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 ("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.
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 to its 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. Zofin™ is currently being
tested in an U.S. Food and Drug Administration ("FDA") authorized phase I/II
randomized, double blinded, placebo trial to evaluate the safety and potential
efficacy of intravenous infusion of Zofin™ for the treatment of moderate to
severe SARS related to COVID-19 infection.
To date, the Company has obtained certain Investigation New Drug ("IND"), and
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 ongoing
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.
27
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) 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").
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.
The Company recently formed Livin' Again Inc., a wholly owned subsidiary
("Livin"), 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. The Company intends to
initially market such services by coordinating turnkey opportunities for
Providers to provide IV Drip Therapies at select properties and locations. As of
July 31, 2021, Livin did not have any significant activity.
COVID-19 impact on Economy and Business Environment
The current outbreak of the novel coronavirus ("COVID-19") and resulting impact
to the United States economic environments began to take hold during March 2020.
The adverse public health developments and economic effects of the 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 in connection with the COVID-19 outbreak and which currently still
continue to have a negative impact to our business and the economy. 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.
28
Results of Operations
Three months ended July 31, 2021 compared to three months ended July 31, 2020
Revenues
Our revenues for the three months ended July 31, 2021 were $1,367,895, compared
to revenues of $767,333 for the three months ended July 31, 2020. The increase
in revenues during the three months ended July 31, 2021 of $600,562 (78.3%) was
primarily the result of the Company being able to realize an increase of
approximately 103.1% (approximately $694,500) in unit sales of its products
during the three months ended July 31, 2021 compared with the three months ended
July 31, 2020, partially offset from a decrease of approximately 12.2%
(approximately $93,940) in the average sales prices for the products sold during
the three months ended July 31, 2021 compared with the average sales prices
realized on products sold during the three months ended July 31, 2020. The
increase in the units sold was partly attributable to favorable responses to the
Company's sales and marketing efforts establishing greater market awareness, the
introduction of new and more advanced product offerings and increased research
and development efforts which provided customers with greater comfort in the
Company's products and ability to better address potential market uncertainty
regarding anticipated FDA regulations. The decrease in the average sales prices
realized on products sold during the three months ended July 31, 2021 compared
with the three months ended July 31, 2020 was due to volume pricing discounts
for large orders of the Company's medical grade product offerings and 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.
Cost of Revenues
Our cost of revenues for the three months ended July 31, 2021 were $136,044,
compared with cost of revenues of $100,907 for the three months ended July 31,
2020. The increase in the cost of revenues during the three months ended July
31, 2021 of $35,137 (34.8%) compared with the three months ended July 31, 2020
was due to an increase in the amount of units sold of 103.1% (approximately
$69,070) during the three months ended July 31, 2021 compared with the three
months ended July 31, 2020, partially offset from the reduction in the cost of
units sold of 33.6% (approximately $33,930) during the three months ended July
31, 2021 compared to costs of units sold during the three months ended July 31,
2020, which as described above was primarily the result of the Company's
increase in the sales of the Company's aesthetic product offerings during the
three months ended July 31, 2021 compared to the three months ended July 31,
2020 which have a lower cost of revenue than the Company's medical grade product
offerings.
Gross Profit
Our gross profit for the three months ended July 31, 2021 was $1,231,851 (90.0%
of revenues), compared with gross profit of $666,426 (86.9% of revenues) for the
three months ended July 31, 2020. The increase in gross profit during the three
months ended July 31, 2021 was the result of higher amount of units sold and
lower cost of units sold during the three months ended July 31, 2021 compared to
the three months ended July 31, 2020. The increase in the units sold was partly
attributable to favorable responses to the Company's sales and marketing efforts
establishing greater market awareness and the introduction of new and more
advanced product offerings. The lower cost of units sold was due to the
Company's increase in the sales of the Company's aesthetic product offerings
during the three months ended July 31, 2021 compared to the three months ended
July 31, 2020 which have a lower cost of revenue than the Company's medical
grade product offerings.
General and Administrative Expenses
General and administrative expenses for the three months ended July 31, 2021
were $2,624,808, compared with $5,913,107 for the three months ended July 31,
2020, a decrease of $3,288,299. The decrease in the general and administrative
expenses for the three months ended July 31, 2021 compared with the three months
ended July 31, 2020 was primarily the result of reduced stock-based compensation
costs to advisors, consultants and administrative staff totaling approximately
$4,180,000, partially offset from increased research and development costs of
approximately $203,000, increased commissions due from sales of the Company's
products of approximately $275,000, increased payroll and consulting costs of
approximately $178,000 and approximately $163,000 of increased professional
fees. The increase in research and development costs, payroll and consulting
costs and professional fees was the result of the Company's expansion of its
research and development activities primarily relating to the filing and
approval of IND applications and the performance of clinical trials and public
company compliance related costs.
Other Income (Expense)
Other expense, net, for the three months ended July 31, 2021 was $15,951,
compared with other expense, net, of $12,079 for the three months ended July 31,
2020. The net increase in other expense, net, of $3,872 was principally the
result of increased interest costs of approximately $7,094, partially offset
from reduced income associated with settlements of amounts due for accounts
payable.
29
Nine months ended July 31, 2021 compared to nine months ended July 31, 2020
Revenues
Our revenues for the nine months ended July 31, 2021 were $3,931,411, compared
to revenues of $2,072,511 for the nine months ended July 31, 2020. The increase
in revenues during the nine months ended July 31, 2021 of $1,858,900 (89.7%) was
primarily the result of the Company being able to realize an increase of
approximately 116.6% (approximately $2,116,060) in unit sales of its products
during the nine months ended July 31, 2021 compared with the nine months ended
July 31, 2020, partially offset from a decrease of approximately 12.4%
(approximately $257,160) in the average sales prices for the products sold
during the nine months ended July 31, 2021 compared with the average sales
prices realized on products sold during the nine months ended July 31, 2020. The
increase in the units sold was partly attributable to favorable responses to the
Company's sales and marketing efforts establishing greater market awareness, the
introduction of new and more advanced product offerings and increased research
and development efforts which provided customers with greater comfort in the
Company's products and ability to better address potential market uncertainty
regarding anticipated FDA regulations. The decrease in the average sales prices
realized on products sold during the three months ended July 31, 2021 compared
with the three months ended July 31, 2020 was due to volume pricing discounts
for large orders of the Company's medical grade product offerings and 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.
Cost of Revenues
Our cost of revenues for the nine months ended July 31, 2021 were $440,536,
compared with cost of revenues of $297,905 for the nine months ended July 31,
2020. The increase in the cost of revenues during the nine months ended July 31,
2021 of $142,631 (47.9%) compared with the nine months ended July 31, 2020 was
due to an increase in the amount of units sold of 116.6% (approximately
$237,120) during the nine months ended July 31, 2021 compared with the nine
months ended July 31, 2020, partially offset from the reduction in the cost of
units sold of 31.7% (approximately ($94,490) during the nine months ended July
31, 2021 compared to costs of units sold during the nine months ended July 31,
2020, which as described above was primarily the result of the Company's
increase in the sales of the Company's aesthetic product offerings during the
nine months ended July 31, 2021 compared to the nine months ended July 31, 2020
which have a lower cost of revenue than the Company's medical grade product
offerings.
Gross Profit
Our gross profit for the nine months ended July 31, 2021 was $3,490,875 (88.8%
of revenues), compared with gross profit of $1,774,606 (85.6% of revenues) for
the nine months ended July 31, 2020. The increase in gross profit during the
nine months ended July 31, 2021 was the result of higher amount of units sold
and lower cost of units sold during the nine months ended July 31, 2021 compared
to the nine months ended July 31, 2020. The increase in the units sold was
partly attributable to favorable responses to the Company's sales and marketing
efforts establishing greater market awareness and the introduction of new and
more advanced product offerings. The lower cost of units sold was due to the
Company's increase in the sales of the Company's aesthetic product offerings
during the nine months ended July 31, 2021 compared to the nine months ended
July 31, 2020 which have a lower cost of revenue than the Company's medical
grade product offerings.
30
General and Administrative Expenses
General and administrative expenses for the nine months ended July 31, 2021 were
$15,282,596, compared with $9,065,950 for the nine months ended July 31, 2020,
an increase of $6,216,646. The increase in the general and administrative
expenses for the nine months ended July 31, 2021 compared with the nine months
ended July 31, 2020 was primarily the result of increased stock-based
compensation costs to advisors, consultants and administrative staff totaling
approximately $2,877,000, increased research and development costs of
approximately $994,000, increased commissions due from sales of the Company's
products of approximately $699,000, increased payroll and consulting costs of
approximately $1,029,000, increased professional fees of approximately $270,000,
increased office related costs of approximately $116,000 and approximately
$214,000 of increased laboratory related expenses. The increase in research and
development costs, payroll and consulting costs, professional fees and
laboratory related expenses was the result of the Company's expansion of its
research and development activities primarily relating to the filing and
approval of IND applications and the performance of clinical trials and public
company compliance related costs.
Other Income (Expense)
Other expense, net, for the nine months ended July 31, 2021 was $6,687, compared
with other (expense), net, of ($126,820) for the nine months ended July 31,
2020. The net decrease in other expense, net, of $120,133 was principally the
result of reduced interest costs of approximately $94,000 recorded in connection
with the amount of the discount to the fair value of common stock associated
with the conversion of a funding facility into equity and the reduction in
interest expense associated with such funding facility of approximately $25,000
during the nine months ended July 31, 2020.
Liquidity and Capital Resources
During the fiscal nine months ended July 31, 2021 and through the date of this
Quarterly Report on Form 10-Q, the Company has 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.
1. During November 2020, the Company sold 800,000 shares of common stock to an
"accredited investor" at $0.05 per share, for an aggregate purchase price of
$40,000. The proceeds were used for working capital.
2. During February 2021, the Company sold an aggregate of 12,340,910 shares of
common stock to five "accredited investors" at prices ranging from $0.05 per
share to $0.06 per share for an aggregate purchase price of $665,000. The
proceeds were used for working capital.
3. On February 22, 2021, the Company sold 1,818,181 shares of common stock to
Republic Asset Holdings LLC., a Company controlled by Michael Carbonara, a
director of the Company, at $0.055 per share for an aggregate purchase price
of $100,000. The proceeds were used for working capital.
4. During April 2021, the Company sold an aggregate of 13,677,821 shares of
common stock to seven "accredited investors" at prices ranging from $0.03 per
share to $0.25 per share for an aggregate purchase price of $535,000. The
proceeds were used for working capital.
5. During May 2021, the Company sold an aggregate of 2,087,822 shares of common
stock to eight "accredited investors" at $0.13 per share for an aggregate
purchase price of $286,250. The proceeds were used for working capital.
6. During the period June 2021 through July 2021, the Company sold an aggregate
of 11,541,500 shares of common stock to four "accredited investors" at prices
ranging from $0.05 per share to $0.13 per share for an aggregate purchase
price of $631,020. The proceeds were used for working capital.
7. During August 2021, the Company sold an aggregate of 3,000,000 shares of
common stock to one "accredited investor" at $0.05 per share for an aggregate
purchase price of $150,000. 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.
31
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 Nine Months Ended
July 31,
2021 2020
Cash, beginning of year $ 590,797 $ 132,557
Net cash used in operating activities (2,120,925 ) (973,592 )
Net cash used in investing activities (224,809 ) (138,694 )
Net cash provided by financing activities 1,784,844 1,296,674
Cash, end of period
$ 29,207 $ 319,945
During the nine months ended July 31, 2021, the Company used cash in operating
activities of $2,120,925, compared to $973,592 for the nine months ended July
31, 2020, an increase in cash used of $1,147,333. The increase in cash used in
operating activities was due to the increase in the general and administrative
expenses during the nine months ended July 31, 2021 after adjusting for non-cash
charges (mostly related to stock-based compensation), resulting from increased
payroll and consulting costs and laboratory related expenses in connection with
the Company's expansion of its research and development activities during the
nine months ended July 31, 2021, partially offset from the increase in revenues
and gross profit during the nine months ended July 31, 2021.
During the nine months ended July 31, 2021, the Company had cash used in
investing activities of $224,809, compared to cash used in investing activities
of $138,694 for the nine months ended July 31, 2020. The increase in cash used
in investing activities of $86,115 was due primarily due the Company's
construction of the new lab facility in Basalt, CO partially offset from lower
capital expenditures for the acquisition of additional fixed assets required in
connection with the Company's laboratory operations during the nine months ended
July 31, 2021 as compared to the nine months ended July 31, 2020.
During the nine months ended July 31, 2021, the Company had cash provided by
financing activities of $1,784,844 compared to cash provided by financing
activities of $1,296,674 for the nine months ended July 31, 2020. The increase
in cash provided by financing activities was due to increases in proceeds from
the sale of equity securities and convertible notes of approximately $431,000,
decreases in repayments of outstanding debt obligations of approximately $48,000
and reduced payments on finance leases of approximately $9,000.
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 operating losses of
$11,791,721 for the nine months ended July 31, 2021. In addition, the Company
had an accumulated deficit of $40,666,597 at July 31, 2021. The Company had a
negative working capital position of $3,095,005 at July 31, 2021.
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 outbreak of the novel coronavirus ("COVID-19")
during March 2020 and the resulting adverse public health developments and
economic effects to the United States business environments 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 resumes 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.
32
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 (1) 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, (2) the effects of the COVID-19 crisis resume to
pre-COVID-19 market conditions, (3) 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,
(4) obligations to the Company's creditors are not accelerated, (5) the
Company's operating expenses remain at current levels and/or the Company is
successful in restructuring and/or deferring ongoing obligations, (6) 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 (7) 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 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 similar or worse devastating impact to the United States and
worldwide economies and our business. In addition, 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. As described above, the COVID-19 crisis has
significantly impaired the Company and the overall Unites States and World
economies.
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 July 31, 2021, 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 October 31, 2020 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, 2020, "Summary of Significant Accounting Policies".
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