UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
For the transition period from __________ to _________
Commission
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Securities registered pursuant to Section 12(b) of the Act:
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Securities registered pursuant to Section 12(g) of the Act:
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
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| Emerging Growth Company |
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As of May 13, 2022, there were shares of common stock outstanding.
SIGYN THERAPEUTICS, INC.
TABLE OF CONTENTS
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DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This report contains forward-looking statements. The forward-looking statements are contained principally in the sections entitled “Description of Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “seeks,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “would” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. These risks and uncertainties include, but are not limited to, the factors described in the section captioned “Risk Factors” below. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Such statements may include, but are not limited to, information related to: anticipated operating results; licensing arrangements; relationships with our customers; consumer demand; financial resources and condition; changes in revenues; changes in profitability; changes in accounting treatment; cost of sales; selling, general and administrative expenses; interest expense; the ability to secure materials and subcontractors; the ability to produce the liquidity or enter into agreements to acquire the capital necessary to continue our operations and take advantage of opportunities; legal proceedings and claims.
Also, forward-looking statements represent our estimates and assumptions only as of the date of this report. You should read this report and the documents that we reference and filed as exhibits to this report completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.
USE OF CERTAIN DEFINED TERMS
Except as otherwise indicated by the context, references in this report to “we,” “us,” “our,” “our Company,” or “the Company” is of Sigyn Therapeutics, Inc.
In addition, unless the context otherwise requires and for the purposes of this report only:
| ● | “Sigyn” refers to Sigyn Therapeutics, Inc., a Delaware corporation; | |
| ● | “Commission” refers to the Securities and Exchange Commission; | |
| ● | “Exchange Act” refers to the Securities Exchange Act of 1934, as amended; and | |
| ● | “Securities Act” refers to the Securities Act of 1933, as amended. |
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SIGYN THERAPEUTICS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, 2022 | December 31, 2021 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Inventories | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Operating lease right-of-use assets, net | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Short-term convertible notes payable, less unamortized debt issuance costs of $ | ||||||||
| Current portion of operating lease liabilities | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities: | ||||||||
| Operating lease liabilities, net of current portion | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Stockholders’ deficit: | ||||||||
| Common stock, $ par value, shares authorized; shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
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SIGYN THERAPEUTICS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Net revenues | $ | $ | ||||||
| Gross Profit | - | - | ||||||
| Operating expenses: | ||||||||
| Marketing expenses | ||||||||
| Research and development | ||||||||
| General and administrative | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other expense: | ||||||||
| Interest expense | - | |||||||
| Interest expense - debt discount | ||||||||
| Interest expense - original issuance costs | ||||||||
| Total other expense | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Income taxes | - | - | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Net loss per share, basic and diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of shares outstanding Basic and diluted | ||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
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SIGYN THERAPEUTICS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
| Common Stock | Additional Paid | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | in Capital | Deficit | Deficit | ||||||||||||||||
| Balance as of December 31, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Common stock issued to third party for services | - | |||||||||||||||||||
| Warrants issued to third parties in conjunction with debt issuance | - | - | - | |||||||||||||||||
| Beneficial conversion feature in conjunction with debt issuance | - | - | - | |||||||||||||||||
| Common stock issued in conjunction with cashless exercise of warrants | ( | ) | - | - | ||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||
| Balance as of March 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Balance as of December 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Warrants issued to third parties in conjunction with debt issuance | - | - | - | |||||||||||||||||
| Amortization of warrants issued in connection with a debt modification | - | - | - | |||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||
| Balance as of March 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
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SIGYN THERAPEUTICS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation expense | ||||||||
| Amortization expense | ||||||||
| Stock issued for services | - | |||||||
| Accretion of debt discount | ||||||||
| Accretion of original issuance costs | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Other current assets | ( | ) | - | |||||
| Accounts payable | ||||||||
| Accrued payroll and payroll taxes | - | |||||||
| Other current liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | - | ( | ) | |||||
| Net cash used in investing activities | - | ( | ) | |||||
| Cash flows from financing activities: | ||||||||
| Proceeds from short-term convertible notes | ||||||||
| Net cash provided by financing activities | ||||||||
| Net decrease in cash | ( | ) | ( | ) | ||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Beneficial conversion feature in conjunction with debt issuance | $ | $ | ||||||
| Amortization of warrants issued in connection with a debt modification | $ | $ | ||||||
| Warrants issued to third parties in conjunction with debt issuance | $ | $ | ||||||
| Original issue discount issued in conjunction with debt | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
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SIGYN THERAPEUTICS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES
Corporate History and Background
Sigyn Therapeutics, Inc. (“Sigyn” or the “Company”) is a development-stage therapeutic technology company headquartered in San Diego, California USA. Our business focus is the clinical advancement of Sigyn Therapy™, a multi-function blood purification technology designed to overcome the limitations of previous drugs and devices to treat life-threatening inflammatory disorders, including sepsis, the leading cause of hospital deaths worldwide.
We are advancing Sigyn Therapy to treat pathogen-associated conditions that precipitate sepsis and other high-mortality disorders that are not addressed with approved drug therapies. To address these unmet therapeutic needs, we designed Sigyn Therapy to extract pathogen sources of life-threating inflammation from the bloodstream in concert with the depletion of pro-inflammatory cytokines, whose dysregulated production (the cytokine storm) plays a prominent role in each of our therapeutic indication opportunities.
In
addition to sepsis, our candidate treatment indications include, but are not limited to; emerging pandemic threats, drug resistant pathogens,
hepatic encephalopathy, bridge to liver transplant, and community-acquired pneumonia, which is a leading cause of
death among infectious diseases, the leading cause of death in children under five years of age, and a catalyst for approximately
Merger Transaction
On October 19, 2020, Sigyn Therapeutics, Inc, a Delaware corporation (the “Registrant”) formerly known as Reign Resources Corporation, completed a Share Exchange Agreement (the “Agreement”) with Sigyn Therapeutics, Inc., a private entity incorporated in the State of Delaware on October 19, 2019.
In the Share Exchange Agreement, we acquired % of the issued and outstanding shares of privately held Sigyn Therapeutics common stock in exchange for % of the fully paid and nonassessable shares of our common stock outstanding (the “Acquisition”). In conjunction with the transaction, we changed our name from Reign Resources Corporation to Sigyn Therapeutics, Inc. pursuant to an amendment to our articles of incorporation that was filed with the State of Delaware. Subsequently, our trading symbol was changed to SIGY. The Acquisition was treated as a “tax-free exchange” under Section 368 of the Internal Revenue Code of 1986 and resulted in the private Sigyn Therapeutics corporate entity becoming a wholly owned subsidiary known as Sigyn Medical Corporation. Upon the closing of the Acquisition, we appointed James A. Joyce and Craig P. Roberts to serve as members of our Board of Directors.
As of May 13, 2022, we have a total shares issued and outstanding, of which shares are held by non-affiliate stockholders.
Post Merger Developments
Since the consummation of our public merger on October 19, 2020, we advanced Sigyn Therapy from conceptual design to clinical application. We initiated and completed several in vitro studies that validated the ability of Sigyn Therapy to address a broad-spectrum of relevant therapeutic targets, including endotoxin (gram-negative bacterial toxin); peptidoglycan and lipoteichoic acid (gram-positive bacterial toxins); viral pathogens (including SARS-CoV-2); hepatic toxins (ammonia, bile acid, and bilirubin); CytoVesicles (extracellular vesicles that transport inflammatory cytokine cargos); and tumor necrosis factor alpha (TNF alpha), interleukin-1 beta (IL-1b), and interleukin 6 (IL-6), which are pro-inflammatory cytokines whose dysregulated production (the cytokine storm) precipitate sepsis and play a prominent role in each of our therapeutic opportunities. Subsequent to these in vitro milestones, we completed animal studies that demonstrated Sigyn Therapy to be safe and well tolerated.
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We plan to incorporate the data collected from our post-merger studies into an Investigational Device Exemption (IDE) that we are drafting for submission to the U.S. Food and Drug Administration (“FDA”) to support the initiation of human clinical studies in the United States.
NOTE 2 – BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include all adjustments necessary for the fair presentation of the Company’s financial position and results of operations for the periods presented.
The Company currently operates in one business segment. The Company is not organized by market and is managed and operated as one business. A single management team reports to the chief operating decision maker, the Chief Executive Officer, who comprehensively manages the entire business. The Company does not currently operate any separate lines of businesses or separate business entities.
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 $
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 private 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 financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to GAAP and have been consistently applied in the preparation of the financial statements.
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Use of Estimates
The preparation of these financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements and the reported amounts of net sales and expenses during the reported periods. Actual results may differ from those estimates and such differences may be material to the financial statements. The more significant estimates and assumptions by management include among others: common stock valuation, and the recoverability of intangibles. The current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions.
Cash
The
Company’s cash is held in bank accounts in the United States and is insured by the Federal Deposit Insurance Corporation (FDIC)
up to $
Income Taxes
Income taxes are accounted for under an asset and liability approach. This process involves calculating the temporary and permanent differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The temporary differences result in deferred tax assets and liabilities, which would be recorded on the Balance Sheets in accordance with ASC 740, which established financial accounting and reporting standards for the effect of income taxes. The likelihood that its deferred tax assets will be recovered from future taxable income must be assessed and, to the extent that recovery is not likely, a valuation allowance is established. Changes in the valuation allowance in a period are recorded through the income tax provision in the consolidated Statements of Operations.
ASC
740-10-30 was adopted from the date of its inception. ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized
in an entity’s consolidated financial statements and prescribes a recognition threshold and measurement attributes for financial
statement disclosure of tax positions taken or expected to be taken on a tax return. Under ASC 740-10, the impact of an uncertain income
tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit
by the relevant taxing authority. An uncertain income tax position will not be recognized if it has
Advertising and Marketing Costs
Advertising
expenses are recorded as general and administrative expenses when they are incurred. The Company had advertising expenses of $
Inventories
In conjunction with the October 19, 2020 Share Exchange Agreement, the Company kept the gem inventory of Reign Resources Corporation. Inventories are stated at the lower of cost or market (net realizable value) on a lot basis each quarter. A lot is determined by the cut, clarity, size, and weight of the sapphires. Inventory consists of sapphire jewels that meet rigorous grading criteria and are of cuts and sizes most commonly used in the jewelry industry. As of March 31, 2022 and December 31, 2021, the Company carried primarily loose sapphire jewels, jewelry for sale on our website, and jewelry held as samples. Samples are used to show potential customers what the jewelry would look like. Promotional items given to customers that are not expected to be returned will be removed from inventory and expensed. There have been no promotional items given to customers as of March 31, 2022. The Company performs its own in-house assessment based on gem guide and the current market price for metals to value its inventory on an annual basis or if circumstances dictate sooner to determine if the estimated fair value is greater or less than cost. In addition, the inventory is reviewed each quarter by the Company against industry prices from gem-guide and if there is a potential impairment, the Company would appraise the inventory. The estimated fair value is subject to significant change due to changes in popularity of cut, perceived grade of the clarity of the sapphires, the number, type and size of inclusions, the availability of other similar quality and size sapphires, and other factors. As a result, the internal assessed value of the sapphires could be significantly lower from the current estimated fair value. Loose sapphire jewels do not degrade in quality over time.
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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 $
Property and Equipment
Property
and equipment are carried at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets, generally
Intangible Assets
Intangible
assets consist primarily of website development costs. Our intangible assets are being amortized on a straight-line basis over a period
of
Impairment of Long-lived Assets
We periodically evaluate whether the carrying value of property, equipment and intangible assets has been impaired when circumstances indicate the carrying value of those assets may not be recoverable. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value is not recoverable, the impairment loss is measured as the excess of the asset’s carrying value over its fair value.
Our impairment analyses require management to apply judgment in estimating future cash flows as well as asset fair values, including forecasting useful lives of the assets, assessing the probability of different outcomes, and selecting the discount rate that reflects the risk inherent in future cash flows. If the carrying value is not recoverable, we assess the fair value of long-lived assets using commonly accepted techniques, and may use more than one method, including, but not limited to, recent third-party comparable sales and discounted cash flow models. If actual results are not consistent with our assumptions and estimates, or our assumptions and estimates change due to new information, we may be exposed to an impairment charge in the future. As of March 31, 2022 and December 31, 2021, the Company had not experienced impairment losses on its long-lived assets.
Fair Value of Financial Instruments
The provisions of accounting guidance, FASB Topic ASC 825 requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value, and defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. As of March 31, 2022 and December 31, 2021, the fair value of cash, accounts payable, accrued expenses, and notes payable approximated carrying value due to the short maturity of the instruments, quoted market prices or interest rates which fluctuate with market rates.
Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:
| ● | Level 1 – Quoted prices in active markets for identical assets or liabilities. |
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| ● | Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | |
| ● | Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities |
The carrying value of financial assets and liabilities recorded at fair value are measured on a recurring or nonrecurring basis. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. There were no financial assets or liabilities carried and measured on a nonrecurring basis during the reporting periods. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. There have been no transfers between levels.
Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted earnings (loss) per share are computed on the basis of the weighted average number of common shares (including common stock subject to redemption) plus dilutive potential common shares outstanding for the reporting period. In periods where losses are reported, the weighted-average number of common stock outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.
Basic and diluted earnings (loss) per share are the same since net losses for all periods presented and including the additional potential common shares would have an anti-dilutive effect.
In accordance with ASC No. 718, Compensation – Stock Compensation (“ASC 718”), we measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.
In accordance with ASC 505, Equity Based Payments to Non-Employees, issuances of the Company’s common stock or warrants for acquiring goods or services are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for the fair value of the equity instruments issued to consultants or vendors is determined at the earlier of (i) the date at which a commitment for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance is complete. Although situations may arise in which counter performance may be required over a period of time, the equity award granted to the party performing the service is fully vested and non-forfeitable on the date of the agreement. As a result, in this situation in which vesting periods do not exist as the instruments fully vested on the date of agreement, the Company determines such date to be the measurement date and will record the estimated fair market value of the instruments granted as a prepaid expense and amortize such amount to general and administrative expense in the accompanying statement of operations over the contract period. When it is appropriate for the Company to recognize the cost of a transaction during financial reporting periods prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is measured at the then-current fair values at each of those interim financial reporting dates.
Reclassifications
Certain
prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on
the reported results of operations. An adjustment has been made to the Unaudited Condensed Consolidated Statements of Operations for
three months ended March 31, 2021, to reclass $
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Concentrations, Risks, and Uncertainties
Business Risk
Substantial business risks and uncertainties are inherent to an entity, including the potential risk of business failure.
The Company is headquartered and operates in the United States. To date, the Company has generated no revenues from operations. There can be no assurance that the Company will be able to raise additional capital and failure to do so would have a material adverse effect on the Company’s financial position, results of operations and cash flows. Also, the success of the Company’s operations is subject to numerous contingencies, some of which are beyond management’s control. Currently, these contingencies include general economic conditions, price of components, competition, and governmental and political conditions.
Interest rate risk
Financial assets and liabilities do not have material interest rate risk.
Credit risk
The Company is exposed to credit risk from its cash in banks. The credit risk on cash in banks is limited because the counterparties are recognized financial institutions.
Seasonality
The business is not subject to substantial seasonal fluctuations.
Major Suppliers
Sigyn Therapy is comprised of components that are supplied by various industry vendors. Additionally, the Company is reliant on third-party organizations to conduct clinical development studies that are necessary to advance Sigyn Therapy toward the marketplace.
Should the relationship with an industry vendor or third-party clinical development organization be interrupted or discontinued, it is believed that alternate component suppliers and third-party clinical development organizations could be identified to support the continued advancement of Sigyn Therapy.
Recent Accounting Pronouncements
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. This standard simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740, Income Taxes, while also clarifying and amending existing guidance, including interim-period accounting for enacted changes in tax law. This standard is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company adopted ASU No. 2019-12 in the first quarter of fiscal 2021, coinciding with the standard’s effective date, and had an immaterial impact from this standard.
In August 2020, the FASB issued ASU No. 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. This ASU is effective for annual reporting periods beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The Company adopted ASU No. 2020-06 in the first quarter of fiscal 2021, coinciding with the standard’s effective date, and had an immaterial impact from this standard s.
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Other recently issued accounting updates are not expected to have a material impact on the Company’s unaudited condensed consolidated financial statements.
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of:
| March 31, | December 31, | |||||||||
| Estimated Life | 2022 | 2021 | ||||||||
| Office equipment | $ | $ | ||||||||
| Computer equipment | ||||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||||
| $ | $ | |||||||||
Depreciation
expense was $
NOTE 5 – INTANGIBLE ASSETS
Intangible assets consisted of the following as of:
| Estimated life | March 31, 2022 | December 31, 2021 | ||||||||
| Website | $ | $ | ||||||||
| Accumulated amortization | ( | ) | ( | ) | ||||||
| $ | $ | |||||||||
As of March 31, 2022, estimated future amortization expenses related to intangible assets were as follows:
| Intangible Assets | ||||
| 2022 (remaining 9 months) | $ | |||
| 2023 | ||||
| $ | ||||
The
Company had amortization expense of $
On January 8, 2020, James Joyce, the Company’s CEO and Craig Roberts, the Company’s CTO, assigned to the Company the rights to patent 62/881,740 pertaining to the devices, systems and methods for the broad-spectrum reduction of pro-inflammatory cytokines in blood.
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NOTE 6 – Convertible Promissory DEBENTURES
Convertible notes payable consisted of the following:
March 31, 2022 | December 31, 2021 | |||||||
| January 28, 2020 ($ | $ | $ | ||||||
| June 23, 2020 ($ | ||||||||
| September 17, 2020 ($ | ||||||||
| March 23, 2022
($ | ||||||||
| Total convertible notes payable | ||||||||
| Original issue discount | ( | ) | ( | ) | ||||
| Debt discount | ( | ) | ||||||
| Total convertible notes payable | $ | $ | ||||||
Principal payments on convertible promissory debentures are due as follows:
| Year ending December 31, | ||||
| 2022 | $ | |||
| 2023 | ||||
| $ | ||||
Current Noteholders
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
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
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
| 15 |
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 | |
| ● | The
parties amended the Note to provide for interest at | |
| ● | The
parties amended the Note for the |
On October 22, 2021, the Company and Osher amended convertible debt agreements as follows:
| ● | The
parties amended the October 20, 2020 Notes for the | |
| ● | The
parties amended the October 20, 2020 Notes for the aggregate principal amount and accrued interest from $ | |
| ● | In
exchange for the extension of the Note, the Company issued Osher warrants to purchase an aggregate of |
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
The Company and Osher amended the convertible debt agreement as follow on October 20, 2020:
| ● | The
parties amended the Note for the aggregate principal amount from $ | |
| ● | The
parties amended the Warrants dated June 23, 2020, for the number of warrant shares from | |
| ● | The
parties amended the Note for the |
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 | |
| ● | The
parties amended the October 20, 2020 Notes for the aggregate principal amount and accrued interest from $ | |
| ● | In
exchange for the extension of the Note, the Company issued Osher warrants to purchase an aggregate of |
| 16 |
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
The Company and Osher amended the convertible debt agreement as follow on October 20, 2020:
| ● | The
parties amended the Warrants dated September 17, 2020, for the number of warrant shares from | |
| ● | The
parties amended the Note for the |
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 | |
| ● | The
parties amended the October 20, 2020 Notes for the aggregate principal amount and accrued interest from $ | |
| ● | In
exchange for the extension of the Note, the Company issued Osher warrants to purchase an aggregate of |
On
October 28, 2021, Osher elected to convert $
Previous Noteholders
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.
NOTE 7 – STOCKHOLDERS’ DEFICIT
Preferred Stock
The Company authorized shares of par value $ preferred stock, of which are issued and outstanding at March 31, 2022, and December 31, 2021, respectively.
Common Stock
The Company has authorized shares of par value $ common stock, of which shares are outstanding at March 31, 2022, and December 31, 2021, respectively.
On
October 28, 2021, Osher elected to convert $
| 17 |
On
October 25, 2021, Osher elected to convert the aggregate principal amount of the Note, $
On
October 20, 2021, the entered into a securities purchase agreement with an accredited investor that resulted in the issuance of
shares of common stock and warrants to purchase an aggregate of
On
October 14, 2021, the Company issued a total of shares of its common stock valued at $
On
July 14, 2021, the Company issued a total of shares of its common stock valued at $
On
May 10, 2021, Brio Capital elected to convert the aggregate principal amount of a $
In
April 2021, the Company initiated an offering of up to $
On
April 14, 2021, the Company issued a total of shares of its restricted common stock valued at $
On
February 19, 2021, a previous noteholder exercised the warrants pursuant to the cashless exercise provision of the warrant agreement
into
On
January 14, 2021, the Company issued a total of shares of its restricted common stock valued at $
Warrants
On
October 22, 2021, the Company and Osher amended convertible debt agreements for the maturity date from
| 18 |
NOTE 8 – OPERATING LEASES
On
May 27, 2021, the Company entered into a sixty-three month lease for its corporate office at $
Operating lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Generally, the implicit rate of interest in arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The operating lease ROU asset includes any lease payments made and excludes lease incentives. Our variable lease payments primarily consist of maintenance and other operating expenses from our real estate leases. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.
We have lease agreements with lease and non-lease components. We have elected to account for these lease and non-lease components as a single lease component. We are also electing not to apply the recognition requirements to short-term leases of twelve months or less and instead will recognize lease payments as expense on a straight-line basis over the lease term.
The components of lease expense and supplemental cash flow information related to leases for the period are as follows:
In accordance with ASC 842, the components of lease expense were as follows:
| Three Months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Operating lease expense | $ | $ | ||||||
| Short term lease cost | $ | $ | ||||||
| Total lease expense | $ | $ | ||||||
In accordance with ASC 842, other information related to leases was as follows:
| Three Months ended March 31, | 2022 | 2021 | ||||||
| Operating cash flows from operating leases | $ | $ | ||||||
| Cash paid for amounts included in the measurement of lease liabilities | $ | $ | ||||||
| Weighted-average remaining lease term—operating leases | | - | ||||||
| Weighted-average discount rate—operating leases | % | - | ||||||
In accordance with ASC 842, maturities of operating lease liabilities as of March 31, 2022 were as follows:
| Operating | ||||
| Year ending: | Lease | |||
| 2022 (remaining 9 months) | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Total undiscounted cash flows | $ | |||
| Reconciliation of lease liabilities: | ||||
| Weighted-average remaining lease terms | | |||
| Weighted-average discount rate | % | |||
| Present values | $ | 275,928 | ||
| Lease liabilities—current | ||||
| Lease liabilities—long-term | ||||
| Lease liabilities—total | $ | |||
| Difference between undiscounted and discounted cash flows | $ | |||
Operating
lease cost was $
| 19 |
NOTE 9 – Related Party Transactions
Other than as set forth below, and as disclosed in Notes 5 and 7, there have not been any transaction entered into or been a participant in which a related person had or will have a direct or indirect material interest.
Employment Agreements
Mr.
Ferrell was hired March 9, 2022 as the Company’s Chief Financial Officer. Mr. Ferrell receives an annual base salary of $
FASB ASC Topic 260, Earnings Per Share, requires a reconciliation of the numerator and denominator of the basic and diluted earnings (loss) per share (EPS) computations.
Basic earnings (loss) per share are computed by dividing net earnings available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. In periods where losses are reported, the weighted-average number of common stock outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.
Basic and diluted earnings (loss) per share are the same since net losses for all periods presented and including the additional potential common shares would have an anti-dilutive effect.
| 20 |
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Net loss attributable to the common stockholders | $ | ( | ) | $ | ( | ) | ||
| Basic weighted average outstanding shares of common stock | ||||||||
| Dilutive effect of options and warrants | - | - | ||||||
| Diluted weighted average common stock and common stock equivalents | ||||||||
| Loss per share: | ||||||||
| Basic and diluted | $ | ( | ) | $ | ( | ) | ||
NOTE 11 – COMMITMENTS AND CONTINGENCIES
Legal
From time to time, various lawsuits and legal proceedings may arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any legal proceedings or claims that it believes will have a material adverse effect on its business, financial condition or operating results.
NOTE 12 – SUBSEQUENT EVENTS
The Company evaluated all events or transactions that occurred after March 31, 2022 up through the date the financial statements were available to be issued. During this period, the Company did not have any material recognizable subsequent events required to be disclosed as of and for the period ended March 31, 2022 except for the following:
On
April 28, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “April 2022 Note”)
totaling
On
May 10, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “May 2022 Note”) totaling
| 21 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Special Note Regarding Forward Looking Statements.
This quarterly report on Form 10-Q of Sigyn Therapeutics, Inc. for the period ended March 31, 2022 contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. To the extent that such statements are not recitations of historical fact, such statements constitute forward looking statements which, by definition, involve risks and uncertainties. In particular, statements under the Sections; Description of Business, Management’s Discussion and Analysis of Financial Condition and Results of Operations contain forward looking statements. Where in any forward-looking statements, the Company expresses an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished.
The following are factors that could cause actual results or events to differ materially from those anticipated and include but are not limited to: general economic, financial and business conditions; changes in and compliance with governmental regulations; changes in tax laws; and the cost and effects of legal proceedings.
You should not rely on forward looking statements in this quarterly report. This quarterly report contains forward looking statements that involve risks and uncertainties. We use words such as “anticipates,” “believes,” “plans,” “expects,” “future,” “intends,” and similar expressions to identify these forward-looking statements. Prospective investors should not place undue reliance on these forward-looking statements, which apply only as of the date of this quarterly report. Our actual results could differ materially from those anticipated in these forward-looking statements.
Our Company
Sigyn Therapeutics, Inc. (“Sigyn” or the “Company”) is a development-stage therapeutic technology company headquartered in San Diego, California USA. Our business focus is the clinical advancement of Sigyn Therapy™, a multi-function blood purification technology designed to overcome the limitations of previous drugs and devices to treat life-threatening inflammatory disorders, including sepsis, the leading cause of hospital deaths worldwide.
We are advancing Sigyn Therapy to treat pathogen-associated conditions that precipitate sepsis and other high-mortality disorders that are not addressed with approved drug therapies. To address these unmet therapeutic needs, we designed Sigyn Therapy to extract pathogen sources of life-threating inflammation from the bloodstream in concert with the depletion of pro-inflammatory cytokines, whose dysregulated production (the cytokine storm) plays a prominent role in each of our therapeutic indication opportunities.
In addition to sepsis, our candidate treatment indications include, but are not limited to; emerging pandemic threats, drug resistant pathogens, hepatic encephalopathy, bridge to liver transplant, and community-acquired pneumonia, which is a leading cause of death among infectious diseases, the leading cause of death in children under five years of age, and a catalyst for approximately 50% of sepsis and septic shock cases.
Recent Developments
Convertible Promissory Debentures
Osher – $110,000
On April 28, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “April 2022 Note”) totaling (i) $110,000 aggregate principal amount of April 2022 Note due April 28, 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 220,000 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.
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Brio - $110,000
On May 10, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “May 2022 Note”) totaling (i) $110,000 aggregate principal amount of Note due May 10, 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 220,000 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 – $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 the previous noteholder 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 the previous noteholder 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.
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 the previous noteholder 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 the previous noteholder 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.
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 |
| 23 |
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
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. An adjustment has been made to the Consolidated Statements of Operations for three months ended March 31, 2021, to reclass $93,266 of costs to research and development previously classified in general and administrative. In addition, an adjustment has been made to the Unaudited Condensed Consolidated Balance Sheets as of December 31, 2021, to reclass $1,072 of other current liabilities previously classified in accrued payroll and payroll taxes.
Results of Operations
Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021
The following discussion represents a comparison of our results of operations for the three months ended March 31, 2022 and 2021. The results of operations for the periods shown in our audited condensed consolidated financial statements are not necessarily indicative of operating results for the entire period. In the opinion of management, the audited condensed 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.
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Net revenues | $ | - | $ | - | ||||
| Cost of sales | - | - | ||||||
| Gross Profit | - | - | ||||||
| Operating expenses | 609,236 | 402,096 | ||||||
| Other expense | 68,810 | 59,586 | ||||||
| Net loss before income taxes and discontinued operations | $ | (678,046 | ) | $ | (461,682 | ) | ||
Net Revenues
For the three months ended March 31, 2022 and 2021, we had no revenues.
Cost of Sales
For the three months ended March 31, 2022 and 2021, we had no cost of sales.
Operating expenses
Operating expenses increased by $207,140, or 51.5%, to $609,236 for three months ended March 31, 2022 from $402,096 for the three months ended March 31, 2021 primarily due to increases in professional fees of $35,610, compensation costs of $40,209, research and development costs of $111,826, depreciation costs of $1,360, rent expenses of $17,469, consulting fees of $76,642, and general and administration costs of $41,874, offset primarily by a decrease in investor relations costs of $26,395, marketing costs of $82,000, and amortization costs of $9,454, as a result of adding administrative infrastructure for our anticipated business development.
| 24 |
For the three months ended March 31, 2022, we had marketing expenses of $250, research and development costs of $228,342, and general and administrative expenses of $380,644 primarily due to professional fees of $53,494, compensation costs of $144,894, rent of $17,919, depreciation costs of $1,704, amortization costs of $900, investor relations costs of $10,105, consulting fees of $107,252, and general and administration costs of $44,377, as a result of adding administrative infrastructure for our anticipated business development.
For the three months ended March 31, 2021, we had marketing expenses of $82,250, research and development costs of $116,516, and general and administrative expenses of $203,330 primarily due to professional fees of $17,884, compensation costs of $104,685, rent of $450, depreciation and amortization costs of $10,698, investor relations costs of $36,500, consulting fees of $30,610, and general and administration costs of $2,503, as a result of adding administrative infrastructure for our anticipated business development.
Other Expense
Other expense for the three months ended March 31, 2022 totaled $68,810 primarily due to interest expense of $52,257 in conjunction with accretion of debt discount and interest expense of $16,522 in conjunction with accretion of original issuance discount, compared to other expense of $59,586 for the three months ended March 31, 2021 primarily due to interest expense of $50,860 in conjunction with accretion of debt discount and interest expense of $8,726 in conjunction with accretion of original issuance discount.
Net loss before income taxes
Net loss before income taxes and discontinued operations for the three months ended March 31, 2022 totaled $678,046 primarily due to (increases/decreases) in compensation costs, professional fees, marketing costs, investor relations costs, consulting fees, and general and administration costs compared to a loss of $461,682 for the three months ended March 31, 2021 primarily due to (increases/decreases) in compensation costs, professional fees, marketing costs, investor relations, consulting fees, and general and administration costs.
Assets and Liabilities
Assets were $447,414 as of March 31, 2022. Assets consisted primarily of cash of $81,385, inventories of $50,000, other current assets of $12,245, equipment of $26,342, intangible assets of $4,800, operating lease right-of-use assets of $251,931, and other assets of $20,711. Liabilities were $1,178,983 as of March 31, 2022. Liabilities consisted primarily accounts payable of $196,147, convertible notes of $704,920, net of $215,896 of unamortized debt discount and debt issuance costs, operating lease liabilities of $275,929, and other current liabilities of $1,987.
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 $4,943,805 at March 31, 2022, had a working capital deficit of $807,218 and $341,187 at March 31, 2022 and December 31, 2020, respectively, had a net loss of $678,046 and $461,682 for the three months ended March 31, 2022 and 2021, respectively, and net cash used in operating activities of $459,571 and $274,424 for the three months ended March 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 private 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.
| 25 |
The condensed 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 three months ended March 31, 2022 of $259,571 resulting from cash used in operating activities of $459,571, offset partially by cash provided by financing activities of $200,000.
The following is a summary of our cash flows provided by (used in) operating, investing, and financing activities during the periods indicated:
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Net cash provided by (used in): | ||||||||
| Operating activities | $ | (459,571 | ) | $ | (274,424 | ) | ||
| Investing activities | - | (2,871 | ) | |||||
| Financing activities | 200,000 | 200,000 | ||||||
| $ | (259,571 | ) | $ | (77,295 | ) | |||
Cash Flows from Operating Activities – For the three months ended March 31, 2022, net cash used in operations was $459,571 compared to net cash used in operations of $274,424 for the three months ended March 31, 2021. Net cash used in operations was primarily due to a net loss of $678,046 for three months ended March 31, 2022 and the changes in operating assets and liabilities of $147,092, primarily due to the increase in accounts payable of $156,473, other current liabilities of $789, and other current assets of $10,170. In addition, net cash used in operating activities includes adjustments to reconcile net profit from depreciation expense of $1,704, amortization expense of $900, accretion of original issuance costs of $16,522, and accretion of debt discount of $52,257.
For the three months ended March 31, 2021, net cash used in operations was $274,424. Net cash used in operations was primarily due to a net loss of $461,682 for three months ended March 31, 2021 and the changes in operating assets and liabilities of $34,724, primarily due to the increase in accounts payable of $28,055, accrued payroll and payroll taxes of $5,007, and other current liabilities of $1,662. In addition, net cash used in operating activities includes adjustments to reconcile net profit from depreciation expense of $344, amortization expense of $10,354, stock issued for services of $82,250, accretion of original issuance costs of $8,726, and accretion of debt discount of $50,860.
Cash Flows from Investing Activities – For the three months ended March 31, 2022, net cash used in investing was none compared to cash flows from investing activities of $2,871 for the three months ended March 31, 2020 due to the purchase of property and equipment.
Cash Flows from Financing Activities – For the three months ended March 31, 2022 and 2021, net cash provided by financing was $200,000 and $200,000, respectively, due to proceeds from short term convertible notes.
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 stockholders, in the case of equity financing.
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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 unaudited condensed consolidated financial statements for critical accounting policies.
Recent Accounting Pronouncements
Refer to Note 3 in the accompanying notes to the condensed consolidated financial statements.
Off-Balance Sheet Arrangements
As of March 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; | |
| ● | 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-l5(e) under the Exchange Act) that are designed to ensure that information that would be required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
| 27 |
Our management, under the supervision and with the participation of our CEO and Chief Financial Officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures as defined in SEC Rules 13a-15(e) and 15d-15(e) as of the end of the period covered by this report. Based on such evaluation, management identified deficiencies that were determined to be a material weakness.
Management’s Report on Internal Controls over Financial Reporting
The Company’s management is responsible for establishing and maintaining effective internal control over financial reporting (as defined in Rule 13a-l5(f) of the Securities Exchange Act). Management assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2022. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) (2013). Based on that assessment, management believes that, as of March 31, 2022, the Company’s internal control over financial reporting was ineffective based on the COSO criteria, due to the following material weaknesses listed below.
The specific material weaknesses identified by the company’s management as of end of the period covered by this report include the following:
| ● | we have not performed a risk assessment and mapped our processes to control objectives; | |
| ● | we have not implemented comprehensive entity-level internal controls; | |
| ● | we have not implemented adequate system and manual controls; and | |
| ● | we do not have sufficient segregation of duties. As such, the officers approve their own related business expense reimbursements |
Despite the material weaknesses reported above, our management believes that our condensed consolidated financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented and that this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
This report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Commission that permit us to provide only management’s report in this report.
Management’s Remediation Plan
The weaknesses and their related risks are not uncommon in a company of our size because of the limitations in the size and number of staff. Due to our size and nature, segregation of all conflicting duties has not always been possible and may not be economically feasible.
However, we plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this annual report on Form 10-K, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes in the current fiscal year as resources allow:
| (i) | appoint additional qualified personnel to address inadequate segregation of duties and implement modifications to our financial controls to address such inadequacies; | |
| (ii) | hire a new Big 4 CFO with experience working in publicly traded companies and hire a staff person to support the CFO, which was accomplished in March 2022. |
The remediation efforts set out herein will be implemented in the 2022 fiscal year. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
Management believes that despite our material weaknesses set forth above, our condensed consolidated financial statements for the three months ended March 31, 2022 are fairly stated, in all material respects, in accordance with U.S. GAAP.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the three months ending March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEDINGS.
From time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business. We are not currently involved in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations. We may become involved in material legal proceedings in the future. To the best our knowledge, none of our directors, officers or affiliates is involved in a legal proceeding adverse to our business or has a material interest adverse to our business.
ITEM 1A. RISK FACTORS.
We are a Smaller Reporting Company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On March 23, 2022, the Company entered into an Original Issue Discount Senior Convertible Debentures (the “Note”) totaling (i) $220,000 aggregate principal amount of Note due March 23, 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 440,000 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.
On April 28, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “April 2022 Note”) totaling (i) $110,000 aggregate principal amount of April 2022 Note due April 28, 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 220,000 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.
On May 10, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “May 2022 Note”) totaling (i) $110,000 aggregate principal amount of Note due May 10, 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 220,000 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.
These issuances have been made pursuant to transactions exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFTEY DISCLOSURE.
Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities from the Federal Mine Safety and Health Administration, or MSHA, under the Federal Mine Safety and Health Act of 1977, or the Mine Act. During the quarter ended March 31, 2022, we did not have any projects that were in production and as such, were not subject to regulation by MSHA under the Mine Act.
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ITEM 5. OTHER INFORMITON.
None.
Item 6. Exhibits.
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All references to Registrant’s Forms 8-K, 10-K and 10-Q include reference to File No. 333-204486
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Sigyn Therapeutics, Inc. a Delaware corporation | ||
| Dated: May 13, 2022 | By: | /s/ James Joyce |
| James Joyce | ||
| Chief Executive Officer and Director (Principal Executive Officer) | ||
| Dated: May 13, 2022 | By: | /s/ Jeremy Ferrell |
| Jeremy Ferrell | ||
| Chief Financial Officer (Principal Financial and Accounting Officer) | ||
| Dated: May 13, 2022 | By: | /s/ Craig Roberts |
| Craig Roberts | ||
| Chief Technology Officer and Director | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ James Joyce | Chief Executive Officer and Director | May 13, 2022 | ||
| James Joyce | (Principal Executive Officer) | |||
| /s/ Jeremy Ferrell | Chief Financial Officer | May 13, 2022 | ||
| Jeremy Ferrell | (Principal Financial and Accounting Officer) | |||
| /s/ Craig Roberts | CTO and Director | May 13, 2022 | ||
| Craig Roberts |
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