You should read the following discussion and analysis of our financial condition
and results of operations together with our consolidated financial statements
and related notes included elsewhere in this filing. This discussion and other
parts of this filing contain forward-looking statements that involve risk and
uncertainties, such as statements of our plans, objectives, expectations,
intentions, and beliefs. Our actual results may differ materially from those
discussed in these forward-looking statements as a result of various factors,
including those set forth under "Risk Factors" and in other parts of this
filing, and you should not place undue certain on these forward-looking
statements, which apply only as of the date of this filing. See "Disclosure
Regarding Forward-Looking Statements".
We are an emerging growth company as defined in Section 2(a) (19) of the
Securities Act. Pursuant to Section 107 of the Jumpstart Our Business Startups
Act, we may take advantage of the extended transition period provided in Section
7(a)(2)(B) of the Securities Act for complying with new or revised accounting
standards, meaning that we can delay the adoption of certain accounting
standards until those standards would otherwise apply to private companies. We
have chosen to take advantage of the extended transition period for complying
with new or revised accounting standards applicable to public companies to delay
adoption of such standards until such standards are made applicable to private
companies. Accordingly, our consolidated financial statements may not be
comparable to the financial statements of public companies that comply with such
new or revised accounting standards.
OVERVIEW:
Historical Development
Our Company
Sigyn Therapeutics, Inc. ("Sigyn", the "Company", "we," "us," or "our") is a
development-stage company focused on creating therapeutic solutions that address
unmet needs in global health. Our corporate address is 2468 Historic Decatur
Road, Suite 140, San Diego, California, 92106.
Sigyn Therapy™, our lead product candidate, is a broad-spectrum blood
purification technology designed to treat pathogen-associated inflammatory
disorders that are not addressed with approved drug therapies. Candidate
treatment indications include endotoxemia and inflammation in end-stage renal
disease (dialysis) patients, sepsis (a leading cause of hospital deaths),
community acquired pneumonia (a leading cause of death among infectious
diseases), and emerging pandemic threats.
Our development pipeline includes a cancer treatment system comprised of
ChemoPrep™ to enhance the tumor site delivery of chemotherapy, and ChemoPure™ to
reduce treatment toxicity and inhibit the spread of cancer metastasis.
15
Financing Transactions
Preferred Stock
The Company has 10,000,000 shares of par value $0.0001 preferred stock
authorized, of which no preferred shares are issued and outstanding at December,
31, 2022.
Common Stock
The Company has authorized 1,000,000,000 shares of par value $0.0001 common
stock, of which 42,713,325 shares were outstanding as of December 31, 2022.
On November 23, 2022, an investor elected to convert the aggregate principal
amount of the Note, $145,200, into 968,000 common shares.
On October 28, 2021, an investor elected to convert $16,714 of the aggregate
principal amount of the Note of $199,650, into 42,857 common shares.
On October 25, 2021, an investor elected to convert the aggregate principal
amount of the Note, $110,000, into 157,143 common shares.
On October 20, 2021, the Company entered into a securities purchase agreement
with an accredited investor that resulted in the issuance of 320,000 shares of
common stock and warrants to purchase an aggregate of 320,000 shares of the
Company's common stock for total proceeds totaling $400,000. The offering
allowed for qualified investors to purchase one share of the Company's common
stock at $1.25. For each share purchased, the investor received a five-year
warrant to purchase one share of common stock at $1.25 per share. No commissions
were paid in the offering. This issuance was pursuant to Section 4(a)(2) of the
Securities Act in a transaction exempt from registration.
On October 14, 2021, the Company issued a total of 47,000 shares of its common
stock valued at $37,600 (based on the stock price of the Company's common stock
on the date of issuance) to a third party, for communications to the financial
industry.
On July 14, 2021, the Company issued a total of 47,000 shares of its common
stock valued at $47,000 (based on the stock price of the Company's common stock
on the date of issuance) to a third party, for communications to the financial
industry.
On May 10, 2021, Brio Capital elected to convert the aggregate principal amount
of a $110,000 convertible note issued on February 10, 2021 into 157,143 shares
of the Company's common stock.
In April 2021, the Company initiated an offering of up to $1.5 million of the
Company's restricted common shares. The offering allowed for qualified investors
to purchase one share of the Company's common stock $1.25. For each share
purchased, the investor received a five-year warrant to purchase one share of
common stock at $1.75 per share. On May 10, 2021, the Company closed the
offering to investors and subsequently disclosed that it had entered into
securities purchase agreements with accredited investors that resulted in the
issuance of 1,172,000 shares of common stock and warrants to purchase an
aggregate of 1,172,000 shares of the Company's common stock for total proceeds
totaling $1,465,000. No commissions were paid in the offering. This issuance was
pursuant to Section 4(a)(2) of the Securities Act in a transaction exempt from
registration.
On April 14, 2021, the Company issued a total of 47,000 shares of its restricted
common stock valued at $82,250 (based on the stock price of the Company's common
stock on the date of issuance) to a third party, for communications to the
financial industry. This issuance was pursuant to Section 4(a) (2) of the
Securities Act in a transaction exempt from registration.
16
On February 19, 2021, a previous noteholder exercised the warrants pursuant to
the cashless exercise provision of the warrant agreement into 57,147 common
shares. The common shares have not been issued as of March 14, 2022.
On January 14, 2021, the Company issued a total of 47,000 shares of its
restricted common stock valued at $82,250 (based on the stock price of the
Company's common stock on the date of issuance) to a third party, for
communications to the financial industry. This issuance was pursuant to Section
4(a)(2) of the Securities Act in a transaction exempt from registration.
Warrants
On October 22, 2021, the Company and Osher amended convertible debt agreements
for the maturity date from October 20, 2021 to October 20, 2022. In exchange for
the extension of the Note, the Company issued Osher 450,000 warrants to purchase
an aggregate of 450,000 shares of the Company's common stock, valued at $197,501
(based on the Black Scholes valuation model on the date of grant) (see Note 6).
The warrants are exercisable for a period of five years at $1.00 per share in
whole or in part, as either a cash exercise or as a cashless exercise, and fully
vest at grant date. The Company accreted the value of the warrants rateably
through October 20, 2022. The Company recorded $147,720 and $40,041 for the
years ended December 31, 2022 and 2021, respectively, and is classified in other
expenses in the consolidated Statements of Operations.
In March 2023, the Company offered a short-term inducement to the Company's
warrant holders in which the Company will issue one share of the Company's
common stock in exchange for each two warrants returned to the Company to be
cancelled. All other terms of the original grants remain the same. A total of
8,899,019 warrants were exchanged for 4,449,512 shares of the Company's common
stock through March 24, 2023.
Current Noteholders
2023 Convertible Notes
During the three months ended March 31, 2023, the Company entered into an
Original Issue Discount Senior Convertible Debentures totaling (i) $970,200
aggregate principal amount of Note (total of $882,000 cash was received) due in
various dates in January through March 2024 based on $1.00 for each $0.90909
paid by the previous noteholder and (ii) five-year Common Stock Purchase
Warrants ("Warrants') to purchase up to an aggregate of 6,468,004 shares of the
Company's Common Stock at an exercise price of $0.25 per share. The conversion
price for the principal in connection with voluntary conversions by the holders
of the convertible notes is $0.15 per share.
Osher - $110,000
On December 22, 2022, the Company entered into an Original Issue Discount Senior
Convertible Debenture (the "Note") with respect to the sale and issuance to
institutional investor Osher Capital Partners LLC ("Osher") of (i) $110,000
aggregate principal amount of Note due December 22, 2023 based on $1.00 for each
$0.90909 paid by Osher noteholder and (ii) five-year Common Stock Purchase
Warrants ("Warrants') to purchase up to an aggregate of 733,333 shares of the
Company's Common Stock at an exercise price of $0.25 per share. The aggregate
cash subscription amount received by the Company from Osher for the issuance of
the Note and Warrants was $100,000 which was issued at a $10,000 original issue
discount from the face value of the Note. The conversion price for the principal
in connection with voluntary conversions by a holder of the convertible notes is
$0.15 per share, subject to adjustment as provided therein, such as stock splits
and stock dividends.
Osher - $55,000
On November 14, 2022, the Company entered into an Original Issue Discount Senior
Convertible Debenture (the "Note") with respect to the sale and issuance to
institutional investor Osher Capital Partners LLC ("Osher") of (i) $55,000
aggregate principal amount of Note due November 14, 2023 based on $1.00 for each
$0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants
("Warrants') to purchase up to an aggregate of 366,667 shares of the Company's
Common Stock at an exercise price of $0.25 per share. The aggregate cash
subscription amount received by the Company from Osher for the issuance of the
Note and Warrants was $50,000 which was issued at a $5,000 original issue
discount from the face value of the Note. The conversion price for the principal
in connection with voluntary conversions by a holder of the convertible notes is
$0.15 per share, subject to adjustment as provided therein, such as stock splits
and stock dividends.
17
Brio - $82,500
On November 9, 2022, the Company entered into an Original Issue Discount Senior
Convertible Debenture (the "Note") with respect to the sale and issuance to
institutional investor Brio Capital Master Fund Ltd ("Brio") of (i) $82,500
aggregate principal amount of Note due November 9, 2023 based on $1.00 for each
$0.90909 paid by Brio and (ii) five-year Common Stock Purchase Warrants
("Warrants') to purchase up to an aggregate of 550,000 shares of the Company's
Common Stock at an exercise price of $0.25 per share. The aggregate cash
subscription amount received by the Company from Brio for the issuance of the
Note and Warrants was $75,000 which was issued at a $7,500 original issue
discount from the face value of the Note. The conversion price for the principal
in connection with voluntary conversions by a holder of the convertible notes is
$0.15 per share, subject to adjustment as provided therein, such as stock splits
and stock dividends.
Osher - $110,000
On October 20, 2022, the Company entered into an Original Issue Discount Senior
Convertible Debenture (the "Note") with respect to the sale and issuance to
institutional investor Osher Capital Partners LLC ("Osher") of (i) $110,000
aggregate principal amount of Note due October 20, 2023 based on $1.00 for each
$0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants
("Warrants') to purchase up to an aggregate of 733,333 shares of the Company's
Common Stock at an exercise price of $0.25 per share. The aggregate cash
subscription amount received by the Company from Osher for the issuance of the
Note and Warrants was $100,000 which was issued at a $10,000 original issue
discount from the face value of the Note. The conversion price for the principal
in connection with voluntary conversions by a holder of the convertible notes is
$0.15 per share, subject to adjustment as provided therein, such as stock splits
and stock dividends.
Osher - $110,000
On September 20, 2022, the Company entered into an Original Issue Discount
Senior Convertible Debenture (the "Note") with respect to the sale and issuance
to institutional investor Osher Capital Partners LLC ("Osher") of (i) $110,000
aggregate principal amount of Note due September 20, 2023 based on $1.00 for
each $0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants
("Warrants') to purchase up to an aggregate of 733,333 shares of the Company's
Common Stock at an exercise price of $0.25 per share. The aggregate cash
subscription amount received by the Company from Osher for the issuance of the
Note and Warrants was $100,000 which was issued at a $10,000 original issue
discount from the face value of the Note. The conversion price for the principal
in connection with voluntary conversions by a holder of the convertible notes is
$0.15 per share, subject to adjustment as provided therein, such as stock splits
and stock dividends.
Brio - $82,500
On September 9, 2022, the Company entered into an Original Issue Discount Senior
Convertible Debenture (the "Note") with respect to the sale and issuance to
institutional investor Brio Capital Master Fund Ltd. ("Brio") of (i) $82,500
aggregate principal amount of Note due September 9, 2023 based on $1.00 for each
$0.90909 paid by Brio and (ii) five-year Common Stock Purchase Warrants
("Warrants') to purchase up to an aggregate of 550,000 shares of the Company's
Common Stock at an exercise price of $0.25 per share. The aggregate cash
subscription amount received by the Company from Brio for the issuance of the
Note and Warrants was $75,000 which was issued at a $7,500 original issue
discount from the face value of the Note. The conversion price for the principal
in connection with voluntary conversions by a holder of the convertible notes is
$0.15 per share, subject to adjustment as provided therein, such as stock splits
and stock dividends.
Osher - $110,000
On August 31, 2022, the Company entered into an Original Issue Discount Senior
Convertible Debenture (the "Note") with respect to the sale and issuance to
institutional investor Osher Capital Partners LLC ("Osher") of (i) $110,000
aggregate principal amount of Note due August 31, 2023 based on $1.00 for each
$0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants
("Warrants') to purchase up to an aggregate of 733,333 shares of the Company's
Common Stock at an exercise price of $0.25 per share. The aggregate cash
subscription amount received by the Company from Osher for the issuance of the
Note and Warrants was $100,000 which was issued at a $10,000 original issue
discount from the face value of the Note. The conversion price for the principal
in connection with voluntary conversions by a holder of the convertible notes is
$0.15 per share, subject to adjustment as provided therein, such as stock splits
and stock dividends.
18
Other - $341,000
In July 2022, the Company entered into an Original Issue Discount Senior
Convertible Debentures (the "July 2022 Notes") totalling (i) $341,000 aggregate
principal amount of Note (total of $310,000 cash was received) due in various
dates in July 2023 based on $1.00 for each $0.90909 paid by Osher and (ii)
five-year Common Stock Purchase Warrants ("Warrants') to purchase up to an
aggregate of 676,936 shares of the Company's Common Stock at an exercise price
of $0.50 per share. The conversion price for the principal in connection with
voluntary conversions by the holders of the convertible notes is $0.50 per
share.
Osher - $82,500
On June 22, 2022, the Company entered into an Original Issue Discount Senior
Convertible Debenture (the "Note") with respect to the sale and issuance to
institutional investor Osher Capital Partners LLC ("Osher") of (i) $82,500
aggregate principal amount of Note due June 22, 2023 based on $1.00 for each
$0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants
("Warrants') to purchase up to an aggregate of 165,000 shares of the Company's
Common Stock at an exercise price of $0.50 per share. The aggregate cash
subscription amount received by the Company from Osher for the issuance of the
Note and Warrants was $75,000 which was issued at a $7,500 original issue
discount from the face value of the Note. The conversion price for the principal
in connection with voluntary conversions by a holder of the convertible notes is
$0.50 per share, subject to adjustment as provided therein, such as stock splits
and stock dividends.
Osher - $55,000
On June 1, 2022, the Company entered into an Original Issue Discount Senior
Convertible Debenture (the "Note") with respect to the sale and issuance to
institutional investor Osher Capital Partners LLC ("Osher") of (i) $55,000
aggregate principal amount of Note due June 1, 2023 based on $1.00 for each
$0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants
("Warrants') to purchase up to an aggregate of 110,000 shares of the Company's
Common Stock at an exercise price of $0.50 per share. The aggregate cash
subscription amount received by the Company from Osher for the issuance of the
Note and Warrants was $50,000 which was issued at a $5,000 original issue
discount from the face value of the Note. The conversion price for the principal
in connection with voluntary conversions by a holder of the convertible notes is
$0.50 per share, subject to adjustment as provided therein, such as stock splits
and stock dividends.
Brio - $110,000
On May 10, 2022, the Company entered into an Original Issue Discount Senior
Convertible Debenture (the "Note") with respect to the sale and issuance to
institutional investor Brio Capital Master Fund Ltd. ("Brio") of (i) $110,000
aggregate principal amount of Note due May 10, 2023 based on $1.00 for each
$0.90909 paid by Brio and (ii) five-year Common Stock Purchase Warrants
("Warrants') to purchase up to an aggregate of 220,000 shares of the Company's
Common Stock at an exercise price of $0.50 per share. The aggregate cash
subscription amount received by the Company from Brio for the issuance of the
Note and Warrants was $100,000 which was issued at a $10,000 original issue
discount from the face value of the Note. The conversion price for the principal
in connection with voluntary conversions by a holder of the convertible notes is
$0.50 per share, subject to adjustment as provided therein, such as stock splits
and stock dividends.
Osher - $110,000
On April 28, 2022, the Company entered into an Original Issue Discount Senior
Convertible Debenture (the "Note") with respect to the sale and issuance to
institutional investor Osher Capital Partners LLC ("Osher") of (i) $110,000
aggregate principal amount of Note due April 28, 2023 based on $1.00 for each
$0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants
("Warrants') to purchase up to an aggregate of 220,000 shares of the Company's
Common Stock at an exercise price of $0.50 per share. The aggregate cash
subscription amount received by the Company from Osher for the issuance of the
Note and Warrants was $100,000 which was issued at a $10,000 original issue
discount from the face value of the Note. The conversion price for the principal
in connection with voluntary conversions by a holder of the convertible notes is
$0.50 per share, subject to adjustment as provided therein, such as stock splits
and stock dividends.
19
Osher - $110,000
On March 23, 2022, the Company entered into an Original Issue Discount Senior
Convertible Debenture (the "Note") with respect to the sale and issuance to
institutional investor Osher Capital Partners LLC ("Osher") of (i) $110,000
aggregate principal amount of Note due March 23, 2023 based on $1.00 for each
$0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants
("Warrants') to purchase up to an aggregate of 220,000 shares of the Company's
Common Stock at an exercise price of $0.50 per share. The aggregate cash
subscription amount received by the Company from Osher for the issuance of the
Note and Warrants was $100,000 which was issued at a $10,000 original issue
discount from the face value of the Note. The conversion price for the principal
in connection with voluntary conversions by a holder of the convertible notes is
$0.50 per share, subject to adjustment as provided therein, such as stock splits
and stock dividends.
The Company has not repaid this convertible note and the convertible note is now
in default. The Company is currently in discussions to restructure the terms of
the note.
Brio - $110,000
On March 23, 2022, the Company entered into an Original Issue Discount Senior
Convertible Debenture (the "Note") with respect to the sale and issuance to
institutional investor Brio Capital Master Fund Ltd. ("Brio") of (i) $110,000
aggregate principal amount of Note due March 23, 2023 based on $1.00 for each
$0.90909 paid by Brio and (ii) five-year Common Stock Purchase Warrants
("Warrants') to purchase up to an aggregate of 220,000 shares of the Company's
Common Stock at an exercise price of $0.50 per share. The aggregate cash
subscription amount received by the Company from Brio for the issuance of the
Note and Warrants was $100,000 which was issued at a $10,000 original issue
discount from the face value of the Note. The conversion price for the principal
in connection with voluntary conversions by a holder of the convertible notes is
$0.50 per share, subject to adjustment as provided therein, such as stock splits
and stock dividends.
The Company has not repaid this convertible note and the convertible note is now
in default. The Company is currently in discussions to restructure the terms of
the note.
Osher - $199,650
On September 17, 2020 (the "Original Issue Date"), the Company entered into a
Securities Purchase Agreement (the "Purchase Agreement") with respect to the
sale and issuance to institutional investor Osher Capital Partners LLC ("Osher")
of (i) $181,500 aggregate principal amount of Original Issue Discount Senior
Convertible Debenture (the "Note") due September 30, 2021, based on $1.00 for
each $0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants
("Warrants') to purchase up to an aggregate of 8,250 shares of the Company's
Common Stock at an exercise price of $30.00 per share. The aggregate cash
subscription amount received by the Company from Osher for the issuance of the
Note and Warrants was $165,000 which was issued at a $16,500 original issue
discount from the face value of the Note. The conversion price for the principal
in connection with voluntary conversions by a holder of the convertible notes is
$0.39 per share, as amended on October 20, 2020, subject to adjustment as
provided therein, such as stock splits and stock dividends.
The Company and Osher amended the convertible debt agreement as follows on
October 20, 2020:
? The parties amended the Warrants dated September 17, 2020, for the number of
warrant shares from 8,250 warrant shares to 465,366 warrant shares at an
exercise price of $0.59 per share.
? The parties amended the Note for the maturity date from September 30, 2021 to
October 20, 2021.
On October 22, 2021, the Company and Osher amended convertible debt agreements
as follows:
? The parties amended the October 20, 2020 Notes for the maturity date from
October 20, 2021 to October 20, 2022.
? The parties amended the October 20, 2020 Notes for the aggregate principal
amount and accrued interest from $652,300 to $717,530 which is issued at a
$65,230 original issue discount from the face value of the October 20, 2020
Notes now due October 20, 2022.
? In exchange for the extension of the Note, the Company issued Osher five-year
warrants to purchase an aggregate of 450,000 shares of the Company's common
stock at an exercise price of $1.00 per share.
20
On October 28, 2021, Osher elected to convert $16,714 of the aggregate principal
amount of the Note of $199,650, into 42,857 common shares.
The Company has not repaid this convertible note and the convertible note is now
in default. The Company is currently in discussions to restructure the terms of
the note.
Osher - $60,500 (as amended on October 20, 2020 to $55,000)
On June 23, 2020 (the "Original Issue Date"), the Company entered into a
Securities Purchase Agreement (the "Purchase Agreement") with respect to the
sale and issuance to institutional investor Osher Capital Partners LLC ("Osher")
of (i) $50,000 aggregate principal amount of Original Issue Discount Senior
Convertible Debenture (the "Note") due June 23, 2021, based on $1.00 for each
$0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants
("Warrants") to purchase up to an aggregate of 10,000 shares of the Company's
Common Stock at an exercise price of $30.00 per share. The aggregate cash
subscription amount received by the Company from Osher for the issuance of the
Note and Warrants was $50,005 which was issued at a $0 original issue discount
from the face value of the Note. The conversion price for the principal in
connection with voluntary conversions by a holder of the convertible notes is
$0.39 per share, as amended on October 20, 2020, subject to adjustment as
provided therein, such as stock splits and stock dividends.
The Company and Osher amended the convertible debt agreement as follows on
October 20, 2020:
? The parties amended the Note for the aggregate principal amount from $50,000
to $55,000. The aggregate cash subscription amount received by the Company
from Osher for the issuance of the Note and Warrants was $50,005 which was
issued at an amended $4,995 original issue discount from the face value of the
Note.
? The parties amended the Warrants dated June 23, 2020, for the number of
warrant shares from 10,000 warrant shares to 141,020 warrant shares at an
exercise price of $0.59 per share.
? The parties amended the Note for the maturity date from June 23, 2021 to
October 20, 2021.
On October 22, 2021, the Company and Osher amended convertible debt agreements
as follows (see Note 12):
? The parties amended the October 20, 2020 Notes for the maturity date from
October 20, 2021 to October 20, 2022.
? The parties amended the October 20, 2020 Notes for the aggregate principal
amount and accrued interest from $652,300 to $717,530 which is issued at a
$65,230 original issue discount from the face value of the October 20, 2020
Notes now due October 20, 2022.
? In exchange for the extension of the Note, the Company issued Osher five-year
warrants to purchase an aggregate of 450,000 shares of the Company's common
stock at an exercise price of $1.00 per share.
The Company has not repaid this convertible note and the convertible note is now
in default. The Company is currently in discussions to restructure the terms of
the note.
Osher - $457,380
On January 28, 2020 (the "Original Issue Date"), the Company entered into a
Securities Purchase Agreement (the "Purchase Agreement") with respect to the
sale and issuance to institutional investor Osher Capital Partners LLC ("Osher")
of (i) $385,000 aggregate principal amount of Original Issue Discount Senior
Convertible Debenture due January 26, 2021, based on $1.00 for each $0.90909
paid by Osher and (ii) five-year Common Stock Purchase Warrants to purchase up
to an aggregate of 80,209 shares of the Company's Common Stock at an exercise
price of $7.00 per share. The aggregate cash subscription amount received by the
Company from Osher for the issuance of the note and warrants was $350,005 which
was issued at a $34,995 original issue discount from the face value of the Note.
The conversion price for the principal in connection with voluntary conversions
by a holder of the convertible notes is $0.094 per share, as amended on October
20, 2020, subject to adjustment as provided therein, such as stock splits and
stock dividends.
21
The Company and Osher amended the convertible debt agreement as follows on
October 20, 2020:
? The parties amended the Warrants dated January 28, 2020, for the number of
warrant shares from 80,209 warrant shares to 4,113,083 warrant shares at an
exercise price of $0.14 per share.
? The parties amended the Note to provide for interest at 8% per annum.
? The parties amended the Note for the maturity date from June 23, 2021 to
October 20, 2021.
On October 22, 2021, the Company and Osher amended convertible debt agreements
as follows:
? The parties amended the October 20, 2020 Notes for the maturity date from
October 20, 2021 to October 20, 2022.
? The parties amended the October 20, 2020 Notes for the aggregate principal
amount and accrued interest from $652,300 to $717,530 which is issued at a
$65,230 original issue discount from the face value of the October 20, 2020
Notes now due October 20, 2022.
? In exchange for the extension of the Note, the Company issued Osher five-year
warrants to purchase an aggregate of 450,000 shares of the Company's common
stock at an exercise price of $1.00 per share.
The Company has not repaid this convertible note and the convertible note is now
in default. The Company is currently in discussions to restructure the terms of
the note.
Previous Noteholders
Other - $145,200
On November 21, 2022, the Company entered into an Original Issue Discount Senior
Convertible Debenture (the "Note") with a third party investor of (i) $145,200
aggregate principal amount of Note due November 21, 2023 based on $1.00 for each
$0.90909 paid by the previous noteholder and (ii) five-year Common Stock
Purchase Warrants ("Warrants') to purchase up to an aggregate of 968,000 shares
of the Company's Common Stock at an exercise price of $0.25 per share. The
aggregate cash subscription amount received by the Company from the previous
noteholder for the issuance of the Note and Warrants was $132,000 which was
issued at a $13,200 original issue discount from the face value of the Note. The
conversion price for the principal in connection with voluntary conversions by a
holder of the convertible notes is $0.15 per share, subject to adjustment as
provided therein, such as stock splits and stock dividends.
On November 23, 2022, third party investor elected to convert the aggregate
principal amount of the Note, $145,200, into 968,000 common shares.
All other previous notes were detailed in our Form 10-K filed on March 31, 2022.
No changes occurred related to these notes during the period covered by this
Form 10-Q.
Impairment of Inventory
Based on the significant advancement of Sigyn Therapy, the Company decided in
the 4th quarter of 2021 to assess the value of retail business operations that
were a focus of the Company prior to the merger transaction consummated on
October 19, 2020.
Related to this assessment, management determined the wholesale liquidation
value of its sapphire gem inventory to be 5-10% of the previously reported
retail value, based on communications with certified gemologists, the variance
between retail and wholesale valuations, and current market conditions. As a
result, the Company has valued the inventory at $50,000 and recorded an
impairment of assets of $536,047 in the year ended December 31, 2021 and is
classified in other expenses in the consolidated Statements of Operations.
22
Limited Operating History; Need for Additional Capital
There is limited historical financial information about us on which to base an
evaluation of our performance. We cannot guarantee we will be successful in our
business operations. Our business is subject to risks inherent in the
establishment of a new business enterprise, including limited capital resources,
and possible cost overruns due to increases in the cost of services. To become
profitable and competitive, we must receive additional capital. We have no
assurance that future financing will materialize. If that financing is not
available, we may be unable to continue operations.
Overview of Presentation
The following Management's Discussion and Analysis ("MD&A") or Plan of
Operations includes the following sections:
? Results of Operations
? Liquidity and Capital Resources
? Capital Expenditures
? Going Concern
? Critical Accounting Policies
? Off-Balance Sheet Arrangements
General and administrative expenses consist primarily of personnel costs and
professional fees required to support our operations and growth.
Depending on the extent of our future growth, we may experience significant
strain on our management, personnel, and information systems. We will need to
implement and improve operational, financial, and management information
systems. In addition, we are implementing new information systems that will
provide better record-keeping, customer service and billing. However, there can
be no assurance that our management resources or information systems will be
sufficient to manage any future growth in our business, and the failure to do so
could have a material adverse effect on our business, results of operations and
financial condition.
Reclassifications
An adjustment has been made to the Consolidated Balance Sheets as of December
31, 2021, to reclass $1,072 of other current liabilities previously classified
in accrued payroll and payroll taxes. These reclassifications had no effect on
the reported results of operations.
Results of Operations
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021
The following discussion represents a comparison of our results of operations
for the years ended December 31, 2022 and 2021. The results of operations for
the periods shown in our audited consolidated financial statements are not
necessarily indicative of operating results for the entire period. In the
opinion of management, the audited consolidated financial statements recognize
all adjustments of a normal recurring nature considered necessary to fairly
state our financial position, results of operations and cash flows for the
periods presented.
23
Year Ended Year Ended
December 31, 2022 December 31, 2021
Net revenues $ - $ -
Cost of sales - -
Gross Profit - -
Operating expenses 2,147,265 2,008,217
Other expense 782,552 996,402
Net loss before income taxes $ (2,929,817 ) $ (3,004,619 )
Net Revenues
For the years ended December 31, 2022 and 2021, we had no revenues.
Cost of Sales
For the years ended December 31, 2022 and 2021, we had no cost of sales.
Operating expenses
Operating expenses increased by $139,048, or 6.9%, to $2,147,265 for the year
ended December 31, 2022 from $2,008,217 for the year ended December 31, 2021
primarily due to increases in professional fees of $86,093, compensation costs
of $237,983, depreciation costs of $3,908, insurance costs of $212,284, rent
expenses of $30,105, and general and administration costs of $12,804, offset
partially by consulting costs of $79,369, research and development costs of
$76,357, investor relations costs of $275,798, and amortization costs of
$12,605, as a result of adding administrative infrastructure for our anticipated
business development. In 2022, the Company incurred an increase in professional
fees (primarily legal and audit fees), incurred a full year of compensation for
its CEO and CTO and hired a CFO resulting in increased compensation costs,
increased consulting costs (primarily for public relations and brand awareness),
has decreased investor relations costs (primarily the fair value of common stock
issued for services of $249,100 in 2021), and incurred a full year of rent from
the lease of office space in June 2021. Research and development costs consist
of a decrease of $76,357 attributed to third parties for developmental services
of $100,211 offset partially by an increase in testing in house efforts of
$23,854.
For the year ended December 31, 2022, we had marketing expenses of $457,
research and development costs of $657,657, and general and administrative
expenses of $1,489,151 primarily due to professional fees of $209,386,
compensation costs of $689,717, consulting costs of $206,825, insurance costs of
$215,704, rent of $76,768, depreciation costs of $6,854, amortization costs of
$3,600, investor relations costs of $53,208, and general and administration
costs of $27,546, as a result of adding administrative infrastructure for our
anticipated business development. In 2022, the Company has incurred professional
fees (primarily legal and audit fees), incurred compensation for its CEO and CTO
and hired a CFO, incurred consulting costs (primarily for public relations and
brand awareness), had investor relations costs, and had rent through the lease
of office space. Research and development costs consist of $579,977 attributed
to in house efforts and $77,680 to third parties for developmental services and
testing.
For the year ended December 31, 2021, we had research and development costs of
$734,014, and general and administrative expenses of $1,274,203 primarily due to
professional fees of $123,293, compensation costs of $451,734, consulting costs
of $286,194, rent of $46,663, depreciation and amortization costs of $19,151,
investor relations costs of $329,006, and general and administration costs of
$18,162, as a result of adding administrative infrastructure for our anticipated
business development. In 2021, the Company has incurred professional fees
(primarily legal and audit fees, and consulting costs), had investor relations
costs (primarily the fair value of common stock issued for services of
$249,100), and incurred compensation for its CEO and CTO. Research and
development costs consist of $556,123 attributed to in house efforts and
$177,891 to third parties for developmental services and testing.
24
Other Expense
Other expense for the year ended December 31, 2022 totaled $782,552 primarily
due interest expense of $782,114 in conjunction with accretion of debt discount
and original issuance discount, and interest expense of $438, compared to other
expense of $996,402 primarily due to impairment of assets of $536,047, interest
expense of $429,488 in conjunction with accretion of debt discount and original
issuance discount, and interest expense of $30,867 for the year ended December
31, 2021.
Net loss before income taxes
Net loss before income taxes for the year ended December 31, 2022 totaled
$2,929,817 primarily due to (increases/decreases) in compensation costs,
professional fees, consulting costs, research and development costs, investor
relations costs, insurance costs, and general and administration costs compared
to a loss of $3,004,619 primarily due to (increases/decreases) in compensation
costs, professional fees, consulting costs, research and development costs,
investor relations costs, and general and administration cost for the year ended
December 31, 2021 primarily due to professional fees.
Assets and Liabilities
Assets were $332,879 as of December 31, 2022. Assets consisted primarily of cash
of $8,356, inventories of $50,000, other current assets of $11,942, equipment of
$22,052, intangible assets of $2,100, and operating lease right-of-use assets of
$217,718, and other assets of $20,711. Liabilities were $2,236,119 as of
December 31, 2022. Liabilities consisted primarily of accounts payable of
$327,517, accrued payroll and payroll taxes of $30,124, convertible notes of
$1,636,656, net of $642,660 of unamortized debt discount, operating lease
liabilities of $240,625, and other current liabilities of $1,197.
Liquidity and Capital Resources
Going Concern
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern, which contemplates, among other things, the
realization of assets and satisfaction of liabilities in the normal course of
business. The Company had an accumulated deficit of $7,195,576 at December 31,
2022, had a working capital deficit of approximately $1,978,396 at December 31,
2022, had net losses of $2,929,817 and $3,004,619 for the years ended December
31, 2022 and 2021, respectively, and net cash used in operating activities of
$1,830,242 and $1,774,182 for the years ended December 31, 2022 and 2021,
respectively, with no revenue earned since inception, and a lack of operational
history. These matters raise substantial doubt about the Company's ability to
continue as a going concern.
While the Company is attempting to expand operations and increase revenues, the
Company's cash position may not be significant enough to support the Company's
daily operations. Management intends to raise additional funds by way of a
public offering or an asset sale transaction. Management believes that the
actions presently being taken to further implement its business plan and
generate revenues provide the opportunity for the Company to continue as a going
concern. While management believes in the viability of its strategy to generate
revenues and in its ability to raise additional funds or transact an asset sale,
there can be no assurances to that effect or on terms acceptable to the Company.
The ability of the Company to continue as a going concern is dependent upon the
Company's ability to further implement its business plan and generate revenues.
The consolidated financial statements do not include any adjustments that might
be necessary if we are unable to continue as a going concern.
General - Overall, we had a decrease in cash flows for the year ended December
31, 2022 of $332,600 resulting from cash used in operating activities of
$1,830,242 and cash used in investing activities of $860, offset partially by
cash provided by financing activities of $1,498,502.
25
The following is a summary of our cash flows provided by (used in) operating,
investing, and financing activities during the periods indicated:
Year Ended Year Ended
December 31, 2021 December 31, 2020Net cash provided by (used in):
Operating activities $ (1,830,242 ) $ (1,774,182 )
Investing activities (860 ) (29,264 )
Financing activities 1,498,502 2,060,000
$ (332,600 ) $ 256,554
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021
Cash Flows from Operating Activities - For the year ended December 31, 2022, net
cash used in operations was $1,830,242 compared to net cash used in operations
of $1,774,182 for the year ended December 31, 2021. Net cash used in operations
was primarily due to a net loss of $2,929,817 for year ended December 31, 2022
and the changes in operating assets and liabilities of $307,007, primarily due
to the increases in other current assets of $9,867, accounts payable of
$287,843, and accrued payroll and payroll taxes of $29,052, offset primarily by
decreases in other current liabilities of $21. In addition, net cash used in
operating activities includes adjustments to reconcile net profit from
depreciation expense of $6,854, amortization expense of $3,600, accretion of
original issuance costs of $135,812, and the accretion of debt discount of
$646,302.
Net cash used in operations was primarily due to a net loss of $3,004,619 for
year ended December 31, 2021 and the changes in operating assets and liabilities
of $34,149, primarily due to the increases in other current assets of $2,075 and
other assets of $20,711, and a decrease in accrued payroll and payroll taxes of
$58,635, offset primarily by increases in accounts payable of $23,669 and other
current liabilities of $23,603. In addition, net cash used in operating
activities includes adjustments to reconcile net profit from depreciation
expense of $2,946, amortization expense of $16,205, accretion of original
issuance costs of $61,283, accretion of debt discount of $368,205, stock issued
for services of $249,100, interest expense converted to notes payable of
$30,800, and impairment of assets of $536,047.
Cash Flows from Investing Activities - For the year ended December 31, 2022, net
cash used in investing was $860 due to the purchase of property and equipment
compared to cash flows from investing activities of $29,264 due to the purchase
of property and equipment for the year ended December 31, 2021.
Cash Flows from Financing Activities - For the year ended December 31, 2022, net
cash provided by financing was $1,498,502 due to proceeds from short term
convertible notes of $1,567,000 net of fees associated with the filing of the
Company's Form S-1 of $68,498. For the year ended December 31, 2021, net cash
provided by financing was $2,060,000 due to proceeds from short term convertible
notes of $250,000, repayments of short-term convertible notes of $55,000, and
common stock and warrants issued for cash of $1,865,000.
Financing - We expect that our current working capital position, together with
our expected future cash flows from operations will be insufficient to fund our
operations in the ordinary course of business, anticipated capital expenditures,
debt payment requirements and other contractual obligations for at least the
next twelve months. However, this belief is based upon many assumptions and is
subject to numerous risks, and there can be no assurance that we will not
require additional funding in the future.
We have no present agreements or commitments with respect to any material
acquisitions of other businesses, products, product rights or technologies or
any other material capital expenditures. However, we will continue to evaluate
acquisitions of and/or investments in products, technologies, capital equipment
or improvements or companies that complement our business and may make such
acquisitions and/or investments in the future. Accordingly, we may need to
obtain additional sources of capital in the future to finance any such
acquisitions and/or investments. We may not be able to obtain such financing on
commercially reasonable terms, if at all. Due to the ongoing global economic
crisis, we believe it may be difficult to obtain additional financing if needed.
Even if we are able to obtain additional financing, it may contain undue
restrictions on our operations, in the case of debt financing, or cause
substantial dilution for our shareholders, in the case of equity financing.
26
Employment Agreements
Mr. Joyce receives an annual base salary of $455,000, plus bonus compensation
not to exceed 50% of salary. Mr. Joyce's employment also provides for medical
insurance, disability benefits and one year of severance pay if his employment
is terminated without cause or due to a change in control. Additionally, the
Company has agreed to maintain a beneficial ownership target of 9% for Mr.
Joyce. The Company incurred compensation expense of $453,067 and $496,125
(including $18,542 of 2020 payroll paid in 2021), and employee benefits of
$48,811 and $31,126, for the years ended December 31, 2022 and 2021,
respectively.
Sigyn had no employment agreement with its CTO but still incurred compensation
on behalf of the CTO. The Company incurred compensation expense of $233,678 and
$259,000, and employee benefits of $25,312 and $21,704, for the years ended
December 31, 2022 and 2021, respectively.
Bonus
On July 21, 2021, as a result of achieving certain milestones, the Board of
Directors agreed to pay each of the Company's CEO and CTO a performance bonus
equal to 5% of their annual salary totaling $34,750.
Capital Expenditures
We expect to purchase approximately $30,000 of equipment in connection with the
expansion of our business during the next twelve months.
Fiscal Year-End
Our fiscal year end is December 31.
Critical Accounting Policies
Refer to Note 3 in the accompanying notes to the consolidated financial
statements for critical accounting policies.
Recent Accounting Pronouncements
Refer to Note 3 in the accompanying notes to the consolidated financial
statements.
Future Contractual Obligations and Commitments
Refer to Note 3 in the accompanying notes to the consolidated financial
statements for future contractual obligations and commitments. Future
contractual obligations and commitments are based on the terms of the relevant
agreements and appropriate classification of items under GAAP as currently in
effect. Future events could cause actual payments to differ from these amounts.
We incur contractual obligations and financial commitments in the normal course
of our operations and financing activities. Contractual obligations include
future cash payments required under existing contracts, such as debt and lease
agreements. These obligations may result from both general financing activities
and from commercial arrangements that are directly supported by related
operating activities. Details on these obligations are set forth below.
Off-Balance Sheet Arrangements
As of December 31, 2022, we have not entered into any transaction, agreement or
other contractual arrangement with an entity unconsolidated under which it has:
? a retained or contingent interest in assets transferred to the unconsolidated
entity or similar arrangement that serves as credit;
? liquidity or market risk support to such entity for such assets;
27
? an obligation, including a contingent obligation, under a contract that would
be accounted for as a derivative instrument; or
? an obligation, including a contingent obligation, arising out of a variable
interest in an unconsolidated entity that is held by, and material to us,
where such entity provides financing, liquidity, market risk or credit risk
support to or engages in leasing, hedging, or research and development
services with us.
Inflation
We do not believe that inflation has had a material effect on our results of
operations.
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