Zeo ScientifiX, Inc 10-Q for FY2023 Q1
Zeo ScientifiX, Inc. (ZEOX)
About this 10-Q
Zeo ScientifiX, Inc filed this 10-Q on September 14, 2022, covering the quarter ended July 31, 2022 (FY2023 Q1).
Headline figures
Quarter ended July 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.71M
- up 25.2% from $1.37M a year earlier
- Net loss
- $2.73M
- compared with a net loss of $1.41M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
For
the quarterly period ended
OR
For the transition period from ___________ to ___________
Commission
file number:
(Exact Name of Registrant as Specified in Its Charter)
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or Other Jurisdiction of Incorporation or Organization) |
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | N/A | N/A |
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value
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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by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files.)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “accelerated filer”, “large accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer | ☐ | Accelerated Filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
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by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
There were shares of common stock, $0.001 par value, of the Registrant issued and outstanding as of September 13, 2022.
ORGANICELL REGENERATIVE MEDICINE, INC.
TABLE OF CONTENTS
i
Part I – FINANCIAL INFORMATION
Item 1. Financial Statements
Organicell Regenerative Medicine, Inc.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| July 31, | October 31, | |||||||
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net of allowance for bad debts | ||||||||
| Prepaid expenses | ||||||||
| Inventories | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Other assets – right of use | ||||||||
| Security deposits | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accrued liabilities to management | ||||||||
| Notes payable | ||||||||
| Advances payable | ||||||||
| Advances for future stock purchases | ||||||||
| Finance lease obligations | ||||||||
| Operating lease obligations | ||||||||
| Deferred revenue | ||||||||
| Debentures payable | ||||||||
| Promissory Note, net of debt discount | ||||||||
| Commitment Fee Shortfall Obligation | ||||||||
| Liabilities attributable to discontinued operations | ||||||||
| Total Current Liabilities | ||||||||
| Long term finance lease obligations | ||||||||
| Long term operating lease obligations | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ Deficit | ||||||||
| Common stock, $ par value, shares authorized; and shares issued and outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
1
Organicell Regenerative Medicine, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three
Months Ended July 31, | Nine months Ended July 31, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross profit | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Change in Commitment Fee Shortfall Obligation | ( | ) | ||||||||||||||
| Gain from write-off of liabilities attributable to discontinued operations | ||||||||||||||||
| Other | ||||||||||||||||
| Loss before taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per common share - basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of common shares outstanding - basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
2
Organicell Regenerative Medicine, Inc.
CONSOLIDATED CHANGES TO STOCKHOLDERS’ DEFICIT
For the Three Months And Nine Months Ended July 31, 2022 and 2021
(Unaudited)
Three Months Ended July 31,
| Additional | Total | |||||||||||||||||||
| Common Stock | Paid In | Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Par Value | Capital | Deficit | Deficit | ||||||||||||||||
| Balance May 1, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Stock-based compensation | ||||||||||||||||||||
| Capital contributed by Executive | - | |||||||||||||||||||
| Common stock issued as commitment fee for Promissory Note | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance July 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Balance May 1, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Sale of common stock | ||||||||||||||||||||
| Exchange of accounts payable for stock | ||||||||||||||||||||
| Stock issued for future services | ||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance July 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
Nine Months Ended July 31,
| Additional | Total | |||||||||||||||||||
| Common Stock | Paid In | Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Par Value | Capital | Deficit | Deficit | ||||||||||||||||
| Balance October 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Sale of common stock | ||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||
| Capital contributed by Executive | - | |||||||||||||||||||
| Common stock issued as commitment fee for Promissory Note | ||||||||||||||||||||
| Stock issued in settlement of litigation | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance July 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Balance October 31, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Sale of common stock | ||||||||||||||||||||
| Exchange of accounts payable for stock | ||||||||||||||||||||
| Stock issued for future services | ||||||||||||||||||||
| Stock based compensation | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance July 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
Organicell Regenerative Medicine, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months Ended July 31, | ||||||||
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization expense | ||||||||
| Amortization of OID and commitment fee discount – Promissory Note | ||||||||
| Change in Commitment Fee Shortfall Obligation | ||||||||
| Gain from write-off of liabilities attributable to discontinued operations | ( | ) | ||||||
| Write-off of inventory | ||||||||
| Stock-based compensation | ||||||||
| Stock issued in settlement of litigation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Inventories | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Accrued liabilities to management | ||||||||
| Security deposits | ( | ) | ( | ) | ||||
| Deferred revenue | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of fixed assets | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of Promissory Note | ||||||||
| Advances for future stock purchases | ||||||||
| Capital contributed by executive | ||||||||
| Payments on finance lease | ( | ) | ( | ) | ||||
| Repayments of notes payable | ( | ) | ( | ) | ||||
| Proceeds from sale of common stock | ||||||||
| Net cash provided by financing activities | ||||||||
| (Decrease) in cash | ( | ) | ( | ) | ||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
| Cash paid for taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING TRANSACTIONS: | ||||||||
| OID discount on proceeds received from Promissory Note | $ | $ | ||||||
| Stock purchased from payments due on accounts payable | $ | $ | ||||||
| Common stock issued as commitment fee for Promissory Note | $ | $ | ||||||
| Commitment Fee Shortfall Obligation | $ | $ | ||||||
| Promissory note issued for past due Professional Fees | $ | $ | ||||||
| Purchase of fixed assets included in accounts payable | $ | $ | ||||||
| Stock issued for future services | $ | $ | ||||||
| Stock subscription receivable | $ | $ | ||||||
| Exchange of accounts payable interest into common stock | $ | $ | ||||||
| Operating lease – right of use assets | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Organicell Regenerative Medicine, Inc. f/k/a Biotech Products Services and Research, Inc. (“Organicell” or the “Company”) was incorporated on August 9, 2011 in the State of Nevada. The Company is a clinical-stage biopharmaceutical company principally focusing on the development of innovative biological therapeutics for the treatment of degenerative diseases and the provision of other related services. The Company’s proprietary products are derived from perinatal sources and manufactured to retain the naturally occurring extracellular vesicles, hyaluronic acid, and proteins without the addition or combination of any other substance or diluent. Our proprietary products are principally used in the health care industry administered through doctors and clinics (collectively, “Providers”).
On May 21, 2018, the Company filed a Certificate of Amendment with the Secretary of State of Nevada to change the Company’s name from Biotech Products Services and Research, Inc. to Organicell Regenerative Medicine, Inc., effective June 20, 2018 (the “Name Change”) and during November 2021 the Name Change was effectuated in the marketplace by the Financial Industry Regulatory Agency.
For the nine months ended July 31, 2022 and July 31, 2021, the Company principally operated through General Surgical of Florida, Inc., a Florida corporation and wholly owned subsidiary, which was formed to sell the Company’s therapeutic products to Providers.
The Company’s leading product, Zofin™ (also known as OrganicellTM Flow), is an acellular, biologic therapeutic derived from perinatal sources and is manufactured to retain naturally occurring microRNAs, without the addition or combination of any other substance or diluent.
In June 2021, the Company announced that it was launching a service platform for its first autologous product called Patient Pure XTM (PPXTM). PPXTM is a non-manipulated biologic containing the nanoparticle fraction from a patient’s own peripheral blood. The Company began to accept minimal orders for this service in October 2021.
In November 2020, the Company formed Livin’ Again Inc., a wholly owned subsidiary, for the purpose of among other things, providing independent education, advertising and marketing services, to Providers that provide medical and other healthcare, anti-aging and regenerative services. Due to limited activity to date, the Company intends to close-down this service by October 31, 2022.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.
Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to the rules and regulations of the Securities Exchange Commission, although we believe that the disclosures made are adequate to make the information not misleading. These unaudited consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended October 31, 2021 filed with the Securities and Exchange Commission.
Concentrations of Credit Risk
The
balance sheet items that potentially subject us to concentrations of credit risk are primarily cash and cash equivalents. Balances in
accounts are insured up to Federal Deposit Insurance Corporation (“FDIC”) limits of $
5
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles of the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. Management bases its estimates on historical experience and on other assumptions considered to be reasonable under the circumstances. However, actual results may differ from the estimates.
Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents.
Accounts Receivable
Accounts receivable are recorded at net realizable value on the date revenue is recognized. The Company provides allowances for doubtful accounts for estimated losses resulting from the inability of its customers to pay their obligation. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to repay, additional allowances may be required. The Company provides for potential uncollectible accounts receivable based on specific customer identification and historical collection experience adjusted for existing market conditions.
The
policy for determining past due status is based on the contractual payment terms of each customer, which are generally net 30 or net
60 days. Once collection efforts by the Company and its collection agency are exhausted, the determination for charging off uncollectible
receivables is made. For the three months and nine months ended July 31, 2022 and 2021, the Company did
Stock Subscriptions Receivable
Stock subscriptions receivable for equity investments in the Company are classified as current assets once a fully executed stock subscription agreement is received and provided that the receivable is collected prior to the issuance of the financial statements. In the event that the Company receives a fully executed stock subscription agreement but the receivable is not collected prior to the issuance of the financial statements, the receivable is classified as a direct reduction to stockholders’ equity. At July 31, 2022 and October 31, 2021, there were stock subscriptions receivable outstanding.
Inventory
Inventory
is stated at the lower of cost or net realizable value using the average cost method. The Company provides reserves for potential excess,
dated or obsolete inventories based on an analysis of forecasted demand compared to quantities on hand and any firm purchase orders,
as well as product shelf life. At July 31, 2022 and October 31, 2021, the Company determined that there were
Property and Equipment
Property
and equipment are stated at cost. Depreciation and amortization are provided using the straight-line method over the estimated useful
lives of the related assets. The estimated useful lives of property and equipment range from
6
Construction in Progress
The cost of all projects under construction for new laboratory facilities and other improvements that are in progress (under way) at a particular point in time and have not yet been placed into service are reported as construction in progress until such time as the project is complete.
Revenue Recognition
The Company follows the guidance of FASB Accounting Standards Update (“ASU”) Topic 606 “Revenue from Contracts with Customers” which requires the Company to recognize revenue in amounts that reflect the prorata completion of the performance obligations of the Company required under the contracts.
The Company recognizes revenue only when it transfers control of a promised good or service to a customer in an amount that reflects the consideration it expects to receive in exchange for the good or service. Our performance obligations are satisfied and control is transferred at a point-in-time, which is typically when the transfer of title to the product sold has taken place and there is evidence of our customer’s satisfactory acceptance of the product shipment or delivery except in those instances when the customer has made prior arrangements with the Company to store the product purchased by the customer at the Company’s facilities that is to be delivered at a later date to be designated by the customer.
Basic income (loss) per common share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted average number of shares adjusted for any potentially dilutive debt or equity instruments.
At
July 31, 2022, the Company had common shares issuable upon the exercise of warrants and unpaid Original Base Salary and Incremental
Salary that could be convertible into approximately
All stock-based payments are recognized in the financial statements based on their fair values.
Research and Development Costs
Research
and development costs consist of direct and indirect costs associated with the development of the Company’s technologies.
These costs are expensed as incurred. Our research and development expenses were approximately $
7
Income Taxes
The Company is required to file a consolidated tax return that includes all of its subsidiaries.
Provisions for income taxes are based on taxes payable or refundable for the current year taxable income for federal and state income tax reporting purposes and deferred income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss carryforwards. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of the operations in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some or all of the deferred tax assets will not be realized.
The Company accounts for uncertain tax positions in accordance with FASB Topic 740 – Income Taxes. This pronouncement prescribes a recognition threshold and measurement process for financial statement recognition of uncertain tax positions taken or expected to be taken in a tax return. The interpretation also provides guidance on recognition, derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
For the three months and nine months ended July 31, 2022 and 2021 the Company incurred operating losses, and therefore, there was not any income tax expense amount recorded during those periods. There is a full valuation allowance established for the tax benefit associated with the net losses for the three months and nine months ended July 31, 2022 and 2021.
Valuation of Derivatives
The Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date.
Sequencing
The Company has adopted a sequencing policy whereby, in the event that reclassification of contracts from equity to assets or liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares, shares will be allocated on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest grants receiving the first allocation of shares.
The Company currently has authorized shares of common stock of which shares are issued and outstanding as of September 14, 2022. The Company expects that it will continue to issue common stock in the future in connection with debt and/or equity financings, transactions with third parties, performance incentives and as compensation to its employees. Currently the amount of authorized shares is sufficient to provide for the additional shares that the Company may be contingently obligated to issue under existing arrangements.
8
Fair Value of Financial Instruments
The Company includes fair value information in the notes to financial statements when the fair value of its financial instruments is different from the book value. When the book value approximates fair value, no additional disclosure is made.
The Company follows FASB ASC 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements. It defines fair value 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. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company’s financial instruments consist of cash and cash equivalents, accounts payable, accrued liabilities and convertible debt. The estimated fair value of cash, accounts payable and accrued liabilities approximate their carrying amounts due to the short-term nature of these instruments.
The Company follows the provisions of ASC 820 with respect to its financial instruments. As required by ASC 820, assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement.
Level one — Quoted market prices in active markets for identical assets or liabilities;
Level two — Inputs other than level one inputs that are either directly or indirectly observable 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; and
Level three — Unobservable inputs that are supported by little or no market activity and developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter.
The Company did not have any convertible instruments outstanding at July 31, 2022 and October 31, 2021 that qualify as derivatives.
Operating Lease Obligations
Under the provisions of Accounting Standards Update (ASU) No. 2016-02 (Topic 842) (“ASC 842”), the Company recognizes a right of use (“ROU”) asset and corresponding lease liability for all operating leases upon commencement of the lease. The Company applies the modified retrospective approach which includes a number of optional practical expedients on leases that commenced before the effective date of ASC 842, including continuing to account for leases that commenced before the effective date in accordance with previous guidance, unless the lease is modified and the inclusion of amounts pertaining to the maintenance portion of the leased assets.
The
Company’s policy is to treat operating leases that have a term of one year or less at lease commencement date and do not include
a purchase option that is reasonably certain of exercise, consistent with the lease recognition approach as previously outlined under
ASC 840. In addition, month to month leases which do not involve additional financial commitments on the part of the Company are also
treated consistent with the lease recognition approach as previously outlined under ASC 840. The Company has established a capitalization
threshold of $
Subsequent Events
The Company has evaluated subsequent events that occurred after July 31, 2022 through the financial statement issuance date for subsequent event disclosure consideration.
9
NOTE 3 – GOING CONCERN
The
unaudited accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles,
which contemplate continuation of the Company as a going concern. The Company has had limited revenues since its inception. The Company
incurred net losses of $
New United States Food and Drug Administration (“FDA”) regulations which were announced in November 2017 and which became effective beginning in May 2021 (postponed from November 2020 due to the COVID-19 pandemic) require that the sale of products that fall under Section 351 of the Public Health Services Act pertaining to marketing traditional biologics and human cells, tissues and cellular and tissue based products (“HCT/Ps”) can only be sold pursuant to an approved biologics license application (“BLA”). The Company has not obtained any opinion or ruling regarding the Company’s operations and whether the processing, sales and distribution of the products it currently produces would be subject to the FDA’s previously announced intended enforcement policies regarding HCT/P’s.
In addition to the above, the adverse public health developments and economic effects of the ongoing COVID-19 pandemic in the United States have adversely affected the demand for our products and services by our customers and from patients of our customers as a result of quarantines, facility closures and social distancing measures put into effect in connection with the COVID-19 outbreak and which currently still continue to have a negative impact to our business and the economy.
As a result of the above, the Company’s efforts to establish a stabilized source of sufficient revenues to cover operating costs has yet to be achieved and ultimately may prove to be unsuccessful unless (a) the Company’s ability to process, sell and distribute the products currently being produced or developed in the future are not restricted; (b) the United States economy returns to pre-COVID-19 conditions; and/or (c) additional sources of working capital through operations or debt and/or equity financings are realized. These financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Management anticipates that the Company will remain dependent, for the near future, on additional investment capital to fund ongoing operating expenses and research and development costs related to development of new products and to perform required clinical studies in connection with the sale of its products. The Company does not have any assets to pledge for the purpose of borrowing additional capital. In addition, the Company relies on its ability to produce and sell products it manufactures that are subject to changing technology and regulations that it currently sells and distributes to its customers. The Company’s current market capitalization, common stock liquidity and available authorized shares may hinder its ability to raise equity proceeds. The Company anticipates that future sources of funding, if any, will therefore be costly and dilutive, if available at all.
In view of the matters described in the preceding paragraphs, recoverability of the recorded asset amounts shown in the accompanying consolidated balance sheet assumes that (a) the Company is able to continue to produce products or obtain products under supply arrangements which are in compliance with current and future regulatory guidelines; (b) the United States economy returns to pre-COVID-19 market conditions; (c) the Company will be able to establish a stabilized source of revenues, including efforts to expand sales internationally and the development of new product offerings and/or designations of products; (d) obligations to the Company’s creditors are not accelerated; (e) the Company’s operating expenses remain at current levels and/or the Company is successful in restructuring and/or deferring ongoing obligations; (f) the Company is able to continue its research and development activities, particularly in regards to remaining compliant with the FDA and ongoing safety and efficacy of its products; and/or (g) the Company obtains additional working capital to meet its contractual commitments and maintain the current level of Company operations through debt or equity sources.
There is no assurance that the products we currently produce will not be subject to the FDA’s previously announced intended enforcement policies regarding HCT/P’s and/or the Company will be able to complete its revenue growth strategy. There is no assurance that the Company’s research and development activities will be successful or that the Company will be able to timely fund the required costs of those activities. Without sufficient cash reserves, the Company’s ability to pursue growth objectives will be adversely impacted. Furthermore, despite significant effort since July 2015, the Company has thus far been unsuccessful in achieving a stabilized source of revenues.
If revenues do not increase and stabilize, if the COVID-19 crisis is not satisfactorily managed and/or resolved, if the Company’s ability to process, sell and/or distribute the products currently being produced or developed in the future are restricted, and/or if additional funds cannot otherwise be raised, the Company might be required to seek other alternatives which could include the sale of assets, closure of operations and/or protection under the U.S. bankruptcy laws. As of July 31, 2022, based on the factors described above, the Company concluded that there was substantial doubt about its ability to continue to operate as a going concern for the 12 months following the issuance of these financial statements.
10
NOTE 4 – RESTRUCTURING
Effective
July 13, 2022, the Company entered into (a) a binding letter of intent with Skycrest Holdings, LLC (“Skycrest”) and Greyt
Ventures LLC (“Greyt,” and together with Skycrest, the “Skycrest/Greyt Group”) to invest $
Pursuant
to the binding letters of intent (the “LOIs”), the Company agreed to (a) make certain corporate governance changes as more
fully described therein, including allowing the Investors to appoint new independent directors who will comprise a majority of the members
of the Board; (b) enter into 36-month consulting agreements with each of Skycrest and Greyt (each, a “Consulting Agreement,”
and collectively, the “Consulting Agreements”), pursuant to which (i) Skycrest and Greyt will provide certain advisory services
to the Company as more fully set forth in the LOIs; and (ii) Skycrest and Greyt shall each be compensated for their services by the Company
issuing to each of them ten year-warrants to purchase
Contemporaneously
with entering into the respective LOIs, the
On August 19, 2022 (“Closing”), the Company entered into stock purchase agreements (each, an “SPA” and collectively, the “SPAs”) with Skycrest Holdings, LLC (“Skycrest”), Greyt Ventures LLC (“Greyt”), Beyond 100 FZE (“Beyond 100”) and Smart Co. Holding Pte. Ltd. (“Smart Co,” and together with Skycrest, Greyt and Beyond 100, individually, an “Investor” and collectively, the “Investors”).
Pursuant to the SPAs, the Company issued each Investor 50,000,000 shares of the Company’s common stock (“Shares”) at a price of $0.02 per Share ($1,000,000). In addition, under the SPAs with Skycrest and Greyt, the Company issued each of them 50 shares of newly designated Series C Non-Convertible Preferred Stock (the “Series C Preferred Shares”). The Series C Preferred Shares vote together with Shares of our common stock as a single class on all matters presented to a vote of stockholders, except as required by law and entitle Skycrest and Greyt to each exercise 25.5% of the total voting power of the Company.
The SPAs with Skycrest and Greyt, also grant them the right, acting jointly, to designate a majority of the nominees to be elected to the Company’s board of directors at each annual meeting of the Company’s stockholders (the “Designation Right”). The Designation Right expires at such time as the Series C Preferred Shares are no longer outstanding.
As a result of the issuance to Skycrest and Grey of the Series C Preferred Stock and the granting to them of the Designation Right, a “Change in Control” of the Company is deemed to have occurred.
The SPA with Beyond 100 grants that Investor a right of first refusal for a period of 18 months from Closing with respect to any bona fide offer, or proposal received by the Company from or agreement in principal reached by the Company with a third party to enter into an exclusive arrangement providing for manufacturing, distributing, licensing, and commercializing any of its existing and/or future products and services to be manufactured, licensed and/or distributed by the Company or any of its subsidiaries in India.
The SPAs also accord the Investors registration rights under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to which the Company has agreed to file a registration statement under the Securities Act with the Securities and Exchange Commission (the “SEC”) within 180 days of Closing and use its commercially reasonable efforts to cause such registration statement to be declared effective by the SEC within 60 days thereafter. The registration statement will cover the resale of the Shares pursuant to the SPAs, and in the case of Skycrest and Greyt, the Shares issued or issuable upon exercise of the Consulting Warrants. The SPAs also provide the Investors “piggy-back” registration rights with respect to their respective Shares.
Consulting Agreements
At
Closing, the Company also entered into 36-month consulting agreements with each of Skycrest and Greyt (each, a “Consulting Agreement,”
and collectively, the “Consulting Agreements”), pursuant to which (a) Skycrest and Greyt will provide certain advisory services
to the Company as more fully set forth therein; and (b) Skycrest and Greyt are being compensated for their services by the Company issuing
to each of them at closing ten (10) year-warrants to purchase
11
NOTE 5 – INVENTORIES
| Schedule of Inventories | ||||||||
| July 31, 2022 | October 31, 2021 | |||||||
| Raw materials and supplies | $ | $ | ||||||
| Finished goods | ||||||||
| Total inventories | $ | $ | ||||||
NOTE 6 – PROPERTY AND EQUIPMENT
| Schedule of Property and Equipment | ||||||||
| July 31, 2022 | October 31, 2021 | |||||||
| Computer equipment | $ | $ | ||||||
| Finance lease equipment | ||||||||
| Manufacturing equipment | ||||||||
| Leasehold improvements | ||||||||
| Less: accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Construction in progress | ||||||||
| Total property and equipment, net | $ | $ | ||||||
Depreciation
expense totaled $
As
described in Note 7, during the year ended October 31, 2021, the Company began the build-out of additional laboratory processing, product
distribution and administrative office capacity at its Basalt Lab Lease location. The Basalt Lab Lease location became operational during
May 2022 and amortization of these costs began during May 2022. Amortization expense totaled $
NOTE 7 – LEASE OBLIGATIONS
Finance Lease Obligations:
During
March 2019, the Company entered into a lease agreement for certain lab equipment in the amount of $
During
October 2021, the Company entered into a second lease agreement in the amount of $
12
Operating Lease Obligations:
Administrative Office
The
Company’s corporate administrative offices are leased from MariLuna, LLC, a Florida limited liability company which is owned by
Dr. Mitrani. During July 2020, the Company entered into an extension of the operating lease agreement. The lease term is for an additional
36 months beginning July 1, 2020 and expiring June 30, 2023, with a monthly rental rate of $
Lease
amortization expense for the three months ended July 31, 2022 and 2021 was $
Beginning
October 1, 2020, the Company entered into a second lease agreement with Mariluna LLC for office space located in Aspen, CO. The initial
term of the lease was for one year, expiring on September 30, 2021 and the lease has been subsequently extended on a month to month basis.
Under the terms of the lease, the Company is required to make monthly rental payments of $
In connection with the Closing, both of the lease agreements with Mariluna LLC were terminated and the remaining ROU asset and security deposit were written off (see Note 12).
On
August 30, 2022, the Company entered into a one-year lease agreement for office space in Los Angeles, California commencing September
1, 2022 and ending August 31, 2023. The Company was required to make a one-time prepayment of the annual rent in the amount of $
Laboratory Facilities:
In
connection with the Company’s decision to again operate a placental tissue bank processing laboratory in Miami, Florida, during
February 2019, the Company entered into a renewable month to month lease agreement (“Miami Lab Lease”) for an approximately
450 square foot laboratory and a 100 square foot administrative office space. In connection with the Miami Lab Lease, the Company was
required to post a security deposit of $
During
March 2021, the Company entered into a lease agreement for an approximately 2,452 square foot commercial space located in Basalt, Colorado
(the “Basalt Lab Lease”). The Company intends to build additional laboratory processing, product distribution and administrative
office capacity from this location. The term of the Basalt Lab Lease is for three years and may be renewed for an additional (3) three-year
term provided the Company is not in default (“First Renewal Option”). Rental expense is $
In
connection with the execution of the Basalt Lab Lease, the Company recorded a ROU asset and corresponding operating lease obligation
of $
Lease
amortization expense for the three months and nine months ended July 31, 2022 was $1
13
NOTE 8 – RELATED PARTY TRANSACTIONS
The
Company’s corporate administrative offices are leased from MariLuna, LLC, a Florida limited liability company which is owned by
Dr. Mitrani. The term of the lease expires in June 2023. Monthly rent is $
Beginning
October 1, 2020, the Company entered into a second lease agreement with Mariluna LLC for office space located in Aspen, CO. The initial
term of the lease was for one year, expiring on September 30, 2021 and the lease has been subsequently extended on a month to month basis.
Under the terms of the lease, the Company is required to make monthly rental payments of $
In
connection with Mr. Bothwell’s executive employment agreements, the Company agreed to reimburse Rover Advanced Technologies, LLC
(“Rover”), a company owned and controlled by Mr. Bothwell for office rent and other direct expenses (phone, internet, copier
and direct administrative fees, etc.) totaling $
For
the three months and nine months ended July 31, 2022, the Company sold a total of approximately $
At
July 31, 2022, salary amounts owed to Albert Mitrani, Dr. Mari Mitrani and Ian Bothwell were $
During
June 2022, Albert Mitrani made a capital contribution of $
14
NOTE 9 – NOTES PAYABLE
Notes Payable
Debentures
On
June 20, 2018, the Company issued a total of $
On
August 20, 2022, the Lender and the Company entered into a settlement and general release agreement whereby the Company agreed to make
a lump sum payment of $
Unsecured Promissory Note For Professional Fees Owed
On
January 24, 2022, the Company reached an agreement with a professional firm in connection with unpaid legal services owing as of December
31, 2021 in the amount of $
Unsecured Promissory Note
On
February 5, 2019, the Company entered into an unsecured loan agreement with a third party with a principal balance of $
Promissory Note - SPA
On
January 11, 2022, the Company entered into a Securities Purchase Agreement (“SPA”) with AJB Capital Investments, LLC (“Purchaser”)
pursuant to which we sold a promissory note in the principal amount of $
15
The
Promissory Note matures on July 11, 2022, subject to extension at the option of the Company for up to an additional six month period
(“Extension”), bears interest at a rate of
Under the terms of the Promissory Note, only following an event of default (as defined in the Promissory Note), is convertible into shares of the Company’s common stock at a conversion price equal to the lower of the “VWAP” (as hereinafter defined) of the common stock during (i) the twenty (20) trading day period preceding the issuance date of the Note; or (ii) the twenty (20) trading day period preceding the date of conversion of the Promissory Note. As used in the Promissory Note, “VWAP” means, for any date, the price of our common stock as determined by the first of the following clauses that applies: (i) if the common stock is then listed or quoted on one or more established stock exchanges or national market systems, the daily volume weighted average price of the common stock for such date on the trading market on which the common stock is then listed or quoted as reported by Bloomberg L.P.; or (ii) if the common stock is regularly quoted on an automated quotation system (including applicable tiers of the over-the-counter market maintained by OTC Market Group, Inc.) or by a recognized securities dealer, the volume weighted average price of the common stock for such date on the applicable OTC Markets Group, Inc. tier or as quoted by such securities dealer. In accordance with the terms of the SPA, as of January 11, 2022, the Company has reserved shares of its authorized but unissued common stock for issuance in the event the Purchaser exercises its right to convert the Promissory Note following an event of default.
The Promissory Note may be prepaid by the Company at any time without penalty. The Promissory Note also contains covenants, events of defaults, penalties, default interest and other terms and conditions customary in transactions of this nature.
Pursuant
to the terms of the SPA, the Company paid a commitment fee to the Purchaser in the amount of $
In
the event that by the first anniversary of repayment of the Promissory Note by the Company, the Purchaser has not generated the amount
of $
The offer and sale of the Promissory Note to the Purchaser was made in a private transaction exempt from the registration requirements of the Securities Act of 1933, as amended (“Securities Act”), in reliance on exemptions afforded by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder.
Upon
the closing, the Company recorded a discount of the Promissory Note in the amount of $
For
the three months and nine months ended July 31, 2022, $
At
July 31, 2022, the fair value of the Commitment Fee Shares was approximately $ (valued at $0.03 the closing price of the common
stock of the Company on July 29, 2022). As a result, the Company has recorded a reduction in the Commitment Fee Shortfall Obligation
in the amount of $
16
NOTE 10 – IRS PENALTIES
The
Company’s income tax returns for the periods since inception through the tax year ended October 31, 2015 were not filed with the
Internal Revenue Service (“IRS”) until August 2017 (“Delinquent Filed Returns”). The Company’s income tax
returns for the tax year ended October 31, 2016 were filed with the IRS during December 2017. In connection with the Delinquent Filed
Returns, during the period September 2017 through October 2017, the Company received notices that it was being assessed approximately
$
NOTE 11 – CAPITAL STOCK
Preferred Stock
The Company is authorized to issue shares of $ par value preferred stock in one or more designated series, each of which shall be so designated as to distinguish the shares of each series of preferred stock from the shares of all other series and classes. The Company’s board of directors is authorized, without stockholders’ approval, within any limitations prescribed by law and the Company’s Articles of Incorporation, to fix and determine the designations, rights, qualifications, preferences, limitations and terms of the shares of any series of preferred stock.
On August 17, 2022, the Company filed a Certificate of Designation for a newly created Series C Non-Convertible Preferred Stock consisting of shares, $ par value, of authorized but unissued preferred stock of the Company (“Series C Preferred Shares”).
The Series C Preferred Shares vote together with shares of our common stock as a single class on all matters presented to a vote of stockholders, except as required by law. The Series C Preferred Shares are not convertible into common stock, do not have any dividend rights and do have a nominal liquidation preference. The Series C Preferred Shares also have certain protective provisions, such as requiring the vote of a majority of Series C Preferred Shares to change or amend their rights, powers, privileges, limitations and restrictions.
Issued Shares
As of July 31, 2022, there were designations of Preferred Stock authorized or outstanding.
In connection with the Closing (see Note 4), on August 19, 2022, the Company issued each of Skycrest and Greyt, 50 shares of the Series C Preferred Shares. The Series C Preferred Shares are automatically redeemed by the Company for nominal consideration at such time as the holder owns less than 50% of the Shares purchased pursuant to its SPA and Shares issued or issuable upon exercise of the Consulting Warrants or in the event the holder transfers or seeks to transfer the Series C Preferred Shares, other than by the laws of descent and distribution.
17
Common Stock
Issuances of Common Stock - Sales:
In
November 2021, the Company sold an aggregate of shares of common stock to one “accredited investor” at $ per
share for an aggregate purchase price of $
In
January 2022, the Company sold an aggregate of shares of common stock to one “accredited investor” at $per share
for an aggregate purchase price of $
In
February 2022, the Company sold an aggregate of shares of common stock to one “accredited investor” at $ per
share for an aggregate purchase price of $
During
August 2022, in connection with the Closing, the Company sold an aggregate of shares of common stock to several “accredited
investors” at $ per share for an aggregate purchase price of $
During
August 2022 and September 2022, the Company sold an aggregate of shares of common stock to three “accredited investors”
at $ per share for an aggregate purchase price of $
Issuances of Common Stock – Stock-Based Compensation:
On
December 27, 2021, the Company and an employee agreed to an amendment of the employee’s employment agreement. Under the terms of
the amendment, the employee agreed to extend the term of the agreement through December 31, 2024 and the Company agreed to increase the
employee’s annual salary from $
In connection with the VP Agreements, during the nine months ended July 31, 2022, the Company issued each of the Sales Executive an additional Performance Shares (total shares) valued at $31,500, based on the closing price of the common stock of the Company on the grant date of $ per share. On June 30, 2022, the VP Agreements were terminated (see note 12). The Company has amortized the value of the stock-based compensation of $31,500 up through the date of termination. The Company has recorded a total of $ and $ of stock-based compensation expense during the three and nine months ended July 31, 2022, respectively, in connection with these shares.
On
March 17, 2022, the Company entered into a consulting agreement with a third party to assist the Company with certain services associated
with the implementation of the PPXTM service platform as well as other customary day to day activities as reasonably requested.
The term of the agreement expires on September 30, 2022 (“Initial Term”) and may be renewed for four additional six-month
terms upon mutual agreement. As consideration for agreeing to provide consulting services to the Company during the Initial Term, the
Company agreed to issue the consultant
18
On
June 9, 2022, the Company entered into a consulting agreement with a company affiliated with Mr. Sinnreich in connection with past and
future consulting and advisory services to be provided to the Company. In connection with the consulting agreement, for the months of
June 2022 and July 2022, the Company issued the consultant
On
July 21, 2022, in connection with the Term Sheet, Mr. Sinnreich was issued
On July 21, 2022, in connection with the Term Sheet, during the first year of the Initial Term, Mr. Sinnreich will be compensated by the issuance of 24,000,000 shares of Organicell’s common stock upon execution of the Term Sheet, which shall vest pro-rata in equal monthly installments of 2,000,000 shares each. The shares issued were valued at $0.0343 per share, the closing price of the common stock of the Company on the effective date of the Term Sheet, totaling $823,200. The Company will amortize the costs associated with the issuance over the first year of the Initial Term. The Company recorded $ of stock-based compensation expense during the three and nine months ended July 31, 2022.
On August 18, 2022, the Company entered into a consulting agreement with a third party to provide strategic marketing and digital marketing services for a minimum period of six months. As consideration for agreeing to provide consulting services to the Company, the Company will pay the consultant $15,000 per month and issued the consultant 2,500,000 shares of unregistered common stock valued at $0.0241 per share, the closing price of the common stock of the Company on the effective date of the agreement. All of the shares granted vested immediately on the date of issuance. The Company will record $ of stock-based compensation expense based on the grant date fair value of these shares during the three months ended October 31, 2022. The consulting agreement may be renewed for additional six month periods under the same terms unless either party provides 30 days written notice to terminate.
Equity Line of Credit Commitment:
During
November 2021, the Company entered into an term sheet agreement with Tysadco Partners LLC, a Delaware limited company (“Tysadco”)
whereby Tysadco agreed to provide the Company with a $
On September 1, 2022, the Company entered into a Purchase Agreement (the “Purchase Agreement”) with Tysadco and a Registration Rights Agreement (the “Registration Rights Agreement”) with Tysadco.
Pursuant to the Purchase Agreement, Tysadco committed to purchase, subject to certain restrictions and conditions, up to $10,000,000 worth of the Company’s common stock (the “Commitment”), over a period of 24 months from the effectiveness of the registration statement registering the resale of shares purchased by Tysadco pursuant to the Purchase Agreement (the “Registration Statement”).
19
The Purchase Agreement provides that at any time after the effective date of the Registration Statement, from time to time on any business day selected by the Company (the “Purchase Date”), the Company shall have the right, but not the obligation, to direct Tysadco to buy the lesser of $1,000,000 in common stock per sale or 500% of the daily average share value traded for the 10 days prior to the closing request date, at a purchase price of 80% of the of the two lowest individual daily VWAPs during the ten (10) trading days preceding the draw down or put notice (“Valuation Period”), with a minimum request of $25,000. The payment for the shares covered by each request notice will occur on the business day immediately following the Valuation Period.
In addition, Tysadco will not be obligated to purchase shares if Tysadco’s total number of shares beneficially held at that time would exceed 9.99% of the number of shares of the Company’s common stock as determined in accordance with Rule 13d-1(j) of the Securities Exchange Act of 1934, as amended. In addition, the Company is not permitted to draw on the Purchase Agreement unless the Registration Statement covering the resale of the shares is effective.
The Purchase Agreement also contains customary representations and warranties of each of the parties. The assertions embodied in those representations and warranties were made for purposes of the Purchase Agreement and are subject to qualifications and limitations agreed to by the parties in connection with negotiating the terms of the Purchase Agreement. The Purchase Agreement further provides that the Company and Tysadco are each entitled to customary indemnification from the other for, among other things, any losses or liabilities they may suffer as a result of any breach by the other party of any provisions of the Purchase Agreement or Registration Rights Agreement. The Company has the unconditional right, at any time, for any reason and without any payment or liability, to terminate the Purchase Agreement.
Pursuant to the terms of the Registration Rights Agreement, the Company is obligated to use its commercially reasonable efforts to file a registration statement with the Securities and Exchange Commission within thirty (30) days after the date of such agreement, to register the resale by Tysadco of the shares of common stock issuable under the Purchase Agreement.
Shares Issued - Promissory Note:
As
described in Note 9, in connection with the issuance of the Promissory Note on January 11, 2022, the Company issued the Purchaser’s
commitment shares valued at $
Shares Issued – Amendment of consulting agreement:
On
August 19, 2022 the Company and a consultant (“Consultant”) agreed to an amendment to the consulting agreement whereby the
Consultant was issued
The shares issued were valued at $0.0235 per share, the closing price of the common stock of the Company on the effective date of the settlement, totaling $117,500.
Shares Issued – Settlement of Litigation:
As
described in Note 13, during April 2022 the Company settled a lawsuit whereby the Company paid LAE $
20
Management and Consultants Performance Stock Plan
On April 25, 2020, the Company approved the adoption of the Management and Consultants Performance Stock Plan (“MCPP”) providing for the grant to current senior executive members of management and third-party consultants shares of common stock of the Company (“Shares”) based on the achievement of certain defined operational performance milestones (“Milestones”).
On June 29, 2020, the Board amended the MCPP, providing for the additional grant of common stock of the Company to the current senior executive members of management and the current non-executive members of the Board based on the Company completing any transaction occurring while employed and/or serving as a member of the Board, respectively, that results in a change in control of the Company or any sale of substantially all the assets of the Company (“Transaction”) which upon after giving effect to such issuance of shares below, corresponds to a minimum pre-Transaction fully diluted price per share of the Company’s common stock in the amounts indicated below:
| Schedule of minimum pre-transaction price per share | ||||||||||
| Pre-Transaction Price Per Share Valuation (a) | Executive Bonus Shares Issued (b) | Non-executive Board Bonus Shares Issued (c) | ||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| (a) |
| (b) |
| (c) |
On August 14, 2020, the Board amended the MCPP, providing for the additional grant of common stock of the Company to each Dr. Maria I. Mitrani and Ian Bothwell based on the Company obtaining aggregate gross fundings (grants for research and development and clinical trials, purchase contracts for Company products, debt and/or equity financings) or other financial awards during the term of employment with the Company based on the amounts indicated below:
| Schedule of debt and/or equity financings | ||||||||||
| Aggregate Funding Amount | Shares | |||||||||
| From | To | |||||||||
| $ | $ | |||||||||
| $ | $ | |||||||||
| $ | $ | |||||||||
On
September 23, 2020, the
In addition, each of the current executives were entitled to receive an additional 7 million shares, which when combined with all previous IND and/or eIND’s Milestones previously issued under the MCPP of 43 million shares, represents the total of all incentive shares to be issued to each executive in connection with the combined thirteen IND’s and/or eIND’s Milestones achieved through September 23, 2020. In the future, each of the current executives shall be entitled to receive 5 million shares as a performance incentive for each IND and/or “Expanded Access” approval (and excluding all eIND’s) received by the Company that involve more than 15 patients and provided such milestone occurs during the term of employment with the Company.
On February 10, 2021, the Board amended the MCPP, providing for the grant of common stock of the Company of 5 million shares for each Phase II clinical trial completed, 5 million shares for each Phase III clinical trial approved and initiated (deemed to be upon the time the first patient is enrolled) and 10.0 million shares for each Phase III clinical trial fully enrolled. In addition, the CMO’s portion of a designated grant for an achievement of any applicable Milestone subsequent to September 23, 2020 was reduced to 30% until the time that the CMO becomes a full-time employee of the Company.
21
Pursuant to the MCPP, a total of 342,500,000 shares have been issued and as described above, additional shares are authorized to be issued under the MCPP subject to the achievement of the defined contingent performance based milestones described above and provided the milestones are achieved while the individual is employed and/or serving as a member of the Board:
| Schedule of management and consultants performance stock plan | ||||||||
| MCPP | MCPP Remaining | |||||||
| Shares | Shares | |||||||
| Name | Issued | Authorized | ||||||
| Albert Mitrani | ||||||||
| Ian Bothwell | ||||||||
| Dr. Maria Mitrani | ||||||||
| Dr. George Shapiro | ||||||||
| Dr. Allen Meglin | ||||||||
| Michael Carbonara | ||||||||
| Consultants | ||||||||
| Total | ||||||||
In connection with the MCPP Shares that have been awarded to date, all such shares were issued in connection with the MCPP Shares approved on April 25, 2020 and accordingly were valued $0.027 per share, the closing price of the common stock of the Company on the date that those respective MCPP Shares were approved.
Upon completion of the Share Exchange on October 29, 2021, the MCPP (but not Awards of unexchanged shares of our common stock) was terminated.
In connection with the Closing, the Company and each of the grantees of awards authorized but not yet issued under the MCPP (“Awards”) agreed to waive and terminate their respective Awards.
Unvested Equity Instruments:
A summary of unvested equity instruments outstanding for the nine months ended July 31, 2022 and 2021 are presented below:
| Schedule of Non vested Share Activity | ||||||||
| Number of Nonvested Shares |
Weighted- Average Grant Date Fair Value |
|||||||
| Outstanding at October 31, 2021 | $ | |||||||
| Non-Vested Shares Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Expired/Forfeited | $ | |||||||
| Outstanding at July 31, 2022 | $ | |||||||
| Number
of Nonvested Shares |
Weighted- Average Grant Date Fair Value |
|||||||
| Outstanding at October 31, 2020 | $ | |||||||
| Non-Vested Shares Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Expired/Forfeited | $ | |||||||
| Outstanding at July 31, 2021 | $ | |||||||
22
NOTE 12 – WARRANTS
A summary of warrant activity for the nine months ended July 31, 2022 and 2021 are presented below:
| Schedule of Summary of Warrant Activity | ||||||||||||||||
| Number of Shares | Weighted- average Exercise Price | Remaining Contractual Term (years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding at October 31, 2021 | $ | $ | ||||||||||||||
| Granted | $ | $ | ||||||||||||||
| Exercised | $ | - | $ | |||||||||||||
| Expired/Forfeited | $ | - | $ | |||||||||||||
| Outstanding and exercisable at July 31, 2022 | $ | $ | ||||||||||||||
| Number of Shares | Weighted- average Exercise Price | Remaining Contractual Term (years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding at October 31, 2020 | $ | $ | ||||||||||||||
| Granted | $ | - | $ | |||||||||||||
| Exercised | $ | - | $ | |||||||||||||
| Expired/Forfeited | $ | - | $ | |||||||||||||
| Outstanding and exercisable at July 31, 2021 | $ | $ | ||||||||||||||
On
July 21, 2022, the Company issued Mr. Sinnreich a cashless warrant to purchase an aggregate of
At
Closing, the Company also entered into 36-month consulting agreements with each of Skycrest and Greyt (each, a “Consulting Agreement,”
and collectively, the “Consulting Agreements”), pursuant to which (a) Skycrest and Greyt will provide certain advisory services
to the Company as more fully set forth therein; and (b) Skycrest and Greyt are being compensated for their services by the Company issuing
to each of them at closing ten (10) year-warrants to purchase
At
Closing, Ian Bothwell waived all unpaid and accrued compensation except for four unpaid base salary payments outstanding as of July 31,
2022, in exchange for ten-year warrants to purchase
At
Closing, Dr. George Shapiro terminated his consulting arrangement with the Company and waived all unpaid consulting fee obligations in
exchange for ten-year warrants to purchase
During
August 2022, the Company entered into five separate consulting and employment agreements providing for the issuance of ten-year warrants
to purchase an aggregate of
23
NOTE 13 – COMMITMENTS AND CONTINGENCIES
Employment Agreements
Changes in Management Compensation
Pursuant to the SPAs, the following changes in management compensation were implemented at Closing:
| 1. | Each of Albert Mitrani, Dr. Maria Ines Mitrani and Ian Bothwell entered into an amendment to their respective employment agreements providing for (a) setting their respective base salaries at $300,000 per annum; (b) limits on cell phone, automobile and other monthly allowances; (b) elimination of any compensation associated with commissions, fixed bonus, increases to base salary (based on revenue milestones), and/or tax make-whole provisions associated with equity grants; and (c) deletion of change in control provisions. |
| 2. | Albert Mitrani and Dr. Maria Ines Mitrani each waived all accrued but unpaid compensation, except for two unpaid base salary payments outstanding as of July 31, 2022. The Company, Albert Mitrani and Dr. Maria Ines Mitrani also agreed to terminate the leases with Mariluna LLC for use of Albert Mitrani’s and Mari Mitrani’s Miami, FL and Aspen, Colorado homes, retroactive to July 13, 2022. The Company wrote off the related ROU asset and lease liability as of the Closing Date. |
| 3. | Ian
Bothwell waived all unpaid and accrued compensation except for four unpaid base salary payments
outstanding as of July 31, 2022, in exchange for ten-year warrants to purchase |
| 4. | Dr.
George Shapiro terminated his consulting arrangement with the Company and waived all unpaid
consulting fee obligations in exchange for ten-year warrants to purchase |
| 5. | The Company and each of its directors agreed to terminate all awards granted under the Company’s Management and Consultant Performance Plan. |
Term Sheet – Acting CEO
On July 21, 2022 (“Effective Date”), Matthew Sinnreich was appointed by the Board of Directors to the position of Chief Operating Officer and Acting Chief Executive Officer.
On the Effective Date, Organicell and Mr. Sinnreich entered into a term sheet (the “Term Sheet”) setting forth in principle the terms of Mr. Sinnreich’s employment agreement with and compensation by the Company. Except with respect to the signing bonus described below, the Term Sheet is subject to the negotiation and execution of a definitive employment agreement embodying the provisions of the Term Sheet, as well as customary terms and conditions for an executive employment agreement (the “Employment Agreement”). The parties agreed to use their respective commercial best efforts to negotiate and execute the Employment Agreement.
The
Term Sheet provides that as an inducement for Mr. Sinnreich to join the Company, within five (5) days of the Effective Date, he will
be issued shares of restricted common stock and ten-year warrants to purchase
The Employment Agreement will provide for an initial two-year term commencing on the Effective Date (the “Initial Term”), which will automatically renew for successive one-year terms (each a “Renewal Term,” and together with the Initial Term, the “Term”), unless terminated by either party upon not less than ninety (90) days’ prior written notice given before the expiration of the Initial Term or a Renewal Term, or earlier terminated as provided for therein.
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During
the first year of the Initial Term, Mr. Sinnreich will be compensated by the issuance of shares of Organicell’s common
stock, which shall vest in equal monthly installments of 2,000,000 shares each. During the second year of the Initial Term, Mr. Sinnreich
will be entitled to receive a base salary of $
The Employment Agreement will provide that Mr. Sinnreich will be entitled to receive a bonus payment of $150,000, if and when during the Term, the Company generates $10,000,000 in funding from an equity line of credit arrangement that may be implemented by the Company in the future. In addition, Mr. Sinnreich will be entitled to receive an award of 15,000,000 shares of common stock if any of the following milestones are achieved during the Term and the twelve-month period thereafter (provided the Employment Agreement and Mr. Sinnreich’s employment thereunder is terminated by the Company without cause).
| 1. | The Company first obtains market capitalization of $1.0 billion for a three-month consecutive period. |
| 2. | The Company first obtains market capitalization of $2.0 billion for a three-month consecutive period. |
| 3. | The Company first obtains market capitalization of $5.0 billion for a three-month consecutive period. |
| 4. | The Company first obtains market capitalization of $10.0 billion for a three-month consecutive period |
The offer and sale of the above referenced securities were and will be issued in private transactions exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), in reliance on exemptions afforded by Section 4(a)(2) of the Securities Act and the rules and regulations promulgated thereunder.
As the Employment Agreement does not provide for cash compensation and in light of Mr. Sinnreich’s efforts in implementing the Company’s recent corporate restructuring and advancing its clinical trials, on September 7, 2022, the board of directors of the Company awarded Mr. Sinnreich a one-time payment of $200,000 and agreed to reimburse him for up to $100,000 in out-of-pocket expenses incurred by him in connection with services rendered to the Company, subject to submission of documentation for such expenses in accordance with the Company’s expense reimbursement policies.
Preparation of IRB, Pre-IND, IND Protocols for Clinical Applications and Clinical Trial Initiation and Monitoring:
In connection with the Company’s ongoing research and development efforts and the Company’s efforts to meet compliance with current and anticipated United States Food and Drug Administration (“FDA”) regulations expected to be enforced beginning in May 2021 pertaining to marketing traditional biologics and human cells, tissues and cellular and tissue based products that fall under Section 351 of the Public Health Services Act (“HCT/Ps”), the Company has applied for and received Investigation New Drug (“IND”) approval from the FDA to commence clinical trials in connection with the use of the Company’s products and related treatment protocols for specific indications. The ability to successfully complete the above efforts will be dependent on the actual outcomes in connection with the use of the Company’s products and related treatment protocols for each clinical trial, the Company’s ability to timely enroll patients and fund the required payments and complete the applicable clinical trials, which is subject to available working capital generated from operations, financing arrangements with the third-party vendors involved in the studies and/or from additional debt and/or equity financings as well as the ultimate approval from the FDA.
New CRO Agreements
During
August 2021, October 2021, and December 2021, the Company entered into agreements with a new CRO to provide ongoing clinical research
and related services in connection with three of the Company’s approved clinical research trials (“New CRO Agreements”).
In connection with the New CRO Agreements, the Company is obligated to make aggregate payments to the CRO of approximately $1,700,000
plus estimated aggregate pass-through costs and other third-party direct costs of approximately $565,000 as well as site and patient
related costs. The Company is obligated to make the CRO payments in equal monthly installments over the term of the clinical trial beginning
on the commencement of the work by the CRO in connection with the applicable clinical trial and the payments for the pass-through costs
and other third-party direct costs as well as site and patient related costs are paid in accordance with completion of agreed upon milestones.
As of July 31, 2022, the Company has been billed a total of approximately $583,600 in connection with the New CRO Agreements of which
approximately $
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Contingent Convertible Obligations Into Equity Securities
Obligations Due Under Executive Employment Agreements
Beginning July 1, 2020, at the sole option of the Executive, any portion of unpaid Original Base Salary for periods after January 1, 2020, including unpaid bonus salary, may be converted by Executive into common stock at a conversion rate equal to the average trading price during the month in which the accrued salary pertains. For any unpaid Original Base Salary that existed prior to January 1, 2020, including unpaid bonus salary, the amounts may be converted at a conversion price using the closing trading price of the stock on the last trading day in December 2019.
As
of July 31, 2022,
In connection with the Closing, the Company and each of the Executives agreed to forego their unpaid Original Base Salary and Incremental Salary (see “Changes in Management Compensation” above).
Legal Matters
SEC Matter
On June 17, 2021, Organicell received a subpoena dated June 14, 2021, from the Atlanta Regional Office of the SEC requiring the production of certain documents and communications in connection with the treatment and results of various COVID-19 patients, as discussed in the Company’s Current Reports on Form 8-K filed with the SEC during the period from May 27, 2020 through May 11, 2021. The Company is fully cooperating with the SEC’s investigation and believes that it will be able to provide all of the information requested by the SEC. The Company can make no assurances as to the time or resources that will need to be devoted to this investigation or its final outcome, or the impact, if any, of this investigation or any proceedings on the Company’s current business, financial condition, results of operations, cash flows, or the Company’s future operations.
LAE International Consulting
On
August 17, 2021, the Company was served with a summons and complaint by LAE International Consulting, LLC (“LAE”),
in the case styled LAE International Consulting, LLC v. Organicell Regenerative Medicine, Inc. et al., Case No. 2021-018461-CA-01
(In the Circuit Court of the 11th Judicial Circuit in and for Miami Dade County, Florida) (the “Lawsuit”).
Albert Mitrani, Mari Mitrani and Ian Bothwell (the “Individual Defendants”) were also named as defendants in the Lawsuit.
In the Lawsuit, LAE alleges breach of contract, unjust enrichment, violation of Florida’s Unfair and Deceptive Trade Practices
Act, breach of obligation of good faith and fair dealing, negligent misrepresentation and fraudulent misrepresentation in connection
with a prior consulting agreement entered into between the Company and LAE. During April 2022 the Lawsuit was settled whereby
the Company agreed to pay LAE $
Daniel Pepock and Tracy Yourke
The Company terminated sales representatives Daniel Pepock (“Pepock”) and Tracy Yourke (“Yourke”) effective June 30, 2022.
On June 6, 2022, Pepock filed a Complaint against Organicell Regenerative Medicine, Inc. (“Organicell”) in the Court of Common Pleas of Westmoreland County, Pennsylvania. Organicell removed the case to the United States District Court for the Western District of Pennsylvania, and on July 15, 2022 Mr. Pepock filed an Amended Complaint asserting two counts.
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Count I alleges a claim for “Breach of Employment Agreement, including Violation of the Pennsylvania Wage Payment and Collection Law.” Mr. Pepock alleges that Organicell (i) failed to pay him certain wages in timely manner; (ii) failed to pay him commissions allegedly due; (iii) failed to pay him a severance benefit allegedly due; and (iv) improperly paid him as a 1099 “independent contractor” rather than a W-2 employee for the time period of January 1, 2020 through July 31, 2021. Mr. Pepock sought damages of $235,000 in compensation, plus compensation for alleged increased tax rates and decreased Social Security contributions, liquidated damages, costs of litigation including reasonable attorney fees and witness fees, interest on the judgment, plus any other relief the Court deems proper.
Count II alleges a claim for “Fair Labor Standards Act Retaliatory Discharge. Mr. Pepock alleged that he was unlawfully terminated in retaliation for filing a complaint about unpaid wages and sought damages in an unidentified amount of lost wage compensation, back pay, front pay, liquidated damages, compensation for pain and suffering and other non-economic damages, punitive damages, costs of litigation including reasonable attorney fees and witness fees, interest on the judgment, plus any other relief the Court deems proper.
On June 27, 2022, Ms. Yourke filed a complaint against Organicell in the State of Michigan, 6th Judicial Circuit, County of Oakland. Organicell removed the case to the United States District Court for the Eastern District of Michigan, Southern Division, and on August 10, 2022 Ms. Yourke filed an Amended Complaint asserting three counts.
Counts I and II alleged claims for “Breach of Employment Agreement and Violation of Michigan Sales Representative Commission Act. Ms. Yourke alleged that Organicell (i) failed to pay her certain wages in timely manner; (ii) failed to pay her commissions allegedly due; (iii) failed to pay her a severance benefit allegedly due; and (iv) improperly treated her as a 1099 “independent contractor” rather than a W-2 employee for the time period of January 1, 2020 through July 31, 2021, April 16-30, 2022, and May 1, 2022 through June 30, 2022. Ms. Yourke sought an unidentified amount of damages in the form of compensation, commissions, treble damages, plus compensation for an alleged increased tax rates and increased Social Security contributions, costs of litigation, including actual attorney fees and witness fees, interest on the judgment, plus any other legal and equitable relief that the Court deems proper.
Count III alleged a claim for “Fair Labor Standards Act Retaliatory Discharge. Ms. Yourke alleged that she was unlawfully terminated in retaliation for filing a complaint about unpaid wages and sought damages in an unidentified amount of lost wage compensation, back pay, front pay, liquidated damages, compensation for pain and suffering and other non-economic damages, punitive damages, costs of litigation including reasonable attorney fees and witness fees, interest on the judgment, plus any other relief the Court deems proper.
As of July 31, 2022, all past due wages to Pepock and Yourke were paid.
Mr. Pepock’s action against Organicell was designated for placement into the United States District Court’s Alternative Dispute Resolution program and the Parties agreed to mediate. On August 22, 2022, Mr. Pepock, Ms. Yourke and Organicell agreed to a material settlement term sheet (“Settlement”) which provided for the resolution and full settlement and release of all claims among the parties and for the Company to buy back all of the shares of common stock of the Company issued to and owned by Mr. Pepock and Ms. Yourke at the time of the Settlement (represented by Mr. Pepock and Ms. Yourke to be in excess of 24,800,000 shares) in exchange for a payment by the Company of $500,000. In addition, the Company agreed to release Mr. Pepock and Ms. Yourke from their non-compete restrictions upon the execution of a Settlement Agreement and Mutual General Release. The Settlement relates to disputed claims and nothing therein shall be construed as an admission of liability or wrongdoing by the Company or any other party.
Other
In addition to the foregoing, from time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in any such matter may harm our business.
NOTE 14 – SEGMENT INFORMATION
The
Company has only one operating segment.
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| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Unless stated otherwise, the words “we,” “us,” “our,” the “Company” or “Organicell” in this Quarterly Report on Form 10-Q refer to Organicell Regenerative Medicine, Inc., a Nevada corporation, and its subsidiaries.
Cautionary Note Regarding Forward- Looking Statements
The statements contained in this Quarterly Report on Form 10-Q that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). These forward-looking statements are identified as any statement that does not relate strictly to historical or current facts. Statements using words such as “may,” “could,” “should,” “expect,” “plan,” “project,” “strategy,” “forecast,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” or similar expressions help identify forward-looking statements.
The forward-looking statements contained in this Quarterly Report on Form 10-Q are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management’s assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this Quarterly Report on Form 10-Q are not guarantees of future performance, and management cannot assure any reader that such statements will be realized or the forward-looking events and circumstances will in fact occur. The Company’s actual results may differ materially from those anticipated, estimated, projected or expected by management.
All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. We do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise.
Business Overview
We are a clinical-stage biopharmaceutical company principally focusing on the development of innovative biological therapeutics for the treatment of degenerative diseases and the provision of other related services. The Company’s proprietary products are derived from perinatal sources and manufactured to retain the naturally occurring extracellular vesicles, hyaluronic acid, and proteins without the addition or combination of any other substance or diluent (“RAAM Products”). Our RAAM Products and related services are principally used in the health care industry administered through doctors and clinics (“Providers”).
Organicell operates a placental tissue bank processing laboratory in Miami, Florida and Basalt, Colorado for the purpose of performing research and development and the manufacturing and processing of the anti-aging and cellular therapy derived products that we sell and distribute to our customers.
The Company’s leading product, Zofin™ (also known as OrganicellTM Flow), is an acellular, biologic therapeutic derived from perinatal sources and is manufactured to retain naturally occurring microRNAs, without the addition or combination of any other substance or diluent. This product contains over 300 growth factors, cytokines, chemokines, and 102 unique microRNAs as well as other extracellular vesicles/nanoparticles derived from perinatal tissues.
To date, the Company has obtained certain Investigation New Drug (“IND”), and eighteen emergency IND (“eIND”) approvals from the FDA, including applicable Institutional Review Board (“IRB”) approvals which authorized the Company to commence clinical trials or treatments in connection with the use of Zofin™ and related treatment protocols. The Company is pursuing efforts to complete its already approved clinical studies (see below) as well as obtaining approval to commence additional studies for other specific indications it has identified that the use of its products will provide more favorable and desired health related benefits for patients seeking alternative treatment options than are currently available. The ability of the Company to succeed in these efforts is subject to among other things, the Company having sufficient available working capital to fund the substantial costs of completing clinical trials, which the Company currently does not have, and ultimately, obtaining approval from the FDA.
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New FDA guidance which was announced in November 2017 and which became effective in May 2021 (postponed from November 2020 due to the COVID-19 pandemic) requires that the sale of products that fall under Section 351 of the Public Health Services Act pertaining to marketing traditional biologics and human cells, tissues and cellular and tissue based products (“HCT/Ps”) can only be sold pursuant to an approved biologics license application (“BLA”).
We have not obtained any opinion or ruling regarding the Company’s operations and whether the processing, sales and distribution of the products we currently produce would be subject to the FDA’s previously announced intended enforcement policies regarding HCT/P’s. However, we do not believe that our products fall within these guidelines and intend to vigorously defend against any adverse interpretation by the FDA on the classification of our products that may be deemed as falling under this defined regulation, if any. Notwithstanding the foregoing, we are undertaking efforts on an ongoing basis to mitigate any potential risks associated with an adverse ruling by the FDA and the subsequent limitations on our ability to continue to generate revenues from the sale of our products in the United States until the Company obtains the required licenses. The efforts include continuing with clinical trials, expanding sales internationally and developing new product offerings and/or designations of products that would not fall under these regulations.
In June 2021, the Company announced that it was launching a service platform for its first autologous product called Patient Pure XTM (“PPXTM”). PPXTM is a non-manipulated biologic containing the nanoparticle fraction from a patient’s own peripheral blood. The Company began to accept minimal orders for this service since October 2021.
In November 2020, the Company formed Livin’ Again Inc., a wholly owned subsidiary, for the purpose of among other things, providing independent education, advertising and marketing services, to Providers that provide medical and other healthcare, anti-aging and regenerative services. Due to limited activity to date, the Company intends to close-down this service by October 31, 2022.
COVID-19 impact on Economy and Business Environment
The adverse public health developments and economic effects of the ongoing COVID-19 outbreak in the United States have adversely affected the demand for our products and services by our customers and from patients of our customers as a result of quarantines, facility closures and social distancing measures put into effect. These restrictions have adversely affected the Company’s sales, results of operations and financial condition. In response to the COVID-19 outbreak, the Company (a) has accelerated its research and development activities; (b) has secured and is continuing to seek additional debt and/or equity financing to support working capital requirements; and (c) continues to take steps to stabilize and increase revenues from the sale of its products.
There is no assurance as to when the adverse impact to the United States and worldwide economies resulting from the COVID-19 outbreak will be eliminated, if at all, and whether any new or recurring pandemic outbreaks will occur again in the future causing a similar or worse adverse impact on the United States and worldwide economies or our business.
The following discussion of the Company’s results of operations and liquidity and capital resources should be read in conjunction with our unaudited consolidated financial statements and related notes thereto appearing in Item 1. of this Quarterly Report on Form 10-Q.
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Results of Operations
Three months ended July 31, 2022 as compared to three months ended July 31, 2021
Revenues. Our revenues for the three months ended July 31, 2022 were $1,713,214, compared to revenues of $1,367,895 for the three months ended July 31, 2021. The increase in revenues during the three months ended July 31, 2022 of $345,319 or 25.2%, was primarily the result of the Company being able to realize an increase of approximately 43.9% (approximately $601,300) in the average sales prices for the products sold during the three months ended July 31, 2022 compared with the average sales prices realized on products sold during the three months ended July 31, 2022, partially offset by a decrease of approximately 14.1% (approximately $276,800) in the overall unit sales of its products during the three months ended July 31, 2022 compared with the three months ended July 31, 2021, and the Company’s ability to generate approximately $20,800 of new revenues associated with its recently launched PPXTM service platform during the three months ended July 31, 2022. The increase in the average sales prices realized on products sold during the three months ended July 31, 2022 compared with the three months ended July 31, 2021, was due to increases in sales of higher priced medical grade product and the reduction in volume pricing discounts granted to distributors for large orders of the Company’s medical grade product offerings, partially offset from the reduction in the sales of the Company’s aesthetic product offerings, which are sold at lower prices than the Company’s medical grade product offerings.
Cost of Revenues. Our cost of revenues for the three months ended July 31, 2022 were $208,749, compared with cost of revenues of $136,044 for the three months ended July 31, 2021. The increase in the cost of revenues during the three months ended July 31, 2022 of $72,705 or 53.4%, compared with the three months ended July 31, 2021, was due to an increase in the cost of units sold of 78.5% (approximately ($106,800) during the three months ended July 31, 2022, compared to costs of units sold during the three months ended July 31, 2021, partially offset from an decrease in the amount of units sold of 14.1% (approximately $34,100) during the three months ended July 31, 2022, compared with the three months ended July 31, 2021. The increase in the cost of units sold was primarily the result of the Company’s sales of higher cost medical grade product offerings, and the reduction of lower cost aesthetic product offerings.
Gross Profit. Our gross profit for the three months ended July 31, 2022 was $1,504,465 (87.8% of revenues), compared with gross profit of $1,231,851 (90.1% of revenues) for the three months ended July 31, 2021. The increase in gross profit during the three months ended July 31, 2022 of $272,614 was the result of the Company being able to realize an increases in the average sales prices for the products sold during the three months ended July 31, 2022 and the new revenues associated with its recently launched PPXTM service platform during the three months ended July 31, 2022, partially offset from increases in costs of units sold and decreases in the overall unit sales of its products during the three months ended July 31, 2022 compared to the three months ended July 31, 2021.
General and Administrative Expenses. General and administrative expenses for the three months ended July 31, 2022 were $4,266,895, compared with $2,624,808 for the three months ended July 31, 2021, an increase of $1,642,087 or 62.6%. The increase in the general and administrative expenses for the three months ended July 31, 2022 compared with the three months ended July 31, 2021, was primarily the result of an increase in stock-based compensation costs to advisors, consultants and administrative staff totaling approximately $1,517,000, increases in payroll and consulting fees of $148,000, increases in commissions due from sales of the Company’s products of approximately $78,000, increased laboratory related costs of approximately $137,000 and the write-off of expired inventory associated with Livin Again of $30,000, partially offset by decreased professional fees of approximately $69,000 and decreased research and development costs of approximately $122,000. The increase in stock-based compensation costs was principally the result of the shares issued as stock-based compensation to the Company’s newly hired Chief Operating Officer and Acting Chief Executive Officer during the three months ended July 31, 2022 compared with the three months ended 2021.
Other Income (Expense). Other income for the three months ended July 31, 2022 was $34,973, compared with other (expense) of $15,951 for the three months ended July 31, 2021. The increase in other income of $50,924 during the three months ended July 31, 2022 compared to the three months ended July 31, 2021, was principally the result of the gain from the write-off of liabilities attributable to discontinued operations that had exceeded the “statute of limitations” of $125,851 and the decrease in the Commitment Fee Shortfall Obligation of approximately $42,700 under our Securities Purchase Agreement with AJB (“SPA”) during the three months ended July 31, 2022 compared with the three months ended 2021, partially offset from increased costs of approximately $110,000 from the amortization of discounts in connection with the $600,000 promissory note (“Note”) issued and sold by the Company to AJB Capital Investments, LLC (“AJB”) in January 2022 and the increase of $16,000 in interest costs associated with the Note during the three months ended July 31, 2022 compared with the three months ended July 31, 2021.
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Nine months ended July 31, 2022 as compared to nine months ended July 31, 2021
Revenues. Our revenues for the nine months ended July 31, 2022 were $5,047,534, compared to revenues of $3,931,411 for the nine months ended July 31, 2021. The increase in revenues during the nine months ended July 31, 2022 of $1,116,123 or 28.3% was primarily the result of the Company being able to realize an increase of approximately 33.0% (approximately $1,296,000) in the average sales prices for the products sold during the nine months ended July 31, 2022 compared with the average sales prices realized on products sold during the nine months ended July 31, 2021, partially offset by a decrease of approximately 5.3% (approximately $279,300) in the overall unit sales of its products during the nine months ended July 31, 2022 compared with the nine months ended July 31, 2021, and the Company’s ability to generate approximately $99,300 of new revenues associated with its recently launched PPXTM service platform during the nine months ended July 31, 2022. The increase in the average sales prices realized on products sold during the nine months ended July 31, 2022 compared with the nine months ended July 31, 2021 was due to increases in sales of higher priced medical grade product and the reduction in volume pricing discounts granted to distributors for large orders of the Company’s medical grade product offerings, partially offset from the reduction in the sales of the Company’s aesthetic product offerings, which are sold at lower prices than the Company’s medical grade product offerings.
Cost of Revenues. Our cost of revenues for the nine months ended July 31, 2022 were $484,287, compared with cost of revenues of $440,536 for the nine months ended July 31, 2021. The increase in the cost of revenues during the nine months ended July 31, 2022 of $43,751 or 9.9% compared with the nine months ended July 31, 2021 was due to an increase in the cost of units sold of 16.1% (approximately ($71,100) during the nine months ended July 31, 2022, compared to costs of units sold during the nine months ended July 31, 2021, partially offset from an decrease in the amount of units sold of 5.3% (approximately $27,300) during the nine months ended July 31, 2022, compared with the nine months ended July 31, 2021. The increase in the cost of units sold was primarily the result of the Company’s sales of higher cost medical grade product offerings, and the reduction of lower cost aesthetic product offerings.
Gross Profit. Our gross profit for the nine months ended July 31, 2022 was $4,563,247 (90.4% of revenues), compared with gross profit of $3,490,875 (88.8% of revenues) for the nine months ended July 31, 2021. The increase in gross profit during the nine months ended July 31, 2022 of $1,072,372 was the result of the Company being able to realize an increases in the average sales prices for the products sold during the nine months ended July 31, 2022 and the new revenues associated with its recently launched PPXTM service platform during the nine months ended July 31, 2022, partially offset from increases in costs of units sold and decreases in the overall unit sales of its products during the nine months ended July 31, 2022 compared to the nine months ended July 31, 2021.
General and Administrative Expenses. General and administrative expenses for the nine months ended July 31, 2022 were $10,225,371, compared with $15,282,596 for the nine months ended July 31, 2021, a decrease of $5,057,225 or 33.1%. The decrease in the general and administrative expenses for the nine months ended July 31, 2022 compared with the nine months ended July 31, 2021, was primarily the result of a decrease in stock-based compensation costs to advisors, consultants and administrative staff totaling approximately $5,535,400, reduced research and development costs of approximately $465,000, partially offset by increases in payroll and consulting fees of $123,200, increases in commissions due from sales of the Company’s products of approximately $417,900, increased professional fees of approximately $151,400, increased laboratory and office related expenses of approximately $218,400 and the write-off of expired inventory associated with Livin Again of $30,000. The decrease in stock-based compensation costs was the result of a reduction in the amount of shares issued as stock-based compensation during the nine months ended July 31, 2022 compared with the nine months ended July 31, 2021 and decreases in the costs attributable to the shares issued as stock-based compensation based on decreases in the Company’s share price during periods that the stock-based compensation was granted.
Other Income (Expense). Other (expense) for the nine months ended July 31, 2022 was $215,112, compared with other (expense), net, of $6,687 for the nine months ended July 31, 2021. The increase in other (expense), net, of $208,425 during the nine months ended July 31, 2022 compared to the nine months ended July 31, 2021 was principally the result of increased costs of approximately $272,000 from the amortization of discounts in connection with the with the Note issued and sold by the Company to AJB in January 2022, the increase of $34,000 in interest costs associated with the Note during the nine months ended July 31, 2022 compared with the nine months ended 2021, the increase in the Commitment Fee Shortfall Obligation of approximately $17,700 under our SPA and the reduction in other income of approximately $25,100 from settlements received during the nine months ended July 31, 2022 compared with the nine months ended 2021, partially offset from the gain from the write-off of liabilities attributable to discontinued operations that had exceeded the “statute of limitations” of $125,851 during the nine months ended July 31, 2022 compared with the nine months ended July 31, 2021.
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Liquidity and Capital Resources
Cash and Cash Equivalents
The following table summarizes the sources and uses of cash for the periods stated. The Company held no cash equivalents for any of the periods presented.
For the July 31, | ||||||||
| 2022 | 2021 | |||||||
| Cash, beginning of year | $ | 108,570 | $ | 590,797 | ||||
| Net cash used in operating activities | (1,408,243 | ) | (2,120,925 | ) | ||||
| Net cash used in investing activities | (516,519 | ) | (224,809 | ) | ||||
| Net cash provided by financing activities | 1,890,857 | 1,784,844 | ||||||
| Cash, end of period | $ | 74,665 | $ | 29,207 | ||||
During the nine months July 31, 2022, the Company used cash in operating activities of $1,408,243, compared to $2,120,925 for the nine months July 31, 2021, a decrease in cash used of $712,682. The decrease in cash used in operating activities was due to the increase in revenues and gross profit, the increase in accrued liabilities to management and the decrease in inventory balances during the nine months July 31, 2022 as compared to the nine months July 31, 2021, partially offset from the increase in cash to pay increasing operating expenses on a current basis associated with professional fees, payroll, consulting costs and laboratory related expenses in connection with the Company’s expansion of its research and development activities as well as payment of past due accounts payable and accrued expenses during the nine months July 31, 2022 as compared to the nine months July 31, 2021.
During the nine months July 31, 2022, the Company had cash used in investing activities of $516,519, compared to cash used in investing activities of $224,809 for the nine months July 31, 2021. The increase in cash used in investing activities of $291,710 was due primarily due payments made in connection with the Company’s leasehold improvements associated with the new lab facility in Basalt, CO of approximately $157,200 during the nine months July 31, 2022 as compared to the nine months July 31, 2021 and an increase in laboratory equipment purchased for the Company’s laboratory facilities of approximately $134,500 during the nine months July 31, 2022 as compared to the nine months July 31, 2021.
During the nine months July 31, 2022, the Company had cash provided by financing activities of $1,890,857 compared to cash provided by financing activities of $1,784,844 for the nine months July 31, 2021. The increase in cash provided by financing activities of $106,013 was due to increases in proceeds of $540,000 from the issuance of the Note to AJB, increases in capital contributed by executive of $250,000 and increases in advances for future stock purchases of $700,000 in connection with the Restructuring, partially offset from increases in repayments of outstanding debt obligations of approximately $200,000 and the reduction in the sale of equity securities of approximately $1,207,000 during the nine months July 31, 2022 as compared to the nine months July 31, 2021.
Capital Resources
The Company has historically relied on the sale of debt or equity securities, the restructuring of debt obligations and/or the issuance and/or exchange of equity securities to meet the shortfall in cash to fund its operations. During the nine months ended July 31, 2022 and through the date of this report, the Company completed the following private sales of its securities:
| 1. | In November 2021, the Company sold an aggregate of 8,000,000 shares of common stock to one “accredited investor” at $0.05 per share for an aggregate purchase price of $400,000. The proceeds were used for working capital. |
| 2. | In January 2022, the Company sold an aggregate of 666,667 shares of common stock to one “accredited investor” at $0.03 per share for an aggregate purchase price of $20,000. The purchase price was paid through an offset of an outstanding balance owed by the Company to the investor at the time of the sale of $20,000. |
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| 3. | On January 11, 2022, the Company entered into the SPA with AJB, pursuant to which we sold the Note in the principal amount of $600,000 to AJB in a private transaction for a purchase price of $540,000 (giving effect to original issue discount of $60,000). The proceeds were used for working capital. |
| 4. | In February 2022, the Company sold an aggregate of 8,333,333 shares of common stock to one “accredited investor” at $0.03 per share for an aggregate purchase price of $250,000. The proceeds were used for working capital. |
| 5. | During August 2022, the Company sold an aggregate of 200,000,000 shares of common stock to four “accredited investors” at $0.02 per share for an aggregate purchase price of $4,000,000. The proceeds are being used for working capital. |
| 6. | During August 2022 and September 2022, the Company sold an aggregate of 62,500,000 shares of common stock to three “accredited investors” at $0.04 per share for an aggregate purchase price of $2,500,000. The proceeds are being used for working capital. |
The Company issued the foregoing securities pursuant to the exemption from the registration requirements of the Securities Act afforded by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder.
Going Concern Consideration
The unaudited accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. The Company has had limited revenues since its inception. The Company incurred net losses of $5,877,236 for the nine months ended July 31, 2022. In addition, the Company had an accumulated deficit of $47,501,985 at July 31, 2022. The Company had a negative working capital position of $6,451,479 at July 31, 2022.
New United States Food and Drug Administration (“FDA”) regulations which were announced in November 2017 and which became effective beginning in May 2021 (postponed from November 2020 due to the COVID-19 pandemic) require that the sale of products that fall under Section 351 of the Public Health Services Act pertaining to marketing traditional biologics and human cells, tissues and cellular and tissue based products (“HCT/Ps”) can only be sold pursuant to an approved biologics license application (“BLA”). The Company has not obtained any opinion or ruling regarding the Company’s operations and whether the processing, sales and distribution of the products it currently produces would be subject to the FDA’s previously announced intended enforcement policies regarding HCT/P’s.
In addition to the above, the adverse public health developments and economic effects of the ongoing COVID-19 pandemic in the United States have adversely affected the demand for our products and services by our customers and from patients of our customers as a result of quarantines, facility closures and social distancing measures put into effect in connection with the COVID-19 outbreak and which currently still continue to have a negative impact on our business and the economy in general.
As a result of the above, the Company’s efforts to establish a stabilized source of sufficient revenues to cover operating costs has yet to be achieved and ultimately may prove to be unsuccessful unless (a) the Company’s ability to process, sell and distribute the products currently being produced or developed in the future are not restricted; (b) the United States economy returns to pre-COVID-19 conditions; and/or (c) additional sources of working capital through operations or debt and/or equity financings are realized. These financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Management anticipates that the Company will remain dependent, for the near future, on additional investment capital to fund ongoing operating expenses and research and development costs related to development of new products and to perform required clinical studies in connection with the sale of its products. The Company does not have any assets to pledge for the purpose of borrowing additional capital. In addition, the Company relies on its ability to produce and sell products it manufactures that are subject to changing technology and regulations that it currently sells and distributes to its customers. The Company’s current market capitalization, common stock liquidity and available authorized shares may hinder its ability to raise equity proceeds. The Company anticipates that future sources of funding, if any, will therefore be costly and dilutive, if available at all.
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In view of the matters described in the preceding paragraphs, recoverability of the recorded asset amounts shown in the accompanying consolidated balance sheet assumes that (a) the Company is able to continue to produce products or obtain products under supply arrangements which are in compliance with current and future regulatory guidelines; (b) the United States economy returns to pre-COVID-19 market conditions; (c) the Company will be able to establish a stabilized source of revenues, including efforts to expand sales internationally and the development of new product offerings and/or designations of products; (d) obligations to the Company’s creditors are not accelerated; (e) the Company’s operating expenses remain at current levels and/or the Company is successful in restructuring and/or deferring ongoing obligations; (f) the Company is able to continue its research and development activities, particularly in regards to remaining compliant with the FDA and ongoing safety and efficacy of its products; and/or (g) the Company obtains additional working capital to meet its contractual commitments and maintain the current level of Company operations through debt or equity sources.
There is no assurance that the products we currently produce will not be subject to the FDA’s previously announced intended enforcement policies regarding HCT/P’s and/or the Company will be able to complete its revenue growth strategy. There is no assurance that the Company’s research and development activities will be successful or that the Company will be able to timely fund the required costs of those activities. Without sufficient cash reserves, the Company’s ability to pursue growth objectives will be adversely impacted. Furthermore, despite significant effort since July 2015, the Company has thus far been unsuccessful in achieving a stabilized source of revenues.
If revenues do not increase and stabilize, if the COVID-19 crisis is not satisfactorily managed and/or resolved, if the Company’s ability to process, sell and/or distribute the products currently being produced or developed in the future are restricted, and/or if additional funds cannot otherwise be raised, the Company might be required to seek other alternatives which could include the sale of assets, closure of operations and/or protection under the U.S. bankruptcy laws. As of July 31, 2022, based on the factors described above, the Company concluded that there was substantial doubt about its ability to continue to operate as a going concern for the 12 months following the issuance of these financial statements.
Off-Balance Sheet Arrangements
Our liquidity is not dependent on the use of off-balance sheet financing arrangements (as that term is defined in Item 303(a) (4) (ii) of Regulation S-K) and as of July 31, 2022 and through the date of this report, we had no such arrangements.
Recently Issued Financial Accounting Standards
There were no recently issued financial accounting standards that would have an impact on the Company’s financial statements.
Critical Accounting Policies
Our unaudited consolidated financial statements reflect the selection and application of accounting policies which require us to make significant estimates and judgments. See Note 2 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2021, “Summary of Significant Accounting Policies”.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
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Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized and reported in accordance with the rules of the Securities and Exchange Commission (the “SEC”). Disclosure controls are also designed with the objective of ensuring that such information is accumulated appropriately and communicated to management, including the chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosures.
Our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial and accounting officer) evaluated the effectiveness of our “disclosure controls and procedures” (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) as of July 31, 2022, the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act were recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that our disclosure controls are not effectively designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. See the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2021, for a description of the Company’s material weaknesses in internal control over financial reporting.
Changes in Internal Controls over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended July 31, 2022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
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Part II – OTHER INFORMATION
| Item 1. | Legal Proceedings. |
The Company terminated sales representatives Daniel Pepock (“Pepock”) and Tracy Yourke (“Yourke”) effective June 30, 2022.
On June 6, 2022, Pepock filed a Complaint against Organicell Regenerative Medicine, Inc. (“Organicell”) in the Court of Common Pleas of Westmoreland County, Pennsylvania. Organicell removed the case to the United States District Court for the Western District of Pennsylvania, and on July 15, 2022 Mr. Pepock filed an Amended Complaint asserting two counts.
Count I alleges a claim for “Breach of Employment Agreement, including Violation of the Pennsylvania Wage Payment and Collection Law.” Mr. Pepock alleges that Organicell (i) failed to pay him certain wages in timely manner; (ii) failed to pay him commissions allegedly due; (iii) failed to pay him a severance benefit allegedly due; and (iv) improperly paid him as a 1099 “independent contractor” rather than a W-2 employee for the time period of January 1, 2020 through July 31, 2021. Mr. Pepock sought damages of $235,000 in compensation, plus compensation for alleged increased tax rates and decreased Social Security contributions, liquidated damages, costs of litigation including reasonable attorney fees and witness fees, interest on the judgment, plus any other relief the Court deems proper.
Count II alleges a claim for “Fair Labor Standards Act Retaliatory Discharge. Mr. Pepock alleged that he was unlawfully terminated in retaliation for filing a complaint about unpaid wages and sought damages in an unidentified amount of lost wage compensation, back pay, front pay, liquidated damages, compensation for pain and suffering and other non-economic damages, punitive damages, costs of litigation including reasonable attorney fees and witness fees, interest on the judgment, plus any other relief the Court deems proper.
On June 27, 2022, Ms. Yourke filed a complaint against Organicell in the State of Michigan, 6th Judicial Circuit, County of Oakland. Organicell removed the case to the United States District Court for the Eastern District of Michigan, Southern Division, and on August 10, 2022 Ms. Yourke filed an Amended Complaint asserting three counts.
Counts I and II alleged claims for “Breach of Employment Agreement and Violation of Michigan Sales Representative Commission Act. Ms. Yourke alleged that Organicell (i) failed to pay her certain wages in timely manner; (ii) failed to pay her commissions allegedly due; (iii) failed to pay her a severance benefit allegedly due; and (iv) improperly treated her as a 1099 “independent contractor” rather than a W-2 employee for the time period of January 1, 2020 through July 31, 2021, April 16-30, 2022, and May 1, 2022 through June 30, 2022. Ms. Yourke sought an unidentified amount of damages in the form of compensation, commissions, treble damages, plus compensation for an alleged increased tax rates and increased Social Security contributions, costs of litigation, including actual attorney fees and witness fees, interest on the judgment, plus any other legal and equitable relief that the Court deems proper.
Count III alleged a claim for “Fair Labor Standards Act Retaliatory Discharge. Ms. Yourke alleged that she was unlawfully terminated in retaliation for filing a complaint about unpaid wages and sought damages in an unidentified amount of lost wage compensation, back pay, front pay, liquidated damages, compensation for pain and suffering and other non-economic damages, punitive damages, costs of litigation including reasonable attorney fees and witness fees, interest on the judgment, plus any other relief the Court deems proper.
As of July 31, 2022, all past due wages to Pepock and Yourke were paid.
Mr. Pepock’s action against Organicell was designated for placement into the United States District Court’s Alternative Dispute Resolution program and the Parties agreed to mediate. On August 22, 2022, Mr. Pepock, Ms. Yourke and Organicell agreed to a material settlement term sheet (“Settlement”) which provided for the resolution and full settlement and release of all claims among the parties and for the Company to buy back all of the shares of common stock of the Company issued to and owned by Mr. Pepock and Ms. Yourke at the time of the Settlement (represented by Mr. Pepock and Ms. Yourke to be in excess of 24,800,000 shares) in exchange for a payment by the Company of $500,000. In addition, the Company agreed to release Mr. Pepock and Ms. Yourke from their non-compete restrictions upon the execution of a Settlement Agreement and Mutual General Release. The Settlement relates to disputed claims and nothing therein shall be construed as an admission of liability or wrongdoing by the Company or any other party.
In addition to matters previously reported in our periodic filings under the Exchange Act, from time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in any such matter may harm our business.
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Item 1A. Risk Factors.
As a “smaller reporting company” we are not required to disclose information under this Item.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
None.
| Item 3. | Defaults upon Senior Securities |
None.
| Item 4. | Mine Safety Disclosures |
Not applicable.
| Item 5. | Other Information. |
None.
| Item 6. | Exhibits. |
| Exhibit No: | Description: | |
| 31.1* | Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Executive Officer | |
| 31.2* | Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Financial Officer | |
| 32.1* | Section 1350 Certification of Chief Executive Officer | |
| 32.2* | Section 1350 Certification of Chief Financial Officer | |
| 101.INS ** | XBRL Instance Document | |
| 101.SCH** | XBRL Taxonomy Extension Schema Document | |
| 101.CAL** | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.LAB** | XBRL Taxonomy Extension Labels Linkbase Document | |
| 101.DEF** | XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.PRE** | XBRL Taxonomy Extension Presentation Linkbase Document |
| * | Filed herewith. |
| ** | Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under those sections. |
37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ORGANICELL REGENERATIVE MEDICINE, INC. | ||
| By: | /s/ MATTHEW SINNREICH | |
| Matthew Sinnreich | ||
| Acting Chief Executive Officer | ||
| (Principal Executive Officer) | ||
September 14, 2022 | ||
| By: | /s/ IAN T. BOTHWELL | |
| Ian T. Bothwell | ||
| Chief Financial Officer | ||
(Principal Financial and Accounting Officer) | ||
| September 14, 2022 |
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Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Matthew Sinnreich, as the Acting Chief Executive Officer (principal executive officer) of Organicell Regenerative Medicine, Inc., a Nevada corporation (the “Registrant”), certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the quarter ended July 31, 2022 of the Registrant; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a - 15(e) and 15d - 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a - 15(f) and 15d - 15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reports to be designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
| 5. | The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors or persons performing: |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: September 14, 2022 | /s/ MATTHEW SINNREICH |
| Matthew Sinnreich | |
| Acting Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Ian T. Bothwell, as the Chief Financial Officer (principal financial and accounting officer) of Organicell Regenerative Medicine, Inc., a Nevada corporation (the “Registrant”) certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the quarter ended July 31, 2022 of the Registrant; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a - 15(e) and 15d - 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a - 15(f) and 15d - 15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reports to be designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
| 5. | The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors or persons performing: |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: September 14, 2022 | /s/ Ian T. Bothwell |
| Ian T. Bothwell, | |
| Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Organicell Regenerative Medicine, Inc. on Form 10-Q for the quarter ended July 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Matthew Sinnreich, Acting Chief Executive Officer (principal executive officer) of Organicell Regenerative Medicine, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Organicell Regenerative Medicine, Inc.
| Date: September 14, 2022 | /s/ MATTHEW SINNREICH |
| Matthew Sinnreich | |
| Acting Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Organicell Regenerative Medicine, Inc. on Form 10-Q for the quarter ended July 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Ian T. Bothwell, Chief Financial Officer (principal financial and accounting officer) of Organicell Regenerative Medicine, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Organicell Regenerative Medicine, Inc.
| Date: September 14, 2022 | /s/ IAN T. BOTHWELL |
| Ian T. Bothwell | |
| Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |