31, 2022 . InOctober 2021 , the FASB issued amended guidance that requires acquiring entities to recognize and measure contract assets and liabilities in a business combination in accordance with existing revenue recognition guidance. The amended guidance is effective for interim and annual periods in 2023 and is to be applied prospectively. Early adoption is permitted on a retrospective basis to the beginning of the fiscal year of adoption. The adoption of this guidance will not have a material impact on the Company's consolidated financial statements for prior acquisitions; however, the impact in future periods will be dependent upon the contract assets and contract liabilities acquired in future business combinations.
InNovember 2021 , the FASB issued new guidance to increase the transparency of transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy. The guidance requires annual disclosures of such transactions to include the nature of the transactions and the significant terms and conditions, the accounting treatment and the impact to the company's financial statements. The guidance is effective for annual periods beginning in 2022 and is to be applied on either a prospective or retrospective basis. 20
Other accounting standards and amendments to existing accounting standards that have been issued and have future effective dates are not applicable or are not expected to have a significant impact on the Company's consolidated financial statements Revenue Recognition EffectiveJanuary 1, 2018 , the Company adopted ASC 606 - Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the sale of products by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
The Company's main sources of revenue are comprised of the following:
? Training-GSCG offers a Stem Cell & Exosomes Certification Program where
physicians attending this training sessions will take advantage of a full
review of stem cell biology, characterization and regenerative properties of
cells and cell products, cytokines and growth factors and how they can be apply
in a clinic setting. The physicians will pay for the training sessions upfront
and receives all the material and certificate upon completion of seminar.
Completion of the seminar is when control is transferred and when revenue is
recognized.
? Products-Physicians can order SVF Kits through GSCG which includes EC
Certificate from
paid for upfront and shipped from a third party directly to physicians.
Transfer of control is when the product is shipped which is when revenue is
recognized.
? Equipment- Physicians can order equipment through GSCG which includes a
warranty from manufacture of equipment. Equipment is paid for upfront and
shipped from manufacture directly to physicians. Transfer of control is when
the equipment is shipped which is when revenue is recognized.
? Patient procedures are the treatments GSCG is offering at its
The transfer of control is when the procedures are completed which is when
revenue is recognized. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer. Revenue is measured based on the consideration the Company receives in exchange for those products. Use of Estimates
The preparation of these financial statements in conformity with accounting principles generally accepted inthe United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The significant estimates included in these financial statements are associated with accounting for the goodwill, derivative liability valuations, valuation of preferred stock, fair value estimates, valuation of assets and liabilities in business combination and in its going concern analysis.
Fair Value of Financial Instruments
The fair value of financial instruments, which include cash, accounts payable and accrued expenses and advances from related parties were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments. Management is of the opinion that the Company is not exposed to significant interest, currency or credit risks arising from financial instruments. Fair value is defined as the price which would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-tier fair value hierarchy which prioritizes the inputs used in the valuation methodologies, as follows:
Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are
observable for the asset or liability, either directly or indirectly. These
might include quoted prices for similar assets or liabilities in active markets,
quoted prices for identical or similar assets or liabilities in markets that are
not active, inputs other than quoted prices that are observable for the asset or
liability (such as interest rates, volatilities, prepayment speeds, credit
risks, etc.) or inputs that are derived principally from or corroborated by
market data by correlation or other means.
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Level 3 Inputs - Unobservable inputs for determining the fair values of assets
or liabilities that reflect an entity's own assumptions about the assumptions
that market participants would use in pricing the assets or liabilities.
At December 31, 2022 and December 31, 2021 , the carrying amounts of the
Company's financial instruments, including cash, account payables, and accrued
expenses, approximate their respective fair value due to the short-term nature
of these instruments.
At December 31, 2022 and December 31, 2021 , the Company does not have any assets
or liabilities except for derivative liabilities related to convertible notes
payable required to be measured at fair value in accordance with FASB ASC Topic
820, Fair Value Measurement.
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