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 to provide other related services. Our proprietary
products are derived from perinatal sources and manufactured to retain the
naturally occurring microRNAs, 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").
Since May 2019, Organicell has operated a placental tissue bank processing
laboratory in Miami, Florida 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 OrganicellTM 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 Investigation New Drug ("IND"), and
eighteen 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 (see below) 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.
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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 since October 2021.
In November 2020, the Company formed Livin' Again Inc., a wholly owned
subsidiary, for the purpose of among other things, providing independent
education, advertising and marketing services, to Providers that provide medical
and other healthcare, anti-aging and regenerative services. including
FDA-approved IV vitamin and mineral liquid infusions ("IV Drip Therapies"). To
date, there has been no significant activity and the Company has no timetable,
if any, as to when IV Drip Therapies revenues will commence.
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) is seeking to raise 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.
24
Results of Operations
Three months ended April 30, 2022 as compared to three months ended April 30,
2021
Revenues. Our revenues for the three months ended April 30, 2022 were
$1,735,173, compared to revenues of $1,195,076 for the three months ended
April 30, 2021. The increase in revenues during the three months ended April 30,
2022 of $540,097 or 45.2%, was primarily the result of the Company being able to
realize an increase of approximately 31.5% (approximately $376,600) in the
average sales prices for the products sold during the three months ended
April 30, 2022 compared with the average sales prices realized on products sold
during the three months ended April 30, 2022, an increase of approximately 8.49%
(approximately $133,500) in the overall unit sales of its products during the
three months ended April 30, 2022 compared with the three months ended April 30,
2021, and the Company's ability to generate approximately $30,500 of new
revenues associated with its recently launched PPXTM service platform during the
three months ended April 30, 2022. The increase in the average sales prices
realized on products sold during the three months ended April 30, 2022 compared
with the three months ended April 30, 2021, was due to increases in sales of
higher priced medical grade product and the reduction in volume pricing
discounts granted to distributors for large orders of the Company's medical
grade product offerings, partially offset from the reduction in the sales of the
Company's aesthetic product offerings, which are sold at lower prices than the
Company's medical grade product offerings.
Cost of Revenues. Our cost of revenues for the three months ended April 30, 2022
were $126,418, compared with cost of revenues of $136,321 for the three months
ended April 30, 2021. The decrease in the cost of revenues during the three
months ended April 30, 2022 of $9,903 or 7.3%, compared with the three months
ended April 30, 2021, was due to a reduction in the cost of units sold of 14.5%
(approximately ($19,800) during the three months ended April 30, 2022, compared
to costs of units sold during the three months ended April 30, 2021, partially
offset from an increase in the amount of units sold of 8.5% (approximately
$9,900) during the three months ended April 30, 2022, compared with the three
months ended April 30, 2021. The decrease in the cost of units sold was
primarily the result of the Company's ability to obtain lower cost of raw
materials used in the processing of the units that were sold during the three
months ended April 30, 2022, compared with the three months ended April 30,
2021.
Gross Profit. Our gross profit for the three months ended April 30, 2022 was
$1,608,755 (92.7% of revenues), compared with gross profit of $1,058,755 (88.6%
of revenues) for the three months ended April 30, 2021. The increase in gross
profit during the three months ended April 30, 2022 of $550,000 was the result
of increase in average sales prices for the products sold, lower costs
associated with units sold and the new revenues associated with its recently
launched PPXTM service platform during the three months ended April 30, 2022,
compared to the three months ended April 30, 2021.
General and Administrative Expenses. General and administrative expenses for the
three months ended April 30, 2022 were $2,867,017, compared with $3,292,158 for
the three months ended April 30, 2021, a decrease of $425,141 or 12.9%. The
decrease in the general and administrative expenses for the three months ended
April 30, 2022 compared with the three months ended April 30, 2021, was
primarily the result of a decrease in stock-based compensation costs to
advisors, consultants and administrative staff totaling approximately $957,000
partially offset by increases in payroll and consulting fees of $81,000,
increases in commissions due from sales of the Company's products of
approximately $180,000, increased professional fees of approximately $33,400,
research and development costs of approximately $42,000 and increased laboratory
related costs of approximately $78,000. The decrease in stock-based compensation
costs was the result of a reduction in the amount of shares issued as
stock-based compensation during the three months ended April 30, 2022 compared
with the three months ended 2020 and decreases in the costs attributable to the
shares issued as stock-based compensation based on decreases in the Company's
share price during periods that the stock-based compensation was granted.
Other Income (Expense). Other (expense) for the three months ended April 30,
2022 was $197,781, compared with other (expense) of $6,092 for the three months
ended April 30, 2021. The increase in other (expense) of $191,689 during the
three months ended April 30, 2022 compared to the three months ended April 30,
2021, was principally the result of increased costs of approximately $130,000
from the amortization of discounts associated with a $600,000 promissory note
("Note") issued and sold by the Company to AJB Capital Investments, LLC ("AJB")
in January 2022, the increase in the Commitment Fee Shortfall Obligation of
approximately $49,000 under our Securities Purchase Agreement with AJB ("SPA")
and the increase of $15,000 in interest costs associated with the Note during
the three months ended April 30, 2022 compared with the three months ended 2021.
25
Six months ended April 30, 2022 as compared to six months ended April 30, 2021
Revenues. Our revenues for the six months ended April 30, 2022 were $3,334,321,
compared to revenues of $2,563,516 for the six months ended April 30, 2021. The
increase in revenues during the six months ended April 30, 2022 of $770,805 or
30.0% was primarily the result of the Company being able to realize an increase
of approximately 26.8% (approximately $687,000) in the average sales prices for
the products sold during the six months ended April 30, 2022 compared with the
average sales prices realized on products sold during the six months ended
April 30, 2021 and the Company's ability to generate approximately $78,500 of
new revenues associated with its recently launched PPXTM service platform during
the six months ended April 30, 2022. The increase in the average sales prices
realized on products sold during the six months ended April 30, 2022 compared
with the six months ended April 30, 2021 was due to increases in sales of higher
priced medical grade product and the reduction in volume pricing discounts
granted to distributors for large orders of the Company's medical grade product
offerings.
Cost of Revenues. Our cost of revenues for the six months ended April 30, 2022
were $275,539, compared with cost of revenues of $304,492 for the six months
ended April 30, 2021. The decrease in the cost of revenues during the six months
ended April 30, 2022 of $28,953 or 9.5% compared with the six months ended
April 30, 2021 was due to a reduction in the cost of units sold of 9.66%
(approximately ($29,400) during the six months ended April 30, 2022 compared to
costs of units sold during the six months ended April 30, 2021. The decrease in
the cost of units sold was primarily the result of the Company's ability to
obtain lower cost of raw materials used in the processing of the units that were
sold during the six months ended April 30, 2022, compared with the six months
ended April 30, 2021.
Gross Profit. Our gross profit for the six months ended April 30, 2022 was
$3,058,782 (91.7% of revenues), compared with gross profit of $2,259,024 (88.1%
of revenues) for the six months ended April 30, 2021. The increase in gross
profit during the six months ended April 30, 2022 of $799,758 was the result of
increase in average sales prices for the products sold, lower costs associated
with units sold and the new revenues associated with its recently launched PPXTM
service platform during the six months ended April 30, 2022 compared to the six
months ended April 30, 2021.
General and Administrative Expenses. General and administrative expenses for the
six months ended April 30, 2022 were $5,958,477, compared with $12,657,788 for
the six months ended April 30, 2021, a decrease of $6,699,311 or 52.9%. The
decrease in the general and administrative expenses for the six months ended
April 30, 2022 compared with the six months ended April 30, 2021, was primarily
the result of a decrease in stock-based compensation costs to advisors,
consultants and administrative staff totaling approximately $7,052,000 reduced
research and development costs of approximately $343,000, partially offset by
increases in commissions due from sales of the Company's products of
approximately $350,000, increased professional fees of approximately $220,000
and increased laboratory and office related expenses of approximately $90,000.
The decrease in stock-based compensation costs was the result of a reduction in
the amount of shares issued as stock-based compensation during the six months
ended April 30, 2022 compared with the six months ended April 30, 2021 and
decreases in the costs attributable to the shares issued as stock-based
compensation based on decreases in the Company's share price during periods that
the stock-based compensation was granted.
Other Income (Expense). Other (expense) for the six months ended April 30, 2022
was ($250,084), compared with other income, net, of $9,264 for the six months
ended April 30, 2021. The increase in other (expense), net, of $259,348 during
the six months ended April 30, 2022 compared to the six months ended April 30,
2021 was principally the result of increased costs of approximately $162,000
from the amortization of the discounts associated with the Note, the increase in
the Commitment Fee Shortfall Obligation of approximately $60,500 under the SPA,
the increase of approximately $18,300 in interest costs associated with the Note
and the reduction in other income of approximately $21,575 from settlements
received during the six months ended April 30, 2022 compared with the six months
ended 2021.
26
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
Six Months Ended
April 30,
2022 2021
Cash, beginning of year $ 108,570 $ 590,797
Net cash used in operating activities (623,943 ) (1,618,020 )
Net cash used in investing activities (385,036 ) (46,264 )
Net cash provided by financing activities 966,411 1,269,402
Cash, end of period
$ 66,002 $ 195,915
During the six months April 30, 2022, the Company used cash in operating
activities of $623,943, compared to $1,618,020 for the six months April 30,
2021, a decrease in cash used of $994,077. The decrease in cash used in
operating activities was due to the increase in revenues and gross profit, the
increase in accrued liabilities to management and the reduction in accounts
receivable balances during the six months April 30, 2022 as compared to the six
months April 30, 2021, partially offset from the increase in cash to pay
increasing operating expenses on a current basis associated with professional
fees, payroll, consulting costs and laboratory related expenses in connection
with the Company's expansion of its research and development activities as well
as payment of past due accounts payable and accrued expenses during the six
months April 30, 2022 as compared to the six months April 30, 2021.
During the six months April 30, 2022, the Company had cash used in investing
activities of $385,036, compared to cash used in investing activities of $46,264
for the six months April 30, 2021. The increase in cash used in investing
activities of $338,772 was due primarily due the Company's leasehold
improvements associated with the new lab facility in Basalt, CO of $379,100
during the six months April 30, 2022 as compared to the six months April 30,
2021, partially offset from reduced laboratory equipment purchased for the
Company's laboratory facilities during the six months April 30, 2022 as compared
to the six months April 30, 2021.
During the six months April 30, 2022, the Company had cash provided by financing
activities of $966,411 compared to cash provided by financing activities of
$1,269,402 for the six months April 30, 2021. The decrease in cash provided by
financing activities of $302,991 was due to decreases in proceeds from the sale
of equity securities of approximately $680,000 and increases in repayments of
outstanding debt obligations of approximately $165,600, partially offset from
the increase in proceeds of $540,000 from the issuance of the Note to AJB,
during the six months April 30, 2022 as compared to the six months April 30,
2021.
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. During
the six months ended April 30, 2022 and through the date of this report, the
Company completed the following private sales of its securities:
1. In November 2021, the Company sold an aggregate of 8,000,000 shares of common
stock to one "accredited investor" at $0.05 per share for an aggregate
purchase price of $400,000. The proceeds were used for working capital.
27
2. In January 2022, the Company sold an aggregate of 666,667 shares of common
stock to one "accredited investor" at $0.03 per share for an aggregate
purchase price of $20,000. The purchase price was paid through an offset of an
outstanding balance owed by the Company to the investor at the time of the
sale of $20,000.
3. On January 11, 2022, the Company entered into the SPA with AJB, pursuant to
which we sold the Note in the principal amount of $600,000 to AJB in a private
transaction for a purchase price of $540,000 (giving effect to original issue
discount of $60,000). The proceeds were used for working capital.
4. In February 2022, the Company sold an aggregate of 8,333,333 shares of common
stock to one "accredited investor" at $0.03 per share for an aggregate
purchase price of $250,000. The proceeds were used for working capital.
The Company issued the foregoing securities pursuant to the exemption from the
registration requirements of the Securities Act afforded by Section 4(a)(2) of
the Securities Act and/or Regulation D promulgated thereunder.
Going Concern Consideration
The unaudited accompanying 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 $3,149,779 for
the six months ended April 30, 2022. In addition, the Company had an accumulated
deficit of $44,774,528 at April 30, 2022. The Company had a negative working
capital position of $5,680,451 at April 30, 2022.
New 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 and economic
effects of the ongoing COVID-19 pandemic 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 in connection with the COVID-19
outbreak 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.
28
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.
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 COVID-19 crisis is not
satisfactorily managed and/or resolved, 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 April 30, 2022, 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 April 30, 2022 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, 2021, "Summary of Significant Accounting Policies".
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