Zeo ScientifiX, Inc 10-K, filed Feb 14, 2023
Zeo ScientifiX, Inc. (ZEOX)
About this 10-K
Zeo ScientifiX, Inc filed this 10-K on February 14, 2023, covering the fiscal year ended October 31, 2022.
Headline figures
Fiscal year ended October 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $6.49M
- up 16.0% from $5.6M a year earlier
- Net loss
- $8.9M
- compared with a net loss of $12.76M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the fiscal year ended:
For the transition period from: _____________ to _____________
Commission file number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
(Address of principal executive offices)
(Issuer’s telephone number)
Securities registered under 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 under Section 12(g) of the Act:
Common Stock, $0.001 par value
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate 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 (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| 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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $
As of February 13, 2023, there were shares of common stock, $0.001 par value per share, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None
TABLE OF CONTENTS
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FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K (this “Annual Report”) and certain information incorporated herein by reference contain forward-looking statements and information within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This information includes assumptions made by, and information currently available to management, including statements regarding future economic performance and financial condition, liquidity and capital resources, acceptance of our products by the market, and management’s plans and objectives. In addition, certain statements included in this and our future filings with the Securities and Exchange Commission (the “SEC”), in press releases, and in oral and written statements made by us or with our approval, which are not statements of historical fact, are forward-looking statements. Words such as “may,” “could,” “should,” “would,” “believe,” “expect,” “expectation,” “anticipate,” “estimate,” “intend,” “seeks,” “plan,” “project,” “continue,” “predict,” “will,” “should,” and other words or expressions of similar meaning are intended by us to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements are found at various places throughout this Annual Report and in the documents incorporated herein by reference. These statements are based on our current expectations about future events or results and information that is currently available to us, involve assumptions, risks, and uncertainties, and speak only as of the date on which such statements are made.
Forward-looking statements include, but are not limited to, the following:
| ● | Our products’ advantages; |
| ● | Expectations regarding our future growth; |
| ● | Expectations regarding available cash resources to fund current operations and future growth; |
| ● | Our ability to comply with regulations governing the production and sale of our products; |
| ● | Our ability to receive regulatory approvals; |
| ● | Market opportunities for our services and products; |
| ● | Clinical trial outcomes; |
| ● | Our ability to compete effectively; |
| ● | Our ability to respond to market forces; and |
| ● | Our ability to protect our intellectual property. |
Actual results and outcomes may differ materially from those expressed or implied in these forward-looking statements. Factors that may cause such a difference include, but are not limited to, those discussed in Part I, Item 1A. Risk Factors, below. Except as expressly required by the federal securities laws, we undertake no obligation to update any such factors, or to publicly announce the results of, or changes to any of the forward-looking statements contained herein to reflect future events, developments, changed circumstances, or for any other reason.
Unless otherwise noted, as used in this Annual Report, the terms “Organicell,” the “Company,” “we,” “our” and “us” refer to Organicell Regenerative Medicine, Inc., a Nevada corporation, and its subsidiaries consolidated as a combined entity.
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PART I
Item 1. 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 regenerative medicine. 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 an extracellular vesicle processing laboratory in Davie, Florida, and Basalt, Colorado each 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 Organicell™ Flow), is an acellular, biologic therapeutic derived from perinatal sources and is manufactured to retain naturally occurring microRNAs, without the addition or combination of any other substance or diluent. This product contains over 300 growth factors, cytokines, chemokines, and 102 unique microRNAs as well as other exosomes/nanoparticles derived from perinatal tissues.
To date, the Company has obtained certain Investigational New Drug (“IND”), and 18 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 (as described 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.
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 X™ (“PPX™”). PPX™ 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.
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Recent Developments Regarding Zofin™ and Other Products
In April 2020, the FDA approved an IND application for the Company’s lead product, Zofin™ (IND # 19881), for a Phase I/II Randomized, Double Blinded, Placebo Trial to Evaluate the Safety and Potential Efficacy of Intravenous Infusion of Organicell™ Flow for the Treatment of Moderate to Severe Acute Respiratory Syndrome (“SARS”) Related to COVID-19 Infection vs Placebo. The IRB was approved by the Institute of Regenerative and Cellular Medicine (“IRCM”) during June 2020 (approval number: IRCM-2020-254). Enrollment for the clinical trial began in September 2020. A total of ten patients have been enrolled to the study thus far and currently the clinical trial is not enrolling subjects due to the challenges of enrolling the remaining study population.
In March 2021, Organicell entered into a Material Cooperative Research and Development Agreement with the Centers for Disease Control and Prevention (the “CDC”) to determine the anti-inflammatory and anti-infective effectiveness of Zofin™ in experimental models of influenza infection. Pursuant to the agreement, Organicell will supply the CDC with Zofin™ and using well established in vitro and in vivo experimental models of influenza infection, the CDC will test the anti-infective and anti-inflammatory properties of Zofin™. All the proposed experiments will be performed in the appropriate biosafety levels and approved protocols at the Immunology and Pathogenesis Branch / Influenza Division of the CDC.
In April 2021, the Company entered into a similar agreement with Oklahoma State University to evaluate Zofin™ for the treatment of respiratory diseases caused by virus infections of pandemic potential and the FDA approved an IND application for Zofin™, in the treatment of knee osteoarthritis.
In June 2021, Organicell announced the results of its expanded access (EA) intermediate size patient population trial (NCT04657406) for treatment of COVID-19 patients with Zofin™, which EA trial had been authorized by the FDA in September 2020. The results of the EA trial indicated that treatment of participants with Zofin™:
| ● | met endpoints for safety and efficacy in patients with mild to moderate COVID-19; |
| ● | mitigated mild and moderate symptoms; |
| ● | improved pulmonary opacities detected in chest X-rays; and |
| ● | improved inflammatory biomarkers. |
The trial was conducted at United Memorial Medical Center in Houston, Texas. The study enrolled a total of 11 subjects: adults between the age of 35 to 69 who were fighting COVID-19 infection and presented respiratory fatigue with and without exertion, cough, and shortness of breath and met all inclusion/exclusion criteria. One patient withdrew before receiving any doses of Zofin™. Two subjects withdrew at day 14 post treatment with Zofin™. As a result, eight subjects completed the day 30 follow-up and are included in the data analysis. The administration of Zofin™ in the trial was well tolerated in all enrolled subjects, with no adverse events. Chest X-ray data demonstrated that 75% of subjects had bilateral opacities caused by COVID-19 infection at day 0 (baseline), prior to treatment with Zofin™ and thirty (30) days after Zofin™ treatment, chest X-ray data showed 83% of treated subjects had normal lung imaging, indicating complete recovery. Upon such time that Organicell enrolls and submits additional patient data from the above-mentioned study, Organicell intends to submit the updated results of the trial to the FDA for approval of an amendment to the Company’s previously approved IND (NCT04384445) to perform a placebo-controlled Phase II clinical trial to confirm safety and efficacy in a randomized fashion.
The Company is currently in the process of pursuing the implementation of three other previously approved clinical trials:
| ● | In July 2021, the Company announced that the FDA had approved an IND application for its lead product, Zofin™, for the treatment of ‘Prolonged COVID-19 Symptoms’ (“Long Haulers”). This approved trial design consists of a double blinded, placebo-controlled, randomized phase I/II trial designed to investigate the safety and potential efficacy of Zofin™ in treating COVID-19 Long Haulers. |
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Organicell has secured several sites to date to carry out the trial. The trial, organized and operated through Proxima Clinical Research, a Houston-based CRO, has enrolled a total of 3 participants through January 15, 2023 and the Company expects it can complete full enrolment (30 patients) no later than December 2023. Based on the timing to successfully enroll all patients during 2023, the Company expects to complete the trial during 2024 subject to the Company having sufficient working capital to finance the ongoing costs of the trial, as to all of which no assurance can be given.
Patients enrolled in the study will have met prescribed Long Hauler conditions, with subjects experiencing consistent symptoms of a COVID-19 infection for a prolonged period of time, which is greater than 6 weeks and less than 12 months. Enrolled patients will receive 3 doses of Zofin™ in accordance with the study protocol.
The trial objectives are to demonstrate the safety and potential efficacy of Zofin™ administered intravenously in subjects experiencing prolonged COVID-19 symptoms. Based on the successful outcome of this trial, the Company intends to immediately submit efficacy data gathered to the FDA to obtain approval for an amendment to its Investigational New Drug (IND) application to begin a Phase II/III trial that will focus on the efficacy of Zofin™ in the treatment of COVID-19 Long Haulers. |
| ● | In January 2021, the Company announced that the FDA had approved an IND application for its lead product, Zofin™, in the treatment of patients diagnosed with chronic obstructive pulmonary disease (“COPD”). This approved trial design will be a double blinded, placebo-controlled, phase I/II trial investigating the safety and potential efficacy of intravenous infusion (IV) of Zofin™ for the treatment of COPD. The Company and the CRO are currently working to initiate and complete enrollment in the trial which the Company expects to be completed during 2023, subject to the Company having sufficient working capital to finance the ongoing costs of the trial, as to all of which no assurance can be given. |
| ● | In April 2021, the Company announced that the FDA had approved the IND application for its lead product, Zofin™, in the treatment of knee osteoarthritis. This approved trial design, will be a double blinded, placebo-controlled, phase I/II trial investigating the safety and potential efficacy of Zofin™ for patients suffering with knee osteoarthritis. The Company and the CRO are expected to begin working to initiate the trial once the Company has advanced the Long Hauler and COPD trials to desired levels. The commencement of this trial is subject to the successful negotiation and execution of definitive agreements with the site facility where the study patients will be treated and the Company having sufficient working capital to finance the ongoing costs of the trial, as to all of which no assurance can be given. |
In April 2021, we announced that an initial trial of ten COVID -19 patients in India conducted by CWI India, our Indian partner, generated positive results. The trial had been conducted by CWI India, our Indian partner with whom we had entered a product testing and distribution agreement in February 2021, to collaborate on a study or studies to evaluate the effects of Zofin™ on moderate to severe COVID-19 patients in India. The ten patients in the initial trial were treated at hospitals in Bangalore, Kozhikode and Chennai, and all ten patients recovered from their symptoms and were discharged from the hospital. Based on the initial results of this trial, CWI India has since been seeking to obtain government approval to conduct an expanded trial of up to sixty-five patients with moderate to severe COVID-19, who were to be treated at these hospitals. To date, CWI India has not yet obtained the required approval and it is uncertain if they will ultimately be successful in doing so. The Company currently does not anticipate that this clinical trial will advance any further with CWI India.
In May 2021, the Company announced that its Zofin™ therapy has been approved by Pakistani regulators to be used for a treatment of a named COVID-19 patient hospitalized at the Pakistan Institute of Medical Sciences on compassionate grounds. In addition to this compassionate grounds authorization, Organicell received further indications from the Pakistani regulators to begin a broader trial of Zofin™ with up to 60 additional patients suffering from moderate to severe COVID-19. The Company has already shared data with Pakistani regulatory authorities in the country in support of this effort. To date, the Company and the Company’s Pakistani partner for the proposed study have not yet obtained the required approval and the Company is uncertain if they will ultimately be successful in doing so. The Company currently does not anticipate that this clinical trial will advance any further with the Company’s Pakistani partner.
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Recent Corporate Developments
Capital Raise and Corporate Restructuring Transaction
On August 19, 2022 (“Closing”), the Company consummated a $4.0 million capital raise and corporate restructuring transaction.
Stock Purchase Agreements
At 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”).
Skycrest and Greyt are Nevada and Delaware limited liability companies, respectively, which are based in South Florida. Beyond 100 and Smart Co. are Dubai and Singapore corporations, respectively, affiliated with Dr. Bhupendra Kumar Modi, a well-known industrialist and entrepreneur in India and Singapore.
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 combined voting power of the Company, without regard to the number of shares of common stock outstanding. 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. 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 of common stock purchased pursuant to its SPA and shares of common stock issued or issuable upon exercise of the Consulting Warrants (as described below) 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.
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 Preferred Shares are no longer outstanding.
As a result of the issuance to Skycrest and Greyt of the 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 reach 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, pursuant to which the Company has agreed to file a registration statement under the Securities Act with 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.
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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 150,000,000 Shares at an exercise price of $0.02 per Share (the “Consulting Agreement Warrants”), which Warrants are exercisable on a “cashless” basis.
Changes in the Board of Directors
At Closing, Albert Mitrani, Dr. Allen Meglin and Michael Carbonara stepped down as directors of the Company. On September 23, 2022, additional directors were appointed to the board, the majority of whom are “independent” in accordance with the rules and regulations of the SEC and the Nasdaq Stock Market, LLC.
Additional Private Sales of Common Stock
In addition to the securities issued in connection with the $4.0 million capital raise and corporate restructuring transaction described above, in August and September 2022, Organicell offered and sold 65,500,000 shares of common stock in four private transactions to four “accredited investors” for an aggregate purchase price of $2,620,000 or $0.04 per share.
All the above referenced securities were issued and sold pursuant to the exemption from registration afforded by Section 4(a)(2) of the Securities Act and the rules and regulations thereunder.
Tysadco Purchase Agreement
On September 1, 2022, the Company entered into a Purchase Agreement (the “ELOC Purchase Agreement”) with Tysadco Partners LLC, a Delaware limited company (“Tysadco”) and a Registration Rights Agreement with Tysadco.
Pursuant to the ELOC Purchase Agreement, Tysadco committed to purchase, subject to certain restrictions and conditions, up to $10,000,000 worth of the Company’s common stock, over a period of 24 months from the effectiveness of the registration statement registering the resale of shares purchased by Tysadco pursuant to the ELOC Purchase Agreement. which registration statement was declared effective by the SEC on October 24, 2022.
Pursuant to the ELOC Purchase Agreement, on December 2, 2022, the Company submitted a put request to Tysadco to purchase 4,456,326 registered shares at a purchase price (as calculated pursuant to the ELOC Purchase Agreement) of $0.02244, for a total of $100,000. On December 5, 2022, Tysadco funded the put request and the Company issued the 4,456,326 shares to Tysadco. The proceeds from the share sale are being used for working capital and general corporate purposes.
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.
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Corporate Information
The Company was incorporated in the state of Nevada on August 9, 2011, under the name “Bespoke Tricycles Inc.,” changed its name to “Biotech Products Services and Research, Inc.” effective November 4, 2015, and assumed its current name of “Organicell Regenerative Medicine, Inc.”, by amendment to its Articles of Incorporation on June 20, 2018.
Our executive offices are located at 3321 College Avenue, Suite 246, Davie, FL 33134 and our telephone number is (888) 963-7881. Our corporate website is www.organicell.com. Information appearing on our website is not part of this Annual Report.
Industry Overview
The traditional health care industry in the United States is predominantly controlled by the rules of the Centers for Medicare & Medicaid Services (“CMS”) (wwws.cms.gov) and commercial health insurance companies. This control limits patients’ access to alternative medical therapies, that recent medical literature demonstrates highly beneficial outcomes in the field of anti-aging and regenerative medicine. Traditional allopathic medicine of health care provided to patients in the United States relies on government and commercial health insurance for payment of the costs associated with their day-to-day health care. Because of this close relationship, physicians must follow government and commercial insurers guidelines in order to stay in the plans and receive reimbursement. Physicians are restricted in their ability to expand the nature of the treatments provided beyond industry practices because of legal ramifications and/or lack of knowledge concerning protocol of cutting-edge anti-aging and regenerative medical treatments.
Despite the above, anecdotal and medical literature has shown an increased demand by patients for access to alternative medical therapies and treatments. Patients are seeking these alternatives to traditional allopathic medicine, due to the adverse events associated with traditional pharmaceuticals, risks associated with surgeries, and that traditional medicine and insurers are not addressing wellness or preventive medicine sufficiently. To address a wide variety of aging issues, safe alternatives to pathologies, including access to other treatments and pharmaceuticals and to achieve beneficial “elective” health treatments, we intend utilize the latest regenerative technologies. These alternative pathways to date have had significant restrictions because of regulations imposed by the FDA, other regulatory bodies and insurers due to lack of randomized controlled studies, yet many published case series demonstrate safety and efficacy. Patients and consumers are looking to safe alternatives compared more traditional medicine, including the following:
| ● | Cellular/ Tissue based therapies |
| ○ | Adipose-derived stromal vascular fraction |
| ○ | Bone marrow-derived stem cell therapies |
| ○ | Peripheral blood derived therapies (i.e., platelet rich plasma); |
| ○ | Placental-based therapies |
| Ø | Technology documented since 1910 for safety and efficacy, tissue processed from human amniotic membrane and fluid, donated by consenting mothers delivering a full-term healthy baby by scheduled Caesarean section, avoiding any ethical or moral concerns, proven safety record, case series documented success in a multitude of systemic and local pathologies |
| ○ | Growth factor, cytokine therapies |
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| ● | Anti-Aging |
| ○ | Supplements |
| Ø | Vitamin |
| Ø | Mineral |
| Ø | Medical foods |
| ○ | Weight control |
| ○ | Topical lotions and creams for the largest organ the skin |
| ● | Nontraditional medical alternatives |
| ○ | Acupuncture |
| ○ | Naturopathic |
| ○ | Chiropractic |
| ● | Self-directed |
| ○ | Meditation |
| ○ | Yoga |
| ○ | Tai Chi |
Currently, patients who desire alternative treatments rely on the following options:
| ● | Medical Tourism |
| ○ | In United States |
| ○ | Off-shore United States |
| Ø | Central and South America |
| Ø | Caribbean |
| Ø | Europe |
| ● | Consulting directly with physicians knowledgeable in providing regenerative medical services |
| ● | Unlicensed life coaches |
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Current Business Strategy
Our current business strategy is to achieve the following goals and milestones:
| ● | Execute on our current strategy to complete existing clinical studies and secure approval to commence additional studies for other specific indications that we identify that the use of our products will provide more favorable and desired health related benefits for patients seeking alternative treatment options than are currently available; |
| ● | Perform clinical based studies associated with the use of our products (independently and/or in conjunction with Providers, Manufacturers, Government Agencies and Educational Institutions) and seek accelerated approval where available for each product application in accordance with the 21st Century Cures Act (“Cures Act”) and/or through the granting of an FDA-approved biologics application (“BLA”) to allow products to be lawfully marketed and/or sold in the United States; |
| ● | Assure the Company maintains compliance with existing and the anticipated changes to FDA regulations, including the guidance related to the use and sale of tissue-based products (“HCT/Ps”) which was published in November 2017 and took effect in May 2021 (postponed from November 2020 due to the COVID-19 pandemic), as well as readiness to respond to ongoing future changes to regulations impacting our products; |
| ● | Continue to expand our laboratory facilities to meet expected production, processing and research requirements; |
| ● | Engage high profile and industry recognized medical advisors, researchers and/or scientists to help identify and develop new and emerging technologies concerning biologics and to assure our Products remain cutting edge and competitive to products offered by other companies; |
| ● | Identify alternative products and services to (a) offset any potential decline in revenues resulting from FDA limitations on the sales and distribution of our existing products currently being sold and distributed and/or future expected FDA restrictions on RAAM products; and (b) provide our Providers with alternative product and treatment options to remain competitive with the market and our Providers to meet the needs and demands of their patients; |
| ● | Identify sources of exclusive and superior suppliers of RAAM products and/or raw materials used by us in processing our RAAM products; |
| ● | Identify strategic relationships and acquisition targets that would enhance and/or accelerate the growth of the Company; (a) existing raw material and/or medical device suppliers or owners of IP associated with existing and/or additional desired RAAM products, (b) alliances with Providers that specialized in RAAM products, and/or (c) alliances with marketing and distribution companies of RAAM products; |
| ● | Develop and expand operations to provide for growth of our revenues |
| ○ | Expand our sales market and network of Providers within and outside of the United States to increase revenues for RAAM related products through: |
| ● | Hiring additional in-house sales personnel; |
| ● | Selectively engaging independent distributors; |
| ● | Marketing private label products to distributors; |
| ● | Increasing market recognition for our Organicell brand from: marketing and participating in industry trade shows; |
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| ○ | Increase the number of RAAM product offerings for various modalities using proprietary processing, formulas and administration techniques, including the Company’s new product PPX™; and |
| ○ | Extend our referral network of Providers based on: |
| ● | Superior product offerings; |
| ● | Demonstrating a realistic and executable regulatory roadmap to assure Company and product compliance with current and anticipated FDA regulations; and |
| ● | Developing and providing educational support to Providers regarding our products and regulatory concerns; |
| ● | Secure additional working capital |
| ○ | Fund shortfalls in working capital to fund ongoing expenses and required payments to vendors and creditors until revenues are stabilized; |
| ○ | Fund ongoing costs to complete current pipeline of clinical trials as well as future clinical trials; |
| ○ | Fund capital expenditures associated with maintaining compliance of our facilities and products; |
| ○ | Fund our strategy to develop and expand our revenues for the sales and distribution of RAAM related products described above; |
| ○ | Hire additional personnel to support our growth and planned expansion; and |
| ○ | Enhance our CRM, e-commerce and ERP capabilities to facilitate marketing, sales and distribution functionality and accounting for our operations. |
| ● | Enhance Company Corporate Governance |
| ○ | Continue to develop and expand the Company’s internal control policies; and |
| ○ | Continue to explore previously announced plans to uplist the Company to Nasdaq for the purpose of enhancing interest and investment opportunities for the Company once the Company is able to demonstrate compliance with initial listing requirements, including minimum share price and stockholder’s equity thresholds. |
Market Overview
The population of the United States and the developed world is getting older and living longer. According to a United States Consensus Bureau’s report, “An Aging World: 2015,” America’s 65-and-over population is projected to nearly double over the next three decades, ballooning from 48 million to 88 million by 2050 and that worldwide, the 65-and-over population will more than double to 1.6 billion by 2050. According to the report, in 2015, 14.9% of the U.S. population was 65 or over and the United States was the 48th oldest country out of 228 countries and areas in the world in 2015. Baby boomers began reaching age 65 in 2011 and by 2050 the older share of the U.S. population will increase to 22.1%.
The world average age of death has increased by 35 years since 1970, with declines in death rates in all age groups, including those aged 60 and older (Source: Institute for Health Metrics and Evaluation, 2013; Mathers et al., 2015). The leading causes of death are shifting, in part because of increasing longevity. Between 1990 and 2013, the number of deaths from non-communicable diseases (“NCDs”) has increased by 42%; and the largest increases in the proportion of global deaths took place among the population aged 80 and over. An estimated 42.8% of deaths worldwide occur in the population aged 70 and over, with 22.9% in the population aged 80 and over.
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Also, according to the Centers for Disease Control (the “CDC”), “Medical Tourism” (a term commonly used to describe people traveling outside their home country for medical treatment) is a worldwide, multibillion-dollar phenomenon that is expected to grow substantially in the next 5–10 years. Studies have estimated that hundreds of thousands of medical tourists travel from the United States annually and that patients pursue medical care abroad for a variety of reasons, including a desire to receive a procedure or therapy not available in their country of residence. Common categories of procedures that US travelers pursue during medical tourism trips include orthopedic surgery, cosmetic surgery, cardiology (cardiac surgery), oncologic care, and dentistry. Common destinations include Thailand, Mexico, Singapore, India, Malaysia, Cuba, Brazil, Argentina, and Costa Rica.
If we are able to implement our intended business plan, we believe that we will be well situated to address this increased consumer demand for alternative medical treatments.
Marketing and Sales
Currently, we market our RAAM products and services to a network of Providers through in-house, contracted sales personnel and/or from independent distributors. As of the date of this Annual Report, we had one in-house salesperson who marketed our RAAM products and services. In addition, we had arrangements with several independent distributors that were marketing and distributing our products. We intend in the future to expand our in-house sales force and independent distributors as our working capital improves, our product line expands and as volumes increase. We also intend to develop and offer ongoing training seminars to provide the best possible information on the latest advances on anti-aging, and regenerative medicine to Providers.
Raw Materials and Sources of Supply
We acquire the raw materials and supplies for our RAAM research and development and the manufacturing of our RAAM placental-related products from unaffiliated third-party laboratories pursuant to supply arrangements.
In the event any one or more of our current suppliers are unwilling or unable to sell us required raw materials and/or products, for any reason, we may not be able to provide replacement products to our customers, or if other supply arrangements can be made, the replacement products and terms may not be as favorable.
Customers
Our RAAM business is not dependent on any one or more customers, especially as our customer and distribution network expands. Our customer base is increasingly broad based and throughout the United States and worldwide.
Intellectual Property
The table below sets forth a summary of our intellectual property rights.
| Patents: | None | |
| Patent Applications: | Organicell™ has two U.S. Patent Applications on file for its Organicell™ line of products and the proprietary techniques used for processing perinatal fluid. | |
| U.S. Patent Application No. 17/226,587 | ||
| Titled: COMPOSITIONS COMPRISING NANOPARTICLES, METHOD OF MAKING AND USES THEREOF | ||
| Filed: April 9, 2021 | ||
| Inventor: Maria Ines Mitrani | ||
| Applicant: Organicell Regenerative Medicine, Inc. | ||
| Assignment: MARIA INES MITRANI (Assignor), ORGANICELL REGENERATIVE MEDICINE, INC. (Assignee) | ||
| Recorded: April 9, 2021 | ||
| Real/Frame: 055878 / 0801 & 055878 / 0900 |
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| U.S. Patent Application No. 17/990,522 (Continuation of 17/226,587) | ||
| Titled: COMPOSITIONS COMPRISING NANOPARTICLES, METHOD OF MAKING AND USES THEREOF | ||
| Filed: November 18, 2022 | ||
| Inventor: Maria Ines Mitrani | ||
| Applicant: Organicell Regenerative Medicine, Inc. | ||
| Assignment: MARIA INES MITRANI (Assignor), ORGANICELL REGENERATIVE MEDICINE, INC. (Assignee) | ||
| Recorded: April 9, 2021 | ||
| Real/Frame: 055878 / 0801 & 055878 / 0900 | ||
| Organicell™ has twenty-five Ex-US Patent Applications on file for its Organicell™ line of products and the proprietary techniques used for processing perinatal fluid. These Applications are national stage entries of: | ||
| International Patent Application No. PCT/IB2021/052982 | ||
| Titled: COMPOSITIONS COMPRISING NANOPARTICLES, METHOD OF MAKING AND USES THEREOF | ||
| Filed: April 10, 2021 | ||
| Inventor: Maria Ines Mitrani | ||
| Applicant: Organicell Regenerative Medicine, Inc. | ||
| Assignment: MARIA INES MITRANI (Assignor), ORGANICELL REGENERATIVE MEDICINE, INC. (Assignee) | ||
| Country: Australia | ||
| Application Number: 2021253889 | ||
| Filing Date: April 10, 2021 | ||
| Country: Brazil | ||
| Application Number: BR112022020441-8 | ||
|
Filing Date: April 10, 2021
Country: Canada Application Number: Not Yet Assigned Filing Date: April 10, 2021
Country: China Application Number: Not Yet Assigned Filing Date: April 10, 2021
Country: Colombia Application Number: NC2022/0015966 Filing Date: April 10, 2021
Country: Costa Rica Application Number: 2022-570 Filing Date: April 10, 2021
Country: Ecuador Application Number: SENADI-2022-86300 Filing Date: April 10, 2021
Country: Europe Application Number: 21784900.9 Filing Date: April 10, 2021 |
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|
Country: Indonesia Application Number: P00202212337 Filing Date: April 10, 2021
Country: Israel Application Number: 297195 Filing Date: April 10, 2021
Country: India Application Number: 202217062549 Filing Date: April 10, 2021
Country: Japan Application Number: 2022-562119 Filing Date: April 10, 2021
Country: Republic of Korea Application Number: 10-2022-7039360 Filing Date: April 10, 2021
Country: Saint Lucia Application Number: Not available Filing Date: April 10, 2021
Country: Mexico Application Number: MX/a/2022/012692 Filing Date: April 10, 2021
Country: Malaysia Application Number: PI2022005623 Filing Date: April 10, 2021
Country: Nigeria Application Number: Not available Filing Date: April 10, 2021
Country: New Zealand Application Number: 793562 Filing Date: April 10, 2021
Country: Panama Application Number: 94165-01 Filing Date: April 10, 2021
Country: Philippines Application Number: 1-2022-552738 Filing Date: April 10, 2021
Country: Qatar Application Number: QA/202210/0000698 Filing Date: April 10, 2021
Country: Saudi Arabia Application Number: 522440872 Filing Date: April 10, 2021 |
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|
Country: Singapore Application Number: 11202253965C Filing Date: April 10, 2021
Country: Thailand Application Number: 2201006618 Filing Date: April 10, 2021
Country: Vietnam Application Number: 1-2022-06884 Filing Date: April 10, 2021
Country: South Africa Application Number: 2022/11630 Filing Date: April 10, 2021
Country: Jordan Application Number: PCT/JO/2022/259 Filing Date: April 10, 2021 | ||
| Organicell™ has a U.S. Patent Application on file for its Organicell™ PPX product and the proprietary techniques used in the administration of blood-derived exosomes to treat pain. | ||
| U.S. Patent Application No. 18/063,227 | ||
| Titled: COMPOSITIONS AND METHODS FOR TREATING PAIN WITH EXTRACELLULAR VESICLES | ||
| Filed: December 8, 2022 | ||
| Inventors: Maria Ines Mitrani, Michael Bellio, and Albert Mitrani | ||
| Applicant: Organicell Regenerative Medicine, Inc. | ||
| Organicell™ has an International Patent Application on file for its Organicell™ PPX product and the proprietary techniques used in the administration of blood-derived exosomes to treat pain | ||
| International Patent Application No. PCT/US2022/081146 | ||
| Titled: COMPOSITIONS AND METHODS FOR TREATING PAIN WITH EXTRACELLULAR VESICLES | ||
| Filed: December 8, 2022 | ||
| Inventors: Maria Ines Mitrani, Michael Bellio, and Albert Mitrani | ||
| Applicant: Organicell Regenerative Medicine, Inc. | ||
| Organicell™ has a U.S. Provisional Patent Application on file for its Organicell™ updated line of products and proprietary techniques used for processing perinatal fluid. | ||
| U.S. Provisional Patent Application No. 63/379,559 | ||
| Titled: NANOPARTICLE COMPOSITIONS AND METHODS | ||
| Filed: October 14, 2022 | ||
| Inventors: Maria Ines Mitrani | ||
| Applicant: Organicell Regenerative Medicine, Inc. | ||
| Conversion Filing Deadline: October 14, 2023 |
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| Trademarks: | Word Mark: ZENOX | |
| Goods/Services: Radiation sterilized biologically derived products developed from perinatal tissue material in the nature of cultured biological tissue and non-cultured biological tissue, for aesthetic purposes, other than for medical or veterinary purposes (IC 001) | ||
| Serial Number: 90331202 | ||
| Filing Date: November 19, 2020 | ||
| Owner: Organicell Regenerative Medicine, Inc. | ||
| Status: Abandoned on March 21, 2022 | ||
| Word Mark: ZENOX | ||
| Goods/Services: Radiation sterilized biologically derived products developed from perinatal tissue material for medical and medical regenerative purposes, namely, biological tissue grafts, implants comprising living tissue, surgical implants comprising living tissue, and biological implants for cushioning tissues and supporting tissue repair and homeostasis (IC 005) | ||
| Serial Number: 90331195 | ||
| Filing Date: November 19, 2020 | ||
| Owner: Organicell Regenerative Medicine, Inc. | ||
| Status: Abandoned on March 21, 2022 | ||
| Word Mark: XENOX | ||
| Goods/Services: Radiation sterilized biologically derived products developed from perinatal tissue material in the nature of cultured biological tissue and non-cultured biological tissue, for aesthetic purposes, other than for medical or veterinary purposes (IC 001) | ||
| Serial Number: 97075336 | ||
| Filing Date: October 14, 2021 | ||
| Owner: Organicell Regenerative Medicine, Inc. | ||
| Status: Abandoned on January 20, 2023 | ||
| Word Mark: XENOX | ||
| Goods/Services: Radiation sterilized biologically derived products developed from perinatal tissue material for medical and medical regenerative purposes, namely, biological tissue grafts, implants comprising living tissue, surgical implants comprising living tissue, and biological implants for cushioning tissues and supporting tissue repair and homeostasis (IC 005) | ||
| Serial Number: 97075340 | ||
| Filing Date: October 14, 2021 | ||
| Owner: Organicell Regenerative Medicine, Inc. | ||
| Status: Abandoned January 20, 2023 |
| Word Mark: XOTIN | |||
| Goods/Services: Biologically derived nanoparticles, namely, exosomes and extracellular vesicles, developed from perinatal tissue material for aesthetic purposes, other than for medical or veterinary purposes (IC 001) | |||
| Serial Number: 90168590 | |||
| Filing Date: September 9, 2020 | |||
| Owner: Organicell Regenerative Medicine, Inc. | |||
|
Status: |
Registered. Registration Number: 6847416 Registration date: September 13, 2022 | ||
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| Word Mark: XOTIN | ||
| Goods/Services: Biologically derived nanoparticles, namely, exosomes and extracellular vesicles, developed from perinatal tissue for medical and medical regenerative purposes, namely, biological tissue grafts, implants comprising living tissue, surgical implants comprising living tissue, and biological implants for cushioning tissues and supporting tissue repair and homeostasis (IC 005) | ||
| Serial Number: 90168599 | ||
| Filing Date: September 9, 2020 | ||
| Owner: Organicell Regenerative Medicine, Inc. | ||
|
Status: Registered Registration Number: 6815780 Registration date: August 9, 2022 | ||
| Word Mark: ZOFIN | ||
| Goods/Services: Biologically derived products developed from perinatal tissue material in the nature of cultured biological tissue and non-cultured biological tissue, for aesthetic purposes, other than for medical or veterinary purposes (IC 001); Biologically derived products developed from perinatal tissue material for medical and medical regenerative purposes, namely, biological tissue grafts, implants comprising living tissue, surgical implants comprising living tissue, and biological implants for cushioning tissues and supporting tissue repair and homeostasis (IC 005) | ||
| Serial Number: 90050511 | ||
| Filing Date: July 13, 2020 | ||
| Owner: Organicell Regenerative Medicine, Inc. | ||
| Status: Notice of allowance issued May 18, 2021; A third request for extension of time to file a Statement of Use has been granted. | ||
| Word Mark: Organicell | ||
| Goods/Services: Biologically derived products developed from perinatal tissue material in the nature of cultured biological tissue and non-cultured biological tissue, for aesthetic purposes, other than for medical or veterinary purposes (IC 001); Biologically derived products developed from perinatal tissue material for medical and medical regenerative purposes, namely, biological tissue grafts, implants comprising living tissue, surgical implants comprising living tissue, and biological implants for cushioning tissues and supporting tissue repair and homeostasis (IC 005) | ||
| Serial Number: 88903989 | ||
| Filing Date: May 6, 2020 | ||
| Owner: Organicell Regenerative Medicine, Inc. | ||
|
Status: Registered Registration Number: 6647223 Registration date: February 15, 2022 | ||
| Word Mark: Organicell | ||
| Goods/Services: Non-medicated anti-aging serum; non-medicated skin serums; all of the aforementioned goods are made in whole or in substantial part of organic ingredients (IC 003) | ||
| Serial Number: 87311045 | ||
| Filing Date: January 23, 2017 | ||
| Owner: Organicell Regenerative Medicine, Inc. | ||
| Registration Number: 5289671 | ||
| Registration Date: September 19, 2017 | ||
| Status: Live |
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| Word Mark: PATIENT PURE X - PPX | ||
| Goods/Services: plasma extracts for medical use, namely, plasma extract containing purified and concentrated exosomes derived from whole human blood (IC 005) | ||
| Serial Number: 88771931 | ||
| Filing Date: January 24, 2020 | ||
| Owner: Organicell Regenerative Medicine, Inc. | ||
|
Status: Registered Registration Number: 6654296 Registration date: February 22, 2022 |
| Word Mark: PATIENT PURE X - PPX | ||
| Goods/Services: plasma processing services for others, namely, extracting purified and concentrated exosomes based on whole blood harvested from patients for use by hospitals, clinics, or other organizations or persons involved in delivering healthcare services to patients (IC 040) | ||
| Serial Number: 88771934 | ||
| Filing Date: January 24, 2020 | ||
| Owner: Organicell Regenerative Medicine, Inc. | ||
|
Status: Registered Registration Number: 6654297 Registration date: February 22, 2022 |
Pursuant to our employment agreements with our executives, all work product that is created, prepared, produced, authored, edited, amended, conceived or reduced to practice by each executive individually or jointly with others during the period of their employment by the Company and relating in any way to the business or contemplated business, research or development of the Company (regardless of when or where the Work Product is prepared or whose equipment or other resources is used in preparing the same), as well as any and all rights in and to copyrights, trade secrets, trademarks (and related goodwill), patents and other intellectual property rights therein arising in any jurisdiction throughout the world and all related rights of priority under international conventions with respect thereto, including all pending and future applications and registrations thereof, and continuations, divisions, continuations-in-part, reissues, extensions and renewals thereof (collectively, “Intellectual Property Rights”), the sole and exclusive property of the Company. All of the Work Product consisting of copyrightable subject matter shall be deemed “work made for hire” as defined in 17 U.S.C. § 101 and such copyrights are therefore owned by the Company or if not applicable, deemed to be irrevocably assigned to the Company, for no additional consideration. The Intellectual Property Rights in any “Pre-existing Materials” included contained in the Work Product shall be retained by the executive but the executive shall be deemed to have granted to the Company an irrevocable, worldwide, unlimited, royalty-free license to use, publish, reproduce, display, distribute copies of, and prepare derivative works based upon, such Pre-Existing Materials and derivative works thereof. The Company may not assign, transfer and sublicense such rights to others without executive’s consent, other than to a wholly owned subsidiary of the Company. The executive shall provide written notice to the Company’s Chief Executive Officer therein notifying the Company new intellectual property including the Pre-Existing Materials.
Competition
The regenerative medicine field is highly competitive and subject to rapid technological change and regulation. Companies compete on the basis of product efficacy, pricing, and ease of handling/logistics. A critically important factor for growth in the US market is third-party reimbursement, which is difficult to obtain, and the process can be time-consuming and expensive. We expect that it will take some time before RAAM products will be widely accepted under health insurance coverage. In addition, growth of this industry is expected to expand as additional research and development into the benefits of regenerative products and specific products becomes more widely accepted as a result of FDA mandated or optional clinical trials are performed by industry stakeholders.
As stated previously, companies competing in the industry must now meet the new and more stringent regulatory deadlines imposed by the FDA in connection with regulation of RAAM products that went into effect in May 2021 (postponed from November 2020 due to the COVID-19 pandemic). As a result of these concerns, the Company and our competitors are expected to need to pursue research and development efforts, submit IND applications for FDA approval to commence clinical trials for RAAM products and ultimately obtaining a biologic license for their products to be sold, to assure that their respective operations and products remain compliant with FDA regulations and there is no adverse impact to future operations.
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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 both domestically and internationally, expanding sales internationally and developing new product offerings and/or designations of products that would not fall under these regulations, including the Company’s recent launching of PPX™.
We intend to perform clinical trials for our RAAM Products for the purpose of obtaining biologics license status from the FDA to provide us with advantages over our competitors, including acceleration for acceptance of our products in traditional insurance plans, compliance with FDA regulations and/or to provide our customers with superior education and support of the benefits of our products. Initially we are positioning ourselves as a cash-based health care alternative for consumers that can provide higher levels of improvement, that is not available from traditional allopathic medicine at this time.
The Company competes in multiple areas of clinical treatment where regenerative biomaterials may be employed to modulate inflammation, enhance healing and reduce scar tissue formation: advanced wound care treatment, including spine, orthopedic, sports medicine, and surgical as well as regenerative and aesthetics applications.
The primary competitive products in this space and which are now subject to being classified as an HCT/P product that must meet current regulatory guidelines and require IND approvals, clinical trials, and ultimately biologic license are allogenic products derived from perinatal sources or blood/bone sources including placental powders, placental frozen tissues or liquids, cord blood derived products, and Wharton’s jelly derived products. As a result of this increased regulatory oversight of HCT/P’s, competitors have begun shifting their product portfolios to autologous solutions including serums derived from blood, bone marrow, and adipose tissue. These products are the fastest growing sector of regenerative medicine due to their compliant regulatory position with the FDA.
Allogenic competitors are primarily producer-distributor companies which historically included Predictive Biotech, Kimera Labs, MiMedix Group, Inc., Invitrx Therapeutics, Liveyon, BioD (“dermaSciences”), Signature Biologics, Direct Biologics and Vitti Labs LLC, as well as a number of distributors who sell white-labeled products from those producer-distributor entities. Additionally, there are a variety of accredited blood, bone, and soft tissue banks that we historically competed against, including Utah Cord Bank and Cord for Life. Currently one of the largest companies in the autologous segment is Regenexx. We also expect to see the growth of many additional autologous equipment manufacturers during 2023, including APEX Biologix LLC.
In connection with the new FDA regulations that went into effect in May 2021 described above, the Company believes that several of the largest perinatal product manufacturers in the United States, Predictive Biotech and Utah Cord Bank, have closed their operations. In addition, the FDA has indicated that hundreds of other manufacturers and clinics have already received warning letters of violations of the new FDA regulations, including Vitti Labs LLC. To date, the Company has not received any warning letters or correspondence from the FDA indicating that our products were not in compliance with the current FDA regulations.
As stated previously, the demand for RAAM products is very high and expected to grow with the growing baby boomer generation getting older, the increase in patients desiring to seek health care options outside of traditional therapies, the growing trend in the desire of individuals to remain active longer in life and the ongoing rise in health care costs which RAAM products may provide a more efficient and economical alternative for certain conditions.
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Government Regulation
General
The Company’s operations are subject to FDA regulations in connection with the sales and distribution of its RAAM products. In addition, the Company relies on supply agreements with birth tissue recovery companies, supply manufacturers and/or third party distributors for the supply of RAAM products and/or the Company’s intended objectives to conduct research and development and clinical trials of RAAM products, all of whom are required to comply with FDA regulations. We anticipate these regulations will be heavily enforced and subject to more restrictive regulations by the FDA in the future. A summary of the current FDA regulations is set forth below.
FDA Premarket Clearance and Approval Requirements
Tissue Products
Currently the products that are sold by the Company are derived from human tissue that is purchased by the Company and processed directly in the Company’s laboratory facilities. At times when the Company did not manufacture its own products, the products sold were manufactured and processed by third party manufacturers. As discussed below, some tissue-based products are regulated solely under Section 361 of the Public Health Service Act as human cells, tissues and cellular and tissue-based products, or HCT/Ps, which do not require premarket clearance or approval by the FDA. Other tissue products are regulated as biologics and, in order to be lawfully marketed in the United States, require an FDA-approved BLA.
The FDA is continually changing and formulating new guidelines for this industry. In addition, the FDA has published some additional draft guidelines related to this industry and the ultimate form of the regulations are not yet known.
Products Regulated as HCT/Ps
The FDA has specific regulations governing human cells, tissues and cellular and tissue-based products, or HCT/Ps. An HCT/P is a product containing or consisting of human cells or tissue intended for transplantation into a human patient. HCT/Ps that meet the criteria for regulation solely under Section 361 of the Public Health Service Act (so-called “361 HCT/Ps”) are not subject to approval requirements and they are subject to post-market regulatory requirements.
To be a 361 HCT/P, a product generally should meet following criteria:
| ● | Be minimally manipulated, no structural change, or be mixed with anything; |
| ● | Be intended for homologous use, essentially used for the same purpose that it was used in the donor; |
| ● | Its manufacture must not involve combination with another article, except for water, crystalloids or a sterilizing, preserving or storage agent; and |
| ● | It must not be dependent upon the metabolic activity of living cells for its primary function. |
Products Regulated as Biologics- The BLA Pathway
The typical steps for obtaining FDA approval of a BLA to market a biologic product in the U.S. include:
| ● | Completion of preclinical laboratory tests, animal studies and formulations studies under the FDA’s good laboratory practices regulations; |
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| ● | Submission to the FDA of an Investigational New Drug Application (“IND”) for human clinical testing, which must become effective before human clinical trials may begin and which must include independent Institutional Review Board (“IRB”) approval at each clinical site before the trials may be initiated; |
| ● | Performance of adequate and well-controlled clinical trials in accordance with Good Clinical Practices to establish the safety and efficacy of the product for each indication; |
| ● | Submission to the FDA of a Biologics License Application for marketing the product, which includes, among other things, reports of the outcomes and full data sets of the clinical trials, and proposed labeling and packaging for the product; |
| ● | Satisfactory completion of an FDA Advisory Committee review; and |
| ● | Satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with Current Good Manufacturing Practices (“cGMP”) regulations. |
Generally, clinical trials are conducted in three phases:
| ● | Phase I trials typically involve a small number of healthy volunteers and are designed to provide information about the product safety. |
| ● | Phase II trials are conducted in a larger but limited group of patients afflicted with a specific diagnosis in order to determine preliminary efficacy, and to identify possible adverse effects. | |||
| ○ | Dosage studies are designated as Phase IIA and efficacy studies are designated as Phase IIB. | |||
| ● | Phase III clinical trials are generally large-scale, multi-center, comparative trials conducted with patients who have a specific condition in order to provide statistically valid proof of efficacy, as well as safety and potency. |
| ● | In some cases, the FDA will require Phase IV, or post-marketing trials, to collect additional data after a product is on the market. |
The process of obtaining an approved BLA requires the expenditure of substantial time, effort and financial resources and may take years to complete.
FDA Post-Market Regulation
Tissue processors are required to register as an establishment with the FDA. We intend on becoming a registered establishment, accredited by the American Association of Tissue Banks (“AATB”) for the storage and distribution of tissue products that we purchase directly or indirectly from third party manufacturers. Once we are registered, we will be required to comply with regulations, including those regulations regarding storage, controls, access, labeling, record keeping, security, processes, compliance with established Good Tissue Practices, and documentation associated with the sale of our products by our customers to their patients. Our facilities will be subject to periodic inspections to assess our records and determination of our compliance with the regulations.
Products covered by a BLA, 510(k) clearance, or a PMA are subject to numerous additional regulatory requirements, which include, among others, compliance with cGMP, which imposes certain procedural, substantive and record keeping requirements, labeling regulations, the FDA’s general prohibition against promoting products for unapproved or “off-label” uses, and additional adverse event reporting.
Other Regulation Specific to Tissue Products
The AATB, has issued operating standards for tissue banking, whether manufacturing and/or storing products as a distributor of manufactured products by third parties. Compliance with these standards is a requirement in order to become a licensed tissue bank.
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21st Century Cures Act
In December 2016, President Obama signed the 21st Century Cures Act (the “Cures Act”) into law. The Cures Act includes many provisions that aim to speed up the process of bringing new drugs and devices to market. One of the Cures Act’s most significant amendments to the Federal Food, Drug and Cosmetic Act allows the FDA to grant accelerated approval to regenerative medicine products, while also providing the agency with wide discretion on creating new approaches to regenerative medicine. This legislative development is the result of increased pressure from patients and other stakeholders to move regenerative medicine advancements more quickly from the lab into the clinic.
Specifically, the new accelerated approval pathway authorized by the Cures Act allows certain regenerative medicine products to be designated as “regenerative advanced therapy” and become eligible for priority review by FDA. To qualify for this pathway, the product must be aimed at a serious disease and have the potential to deal with currently unmet medical needs. It must also meet the Cures Act’s new definition of a regenerative advanced therapy, which is defined as “cell therapy, therapeutic tissue engineering products, human cell and tissue products, and combination products using any such therapies or products, except for those regulated solely under section 361 of the Public Health Service Act.” This broad definition would seem to encompass the majority of regenerative medicine products known to be currently in the development stages.
As with the existing accelerated approval pathway for drugs and biologics, this new regulatory pathway would allow a regenerative medicine product to be approved for marketing based on surrogate or intermediate clinical trial endpoints rather than longer term clinical outcomes. The use of such endpoints can decrease the number, duration, and complexity of clinical trials that are needed to prove a longer-term outcome. Subsequently, a sponsor would have to conduct confirmatory clinical trials to ensure that the surrogate or intermediate endpoint was in fact predictive of patients’ clinical response to the product, otherwise the accelerated approval could be withdrawn.
The Cures Act also requires the FDA to work with the National Institute of Standards and Technology (“NIST”) and other stakeholders to develop standards and consensus definitions for regenerative medicine products. Such standards are expected to play a large role in advancing this nascent industry by allowing companies to rely on FDA-recognized standards, rather than creating and validating their own as is the case today.
The Cures Act attempts to create a research network and a public-private partnership to assist developers in generating definitive evidence about whether their proposed therapies indeed provide clinical benefits that are hoped for. The Cures Act also requires the FDA to track and report the number and type of applications filed for regenerative medicine products, including the number of products approved through the new accelerated approval pathway. The law also includes provisions that require the FDA to publish guidance on how it will design and implement an approval process for regenerative medicine devices.
November 2017 FDA Guidelines
In November 2017, the FDA released four guidance documents (two final, two draft) in an effort to implement a “comprehensive policy framework” for existing laws and regulations governing regenerative medicine products, including human cells, tissues, and cellular and tissue-based products (“HCT/Ps”). These guidance documents build upon the previous regulatory framework for these products, which was completed in 2005. A guidance document cannot alter a regulation, but can clarify how the FDA intends to enforce the regulation. The Comprehensive regenerative medicine policy framework intends to spur innovation, efficient access to potentially transformative products, while ensuring safety & efficacy.
The framework builds upon the FDA’s existing risk-based regulatory approach to more clearly describe what products are regulated as drugs, devices, and/or biological products. Further, two of the guidance documents propose an efficient, science-based process for helping to ensure the safety and effectiveness of these therapies, while supporting development in this area. The suite of guidance documents also defines a risk-based framework for how the FDA intends to focus its enforcement actions against those products that raise potential significant safety concerns. This modern framework is intended to balance the agency’s commitment to safety with mechanisms to drive further advances in regenerative medicine so innovators can bring new, effective therapies to patients as quickly and safely as possible. The policy also delivers on important provisions of the Act.
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Final Guidance Documents
The two final guidance documents clarify the FDA’s interpretation of the risk-based criteria manufacturers use to determine whether a product is subject to the FDA’s premarket review.
The first guidance provides greater clarity around when cell and tissue-based products would be exempted from the established regulations if they are removed from and implanted into the same individual within the same surgical procedure and remain in their original form. The second final guidance helps stakeholders better understand how existing regulatory criteria apply to their products by clarifying how the agency interprets the existing regulatory definitions “minimal manipulation” and “homologous use.” As this field advances, the FDA has noted that there are a growing number of regenerative medicine products subject to FDA premarket authorization. These guidance documents will help explain how the FDA will provide a risk-based framework for its oversight. The policy framework defines how the FDA intends to take action against unsafe products while facilitating continued innovation of promising technologies.
To accomplish this goal, the guidance document has clarified the FDA’s view of “minimal manipulation” and “homologous use.” These are two concepts that are defined in current regulation to establish the legal threshold for when a product is subject to the FDA’s premarket approval requirements. By further clarifying these terms in the final guidance, the FDA is applying a modern framework for its oversight.
FDA regulations at 21 C.F.R. Part 1271, previous draft guidance documents, and untitled letters establish the agency’s approach to regulating HCT/Ps. Some HCT/Ps are exempt from premarket approval and are subject to regulation solely under section 361 of the Public Health Service Act (“PHS Act”) (so-called “361 HCT/Ps”) whereas others require premarket approval (i.e., as a drug, device, or biologic) (so-called “351 HCT/Ps”). Both 361 HCT/Ps and 351 HCT/Ps are subject to FDA requirements (at Part 1271) for registration and listing, donor-eligibility, current good tissue practices, and other requirements intended to prevent transmission of communicable diseases. Those that are the subject of the “same surgical procedure” exception – are exempt from both premarket approval requirements and the requirements of Part 1271. This regime is outlined in a flow chart, which is one of the few new features of the final guidance documents and is presented below:
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Enforcement Discretion
In order to allow manufacturers of products time to comply with the requirements, the FDA announced that it intended (originally through November 2020 and extended to May 2021 because of the COVID-19 pandemic) to exercise enforcement discretion for certain products that are subject to the FDA’s premarket review under the existing regulations, but are not currently meeting these requirements. The FDA does not intend to exercise such enforcement discretion for those products that pose a potential significant safety concern. Going forward, the FDA will apply a risk-based approach to enforcement, taking into account how products are being administered as well as the diseases and conditions for which they are being used. This risk-based approach allows product manufacturers time to engage with the FDA, as to determine if they need to submit a marketing authorization application and, if so, submit their application to the FDA for approval.
The FDA’s enforcement discretion policy for IND and premarket approval requirements does not apply to products that have been associated with reported safety concerns or have the potential to cause significant safety concerns to patients. The FDA has stepped up its oversight of cellular and related products in recent years and has issued compliance actions, including numerous warning and untitled letters, and pursued litigation for serious violations of the law, including some involving patient harm.
The FDA has indicated it intends to focus enforcement actions on “products with higher risk,” taking into account factors such as non-autologous (allogeneic) use, the route of administration, the site of administration, and whether the product is intended for homologous or non-homologous use. For example, HCT/Ps administered via intravenous injection or infusion, aerosol inhalation, intraocular injection, or injection or infusion into the central nervous system, will be prioritized over HCT/Ps administered by intradermal, subcutaneous, or intra-articular injection. Similarly, HCT/Ps intended for non-homologous use, particularly those intended to treat serious or life-threatening conditions, “are more likely to raise significant safety concerns than HCT/Ps intended for homologous use.”
The Company believes that the new regulatory restrictions being implemented by the FDA are intended to assure that all parties involved in the chain of gathering, processing, distributing and/or administrating RAAM related products have met the required standards to assure that the manufacturing, marketing the administration of the RAAM regulated products are not misleading and are performed in a safe and ethical manner and in accordance with the “objective intent” of the manufacturer.
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.
New Draft Guidance Documents
The two draft guidances provide important information to help spur development and access to innovative regenerative therapies. The first draft guidance, which builds off the regenerative medicine provisions in the Act, addresses how the FDA intends to simplify and streamline its application of the regulatory requirements for devices used in the recovery, isolation, and delivery of regenerative medicine advanced therapies, including combination products. The guidance specifies that devices intended for use with a specific RMAT (as defined below0 may, together with the RMAT, be considered to comprise a combination product.
The second draft guidance describes the expedited programs that may be available to sponsors of regenerative medicine therapies, including the new Regenerative Medicine Advanced Therapy (“RMAT”) designation created by the Cures Act, Priority Review, and Accelerated Approval. In addition, the guidance describes the regenerative medicine therapies that may be eligible for RMAT designation – including cell therapies, therapeutic tissue engineering products, human cell and tissue products, and combination products using any such therapies or products, as well as gene therapies that lead to a durable modification of cells or tissues (including genetically modified cells).
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Fraud, Abuse and False Claims
We are directly and indirectly subject to various federal and state laws governing relationships with healthcare providers and pertaining to healthcare fraud and abuse, including anti-kickback laws. In particular, the federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing, arranging for or recommending a good or service for which payment may be made in whole or part under federal healthcare programs, such as the Medicare and Medicaid programs. (See 42 U.S.C. § 1320a-7b). Penalties for violations include criminal penalties and civil sanctions such as fines, imprisonment and possible exclusion from Medicare, Medicaid and other federal healthcare programs. The Anti-Kickback Statute is broad and prohibits many arrangements and practices that are lawful in businesses outside of the healthcare industry. In implementing the statute, the Office of Inspector General of the U.S. Department of Health and Human Services (“OIG”) has issued a series of regulations, known as the “safe harbors.” These safe harbors set forth provisions that, if all their applicable requirements are met, will assure healthcare providers and other parties that they will not be prosecuted under the Anti-Kickback Statute.
AdvaMed has established guidelines and protocols for medical device manufacturers in their relationships with healthcare professionals on matters including research and development, product training and education, grants and charitable contributions, support of third-party educational conferences, and consulting arrangements. Adoption of the AdvaMed Code by a medical device manufacturer is voluntary, and while the OIG and other federal and state healthcare regulatory agencies encourage its adoption and may look to the AdvaMed Code, they do not view adoption of the AdvaMed Code as proof of compliance with applicable laws. We have incorporated the principles of the AdvaMed Code in our standard operating procedures, sales force training programs, and relationships with health care professionals.
Manufacturing (Processing)
We intend on becoming a registered establishment, accredited by the American Association of Tissue Banks (“AATB”) for the storage and distribution of tissue products that we purchase directly or indirectly from third party manufacturers.
Our laboratory and distribution facilities are subject to periodic unannounced inspections by regulatory authorities based on the activities we may be engaged, and may undergo compliance inspections conducted by the FDA and corresponding state and foreign agencies based on our operations. We intend to seek American Association Blood Banks (“AABB”) or AATB accreditation in connection with the storage of products we intend to distribute.
FDA Compliance Steps
To date, the Company has obtained certain IND and eIND approvals from the FDA, including applicable IRB approvals which authorized the Company to commence clinical trials or treatments in connection with the use of Zofin™ and related treatment protocols.
In connection with the Company’s approved eINDs, the approvals authorize physicians to treat their patients with Zofin™ under a specified protocol when there is no comparable or satisfactory therapy option available for an individual patient who has a serious or immediately life-threatening disease. These are not formal clinical trials and the Company is not given access to full patient data associated with such treatments. Following FDA’s reporting requirements, the Company submitted an annual report for all of the eINDs to the FDA to formally close each of the eINDs. The annual report consists of a written summary of the results including any adverse effects.
For each of the Company’s approved eIND’s described below, the approved protocol consisted of administering three or four individual doses of Zofin™ over an 8-day period and monitoring the patient for a period of 21-days from the date of administering the initial dose.
The use of an eIND for “expanded access” is primarily to treat patients with the investigational drug and not to answer safety or efficacy questions about the drug.
With respect to the Company’s approved INDs and ongoing clinical trials, until such time that the clinical trial is closed and the associated data is reviewed and analyzed by third parties, the Company is not privy to actual patient outcomes and is unable to provide updates on the results of such clinical trials.
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To date, there has not been a severe adverse event that has been reported to be associated with the use of Zofin™.
The information provided below represents the Company’s most up to date information regarding results from the Company’s FDA approved and submitted eINDs and approved phase I/II INDs and other trial related activities:
For each of the patients that have been treated under the Company’s approved eIND’s described below, the Company had endeavored to obtain initial and follow-up patient information beginning with the initial date that Zofin™ was administered. As stated earlier, the collection of this information was not required by applicable FDA regulations, but the Company desired to obtain such information in an effort to support and improve its ongoing research and development activities. The patient outcome information provided below for each eIND identified is based on information provided by the patient’s treating physicians, has not been audited and/or verified by the Company or by any independent third party for accuracy or completeness and the Company does not make any representations as to the accuracy or completeness of such information. Furthermore, the Company is not making any claims and/or inferences as to any direct or indirect correlation of the reported patient outcomes and the use of Zofin™ by providing such information.
| 1. | eIND#22370 approved on 05/11/2020 - Treatment for Acute hypoxic respiratory failure with ARDS secondary to COVID-19 infection for single patient. Patient required mechanical ventilation prior to treatment and developed acute metabolic encephalopathy with ICU delirium along with acute kidney injury and anemia. The patient was treated in May 2020. Patient’s respiratory function at 21-days post treatment, transitioned from a 21% t-collar to room air PMV and decannulation on day 26. The physician reported that patient was discharged from hospital after 29-days post treatment. The single eIND was closed during FDA’s annual reporting. | |
| 2. | eIND#22371 approved on 05/11/2020 - Treatment for Acute hypoxic respiratory secondary to bilateral pneumonia secondary to COVID-19 with ARDS for single patient. Patient had also developed acute kidney failure due to sepsis and was placed on hemodialysis. The patient was treated in May 2020. During the course of the treatment, patient’s respiratory function transitioned from CPAP 5 PS 10 30% ventilation to 30% T-Collar ventilation by day 28. The patient’s acute delirium improved. During the observational 21-day period, the physician reported that the patient remained in the step-down unit and required regular hemodialysis treatment due to the kidney injury. The physician reported that the patient passed away 104 days after treatment. The single eIND was closed during FDA’s annual reporting. |
| 3. | eIND#22897 approved on 05/29/2020 - Treatment for Acute respiratory failure with hypoxia, secondary to COVID-19 with ARDS for single patient. Patient had respiratory impairment due to ARDS and an acute kidney injury that required regular hemodialysis. The patient was treated in June 2020. After receiving the treatment, the patient’s respiratory function improved with a complete decannulation from oxygen therapy by day 4. The patient had a complete recovery of renal function, with decreased creatinine concentration levels, and was removed from hemodialysis by day 17. The physician indicated that the patient was discharged 26-days post treatment initiation. The single eIND was closed during FDA’s annual reporting. | |
| 4. | eIND#25426 approved on 07/24/2020 - Treatment of COVID-19 positive for single patient. The patient was treated in July 2020. The patient was experiencing fatigue, cough, and shortness of breath at rest and upon exertion. At baseline, the patient’s oxygen saturation was 94% with elevated inflammatory biomarkers TNF-a, IL-6, CRP, and D-dimer. Patient reported improvement in fatigue, cough, and shortness of breath by day 21. Furthermore, inflammatory biomarkers IL-6, CRP, and TNF-alpha all decreased into normal range within 21 days. The physician indicated that the patient reported returning to normal activity by day 28. The single eIND was closed during FDA’s annual reporting. | |
| 5. | eIND#25888 approved on 8/01/2020 - Treatment of post COVID-19 complication for single patient. The patient was treated in August 2020. Patient was experiencing shortness of breath, fevers, total malaise, arthropathies vomiting, diarrhea, headaches, and loss of smell. At baseline, bilateral pneumonia with shortness of breath was the primary factor that lead to the long-hauler diagnosis. Blood oxygen saturation level was 95%. The patient began to experience improvements in shortness of breath complications early in the treatment protocol. By the conclusion of the study, the physician indicated that the patient returned to normal with no observation of impairments or respiratory distress. The single eIND was closed during FDA’s annual reporting. |
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| 6. | eIND#26560 approved on 8/17/2020 - Treatment of post-COVID-19 complications for single patient. The patient was treated in August 2020. At baseline, the patient reported prolonged fatigue and shortness of breath. No abnormalities were found in chest x-ray images, oxygen saturation, or inflammatory biomarkers. 20 days post treatment, the physician indicated that the patient continued to experience post-COVID-19 fatigue, shortness of breath, muscle aches, and hair loss. The single eIND was closed during FDA’s annual reporting. |
| 7. | eIND#26561 approved on 8/17/2020 - Treatment of post-COVID-19 complications for single patient. The patient was treated in August 2020. At baseline, the patient reported prolonged fatigue, shortness of breath, body aches and headaches. Significant improvements in fatigue, mental fog, and shortness of breath with exertion were reported 3 days after the 3rd dose. The physician indicated that the patient refused to have further follow up 3 days after the 3rd dose. The single eIND was closed during FDA’s annual reporting. | |
| 8. | eIND#26676 approved on 8/20/2020 - Treatment of respiratory failure due to COVID-19 infection for single patient. The patient was treated in August 2020. Patient was in ICU in severe critical condition prior to initiation of the treatment. The physician indicated that the patient passed away 5 days after initiation of the treatment, having received two of the three doses of Zofin™ as per the protocol. The single eIND was closed during FDA’s annual reporting | |
| 9. | eIND#26700 approved on 8/21/2020 - Treatment for ARDS associated with COVID-19 for a single patient. The patient was treated in August 2020. Patient was in ICU in severe critical condition prior to initiation of the treatment. The physician indicated that the patient passed away 7 days after initiation of the treatment, having received two of the three doses of Zofin™ as per the protocol. The single eIND was closed during FDA’s annual reporting. | |
| 10. | eIND#26776 approved on 8/25/2020 - Treatment of COVID-19 positive for single patient. The patient was treated in September 2020. Patient was experiencing significant fatigue, cough, and shortness of breath; inflammatory biomarker CRP was also elevated at baseline. Initial O2 saturation levels fluctuated from 88-95%. Significant improvements were first noted 2 days after the 2nd dose including a decrease in fever and overall improvement in wellbeing. At day 14, the physician reported that the patient returned to work, with a resolution of all reported symptoms. The patients O2 saturation returned to a stable 98% and CRP biomarker levels decreased to normal levels by day 14. The single eIND was closed during FDA’s annual reporting. | |
| 11. | eIND#26777 approved on 8/25/2020 - Treatment of COVID-19 positive for single patient. The patient was treated in September 2020. At baseline, patient was experiencing symptoms of fever, fatigue, cough, and shortness of breath. Patient first reported 25% improvement after the first dose and 95% improvement 2 days after the second dose. At the day 8 time point, the only clinical feature still present was an occasional cough. The physician reported that the patient returned to work 24 hours after the 3rd dose. The single eIND was closed during FDA’s annual reporting. | |
| 12. | eIND#26864 approved on 9/05/2020 - Treatment of COVID-19 positive for single patient. The patient was treated in September 2020. Patient was in ICU in severe critical condition, on ECMO, prior to initiation of the treatment. The patient received 4 doses of Zofin™ and the physician indicated that the patient remained stable on ECMO 21 days after the 1st dose. The physician reported that the patient passed away 41 days after treatment initiation. The single eIND was closed during FDA’s annual reporting. | |
| 13. | eIND#26821 approved on 9/22/2020 - Treatment of post COVID-19 complications for single patient. The patient was treated in September 2020. At time of initiation of the treatment, the patient reported symptoms to include generalized myalgias, headaches and fatigue. On day 60, the physician indicated that the patient reported marked improvement with arthralgias and achiness but still had complaints of fatigue, headaches and shortness of breath. The single IND was closed during FDA’s annual reporting. | |
| 14. | eIND#26964 approved on 10/10/2020 - Treatment for ARDS associated with COVID-19 for single patient. The patient was treated in October 2020. Patient was in ICU for 16 days and in severe critical condition receiving 100% FiO2, PC mode of ventilator and PEEP 10 prior to initiation of treatment. The physician reported that the patient passed away 1 day after treatment initiation (only 1 dose of the protocol was administered). The single eIND was closed during FDA’s annual reporting. |
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| 15. | eIND#26972 approved on 10/14/2020 - Treatment for ARDS associated with COVID-19 for single patient. The patient was treated in October 2020. Patient was in ICU in severe critical condition prior to initiation of the treatment. The physician reported that the patient passed away 13 days after initiation of the first dose and having only received 2 of the 4 doses as per the protocol. The single eIND was closed during FDA’s annual reporting. |
| 16. | eIND#26978 approved on 10/16/2020 - Treatment for ARDS associated with COVID-19 for single patient. The patient was treated in October 2020. Patient was in ICU suffering with pneumonia and respiratory failure. Initiation of treatment was 6-days post hospital admission and the patient received a total of 4 doses of Zofin™. Physician reported patient was discharged and reported to be in stable condition with complete respiratory improvement. The single eIND was closed during FDA’s annual reporting. | |
| 17. | eIND#27128 approved on 12/04/2020 - Treatment of mild to moderate symptoms of COVID-19 for a single patient. The patient was treated in December 2020. Clinical features prior to infusion included low-grade fever, chills, muscle and joint aches, severe headaches, dry cough, feeling slightly breathless and fatigue. Upon day 13, physician reported the patient had less muscle and joint aches and increased energy. The single eIND was closed during FDA’s annual reporting. | |
| 18. | eIND#27165 approved on 12/15/2020 - Treatment of COVID-19 pneumonia and respiratory failure with ARDS for a single patient. The patient was treated in December 2020. Patient had a severely debilitating medical situation following COVID-19. Prior to the use of Zofin™, patient required use of 100% oxygen non-rebreather face mask. The physician reported that the patient passed away 75 days after only receiving the initial dose of the protocol (only 1 dose of Zofin™ was administered, the patient refused the second and third doses at day 4 and 8 as prescribed by the protocol). The single eIND was closed during FDA’s annual reporting. | |
| 19. | Expanded Access to Zofin™ (Organicell™ Flow) approved on 09/24/2020 - Treatment of Patients with COVID-19 Outpatient and Inpatient Population. The IRB was approved by the Institute of Regenerative and Cellular Medicine on December 16, 2020 (approval number: IRCM-2020-269). The trial was conducted at United Memorial Medical Center in Houston, Texas. The study enrolled a total of 11 subjects: adults between the age of 35 to 69 who were fighting COVID-19 infection and presented respiratory fatigue with and without exertion, cough, and shortness of breath and met all inclusion/exclusion criteria. One patient withdrew before receiving any doses of Zofin™. Two subjects withdrew at day 14 post treatment with Zofin™. As a result, eight subjects completed the day 30 follow-up and are included in the data analysis. The administration of Zofin™ in the trial was well tolerated in all enrolled subjects, with no adverse events. Chest X-ray data demonstrated that 75% of subjects had bilateral opacities caused by COVID-19 infection at day 0 (baseline), prior to treatment with Zofin™ and thirty (30) days after Zofin™ treatment, chest X-ray data showed 83% of treated subjects had normal lung imaging, indicating complete recovery. Upon such time that Organicell enrolls and submits additional patient data from the above-mentioned study, Organicell intends to submit the updated results of the trial to the FDA for approval of an amendment to the Company’s previously approved IND (NCT04384445) to perform a placebo-controlled Phase II clinical trial to confirm safety and efficacy in a randomized fashion. | |
| 20. | IND # 19881 approved on 04/30/2020 - A Phase I/II Randomized, Double Blinded, Placebo Trial to Evaluate the Safety and Potential Efficacy of Intravenous Infusion of OrganicellTM Flow for the Treatment of Moderate to Severe Acute Respiratory Syndrome (SARS) Related to COVID-19 Infection vs Placebo. IRB was approved by the Institute of Regenerative and Cellular Medicine (“IRCM”) on 06/04/2020 (approval number: IRCM-2020-254). The clinical trial is currently in process. A total of ten patients have been enrolled to the study thus far and currently the clinical trial is not enrolling subjects due to the challenges of enrolling the remaining study population. | |
| 21. | IND #27378 approved on 06/24/21. A Phase I/II Randomized, Double Blinded, Placebo Trial to Evaluate the Safety and Potential Efficacy of Intravenous Infusion of Zofin™ (Organicell™ Flow) for the Treatment of Post COVID-19 Complications “Long Haulers” vs Placebo. The trial, organized and operated through the CRO, has enrolled a total of 3 participants through January 15, 2023 and the Company expects the full enrolment of 30 patients to be completed no later than December 2023. Based on the timing to successfully enroll all patients during 2023, the Company plans to complete the trial during 2024 subject to the Company having sufficient working capital to finance the ongoing costs of the trial, as to all of which no assurance can be given. |
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| 22. | IND # 23198 approved on 01/27/2021. A Phase I/II Double Blinded, Placebo Trial to Evaluate the Safety and Potential Efficacy of Intravenous Infusion of Zofin™ (Organicell™ Flow) for the Treatment of patients diagnosed with chronic obstructive pulmonary disease (COPD). The Company and the CRO are currently working to initiate and complete enrollment in the trial which the Company expects to be completed during 2023, subject to the Company having sufficient working capital to finance the ongoing costs of the trial, as to all of which no assurance can be given. |
| 23. | IND # 23788 approved on 04/06/2021. A Phase I/II Randomized, Double Blinded, Placebo Trial to Evaluate the Safety and Potential Efficacy of Zofin™ Infused Intravenously in Patients Suffering with Knee Osteoarthritis vs Placebo. The Company and the CRO are expected to begin working to initiate the trial once the Company has advanced the Long Hauler and COPD trials to desired levels. The commencement of this trial is subject to the successful negotiation and execution of definitive agreements with the site facility where the study patients will be treated and the Company having sufficient working capital to finance the ongoing costs of the trial, as to all of which no assurance can be given. | |
| 24. | In April 2021, we announced that an initial trial of ten COVID -19 patients in India conducted by CWI India, our Indian partner, generated positive results. The trial had been conducted by CWI India, our Indian partner with whom we had entered a product testing and distribution agreement in February 2021, to collaborate on a study or studies to evaluate the effects of Zofin™ on moderate to severe COVID-19 patients in India. The ten patients in the initial trial were treated at hospitals in Bangalore, Kozhikode and Chennai, and all ten patients recovered from their symptoms and were discharged from the hospital. Based on the initial results of this trial, CWI India has since been seeking to obtain government approval to conduct an expanded trial of up to sixty-five patients with moderate to severe COVID-19, who were to be treated at these hospitals. To date, CWI India has not yet obtained the required approval and it is uncertain if they will ultimately be successful in doing so. The Company currently does not anticipate that this clinical trial will advance any further with CWI India. | |
| 25. | In May 2021, the Company announced that its Zofin™ therapy has been approved by Pakistani regulators to be used for a treatment of a single COVID-19 patient hospitalized at the Pakistan Institute of Medical Sciences under compassionate grounds. In addition to this compassionate grounds authorization, Organicell received further indications to begin a broader trial of Zofin™ with up to 60 additional patients suffering from moderate to severe COVID-19. The Company has already shared data with Pakistani regulatory authorities in the country in support of this effort. To date, the Company and the Company’s Pakistani partner for the proposed study have not yet obtained the required approvals and the Company is uncertain if they will ultimately be successful in doing so. The Company currently does not anticipate that this clinical trial will advance any further with the Company’s Pakistani partner. |
The Company is pursuing efforts to complete all of its approved clinical trials and to obtain approval for and 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.
Environmental Laws
Since May 2019, we have operated laboratory facilities that process or directly handled biomedical materials whereby we receive and/or generate wastes that are required to be disposed. We contract with third parties for the transport, treatment, and disposal of the waste that we obtain and at all times plan on being compliant with applicable laws and regulations promulgated by the Resource Conservation and Recovery Act, the U.S. Environmental Protection Agency and similar state agencies.
Employees
As of January 31, 2020, we have 20 full-time employees and no part-time employees. We also engaged 5 other consultants that assisted with various regulatory, marketing, administrative activities and distribution services. From time to time, the Company engages independent contractors for sales and administration activities. There are no collective bargaining agreements.
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Item 1A. Risk Factors.
This Annual Report contains certain statements relating to future events or the future financial performance of our Company. Prospective investors are cautioned that such statements are only predictions and involve risks and uncertainties, and that actual events or results may differ materially. In evaluating such statements, prospective investors should specifically consider the various factors identified in this Annual Report, including the matters set forth below, which could cause actual results to differ materially from those indicated by such forward-looking statements.
If any of the following or other risks materialize, the Company’s business, financial condition, and results of operations could be materially adversely affected which, in turn, could adversely impact the value of our securities. In such a case, investors in our securities could lose all or part of their investment.
Prospective investors should consider carefully whether an investment in the Company is suitable for them in light of the information contained in this Annual Report and the financial resources available to them. The risks described below do not purport to be all the risks to which the Company could be exposed. This section is a summary of certain risks and is not set out in any particular order of priority. They are the risks that we presently believe are material to the operations of the Company. Additional risks of which we are not presently aware or which we presently deem immaterial may also impair the Company’s business, financial condition or results of operations.
Risks Related to Our Business
We have incurred significant losses, have limited cash on hand and there is substantial doubt as to our ability to continue as a going concern.
The Company incurred net losses of $8,896,557 and $12,756,560 for the years ended October 31, 2022 and October 31, 2021, respectively. In addition, the Company had accumulated deficits of $50,521,306 and $41,624,749 at October 31, 2022 and October 31, 2021, respectively, and had working capital positions of $303,085 and ($3,609,174) October 31, 2022 and October 31, 2021, respectively. In their report for the fiscal year ended October 31, 2022, our auditors have expressed that there is substantial doubt as to our ability to continue as a going concern. We have incurred operating losses since our formation and expect to incur substantial losses and negative operating cash flows for the foreseeable future and may never become profitable. We also expect to continue to incur significant operating and capital expenditures for the next several years and anticipate that our expenses will increase substantially in the foreseeable future. We also expect to experience negative cash flow for the foreseeable future as we fund our operating losses and capital expenditures. As a result, we will need to generate significant revenues in order to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability in the future. Our failure to achieve or maintain profitability could negatively impact the value of our common stock.
We have a limited operating history in our current business upon which investors can evaluate our future prospects.
Our current business operations, including our laboratory and processing facility only began operations in May 2019. Therefore, we have limited operating history upon which an evaluation of our current business plan or performance and prospects can be made. The business and prospects of the Company must be considered in the light of the potential problems, delays, uncertainties and complications encountered in connection with a newly established business. The risks include, but are not limited to, the possibility that we will not be able to develop or identify functional and scalable products and services, or that although functional and scalable, our products and services will not be economical to market; that our competitors hold proprietary rights that preclude us from marketing such products; that our competitors market a superior or equivalent product; that we are not able to upgrade and enhance our technologies and products to accommodate new features and expanded service offerings; or the failure to receive necessary regulatory clearances for our products. To successfully introduce and market our products at a profit, we must establish brand name recognition and competitive advantages for our products. There are no assurances that the Company can successfully address these challenges. If it is unsuccessful, the Company and its business, financial condition and operating results could be materially and adversely affected.
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Given the limited operating history, management has little basis on which to forecast future demand for our products from our existing customer base, much less new customers. The current and future expense levels of the Company are based largely on estimates of planned operations and future revenues rather than experience. It is difficult to accurately forecast future revenues because the business of the Company is new, and its market has not been developed. If the forecasts for the Company prove incorrect, the business, operating results and financial condition of the Company will be materially and adversely affected. Moreover, the Company may be unable to adjust its spending in a timely manner to compensate for any unanticipated reduction in revenue. As a result, any significant reduction in revenues would immediately and adversely affect the business, financial condition and operating results of the Company.
The ongoing COVID-19 outbreak and economic crisis has caused a significant disruption to the overall economy and there is no certainty as to when or how the situation will evolve, including whether or not the virus will be controlled and/or the state of our economy and business environment upon emerging from the crisis.
The adverse public health developments and economic effects of the ongoing COVID-19 outbreak in the United States have adversely affected the demand for our products and services by our customers and from patients of our customers as a result of quarantines, facility closures and social distancing measures put into effect. These restrictions have adversely affected the Company’s sales, results of operations and financial condition. In response to the COVID-19 outbreak, the Company (a) has accelerated its research and development activities; (b) is seeking to raise additional debt and/or equity financing to support working capital requirements; and (c) continues to take steps to stabilize and increase revenues from the sale of its products.
There is no assurance as to when the adverse impact to the United States and worldwide economies resulting from the COVID-19 outbreak will be eliminated, if at all, and whether any new or recurring pandemic outbreaks will occur again in the future causing a similar or worse devastating impact to the United States and worldwide economies or our business.
There is no assurance that the COVID-19 crisis will be fully resolved or if resolved, that the overall economy will resume in a manner that allows the Company to resume operations as planned. We may not be able to generate revenues or achieve profitability in the future. Our failure to achieve or maintain profitability could negatively impact the value of our common stock.
On June 17, 2021 we received a subpoena from the Atlanta Regional Office of the SEC and while we are complying with the subpoena, there can be no assurances as to the final outcome of the SEC’s investigation, 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.
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.
We depend upon our officers and key personnel, the loss of which could seriously harm our business.
Our operating performance is substantially dependent on the continued services of our executive officers and key employees, in particular, Ian T. Bothwell, our Interim Chief Executive Officer and Chief Financial Officer. The unexpected loss of his services could have a material adverse effect on our business, operations, financial condition and operating results, as well as the value of our common stock.
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We may not be able to compete successfully with current and future competitors.
We have many potential competitors in the regenerative medicine industry. We will compete, in our current and proposed businesses, with other established companies, most of which have far greater marketing and financial resources and experience than we do. We cannot guarantee that we will be able to penetrate our intended markets and be able to compete profitably, if at all. In addition to established competitors, there are moderate obstacles for competitors to enter this market, but they are not insurmountable if they have the financial resources and intellectual team. Effective competition could result in price reductions, reduced margins or have other negative implications, any of which could adversely affect our business and chances for success. Competition is likely to increase significantly as new companies enter the market and current competitors expand their services. Many of these potential competitors are likely to enjoy substantial competitive advantages, including, but not limited to, larger staffs, greater name recognition, larger and established customer bases and substantially greater financial, marketing, technical and other resources. To be competitive, we must respond promptly and effectively to industry dynamics, evolving standards and competitors’ innovations by continuing to enhance our services and sales and marketing channels. Any pricing pressures, reduced margins or loss of market share resulting from increased competition, or our failure to compete effectively, could fatally damage our business and chances for success.
We currently rely on non-exclusive supply arrangements with birth tissue recovery companies for obtaining the raw material used in manufacturing the products we sell.
If our current supply arrangements with birth tissue recovery companies or third party manufacturers or distributors of products from third party manufacturers are disrupted for any reason, we may not be able to provide products to our customers, or if other supply arrangements can be made, the products and terms may not be as favorable, and that will adversely impact our operations and profitability.
If we do not continually update our products and/or services, they may become obsolete and we may not be able to compete with other companies.
We cannot assure you that we will be able to keep pace with technological advances, or that our current suppliers will be able to keep pace with technological advances and as such, our products and/or services may become obsolete. We cannot assure you that competitors will not develop related or similar services and offer them before we do, or do so more successfully, or that they will not develop services and products more effective than any that we and/or our suppliers have or are intending to develop. In addition, although we may be able to identify new suppliers that can provide more effective services and products to be more competitive, we may not be able to arrange satisfactory arrangements in a timely manner, if at all. If that happens, our business, prospects, results of operations and financial condition will be materially adversely affected.
We enter into supply arrangements for the raw materials and/or products we sell, which make us vulnerable to the ability of such suppliers to remain current and innovative in their product offerings, to timely process and supply the products we desire to purchase, and to remain compliant with the current and changing regulatory environment. If our raw material and/or product suppliers are not successful in managing these responsibilities, it will have an adverse effect on our operations and profitability.
Our current birth tissue supply arrangements for manufacturing the products we sell and our third-party supply arrangements for the supply of products we sell provide for the supply and pricing for those products. There can be no assurance that our suppliers will continue to produce the products that we currently purchase under our existing arrangements, that our suppliers will be able to comply with the required FDA regulations for the manufacturing of such products, that our suppliers will continue to develop technology associated with their manufactured products to remain competitive with other companies, or that our suppliers will remain a going concern in the future. If any of our suppliers were to cause a disruption in our ability to obtain products as desired and expected and/or we are not provided advance notice of such potential disruption, we may not be able to timely identify and replace our current suppliers, if at all, and as a result, we may not be able to provide products to our customers, which will have an adverse impact to our operations.
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In the event of default under our outstanding indebtedness, or we are unable to pay other obligations and accounts payable when due, our creditors may file a creditors petition or force us into involuntary bankruptcy which may have an adverse impact on our business.
The Company had working capital positions of $303,085 and ($3,609,174) at October 31, 2022 and October 31, 2021, respectively. 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. 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 additional sources of working capital through operations or debt and/or equity financings are realized. The Company has not repaid certain outstanding indebtedness on the required due dates and the loans remain still outstanding. Management anticipates that the Company will remain dependent, for the near future, on additional investment capital to fund ongoing operating expenses. The Company does not have significant fixed and/or intangible assets to pledge for the purpose of borrowing additional capital. In addition, the Company relies on short term supply agreements to obtain the supply of raw materials used in manufacturing the products it currently sells and distributes to its customers. The Company’s current market capitalization and common stock liquidity will hinder its ability to raise equity proceeds to implement its business plan and could adversely affect the value of our securities, including the common stock.
We have borrowed and may be required to borrow funds in the future.
If the Company incurs indebtedness, a portion of its cash flow will have to be dedicated to the payment of principal and interest on such indebtedness. Typical loan agreements also might contain restrictive covenants, which may impair the Company’s operating flexibility. Such loan agreements would also provide for default under certain circumstances, such as failure to meet certain financial covenants. A default under a loan agreement could result in the loan becoming immediately due and payable and, if unpaid, a judgment in favor of such lender which would be senior to the rights of the Company’s stockholders. A judgment creditor would have the right to foreclose on any of the Company’s assets resulting in a material adverse effect on the Company’s business, operating results or financial condition.
Currently the Company has limited assets which could be used as collateral in obtaining future borrowings. Because of the Company’s inability to provide lenders with collateral and a limited history of successful operations, the Company may not be successful in its efforts to obtain additional funds though borrowings and as a result may not be able to fund required costs of operations.
These loans are or may be convertible into common stock under certain circumstances which may result in significant dilution to current stockholders.
Our growth depends on external sources of capital, which may not be available on favorable terms or at all.
Our access to capital will depend upon a number of factors over which we have little or no control, including general market conditions, government regulations and the market’s perception of our current and potential future earnings. If general economic instability or downturn leads to an inability to borrow at attractive rates or at all, our ability to obtain capital to finance working capital requirements could be negatively impacted.
If we are unable to obtain capital on terms and conditions that we find acceptable, we likely will have to scale back our business operations. In addition, our ability to refinance all or any debt we may incur in the future, on acceptable terms or at all, is subject to all of the above factors, and will also be affected by our future financial position, results of operations and cash flows, which additional factors are also subject to significant uncertainties, and therefore we may be unable to refinance any debt we may incur in the future, as it matures, on acceptable terms or at all. All of these events would have a material adverse effect on our business, financial condition, liquidity and results of operations.
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Failure to establish or enhance our brand recognition could have a material adverse effect on our business and results of operations.
We believe we will need to expend significant time, effort and resources to enhance the recognition of our brands. We believe developing our brand will be important to our sales and marketing efforts. If we fail to establish or enhance the recognition of our brands, it could have a material adverse effect on our ability to sell our products and adversely affect our business and results of operations. If we fail to develop a positive public image and reputation, our business with our existing customers could decline and we may fail to develop additional business, which could adversely affect our results of operations.
Defects in the products we sell or failures in quality control related to our distribution of products could impair our ability to sell our products or could result in product liability claims, litigation and other significant events involving substantial costs.
Detection of any significant defects in our products that we sell or failure in our quality control procedures or the quality control procedures of our suppliers may result in, among other things, delay in time-to-market, loss of sales and market acceptance of our products, diversion of development resources, injury to our reputation and restrictions imposed by governmental agencies. The costs we may incur in correcting any product defects may be substantial and we may not be able to identify adequate remedies, if required. Additionally, errors, defects or other performance problems could result in financial or other damages to our customers, which could result in litigation. Product liability litigation, even if we prevail and/or our suppliers, would be time consuming and costly to defend, and if we and/or our product suppliers do not prevail, could result in the imposition of a damages award. We presently maintain product liability insurance and we are named insured on our suppliers’ insurance policy; however, it may not be adequate to cover any claims.
Our ability to become profitable and continue as a going concern will be dependent on our ability to attract, employ and retain highly skilled individuals to serve our clients.
The nature of our business requires that we employ skilled persons to perform highly skilled and specialized tasks for our Company. Our failure to retain such personnel could have a material adverse effect on our ability to offer services to clientele and could potentially have a negative effect on our business. There is no guarantee that skilled persons will be available and willing to work for us in the future, nor is there any guarantee that we could afford to retain them if they are available at a future time.
We may not be able to manage our growth effectively.
We must continually implement and improve our products and/or services, operations, operating procedures and quality controls on a timely basis, as well as expand, train, motivate and manage our work force in order to accommodate anticipated growth and compete effectively in our market segment. Successful implementation of our strategy also requires that we establish and manage a competent, dedicated work force and employ additional key employees in corporate management, product development, client service and sales. We can give no assurance that our personnel, systems, procedures and controls will be adequate to support our existing and future operations. If we fail to implement and improve these operations, there could be a material, adverse effect on our business, operating results and financial condition.
If we make any acquisitions or enter into a merger or similar transaction, our business may be negatively impacted.
We have no present plans for any specific acquisition. However, in the event that we make acquisitions in the future, we could have difficulty integrating the acquired companies’ personnel and operations with our own. In addition, the key personnel of the acquired business may not be willing to work for us. We cannot predict the effect expansion may have on our core business. Regardless of whether we are successful in making an acquisition, the negotiations could disrupt our ongoing business, distract our management and employees and increase our expenses. In addition to the risks described above, acquisitions, mergers and other similar transactions are accompanied by a number of inherent risks, including, without limitation, the following:
| ● | the difficulty of integrating acquired products, services or operations; |
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| ● | the potential disruption of the ongoing businesses and distraction of our Management and the management of acquired companies; | |
| ● | the difficulty of incorporating acquired rights or products into our existing business; | |
| ● | difficulties in disposing of the excess or idle facilities of an acquired company or business and expenses in maintaining such facilities; | |
| ● | difficulties in maintaining uniform standards, controls, procedures and policies; | |
| ● | the potential impairment of relationships with employees and customers as a result of any integration of new management personnel; | |
| ● | the potential inability or failure to achieve additional sales and enhance our customer base through cross-marketing of the products to new and existing customers; | |
| ● | the effect of any government regulations which relate to the business acquired; and | |
| ● | potential unknown liabilities associated with acquired businesses or product lines, or the need to spend significant amounts to retool, reposition or modify the marketing and sales of acquired products or the defense of any litigation, whether or not successful, resulting from actions of the acquired company prior to our acquisition. |
Our business could be severely impaired if and to the extent that we are unable to succeed in addressing any of these risks or other problems encountered in connection with these acquisitions, many of which cannot be presently identified, these risks and problems could disrupt our ongoing business, distract our management and employees, increase our expenses and adversely affect our results of operations.
There might be unanticipated obstacles to the execution of our business plan.
The Company’s business plans may change significantly. The Company’s potential business endeavors are capital intensive. Management believes that the Company’s chosen activities and strategies are achievable in light of current economic and legal conditions with the skills, background, and knowledge of the Company’s principals and advisors. Management reserves the right to make significant modifications to the Company’s stated strategies depending on future events.
We may engage in transactions that present conflicts of interest.
The Company’s officers and directors may enter into agreements with the Company from time to time which may not be equivalent to similar transactions entered into with an independent third party. A conflict of interest arises whenever a person has an interest on both sides of a transaction. While we believe that it will take prudent steps to ensure that all transactions between the Company and any officer or director is fair, reasonable, and no more than the amount it would otherwise pay to a third party in an “arms-length” transaction, there can be no assurance that any transaction will meet these requirements in every instance.
Our operating results may fluctuate significantly as a result of a variety of factors, many of which are outside of our control.
We are subject to the following factors, among others, that may negatively affect our operating results:
| ● | The announcement or introduction of new products by our competitors; |
| ● | Failure of Government and private health plans to adequately and timely reimburse the users of our products; |
| ● | Our ability to upgrade and develop our systems and infrastructure to accommodate growth; |
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| ● | Our ability to attract and retain key personnel in a timely and cost effective manner; |
| ● | The amount and timing of operating costs and capital expenditures relating to the expansion of our business, operations and infrastructure; |
| ● | Regulation by Federal, State or Local Governments; and |
| ● | General economic conditions (including fallout from current and future pandemics) as well as economic conditions specific to the healthcare industry. |
We have based our current and future expense levels largely on our investment plans and estimates of future events, although certain of our expense levels are, to a large extent, fixed. We may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. Accordingly, any significant shortfall in revenue relative to our planned expenditures would have an immediate adverse effect on our business, results of operations and financial condition. Further, as a strategic response to changes in the competitive environment, we may from time to time make certain pricing, service or marketing decisions that could have a material and adverse effect on our business, results of operations and financial condition. Due to the foregoing factors, our revenue and operating results are and will remain difficult to forecast.
We are in a highly competitive and evolving field and face competition from well-established tissue processors and medical device manufacturers, as well as new market entrants.
Our business is in a very competitive and evolving field. Competition from other tissue processors, medical device companies and from research and academic institutions is intense, expected to increase, subject to rapid change, and could be significantly affected by new product introductions. The presence of this competition in our market may lead to pricing pressure, which would make it more difficult to sell our products at a price that will make us profitable or prevent us from selling our products at all. Our success will depend on our ability and/or the ability of our suppliers to perfect and protect their intellectual property rights related to their technologies as well as to develop new technologies and new applications for our technologies. Our failure to compete effectively would have a material and adverse effect on our business, results of operations and financial condition.
Rapid technological change could cause our products to become obsolete.
The technologies underlying the products we sell and intend to sell are subject to rapid and profound technological change. Competition intensifies as technical advances in each field are made and become more widely known. We can give no assurance that our suppliers will be able to develop services, products, or processes with significant advantages over the competing products, services, and processes. Any such occurrence could have a material and adverse effect on our business, results of operations and financial condition.
Our products are dependent on the availability of sufficient quantities of tissue from human donors, and any disruption in supply could adversely affect our business.
The success of the human tissue products we sell depends upon, among other factors, the availability of sufficient quantities of tissue from human donors. The availability of donated tissue could be adversely impacted by regulatory changes, public opinion of the donor process as well as our and our suppliers’ reputations in the industry. Any disruption in the supply of donated human tissue could restrict our growth and could have a material adverse impact on our business and financial condition. We cannot be sure that the supply of human tissue will continue to be available at current levels or will be sufficient to meet our future needs.
The products we offer are derived from human tissue and therefore have the potential for disease transmission.
The utilization of human tissue creates the potential for transmission of communicable disease, including, but not limited to, HIV, viral hepatitis, syphilis and other viral, fungal or bacterial pathogens. Our suppliers are required to comply with federal and state regulations intended to prevent communicable disease transmission.
Although we believe that our suppliers maintain strict quality controls over the procurement and processing of the human tissue used to make the products we sell, there is no assurance that these quality controls are or will continue to be adequate. In addition, negative publicity concerning disease transmission from other companies improperly processed donated tissue could have a negative impact on the demand for our products.
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In order to grow revenues from certain of our products, we must expand our relationships with distributors and independent sales representatives.
We derive significant revenues through our relationships with distributors and independent sales representatives. If such relationships were terminated for any reason, it could materially and adversely affect our ability to generate revenues and profits. We intend to obtain the assistance of additional distributors and independent sales representatives to continue our sales growth with respect to certain of our products. We may not be able to find additional distributors and independent sales representatives who will agree to market and/or distribute those products on commercially reasonable terms, if at all. In addition, adding new distributors and independent sales representatives require additional administrative and accounting efforts for which the Company may not have sufficient resources to manage effectively. If we are unable to establish new distribution and independent sales representative relationships or renew current distribution and sales agency agreements on commercially acceptable terms or manage the growth effectively, our business, financial condition and results of operations could be materially and adversely affected.
We continue to invest significant capital in expanding our internal sales force, and there can be no assurance that these efforts will continue to result in significant increases in sales.
We are engaged in a major initiative to build and further expand our internal sales and marketing capabilities which has contributed to our increased sales. As a result, we continue to invest in a direct sales force for certain of our products to allow us to reach new customers. These expenses impact our operating results, and there can be no assurance that we will continue to be successful in significantly expanding the sales of our products.
Our revenues may need to depend on adequate reimbursement from public and private insurers and health systems.
Currently, a significant number of public and private insurers and health systems do not provide reimbursement for our products. Our success and extent of our growth depends on the extent to which reimbursement for the costs of our products and related treatments will be available from third party payers, such as public and private insurers and health systems. Government and other third-party payers attempt to contain healthcare costs by limiting both coverage and the level of reimbursement of new products. Therefore, significant uncertainty usually exists as to the reimbursement status of new healthcare products. If we are not successful in obtaining adequate reimbursement for our products from these third-party payers, the market’s acceptance of our products could be adversely affected. Inadequate reimbursement levels also likely would create downward price pressure on our products. Even if we do succeed in obtaining widespread reimbursement for our products, future changes in reimbursement policies could have a negative impact on our business, financial condition and results of operations.
To be commercially successful, we must convince physicians that our products are compliant with regulations, safe and effective alternatives to existing treatments and that our products should be used in their procedures.
We believe physicians will only adopt our products if they determine, based on experience, clinical data and published peer reviewed journal articles, that the use of our products in a particular procedure is a favorable alternative to conventional methods. Physicians may be slow to change their medical treatment practices for the following reasons, among others:
| ● | Their lack of experience with prior procedures in the field using our products; |
| ● | Lack of evidence supporting additional patient benefits and our products over conventional methods; |
| ● | Perceived liability risks generally associated with the use of new products and procedures; |
| ● | Perceived exposure from regulatory agencies that monitor the use of our products; |
| ● | Limited availability of reimbursement from third party payers; and |
| ● | The time that must be dedicated to training. |
In addition, we believe recommendations for and support of our products by influential physicians are essential for market acceptance and adoption. If we do not receive this support or if we are unable to demonstrate favorable long-term clinical data, physicians and hospitals may not use our products, which would significantly reduce our ability to achieve expected revenue and would prevent us from sustaining profitability.
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We will need to expand our organization and managing growth may be more difficult than expected.
Managing our growth may be more difficult than we expect. We anticipate that a period of significant expansion will be required to penetrate and service the market for our existing and anticipated future products and to continue to develop new products. This expansion will place a significant strain on management, operational and financial resources. To manage the expected growth of our operations and personnel, we must both modify our existing operational and financial systems, procedures and controls and implement new systems, procedures and controls. We must also expand our finance, administrative, and operations staff. Management may be unable to hire, train, retain, motivate and manage necessary personnel or to identify, manage and exploit existing and potential strategic relationships and market opportunities.
We may be unable to obtain or maintain adequate product liability insurance.
Our business exposes us to the risk of product liability claims that are inherent in the manufacturing, processing and marketing of human tissue products. We may be subject to such claims if the products we sell cause, or appear to have caused, an injury. Claims may be made by patients, healthcare providers or others selling our products. We currently maintain product liability insurance that contain limits of coverage for the insured. Defending a lawsuit, regardless of merit, could be costly, divert management attention and result in adverse publicity, which could result in the withdrawal of, or reduced acceptance of, our products in the market. There can be no assurance that adequate insurance will be available in the event of a lawsuit, if at all. A product liability claim could result in significant costs and significant harm to our business.
We may implement a product recall or voluntary market withdrawal, which could significantly increase our costs, damage our reputation and disrupt our business.
The manufacturing, marketing and processing of the tissue products we sell or intend to sell involve an inherent risk that they do not meet applicable quality standards and requirements. In that event, there may be recall or market withdrawal required by a regulatory authority. A recall or market withdrawal of one of our products would be costly and would divert management resources. A recall or withdrawal of one of the products we sell, or a similar product processed, also could impair sales of our products as a result of confusion concerning the scope of the recall or withdrawal, or as a result of the damage to our reputation for quality and safety.
Significant disruptions of information technology systems or breaches of information security could adversely affect our business.
We rely to a large extent upon sophisticated information technology systems to operate our business. In the ordinary course of business, we collect, store and transmit large amounts of confidential information (including, but not limited to, personal information and intellectual property). We also have outsourced significant elements of our operations to third parties, including significant elements of our information technology infrastructure and, as a result, we are managing many independent vendor relationships with third parties who may or could have access to our confidential information. The size and complexity of our information technology and information security systems, and those of our third-party vendors with whom we contract (and the large amounts of confidential information that is present on them), make such systems potentially vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees or vendors, or from malicious attacks by third parties. Such attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives (including, but not limited to, industrial espionage and market manipulation) and expertise. While we have invested significantly in the protection of data and information technology, there can be no assurance that our efforts will prevent service interruptions or security breaches. Although we may obtain cyber-insurance coverage that may cover certain events described above, this insurance is subject to deductibles and coverage limitations and we may not be able to maintain this insurance. Also, it is possible that claims could exceed the limits of our coverage. Any interruption or breach in our systems could adversely affect our business operations and/or result in the loss of critical or sensitive confidential information or intellectual property, and could result in financial, legal, business and reputational harm to us or allow third parties to gain material, inside information that they use to trade in our securities.
New lines of business or new products and services may subject us to additional risks.
From time to time, we may implement or may acquire new lines of business or offer new products and services within existing lines of business. There are risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed or are evolving. In developing and marketing new lines of business and new products and services, we may invest significant time and resources. External factors, such as regulatory compliance obligations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our business, results of operations and financial condition.
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Risks Related to Our Intellectual Property
If we are unable to adequately protect our intellectual property, our ability to compete in the market will be harmed.
Our commercial success will depend in part on patents and other intellectual property protection. To date we have applied for two patent applications and one provisional patent and plan to file for additional patents with respect to our products and we intend to defend our patents and other intellectual property against third party challenges. However, there can be no assurance that any patents applied for will be issued, that scope of protection afforded by any patents issued will be as broad as claimed or if challenged, patents may be found to be invalid or unenforceable. Moreover, there can be no assurance that we will have the financial resources to protect our intellectual property.
There can be no assurances of protection for proprietary rights or reliance on trade secrets.
In certain cases, the Company may rely on trade secrets to protect intellectual property, proprietary technology and processes, which the Company has acquired, developed or may develop in the future. There can be no assurances that secrecy obligations will be honored or that others will not independently develop similar or superior products or technology. The protection of intellectual property and/or proprietary technology through claims of trade secret status has been the subject of increasing claims and litigation by various companies both in order to protect proprietary rights as well as for competitive reasons even where proprietary claims are unsubstantiated. The prosecution of proprietary claims or the defense of such claims is costly and uncertain given the uncertainty and rapid development of the principles of law pertaining to this area. The Company, in common with other firms, may also be subject to claims by other parties with regard to the use of intellectual property, technology information and data, which may be deemed proprietary to others.
Our suppliers’ ability to protect their intellectual property and proprietary technology through patents and other means is uncertain and may be inadequate, which could have a material and adverse effect on us.
We depend significantly on our suppliers’ ability to protect their proprietary rights to the technologies used in the products we purchase from them and resell. Traditional legal means afford only limited protection and may not adequately protect their rights or permit them to gain or keep any competitive advantage. To the extent that they are unable to protect their intellectual property against infringement by others or by claims of infringement by such suppliers, our business could be materially adversely affected.
We may be subject to damages resulting from claims that we, our employees, or our independent contractors have wrongfully used or disclosed alleged trade secrets of others.
Some of our employees were previously employed at other medical device or tissue companies. We may also hire additional employees who are currently employed at other medical device or tissue companies, including our competitors. Additionally, consultants or other independent agents with which we may contract may be or have been in a contractual arrangement with one or more of our competitors. Although no claims against us are currently pending, we may be subject to claims that these employees or independent contractors have used or disclosed any party’s trade secrets or other proprietary information. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management. If we fail to defend such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent our ability to market existing or new products, which could severely harm our business.
If we are unable to protect our patents and trademarks from infringement, our business prospects may be harmed.
We currently have applied for various patents and received registered trademarks for the use of Organicell and the suite of our family of biologic products offered in the United States. Although we may take steps to monitor the possible infringement or misuse of our patents and trademarks once they are obtained, it is possible that third parties may infringe, dilute or otherwise violate our intellectual property rights. Any unauthorized use of our intellectual property could harm our reputation or commercial interests. In addition, our enforcement against third-party infringers or violators may be unduly expensive and time-consuming, and any remedy obtained may constitute insufficient redress relative to the damages we may suffer. Our business may be materially adversely affected in the event we are unable to protect our intellectual property.
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Risks Related to Regulatory Approval of Our Products and Other Government Regulations
Our business is subject to continuing regulatory compliance by the FDA and other authorities, which is costly and our failure to comply could result in negative effects on our business.
The FDA has specific regulations governing our tissue-based products, or HCT/Ps. The FDA has broad post-market and regulatory and enforcement powers. The FDA’s regulation of HCT/Ps includes requirements for registration and listing of products, donor screening and testing, processing and distribution (“Current Good Tissue Practices”), labeling, record keeping and adverse-reaction reporting, and inspection and enforcement.
Biologics and medical devices are subject to even more stringent regulation by the FDA. Even if pre-market clearance or approval is obtained, the approval or clearance may place substantial restrictions on the indications for which the product may be marketed or to whom it may be marketed, may require warnings to accompany the product or impose additional restrictions on the sale and/or use of the product. In addition, regulatory approval is subject to continuing compliance with regulatory standards, including the FDA’s quality system regulations.
If we fail to comply with the FDA regulations regarding our tissue products or medical devices, the FDA could take enforcement action, including, without limitation, any of the following sanctions and the manufacture of our products or processing of our tissue could be delayed or terminated:
| ● | Untitled letters, warning letters, fines, injunctions, and civil penalties; |
| ● | Recall or seizure of our products; |
| ● | Operating restrictions, partial suspension or total shutdown of production; |
| ● | Refusing our requests for clearance or approval of new products; |
| ● | Withdrawing or suspending current applications for approval or approvals already granted; |
| ● | Refusal to grant export approval for our products; and |
| ● | Criminal prosecution. |
It is likely that the FDA’s regulation of HCT/Ps will continue to evolve in the future. Complying with any such new regulatory requirements may entail significant time delays and expense, which could have a material adverse effect on our business. The AATB has issued operating standards for tissue banking. Compliance with these standards is a requirement in order to become an accredited tissue bank. In addition, some states have their own tissue banking regulations.
In November 2017, the FDA released four guidance documents (two final, two draft) in an effort to implement a “comprehensive policy framework” for existing laws and regulations governing regenerative medicine products, including human cells, tissues, and cellular and tissue-based products (“HCT/Ps”). These guidance documents build upon the previous regulatory framework for these products, which was completed in 2005. The Comprehensive regenerative medicine policy framework intends to spur innovation, efficient access to potentially transformative products, while ensuring safety & efficacy.
The framework builds upon the FDA’s existing risk-based regulatory approach to more clearly describe what products are regulated as drugs, devices, and/or biological products. Further, two of the guidance documents propose an efficient, science-based process for helping to ensure the safety and effectiveness of these therapies, while supporting development in this area. The suite of guidance documents also defines a risk-based framework for how the FDA intends to focus its enforcement actions against those products that raise potential significant safety concerns. This modern framework is intended to balance the agency’s commitment to safety with mechanisms to drive further advances in regenerative medicine so innovators can bring new, effective therapies to patients as quickly and safely as possible. The policy also delivers on important provisions of the Act.
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The FDA guidance with regard to 351 HCT/Ps requiring premarket approval became effective in May 2021 (extended from November 2020 due to the COVID-19 pandemic). The guidance states that, in order to “give manufacturers time to determine if they need to submit an IND or marketing application in light of this guidance,” the FDA intends to exercise enforcement discretion (i.e., the agency may permit marketing without an approved marketing application) if the HCT/P “is intended for autologous use and its use does not raise reported safety concerns or potential significant safety concerns.” As of the date of this Annual Report, we are not aware of whether any further extension of effectiveness and enforcement of these regulations is or will be issued by the FDA.
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. However, if our products are deemed by the FDA to fall within the new guidelines and we are unable to successfully challenge any such determination, our business, results of operations and financial condition may be significantly harmed.
In addition, procurement of certain human organs and tissue for transplantation is subject to the restrictions of the National Organ Transplant Act (“NOTA”), which prohibits the transfer of certain human organs, including skin and related tissue for valuable consideration, but permits the reasonable payment associated with the removal, transportation, implantation, processing, preservation, quality control and storage of human tissue and skin. We reimburse tissue banks, hospitals and physicians for their services associated with the recovery, storage and transportation of donated human tissue. Although we have independent third party appraisals that confirm that reasonableness of the service fees we pay, if we were to be found to have violated NOTA’s prohibition on the sale or transfer of human tissue for valuable consideration, we would potentially be subject to criminal enforcement sanctions, which could materially and adversely affect our results of operations.
Finally, as discussed above, we and other manufacturers of skin substitutes are required to provide ASP information to CMS on a quarterly basis. The Medicare payment rates are updated quarterly based on this ASP information. If a manufacturer is found to have made a misrepresentation in the reporting of ASP, such manufacturer is subject to civil monetary penalties of up to $10,000 for each misrepresentation for each day in which the misrepresentation was applied.
To the extent our products do not qualify for regulation as human cells, tissues and cellular and tissue-based products under Section 361 of the Public Health Service Act, this could result in removal of the applicable products from the market, would make the introduction of new tissue products more expensive and significantly delay the expansion of our tissue product offerings and subject us to additional post-market regulatory requirements.
The products we offer are derived from human tissue. The FDA has specific regulations governing human cells, tissues and cellular and tissue-based products, or HCT/Ps. An HCT/P is a product containing or consisting of human cells or tissue intended for transplantation into a human patient. HCT/Ps that meet the criteria for regulation solely under Section 361 of the Public Health Service Act (so-called “361 HCT/Ps”) are not subject to any premarket clearance or approval requirements and are subject to less stringent post-market regulatory requirements.
If a product is deemed not to be a 361 HCT/P, FDA regulations will require premarket clearance or approval requirements that will involve significant time and cost investments by the Company. Further, there can be no assurance that the FDA will not, at some future point, change its position on current or future products’ 361 HCT/P status, and any regulatory reclassification could have adverse consequences for us and make it more difficult or expensive for us to conduct our business by requiring premarket clearance or approval and compliance with additional post-market regulatory requirements with respect to those products. Moreover, increased regulatory scrutiny within the industry in which we operate could lead to increased regulation of HCT/Ps, including 361 HCT/Ps. We also cannot assure you that the FDA will not impose more stringent definitions with respect to products that qualify as 361 HCT/Ps.
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If the FDA does allow the Company to continue to market those products that fall under the new regulations without a biologics license either prior to or after finalization of the draft guidance documents, it may impose conditions, such as labeling restrictions and compliance with cGMP. Although the Company is preparing for these requirements in connection with its pursuit of a BLA for certain of its products, compliance with these conditions would require significant additional time and cost investments by the Company. It is also possible that the FDA will not allow the Company to market any form of its products without a biologics license even prior to finalization of the draft guidance documents and could even require the Company to recall its products, which would likely result in significant harm to our business, results of operations and financial condition.
In November 2017, the FDA issued guidance documents to clarify the FDA’s interpretation of the risk-based criteria manufacturers used to determine which manufactured tissue products are subject to the FDA’s premarket review and in order to be lawfully marketed in the United States, require an FDA-approved BLA.
The FDA guidance with regard to allowing manufacturers for certain products that are subject to the FDA’s premarket review under the existing regulations but are not currently meeting these requirements became effective in May 2021.
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. However, if our products are deemed by the FDA to fall within the new guidelines and we are unable to successfully challenge any such determination, our business, results of operations and financial condition may be significantly harmed.
Our ability to commence and complete clinical studies and other research and development objectives that are required by the FDA, will require that we are properly funded to assure that we can commence and proceed with the required research activities promptly and that the results are favorable.
The Company is pursuing efforts to commence and complete clinical studies as well as obtaining approval to commence additional studies for other specific indications it has identified that the use of its products will provide more favorable and desired health related benefits for patients seeking alternative treatment options than are currently available. The ability of the Company to succeed in these efforts is subject to among other things, the Company having timely and sufficient available working capital to fund the substantial costs of completing clinical trials, and ultimately the approval from the FDA.
We and our sales representatives, whether employees or independent contractors, must comply with various federal and state anti-kickback, self-referral, false claims and similar laws, any breach of which could cause a material adverse effect on our business, financial condition and results of operations.
Our relationships with physicians, hospitals and other healthcare providers are subject to scrutiny under various federal anti-kickback, self-referral, false claims and similar laws, often referred to collectively as healthcare fraud and abuse laws. Healthcare fraud and abuse laws are complex, and even minor, inadvertent violations can give rise to claims that the relevant law has been violated. Possible sanctions for violation of these fraud and abuse laws include monetary fines, civil and criminal penalties, exclusion from federal and state healthcare programs, including Medicare, Medicaid, Veterans Administration health programs, workers’ compensation programs and TRICARE (the healthcare system administered by or on behalf of the U.S. Department of Defense for uniformed services beneficiaries, including active duty and their dependents, retirees and their dependents), and forfeiture of amounts collected in violation of such prohibitions. Certain states have similar fraud and abuse laws, imposing substantial penalties for violations. Any Government investigation or a finding of a violation of these laws would likely result in a material adverse effect on the market price of our common stock, as well as our business, financial condition and results of operations.
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Anti-kickback laws and regulations prohibit any knowing and willful offer, payment, solicitation or receipt of any form of remuneration in return for the referral of an individual or the ordering or recommending of the use of a product or service for which payment may be made by Medicare, Medicaid or other Government-sponsored healthcare programs. We will enter into consulting agreements, speaker agreements, research agreements and product development agreements with physicians, including some who may order our products or make decisions to use them. In addition, some of these physicians own our stock, which they purchased in arm’s length transactions on terms identical to those offered to non-physicians, or received stock awards from us as consideration for services performed by them. While these transactions were structured with the intention of complying with all applicable laws, including state anti-referral laws and other applicable anti-kickback laws, it is possible that regulatory or enforcement agencies or courts may in the future view these transactions as prohibited arrangements that must be restructured or for which we would be subject to other significant civil or criminal penalties. As discussed above, we have incorporated the AdvaMed code principles into our relationships with healthcare professionals under our consulting agreements, and our policies regarding payment of travel and lodging expenses, research and educational grant procedures and sponsorship of third-party conferences. In addition, we have conducted training sessions on these principles. However, there can be no assurance that regulatory or enforcement authorities will view these arrangements as being in compliance with applicable laws or that one or more of our employees or agents will not disregard the rules we have established. Because our strategy relies on the involvement of physicians who consult with us on the design of our products, perform clinical research on our behalf or educate the market about the efficacy and uses of our products, we could be materially impacted if regulatory or enforcement agencies or courts interpret our financial relationships with physicians who refer or order our products to be in violation of applicable laws and determine that we would be unable to achieve compliance with such applicable laws. This could harm our reputation and the reputations of the physicians we engage to provide services on our behalf. In addition, the cost of noncompliance with these laws could be substantial since we could be subject to monetary fines and civil or criminal penalties, and we could also be excluded from federally-funded healthcare programs, including Medicare and Medicaid, for non-compliance.
The Federal False Claims Act (“FCA”) imposes civil liability on any person or entity that submits, or causes the submission of, a false or fraudulent claim to the U.S. Government. Damages under the FCA can be significant and consist of the imposition of fines and penalties. The FCA also allows a private individual or entity with knowledge of past or present fraud against the Federal Government to sue on behalf of the Government to recover the civil penalties and treble damages. The U.S. Department of Justice (“DOJ”) on behalf of the Government has previously alleged that the marketing and promotional practices of pharmaceutical and medical device manufacturers, including the off-label promotion of products or the payment of prohibited kickbacks to doctors, violated the FCA, resulting in the submission of improper claims to federal and state healthcare entitlement programs such as Medicaid. In certain cases, manufacturers have entered into criminal and civil settlements with the federal government under which they entered into plea agreements, paid substantial monetary amounts and entered into corporate integrity agreements that require, among other things, substantial reporting and remedial actions going forward.
The scope and enforcement of all of these laws is uncertain and subject to rapid change, especially in light of the lack of applicable precedent and regulations. There can be no assurance that federal or state regulatory or enforcement authorities will not investigate or challenge our current or future activities under these laws. Any investigation or challenge could have a material adverse effect on our business, financial condition and results of operations. Any state or federal regulatory or enforcement review of us, regardless of the outcome, would be costly and time consuming. Additionally, we cannot predict the impact of any changes in these laws, whether these changes are retroactive or will have effect on a going-forward basis only.
We face significant uncertainty in the industry due to Government healthcare reform.
There have been and continue to be proposals by the Federal Government, State Governments, regulators and third-party payers to control healthcare costs, and generally, to reform the healthcare system in the United States. There are many programs and requirements for which the details have not yet been fully established or the consequences are not fully understood. These proposals may affect aspects of our business. We also cannot predict what further reform proposals, if any, will be adopted, when they will be adopted, or what impact they may have on us.
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Risks Related to our Status as a Public Company
We are subject to the periodic reporting requirements of the Exchange Act that requires us to incur audit fees and legal fees in connection with the preparation of such reports. These additional costs could reduce or eliminate our ability to earn a profit.
We are required to file periodic reports with the SEC pursuant to the Exchange Act and the rules and regulations promulgated thereunder. In order to comply with these requirements, our independent registered public accounting firm has to review our financial statements on a quarterly basis and audit our financial statements on an annual basis. Moreover, our legal counsel has to review and assist in the preparation of such reports. The incurrence of such costs is an expense to our operations, may increase as the Company grows and therefore have a negative effect on our ability to meet our overhead requirements and earn a profit. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock, if an active trading market for our common stock ever develops or is sustained, could drop significantly.
Our internal controls are inadequate, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Rule 13a-15(f) under the Exchange Act, internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the board of directors, management and other personnel, 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 and includes those policies and procedures that:
| ● | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
| ● | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and/or directors of the Company; and |
| ● | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. |
Our Interim Chief Executive Officer and Chief Financial Officer noted the following material weaknesses that have caused management to conclude that, as of October 31, 2022, our disclosure controls and procedures, and our internal control over financial reporting, were not effective at the reasonable assurance level in that:
| ● | Due to our small number of employees and resources, we have limited segregation of duties, as a result of which there is insufficient independent review of duties performed. |
| ● | Due to our small number of employees and resources, we have limited segregation of duties, as a result of which do not have the ability to implement internal controls over the granting of access to our IT environment. |
| ● | As a result of the limited number of accounting personnel, we rely on inexperienced staff and outside consultants for the preparation of our financial reports, including tax preparation, which could require adjustments and lead to overlooking items requiring disclosure. |
| ● | As a result of the Company’s limited financial and personnel resources, there may be difficulties in timely analyzing and identifying potential operational and disclosure transactions within management and to comply with financial reporting regulations. |
We have taken and are continuing to take additional steps to remedy these material weaknesses. However, in doing so, we have incurred and expect to incur additional expenses and diversion of management’s time in order to do so, which may adversely affect our business, results of operations and financial condition. Further effective internal controls, particularly those related to receipts and expenditures as well as disclosures, are necessary for us to produce reliable financial reports and are important to help prevent financial fraud. There can be no assurance that our remedial measures will be sufficient to address the material weaknesses or that our internal control over financial reporting will not be subject to additional material weaknesses in the future If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock, if a market ever develops, could drop significantly.
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Risks Relating to Ownership of Our Common Stock
Two of our stockholders, Skycrest and Greyt, control 51% of the combined voting power of our capital stock regardless of the number of shares of common stock outstanding and accordingly, have the ability to control the election of our directors and the outcome of matters submitted to our stockholders.
Two of our stockholders, Skycrest and Greyt hold our Series C Preferred Shares, which accord them 51% of the combined voting power of our capital stock, regardless of the number of shares of common stock outstanding. Accordingly, Skycrest and Greyt have the ability to control the election of our directors and influence the outcome of issues submitted to our stockholders. As a consequence, it will be difficult, if not impossible for the other stockholders to remove our management. The voting control of the Company by Skycrest and Greyt could also deter unsolicited takeovers, including transactions in which stockholders might otherwise receive a premium for their shares over then current market prices.
Our articles of incorporation allow for our board to create a new series of preferred stock without further approval by our stockholders, which could adversely affect the rights of the holders of our common stock.
Our Board of Directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our Board of Directors have the authority to issue up to 10,000,000 shares of our preferred stock terms of which may be determined by the Board without further stockholder approval. As a result, our Board of Directors could authorize the issuance of a new series of preferred stock (in addition to the Series C Preferred Shares) that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock. In addition, our Board of Directors could authorize the issuance of a new series of preferred stock, subject to the consent of the holders of the stock Series C Preferred Shares that has even greater voting power than the Series C Preferred Shares, to our common stock or that is convertible into our common stock, which could decrease the relative voting power of our common stock or result in dilution to our existing stockholders. Although we have no present intention to issue any new additional shares of preferred stock or to create any additional series of preferred stock, we may issue such shares in the future.
You may experience dilution of your ownership interests because of the future issuance of additional shares of common stock.
In the future, we may issue additional authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our shareholders. We may also issue additional shares of our securities that are convertible into or exercisable for common stock, as the case may be, in connection with hiring or retaining employees, future acquisitions, future sales of its securities for capital raising purposes, or for other business purposes. The future issuance of any such additional shares of common stock may create downward pressure on the value of our securities. There can be no assurance that we will not be required to issue additional shares of common stock, warrants or other convertible securities in the future in conjunction with any capital raising efforts, including at a price (or exercise prices) below the price at which our shares may be valued or are trading in a public market.
Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.
If our stockholders sell substantial amounts of their shares of our common stock, or shares of our common stock underlying any outstanding securities held by them, in the public market under Rule 144 or upon registration of such shares pursuant to an effective registration statement, it could create a circumstance commonly referred to as an “overhang” and in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.
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There can be no assurances that an active trading market may develop for our common stock, or if developed, be maintained.
The average trading volume in our stock has been historically low, with little or no trading at all on some days. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations of the price of, our common stock. Accordingly, investors must assume they may have to bear the economic risk of an investment in our common stock for an indefinite period of time. There can be no assurance that a more active market for the common stock will develop, or if one should develop, there is no assurance that it will be maintained. This severely limits the liquidity of our common stock, and would likely have a material adverse effect on the market price of our common stock and on our ability to raise additional capital.
Our common stock is subject to the “penny stock” rules of the SEC and the trading market in the securities is limited, which makes transactions in the stock cumbersome and may reduce the value of an investment in the stock.
The SEC has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:
| ● | that a broker or dealer approve a person’s account for transactions in penny stocks; and | |
| ● | the broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. |
In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:
| ● | obtain financial information and investment experience objectives of the person; and | |
| ● | make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. |
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth:
| ● | the basis on which the broker or dealer made the suitability determination; and | |
| ● | that the broker or dealer received a signed, written agreement from the investor prior to the transaction. |
Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of common stock and cause a decline in the market value of stock.
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
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The Financial Industry Regulatory Authority (“FINRA”) sales practice requirements may also limit a shareholder’s ability to buy and sell our common stock.
In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our common stock and have an adverse effect on the market for shares of our common stock.
The price of our common stock may become volatile, which could lead to losses by investors and costly securities litigation.
The trading price of our common stock is likely to be highly volatile and could fluctuate in response to factors such as:
| ● | actual or anticipated variations in our operating results; | |
| ● | announcements of developments by us or our competitors; | |
| ● | announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; | |
| ● | adoption of new accounting standards affecting our Company’s industry; | |
| ● | additions or departures of key personnel; | |
| ● | sales of our common stock or other securities in the open market; and | |
| ● | other events or factors, many of which are beyond our control. |
The stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been initiated against the company. Litigation initiated against us, whether or not successful, could result in substantial costs and diversion of our management’s attention and resources, which could harm our business and financial condition.
We must obtain approval from FINRA if we wish to reduce our authorized shares of common stock and/or to effectuate a reverse split of the issued and outstanding shares of the common stock, of which the impact to the trading price of our common stock and/or the liquidity for trading our common stock may be adverse to current stockholders and may not result in desired benefits to the Company.
The Company currently has 2,500,000,000 authorized shares of common stock and 1,463,957,717 shares issued and outstanding. In addition, there are 408,800,000 shares reserved for issuance upon the exercise of outstanding warrants. 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 and consultants. The Company believes that a reverse split would bring value to the issued and outstanding shares of the Company by limiting dilution of operating results by an excessive number of shares overhanging the market.
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The Company’s ability to effectuate a reverse split will require approval from FINRA. FINRA has previously informed the Company that it will not approve and process announcements for company-related actions such as a reverse split if the Company is delinquent in its Exchange Act reports with the SEC and until a Notification Form is submitted.
If completed, and the reverse split does not bring value to the current stockholders and/or our ability to attract prospective investors, including possible adverse impact to the trading price of our common stock and/or the liquidity for trading our common stock, it would likely have a material adverse effect on the market price of our common stock and on our ability to raise additional capital.
If securities analysts do not initiate coverage or continue to cover our common stock or publish unfavorable research or reports about our business, this may have a negative impact on the market price of our common stock.
The trading market for the common stock will depend on the research and reports that securities analysts publish about our business and the Company. We do not have any control over these analysts. There is no guarantee that securities analysts will cover the common stock. If securities analysts do not cover the common stock, the lack of research coverage may adversely affect its market price. If we are covered by securities analysts, and our stock is the subject of an unfavorable report, our stock price and trading volume would likely decline. If one or more of these analysts ceases to cover the Company or fails to publish regular reports on the Company, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.
We have agreed to indemnify our officers and directors against lawsuits to the fullest extent of the law.
Organicell is a Nevada corporation. Nevada law permits the indemnification of officers and directors against expenses incurred in successfully defending against a claim. Nevada law also authorizes Nevada corporations to indemnify their officers and directors against expenses and liabilities incurred because of their being or having been an officer or director. Our organizational documents provide for this indemnification to the fullest extent permitted by law.
Although we currently maintain directors and officers insurance coverage, there is no guarantee that such coverage or that any future insurance coverage we elect to maintain would protect us from any damages or loss claims filed against us.
We do not anticipate dividends to be paid on our common stock, and investors may lose the entire amount of their investment.
Cash dividends have never been declared or paid on the common stock, and we do not anticipate such a declaration or payment for the foreseeable future. We expect to use future earnings, if any, to fund business growth. Therefore, stockholders will not receive any funds absent a sale of their shares. We cannot assure stockholders of a positive return on their investment when they sell their shares, nor can we assure that stockholders will not lose the entire amount of their investment.
The “market overhang” from options, warrants and convertible securities could adversely impact the market price of our shares.
The “market overhang” from options, warrants and convertible securities could adversely impact the market price of our shares as a result of the dilution which would result if such securities were exercised for or converted into shares.
Item 1B. Unresolved Staff Comments.
Not applicable.
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Item 2. Properties.
Prior to October 10, 2022, the Company’s corporate administrative offices and one of two laboratory facilities were located at 1951 NW 7th Ave., Suite 300, Miami, Florida 33136. Such space was occupied pursuant to a services agreement with a non-affiliated third party at a monthly rental of approximately $11,000. The services agreement expired in December 2022.
Effective October 10, 2022, the Company relocated its Florida facilities to 1,156 square feet of administrative and laboratory at the Nova Southeastern University Center for Collaborative Research, 3321 College Avenue, Suite 246, Davie, Florida 33314. This space is occupied pursuant to one year license agreement with the University for an annual base license fee of $20,230.
The Company also leases a 2,452 square foot commercial space located in Basalt, Colorado (the “Basalt Lab Lease”), which provides additional laboratory processing, product distribution and administrative office capacity. The term of the Basalt Lab Lease is for three years expiring on the last day of February 2024, and may be renewed for an additional (3) three-year term provided the Company is not in default. Rental expense is $6,800 per month and provides for annual increases of 3% or the Denver Aurora Metropolitan CPI index, whichever is greater. In connection with the Basalt Lab Lease, the Company posted a security deposit of $13,600.
Item 3. Legal Proceedings.
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.
The Company terminated the employment agreements with the Sales Executives Daniel Pepock (“Pepock”) and Tracy Yourke (“Yourke”) effective June 30, 2022. 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 (“Purchase Price”). In addition, the Company agreed to release Mr. Pepock and Ms. Yourke from their non-compete restrictions upon transfer of the shares to the Company. 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.
Effective October 13, 2022, the parties executed a Confidential Settlement Agreement and Mutual General Release memorializing the terms of the Settlement. On January 31, 2023, 24,800,001 shares were transferred to the Company and the Company paid the Purchase Price. The shares received by the Company were immediately cancelled and returned to the Company’s treasury of authorized and unissued shares. As a result of the above, the matter has been fully settled and Mr. Pepock and Ms. Yourke were released from their non-compete restrictions.
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.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock is traded on the OTCQB tier of the over-the-counter market operated by OTC Markets Group, Inc. under the symbol “OCEL”. The trading market for our common stock is limited and sporadic. We can provide no assurance that our shares of common stock will continue to be traded on the over-the counter market or another national securities exchange, or if traded, that any public market for our common stock will be active and sustained.
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type, size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) monthly account statements showing the market value of each penny stock held in the customer’s account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock if it becomes subject to these penny stock rules. Therefore, because our common stock is subject to the penny stock rules, shareholders may have difficulty selling those securities.
Common Stock
As of February 13, 2023, 1,463,957,717 shares of our common stock were outstanding.
Holders of Our Common Stock
As of February 3, 2023, we had approximately 207 holders of record of our common stock. One of these holders is CEDE and Company which is the mechanism used for brokerage firms to hold securities in book entry form on behalf of their clients and as of February 3, 2023, they held approximately 379,694,548 shares of common stock for these shareholders. Based on a report provided to us in October 2022, the Company had approximately 7,600 beneficial stockholders.
48
Transfer Agent
The transfer agent for our common stock is Securities Transfer Corporation (which acquired Action Stock Transfer Corporation, our former transfer agent, in December 2022), 2901 Dallas Pkwy Suite 380, Plano, TX 75093.
Dividend Policy
We have never paid or declared dividends on our securities. The payment of cash dividends, if any, in the future is within the discretion of our Board and will depend upon our earnings, our capital requirements, financial condition and other relevant factors. We do not expect to pay dividends for the foreseeable future, and intend to retain future earnings, if any, towards the use in our business and growth strategies.
Securities Authorized for Issuance under Equity Compensation Plans
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
| Board Stock Compensation Plan | -0- | -- | 4,513,192 | |||||||||
| 2021 Equity Incentive Plan | -0- | -0- | 166,600,000 | |||||||||
Recent Sales of Unregistered Securities
None.
Item 6. [Reserved].
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion together with our consolidated financial statements and the related notes included elsewhere in this report. This discussion contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ materially from those we currently anticipate as a result of many factors, including the factors we describe under Item 1A. Risk Factors and elsewhere in this report.
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 devastating impact to the United States and worldwide economies or our business.
49
Results of Operations
Fiscal year ended October 31, 2022 as compared to fiscal year ended October 31, 2021
Revenues. Our revenues for the year ended October 31, 2022 were $6,491,008, compared to revenues of $5,597,487 for the year ended October 31, 2021. The increase in revenues during the year ended October 31, 2022 of $893,521 or 16.0% was primarily the result of the Company being able to realize an increase of approximately 14.7% (approximately $793,000) in the average sales prices for the products sold during the year ended October 31, 2022 compared with the average sales prices realized on products sold during the year ended October 31, 2021, partially offset by a decrease of approximately 0.4% (approximately $27,000) in the overall unit sales of its products during the year ended October 31, 2022 compared with the year ended October 31, 2021, and the Company’s ability to generate approximately $100,400 of increased revenues associated with units processed in connection with its recently launched PPX™ service platform during the year ended October 31, 2022 compared to the year ended October 31, 2021. The increase in the average sales prices realized on products sold during the year ended October 31, 2022 compared with the year ended October 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 and 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 year ended October 31, 2022 were $753,534 compared with cost of revenues of $547,881 for the year ended October 31, 2021. The increase in the cost of revenues during the year ended October 31, 2022 of $205,653 or 37.5% compared with the year ended October 31, 2021 was due to an increase in the cost of units sold of 24.2% (approximately ($132,600) during the year ended October 31, 2022, compared to costs of units sold during the year ended October 31, 2021 and the Company’s increase in costs associated with units processed in connection with the recently launched PPX™ service platform of approximately $76,000 during the year ended October 31, 2022 compared to the year ended October 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 year ended October 31, 2022 was $5,737,474 (88.4% of revenues), compared with gross profit of $5,049,606 (90.2% of revenues) for the year ended October 31, 2021. The increase in gross profit during the year ended October 31, 2022 of $687,868 was the result of the Company being able to realize an increases in the average sales prices for the products sold during the year ended October 31, 2022 and the new revenues associated with its recently launched PPX™ service platform during the year ended October 31, 2022, partially offset from increases in costs of units sold during the year ended October 31, 2022 compared to the year ended October 31, 2021.
General and Administrative Expenses. General and administrative expenses for the year ended October 31, 2022 were $14,580,434, compared with $17,793,709 for the year ended October 31, 2021, a decrease of $3,213,275 or 18.1%. The decrease in the general and administrative expenses for the year ended October 31, 2022 compared with the year ended October 31, 2021, was primarily the result of a decrease in stock-based compensation costs to advisors, consultants and administrative staff totaling approximately $4,735,719, reduced research and development costs of approximately $329,000, partially offset by increases in payroll and consulting fees of approximately $332,700, increases in commissions due from sales of the Company’s products of approximately $430,000, increased professional fees of approximately $561,400 and increased laboratory and office related expenses of approximately $559,000. 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 year ended October 31, 2022 compared with the year ended October 31, 2021, partially offset from increases in the average costs attributable to the shares issued as stock-based compensation based on the Company’s share price at the time that the stock-based compensation was granted (average cost of shares granted during the year ended October 31, 2022 was $0.074 versus average cost of shares granted during the year ended October 31, 2021 of $0.062).
Other Income (Expense). Other (expense), net, for the year ended October 31, 2022 was $53,598, compared with other (expense), net, of $12,457 for the year ended October 31, 2021. The increase in other (expense), net, of $41,141 during the year ended October 31, 2022 compared to the year ended October 31, 2021 was principally the result of increased costs of approximately $323,100 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 $37,200 of interest costs principally the result of $52,000 in interest costs associated with the Note during the year ended October 31, 2022 offset by a reduction of interest costs from other interest bearing obligations totally approximately $14,000, and the increase in the Commitment Fee Shortfall Obligation of approximately $30,700 under our SPA during the year ended October 31, 2022 compared with the year ended 2021, partially offset from increases of approximately $224,000 from gains from settlements and write-offs on outstanding payables and the gain from the write-off of liabilities attributable to discontinued operations that had exceeded the “statute of limitations” of $125,851during the year ended October 31, 2022 compared with the year ended October 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 Fiscal Year Ended October 31, |
||||||||
| 2022 | 2021 | |||||||
| Cash, beginning of year | $ | 108,570 | $ | 590,797 | ||||
| Net cash used in operating activities | (3,165,840 | ) | (2,680,354 | ) | ||||
| Net cash used in investing activities | (824,743 | ) | (424,742 | ) | ||||
| Net cash provided by financing activities | 7,635,110 | 2,622,869 | ||||||
| Cash, end of year | $ | 3,753,097 | $ | 108,570 | ||||
During the year ended October 31, 2022, the Company used cash in operating activities of $3,165,840, compared to $2,680,354 for the year ended October 31, 2021, an increase in cash used of $485,486. The increase in cash used in operating activities was due to 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 increases in payments of past due accounts payable and accrued expenses during the year ended October 31, 2022 as compared to the year ended October 31, 2021, partially offset from the increase in revenues and gross profit during the year ended October 31, 2022 as compared to the year ended October 31, 2021.
During the year ended October 31, 2022, the Company had cash used in investing activities of $824,743, compared to cash used in investing activities of $424,742 for the year ended October 31, 2021 an increase in cash used of $400,001. The increase in cash used in investing activities was due primarily due to $690,704 of payments made in connection with the Company’s leasehold improvements associated with the new lab facility in Basalt, CO during the year ended October 31, 2022 as compared to the year ended October 31, 2021 and an decrease of $290,703 in laboratory equipment purchased for the Company’s Basalt, CO laboratory facilities during the year ended October 31, 2022 as compared to the year ended October 31, 2021.
During the year ended October 31, 2022, the Company had cash provided by financing activities of $7,635,110 compared to cash provided by financing activities of $2,622,869 for the year ended October 31, 2021. The increase in cash provided by financing activities of $5,012,241 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 proceeds from the sale of equity securities in connection with the Restructuring of $4,000,0000 and the sale of equity securities in other transactions of $562,730, partially offset from increases in repayments of outstanding debt obligations of approximately $331,400 and increase in payments on capital leases of approximately $9,000 during the year ended October 31, 2022 as compared to the year ended October 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 fiscal year ended October 31, 2022 and through the date of this Annual Report, the Company completed the following private sales of its securities:
| 1. | During November 2020, the Company sold 800,000 shares of common stock to an “accredited investor”, at $0.05 per share, for an aggregate purchase price of $40,000. The proceeds were used for working capital. |
| 2. | During February 2021, the Company sold an aggregate of 12,340,910 shares of common stock to five “accredited investors” at prices ranging from $0.05 per share to $0.06 per share for an aggregate purchase price of $665,000. The proceeds were used for working capital. |
51
| 3. | On February 22, 2021, the Company sold 1,818,181 shares of common stock to Republic Asset Holdings LLC., a Company controlled by Michael Carbonara, a director of the Company, at $0.055 per share for an aggregate purchase price of $100,000. The proceeds were used for working capital. |
| 4. | During April 2021, the Company sold an aggregate of 13,677,821 shares of common stock to seven “accredited investors” at prices ranging from $0.03 per share to $0.25 per share for an aggregate purchase price of $535,000. The proceeds were used for working capital. |
| 5. | During May 2021, the Company sold an aggregate of 2,087,822 shares of common stock to eight “accredited investors” at prices ranging from $0.13 per share to $0.15 per share for an aggregate purchase price of $286,250. The proceeds were used for working capital. |
| 6. | During the period June 2021 through July 2021, the Company sold an aggregate of 11,541,500 shares of common stock to four “accredited investors” at prices ranging from $0.05 per share to $0.13 per share for an aggregate purchase price of $631,020. The proceeds were used for working capital. |
| 7. | During August 2021, the Company sold an aggregate of 3,000,000 shares of common stock to one “accredited investor” at $0.05 per share for an aggregate purchase price of $150,000. The proceeds were used for working capital. |
| 8. | During October 2021, the Company sold an aggregate of 7,500,000 shares of common stock to four “accredited investors” at $0.04 per share for an aggregate purchase price of $300,000. The proceeds were used for working capital. |
| 9. | 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. |
| 10. | On January 11, 2022, the Company entered into a Securities Purchase Agreement with AJB Capital Investments, LLC (the “Purchaser”) pursuant to which we sold a Promissory Note in the principal amount of $600,000 to the Purchaser in a private transaction to for a purchase price of $540,000 (giving effect to original issue discount of $60,000). See “Item 1. Business – Recent Development” for further details regarding this transaction. |
| 11. | 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. |
| 12. | 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. |
| 13. | During August 2022 and September 2022, the Company sold an aggregate of 65,500,000 shares of common stock to four “accredited investors” at $0.04 per share for an aggregate purchase price of $2,620,000. 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.
Put Request
Pursuant to the Purchase Agreement entered into with Tysadco Partners LLC, on December 2, 2022, the Company submitted a put request to Tysadco to purchase 4,456,326 registered shares at a purchase price (as calculated pursuant to the Purchase Agreement) of $0.02244, for a total of $100,000 (“Put Request”). On December 5, 2022, Tysadco funded the Put Request and the Company issued 4,456,326 shares to Tysadco. The proceeds from the share sale are being used for working capital and general corporate purposes.
52
Going Concern Consideration
The 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 $8,896,557 for the year ended October 31, 2022. In addition, the Company had an accumulated deficit of $50,521,306 at October 31, 2022. The Company had a working capital position of $303,085 at October 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 associated with the ongoing COVID-19 pandemic combined with the downturn in the overall United States and global economies have adversely affected the demand for our products and services by our customers and from patients of our customers 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.
53
If revenues do not increase and stabilize, 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 October 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 October 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 audited 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 this report, “Summary of Significant Accounting Policies”.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
As a “smaller reporting company,” as defined by Item 10 of Regulation S-K, we are not required to provide the information required by this item of Form 10-K.
54
Item 8. Financial Statements and Supplementary Data.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Organicell Regenerative Medicine, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Organicell Regenerative Medicine, Inc. (the “Company”) as of October 31, 2022 and 2021, the related consolidated statements of operations, changes in stockholders’ equity (deficit) and cash flows for each of the two years in the period ended October 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of October 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended October 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 3, the Company has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ Marcum llp
We have served as the Company’s auditor since 2015
February 14, 2023
F-2
Organicell Regenerative Medicine, Inc.
CONSOLIDATED BALANCE SHEETS
As of October 31, 2022 and 2021
| October 31, 2022 |
October 31, 2021 |
|||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net of allowance for bad debts | ||||||||
| Receivables from related party | ||||||||
| Other receivables | ||||||||
| Prepaid expenses | ||||||||
| Inventories | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Other assets – right of use | ||||||||
| Security deposits | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES, SHARES SUBJECT TO POSSIBLE REDEMPTION AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accrued liabilities to management | ||||||||
| Notes payable | ||||||||
| Advances payable | ||||||||
| Finance lease obligations | ||||||||
| Operating lease obligations | ||||||||
| Deferred revenue | ||||||||
| Debentures payable | ||||||||
| Promissory Note, net of debt discount | ||||||||
| Commitment Fee Shortfall Obligation | ||||||||
| Commitment to repurchase shares in connection with settlement of litigation | ||||||||
| Liabilities attributable to discontinued operations | ||||||||
| Total Current Liabilities | ||||||||
| Long term finance lease obligations | ||||||||
| Long term operating lease obligations | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Shares Subject To Possible Redemption | ||||||||
| Series C Preferred Stock, $ par value, shares authorized; and shares issued and outstanding, respectively | ||||||||
| Stockholders’ Equity (Deficit) | ||||||||
| Common stock, $ par value, shares authorized; and shares issued and outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| Total Stockholders’ Equity (Deficit) | ( |
) | ||||||
| TOTAL LIABILITIES, SHARES SUBJECT TO POSSIBLE REDEMPTION AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-3
Organicell Regenerative Medicine, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended October 31, 2022 and 2021
| Year Ended October 31, |
||||||||
| 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.
F-4
Organicell Regenerative Medicine, Inc.
CONSOLIDATED CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
For the Years Ended October 31, 2021 and 2022
| Additional | Total Stockholders’ |
|||||||||||||||||||
| Common Stock | Paid In | Accumulated | Equity | |||||||||||||||||
| Shares | Par Value | Capital | Deficit | (Deficit) | ||||||||||||||||
| 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 October 31, 2021 | ( |
) | ( |
) | ||||||||||||||||
| Sale of common stock | ||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||
| Capital contributed by Executive | - | |||||||||||||||||||
| Warrants issued to executives as payment for outstanding compensation | - | |||||||||||||||||||
| Executive forgiveness of employment obligations in connection with Restructuring | - | |||||||||||||||||||
| Commitment to repurchase shares in connection with settlement of litigation | - | ( |
) | ( |
) | |||||||||||||||
| Common stock issued as commitment fee for Promissory Note | ||||||||||||||||||||
| Exchange of accounts payable for stock | ||||||||||||||||||||
| Stock issued in settlement of litigation | ||||||||||||||||||||
| Net loss | - | ( |
) | ( |
) | |||||||||||||||
| Balance October 31, 2022 | $ | $ | $ | ( |
) | $ | ||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Organicell Regenerative Medicine, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended October 31, 2022 and 2021
| Year Ended October 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 | ( |
) | ||||||
| Gain from write-offs and settlements of accounts payable and notes payable | ( |
) | ||||||
| Reserve for bad debt | ||||||||
| Write-off of inventory | ||||||||
| Stock issued in settlement of litigation | ||||||||
| Stock-based compensation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net of allowance for bad debts | ( |
) | ||||||
| Receivables from related party | ( |
) | ||||||
| Other 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 | ||||||||
| Purchase of fixed assets | ( |
) | ( |
) | ||||
| Net cash used in investing activities | ( |
) | ( |
) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of notes payable | ||||||||
| Capital contributed by executive | ||||||||
| Payments on finance lease | ( |
) | ( |
) | ||||
| Repayments of notes payable | ( |
) | ( |
) | ||||
| Proceeds from sale of common stock | ||||||||
| Net cash provided by financing activities | ||||||||
| Increase (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: | ||||||||
| Executive forgiveness of employment obligations in connection with Restructuring | $ | $ | ||||||
| Warrants issued to executives as payment for outstanding compensation | $ | $ | ||||||
| Stock issued in exchange for accounts payable | $ | $ | ||||||
| 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 | $ | $ | ||||||
| Commitment to repurchase shares in connection with settlement of litigation | $ | $ | ||||||
| Promissory note issued for past due Professional Fees | $ | $ | ||||||
| Purchase of fixed assets included in accounts payable | $ | $ | ||||||
| Exchange of accounts payable for common stock | $ | $ | ||||||
| Stock issued for future services | $ | $ | ||||||
| Finance lease obligations | $ | $ | ||||||
| Operating lease – right of use assets | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
ORGANICELL REGENERATIVE MEDICINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 years ended October 31, 2022 and 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 and to date revenues from PPXTM continue to be immaterial.
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, as of October 31, 2022, the Company has abandoned any future plans to operate these services.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The 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.
Reclassifications
Certain comparative figures have been reclassified to conform to the current year financial statement presentation. These reclassifications had no effect on the reported results of operations. An adjustment has been made to the Consolidated Statements of Cash Flows for the year ended October 31, 2021 to reclassify certain payments for the purchase of fixed assets.
Concentrations of Risk
Credit Risk
The balance sheet items that potentially subject us to concentrations of credit risk are primarily cash and cash equivalents and accounts receivable. Balances in accounts are insured up to Federal Deposit Insurance Corporation (“FDIC”) limits of $
F-7
Major Customer
During the fiscal year ended October 31, 2022, the Company sold a total of approximately $
During the fiscal year ended October 31, 2021, the Company sold a total of approximately $
The Company’s sales agreements are non-exclusive and the Company does not believe it has any exposure based on the customers of its products.
Major Supplier
During the fiscal year ended October 31, 2022, the Company purchased the tissue raw material used in manufacturing of its products from two suppliers, of which each accounted for approximately $
During the fiscal year ended October 31, 2021, the Company purchased the tissue raw material used in manufacturing of its products from two suppliers, of which each accounted for approximately $
The Company’s supply agreements are non-exclusive and the Company does not believe it has any exposure based on the availability of raw materials and/or products from other suppliers.
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 year ended October 31, 2022 and 2021, the Company recorded bad debt expense of $
F-8
Inventory
Inventory
is stated at the lower of cost or net realizable value using the average cost method. The Company provides a reserve 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 October 31, 2022, the Company wrote off $
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
Leasehold Improvements
Leasehold improvements in excess of $1,000 that are made in connection with leases having a term of more than 12 months are capitalized by the Company and amortized over the shorter of the useful life of the asset or the remaining lease periods and renewals that are deemed to be reasonably certain at the date the leasehold improvements are purchased. Costs associated with leasehold improvements that do not exceed $1,000 are expensed as incurred.
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 and 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 fully vested 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 fully vested shares outstanding during the year. 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 October 31, 2022, the Company had common shares issuable upon the exercise of warrants that were not included in the computation of dilutive loss per share because their inclusion is anti-dilutive for the year ended October 31, 2022. At October 31, 2021, 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.
F-9
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 $
Income Taxes
The Company files 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 years ended October 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 years ended October 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 February 3, 2023. 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.
F-10
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 October 31, 2022 and October 31, 2021 that contain 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 October 31, 2022 through the financial statement issuance date for subsequent event disclosure or recording.
F-11
NOTE 3 – GOING CONCERN
The 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 associated with the ongoing COVID-19 pandemic combined with the downturn in the overall United States and global economies have adversely affected the demand for our products and services by our customers and from patients of our customers 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 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 October 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.
F-12
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 150,000,000 Shares at an exercise price of $0.02 per Share (the “Consulting Agreement Warrants”), which Warrants are exercisable on a “cashless” basis (see Note 13).
F-13
NOTE 5 – INVENTORIES
| Schedule of inventories | ||||||||
| October 31, 2022 |
October 31, 2021 |
|||||||
| Raw materials and supplies | $ | $ | ||||||
| Finished goods | ||||||||
| Total inventories | $ | $ | ||||||
NOTE 6 – PROPERTY AND EQUIPMENT
| Schedule of property and equipment | ||||||||
| October 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 $
F-14
The weighted average remaining term of the Company’s Finance Leases as of October 31, 2022 was 35.8 months. The minimum lease payments pursuant to the Finance Leases are as follows:
| Schedule of minimum lease payment to finance lease | ||||
| Minimum | ||||
| Year Ended October 31, | Rent | |||
| 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| Total undiscounted finance lease payments | ||||
| Less: imputed interest | ( |
) | ||
| Present value of finance lease liabilities | $ | |||
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 $
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 as of July 31, 2022 and the remaining ROU asset was written off and the security deposit was forfeited (see Note 13).
Lease amortization expense for the year ended October 31, 2022 and 2021 was $
On August 30, 2022, the Company entered into a one-year lease agreement (“LA Office Lease”) 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 $
F-15
Effective October 10, 2022, the Company relocated its Miami laboratory to a 1,156 square foot administrative and laboratory facility at the Nova Southeastern University Center for Collaborative Research in Davie, Florida. This space is occupied pursuant to one year license agreement (“University Lease”) for an annual base license fee 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 years ended October 31, 2022 and 2021 was $
The weighted average remaining term of the Company’s operating leases as of October 31, 2022 was 11.9 months. The minimum lease payments pursuant to the Basalt Lab Lease, the University Lease, and the LA Office Lease are as follows:
| Schedule of minimum lease payment to finance lease | ||||
| Minimum | ||||
| Year Ended October 31, | Rent | |||
| 2023 | $ | |||
| 2024 | ||||
| Thereafter | ||||
| Total undiscounted operating lease payments | ||||
| Less: imputed interest | ( |
) | ||
| Present value of operating lease liabilities | $ | |||
NOTE 8 – RELATED PARTY TRANSACTIONS
On October 29, 2021, the Company entered into an Exchange Agreement (see Note 12) with the current executive officers of the Company (as well as other non-related party shareholders) whereby the executive officers of the Company exchanged an aggregate of shares previously issued to them under consulting and employment agreements and/or pursuant to the MCPP for newly issued shares pursuant to the 2021 Plan (on a 1:1 basis).
The Company’s corporate administrative offices were previously leased from MariLuna, LLC, a Florida limited liability company which is owned by Dr. Mitrani under a lease agreement that expires June 30, 2023. The Company paid a security deposit of $
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 was subsequently extended on a month to month basis. Under the terms of the lease, the Company was required to make monthly rental payments of $
F-16
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 year ended October 31, 2022, the Company sold a total of approximately $
For the year ended October 31, 2021, the Company sold a total of approximately $
On February 26, 2020, the Company agreed to enter into a consulting agreement with the CMO to provide ongoing services to the Company. The CMO was entitled to receive compensation of $ annually, commencing March 1, 2020. The term of the consulting agreement is one year, with automatic renewals for annual periods thereafter unless prior written notice is provided by either party of the desire to terminate. During February 2021, the consulting arrangement was amended whereby the CMO’s accrued and unpaid consulting fees of $
Effective December 21, 2020, the Company granted a bonus of $
From time to time, Mr. Bothwell and/or his respective affiliates have advanced funds to the Company to pay for certain expenses of the Company. As of October 31, 2022 and 2021, $
At October 31, 2021, salary amounts owed to Albert Mitrani, Dr. Mari Mitrani and Ian Bothwell were $
During June 2022, Albert Mitrani made a capital contribution of $
F-17
NOTE 9 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
| Schedule of account payable and accrued expenses | ||||||||
| October 31, 2022 |
October 31, 2021 |
|||||||
| Accrued payroll related liabilities | $ | $ | ||||||
| Lab equipment and supplies payables | ||||||||
| Clinical trial payables | ||||||||
| Legal fees payables | ||||||||
| Other professional fees payables | ||||||||
| Accrued IRS penalty | ||||||||
| Accrued commissions payable | ||||||||
| Construction payables | ||||||||
| Other payables and accrued expenses | ||||||||
| Accounts Payable and Accrued Expenses | $ | $ | ||||||
NOTE 10 – 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 $
F-18
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 $
The Promissory Note matured 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 October 31, 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.
F-19
Upon the closing, the Company recorded a discount of the Promissory Note in the amount of $
For the year ended October 31, 2022, $
At October 31, 2022, the fair value of the Commitment Fee Shares was approximately $ (valued at $0.0272 the closing price of the common stock of the Company on October 31, 2022). As a result, the Company has recorded an increase in the Commitment Fee Shortfall Obligation in the amount of $
On January 12, 2023, the Promissory Note was paid in full.
Credit Facility
On September 19, 2019, the Company’s wholly owned subsidiary, General Surgical Florida, received $
NOTE 11 – INCOME TAXES
The Company files a consolidated federal income tax return that includes all of its subsidiaries. For the years ended October 31, 2022 and 2021, the Company incurred operating losses, and therefore, there was not any current income tax expense amount recorded during those periods.
The consolidated provision for income taxes for October 31, 2022 and 2021 consists of the following:
| Schedule of provision for income tax | ||||||||
| Year Ended October 31, |
Year Ended October 31, |
|||||||
| 2022 | 2021 | |||||||
| Current: | ||||||||
| Federal | $ | $ | ||||||
| State | ||||||||
| Current Income Tax Expense (Benefit) | $ | $ | ||||||
| Deferred: | ||||||||
| Federal | $ | $ | ( |
) | ||||
| State | ( |
) | ||||||
| Deferred Income Tax Expense (Benefit) | ( |
) | ||||||
| Change in Valuation Allowance | ( |
) | ||||||
| Income tax provision | $ | $ | ||||||
F-20
Effective tax rates differ from the federal statutory rate of
| Schedule of effective income tax rate | ||||||||
| October 31, 2022 |
October 31, 2021 |
|||||||
| Tax at federal statutory rate | $ | ( |
) | $ | ( |
) | ||
| State taxes, net of federal benefit | ( |
) | ( |
) | ||||
| Permanent differences | ||||||||
| Stock-based compensation | ||||||||
| Executive Forgiveness of employment obligations In connection with Restructuring | ||||||||
| Other | ( |
) | ||||||
| Total income tax expense (benefit) | ( |
) | ||||||
| Change in valuation allowance | ( |
) | ||||||
| Income tax provision | $ | $ | ||||||
The
Company had a federal net operating loss carryover of $
The tax effects of temporary differences and carry-forwards that give rise to deferred tax assets and liabilities for the Company were as follows:
| Schedule of deferred tax assets and liabilities | ||||||||
| October 31, 2022 |
October 31, 2021 |
|||||||
| Deferred Tax Assets: | ||||||||
| Stock based compensation | $ | $ | ||||||
| Accrued compensation | ||||||||
| Net operating loss carryforward-Federal | ||||||||
| Net operating loss carryforward-State | ||||||||
| Other | ||||||||
| Total deferred tax assets: | ||||||||
| Deferred Tax Liabilities: | ||||||||
| Property and equipment | ||||||||
| Total deferred tax liabilities: | ||||||||
| Valuation Allowance | ( |
) | ( |
) | ||||
| Net deferred tax assets | $ | $ | ||||||
FASB ASC 740 requires a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. At October 31, 2022 and October 31, 2021, the net deferred tax asset was offset by a full valuation allowance.
Pursuant to Code Sec. 382 of the Internal Revenue Code (“the Code”), the utilization of net operating loss carryforwards may be limited as a result of a cumulative change in stock ownership of more than 50% over a three-year period. The Company may be subject to such limitation.
F-21
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 12 – 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
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.
F-22
Common Stock
On December 21, 2020 and January 4, 2021, pursuant to the Nevada Revised Statutes and the Bylaws of the Company, the Board of Directors of the Company and the stockholders having the
Issuances of Common Stock - Sales:
During November 2020, the Company sold shares of common stock to an “accredited investor”, at $ per share, for an aggregate purchase price of $
During February 2021, the Company sold an aggregate of shares of common stock to five “accredited investors”, at prices ranging from $ per share to $ per share for an aggregate purchase price of $
On February 22, 2021, the Company sold shares of common stock to Republic Asset Holdings LLC., a Company controlled by Michael Carbonara, a director of the Company, at $ per share for an aggregate purchase price of $
During April 2021, the Company sold an aggregate of shares of common stock to seven “accredited investors” at prices ranging from $ per share to $ per share for an aggregate purchase price of $
During May 2021, the Company sold an aggregate of shares of common stock to eight “accredited investors” at prices ranging from $ per share to $ per share for an aggregate purchase price of $
During the period June 2021 through July 2021, the Company sold an aggregate of shares of common stock to four “accredited investors” at prices ranging from $ per share to $ per share for an aggregate purchase price of $
During August 2021, the Company sold an aggregate of shares of common stock to one “accredited investor” at $ per share for an aggregate purchase price of $
During October 2021, the Company sold an aggregate of shares of common stock to four “accredited investors” at $ per share for an aggregate purchase price of $
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 $0.03 per share for an aggregate purchase price of $. 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.
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 $
F-23
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 four “accredited investors” at $ per share for an aggregate purchase price of $
Issuances of Common Stock – Stock Based Compensation:
In connection with the VP Agreements, each of the Sales Executives were granted shares of unregistered common stock of the Company (“Execution Shares”) valued at $ per share, the closing price of the common stock of the Company on the grant date. The Company recorded $ of stock-based compensation expense on the grant date for each issuance. In addition, the VP Agreements provided each Sales Executives the right to receive a minimum of
Effective March 29, 2021, the Company and Assure Immune L.L.C (“Consultant”) executed an amendment of the Consultant’s Agreement, whereby the Company issued to the Consultants shares of unregistered common stock (“Shares”) valued at $ per share, the closing price of the common stock of the Company on the grant date. The Company will amortize the costs associated with this issuance of $
During November 2020, the Company entered into an additional consulting agreement with a third party to provide consulting services in connection with the development of international research and development, sales and distribution and financing opportunities for a period of six months. As consideration for agreeing to provide the consulting services to the Company, the Company issued the consultant shares of fully vested unregistered common stock valued at $ per share, the closing price of the common stock of the Company on the effective date of the agreement. The Company recorded $ of stock-based compensation expense during the year ended October 31, 2021. On August 9, 2021, the Company and the third party entered into another consulting agreement with substantially the same terms and condition as provided for in the original agreement. The shares of fully vested unregistered common stock issued to the consultant under the new agreement were valued at $
During November 2020, in consideration for agreeing to provide medical consulting and advisory services to the Company, the Board approved the issuance to one individual an aggregate of shares of unregistered common stock valued at $ per share, the closing price of the common stock of the Company on the respective grant dates. The Company recorded $ of stock-based compensation expense based on the grant date fair value of these shares during the year ended October 31, 2021.
During December 2020, the Board approved the bonus of shares of newly issued common stock to executive management (consisting of Mr. Mitrani, Dr. Mitrani and Mr. Bothwell) totaling shares; non-executive Board members (consisting of Mr. Carbonara and Dr. Meglin) totaling shares; administrative staff totaling ; and to several medical advisors totaling shares valued at $ per share, the closing price of the common stock of the Company on the respective grant dates. The Company recorded a total of $ of stock-based compensation expense based on the grant date fair value of these shares during the year ended October 31, 2021.
F-24
During April 2021, the Board approved the bonus of shares of newly issued common stock to an employee valued at $ per share, the closing price of the common stock of the Company on the grant date. The Company recorded a total of $ of stock-based compensation expense based on the grant date fair value of these shares during the year ended October 31, 2021.
During December 2020, January 2021 and February 2021, the Company issued to various employees and consultants , and shares of unregistered common stock, respectively, valued at prices ranging from $ to $ per share, the closing price of the common stock of the Company on the respective grant dates. The Company recorded a total of $ of stock-based compensation expense during the year ended October 31, 2021 based on the grant date fair value of these shares.
During February 2021, the Company entered into a consulting agreement with a third party to provide consulting services for a one-year period. As consideration for agreeing to provide consulting services to the Company, the Company agreed to issue the consultant shares of unregistered common stock upon completion of the three-month anniversary of the agreement. In addition, the Company has agreed to provide an additional shares of newly issued common stock for each celebrity and/or athlete which the consultant arranges to provide marketing services to the Company and that is responsible for bringing a minimum of $
During April 2021, the Company entered into a consulting agreement with a third party to provide investor relation services. The term of the agreement is month to month and may be terminated with or without cause. As consideration for agreeing to provide the consulting services to the Company, the Company has agreed to pay the consultants a minimum of $
During March 2021, April 2021 and May 2021, the Company granted a total of shares of common stock to various consultants valued at prices ranging from $ per share to $ per share, the closing price of the common stock of the Company on the respective grant dates. The Company recorded $ of stock-based compensation expense based on the grant date fair value of these shares during the year ended October 31, 2021.
On June 4, 2021, the Company and an employee agreed to 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, 2022 and the Company agreed to grant the employee shares of common stock of the Company to vest upon execution of the amendment (valued at $ per share, the closing price of the common stock of the Company on the grant date). The total value of the stock granted in connection with the amendment of $ will be amortized beginning June 4, 2021 over the remaining term of the agreement. On October 31, 2022, the parties mutually agreed to terminate the employee’s employment agreement. The Company recorded $ and $ of stock-based compensation expense based on the grant date fair value of these shares during the year ended October 31, 2022 and 2021, respectively.
During June 2021, the Company granted a total of shares of common stock to various consultants and service providers valued at prices ranging from $ per share to $ per share, the closing price of the common stock of the Company on the respective grant dates. The Company recorded $ of stock-based compensation expense based on the grant date fair value of these shares during the year ended October 31, 2021.
On June 10, 2021, the Company agreed to issue shares of common stock to a service provider as a prepayment for future services to be provided to the Company valued at $
F-25
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 $
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 expired on September 30, 2022 (“Initial Term”). As consideration for agreeing to provide consulting services to the Company during the Initial Term, the Company agreed to issue the consultant
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. On November 22, 2022, Mr. Sinnreich resigned from the Company. The Company will amortize the costs associated with the issuance through the date of Mr. Sinnreich’s termination. For the year ended October 31, 2022, a total of 6,706,849 shares had vested and the Company recorded $ of stock-based compensation expense during the year ended October 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 $60,250 of stock-based compensation expense based on the grant date fair value of these shares during the term of the consulting agreement. 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. The Company recorded $ of stock-based compensation expense during the year ended October 31, 2022.
On December 1, 2022, the Company granted shares of common stock to an employee as provided for in the employment agreement valued at $ per share, the closing price of the common stock of the Company on the grant date. The Company will record $ of stock-based compensation expense based on the grant date fair value of these shares during the three months ended January 31, 2023.
On December 29, 2022, the Company agreed to issue shares of common stock to a service provider in exchange for the provider providing discounts of 10% on all services provided retroactive to August 2022. The common stock granted was valued at $ based on the closing price of the common stock of the Company on the date of the agreement of $ per share.
F-26
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”). Pursuant to the terms of the Registration Rights Agreement, the Company was 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. On September 2, 2022, the Company filed the required registration statement and on October 24, 2022, the Registration Statement was declared effective.
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 (“Request”). 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 Purchase Agreement, on December 2, 2022, the Company submitted a put request to Tysadco to purchase 4,456,326 registered shares at a purchase price of $0.02244, for a total of $100,000 (“Put Request”). On December 5, 2022, Tysadco funded the Put Request and the Company issued 4,456,326 shares to Tysadco. The proceeds from the share sale are being used for working capital and general corporate purposes.
F-27
Shares Issued – Promissory Note:
As described in Note 10, 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. The Company recorded a gain of $72,500 for the year ended October 31, 2022 in connection with the settlement, representing the difference in the fair value of the shares issued and the amount of obligations settled.
Shares Issued – Settlement of Litigation:
As described in Note 14, during April 2022 the Company settled a lawsuit whereby the Company paid LAE $
Shares Repurchased – Settlement of Litigation:
As described in Note 14, during January 2023, the Company settled a lawsuit by repurchasing
Issuances of Common Stock – Exchange of balances due on accounts payable for stock:
During
February 2021, the consulting arrangement was amended whereby the CMO’s accrued and unpaid consulting fees of $
During May 2021, the Company and two employees agreed to exchange $
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”).
F-28
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.
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 Shares | ||||
| Name | Issued | |||
| 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.
During the years ended October 31, 2022 and 2021, a total
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.
2021 Plan and Share Exchange Agreement
In September 2021, the Company adopted the 2021 Equity Incentive Plan (“2021 Plan”). The 2021 Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, and Performance Shares (an “Award”) to any person who is an employee or director of, or consultant to the Company. The maximum aggregate number of shares that may be issued pursuant to all Awards is shares.
The 2021 Plan is administered by (a) the board of the directors of the Company; or (b) a committee designated by the board, which Committee shall be constituted in such a manner as to satisfy the applicable laws and to permit such grants and related transactions under the Plan to be exempt from Section 16(b) of the Exchange Act in accordance with Rule 16b-3. Once appointed, such committee shall continue to serve in its designated capacity until otherwise directed by the board. The board of directors may at any time amend, suspend, or terminate the Plan; provided, however, that no such amendment shall be made without the approval of the Company’s shareholders to the extent such approval is required by applicable laws.
F-29
On October 29, 2021, the Company entered into an Exchange Agreement (the “Exchange Agreement”) with shareholders (including executive officers) who were issued shares under (i) various consulting and employment agreements during 2021 (the “Service Providers”), and (ii) those shareholders who were issued shares of common stock pursuant to the MCPP (the “MCPP Holders”).
The shares received in connection with the Exchange Agreement were treated as a modification to the original awards granted. The Company determined that there was not any incremental value resulting from the exchange and as a result there was no additional compensation costs recorded.
As of October 31, 2022, a total of shares of our common stock, including the Exchange Shares have been awarded under the 2021 Plan.
Unvested Equity Instruments:
A summary of unvested equity instruments outstanding for the years ended October 31, 2022 and 2021 are presented below:
| Schedule of non vested share activity | ||||||||
| Number of Nonvested Shares |
Weighted- Average Grant Date Value |
|||||||
| Outstanding at October 31, 2021 | $ | |||||||
| Non-Vested Shares Granted | $ | |||||||
| Vested | $ | |||||||
| Expired/Forfeited | $ | |||||||
| Outstanding at October 31, 2022 | $ | |||||||
| Number of Nonvested Shares |
Weighted- Average Grant Date Value |
|||||||
| Outstanding at October 31, 2020 | $ | |||||||
| Non-Vested Shares Granted | $ | |||||||
| Vested | $ | |||||||
| Expired/Forfeited | $ | |||||||
| Outstanding at October 31, 2021 | $ | |||||||
As of October 31, 2022, the total compensation cost related to nonvested awards not yet recognized and the weighted-average period over which such costs are expected to be recognized was $ and .0 months, respectively.
As of October 31, 2021, the total compensation cost related to nonvested awards not yet recognized and the weighted-average period over which such costs are expected to be recognized was $ and months, respectively.
F-30
NOTE 13 – WARRANTS
A summary of warrant activity for the years ended October 31, 2022 and 2021 are presented below:
| Schedule 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 at October 31, 2022 | $ | $ | ||||||||||||||
| Exercisable at October 31, 2022 | $ | $ | ||||||||||||||
| Number of Shares |
Weighted-average |
Remaining Contractual Term (years) |
Aggregate Intrinsic Value |
|||||||||||||
| Outstanding at October 31, 2020 | $ | $ | ||||||||||||||
| Granted | $ | - | $ | |||||||||||||
| Exercised | $ | - | $ | |||||||||||||
| Expired/Forfeited | $ | - | $ | |||||||||||||
| Outstanding and exercisable at October 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
F-31
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
During September 2022, each of the five non-executive directors (other than the Chairman) were granted the right to be party to a Director’s Service Agreement. Pursuant to that agreement, non-employee directors will be compensated for their services by the annual issuance of warrants to acquire up to
Effective August 1, 2022, the Company entered into a one-year consulting agreement with a third party to provide strategic advice, assistance with implementation of new business strategies and overall advice concerning the Company’s business goals and objectives. The consultant shall receive compensation in the form of a warrant to acquire up to
All stock compensation expense is classified under general and administrative expenses in the consolidated statements of operations
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NOTE 14 – COMMITMENTS AND CONTINGENCIES
Executive Employment Agreements
The Company is party to executive employment agreements
with each of Ian T. Bothwell (our Interim Chief Executive Officer and Chief Financial Officer), Dr. Maria Ines Mitrani (our Chief Science
Officer) and Albert Mitrani, our Executive Vice President of Sales), originally executed in April 2018 and subsequently amended (the
“Executive Employment Agreements”). As amended, the Executive Employment Agreements provide for a term expiring on
December 31, 2025 and a base annual salary of $
Pursuant to the terms of the SPA, the Executive Employment Agreements were further amended on August 19, 2022 and February 9, 2023 as follows:
| 1. | Each of Albert Mitrani, Dr. Maria Ines Mitrani and Ian Bothwell amended their respective employment agreements
providing for (a) setting their respective base salaries at $ |
In addition, each of Albert Mitrani, Dr. Maria Ines Mitrani and Ian
Bothwell agreed to a reduction in each executive’s annual salary to $
| 2. | Albert Mitrani and Dr. Maria Ines Mitrani each waived all accrued but unpaid compensation 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. The balance of unpaid and accrued compensation that was forgiven
by Albert Mitrani and Dr. Maria Ines Mitrani totaling $ |
| 3. | Ian Bothwell waived all unpaid and accrued compensation outstanding as of July 31, 2022, in exchange for
ten-year warrants to purchase |
| 4. | Each of Albert Mitrani, Dr. Maria Ines Mitrani, Ian Bothwell and all other recipients agreed to terminate all awards granted but not yet issued under the Company’s Management and Consultant Performance Plan. |
| 5. | Each of Albert Mitrani, Dr. Maria Ines Mitrani and Ian Bothwell agreed to modify severance compensation provisions to be paid upon termination to only occur upon a termination without cause in an amount equal to one month’s base salary for each year of service. |
In connection with the February 9, 2023 amendment
to the Executive Employment Agreements, Mr. Bothwell and Mr. Mitrani also agreed to repay approximately $
Bonuses
Effective December 21, 2020, the Company granted a bonus of $
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.
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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.
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.
On September 13, 2022, Mr. Sinnreich assumed the position of President and Acting Chief Executive Officer. He subsequently resigned from the Company on November 22, 2022. The Company is currently reviewing its rights to rescind previously issued shares and payments to Mr. Sinnreich in light of the resignation.
VP Agreements - Sales Executives
On January 6, 2020, the Company entered into employment agreements with two individuals (“Sales Executives”), each to serve as a Vice President – Global Sales and Marketing. The terms of each Sales Executive employment agreement are identical (“VP Agreements”). The initial term of the VP agreements are for three years and provide for automatic annual renewals thereafter, unless either party provides 90-day written notice prior to expiration of the then current term. The VP Agreements may also be terminated by the Company beginning June 30, 2020 in the event the Sales Executive fails to meet certain defined minimum revenue growth milestones.
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Upon execution of the VP Agreements, each of the Sales Executives were granted 1,000,000 shares of unregistered common stock of the Company valued at $0.035 per share, the closing price of the common stock of the Company on the grant date. The VP Agreements also provide each Sales Executives the right to receive a minimum of 750,000 shares of common stock at the end of each quarterly anniversary of the VP Agreements throughout the Initial Term (maximum 9,000,000 shares) (“Performance Shares”). As of December 31, 2021, the Sales executives had been issued all of the Performance Shares. The VP Agreements were terminated on June 30, 2022 (see Legal Matters below).
Consultant Agreements
Assure Immune LLC
Effective March 29, 2021, the Company and Assure Immune L.L.C (“Consultant”) entered into an amendment (“Amendment”) to the consulting agreement between the parties dated March 30, 2020 (“Agreement”). Under the terms of the Amendment, the initial term of the Agreement was extended for an additional 2 years (until March 30, 2023) and the terms for eligibility of the Consultants to receive future grants of stock above those stock issuances granted as of the date of the Amendment based on achievement of certain future milestones previously provided for in the Agreement were eliminated. In addition, the Amendment provided additional terms in connection with termination of the Agreement.
On August 19, 2022 the
LAE International Consulting, LLC
During October 2020, the Company entered into a consulting agreement with LAE International Consulting, LLC (“LAE”) to provide consulting services in connection with the development of international research and development, sales and distribution and investment opportunities. As consideration for agreeing to provide the consulting services to the Company, the
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.
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CRO Agreement 1 and CRO Agreement 2
During November 2020, the Company entered into an agreement with a third-party contract research organization (“CRO”) to provide ongoing clinical research related services in connection with a planned future clinical trial (“CRO Agreement 1”). In connection with the CRO Agreement 1, the Company was obligated to make payments of approximately $778,000 plus pass through costs and other third-party direct costs during the term of clinical trial expected to run until September 2021. In connection with the CRO Agreement 1, the Company was obligated to pay in accordance with defined completed milestones, beginning with approximately $195,524 upon work order execution.
During January 2021, the Company entered into an additional agreement with the CRO to provide ongoing clinical research related services in connection with a planned future clinical trial (“CRO Agreement 2”). In connection with the CRO Agreement 2, the Company was obligated to payments of approximately $477,000 plus pass through costs and other third-party direct costs during the term of clinical trial expected to run until August 2021. In connection with the CRO Agreement 2, the Company was obligated to pay in accordance with defined completed milestones, beginning with approximately $147,000 upon work order execution.
During February 2021, the Company provided notice to the CRO that it was terminating the engagement of the CRO in connection with the two above-described projects as a result of the significant increases in projected trial costs over the originally contracted amounts. On July 29, 2021, the parties reached a settlement agreement and general release in connection with termination of both of the agreements and all remaining past due amounts of $265,000 whereby the Company paid the CRO $100,000 and the Company was fully released from paying the remaining unpaid invoiced amounts of $145,000. For the year ended October 31, 2021, the Company has recorded approximately $390,000, net of expenses in connection with services performed by the CRO up through the date the projects were terminated.
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 two of the Company’s approved clinical research trials (“New CRO Agreements”). On August 23, 2022 the New CRO Agreements were amended. In connection with the New CRO Agreements, the Company is obligated to make aggregate payments to the CRO of approximately $1,433,000 plus estimated aggregate pass-through costs and other third-party direct costs of approximately $495,000 as well as site and patient related costs. The Company is obligated to make the CRO payments based on the actual costs incurred 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 October 31, 2022, the Company has been billed a total of approximately $680,000 in connection with the New CRO Agreements, including $18,400 of escrow related payments, of which approximately $
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 October 31, 2021,
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As of July 31, 2022,
Leases
Ethan NY
On September 3, 2015, Ethan NY entered into a five-year lease agreement (“Ethan Lease”) for a store located in New York City, New York. The Ethan Lease commenced on October 1, 2015. Under the terms of the Ethan Lease, minimum monthly lease payments of $
All of Ethan NY’s obligations under the Ethan Lease are recourse only to the assets at Ethan NY, except for certain obligations under the Ethan Lease that were guaranteed by a former employee. Under the terms of the Ethan Lease, the obligations of Ethan NY for future rents are to be mitigated based on the amount of any future rents that are received for the rental of the leased premises to other tenants during the initial term. During August 2016, Ethan NY received confirmation that the leased premises had been leased to another tenant. Ethan NY is not aware of any claim pending or threatened in connection with the Ethan Lease. At October 31, 2021, Ethan NY recorded in liabilities of discontinued operations the amount of rent obligations through June 30, 2016 and a reserve for estimated losses in connection with termination of the Ethan Lease of $101,905. In New York State, the statute of limitations for filing a breach of contract claim is 6 years. As a result, during the year ended October 31, 2022, the Company recorded a gain from the write-off of liabilities attributable to discontinued operations that were no longer enforceable due to the statute of limitations.
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 $
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Daniel Pepock and Tracy Yourke
The Company terminated the employment agreements with the Sales Executives 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 (“Purchase Price”). In addition, the Company agreed to release Mr. Pepock and Ms. Yourke from their non-compete restrictions upon transfer of the shares to the Company. 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.
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Effective October 13, 2022, the parties executed a Confidential Settlement Agreement and Mutual General Release memorializing the terms of the Settlement. On January 31, 2023, 24,800,001 shares were transferred to the Company and the Company paid the Purchase Price. The shares received by the Company were immediately cancelled and returned to the Company’s treasury of authorized and unissued shares. As a result of the above, the matter has been fully settled and Mr. Pepock and Ms. Yourke were released from their non-compete restrictions.
At October 31, 2022, the Company has recorded the obligation to repurchase the shares in connection with settlement of the litigation in the amount of $500,000 in the consolidated balance sheet.
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 15 – LIABILITIES ATTRIBUTABLE TO DISCONTINUED OPERATIONS
During September 2015, the Company formed Ethan NY for the purpose of selling clothing and accessories through a retail store. During June 2016, the Ethan NY operations were closed.
The following summarizes the carrying amounts of the assets and liabilities of Ethan NY at October 31, 2022 and 2021:
| Schedule of assets and liabilities | ||||||||
| October 31, | ||||||||
| 2022 | 2021 | |||||||
| Assets | $ | $ | ||||||
| Liabilities: | ||||||||
| Accounts Payable | $ | $ | ||||||
| Accrued Expenses | ||||||||
| Total liabilities | $ | $ | ||||||
In New York State, the statute of limitations for filing a breach of contract claim is 6 years. As a result, during the year ended October 31, 2022, the Company recorded a gain from the write-off of liabilities attributable to discontinued operations that were no longer enforceable due to the statute of limitations.
NOTE 16 – SEGMENT INFORMATION
For
the years ended October 31, 2022 and 2021, the Company operated only one
NOTE 17 – 401(K) PLAN
The Company sponsors a pooled defined contribution retirement plan (“401(k) Plan”) covering all eligible employees effective January 25, 2023. The 401(k) Plan allows eligible employees to contribute, subject to Internal Revenue Service limitations on total annual contributions, up to 92% of their compensation as defined in the 401(k) Plan, to various investment funds. Under the 401(k) Plan, the Company may, but is not obligated to, make any contributions to the 401(K) Plan for any eligible employees. The Company has
NOTE 18 – SUBSEQUENT EVENTS
Several subsequent events are disclosed in Notes 8, 10, 12, 13, 14 and 17. There were no other subsequent events for disclosure purposes.
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Controls and Procedures.
In accordance with Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management is required to perform an evaluation under the supervision and with the participation of the Company’s management, including the Company’s principal executive and principal financial officers, or persons performing similar functions, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period.
Based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of October 31, 2022, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control Over Financial Reporting
General
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act, as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that: pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
As of October 31, 2022, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control-Integrated Framework of 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments.
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Based on that evaluation under this framework, our management concluded that as of October 31, 2022, our internal control over financial reporting was not effective because of the following material weaknesses:
| ● | Due to our small number of employees and resources, we have limited segregation of duties, as a result of which there is insufficient independent review of duties performed. |
| ● | Due to our small number of employees and resources, we have limited segregation of duties, as a result of which do not have the ability to implement internal controls over the granting of access to our IT environment. |
| ● | As a result of the limited number of accounting personnel, we rely on inexperienced staff and outside consultants for the preparation of our financial reports, including tax preparation, which could require adjustments and lead to overlooking items requiring disclosure. |
| ● | As a result of the Company’s limited financial and personnel resources, there may be difficulties in timely analyzing and identifying potential operational and disclosure transactions within management and to comply with financial reporting regulations. |
Management’s Remediation Initiatives
In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have expanded our accounting and administrative support staff during the fiscal year ended October 31, 2022. We also continue to engage outside tax consultants to assist in advising the Company in tax matters on an ongoing basis.
If and when the Company obtains sufficient capital resources, the Company intends to hire additional personnel with sufficient U.S. GAAP knowledge and business experience and to segregate appropriate duties among them. The Company has also begun efforts to further automate its accounting, sales ordering and inventory management functions.
In September 2022, we appointed six (6) independent members to our board of directors (and established an audit committee consisting of three independent directors, which is responsible for the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management. One of the independent members who also served on the audit committee resigned in December 2022.
This report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.
Changes in Internal Controls
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 fourth quarter ended October 31, 2022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. Other Information.
None.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Directors and Executive Officers
Below are the names of and certain information regarding the Company’s current executive officers and directors:
| Name: | Age: | Position: | Director or Officer Since: | |||
| Ian T. Bothwell | 62 | Interim Chief Executive Officer, Chief Financial Officer and Director | November 4, 2016 | |||
| Dr. Maria Ines Mitrani | 42 | Chief Science Officer, VP and Director | November 4, 2016 | |||
| Dr. George Shapiro | 62 | Chief Medical Officer and Director | February 7, 2019 | |||
| Albert Mitrani | 67 | Executive Vice President of Sales | June 24, 2015 | |||
| Dr. Bhupendra Kumar Modi | 74 | Director – Chairman of the Board | September 23, 2022 | |||
| Chuck Bretz | 65 | Director – Vice Chairman of the Board | September 23, 2022 | |||
| Gurvinder Pal Singh | 61 | Director | September 23, 2022 | |||
| S. Jerry Glauser | 75 | Director | September 23, 2022 | |||
| Leathem Stearn | 74 | Director | September 23, 2022 |
Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Directors are elected by a plurality of the votes cast at the annual meeting of stockholders and hold office until the expiration of the term for which he or she was elected and until a successor has been elected and qualified.
Executive officers are appointed by, and serve at the pleasure of, the board of directors of the Company, subject to any contractual arrangements.
Professional Experience
Ian T. Bothwell was elected as a member of the board of directors of the Company effective September 11, 2019. Mr. Bothwell previously served as a member of the board of directors of the Company from March 8, 2017 until his resignation in April 2018, when the Company executed a Plan and Agreement of Reorganization. Mr. Bothwell serves as the Chief Financial Officer of the Company, a position he has held since November 4, 2016. In addition, he was appointed Interim Chief Executive Officer of the Company on November 22, 2022. From 2003 through November 2015, Mr. Bothwell served in various executive positions for Central Energy GP LLC, the general partner of Central Energy Partners LP, a previously publicly traded master limited partnership. From July 2007 through November 2015, Mr. Bothwell served as President and a director of Regional Enterprises, Inc. Since April 2007, Mr. Bothwell has served as the President and controlling member of Rover Advanced Technologies, LLC, a company formed to provide management solutions to the public transportation industry. Since 2015, Mr. Bothwell has also served as the President and controlling member of CountOnMe Inc., a company that provides software solutions for the educational industry. Mr. Bothwell received his Bachelor of Science in Business Administration from Boston University in 1984.
Dr. Maria Ines Mitrani was elected as a member of the board of directors of the Company effective August 14, 2019. Dr. Mitrani previously served as a member of the board of directors of the Company from November 4, 2016 until her resignation in April 2018, when the Company executed a Plan and Agreement of Reorganization. Dr. Mitrani is a cofounder of the Company and is its Chief Science Officer. Dr. Mitrani previously served as the Executive Vice President of Analytical Stem Cell from 2014 to 2015. From 2012 to 2014, Dr. Mitrani served as the Executive Vice President, Medical Tourism Coordinator and Patient Referral Coordinator of Americell Trinidad, LLC. From 2008 to 2014, Dr. Mitrani was with the American Stem Cell & Anti-Aging center where she co-founded the first autologous stem cell center in Quito, Ecuador. Dr. Mitrani received a degree in medicine from Universidad San Francisco de Quito, in Quito, Ecuador.
Dr. George Shapiro was elected as a member of the board of directors of the Company effective February 2019. Since September 2018, Dr. Shapiro has served as the Company’s Chief Medical Officer. George C. Shapiro has been in practice for over 27 years. His career in medicine began in 1988 when he graduated from New York Medical College. An internship and residency then followed at Albert Einstein college of Medicine, after which, Dr. Shapiro completed a Cardiovascular Disease fellowship at Columbia University College of Physicians and Surgeons in 1994. Dr. Shapiro is currently a cardiologist in private practice.
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Albert Mitrani has been serving as Executive Vice President of Sales since July 21, 2022. Mr. Mitrani served as our President, Secretary and Treasurer from June 24, 2015 to July 21, 2022, as our Chief Executive Officer from September 2019 until July 21. 2022 and as a member of the board of directors from June 24, 2015 to August 19, 2022. He also was our Chief Executive Officer and Chairman of the Board from June 24, 2015 until April 13, 2018. Mr. Mitrani served as the Chief Executive Officer of Analytical Stem Cell Corp. from April 2014 through May 2015. Analytical Stem Cell was involved in stem cell research and patient treatment referral centers. From February 2012 through March 2014 Mr. Mitrani was the Chief Executive Officer of Americell Trinidad and the President of ASCAAC LLC (American Stem Cell) from March 2011 through January 2013. Mr. Mitrani was the Chief Executive Officer of American Cellular Center Quito Ecuador from 2009 through 2012.
Dr. Bhupendra Kumar Modi became a director and Chairman of the Board on September 23, 2022. Dr. Modi has nearly four decades of business experience and for over three decades has been the Group Chairman of Modi Holdings – a diversified business conglomerate with business interests in mobility, finance, healthcare, education, entertainment, clean energy and life sciences. Headquartered in Singapore, Modi Holdings has a global footprint with companies in India, Singapore and the U.S. Dr. Modi is well-known for bringing the latest technologies into India in partnerships with industry leaders like Xerox, Alcatel, Telstra, Olivetti, Axiata, Singapore Technologies Telemedia and Fountain Life, among others.
In the past few years, Dr. Modi has been focusing on his philosophy of living ‘Beyond 100’, where he is attempting to create an ecosystem that enables people to live Happy and Healthy beyond 100. His efforts in the healthcare industry have earned him the epithet of ‘Global Leader in Wellness’, by the American Academy of Anti-Aging Medicine. We believe that given his diverse and extensive business experience, Dr. Modi is a significant addition to the Company as a member of our board of directors and as its Vice Chairman.
Chuck Bretz became a director of the Company and Vice Chairman of the Board on September 23, 2022. Mr. Bretz has been a practicing attorney for the last 40 years in both the private and public sectors. Since 1999, Mr. Bretz, has been a principal of the Joliet, Illinois law firm he founded which is now known as Chuck Bretz & Associates, P.C. The firm advises various businesses in multiple commercial and real estate matters. Mr. Bretz is also currently actively involved in advising entrepreneurs across the country in structuring and negotiating business and real estate transactions. We believe that his combination of legal and business experience brings value to the Company as a member of our board of directors and as its Vice-Chairman.
Gurvinder Pal Singh joined our Board of Directors on September 23, 2022, has over 35 years of professional experience in business strategy, corporate finance and financial accounting covering varied areas such as mergers and acquisitions, statutory compliance, capital raising, budgeting and internal controls, audit, financial management, risk management, investor relations and tax planning. Since 1996, he has served as Chief Finance Officer of Modi Holdings, whose holdings include various companies in India, Singapore and the U.S., in the fields of mobile services, mobile devices, mobile retain, healthcare, new energy and wellness. Mr. Singh is a graduate of the University of New Delhi and a Chartered Accountant in India. Given his varied and extensive finance and business experience, we believe that he will be a valuable addition to Organicell as a member of the board of directors.
S. Jerry Glauser joined the Company’s board of directors on September 23, 2022. He has been in the automobile business for 50 years, starting in the family business in South New Jersey. In 1973, Mr. Glauser bought his first dealership in Sarasota Florida and over the next three decades expanded to ownership of a dozen dealerships in Florida. In 2004, he sold his Florida dealerships and acquired a Mercedes-Benz dealership in Denver, Colorado, which he sold in 2006. He then bought a Mercedes-Benz dealership in Houston, Texas, which he operated until its sale. For the last eight years, Mr. Glauser has been a private investor in various biotech companies and real estate ventures. We believe that his over half century of business experience brings a unique perspective to the board of directors.
Leathem Stearn joined the board of directors on September 23, 2002. Since 1970, Mr. Stearn been an inventor, designer, entrepreneur and investor in various industries and with multiple companies. In 1986, Mr. Stearn founded Scunci International, LLC, where he developed the “Scrunchy” product and Scunci Brand of women hair accessories. He managed the Company until its sale in 1988, but continues to hold and license the Scunci Trademark® world-wide. From 1992 to1995, Mr. Stearn was a partner and CEO of Artnet, a company which he co-founded that became the leading art information company in the Art industry. Mr. Stearn has also founded or co-founded, developed and managed a number of other ventures including; Showcase International, LLC (from 1989 to 1992), which developed the first entertainment industry multi-media portfolio database; Smith Stearn Yachts LLC (from 2004 to 2010), which developed and operated a yacht sharing business and a number of other companies in the maritime industry. The Company believes that Mr. Stearn’s diverse experience makes him a valuable addition to the board of directors.
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Family Relationships
Dr. Maria Ines Mitrani, our Chief Science Officer and a director and Albert Mitrani, our Executive Vice President of Sales, are spouses.
Board Committees
At the September 23, 2022 meeting, the Board also established three standing committees; an audit committee, a compensation committee and a nominating and corporate governance committee. The members of the audit committee are Messrs. Singh and Glauser, with Mr. Singh acting as Chairman, the members of the compensation committee are Dr. Modi, Mr. Bretz and Mr. Stearn, with Dr. Modi acting as Chairman and the members of the nominating and corporate governance committee are Messrs. Bretz and Singh, with Mr. Bretz serving as Chairman.
Independence
The Board has determined that each of our non-executive directors is “independent” within the meaning of the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) and the listing standards of the Nasdaq Stock Market.
In addition, we believe Messr. Singh qualifies an “audit committee financial expert” as the term is defined by the applicable rules and regulations of the SEC and the Nasdaq Stock Market listing standards, based on his business professional experience in the financial and accounting fields. At the time of the listing of our common stock for trading on the Nasdaq Stock Market, we are required to certify to the Nasdaq Stock Market, that our audit committee has, and will continue to have, at least one member who has past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background that results in the individual’s financial sophistication.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Exchange Act requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% stockholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports that they file.
Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that all filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied with under Section 16 of the Exchange Act during the fiscal year ended October 31, 2022 and up through the date of this Annual Report, except that due to administrative delays in obtaining Edgar filing codes, the following Forms 3 were inadvertently filed late as follows:
| 1. | Greyt Ventures LLC filed its Form 3 on September 16, 2022, 16 days late. |
| 2. | Mr. Bretz filed his Form 3 on September 29, 20222, 29 days late. |
| 3. | Dr. Modi and Mr. Singh filed their Forms 3 on October 3, 2022, 33 days late. |
| 4. | Mr. Stearn filed his Form 3 on October 6, 2022, 36 days late. |
| 5. | John Chiste, who stepped down as a director on December 21, 2022, filed his Form 3 on October 11, 2022, 41 days late. |
| 6. | Mr. Glauser filed his Form 3 on October 27, 2022, 57 days late. |
| 7. | Skycrest Holdings, LLC filed its Form 3 on December 16, 2022, 107 days late. |
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Item 11. Executive Compensation.
The following table sets forth information concerning the total compensation paid or accrued by the Company during the last two fiscal years indicated to (i) all individuals that served as the Company’s principal executive officer or acted in a similar capacity for the Company at any time during the fiscal year ended October 31, 2022; (ii) the two most highly compensated executive officers who were serving as executive officers of the Company at the end of the fiscal year ended October 31, 2022 whose total compensation exceeded $100,000; and (iii) up to two additional individuals for whom disclosure would have been provided pursuant to clause (ii) above but for the fact that the individual was not serving as an executive officer of the Company at the end of the fiscal year ended October 31, 2022.
SUMMARY COMPENSATION TABLE
Name and Principal Position |
Fiscal Year |
Salary ($) |
Bonus ($) |
Stock Awards ($) |
Option Awards ($) |
Non-equity
Incentive Plan Compensation ($) |
Nonqualified
Deferred Compensation Earnings ($) |
All Other Consideration ($) |
Total Actually Received ($) |
||||||||||||||||||||||||||
| Ian T. Bothwell, | 2022 | 300,000 | 200,000 | -0- | -0- | -0- | -0- | 35,957 | (10) | 80,119 | (6) | ||||||||||||||||||||||||
| Interim Chief Executive Officer, Chief Financial Officer (1) | 2021 | 300,000 | 200,000 | 2,205,000 | (1) | -0- | -0- | -0- | 21,854 | (10) | 2,726,854 | (6) | |||||||||||||||||||||||
| Matthew Sinnreich, | 2022 | -0- | 300,000 | 571,353 | (2) | 1,332,000 | (2) | -0- | -0- | -0- | 2,203,353 | ||||||||||||||||||||||||
| Acting Chief Executive Officer (2) | 2021 | -0- | -0- | -0- | -0- | -0- | -0- | -0- | -0- | ||||||||||||||||||||||||||
| Albert Mitrani - CEO, | 2022 | 428,623 | -0- | -0- | -0- | -0- | -0- | 83,243 | (11) | 79,479 | (7) | ||||||||||||||||||||||||
| President and Executive Vice President of Sales (3) | 2021 | 488,546 | 50,000 | 2,205,000 | (3) | -0- | -0- | -0- | 81,056 | (11) | 2,824,602 | (7) | |||||||||||||||||||||||
| Dr. Maria I. Mitrani, VP and | 2022 | 300,000 | 200,000 | -0- | -0- | -0- | -0- | -0- | (63,455 | )(8) | |||||||||||||||||||||||||
| Chief Science Officer (4) | 2021 | 300,000 | 200,000 | 2,205,000 | (4) | -0- | -0- | -0- | -0- | 2,705,000 | (8) | ||||||||||||||||||||||||
| Dr. George Shapiro, | 2022 | 85,500 | -0- | -0- | -0- | -0- | -0- | -0- | $ | 7,740 | (9) | ||||||||||||||||||||||||
| Chief Medical Officer (5) | 2021 | 81,417 | -0- | 121,500 | (5) | -0- | -0- | -0- | -0- | 202,917 | (9) | ||||||||||||||||||||||||
| (1) | Mr. Bothwell has served as Chief Financial Officer of the Company since November 4, 2016. On November 22, 2022, he was appointed Interim Chief Executive Officer. Mr. Bothwell was granted 30,000,000 shares of common stock of the Company with an aggregate grant value of $2,205,000. See Note 12 to the October 31, 2022 audited consolidated financial statements for a description of the assumptions used in determining the value of the stock granted. |
| (2) | Matthew Sinnreich served as Acting Chief Executive Officer and Chief Operating Officer of the Company from July 21, 2022 to September 23, 2022 and as Acting Chief Executive Officer and President from September 23, 2022 to November 22, 2022, when he resigned. During fiscal year 2022, Mr. Sinnreich was granted 10,000,000 shares of common stock of the Company and a warrant to purchase 40,000,000 shares of common stock of the Company with an aggregate grant value of 343,000 and 1,332,000, respectively. Mr. Sinnreich also received 24,000,000 shares of common stock of the Company in lieu of any cash salary during his first year of employment with an aggregate grant value of $823,200, of which 6,706,849 ($228,353) was vested as of October 31, 2022. See Notes 11 and 12 to the October 31, 2022 audited consolidated financial statements for a description of the assumptions used in determining the value of the stock granted and the warrants issued. |
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| (3) | Albert Mitrani served as Chief Executive Officer from June 2015 until April 2018, when he was appointed President. From September 2019 until July 21, 2022, Mr. Mitrani again served and Chief Executive Officer. On July 21, 2022, when he stepped down from that position and assumed the position of Executive Vice President of Sales. During fiscal year 2021, Mr. Mitrani was granted 30,000,000 shares of common stock of the Company with an aggregate grant value of $2,205,000. See Note 12 to the October 31, 2022 audited consolidated financial statements for a description of the assumptions used in determining the value of the stock granted. |
| (4) | Dr. Maria I. Mitrani has served as Vice President and Chief Science Officer of the Company since November 4, 2016. During fiscal year 2021, Dr. Mitrani was granted 30,000,000 shares of common stock of the Company with an aggregate grant value of $2,205,000. See Note 12 to the October 31, 2022 audited consolidated financial statements for a description of the assumptions used in determining the value of the stock granted. |
| (5) | Dr. George Shapiro has served as the Chief Medical Officer of the Company since September 2018. During fiscal year 2021, Dr. Shapiro was granted 4,500,000 shares of common stock of the Company with an aggregate grant value of $121,500. See Note 12 to the October 31, 2022 audited consolidated financial statements for a description of the assumptions used in determining the value of the stock granted. |
| (6) | In connection with the Restructuring on August 19, 2022, Mr. Bothwell was granted a warrant to purchase 30,000,000 shares of common stock of the Company with a grant value of $588,000 as payment for $588,000 of accrued and unpaid salary. In addition, $455,478 of accrued and unpaid salary was forgiven by Mr. Bothwell in connection with the Restructuring on August 19, 2022 and is reflected as a reduction in the total amount received during the year ended October 31, 2022. $0 and $843,378 of salary was accrued and unpaid at October 31, 2022 and 2021, respectively. See Note 13 to the October 31, 2022 audited consolidated financial statements for a description of the assumptions used in determining the value of the warrants issued. |
| (7) | $430,200 of accrued and unpaid salary was forgiven by Mr. Mitrani in connection with the Restructuring on August 19, 2022 and is reflected as a reduction in the total amount received during the year ended October 31, 2022. $0 and $362,455 of salary was accrued and unpaid at October 31, 2022 and 2021, respectively. |
| (8) | $563,455 of accrued and unpaid salary was forgiven by Dr. Mitrani in connection with the Restructuring on August 19, 2022 and is reflected as a reduction in the total amount received during the year ended October 31, 2022. $0 and $275,824 of salary and commissions were accrued and unpaid at October 31, 2022 and 2021, respectively. |
| (9) | In connection with the Restructuring on August 19, 2022, Dr. Shapiro was granted a warrant to purchase 3,150,000 shares of common stock of the Company with a grant value of $61,740 as payment for $61,740 of accrued and unpaid salary. In addition, $77,760 of accrued and unpaid salary was forgiven by Dr. Shapiro in connection with the Restructuring on August 19, 2022 and is reflected as a reduction in the total amount received during the year ended October 31, 2022. $0 and $54,000 of salary was accrued and unpaid at October 31, 2022 and 2021, respectively. See Note 13 to the October 31, 2022 audited consolidated financial statements for a description of the assumptions used in determining the value of the warrants issued. |
| (10) | Ian Bothwell received benefits totaling approximately $35,957 and $21,854 during fiscal year ended October 31, 2022 and 2021, respectively. |
| (11) | Albert Mitrani and his wife, Dr. Maria I. Mitrani, received benefits totaling approximately $83,243 and $81,056 during fiscal year ended October 31, 2022 and 2021, respectively. |
We have no plans in place and have never maintained any plans that provide for the payment of retirement benefits or benefits that will be paid primarily following retirement including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax-qualified deferred contribution plans and nonqualified deferred contribution plans.
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Outstanding Equity Awards at Fiscal Year-End
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
| Name (a) |
Number
of Securities Underlying Unexercised Options Exercisable (b) |
Number
of Securities Underlying Unexercised Options Unexercisable (c) |
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (d) |
Option Exercise Price (e) |
Option Expiration Date (f) |
Stock
Awards Number of Shares or Units of Stock That Have Not Vested (g) |
Market
Value of Shares or Units of Stock That Have Not Vested (h) |
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (i) |
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units of Other Rights That Have Not Vested (j) |
|||||||||||||||||||||||||||
| Ian T. Bothwell | 7,500,000 | - | - | $ | 0.028 | 02/26/30 | - | - | 15,000,000 | $ | 405,000 | (2) | ||||||||||||||||||||||||
| 30,000,000 | - | - | $ | 0.020 | 07/13/32 | - | - | - | $ | - | ||||||||||||||||||||||||||
| Matthew Sinnreich(1) | 40,000,000 | - | - | $ | 0.034 | 07/21/33 | - | - | - | $ | - | |||||||||||||||||||||||||
| Albert Mitrani | - | - | - | - | - | - | - | 15,000,000 | $ | 405,000 | (2) | |||||||||||||||||||||||||
| Dr. Maria Ines Mitrani | - | - | - | - | - | - | - | 15,000,000 | $ | 405,000 | (2) | |||||||||||||||||||||||||
| Dr. George Shapiro | 3,150,000 | - | - | $ | 0.020 | 07/13/32 | - | - | 5,000,000 | $ | 135,000 | (2) | ||||||||||||||||||||||||
| (1) | Mr. Sinnreich resigned on November 22, 2022. |
| (2) | Based on the closing stock price of $0.027 on October 31, 2022. |
Executive Employment Agreements
The Company is party to executive employment agreements with each of Ian T. Bothwell (our Interim Chief Executive Officer and Chief Financial Officer), Dr. Maria Ines Mitrani (our Chief Science Officer) and Albert Mitrani, our Executive Vice President of Sales), originally executed in April 2018 and subsequently amended, most recently on August 19, 2022 and February 9, 2023 (the “Executive Employment Agreements”). As amended, the Executive Employment Agreements provide for:
| 1. | A base salary of $300,000, provided, however, that each of the executives agreed to a reduction in each executive’s annual salary to $150,000 per year effective November 30, 2022 in the case of Ian T. Bothwell and December 15, 2022 in the case of Dr. Maria Ines Mitrani and Albert Mitrani. The salary reduction will remain in effect through such time as net revenues from operations are breakeven when calculating the salaries of all three executives without the agreed upon reductions ( the “Salary Reduction Period”). There is no obligation of the Company to repay that portion of each executive’s salary that has been reduced during the Salary Reduction Period. |
| 2. | A term expiring on December 31, 2025. |
| 3. | Payment of severance only in the event of termination without cause, in an amount equal to one month’s salary for each year of service. |
| 4. | Customary confidentiality and non-competition provisions. |
In connection with the February 9, 2023 amendment to the Executive Employment Agreements, Mr. Bothwell and Mr. Mitrani also agreed to repay approximately $44,600 and $84,300, respectively, of previously reimbursed expenses to the Company and the Company and the executives exchanged mutual releases.
Employment Arrangements with Matthew Sinnreich
On July 21, 2022, Matthew Sinnreich was appointed by the Board to the position of Chief Operating Officer and Acting Chief Executive Officer. Contemporaneously therewith, 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 definitive employment agreement was not negotiated and executed prior to Mr. Sinnreich stepping down from the Company as noted below.
As an inducement for Mr. Sinnreich to join the Company, pursuant to the Term Sheet he was issued 10,000,000 shares of restricted common stock and ten-year warrants to purchase 40,000,000 shares at a price of $0.034 per share, exercisable on a “cashless” basis. The shares and warrants vested immediately upon issuance.
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The Term Sheet also provided that 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, 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 $25,000 per month, payable in cash of shares of Organicell’s common stock, at his election.
On September 7, 2022, the board of directors of the Company awarded Matthew 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.
On September 13, 2022, Mr. Sinnreich assumed the position of President and Acting Chief Executive Officer. He subsequently resigned from the Company on November 22, 2022. The Company is currently reviewing its rights to rescind previously issued shares and payments to Mr. Sinnreich in light of the resignation.
Board Stock Compensation Plan
On February 26, 2020, the Company established the Board Stock Compensation Plan (the “Board Plan”) which provides compensation for non-executive Board members for participation in Board meetings retroactive to November 1, 2019. The Board Plan provides for a grant of $7,500 in equivalent shares of common stock (based on trading price at the end of the applicable current quarter) on the last day of each respective fiscal quarter that a member attends at least 75% of all meetings held during such quarter and in which a minimum of 1 meeting is held, for a maximum annual compensation amount of $30,000 per year per member. In addition, Board members that participate on future board committees will also be eligible to receive additional compensation for serving on such committees, in amounts to be determined by the Board. The maximum aggregate number of shares that are currently authorized to be issued pursuant to the Board Plan is 5,000,000 shares. The Company is no longer using the Board Plan to compensate its non-executive directors as set forth in Item 10. Management – Compensation of Non-Executive Directors above.
2020 Plan
On February 26, 2020, the Company established the 2020 Stock Incentive Plan (the “2020 Plan”). The 2020 Plan provided for the grant of options, appreciation rights, dividend equivalent right and restricted common stock of the Company (an “Award”) to any person who is an employee or director of, or consultant to the Company. The maximum aggregate number of shares that may be issued pursuant to all Awards is 50,000,000 shares, plus an annual yearly increase. No awards were issued under the 2020 Plan and the 2020 Plan was terminated in connection with the adoption of the Company’s 2021 Equity Incentive Plan (the “2021 Plan”) and share exchange as described in “ - 2021 Plan and Share Exchange” below.
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 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, five million shares for each Phase III clinical trial approved and initiated (deemed to be upon the time the first patient is enrolled) and 10 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.
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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:
| MCPP | MCPP Remaining | |||||||
| Shares | Shares | |||||||
| Name | Issued | Authorized | ||||||
| Albert Mitrani | 80,000,000 | 137,500,000 | ||||||
| Ian Bothwell | 80,000,000 | 167,500,000 | ||||||
| Dr. Maria Mitrani | 80,000,000 | 167,500,000 | ||||||
| Dr. George Shapiro | 69,500,000 | 100,000,000 | ||||||
| Dr. Allen Meglin | - | 5,000,000 | ||||||
| Michael Carbonara | - | 5,000,000 | ||||||
| Consultants | 33,000,000 | - | ||||||
| Total | 342,500,000 | 582,500,000 | ||||||
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.
During the years ended October 31, 2022 and 2021, a total 0 shares and 49,500,000 shares, respectively, were issued in connection with certain Milestones achieved. The Company recorded a total of $0 and $1,336,500 of stock-based compensation expense during the years ended October 31, 2022 and 2021, respectively. For the MCPP Shares approved on February 10, 2021, the closing price of the common stock of the Company was $0.108.
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.
2021 Plan and Share Exchange Agreement
In September 2021, the Company adopted the 2021 Equity Incentive Plan (“2021 Plan”). The 2021 Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, and Performance Shares (an “Award”) to any person who is an employee or director of, or consultant to the Company. The maximum aggregate number of shares that may be issued pursuant to all Awards is 250,000,000 shares.
The 2021 Plan is administered by (a) the board of the directors of the Company; or (b) a committee designated by the board, which Committee shall be constituted in such a manner as to satisfy the applicable laws and to permit such grants and related transactions under the Plan to be exempt from Section 16(b) of the Exchange Act in accordance with Rule 16b-3. Once appointed, such committee shall continue to serve in its designated capacity until otherwise directed by the board. The board of directors may at any time amend, suspend, or terminate the Plan; provided, however, that no such amendment shall be made without the approval of the Company’s shareholders to the extent such approval is required by applicable laws.
On October 29, 2021, the Company entered into an Exchange Agreement (the “Exchange Agreement”) with shareholders (including executive officers) who were issued shares under (i) various consulting and employment agreements during 2021 (the “Service Providers”), and (ii) those shareholders who were issued shares of common stock pursuant to the MCPP (the “MCPP Holders”).
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The Service Providers who executed the Exchange Agreement were issued a total of 30,300,000 shares under their respective consulting or employment agreements (the “Service Provider Shares”), and the MCPP Holders who executed the Exchange Agreement received a total of 49,500,000 shares under the MCPP, for an aggregate of 79,800,000 shares of common stock. As of the effective date of the Exchange Agreement, the Service Providers and MCPP Holders who executed the Exchange Agreement agreed to exchange their respective Service Provider Shares or the shares issued under the MCPP for newly issued shares pursuant to the 2021 Plan (on a 1:1 basis, resulting in the issuance of 79,800,000 shares of common stock under the 2021 Plan (the “Exchange Shares”). Upon completion of the Share Exchange, the 2020 Plan and the MCPP (but not Awards of unexchanged shares of our common stock) were terminated.
As of October 31, 2022, a total of 83,400,000 shares of our common stock, including the Exchange Shares have been awarded under the 2021 Plan.
Compensation of Directors Table
The following table summarizes all compensation paid to our non-executive directors for the fiscal year ended October 31, 2022.
Name |
|
Fees Earned Or Paid In Cash ($) |
|
|
Option/Equity Awards (#)(1) |
|
|
Non-Equity Plan Compensation ($) |
|
|
Non-Qualified Deferred Compensation Earnings ($) |
|
|
All Other Compensation ($) |
|
|
Total ($) |
| ||||||
| Dr. Bhupendra Kumar Modi | - | - | - | - | - | - | ||||||||||||||||||
| Chuck Bretz | - | 1,000,000 | - | - | - | - | ||||||||||||||||||
| Jerry Glauser | - | 1,000,000 | - | - | - | - | ||||||||||||||||||
| Leathem Stearn | - | 1,000,000 | - | - | - | - | ||||||||||||||||||
| Gurvinder Pal Singh | - | 1,000,000 | - | - | - | - | ||||||||||||||||||
| John Chiste (2) | - | 1,000,000 | - | - | - | - | ||||||||||||||||||
| (1) | Represents Directors Warrants as more fully described in “Narrative Disclosure to the Director Compensation Table” set forth below. |
| (2) | Mr. Chiste stepped down as a director on December 21, 2022. |
Narrative Disclosure to the Director Compensation Table
Each of our non-executive directors will be party to a Director’s Service Agreement. Pursuant to that agreement, non-employee directors (other than Dr. Modi) will be compensated for their services by the annual issuance of warrants to acquire up to 1,000,000 shares of the Company’s common stock at an exercise price equal to fair market value of the common stock as of the date of grant (the “Director Warrants”). The Director Warrants shall be exercisable for a period of ten (10) years from the date of grant and shall vest in equal monthly installments of 83,333.33 shares, subject to continued service by the director as a member of the board of directors. The agreement will also provide for indemnification of directors to the fullest extent permitted by Nevada law.
It is contemplated that non-executive directors will be granted a comparable amount of Director Warrants or stock options for each year of service.
[Non-employee directors are also reimbursed for out-of-pocket costs incurred in connection with attending meetings.]
Code of Ethics
Due to our small size, we have not adopted a Code of Ethics and Business Conduct that applies to our officers, directors and employees. We intend to adopt a Code of Ethics and Business Conduct in the near future as we grow our operations and hire additional employees.
65
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth, as of February 3, 2023, the beneficial ownership of our common stock by each director and executive officer, by each person known by us to beneficially own 5% or more of our common stock and by directors and executive officers as a group. Unless otherwise stated, the address of the persons set forth in the table is c/o the Company, 3321 College Ave, Suite 246, Davie, Florida 33314:
Name Officers and Directors |
Title | Shares |
% of Class (1) |
% of Voting Power (2) |
||||||||||
| Ian Bothwell (3) | Interim Chief Executive Officer, Chief Financial Officer and Director | 170,518,726 | 12.14 | % | 5.95 | % | ||||||||
| Dr. Maria Mitrani (4) | Chief Science Officer and Director | 253,497,990 | 18.54 | % | 9.08 | % | ||||||||
| Dr. George Shapiro (5) | Chief Medical Officer and Director | 78,754,187 | 5.75 | % | 2.82 | % | ||||||||
| Albert Mitrani (6) | Executive Vice President of Sales | 253,497,990 | 18.54 | % | 9.08 | % | ||||||||
| Dr. Bhupendra Kumar Modi (7) | Director - Chairman | 100,000,000 | 7.31 | % | 3.58 | % | ||||||||
| Chuck Bretz (8) | Director - Vice Chairman | 533,790 | 0.04 | % | 0.02 | % | ||||||||
| Jerry Glauser (9) | Director | 27,200,456 | 1.99 | % | 0.97 | % | ||||||||
| Leathem Stearn (10) | Director | 13,700,457 | 1.00 | % | 0.49 | % | ||||||||
| Gurvinder Pal Singh (11) | Director | 533,790 | 0.04 | % | 0.02 | % | ||||||||
| All officers and directors as a group (10 persons) | 474,220,670 | 34.55 | % | 16.93 | % | |||||||||
| Other 5% or Greater Stockholders | ||||||||||||||
| Skycrest Holdings LLC (12) | 200,000,000 | 13.18 | % | 31.96 | % | |||||||||
| Greyt Ventures LLC (13) | 200,000,000 | 13.18 | % | 31.96 | % | |||||||||
| (1) | Based on 1,367,311,142 shares of vested common stock outstanding as of February 3, 2023. |
(2) |
Based on 1,367,311,142 shares of vested common stock and 100 Series C Preferred Shares outstanding as of February 3, 2023. The shares of common stock and the Series C Preferred Shares vote together as a single class on all matters presented to stockholders, except as required by Nevada law. Each Series C Preferred Share entitles the holder to 51.0 % of the combined voting power of the Company’s capital stock and an aggregate of 51.0% for all 100 Series C Preferred Shares outstanding, notwithstanding the number of shares of common stock outstanding. |
| (3) | Includes warrants to purchase 37,500,000 shares of common stock of the Company. Does not include 15,000,000 shares of common stock issued to Mr. Bothwell which vest on December 31, 2023. |
| (4) | Does not include 15,000,000 shares of common stock issued to Dr. Maria Mitrani which vest on December 31, 2023. Includes 151,790,190 shares of common stock held by Albert Mitrani, Dr. Mitrani’s husband which does not include 15,000,000 shares of common stock issued to Albert Mitrani which vest on December 31, 2023. |
| (5) | Includes warrants to purchase 3,150,000 shares of common stock of the Company. Does not include 5,000,000 shares of common stock issued to Mr. Shapiro which vest on December 31, 2023. |
| (6) | Does not include 15,000,000 shares of common stock issued to Albert Mitrani which vest on December 31, 2023. Includes 101,707,800 shares of common stock held by Dr. Maria Mitrani, Albert Mitrani’s wife which does not include 15,000,000 shares of common stock issued to Dr. Mitrani which vest on December 31, 2023. |
| (7) | Represents 50,000,000 shares of common stock held of record by Beyond 100 FZE and 50,000,000 shares of common stock held of record by Smart Co. Holding Pte. Ltd., each of which Dr. Modi is the sole beneficial owner. |
66
| (8) | Includes vested warrants to purchase 367,123 shares of common stock of the Company and warrants to purchase 166,667 shares of common stock of the Company that vest within 60 days of February 3, 2023. |
| (9) | Includes vested warrants to purchase 367,123 shares of common stock of the Company and warrants to purchase 166,667 shares of common stock of the Company that vest within 60 days of February 3, 2023. |
| (10) | Includes 12,500,000 shares of common stock held of record by Stearn Enterprises LLC, of which Mr. Stearn is the sole beneficial owner. Includes vested warrants to purchase 367,123 shares of common stock of the Company and warrants to purchase 166,667 shares of common stock of the Company that vest within 60 days of February 3, 2023. |
| (11) | Includes vested warrants to purchase 367,123 shares of common stock of the Company and warrants to purchase 166,667 shares of common stock of the Company that vest within 60 days of February 3, 2023. |
| (12) | 812 Meridian Lane, Hollywood FL 33019. Represents 50,000,000 shares of common stock, warrants to purchase 150,000,000 shares of common stock and 50 Series C Preferred Shares held of record by Skycrest Holdings, LLC, of which Louis Birdman is the managing member. |
| (13) | 20533 Biscayne Blvd., Suite 648, Aventura, FL 33180. Represents 50,000,000 shares of common stock, warrants to purchase 150,000,000 shares of common stock and 50 Series C Preferred Shares held of record by Greyt Ventures LLC, of which Ms. Wendy Grey is the sole member and manager. |
The Company has not received any filings by a third party indicating beneficial ownership of more than 5% of our outstanding voting capital stock that are not listed herein.
The persons named above have full voting and investment power with respect to the shares indicated. Under the rules of the SEC, a person (or group of persons) is deemed to be a “beneficial owner” of a security if he or she, directly or indirectly, has or shares the power to vote or to direct the voting of such security, or the power to dispose of or to direct the disposition of such security. Accordingly, more than one person may be deemed to be a beneficial owner of the same security. Beneficial ownership is determined in accordance with SEC rules and includes only vested securities and those securities which a person or entity may have the right to acquire and/or vest in the next 60 days.
Securities Authorized for Issuance under Equity Compensation Plans
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
| Board Stock Compensation Plan (1) | -0- | - | 4,513,192 | |||||||||
| 2021 Equity Incentive Plan | -0- | -0- | 166,600,000 | |||||||||
| (1) | The Company is no longer using the Board Plan to compensate its non-executive directors. |
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Item 13. Certain Relationships and Related Transactions and Director Independence.
Review, Approval and Ratification of Related Party Transactions
Review, approval, or ratification of transactions with our executive officers, directors and significant stockholders are subject to approval or ratification by a majority of disinterested directors. Once our board of directors is comprised of a majority of independent directors, we anticipate that such transactions will require approval or ratification by a majority of our independent directors or a committee of the board of directors consisting of independent directors.
Leases
Until July 31, 2022, the Company’ leased administrative office space located at 515 North Shore Drive, Miami Beach, Florida 33141, from MariLuna, LLC, a Florida limited liability company which is owned by Dr. Maria Mitrani, the Chief Science Officer and director of the Company at a monthly rent of $3,500. The lease was to expire in June 2023. In addition, since October 2020 and until July 31, 2022, we have been party to a second lease with MariLuna LLC for office space located in Aspen, Colorado at a monthly rent of $6,500. The initial term of the lease was for one year, expiring on September 30, 2021 and the lease was subsequently extended on a month to month basis. Both leases were terminated by agreement of the Company and MariLuna, LLC, retroactive to July 31, 2022 in connection with the August 19, 2022 funding and corporate restructuring transaction.
Reimbursements
In its employment agreement with Ian Bothwell, the Company agreed to reimburse Rover Advanced Technologies, LLC, a company owned and controlled by Mr. Bothwell for office rent and other direct expenses (phone, internet, copier and direct administrative fees, etc.) totaling $36,352 and $31,192 for the years ended October 31, 2022 and 20210, respectively. In connection with the August 19, 2022 funding and corporate restructuring transaction, the Company and Mr. Bothwell agreed to terminate the reimbursement arrangement effective October 31, 2022. The Company and Mr. Bothwell are reviewing the payments to be reimbursed as a result of the corporate restructuring transaction.
Advances by Executive Officers
From time to time, Mr. Bothwell and/or his respective affiliates have advanced funds to the Company to pay for certain expenses of the Company. As of October 31, 2022 and October 31, 2021, $0 and $6,253 respectively, is owed to Mr. Bothwell and/or his respective affiliates.
Manuel. Iglesias, the Company’s former Chief Executive Officer, and/or his affiliates advanced funds to the Company to pay for certain expenses of the Company. As of each of October 31, 2022 AND October 31, 2021, $220,897 was owed to Mr. Iglesias and/or his affiliates, respectively. Mr. Iglesias also personally guaranteed a $100,000 credit facility secured by the Company in September 2019.
Sales to Related Parties
For the year ended October 31, 2022, the Company sold a total of approximately $702,100 of product to a management services organization (“MSO”) that provides administrative services and contracts for medical supplies for several medical practices, including $207,072 of products purchased from the Company that were attributable to the medical practice owned by Dr. George Shapiro the Company’s Chief Medical Officer and a member of the board of directors. Dr. Shapiro also has an indirect economic interest in the parent company that owns the MSO. For the year ended October 31, 2021, the total amount of sales of products to the medical practice owned by Dr. Allen Meglin, a member of the board of directors until August 2022 and to customers related to Mr. Michael Carbonara, a member of the board of directors until August 2022 totaled $20,820 and $101,715, respectively.
For the year ended October 31, 2021, the Company sold a total of approximately $881,600 of product to a management services organization (“MSO”) that provides administrative services and contracts for medical supplies for several medical practices, including $211,505 of products purchased from the Company that were attributable to the medical practice owned by Dr. George Shapiro the Company’s Chief Medical Officer and a member of the board of directors. Dr. Shapiro also has an indirect economic interest in the parent company that owns the MSO. For the year ended October 31, 2021, the total amount of sales of products to the medical practice owned by Dr. Allen Meglin, a member of the board of directors until August 2022 and to customers related to Mr. Michael Carbonara, a member of the board of directors until August 2022 totaled $13,820 and $32,655, respectively.
68
Item 14. Principal Accounting Fees and Services.
Our independent registered public accounting firm is Marcum LLP (“Marcum”).
Audit Fees
The aggregate fees billed the Company for the fiscal years ended October 31, 2022 and October 31, 2021 for professional services rendered by our principal accountants for their audit of our annual financial statements and review of financial statements included in our quarterly reports or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were:
| Fiscal Year Ended October 31, 2022: | $ | 191,000 | ||
| Fiscal Year Ended October 31, 2021: | $ | 160,000 |
Audit-Related Fees
The aggregate fees billed the Company for the fiscal years ended October 31, 2022 and October 31, 2021 for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of the registrant’s financial statements and are not reported under Item 9(e)(1) of Schedule 14A.
| Fiscal Year Ended October 31, 2022: | $ | 36,838 | ||
| Fiscal Year Ended October 31, 2021: | $ | 19,385 |
Tax Fees
The aggregate fees billed the Company for the fiscal years ended October 31, 2022 and October 31, 2021 for professional services rendered by the principal accountants for tax compliance, tax advice, and tax planning.
| Fiscal Year Ended October 31, 2022: | $ | - | ||
| Fiscal Year Ended October 31, 2021: | $ | - |
All Other Fees
The aggregate fees billed the Company for the fiscal years ended October 31, 2022 and October 31, 2021 for products and services provided by the principal accountants, other than the services reported in Items 9(e)(1) through 9(e)(3) of Schedule 14A.
| Fiscal Year Ended October 31, 2022: | $ | - | ||
| Fiscal Year Ended October 31, 2021: | $ | - |
Pre-Approval Policies and Procedures
We have not used Marcum for financial information system design and implementation. These services, which include designing or implementing a system that aggregates source data underlying the financial statements or generates information that is significant to our financial statements, are provided internally or by other service providers. We did not engage Marcum to provide compliance outsourcing services.
Our board of directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered. The board of directors has considered the nature and amount of fees billed by Marcum and believes that the provision of services for activities unrelated to the audit is compatible with maintaining our independence.
69
PART IV
Item 15. Exhibits and Financial Statement Schedules.
70
71
72
|
* |
Filed herewith. |
| + | Management compensation plan or arrangement. |
| ** |
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or filing 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. |
73
Item 16. Form 10-K Summary.
None.
74
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/ Ian T. Bothwell | |
| Ian T. Bothwell | ||
| Interim Chief Executive Officer and Chief Financial Officer | ||
|
(Principal Executive, Financial and Accounting Officer) | ||
| February 14, 2023 | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
| Signature | Title | Date | ||
| /s/ Ian T. Bothwell |
Interim Chief Executive Officer, Chief Financial Officer, Director (Principal Executive, Financial and Accounting Officer) |
February 14, 2023 | ||
| Ian T. Bothwell | ||||
| /s/ Maria Ines Mitrani |
Chief Science Officer, Director |
February 14, 2023 | ||
| Maria Ines Mitrani | ||||
| /s/ George Shapiro |
Chief Medical Officer, Director |
February 14, 2023 | ||
| George Shapiro | ||||
| /s/ Bhupendra Kumar Modi | Director and Chairman of the Board | February 14, 2023 | ||
| Bhupendra Kumar Modi | ||||
| /s/ Chuck Bretz | Director and Vice Chairman of the Board | February 14, 2023 | ||
| Chuck Bretz | ||||
| /s/ Gurvinder Pal Singh | Director | February 14, 2023 | ||
| Gurvinder Pal Singh | ||||
| /s/ S. Jerry Glauser | Director | February 14, 2023 | ||
| S. Jerry Glauser | ||||
| /s/ Leathem Stearn | Director | February 14, 2023 | ||
| Leathem Stearn |
75
Exhibit 10.61
ORGANICELL REGENERATIVE MEDICINE, INC.
3321 COLLEGE AVE, SUITE 246
DAVIE, FL 33314
February 9, 2023
Dr. Maria Ines Mitrani
____________
____________
Re: February 2023 Amendment to August 2022 Amendment and Employment Agreement (“February 2023 Amendment”)
Dear Maria:
Reference is made to that certain amendment agreement dated August 19, 2022 (“August 2022 Amendment”) to the Amended and Restated Executive Employment Agreement dated June 29, 2020 (the “Employment Agreement”), by and between Organicell Regenerative Medicine, Inc., a Nevada corporation (the “Company”) and Maria Ines Mitrani (“Executive”). In connection with the capital and management restructuring of the Company, the Company and Executive agree to further amend the August 2022 Amendment and the Employment Agreement, effective as of the date of the last to sign (“Effective Date”), as follows:
Section 3(a) of the Employment Agreement shall be amended and replaced in its entirety as follows:
(a) Base Salary. The Executive’s annual base salary shall be three hundred thousand dollars ($300,000), retroactive to January 1, 2019 (together with any subsequent increases thereto as hereinafter provided, the “Base Salary”).
Notwithstanding the above, the Executive’s Base Salary shall be reduced from Three Hundred Thousand and 00/100 Dollars ($300,000.00) per year to One Hundred Fifty Thousand and 00/100 Dollars ($150,000.00) per year (“Reduced Salary”) effective the pay period December 15, 2022 through such time that net revenues from operations is breakeven when calculating the Executive’s salary and the salaries of others agreeing to a salary reduction without the agreed upon reductions (“Salary Reduction Period”). Said Executive further waives the right to receive all accrued but unpaid compensation as of July 31, 2022. There is no obligation of the Company to repay that portion of Base Salary that has been reduced during the Salary Reduction Period.
Section 4 (c)(ii) of the Employment Agreement (Termination by Company for Cause) shall be amended and replaced in its entirety as follows: in carrying out his duties hereunder, the executive commits gross negligence or intentional misconduct resulting in material harm to the Company, commits theft, embezzlement or conversion of Company assets, or willfully disparages the Company, its board members, shareholders, employees, investors or advisors;… this revision of the Agreement as to any acts or omissions which occur after the effective date of this February 2023 Amendment only.
Page 1 of 3
Section 5 of the Employment Agreement (Compensation Upon Termination) shall be amended and replaced in its entirety as follows:
| 5. | Compensation Upon Termination: |
(a) If the Executive’s employment with the Company is terminated for Cause pursuant to Section 4(c), the Company shall pay or provide to the Executive (or to his authorized representative or estate) (i) any earned but unpaid salary (consisting of Base Salary and/or Reduced Salary as the case may be) as of the Termination Date; and (ii) unpaid expense reimbursements as of the Termination Date only.
(b) Upon termination of Executive except for Cause, Executive shall be entitled to severance equal to one month’s Base Salary times the number of years of service with the Company, with it being expressly acknowledged and agreed that Executive’s service with the Company has been uninterrupted since the Executive began serving the Company on November 24, 2015.
The Company and Executive agree that except as amended or modified hereby, the Employment Agreement and the August 2022 Amendment are valid, ratified, approved and confirmed and remain in full force and effect.
Promptly following the Effective Date of this February 2023 Amendment, the Company agrees to reimburse Executive for any properly documented unpaid contracted expenses (benefits pursuant to Employment Agreement) and authorized unpaid business expenses.
In addition to the above amendments to the Employment Agreement and August 22 Amendment, the Parties have also agreed to the following:
| 1. | Release of Company and Advisors/Investors by Executive. Executive, and each and every one of its affiliates, respective predecessors, successors and assigns, hereby releases, acquits and forever discharges Company and its Advisors/Investors, including but not limited to Robert Smoley and Harvey Birdman, along with their families and any entities owned by or associated with them, from and with respect to any and all claims, complaints, grievances, demands, debts, contracts, agreements, invoices, liabilities, obligations, suits, costs, expenses, rights, actions, and causes of action, of whatever nature, character or description, whether known or unknown, related to the employment of Executive. This release shall not be construed or otherwise deemed as a release of any rights to enforce this Agreement. |
| 2. | General Release of Executive by Company and Advisors/Investors. It is hereby acknowledged that this is a general release. In consideration of the agreements herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and each and every one of its officers, directors, respective predecessors, successors and assigns, and its Advisors/Investors, including but not limited to Robert Smoley and Harvey Birdman, along with their families and any entities owned by or associated with them, hereby releases, acquits and forever discharges Executive from and with respect to any and all claims, complaints, grievances, demands, debts, contracts, agreements, invoices, liabilities, obligations, suits, costs, expenses, rights, actions, and causes of action, of whatever nature, character or description, whether known or unknown, suspected or unsuspected, which the Company now has, may have or has ever had against the Executive by reason of any and all acts, omissions, events, circumstances or facts existing or occurring up to the date of the execution hereof. This release shall not be construed or otherwise deemed as a release of any rights to enforce this Agreement, and shall be executed by the Interim CEO of the Company who has full authority to sign this Agreement on behalf of the Company and Advisors/Investors. |
Page 2 of 3
| 3. | Indemnification. Executive shall indemnify, hold harmless, and defend Company from and against any damage, claim, liability, deficiency, loss, cost or expense (including reasonable attorneys’ fees (“Damages”) resulting from any obligation undertaken or agreement entered into by Executive which binds the Company that has not been disclosed by Executive as of the Effective Date. |
If the foregoing correctly set forth our agreement, please countersign this letter agreement below.
Very truly yours,
| ORGANICELL REGENERATIVE MEDICINE, INC. | ||
| By: | /s/ Ian Bothwell | |
Ian Bothwell, Interim Chief Executive Officer on behalf of the Company and Advisors/Investors. |
||
| ACCEPTED AND AGREED TO THIS 9th DAY OF FEBRUARY, 2023 | |
| /s/ Maria Ines Mitrani | |
| Maria Ines Mitrani | |
Page 3 of 3
Exhibit 10.62
ORGANICELL REGENERATIVE MEDICINE, INC.
3321
COLLEGE AVE, SUITE 246
DAVIE, FL 33314
February 9, 2023
Mr. Albert Mitrani
____________
____________
Re: February 2023 Amendment to August 2022 Amendment and Employment Agreement (“February 2023 Amendment”)
Dear Albert:
Reference is made to that certain amendment agreement dated August 19, 2022 (“August 2022 Amendment”) to the Amended and Restated Executive Employment Agreement dated June 29, 2020 (the “Employment Agreement”), by and between Organicell Regenerative Medicine, Inc., a Nevada corporation (the “Company”) and Albert Mitrani (“Executive”). In connection with the capital and management restructuring of the Company, the Company and Executive agree to further amend the August 2022 Amendment and the Employment Agreement, effective as of the date of the last to sign (“Effective Date”), as follows:
Section 3(a) of the Employment Agreement shall be amended and replaced in its entirety as follows:
(a) Base Salary. The Executive’s annual base salary shall be three hundred thousand dollars ($300,000), retroactive to January 1, 2019 (together with any subsequent increases thereto as hereinafter provided, the “Base Salary”).
Notwithstanding the above, the Executive’s Base Salary shall be reduced from Three Hundred Thousand and 00/100 Dollars ($300,000.00) per year to One Hundred Fifty Thousand and 00/100 Dollars ($150,000.00) per year (“Reduced Salary”) effective the pay period December 15, 2022 through such time that net revenues from operations is breakeven when calculating the Executive’s salary and the salaries of others agreeing to a salary reduction without the agreed upon reductions (“Salary Reduction Period”). Said Executive further waives the right to receive all accrued but unpaid compensation as of July 31, 2022. There is no obligation of the Company to repay that portion of Base Salary that has been reduced during the Salary Reduction Period.
Section 4 (c)(ii) of the Employment Agreement (Termination by Company for Cause) shall be amended and replaced in its entirety as follows: in carrying out his duties hereunder, the executive commits gross negligence or intentional misconduct resulting in material harm to the Company, commits theft, embezzlement or conversion of Company assets, or willfully disparages the Company, its board members, shareholders, employees, investors or advisors;… This revision of the Agreement is effective as to any acts or omissions which occur after the effective date of this February 2023 Amendment only.
Page 1 of 3
Section 5 of the Employment Agreement (Compensation Upon Termination) shall be amended and replaced in its entirety as follows:
| 5. | Compensation Upon Termination: |
(a) If the Executive’s employment with the Company is terminated for Cause pursuant to Section 4(c), the Company shall pay or provide to the Executive (or to his authorized representative or estate) (i) any earned but unpaid salary (consisting of Base Salary and/or Reduced Salary as the case may be) as of the Termination Date; and (ii) unpaid expense reimbursements as of the Termination Date only.
(b) Upon termination of Executive except for Cause, Executive shall be entitled to severance equal to one month’s Base Salary times the number of years of service with the Company, with it being expressly acknowledged and agreed that Executive’s service with the Company has been uninterrupted since the Executive began serving the Company on June 4, 2015.
The Company and Executive agree that except as amended or modified hereby, the Employment Agreement and the August 2022 Amendment are valid, ratified, approved and confirmed and remain in full force and effect.
Promptly following the Effective Date of this February 2023 Amendment, the Company agrees to reimburse Executive for any properly documented unpaid contracted expenses (benefits pursuant to Employment Agreement) and authorized unpaid business expenses.
In addition to the above amendments to the Employment Agreement and August 22 Amendment, the Parties have also agreed to the following:
| 1. | Reimbursement Of Expenses. Executive shall be obligated to repay $84,277.86 of past reimbursements paid by the Company as of October 31, 2022 in error. The terms of the repayment shall be a pro rata monthly payment beginning with that pay period immediately after the Salary Reduction Period. |
| 2. | Release of Company and Advisors/Investors by Executive. Executive, and each and every one of its affiliates, respective predecessors, successors and assigns, hereby releases, acquits and forever discharges Company and its Advisors/Investors, including but not limited to Robert Smoley and Harvey Birdman, along with their families and any entities owned by or associated with them, from and with respect to any and all claims, complaints, grievances, demands, debts, contracts, agreements, invoices, liabilities, obligations, suits, costs, expenses, rights, actions, and causes of action, of whatever nature, character or description, whether known or unknown, related to the employment of Executive. This release shall not be construed or otherwise deemed as a release of any rights to enforce this Agreement. |
Page 2 of 3
| 3. | General Release of Executive by Company and Advisors/Investors. It is hereby acknowledged that this is a general release. In consideration of the agreements herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and each and every one of its officers, directors, respective predecessors, successors and assigns, and its Advisors/Investors, including but not limited to Robert Smoley and Harvey Birdman, along with their families and any entities owned by or associated with them, hereby releases, acquits and forever discharges Executive from and with respect to any and all claims, complaints, grievances, demands, debts, contracts, agreements, invoices, liabilities, obligations, suits, costs, expenses, rights, actions, and causes of action, of whatever nature, character or description, whether known or unknown, suspected or unsuspected, which the Company now has, may have or has ever had against the Executive by reason of any and all acts, omissions, events, circumstances or facts existing or occurring up to the date of the execution hereof. This release shall not be construed or otherwise deemed as a release of any rights to enforce this Agreement, and shall be executed by the Interim CEO of the Company who has full authority to sign this Agreement on behalf of both the Company and the Advisors/Investors. |
| 4. | Indemnification. Executive shall indemnify, hold harmless, and defend Company from and against any damage, claim, liability, deficiency, loss, cost or expense (including reasonable attorneys’ fees (“Damages”) resulting from any obligation undertaken or agreement entered into by Executive which binds the Company that has not been disclosed by Executive as of the Effective Date. |
If the foregoing correctly set forth our agreement, please countersign this letter agreement below.
Very truly yours,
| ORGANICELL REGENERATIVE MEDICINE, INC. | ||
| By: | /s/ Ian Bothwell | |
Ian Bothwell, Interim Chief Executive Officer on behalf of the Company and the Advisors/Investors. |
||
| ACCEPTED AND AGREED TO THIS 9th DAY OF FEBRUARY, 2023 | ||
| /s/ Albert Mitrani | ||
| Albert Mitrani | ||
Page 3 of 3
Exhibit 10.63
Exhibit 23.1
Independent Registered Public Accounting Firm’s Consent
We consent to the incorporation by reference in the Registration Statement of Organicell Regenerative Medicine, Inc. on Form S-8 (File No. 333-260261) of our report dated February 14, 2023, which includes an explanatory paragraph as to the Company’s ability to continue as a going concern, with respect to our audits of the consolidated financial statements of Organicell Regenerative Medicine, Inc. as of October 31, 2022 and 2021 and for the two years then ended, which report is included in this Annual Report on Form 10-K of Organicell Regenerative Medicine, Inc. for the year ended October 31, 2022.
/s/ Marcum llp
Marcum llp
Fort Lauderdale, FL
February 14, 2023
Exhibit 31.1
CERTIFICATION PURSUANT TO 18 U.S.C. SS 1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Ian T. Bothwell, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K for the fiscal year ended October 31, 2022 (the “Report”) of Organicell Regenerative Medicine, Inc., a Nevada corporation (the “Registrant”); |
| 2. | Based on my knowledge, this Report does not contain any untrue statement of a 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. | As the Registrant’s Interim Chief Executive Officer and Chief Financial Officer (principal executive, financial and accounting officer), I am 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 reporting 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 my 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; and |
| 5. | As the Registrant’s principal executive, financial and accounting officer, I have disclosed, based on the most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions): |
| (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: February 14, 2023 | /s/ Ian T. Bothwell |
| Ian T. Bothwell | |
| Interim Chief Executive Officer and Chief Financial Officer | |
| (Principal Executive, Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned Ian T. Bothwell, Interim Chief Executive Officer and Chief Financial Officer (principal executive, financial and accounting officer) of Organicell Regenerative Medicine, Inc., a Nevada corporation (the “Company”), hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | the Annual Report on Form 10-K of the Company for the fiscal year ended October 31, 2022 (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 the Registrant. |
| Date: February 14, 2023 | /s/ Ian T. Bothwell |
| Ian T. Bothwell | |
| Interim Chief Executive Officer and Chief Financial Officer | |
| (Principal Executive, Financial and Accounting Officer) |