The accompanying notes are an integral part of
these consolidated financial statements.
The accompanying notes are an integral part of
these consolidated financial statements.
The accompanying notes are an integral part of
these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND DESCRIPTION
OF BUSINESS
Organicell Regenerative Medicine, Inc. (formerly
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 to provide other related services. Our proprietary products are
derived from perinatal sources and are principally used in the health care industry administered through doctors and clinics (collectively,
the “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 (“FINRA”).
For the year ended October 31, 2021, the Company
principally operated through General Surgical of Florida, Inc., a Florida corporation and wholly owned subsidiary, with a business purpose
to sell therapeutic products to Providers. During November 2020, the Company formed Livin Again Inc. (“Livin”), a wholly owned
subsidiary of the Company for the purpose of among other things, providing advertising and marketing services, to Providers of medical
and other healthcare, anti-aging and regenerative services (“Regenerative Services”) including FDA-approved IV vitamin and
mineral liquid infusions. To date, there has been no significant activity and the Company has no timetable, if any, as to when IV Drip
Therapies revenues will commence.
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.
Concentrations of 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 $250,000 per institution. At October 31, 2021, the Company
did not hold cash balances in any financial institution in excess of FDIC insurance coverage limits.
During the fiscal year ended October 31, 2021,
the Company sold a total of approximately $2,140,000 (37.6%) to a large distributor and the distributors customers, approximately $709,000
(12.5%) to customers of another distributor and $881,600 (15.7%) of product to a management services organization (MSO) that provides
administrative services and contracts for medical supplies for several medical practices. During the fiscal year ended October 31, 2020,
the Company did not have any customer that accounted for more than 10% of the total revenues for the year ended October 31, 2020.
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
$148,600 and $131,600 or 53.0% and 47.0%, respectively, of the total amount of tissue raw material purchased during that period. During
the fiscal year ended October 31, 2020, the Company purchased the tissue raw material used in manufacturing of its products from two suppliers,
of which each accounted for approximately $179,000 and $30,000 or 85.6% and 14.4%, respectively, of the total amount of tissue raw material
purchased during that period.
The Company’s sales and supply agreements
are non-exclusive and the Company does not believe it has any exposure based on the customers of its products and/or 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 fair 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 repay 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, 2021 and 2020, the Company recorded bad debt expense of $0 and $340, respectively.
Inventory
Inventory is stated at the lower of cost or net
realizable value using the average cost method. We provide reserves for potential excess, dated or obsolete inventories based on an analysis
of forecasted demand compared to quantities on hand and any firm purchase orders, as well as product shelf life. At October 31, 2021,
we determined that there were not any reserves required in connection with our finished goods.
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 3 to 15 years. Upon sale or retirement, the cost and related accumulated depreciation and amortization
are eliminated from their respective accounts, and the resulting gain or loss is included in results of operations. Repairs and maintenance
charges, which do not increase the useful lives of the assets, are charged to operations 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.
Net Income (Loss) Per Common Share
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, 2021, the Company had 9,500,000
common shares issuable upon the exercise of warrants and unpaid Original Base Salary and Incremental Salary that could be convertible
into approximately 35,684,900 common shares that were not included in the computation of dilutive loss per share because their inclusion
is anti-dilutive for the year ended October 31, 2021. At October 31, 2020, the Company had 9,500,000 common shares issuable upon the exercise
of warrants and unpaid Original Base Salary and Incremental Salary that could be convertible into approximately 32,671,100 common shares
that were not included in the computation of dilutive loss per share because their inclusion is anti-dilutive for the year ended October
31, 2020.
Stock-Based Compensation
All stock-based payments are recognized in the
financial statements based on their fair values.
Research and Development Costs
Research and development costs consist of direct
and indirect costs associated with the development of the Company’s technologies. These costs are expensed as incurred.
Our research and development expenses were $1,120,067 and $233,526 for the years ended October 31, 2021 and 2020, respectively. The research
and development costs primarily relate to the filing and approval of IND applications and the performance of clinical trials.
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, 2021 and 2020
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, 2021 and
2020.
Valuation of Derivatives
The Company evaluates its financial instruments,
including 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 2,500,000,000 authorized
shares of common stock of which 1,149,204,595 shares are issued and outstanding as of January 28, 2022. The Company expects that it will
continue to issue common stock in the future in connection with debt and/or equity financings, transactions with third parties, performance
incentives and as compensation to its employees. Currently the amount of authorized shares is sufficient to provide for the additional
shares that the Company may be contingently obligated to issue under existing arrangements.
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, 2021 and October 31, 2020 that contain derivatives.
Operating and Finance 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 $15,000 in determining whether any future
operating leases will be capitalized.
Subsequent Events
The Company has evaluated subsequent events that
occurred after October 31, 2021 through the financial statement issuance date for subsequent event disclosure or recording.
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 operating losses of $12,744,103 for the year ended
October 31, 2021. In addition, the Company had an accumulated deficit of $41,624,749 at October 31, 2021. The Company had a negative working
capital position of $3,609,174 at October 31, 2021.
New United States Food and Drug Administration
(“FDA”) regulations which were announced in November 2017 and which became effective beginning in May 2021 (postponed from
November 2020 due to the COVID -19 pandemic) require that the sale of products that fall under Section 351 of the Public Health Services
Act pertaining to marketing traditional biologics and human cells, tissues and cellular and tissue based products (“HCT/Ps”)
can only be sold pursuant to an approved biologics license application (“BLA”). The Company has not obtained any opinion or
ruling regarding the Company’s operations and whether the processing, sales and distribution of the products it currently produces
would be subject to the FDA’s previously announced intended enforcement policies regarding HCT/P’s.
In addition to the above, the adverse public health
developments and economic effects of the ongoing COVID-19 pandemic in the United States have adversely affected the demand for our products
and services by our customers and from patients of our customers as a result of quarantines, facility closures and social distancing measures
put into effect in connection with the COVID-19 outbreak and which currently still continue to have a negative impact to our business
and the economy.
As a result of the above, the Company’s
efforts to establish a stabilized source of sufficient revenues to cover operating costs has yet to be achieved and ultimately may prove
to be unsuccessful unless (a) the Company’s ability to process, sell and distribute the products currently being produced or developed
in the future are not restricted, (b) the United States economy resumes to pre-COVID-19 conditions and/or (c) additional sources of working
capital through operations or debt and/or equity financings are realized. These financial statements do not include any adjustments that
might be necessary if the Company is unable to continue as a going concern.
Management anticipates that the Company will remain
dependent, for the near future, on additional investment capital to fund ongoing operating expenses and research and development costs
related to development of new products and to perform required clinical studies in connection with the sale of its products. The Company
does not have any assets to pledge for the purpose of borrowing additional capital. In addition, the Company relies on its ability to
produce and sell products it manufactures that are subject to changing technology and regulations that it currently sells and distributes
to its customers. The Company’s current market capitalization, common stock liquidity and available authorized shares may hinder
its ability to raise equity proceeds. The Company anticipates that future sources of funding, if any, will therefore be costly and dilutive,
if available at all.
In view of the matters described in the preceding
paragraphs, recoverability of the recorded asset amounts shown in the accompanying consolidated balance sheet assumes that (1) the Company
is able to continue to produce products or obtain products under supply arrangements which are in compliance with current and future regulatory
guidelines, (2) the effects of the COVID-19 crisis resume to pre-COVID-19 market conditions, (3) the Company will be able to establish
a stabilized source of revenues, including efforts to expand sales internationally and the development of new product offerings and/or
designations of products, (4) obligations to the Company’s creditors are not accelerated, (5) the Company’s operating expenses
remain at current levels and/or the Company is successful in restructuring and/or deferring ongoing obligations, (6) the Company is able
to continue its research and development activities, particularly in regards to remaining compliant with the FDA and ongoing safety and
efficacy of its products, and/or (7) the Company obtains additional working capital to meet its contractual commitments and maintain the
current level of Company operations through debt or equity sources.
There is no assurance as to when the adverse impact
to the United States and worldwide economies resulting from the COVID-19 outbreak will be eliminated, if at all, and whether any new or
recurring pandemic outbreaks will occur again in the future causing similar or worse devastating impact to the United States and worldwide
economies and our business. In addition, there is no assurance that the products we currently produce will not be subject to the FDA’s
previously announced intended enforcement policies regarding HCT/P’s and/or the Company will be able to complete its revenue growth
strategy. There is no assurance that the Company’s research and development activities will be successful or that the Company will
be able to timely fund the required costs of those activities. Without sufficient cash reserves, the Company’s ability to pursue
growth objectives will be adversely impacted. Furthermore, despite significant effort since July 2015, the Company has thus far been unsuccessful
in achieving a stabilized source of revenues. As described above, the COVID-19 crisis has significantly impaired the Company and the overall
Unites States and World economies.
If revenues do not increase and stabilize, if
the COVID-19 crisis is not satisfactorily managed and/or resolved, if the Company’s ability to process, sell and/or distribute the
products currently being produced or developed in the future are restricted, and/or if additional funds cannot otherwise be raised, the
Company might be required to seek other alternatives which could include the sale of assets, closure of operations and/or protection under
the U.S. bankruptcy laws. As of October 31, 2021, based on the factors described above, the Company concluded that there was substantial
doubt about its ability to continue to operate as a going concern for the 12 months following the issuance of these financial statements.
NOTE 4 – INVENTORIES
Schedule of Inventories
|
|
|
|
|
|
|
|
|
|
|
October 31,
2021
|
|
|
October 31,
2020
|
|
|
|
|
|
|
|
|
Raw materials and supplies
|
|
$
|
92,601
|
|
|
$
|
26,199
|
|
Finished goods
|
|
|
142,226
|
|
|
|
120,612
|
|
|
|
|
|
|
|
|
|
|
Total inventories
|
|
$
|
234,827
|
|
|
$
|
146,811
|
|
NOTE 5 - PROPERTY AND EQUIPMENT
Schedule of Property and Equipment
|
|
|
|
|
|
|
|
|
|
|
October 31,
2021
|
|
|
October 31,
2020
|
|
Computer equipment
|
|
$
|
10,684
|
|
|
$
|
8,653
|
|
Finance lease equipment
|
|
|
544,378
|
|
|
|
239,595
|
|
Manufacturing equipment
|
|
|
258,791
|
|
|
|
171,430
|
|
|
|
|
813,853
|
|
|
|
419,678
|
|
Less: accumulated depreciation
|
|
|
(107,146
|
)
|
|
|
(54,444
|
)
|
|
|
|
706,707
|
|
|
|
365,234
|
|
Construction in progress:
|
|
|
|
|
|
|
|
|
Leasehold improvements
|
|
|
406,709
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment, net
|
|
$
|
1,113,416
|
|
|
$
|
365,234
|
|
Depreciation expense totaled $52,702 and $36,775
for the years ended October 31, 2021 and 2020, respectively.
As described in Note 6, 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 total costs incurred as of October 31, 2021 was $406,709 and is reflected as construction
in progress. Amortization of these costs will begin once the build-out is complete and the facility becomes operational.
NOTE 6 – LEASE OBLIGATIONS
Finance Lease Obligations:
During March 2019, the Company entered into a
lease agreement for certain lab equipment in the amount of $239,595. Under the terms of the lease agreement, the Company is required to
make 60 equal monthly payments of $4,513 plus applicable sales taxes. Under the Lease Agreement, the Company has the right to acquire
all of the leased equipment for $1.00. As a result, the lease agreement is being accounted for as a finance lease obligation. The annual
interest rate charged in connection with the lease is 4.5%. The leased equipment are being depreciated over their estimated useful lives
of 15 years.
During October 2021, the Company entered into
a second lease agreement in the amount of $304,873 for certain lab equipment that is being installed at the Basalt lab location. Under
the terms of the lease agreement, the Company is required to make 60 equal monthly payments of $5,478 plus applicable sales taxes. Under
the Lease Agreement, the Company has the right to acquire all of the leased equipment for $1.00. As a result, the lease agreement is being
accounted for as a finance lease obligation. The annual interest rate charged in connection with the lease is 3.0%. Lease payments and
depreciation of the leased equipment has not commenced pending completion of the Basalt lab buildout (see below) and the facility becomes
operational. The leased equipment will be depreciated over their estimated useful lives of 15 years.
The weighted average remaining term of the Company’s
Finance Leases as of October 31, 2021 was 45.4 months. The minimum lease payments pursuant to the Finance Leases are as follows:
Schedule of Financial Lease Payment
|
|
|
|
|
|
|
Minimum
|
|
Year Ended October 31,
|
|
Rent
|
|
2022
|
|
$
|
103,454
|
|
2023
|
|
|
119,887
|
|
2024
|
|
|
83,783
|
|
2025
|
|
|
65,731
|
|
2026
|
|
|
65,731
|
|
Thereafter
|
|
|
16,432
|
|
Total undiscounted finance lease payments
|
|
|
455,018
|
|
Less: imputed interest
|
|
|
(31,000
|
)
|
Present value of finance lease liabilities
|
|
$
|
424,018
|
|
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 $3,500. On July 1, 2020, in connection with the adoption of ASC 842, the Company recorded
a ROU asset and corresponding operating lease obligation of $117,659 (present value of the associated leased payments based on an assumed
borrowing rate of 4.5%).
Lease amortization expense for the year ended
October 31, 2021 and 2020 was $38,037 and $35,117, respectively.
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 $6,500 and was required to provide a security deposit of $11,000 upon execution
of the lease agreement.
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 facility. Monthly lease payments are approximately $5,200 plus administrative fees and taxes. In connection with the Miami Lab
Lease, the Company was required to post a security deposit of $6,332. From November 2020 through May 31, 2021, the Company entered into
an additional month to month lease agreement in the same facility as the Miami Lab Lease for an additional 390 square foot laboratory.
Monthly lease payments were approximately $4,400 plus administrative fees and taxes.
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. 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 was required to post a security deposit of $13,600. The Company is currently
constructing the laboratory and office build-out at an estimated cost of $500,000. The Company expects the construction to be completed
during the quarter ended January 31, 2022. The Company has recorded a ROU asset and corresponding operating lease obligation of $235,313
(present value of the associated leased payments based on an assumed borrowing rate of 4.5%).
Lease amortization expense for the years ended
October 31, 2021 and 2020 was $47,967 and $0, respectively.
The weighted average remaining term of the Company’s
operating leases as of October 31, 2021 was 24.1 months. The minimum lease payments pursuant to the Aspen, CO office lease and the Basalt
Lab Lease are as follows:
Schedule of Operating Lease
|
|
|
|
|
|
|
Minimum
|
|
Year Ended October 31,
|
|
Rent
|
|
2022
|
|
$
|
125,232
|
|
2023
|
|
|
113,729
|
|
2024
|
|
|
28,857
|
|
Total undiscounted operating lease payments
|
|
|
267,818
|
|
Less: imputed interest
|
|
|
(13,153
|
)
|
Present value of operating lease liabilities
|
|
$
|
254,665
|
|
NOTE 7 – RELATED PARTY TRANSACTIONS
On February 26, 2020, April 25, 2020 and June
29, 2020, Mr. Mitrani’s, Dr. Mitrani’s and Mr. Bothwell’s employment agreements were amended. See Note 12 for a more
detailed description of the executive employment agreements and the respective amendments referred to above.
Effective February 26, 2020, Mr. Bothwell was
granted cashless warrants to purchase 7,500,000 shares of common stock of the Company. The newly granted warrants vest immediately, have
an exercise price of $0.028 per share and are exercisable for ten years from the effective date of the grant (see Note 11).
During April 2020, June 2020, August 2020, September
2020, February 2021 and April 2021, each of the current executives of the Company, Albert Mitrani, Dr. Mari Mitrani, Ian Bothwell and
Dr. George Shapiro (“Current Executives”) were granted rights under the Management and Consultant Performance Plan (“MCPP”)
to receive common stock of the Company based on the achievement of certain defined milestones. In addition, during June 2020, each of
the current non-executive members of the Board were granted rights under the MCPP to receive common stock of the Company based on the
achievement of certain defined milestones (see Note 10).
On October 29, 2021, the Company entered into
an Exchange Agreement (see Note 10) 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 50,000,000 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
are leased from MariLuna, LLC, a Florida limited liability company which is owned by Dr. Mitrani. During July 2020, the term of the lease
was extended through June 2023. Beginning July 2020, the monthly rent increased from $2,900 to $3,500. The Company paid a security deposit
of $5,000. Total rent expense for the year ended October 31, 2021 and 2020 was $42,000 and $37,200, respectively.
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 $6,500 and was required to provide a security deposit of $11,000 upon execution
of the lease agreement. Total rent expense for the years ended October 31, 2021 and 2020 was $78,000 and $6,500, respectively.
In connection with Mr. Bothwell’s executive
employment agreements, 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 $31,192 and $24,788
for the years ended October 31, 2021 and 2020, 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. 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 and to customers related to Mr. Michael Carbonara totaled $13,820 and $32,655, respectively. During the fiscal year ended
October 31, 2020, sales to the medical practices related to Dr. George Shapiro and Dr. Allen Meglin and to customers related to Mr. Michael
Carbonara totaled $53,740, $27,385, and $14,320, respectively.
During April 2020 through May 2020, the Company
sold 11,000,000 shares of common stock to Dr. Allen Meglin, a director of the Company at $0.02 per share for an aggregate purchase price
of $220,000. During July, August and October 2020, the Company sold an additional 1,166,666 shares, 422,514 shares, and 625,000 shares
of common stock to Dr. Allen Meglin at $0.03 per share, $0.10 per share and $0.08 per share, respectively, for an aggregate purchase price
of $127,251 (see Note 10).
On October 10, 2019, the Company and Michael Carbonara,
a director of the Company agreed to a convertible funding facility arrangement (“Funding Facility”) whereby Mr. Carbonara
or its designee funded the Company $500,000. The Funding Facility was converted into 40,000,000 shares of newly issued restricted common
stock of the Company on February 12, 2020, issued to Republic Asset Holdings LLC, a Company controlled by Mr. Carbonara. On April 27,
2020, the Company sold 5,000,000 shares of common stock to Republic Asset Holdings LLC at $0.02 per share for an aggregate purchase price
of $100,000. On February 22, 2021, the Company sold 1,818,181 shares of common stock to Republic Asset Holdings LLC at $0.055 per share
for an aggregate purchase price of $100,000 (see Note 10).
On February 26, 2020, the Company agreed to immediately
grant Dr. George Shapiro, the Company’s Chief Medical Officer (“CMO”) 5,000,000 shares of common stock in recognition
of past services provided to the Company through February 2020. In addition, the Company agreed to enter into a consulting agreement with
the CMO to provide ongoing services to the Company. The CMO will receive compensation of $82,250 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 $82,250 through February 2021 were fully satisfied through the issuance of 500,000 shares of newly issued
common stock of the Company. Furthermore, until the CMO becomes a full-time employee of the Company and provided the CMO continues to
serve in his current position, the CMO shall receive compensation equal to $27,000 per quarter beginning May 1, 2021, payable in cash
or in stock (based on the average monthly trading price of the common stock during the applicable quarter) at the option of the Company.
In connection with Mr. Robert Zucker’s resignation
as a member of the Board of Directors of the Company in April 2020, the Board approved the issuance to Mr. Zucker of 736,808 shares of
unregistered common stock of the Company valued at $0.022 per share, the closing price of the common stock of the Company on the grant
date (see Note 10).
On May 28, 2020, the Company entered into a distribution
agreement with a company owned by Jack Mitrani, the son of Mr. Mitrani. Under the terms of the agreement, the Company agreed to grant
the distributor 3,000,000 shares of unregistered common stock valued at $0.115 per share, the closing price of the common stock of the
Company on the grant date (see Note 10).
Effective December 21, 2020, the Company granted
a bonus of $50,000 and 15,000,000 shares of common stock of the Company each to Mr. Mitrani, Dr. Mitrani and Mr. Bothwell and 1,000,000
shares of common stock of the Company each to Mr. Carbonara and Dr. Allen Meglin (see Note 10).
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, 2021 and 2020, $6,253 and
$1,965, respectively, is owed to Mr. Bothwell and/or his respective affiliates.
At October 31, 2021, salary amounts owed to Albert
Mitrani, Dr. Mari Mitrani and Ian Bothwell were $275,924, $362,455 and $843,478, respectively and consulting fees owed to Dr. George Shapiro
were $54,000. At October 31, 2020, salary amounts owed to Albert Mitrani, Dr. Mari Mitrani and Ian Bothwell were $216,436, $233,655 and
$649,407, respectively and consulting fees owed to Dr. George Shapiro were $54,833.
NOTE 8 - NOTES PAYABLE
Private Placement Of Convertible Debentures
On June 20, 2018, the Company issued a total of
$150,000 of convertible 6% debentures (“150,000 Debentures”) to an accredited investor. The principal amount of the $150,000
Debentures, plus accrued and unpaid interest through June 30, 2019 were payable on the 10th business day subsequent to June
30, 2019, unless the payment of the $150,000 Debentures were prepaid at the sole option of the Company, were converted as provided for
under the terms of the $150,000 Debentures, and/or accelerated due to an event of default in accordance with the terms of the $150,000
Debentures. Interest on the $150,000 Debentures for each calendar quarter ended beginning with the quarter ended June 30, 2018 is payable
on the 10th business day following the immediately prior calendar quarter. The $150,000 Debentures were not repaid as required.
At October 31, 2021, the principal balance of the $150,000 Debentures outstanding was $144,000 and accrued and unpaid interest was $2,160.
During October 2018, the Company issued a total
of $70,000 of convertible 6% debentures (“70,000 Debentures”) to two accredited investors. The principal amount of the $70,000
Debentures, plus accrued and unpaid interest through September 30, 2019 were payable on the 10th business day subsequent to
September 30, 2019. The $70,000 Debentures were not paid on the required maturity dates. On June 25, 2020, the Company entered into a
settlement and general release agreement with the holder of the $50,000 Debenture (one of the two holders that participated in the $70,000
Debentures described above), whereby the Company is required to repay the balance of the $50,000 Debenture in eight monthly installments
of $6,250 plus outstanding accrued interest beginning June 30, 2020 and ending on January 31, 2021. During October 2020, the Company and
the holder of the $20,000 debenture (one of the two holders that participated in the $70,000 Debentures described above), agreed to convert
the principal amount of the $20,000 debenture plus interest accrued and unpaid through the date of the conversion totaling approximately
$20,300 into 160,000 shares of common stock of the Company (approximately $0.125 per share). The conversion price was at a discount to
the trading price of $0.278 as of the effective date of the transaction, resulting in additional interest costs of $24,180, which have
been recorded during the year ended October 31, 2020.
Unsecured Promissory Note
On February 5, 2019, the Company entered into
an unsecured loan agreement with a third party with a principal balance of $25,000. The outstanding principal was due March 8, 2019. The
loan was not repaid on the maturity date as required. The third party subsequently agreed to apply amounts due for invoices due
from third party for future purchases of the Company products to the extent of the outstanding balances owed by the Company in connection
with the loan (interest and principal). As of October 31, 2021, the remaining amount due under this arrangement was approximately $4,392.
Credit Facility
On September 19, 2019, the Company’s wholly
owned subsidiary, General Surgical Florida, received $100,000 in connection with an unsecured line of credit (“Credit Facility”).
The Credit Facility was fully repaid on November 2, 2020. Under the terms of the Credit Facility, the Company was required to make weekly
payments averaging approximately $2,541 (payments totaling $132,160). The effective annual interest rate was approximately 45.67%. Proceeds
received from the Credit Facility were used for working capital purposes. Mr. Iglesias, who at the time was the Company’s Chief
Executive Officer, provided a personal guaranty in connection with amounts required to paid under the Credit Facility.
Funding Facility
On October 10, 2019, the Company and an investor
(“Noteholder”) agreed to a funding facility arrangement (“Funding Facility”) whereby the Noteholder was required
to fund the Company an initial tranche of $100,000 on October 15, 2019 (“Initial Funding Date”) and had the option to fund
the Company up to an aggregate of $500,000 (“Funding Facility Limit”) in minimum $100,000 monthly tranches by no later than
February 15, 2020 (“Funding Expiration Date”). The Funding Facility matures on February 15, 2021 (“Maturity Date”)
and accrues interest at 6.0% per annum. The Funding Facility, plus all accrued interest, automatically converts into 40,000,000 shares
of newly issued restricted common stock of the Company (“Converted Stock”) if the Noteholder funds the full $500,000 by the
Funding Expiration Date. The Noteholder fully funded the Funding Facility as prescribed on February 12, 2020 and the Company issued the
Noteholder the Converted Stock to the Noteholders designated entity, Republic Asset Holdings LLC.
The Company determined the fair value of the Converted
Stock in accordance with ASC 820, which was determined to be approximately $599,400. As a result, the Company has recorded additional
interest expense in the amount of $94,170, as of the date of conversion, representing the amount of the discount to the fair value of
the Converted Stock associated with the conversion of the Funding Facility obligation totaling $505,230 on the date of conversion (principal
and accrued interest).
NOTE 9 — INCOME TAXES
The Company files a consolidated federal income
tax return that includes all of its subsidiaries. For the years ended October 31, 2021 and 2020, 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, 2021 and 2020 consists of the following:
Schedule of consolidated provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
Year Ended
October 31,
|
|
|
Year Ended
October 31,
|
|
|
|
2021
|
|
|
2020
|
|
Current:
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
–
|
|
|
$
|
–
|
|
State
|
|
|
–
|
|
|
|
–
|
|
Current Income Tax Expense (Benefit)
|
|
$
|
–
|
|
|
$
|
–
|
|
Deferred:
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(2,651,809
|
)
|
|
$
|
(2,626,791
|
)
|
State
|
|
|
(563,409
|
)
|
|
|
(540,796
|
)
|
Deferred Income Tax Expense (Benefit)
|
|
|
(3,215,218
|
)
|
|
|
(3,167,587
|
)
|
Change in Valuation Allowance
|
|
|
3,215,218
|
|
|
|
(3,167,587
|
)
|
Income tax provision
|
|
$
|
–
|
|
|
$
|
–
|
|
Effective tax rates differ from the federal statutory
rate of 21% for 2021 and 2020 applied to income before income taxes. A reconciliation of the U.S. federal statutory tax amount to the
Company’s effective tax amount is as follows:
Schedule of Income before Income Taxes
|
|
|
|
|
|
|
|
|
|
|
October 31,
2021
|
|
|
October 31,
2020
|
|
Tax at federal statutory rate
|
|
$
|
(2,678,878
|
)
|
|
$
|
(2,642,423
|
)
|
State taxes, net of federal benefit
|
|
|
(554,273
|
)
|
|
|
(546,730
|
)
|
Permanent differences
|
|
|
27,070
|
|
|
|
18,782
|
|
Other
|
|
|
(9,137
|
)
|
|
|
2,784
|
|
Total income tax expense (benefit)
|
|
|
(3,215,218
|
)
|
|
|
(3,167,587
|
))
|
Change in valuation allowance
|
|
|
3,215,218
|
|
|
|
3,167,587
|
|
Income tax provision
|
|
$
|
–
|
|
|
$
|
–
|
|
The Company had a federal net operating loss carryover
of $7,200,185 as of October 31, 2021.
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,
2021
|
|
|
October
31,
2020
|
|
Deferred Tax Assets:
|
|
|
|
|
|
|
|
|
Stock based compensation
|
|
$
|
7,281,332
|
|
|
$
|
5,184,240
|
|
Accrued compensation
|
|
|
480,109
|
|
|
|
315,122
|
|
Net operating loss carryforward-Federal
|
|
|
1,512,039
|
|
|
|
640,663
|
|
Net operating loss carryforward-State
|
|
|
282,780
|
|
|
|
118,160
|
|
State bonus depreciation
|
|
|
29,986
|
|
|
|
-
|
|
Other
|
|
|
177
|
|
|
|
177
|
|
Total deferred tax assets:
|
|
|
9,586,423
|
|
|
|
6,258,362
|
|
Deferred Tax Liabilities:
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
205,378
|
|
|
|
92,535
|
|
Total deferred tax liabilities:
|
|
|
205,378
|
|
|
|
92,535
|
|
|
|
|
|
|
|
|
|
|
Valuation Allowance
|
|
|
(9,381,045
|
)
|
|
|
(6,165,827
|
)
|
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, 2021 and October 31, 2020, the net deferred tax asset was offset by a full valuation allowance.
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 $90,000 of penalties, plus interest (“IRS Penalties”),
in connection with the late filing of certain information returns that were included as part of the Delinquent Filed Returns. In connection
with the notices, the IRS indicated its intent to levy property of the Company if the IRS penalties were not paid as required. During
January 2018, the Company requested from the IRS an abatement of the IRS penalties based on reasonable cause. During April 2018, the IRS
notified the Company that the IRS penalties for the tax year ended 2011 of $20,000, plus interest, were abated and the request for abatement
for the IRS penalties for the tax years ended 2012 – 2015 were denied. The Company is currently appealing the initial determination
by the IRS to exclude the IRS penalties for the tax years 2012-2015 in its consideration of abatement and
filed a “Request for Collection Due Process Equivalent Hearing” (“Request”) in September 2021. During the
period that the Request is being reviewed and processed by the IRS, the IRS has agreed to put a hold on taking any levy action against
the Company for the remaining amounts of the IRS Penalties that are still outstanding. In connection with the notices, the Company has
accrued $83,684 and $70,000 of accrued tax penalties and interest on the balance sheet as of October 31, 2021 and October 31, 2020, respectively.
NOTE 10 – CAPITAL STOCK
Preferred Stock
The Company is authorized to issue 10,000,000
shares of $0.001 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.
Issued Shares
As of October 31, 2021, there were no designations
of Preferred Stock authorized or outstanding.
Common Stock
On May 18, 2020 and May 19, 2020, pursuant to
the Nevada Revised Statutes and the Bylaws of the Company, the Board of Directors of the Company and the stockholders having the voting
equivalency of 50.30% of the outstanding capital stock, respectively, approved the filing of an amendment to the Articles of Incorporation
of the Company to increase the authorized amount of common stock from 750,000,000 to 1,500,000,000, without changing the par value of
the common stock or authorized number and par value of “blank check” Preferred Stock. On June 2, 2020, the Company filed a
Definitive 14C with the SEC regarding the corporate action. On June 24, 2020, the Company filed a Certificate of Amendment to the Company’s
Articles of Incorporation with the Secretary of State of Nevada to effectuate the corporate action on June 24, 2020.
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 voting
equivalency of 53.55% of the outstanding capital stock, respectively, approved the filing of an amendment to the Articles of Incorporation
of the Company to increase the authorized amount of common stock from 1,500,000,000 to 2,500,000,000, without changing the par value of
the common stock or authorized number and par value of “blank check” Preferred Stock. On January 19, 2021, the Company filed
a Definitive 14C with the SEC regarding the corporate action. On February 9, 2021, the Company intends to file the Certificate of Amendment
to the Company’s Articles of Incorporation with the Secretary of State of Nevada to effectuate the corporate action on February
9, 2021.
Issuances of Common Stock - Sales:
During November 2019 through January 2020, the
Company sold 3,250,000 shares of common stock to three “accredited investors” at $0.02 per share for an aggregate purchase
price of $65,000. The proceeds were used for working capital.
During February 2020 through April 2020, the Company
sold 11,050,000 shares of common stock to five “accredited investors” at $0.02 per share for an aggregate purchase price of
$221,000. The proceeds were used for working capital.
During April 2020 through May 2020, the Company
sold 11,000,000 shares of common stock to Dr. Allen Meglin, a director of the Company at $0.02 per share for an aggregate purchase price
of $220,000. During July, August and October 2020, the Company sold an additional 1,166,666 shares, 422,514 shares, and 625,000 shares
of common stock to Dr. Allen Meglin at $0.03 per share, $0.10 per share and $0.08 per share, respectively, for an aggregate purchase price
of $127,251. The proceeds from all of the above sales were used for working capital. Certain of the above transactions were at sales prices
that were at a discount to the trading prices as of the effective dates of the transactions, resulting in additional stock-based compensation
expense of $195,869, which has been recorded during the year ended October 31, 2020.
On April 27, 2020, the Company sold 5,000,000
shares of common stock to Republic Asset Holdings LLC., a Company controlled by Michael Carbonara, a director of the Company, at $0.02
per share for an aggregate purchase price of $100,000. The proceeds were used for working capital. The sales price was at a discount to
the trading price of $0.0269 as of the effective date of the transaction, resulting in additional stock-based compensation expense of
$34,500, which has been recorded during the year ended October 31, 2020.
During May 2020, the Company sold 3,000,000 shares
of common stock to two “accredited investors” at $0.02 per share for an aggregate purchase price of $60,000. The proceeds
were used for working capital.
During July and August 2020, the Company completed
the private placement to 19 accredited investors for the sale of 13,499,992 shares of Common stock of the Company at a selling price of
$0.03 per share for an aggregate amount of $405,000 (“Sale”). In connection with the Sale, the Company agreed that all of
the proceeds from the Sale are to be deposited into a separate bank account (“Sale Account”) of the Company and the proceeds
are to be used exclusively to fund the costs associated with the Company’s ongoing public company filing requirements, including
audit, tax, valuation and legal fees. The Company also agreed to maintain the Sale Account with a minimum cash balance of $25,000 at all
times until such time that the Company has filed all required financial reports through the period ended July 31, 2021.
During July 2020, the Company sold 1,000,000 shares
of common stock to two “accredited investors”, at $0.02 per share and $0.03 per share, respectively for an aggregate purchase
price of $25,000. The proceeds were used for working capital.
During August 2020, the Company sold 8,606,665
shares of common stock to nine “accredited investors”, at prices ranging from $0.03 per share and $0.06 per share, for an
aggregate purchase price of $392,100. The proceeds were used for working capital.
During September 2020, the Company sold 4,800,000
shares of common stock to five “accredited investors”, at prices ranging from $0.06 per share and $0.10 per share, for an
aggregate purchase price of $410,000. The proceeds were used for working capital.
During October 2020, the Company sold 2,033,333
shares of common stock to five “accredited investors”, at prices ranging from $0.06 per share and $0.10 per share, for an
aggregate purchase price of $170,000. The proceeds were used for working capital.
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.
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.
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. The sales price was at a discount to
the trading price of $0.086 as of the effective date of the transaction, resulting in additional stock-based compensation expense of $56,364,
which has been recorded during the year ended October 31, 2021.
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.
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.
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.
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.
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.
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.
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.
Issuances of Common Stock – Stock Compensation:
Upon execution of the VP Agreements, each of the
Sales Executives were granted 1,000,000 shares of unregistered common stock of the Company (“Execution Shares”) valued at
$0.035 per share, the closing price of the common stock of the Company on the grant date. The Company recorded $35,000 of stock-based
compensation expense on the grant date for each issuance. 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”), provided that the VP Agreements remain in effect during the applicable quarterly
period. For the year ended October 31, 2021 and 2020, each Sales Executive has vested an additional 6,300,000 and 2,250,000 Performance
Shares (total 17,100,000 shares). The Company recorded stock-based compensation expense for the years ended October 31, 2021 and 2020
in connection with the vested Execution Shares and Performance Shares of $323,400 and $227,500, respectively (see Note 12).
In connection with the execution of the Consultants
Agreement, the Company issued to the Consultants 12,000,000 shares of unregistered common stock (“Shares”) valued at $0.022
per share, the closing price of the common stock of the Company on the grant date. The Company recorded a total of $266,400 of stock-based
compensation expense during the year ended October 31, 2020 based on the vesting of the Shares (50% of the Shares vest as of the Effective
Date of the Consultants Agreement and 50% of the Shares vest on the six-month anniversary of the Consultants Agreement). In connection
with the execution of the Amendment of the Consultant’s Agreement, the Company issued to the Consultants 20,000,000 shares of unregistered
common stock (“Shares”) valued at $0.0614 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 $1,228,000 over the remaining term of the Consultant’s Agreement.
The shares issued vest 50% as of the date of the Amendment and the remaining 50% will vest on December 31, 2021 or upon the date that
the Company obtains approval for certain IND’s submitted, whichever is sooner. The Company recorded a total of $358,167 of stock-based
compensation expense during the year ended October 31, 2021.
During the period November 1, 2019 through January
31, 2020, in consideration for agreeing to provide lab and administrative consulting services to the Company, the Board approved the issuance
to three individuals an aggregate of 650,000 shares of unregistered common stock valued between $0.027 and $0.031 per share, the closing
price of the common stock of the Company on the respective grants dates. The Company recorded $18,650 of stock-based compensation expense
during the year ended October 31, 2020.
During the period February 1, 2020 through April
30, 2020, in consideration for agreeing to provide lab and administrative consulting services to the Company, the Board approved the issuance
to four individuals an aggregate of 2,725,000 shares of unregistered common stock valued between $0.029 and $0.034 per share, the closing
price of the common stock of the Company on the respective grants dates. The Company recorded $89,458 of stock-based compensation expense
during the year ended October 31, 2020.
During the period May 1, 2020 through July 31,
2020, in consideration for agreeing to provide lab and administrative consulting services to the Company, the Board approved the issuance
to eight individuals an aggregate of 925,000 shares of unregistered common stock valued between $0.031 and $0.048 per share, the closing
price of the common stock of the Company on the respective grants dates. For certain of the issuances, the stock vests on January 31,
2021, provided the recipient remains engaged with the Company during the period. The Company recorded $27,809 of stock-based compensation
expense during the year ended October 31, 2020.
During April 2020, May 2020, September 2020 and
October 2020, in consideration for agreeing to provide medical consulting and advisory services to the Company, the Board approved the
issuance to nine individuals an aggregate of 1,050,000 shares of unregistered common stock valued between $0.023 and $0.28 per share,
the closing price of the common stock of the Company on the respective grants dates. The Company recorded $96,600 of stock-based compensation
expense based on the grant date fair value of these shares during the year ended October 31, 2020.
During February 2020, in recognition of past services
provided to the Company through February 2020, the Board approved the issuance to the CMO of 5,000,000 shares of unregistered common stock
valued at $0.028 per share, the closing price of the common stock of the Company on the grant date. The Company recorded $140,000 of stock-based
compensation expense during the year ended October 31, 2020 based on the fair value of these shares on the grant date.
In connection with the resignation of an independent
member of the Board of Directors of the Company in April 2020, the Board approved the issuance to the director of 736,808 shares of unregistered
common stock valued at $0.022 per share, the closing price of the common stock of the Company on the grant date. The Company recorded
$16,210 of stock-based compensation expense during the during the year ended October 31, 2020 based on the fair value of these shares
on the grant date.
On May 28, 2020, the Company entered into a distribution
agreement with a company owned by Jack Mitrani, the son of Mr. Mitrani. Under the terms of the agreement, the Company agreed to grant
the distributor 3,000,000 shares of unregistered common stock valued at $0.115 per share, the closing price of the common stock of the
Company on the grant date. The Company recorded $345,000 of stock-based compensation expense during the year ended October 31, 2020 based
on the fair value of these shares on the grant date. In addition, the distribution agreement also provides for future stock incentives
based on future sales that are generated by the distributor based on a conversion price equal to 75% of the trading price of the common
stock on the last day of the month in which the incentive was earned.
On May 15, 2020 (“Effective Date”),
the Company entered into an advisor agreement with a third party (“Advisor”) whereby the Advisor will provide financial advisory
services (see Note 12). As consideration, the Company agreed to issue the Advisor 1,000,000 shares of common stock (“Grant”),
of which 250,000 shares shall be fully vested as of the Effective Date, 250,000 shares vest on the sixth month anniversary of the Effective
Date, 250,000 shares vest on the ninth month anniversary of the Effective Date and 250,000 shares vest on the twelfth month anniversary
of the Effective Date, provided however that the Agreement is in full effect during such vesting period(s) for the respective portion
of the Grant. In addition, Company agreed to grant 3-year warrants to the Advisor to purchase 6,000,000 shares of common stock of the
Company at a purchase price of $0.04 per share (“Warrants”), of which Warrants to purchase 2,000,000 unrestricted shares shall
be vested upon the Effective Date of the agreement and 2,000,000 and 2,000,000 of the remaining Warrants shall vest on the eighteenth
month and thirtieth month anniversary of the Effective Date of the agreement, respectively, provided however that the Agreement is renewed
and in full effect during the applicable vesting period(s) for the respective portion of the grant. Notwithstanding the above, any unvested
Grant or Warrants prescribed above will immediately become vested shares if (a) the Company concludes a transaction involving any of the
entities introduced by Advisor based on a transaction value greater than $5MM or (b) the Company completes any transaction that results
in a change in control or any financing transaction with an aggregate value of at least $25MM. The Grant shares were valued at $0.04 per
share, the closing price of the common stock of the Company on the grant date. The Company will record $10,000 of stock-based compensation
expense during each quarter in which the Grant shares become vested based on the fair value of these vested shares on the grant date.
During October 2020, the Company terminated the agreement with the Advisor as provided for under the advisor agreement.
During July 2020, the Company entered into a consulting
agreement with a third party to provide investment banking related consulting services for a minimum period of six months. As consideration
for agreeing to provide consulting services to the Company, the Company issued the consultant 5,000,000 shares of unregistered common
stock valued at $0.05 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 recorded $250,000 of stock-based compensation expense based on
the grant date fair value of these shares during the year ended October 31, 2020.
During August 2020, the Company entered into two
separate consulting agreements with third parties to provide marketing and public relations services for a minimum period of six months.
As consideration for agreeing to provide consulting services to the Company, the Company issued the consultants 300,000 shares and 25,000
shares, respectively, of unregistered common stock valued at $0.127 per share, the closing price of the common stock of the Company on
the effective date of the agreements. The Company recorded a total of $40,790 of stock-based compensation expense based on the grant date
fair value of these shares during the year ended October 31, 2020.
During October 2020, in consideration for agreeing
to provide lab and administrative consulting services to the Company, the Board approved the issuance to two individuals an aggregate
of 230,000 shares of unregistered common stock valued between $0.035 and $0.17 per share, the closing price of the common stock of the
Company on the respective grants dates. The Company recorded $8,730 of stock-based compensation expense during the during the year ended
October 31, 2020.
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 2,000,000 shares of fully vested unregistered common
stock valued at $0.151 per share, the closing price of the common stock of the Company on the effective date of the agreement. The Company
recorded $302,000 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 2,000,000 shares of fully vested unregistered common stock issued to the consultant under the new agreement were valued at $185,400
(valued at $0.093 per share, the closing price of the common stock of the Company on the effective date of the agreement). The Company
recorded $92,700 of stock-based compensation expense during the year ended October 31, 2021 based on the grant date fair value of these
shares amortized over the term of the agreement.
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
250,000 shares of unregistered common stock valued at $0.145 per share, the closing price of the common stock of the Company on the respective
grant dates. The Company recorded $36,225 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 47,675,000 shares of newly issued common stock to executive management (consisting of Mr. Mitrani, Dr. Mitrani and Mr. Bothwell) totaling
45,000,000 shares; non-executive Board members (consisting of Mr. Carbonara and Dr. Meglin) totaling 2,000,000 shares; administrative
staff totaling 550,000; and to several medical advisors totaling 125,000 shares valued at $0.12 per share, the closing price of the common
stock of the Company on the respective grant dates. The Company recorded a total of $5,721,000 of stock-based compensation expense based
on the grant date fair value of these shares during the year ended October 31, 2021.
During April 2021, the Board approved the bonus
of 500,000 shares of newly issued common stock to an employee valued at $0.055 per share, the closing price of the common stock of the
Company on the grant date. The Company recorded a total of $27,450 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 25,000, 240,000 and 50,000 shares of unregistered common stock, respectively,
valued at prices ranging from $0.035 to $0.17 per share, the closing price of the common stock of the Company on the respective grant
dates. The Company recorded a total of $19,855 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 500,000 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 250,000 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 $75,000 of monthly revenues in connection with sales of the Company’s products, up to a
maximum of 1,500,000 shares. The shares issued were valued at $0.095 per share, the closing price of the common stock of the Company on
the effective date of the agreement, totaling $47,500. The Company will amortize the costs associated with the issuance over the term
of the agreement. The Company amortized $35,625 of stock-based compensation expense during the year ended October 31, 2021.
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 $15,000 per month and to issue 500,000 shares of restricted common stock which vested fully on May
21, 2021 (valued at $0.057 per share, the closing price of the common stock of the Company on the grant date). The Company recorded a
total of $28,500 of stock-based compensation expense during the year ended October 31, 2021.
During March 2021, April 2021 and May 2021, the
Company granted a total of 750,000 of common stock to various consultants valued at prices ranging from $0.049 per share to $0.40 per
share, the closing price of the common stock of the Company on the respective grant dates. The Company recorded $85,075 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 1,000,000 shares of common stock of the Company to
vest upon execution of the amendment (valued at $0.136 per share, the closing price of the common stock of the Company on the grant date).
In addition, the employee is eligible to receive up to an aggregate of 3,000,000 additional shares of common stock based on achievement
of certain milestones. The total value of the stock granted in connection with the amendment of $136,000 will be amortized beginning June
4, 2021 over the remaining term of the agreement. The Company recorded $35,789 of stock-based compensation expense based on the grant
date fair value of these shares during the year ended October 31, 2021.
During June 2021, the Company granted a total
of 1,100,000 of common stock to various consultants and service providers valued at prices ranging from $0.14 per share to $0.148 per
share, the closing price of the common stock of the Company on the respective grant dates. The Company recorded $154,740 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
60,000 shares of common stock to a service provider as a prepayment for future services to be provided to the Company valued at $10,000
(valued at $0.167 per share, the closing price of the common stock of the Company on the date of the agreement).
On December 27, 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, 2024 and the Company agreed to increase the employee’s annual salary from $180,000 per
year to $210,000 per year effective January 1, 2022. In connection with the amendment, the Company agreed to grant the employee the employee
1,000,000 shares of common stock of the Company to vest over the remaining term of the agreement (valued at $.029 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
$29,000 will be amortized over the remaining term of the agreement.
Equity Line Of Credit Commitment:
During November 2021, the Company entered into
an agreement with an investor whereby the investor has agreed to provide the Company with a $10,000,000 equity line of credit facility
(“ELOC”), subject to many conditions including the Company determining to proceed with the ELOC, approval and execution of
definitive agreements for the ELOC and the Company subsequently filing a registration statement covering the underlying shares to be sold
under the ELOC. The Company is not obligated to proceed with the ELOC or file a registration statement for the ELOC. In connection with
the above, the investor agreed to purchase 7,000,000 restricted common shares of the Company priced at $0.05 per share ($350,000) upon
such time that the Company initially files the registration statement for the ELOC. In connection with the above, the Company agreed to
pay a commitment fee to the investor in the amount of 3,000,000 shares of common stock of the Company fully vested (valued at $0.067 per
share, the closing price of the common stock of the Company on the date of the agreement). The Company will record $201,000 of stock-based
compensation expense based on the grant date fair value of these shares during the quarter ended January 31, 2022.
Issuances of Common Stock – Conversion
of Debt:
As more fully described in Note 8, the Noteholder
fully funded the Funding Facility as prescribed on February 12, 2020 and the Company converted the Funding Facility into 40,000,000 shares
of common stock of the Company (approximately $0.013 per share).
As more fully described in Note 8, during October
2020, the Company and the holder of the $20,000 debenture, agreed to convert the principal amount of the $20,000 debenture plus interest
accrued and unpaid through the date of the conversion totaling approximately $20,300 into 160,000 shares of common stock of the Company
(approximately $0.125 per share).
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 $82,250 were fully satisfied though the issuance of 500,000
shares of newly issued common stock of the Company valued at $0.165 per share (share price was $0.084 per share on the date of the exchange).
Furthermore, until the CMO becomes a full-time employee of the Company and provided the CMO continues to serve in his current position,
the CMO shall receive compensation equal to $27,000 per quarter beginning May 1, 2021, payable in cash or in stock (based on the average
monthly trading price of the common stock during the applicable quarter) at the option of the Company.
During May 2021, the Company and two employees
agreed to exchange $30,973 of commission payables due to the employees for 176,989 shares of newly issued common stock valued at $0.175
per share, the closing price of the common stock of the Company on the date of the 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”).
On June 29, 2020, the Board amended the MCPP,
providing for the additional grant of common stock of the Company to the current senior executive members of management and the current
non-executive members of the Board based on the Company completing any transaction occurring while employed and/or serving as a member
of the Board, respectively, that results in a change in control of the Company or any sale of substantially all the assets of the Company
(“Transaction”) which upon after giving effect to such issuance of shares below, corresponds to a minimum pre-Transaction
fully diluted price per share of the Company’s common stock in the amounts indicated below.
|
Schedule of minimum pre-Transaction price per share
|
|
|
|
|
|
|
|
|
|
Pre-Transaction Price Per Share
Valuation (a)
|
|
|
Executive Bonus Shares
Issued (b)
|
|
|
Non-executive Board Bonus Shares
Issued (c)
|
|
$
|
0.22
|
|
|
|
40,000,000
|
|
|
|
2,000,000
|
|
$
|
0.34
|
|
|
|
60,000,000
|
|
|
|
3,000,000
|
|
$
|
0.45
|
|
|
|
80,000,000
|
|
|
|
4,000,000
|
|
$
|
0.54
|
|
|
|
100,000,000
|
|
|
|
5,000,000
|
|
(a)
|
proforma for issuance of all shares to be issued pursuant to the MCPP and other in the money contingent share issuances
|
(b)
|
per each executive consisting of Albert Mitrani, Dr. Mari Mitrani, Ian Bothwell, and Dr. George Shapiro
|
(c)
|
per each non-executive Board member consisting of Dr. Allen Meglin and Michael Carbonara
|
On August 14, 2020, the Board amended the MCPP,
providing for the additional grant of common stock of the Company to each Dr. Maria I. Mitrani and Ian Bothwell based on the Company obtaining
aggregate gross fundings (grants for research and development and clinical trials, purchase contracts for Company products, debt and/or
equity financings) or other financial awards during the term of employment with the Company based on the amounts indicated below:
|
Schedule of debt and/or equity financings
|
|
|
|
|
|
|
|
|
|
Aggregate Funding Amount
|
|
|
Shares
|
|
From
|
|
|
To
|
|
|
|
|
$
|
2,500,000
|
|
|
$
|
5,000,000
|
|
|
|
5,000,000
|
|
$
|
5,000,001
|
|
|
$
|
10,000,000
|
|
|
|
10,000,000
|
|
$
|
10,000,001
|
|
|
$
|
30,000,000
|
|
|
|
30,000,000
|
|
On September 23, 2020, the Board amended the MCPP,
providing for the grant of common stock of the Company of 15.0 million, 7.5 million and 15.0 million shares of common stock of the Company,
respectively, to each Albert Mitrani, Dr. Maria I. Mitrani and Ian Bothwell upon such time that the Company’s common stock trades
above $0.25 per share, $0.50 per share and $0.75 per share, respectively, for 30 consecutive trading days subsequent to March 31, 2021
and provided such milestone occurs during the term of employment with the Company.
In addition, each of the current executives were
entitled to receive an additional 7 million shares, which when combined with all previous IND and/or eIND’s Milestones previously
issued under the MCPP of 43 million shares, represents the total of all incentive shares to be issued to each executive in connection
with the combined thirteen IND’s and/or eIND’s Milestones achieved through September 23, 2020. In the future, each of the
current executives shall be entitled to receive 5 million shares as a performance incentive for each IND and/or “Expanded Access”
approval (and excluding all eIND’s) received by the Company that involve more than 15 patients and provided such milestone occurs
during the term of employment with the Company.
On February 10, 2021, the Board amended the MCPP,
providing for the grant of common stock of the Company of 5 million shares for each Phase II clinical trial completed, 5 million shares
for each Phase III clinical trial approved and initiated (deemed to be upon the time the first patient is enrolled) and 10.0 million shares
for each Phase III clinical trial fully enrolled. In addition, the CMO’s portion of a designated grant for an achievement of any
applicable Milestone subsequent to September 23, 2020 was reduced to 30% until the time that the CMO becomes a full-time employee of the
Company.
Pursuant to the MCPP, a total of 342,500,000 shares
have been issued and as described above, additional shares are authorized to be issued under the MCPP subject to the achievement of the
defined contingent performance based milestones described above and provided the milestones are achieved while the individual is employed
and/or serving as a member of the Board:
Schedule of management and consultants performance stock plan
|
|
|
|
|
|
|
|
|
|
|
MCPP
|
|
|
MCPP Remaining
|
|
|
|
Shares
|
|
|
Shares
|
|
Name
|
|
Issued
|
|
|
Authorized
|
|
Albert Mitrani
|
|
|
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
|
|
The Company will record stock-based compensation
expense in connection with any MCPP Shares that are actually awarded based on the fair value as of the initial grant date that the respective
milestone for the MCPP Shares were approved. 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, 2021 and 2020, a total 49,500,000 shares and 293,000,000 shares, respectively, were issued in connection with certain
Milestones achieved. The Company recorded a total of $1,336,500 and $7,911,000 of stock-based compensation
expense during the years ended October 31, 2021 and 2020, respectively. For the MCPP Shares approved on April 25, 2020, June 29, 2020,
August 14, 2020, September 23, 2020, and February 10, 2021, the closing price of the common stock of the Company was $0.027, $0.056, $0.128,
$0.28 and 0.108, respectively.
Upon completion of the Share Exchange (see below),
the MCPP (but not Awards of unexchanged shares of our common stock) was terminated.
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”).
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.
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, 2021, a total of 83,400,000
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, 2021 and 2020 are presented below:
Schedule of unvested equity instruments
|
|
|
|
|
|
|
|
|
|
|
Number of Nonvested Shares
|
|
|
Weighted-
Average
Grant Date
Value
|
|
Outstanding at October 31, 2020
|
|
|
1,111,111
|
|
|
$
|
0.029
|
|
Non-Vested Shares Granted
|
|
|
83,400,000
|
|
|
$
|
0.062
|
|
Vested
|
|
|
666,666
|
|
|
$
|
0.029
|
|
Expired/Forfeited
|
|
|
-
|
|
|
$
|
-
|
|
Outstanding at October 31, 2021
|
|
|
83,844,445
|
|
|
$
|
0.062
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Nonvested Shares
|
|
|
Weighted-
Average
Grant Date
Value
|
|
Outstanding at October 31, 2019
|
|
|
1,777,777
|
|
|
$
|
0.029
|
|
Non-Vested Shares Granted
|
|
|
-
|
|
|
$
|
-
|
|
Vested
|
|
|
666,666
|
|
|
$
|
0.029
|
|
Expired/Forfeited
|
|
|
-
|
|
|
$
|
-
|
|
Outstanding at October 31, 2020
|
|
|
1,111,111
|
|
|
$
|
0.029
|
|
|
|
|
|
|
|
|
|
|
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 $1,093,022 and 14.3 months, respectively.
As of October 31, 2020, 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 $32,222 and 20.0 months, respectively.
NOTE 11 – WARRANTS
A summary of warrant activity for the years ended
October 31, 2021 and 2020 are presented below:
Summary of Warrant Activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
|
Weighted-average
Exercise Price
|
|
|
Remaining
Contractual
Term (years)
|
|
|
Aggregate
Intrinsic Value
|
|
Outstanding at October 31, 2020
|
|
|
9,500,000
|
|
|
$
|
0.03
|
|
|
|
7.90
|
|
|
$
|
1,268,000
|
|
Granted
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Expired/Forfeited
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Outstanding and exercisable at October 31, 2021
|
|
|
9,500,000
|
|
|
$
|
0.03
|
|
|
|
6.90
|
|
|
$
|
289,500
|
|
|
|
Number of
Shares
|
|
|
Weighted-average
Exercise Price
|
|
|
Remaining
Contractual
Term (years)
|
|
|
Aggregate
Intrinsic Value
|
|
Outstanding at October 31, 2019
|
|
|
4,529,371
|
|
|
$
|
0.20
|
|
|
|
0.30
|
|
|
$
|
-
|
|
Granted
|
|
|
9,500,000
|
|
|
$
|
0.03
|
|
|
|
8.53
|
|
|
$
|
-
|
|
Exercised
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
$
|
-
|
|
Expired/Forfeited
|
|
|
(4,529,371
|
)
|
|
$
|
0.20
|
|
|
|
-
|
|
|
$
|
-
|
|
Outstanding and exercisable at October 31, 2020
|
|
|
9,500,000
|
|
|
$
|
0.03
|
|
|
|
7.90
|
|
|
$
|
1,268,000
|
|
On February 26, 2020, the Company issued the CFO
a cashless warrant to purchase an aggregate of 7,500,000 shares of common stock in connection with the CFO’s employment agreement.
The warrant is exercisable for $0.028 per share (the closing price of the Company’s common stock on the date of grant), until the
tenth anniversary date of the date of issuance. The Company valued the warrants on the dates of the grant using the Black-Scholes option
pricing model with the following weighted average assumptions: (1) risk free interest rate 1.14%, (2) term of 10 years, (3) expected stock
volatility of 87%, and (4) expected dividend rate of 0%. All of the warrants vested immediately. The grant date fair value of the warrants
issued was $176,250. The Company recorded $176,250 of stock-based compensation expense during the year ended October 31, 2020 based on
the fair value of these warrants on the grant date.
On May 15, 2020 (“Effective Date”),
the Company granted the Advisor warrants to purchase 6,000,000 shares of common stock of the Company at a purchase price of $0.04 per
share (“Warrants”) and exercisable for three years from the Effective Date. Warrants to purchase 2,000,000 shares shall be
vested upon the Effective Date of the agreement and 2,000,000 and 2,000,000 of the remaining Warrants shall vest on the eighteenth month
and thirtieth month anniversary of the Effective Date of the agreement, respectively, provided however that the agreement is renewed and
in full effect during the applicable vesting period(s) for the respective portion of the grant. Notwithstanding the above, any unvested
Warrants prescribed above will immediately become vested if (a) the Company concludes a transaction involving any of the entities introduced
by Advisor based on a transaction value greater than $5,000,000 or (b) the Company completes any transaction that results in a change
in control or any financing transaction with an aggregate value of at least $25,000,000. The Company valued the warrants on the dates
of the grant using the Black-Scholes option pricing model with the following weighted average assumptions: (1) risk free interest rate
0.31%, (2) term of 3 years, (3) expected stock volatility of 90%, and (4) expected dividend rate of 0%. The grant date fair value of the
warrants issued was $121,200. The Company will record $40,400 of stock-based compensation expense during the period that the Grant shares
vest based on the fair value of these warrants on the grant date. During October 2020, the Company terminated the agreement with the Advisor
as provided for under the advisor agreement (see Note 12).
All stock compensation expense is classified under
general and administrative expenses in the consolidated statements of operations
NOTE 12 – COMMITMENTS AND CONTINGENCIES
The description of Mr. Mitrani’s, Dr. Mitrani’s
and Mr. Bothwell’s executive employment agreements executed in April 2018 (collectively referred to as the April 2018 Executive
Employment Agreements) are summarized below:
April 2018 Executive Employment Agreements
General
Pursuant to Albert Mitrani’s April 2018
Executive Employment Agreement, Mr. Mitrani serves as the Company’s President and Chief Operating Officer. Mr. Mitrani’s base
annual salary is $162,500, which shall accrue commencing on the Effective Date and shall be payable in equal semi-monthly installments,
commencing May 1, 2018, in arrears. The base salary shall be reviewed at least annually by the Board and the Board may, but shall not
be required to, increase the base salary during the Employment Term. Mr. Mitrani is also entitled to a commission on all sales attributable
to him (i.e., excluding existing customers of the Company at the time of the Reorganization) at the rate of five percent (5%) of the “Net
Sales” as defined in the agreement and an expense allowance of $5,000 per month.
Pursuant to Ian Bothwell’s April 2018 Executive
Employment Agreement, Mr. Bothwell continues to serve as the Company’s Chief Financial Officer. Mr. Bothwell’s base annual
salary is $162,500, which shall accrue commencing on the Effective Date and shall be payable in equal semi-monthly installments, commencing
May 1, 2018, in arrears. The base salary shall be reviewed at least annually by the Board and the Board may, but shall not be required
to, increase the base salary during the Employment Term. Mr. Bothwell has not been paid salary since July 2018.
Pursuant to Dr. Maria I. Mitrani’s April
2018 Executive Employment Agreement, Dr. Mitrani continues to serve as the Company’s Chief Science Officer. Dr. Mitrani’s
base annual salary is $162,500, which shall accrue commencing on the Effective Date and shall be payable in equal semi-monthly installments,
commencing May 1, 2018, in arrears. The base salary shall be reviewed at least annually by the Board and the Board may, but shall not
be required to, increase the base salary during the Employment Term.
Term
The term of each of the April 2018 Executive Employment
Agreements commences as of the Effective Date and continues until December 31, 2020 (Mr. Bothwell) or December 31, 2023 (Mr. Mitrani and
Dr. Mitrani) (“Initial Term”), unless terminated earlier pursuant to the terms of the April 2018 Executive Employment Agreement;
provided that on such expiration of the Initial Term, and each annual anniversary thereafter (such date and each annual anniversary
thereof, a “Renewal Date”), the agreement shall be deemed to be automatically extended, upon the same terms and conditions,
for successive periods of one year, unless either party provides written notice of its intention not to extend the term of the April 2018
Executive Employment Agreement at least 90 days’ prior to the applicable renewal Date. The period during which the Executive is
employed by the Company hereunder is hereinafter referred to as the “Employment Term.”
Unpaid Advances
The Company was required to repay the unpaid advances
subsequent to December 31, 2017, and the unreimbursed expenses incurred subsequent to December 31, 2017, on May 15, 2018. Such
payments were not made as required.
Fringe Benefits and Perquisites
During the Employment Term, each Executive shall
be entitled to fringe benefits and perquisites consistent with the practices of the Company, and to the extent the Company provides similar
benefits or perquisites (or both) to similarly situated executives of the Company.
Termination
The Company may terminate the April 2018 Executive
Employment Agreement at any time for good cause, as defined in the April 2018 Executive Employment Agreement, including, the Executive’s
death, disability, Executive’s willful and intentional failure or refusal to follow reasonable instructions of the Company’s
Board of Directors, reasonable and material policies, standards and regulations of the Company’s Board of Directors or management.
Amendments To The April 2018 Executive Employment
Agreements
February 26, 2020 Amendment
On February 26, 2020, the Company agreed to modify
the employment agreement of Mr. Ian T. Bothwell, the Company’s Chief Financial Officer to provide Mr. Bothwell with:
|
a)
|
an extension to his employment agreement dated April 13, 2018 from December 2020 to December 2023 consistent
with other executives of the Company; and
|
|
b)
|
a one-time bonus in the form of a fully vested cashless warrant to purchase 7,500,000 shares of common
stock of the Company, exercisable for ten years at an exercise price of $0.28 per share, the closing price of the common stock on the
date of the grant.
|
April 25, 2020 Amendment
On April 25, 2020, the Company agreed to amend
and revise the each of Albert Mitrani, Ian Bothwell and Dr. Maria I. Mitrani, (individually each of A. Mitrani, Bothwell and Dr. Mitrani
are referred to as an “Executive” and collectively the “Executives”) April 2018 Executive Employment Agreements.
The primary amended terms associated with the agreements for each Executive were substantially similar and consisted of the following:
|
Term:
|
An extension to the term of the employment agreements dated April 13, 2018 from December 31, 2023 to December
31, 2025.
|
|
Base Salary:
|
An increase in base annual salary from $162,500 to $300,000.
The amended salary amount of $300,000 shall be retroactively adjusted to commence as of January 1, 2019. The increased annual salary
of $137,500 (“Incremental Salary”) over the prior annual salary amount of $162,500 (“Original Base Salary”) shall
only be paid only upon there being sufficient available cash. 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.
|
Beginning December 1, 2020, at the sole
option of the Executive, all unpaid Incremental Salary for periods after January 1, 2020 may be converted by the 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 Incremental
Salary that existed prior to January 1, 2020, 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.
Until such time as the Executive elects
to convert, the accrued and unpaid salary, including Original Base Salary and Incremental Salary shall remain an obligation of the Company.
Severance Provisions:
|
1.
|
Company termination without cause, Executive for good reason:
|
|
a)
|
All existing accrued obligations existing at time of termination shall be paid to Executive.
|
|
b)
|
Any unvested equity grants in favor of Executive shall immediately become fully vested and any pending
grants pursuant to the MCPP eligible to be issued to Executive shall be granted to Executive, regardless of whether the associated milestone
were achieved prior to termination,
|
|
c)
|
Executive shall be entitled to a cash payment equal to his unpaid base salary for the remaining term in
effect at time of the time of the termination or an amount equal to four times (4x’s) the base salary in effect at the time of termination,
whichever is greater,
|
|
d)
|
Executive shall be entitled to a cash payment equal to his 200% of the prior year’s cash or stock
bonus (excluding any stock grants received pursuant to the MCPP).
|
|
2.
|
Change In Control: In the event of a Change in Control and the Executive’s employment agreement
is not extended for period of five years from the date of the Change in Control with all other terms and conditions of the agreement remaining
the same, then the Executive may terminate the agreement for good reason and all respective severance terms as provided for a termination
by Executive for good reason described in clause 1 above shall be provided to Executive.
|
|
3.
|
Executive termination due to disability, death, or non-renewal by Company:
|
|
a)
|
All existing accrued obligations existing at time of termination shall be paid to Executive.
|
|
b)
|
Any unvested equity grants in favor of Executive shall immediately become fully vested and any pending
grants pursuant to the MCPP eligible to be issued to Executive shall be granted to Executive, regardless of whether the associated milestone
were achieved prior to termination.
|
|
c)
|
Executive shall be entitled to a cash payment equal to 299% of Executive’s base salary in effect
at the time of termination, plus a gross up amount to cover Executive’s tax liability associated with such payment.
|
|
d)
|
200% of the prior year’s cash or stock bonus (excluding MCPP performance stock grants).
|
June 29, 2020 Amendment
On June 29, 2020, the board of directors of the
Company (“Board”) agreed to further amend and revise the April 2018 Executive Employment Agreements for each of Executives.
The primary amended terms associated with the agreements for each Executive were substantially similar and consisted of the following:
|
Base Salary:
|
An increase in the Executives annual base annual salary upon such time that the Company achieves monthly revenues in the amounts provided below, provided such monthly revenue increase occurs for four consecutive months. Upon the achievement of the defined salary milestone, the salary adjustment will be retroactive to the first month in which the salary threshold was met. Any adjustment pursuant to this provision shall not be reduced for any future reduction in revenues that may occur.
|
|
Schedule of Employee Benefits
|
|
|
|
|
|
Monthly Revenues
(in millions)
|
|
|
Base Salary
Increase
|
|
|
|
|
|
|
$
|
1.00
|
|
|
$
|
130,000
|
|
$
|
1.50
|
|
|
$
|
200,000
|
|
$
|
2.00
|
|
|
$
|
275,000
|
|
$
|
3.50
|
|
|
$
|
630,000
|
|
$
|
5.00
|
|
|
$
|
900,000
|
|
Bonuses
On February 26, 2020, pursuant to the respective
employment agreements with each of the Company’s executive officers, the Board granted each of Mr. Albert Mitrani, Dr. Maria Mitrani
and Mr. Ian Bothwell a cash bonus of $37,500 for the calendar year ended December 31, 2019. Effective December 21, 2020, the Company granted
a bonus of $50,000 and 15,000,000 shares of common stock of the Company each to Mr. Mitrani, Dr. Mitrani and Mr. Bothwell (see Note 10).
Advisor Agreement
Effective May 15, 2020 (“Effective Date”),
the Company entered into a one-year agreement (“Advisor Agreement”) with an individual to provide financial advisory services
to the Company (“Advisor”). The Advisor Agreement is subject to successive, automatic one (1) year extensions unless either
party has given the other 30- day written notice prior to the expiration of then in effect termination date, of their desire not to renew
the Advisor Agreement. As the compensation for Advisor’s services and his fulfillment of all obligations under the agreement the
Company agreed to issue the Advisor 1,000,000 shares of common stock (“Stock Grant”), of which 250,000 shares shall be fully
vested as of the Effective Date, 250,000 shares vest on the sixth month anniversary of the Effective Date, 250,000 shares vest on the
ninth month anniversary of the Effective Date and 250,000 shares vest on the twelfth month anniversary of the Effective Date, provided
however that the Advisor Agreement is in full effect during such vesting period(s) for the respective portion of the Stock Grant. In addition,
Company agreed to grant 3-year warrants to the Advisor to purchase 6,000,000 shares of common stock of the Company at a purchase price
of $0.04 per share (“Warrants”), of which Warrants to purchase 2,000,000 unrestricted shares shall be vested upon the Effective
Date of the Advisor Agreement and 2,000,000 and 2,000,000 of the remaining Warrants shall vest on the eighteenth month and thirtieth month
anniversary of the Effective Date of the Advisor agreement, respectively, provided however that the Advisor Agreement is in full effect
during the applicable vesting period(s) for the respective portion of the grant. The Advisor Agreement may be terminated by the Company
based on Advisor’s breach of any of the terms of the Advisor Agreement, the Company’s determination that Advisor is not meeting
the desired objectives or if either party provides notice of the desire not to renew the Advisor Agreement upon expiration. During October
2020, the Company terminated the agreement with the Advisor as provided for under the advisor agreement. The unvested portion of the Stock
Grant and Warrants as of the termination date were cancelled.
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. The Sales Executives will receive compensation in the
form of monthly salary of $18,000 and a quarterly override during the calendar year 2020 based on revenues earned by the Company during
each quarterly period that exceed $600,000 (“Override Threshold”) beginning for the quarter ended June 30, 2020. The VP Agreements
also require the Sales Executives and the Company to mutually agree on the Override Threshold for calendar years 2021 and 2022 to be eligible
for the Override Threshold for those years, which has yet to be agreed to.
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”), provided that the VP Agreements remain in effect during
the applicable quarterly period.
Consultant Agreements
Effective March 30, 2020 (the “Effective
Date”), the Company entered into a consulting agreement (“Agreement”) with Assure Immune L.L.C. (the “Consultant”)
for an initial term of one year (the “Initial Term”) with automatic renewals for two (2) additional annual periods (each a
“Renewal Term,” and together with the “Initial Term,” the “Term”), unless written notice is provided
by either party at least 45 days prior to the applicable termination date. Neither party provided written notice within the specified
deadlines to terminate upon expiration of the Initial Term and as a result the Term has been extended to March 30, 2022. Under the Agreement,
the Consultant will provide the Company during the Term with expertise, experience, advice and direction associated with the critical
functional executive level roles of the Company as it relates to the oversight and management of the Company’s regulatory, research
and development and laboratory operations, consistent with the Company’s corporate mission and strategies and subject to the resource
limitations of the Company. In connection with the Agreement, the Consultants will receive monthly fees of $30,000 during the Initial
Term and monthly consulting fees of $35,000 during the first Renewal Term and $40,000 during the second Renewal Terms, if any. In addition.
the Company agreed to issue to the Consultant or its designees 12,000,000 shares of common stock of the Company (“Shares”),
50% of which Shares vest as of the Effective Date and balance of which Shares vest upon the six-month anniversary of the Effective Date.
The Agreement also provides that upon the commencement of each Renewal Term, if any, the Consultant will receive up to 6,000,000 additional
Shares, 50% of which Shares will vest on the commencement date of the Renewal Term and the balance of which additional Shares will vest
on the six (6) month anniversary of such date. In connection with the Agreement, the Consultant (and its principals) are obligated
to comply with customary confidentiality, non-compete and non-solicitation covenants and have agreed that all intellectual property developed
during the term of the Agreement shall remain the property of the Company. In addition to the Shares to be issued above, the Consultant
or its designees will be entitled to participate in the Company’s Management and Consultants Performance Stock Plan (the “MCPP”),
more fully described in Note 10.
Effective March 29, 2021, the Company and the
Consultant entered into an amendment to the Agreement (“Amendment”). Under the terms of the Amendment, the initial term of
the Agreement was extended for an additional 2 years 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.
Under the terms of the Amendment, the Consultant received an additional 20,000,000 shares of common stock that vest 50% upon execution
of the Amendment and 50% on the sooner of (1) December 31, 2021 or (2) upon the approval of both of the Company’s IND’s to
be submitted for Osteoarthritis and COVID 19 “Long Hauler”.
During October 2020, the Company entered into
a consulting agreement with a third party 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 Company has agreed to pay the consultants a minimum of $12,500 per month for the first three months of the agreement
and to issue up to 5,000,000 shares of restricted common stock (valued at $0.175 per share, the closing price of the common stock of the
Company on the grant date), based on successful performance of defined milestones. The agreement could be terminated on the third month
anniversary of the agreement or later with or without cause. The Company notified the consultant prior to the third month anniversary
that it was going to terminate the agreement on third month anniversary unless mutually agreed upon amendments to the agreement were completed.
The parties never formally reached any arrangement regarding the future amendments (see Legal Matters below).
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.
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
three of the Company’s approved clinical research trials (“New CRO Agreements”). In connection with the New CRO Agreements,
the Company is obligated to make aggregate payments to the CRO of approximately $1,700,000 plus estimated aggregate pass through costs
and other third-party direct costs of approximately $565,000 as well as site and patient related costs. In connection with the CRO payments,
the Company is obligated the to pay in equal monthly installments over the term of the clinical trial beginning on the commencement of
the applicable clinical trial. 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.
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.
Beginning December 1, 2020, at the sole option
of the Executive, all unpaid Incremental Salary for periods after January 1, 2020 may be converted by the 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 Incremental
Salary that existed prior to January 1, 2020, 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.
None of the Executives have yet to elect to convert
any portion of their unpaid Original Base Salary.
As of October 31, 2021, there was approximately
$721,000 of unpaid Original Base Salary and Incremental Salary related to the period prior to December 31, 2019 and approximately $760,000
of unpaid Original Base Salary and Incremental Salary related to the period January 1, 2020 through October 31, 2021, that could be converted
in the future into approximately 35,685,000 shares of common stock (weighted average conversion price of $0.042 per share).
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 $9,500 per month were to commence in December 2015 through
October 2020. During June 2016, Ethan NY exited from its leased premises. Ethan NY did not make any of the required minimum monthly lease
payments as required. The total amount of minimum lease payments that Ethan NY is obligated to pay pursuant to this 5-year lease is $586,242
(excluding late fees and interest provided for under the Ethan Lease).
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. In connection with the termination of the Ethan
Lease, Ethan NY has made several unsuccessful attempts to contact the landlord for the purpose of obtaining a settlement and release for
any amounts that the landlord may claim are owing under the Ethan Lease, if any. Ethan NY is not aware of any claim pending or threatened
in connection with the Ethan Lease. At October 31, 2021 and 2020, Ethan NY has 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 and $101,905, respectively. In New York State, the statute of limitations for filing a breach of contract claim is 6
years.
Legal Matters
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.
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”) are 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. Prior
to institution of the Lawsuit, the Company terminated the consulting agreement. In the Lawsuit, LAE is seeking judgment for
compensatory damages, interest, costs, and attorneys’ fees. The Company denies any wrongdoing and responsibility in connection
with the Lawsuit, and believes it has strong defenses to the Lawsuit. Although the Lawsuit is in its early stages, the Company and the
Individual Defendants have filed motions to dismiss due to, among other things, (a) that the consulting agreement expressly negates LAE’s
claims; (b) there was, in fact, no breach of contract by the Company; (c) LAE provides no grounds, and cannot provide any grounds, for
its barebones claims that the Company and Individual Defendants induced LAE into a contract that they did not intend to perform; (d) many
of the claims against the Individual Defendants do not exist as a matter of law; and (e) technical deficiencies in the complaint itself
The Company is awaiting a ruling on the motion, and the Individual Defendants’ motion to dismiss will be set for hearing in due
course.
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 13 – 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, 2021 and 2020:
Schedule of carrying amounts
of the assets and liabilities
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|
|
|
|
|
|
|
|
|
|
October 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts Payable
|
|
$
|
94,835
|
|
|
$
|
94,835
|
|
Accrued Expenses
|
|
|
31,016
|
|
|
|
31,016
|
|
|
|
$
|
125,851
|
|
|
$
|
125,851
|
|
In New York State, the statute of limitations
for filing a breach of contract claim is 6 years.
NOTE 14 - SEGMENT INFORMATION
For the years ended October 31, 2021 and 2020,
the Company operated only 1 one operating segment.
NOTE 15 – SUBSEQUENT EVENTS
SPA - Promissory Note
On January 11, 2022, the Company entered into
a Securities Purchase Agreement (the “SPA”) with AJB Capital Investments, LLC (the “Purchaser”) pursuant to which
we sold a Promissory Note in the principal amount of $600,000 (the “Note”) to the Purchaser in a private transaction to for
a purchase price of $540,000 (giving effect to original issue discount of $60,000). In connection with the sale of the Note, the Company
also paid the Purchaser’s legal fees and due diligence costs of $12,500 and brokerage fees of $9,000 to J.H. Darbie & Co., a
registered broker-dealer. After payment of the legal fees and brokerage fees, the net proceeds to the Company were $518,500, which will
be used for working capital and other general corporate purposes.
The Note matures on July 11, 2022, subject to
extension at the option of the Company for up to an additional six month period, bears interest at the a rate of 10% per annum for the
first six months and 12% per annum thereafter if extended, and only following an event of default (as defined in the 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 Note. As used in the Note, “VWAP” means, for any date, the price of our
common stock as determined by the first of the following clauses that applies: (i) if the common stock is then listed or quoted on one
or more established stock exchanges or national market systems, the daily volume weighted average price of the common stock for such date
on the trading market on which the common stock is then listed or quoted as reported by Bloomberg L.P.; or (ii) if the common stock is
regularly quoted on an automated quotation system (including applicable tiers of the over-the-counter market maintained by OTC Market
Group, Inc.) or by a recognized securities dealer, the volume weighted average price of the common stock for such date on the applicable
OTC Markets Group, Inc. tier or as quoted by such securities dealer. In accordance with the terms of the SPA, as of January 11, 2022,
the Company has reserved 36,923,080 shares of its authorized but unissued common stock for issuance in the event the Purchaser exercises
its right to convert the Note following an event of default.
The Note
may be prepaid by the Company at any time without penalty. The 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 $200,000 (the “Initial Commitment Fee”) in the form of 3,076,921 shares
of the Company’s common stock (the “Initial Commitment Fee Shares”). In addition, if the Company exercises the option
to extend the maturity date of the Note, the Company will pay an additional commitment fee to the Purchaser in the amount of $100,000
(the “Additional Commitment Fee,” and together with the Initial Commitment Fee, collectively, the “Commitment Fee”)
in the form of an additional 1,538,462 shares of its common stock (the “Additional Commitment Fee Shares,” and together with
the Initial Commitment Fee Shares, collectively, the “Commitment Fee Shares”). In the event that by the first anniversary
of repayment of the Note by the Company, the Purchaser has not generated the amount of the Commitment Fee from public sales of the Commitment
Fee Shares, the Company shall either pay the amount of any such shortfall either (i) by issuing additional shares of our common stock
at a price equal to the VWAP for the common stock during the five (5) trading day period prior to such anniversary date; or (ii) in cash,
in which case, the Company shall repurchase any unsold Commitment Fee Shares then held by the Purchaser for such shortfall amount.
The offer and sale of the Note to the Purchaser
was made in a private transaction 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 Rule 506(b) of Regulation D promulgated
thereunder.
The Company will record a discount of the Note
in the amount of approximately $260,000, consisting of the original issue discount of $60,000 and the amount of the guaranty for the proceeds
to be received by the Purchaser’s from the sale of the Initial Commitment Shares issued at closing equal to $200,000. The discount
will be amortized over the initial term of the Note.
Other
Several other subsequent events are disclosed
in Notes 7, 10, and 12. There were no other subsequent events for disclosure purposes.