MRZM Marizyme Inc (QB)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

·We have incurred losses since inception and we anticipate that we will incur continued losses for the foreseeable future; 

Overview

Marizyme, Inc., a Nevada corporation formerly known as GBS Enterprises Incorporated (the “Company,” “Marizyme,” “we,” “us” or “our”), conducted its primary business through its minority owned subsidiary, GBS Software AG, or GROUP, a German-based public-company whose stock traded on the Frankfurt Exchange. GROUP’s software and consulting business was focused on serving IBM’s Lotus Notes and Domino market. On March 21, 2018, GBS Enterprises Incorporated formed a wholly owned subsidiary named Marizyme, Inc., a Nevada Corporation and merged it with GBS Enterprises Incorporated for the purpose of renaming the Company Marizyme, Inc.

Our common stock is currently quoted on the OTC Markets’ QB tier under the symbol “MRZM.” We may also examine our options with respect to the listing of our common stock on the Nasdaq Stock market or the NYSE.

Since late 2018, we have been focused on our clinically-tested and previously patented use of a protease-based therapeutic platform called Krillase® which we acquired from ACB Holding AB. Clinical studies have shown a Krillase-based product to be an effective in the treatment of chronic wounds and burns, while preclinical research may show Krillase to be a promising treatment for acute ischemic stroke. The Krillase-based technology platform has the potential for additional product opportunities such as in the treatment of deep vein thrombosis, coronary thrombosis, skin grafting and gingivitis, or tooth decay.

Beginning in late 2019, we began working with Somahlution LLC, or Somahlution, to license and market Somahlution’s flagship product DuraGraft®. DuraGraft is an “endothelial damage inhibitor” indicated for cardiac bypass, peripheral bypass and other vascular surgeries, approved for marketing in the European Union under CE Mark and in several countries in Asia. The DuraGraft platform technology can be applied to prevent ischemic injury to tissues and organs. Besides its flagship commercial product DuraGraft, preclinical studies have shown that the Somahlution’s DuraGraft platform technology has the potential for multiple product opportunities for several indications in transplant surgery and tissue grafting. As discussed below, on July 30, 2020, we acquired all of the assets of Somahlution and its related companies. 

Recent Events

Somahlution Asset Acquisition

On December 15, 2019, we entered into an asset purchase agreement, as amended on March 31, 2020 and May 29, 2020, or the Agreement, with Somahlution, LLC, Somahlution, Inc. and Somaceutica, LLC, companies duly organized under the laws of Delaware, which we refer to collectively as Somah to acquire all of the assets, and none of the liabilities, of Somah (the “Acquisition”). Somah is engaged in developing products to prevent ischemic injury to organs and tissues and its products (the “Somah Products”) include DuraGraft, a one-time intraoperative vascular graft treatment for use in vascular and bypass surgeries that maintains endothelial function and structure, and other related properties. On July 30, 2020, the Company and Somah signed Amendment No. 3 to the Agreement. Pursuant to the terms of this amendment, it was agreed that, as part of the Acquisition, the Company would acquire the outstanding capital stock of Somahlution, Inc., held by Somahlution, LLC, rather than the assets of Somahlution, Inc. This change to the Agreement was made to accommodate the European Union (“EU”) requirements with respect to the manufacture under Somahlution, Inc. of CE marked products for sale in the EU. On July 30, 2020, the Company closed the Acquisition.

Somah will be entitled to appoint two members to our board of directors. Additionally, following the closing of the Somah acquisition, Satish Chandran, Somah’s founder and Chief Executive Officer, will become our President and Chief Operating Officer and that Catherine Pachuk, Somah’s Chief Science Officer, will become our Chief Science Officer.  

Private Placement

On August 3, 2020, we conducted an initial closing of a private placement (the “Private Placement”) pursuant to which we sold to a number of accredited investors an aggregate of 4,609,984 shares (the “Shares”) of our common stock, par value $0.001 per share, at a purchase price of $1.25 per Share for an aggregate amount of $5,762,480.

Our Products

Krillase

Through our acquisition of the Krillase technology from ACB Holding AB, we have purchased a European Union clinically tested and previously patented protease therapeutic platform for the treatment of deep vein thrombosis and chronic wounds/burns. Krillase may be classified as a biological drug, however, it has been classified as a Class III medical device in Europe for treating chronic wounds.

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Krillase, derived from Antarctic krill, shrimp-like crustaceans, is a combination of endo and exopeptidases that safely and efficiently breaks down thrombogenic material and necrotic tissue. A mix of proteinases and peptidases in Krillase helps the Antarctic krill digest and break down its food in the extremely cold Antarctic environment. As a result, the specialized enzymes provide a “cutting” capability. As a “biochemical knife,” Krillase breaks down necrotic tissue and thrombogenic material and can mitigate or treat multiple disease states in humans. For example, Krillase can dissolve arterial thrombogenic plaque safely and efficiently. In preclinical studies in Europe, Krillase has demonstrated that it can completely dissolve fresh and organized thrombus faster and more effectively than currently approved fibrinolytic therapy without the potential for bleed outs, and it has demonstrated in both preclinical and clinical studies that it promotes faster healing and supports grafting for chronic wounds and burns.

We have acquired a Krillase based product pipeline that is focused on developing products that treat a number of conditions across the critical care market. Itemized below is a breakdown of our current Krillase pipeline and its development status:

·MB101 – Therapy for complex wounds and burns: Completed Phase 2B trials in the EU. 

·MB104 – Therapy for deep vein thrombosis: Early pre-clinical stage. 

Krillase received medical device status in the European Union for debridement of deep partial and full-thickness wounds in hospitalized patients, on July 19, 2005. we expect to initiate commercialization of the Krillase wound healing product for distribution in Europe and South America in 2021. Krillase will initially be delivered as a sterile, long shelf life lyophilized powder.

Unmet Clinical Needs

·CABG remains the standard treatment for multi-vessel coronary artery disease or left main artery disease. 

·Benefits of CABG are, however, limited by high patient level vein graft failure (VGF) rates (~50%) that haven’t changed in decades. 

·“The Early Promise of Coronary Bypass Grafting has not been fulfilled and an insidiously deadly variety of atherosclerosis progressively chokes vein grafts and extinguishes their benefits,” Fitzgibbons, 1996. 

·“VGF remains one of the leading causes of poor in-hospital and long-term outcomes after CABG,” Harskamp, 2013. 

·“The Issue of Low Patency Rates Owing to VGF Needs Urgent Attention,” de Vries, 2016. 

·Vein graft failure is result of damage to graft endothelium that occurs during CABG surgery. 

·Ischemic reperfusion injury is the primary cause of endothelial damage. 

·Vein graft failure post-CABG is associated with poor clinical outcomes. 

·DuraGraft prevents endothelial damage, prevents graft disease and improves clinical outcomes. 

Our Competitive Strength

We believe that the following competitive strengths will enable us to compete effectively:

Our Krillase platform provides a significant and substantial competitive advantage as:

·Clinical studies in Europe have shown Krillase to achieve superior wound healing effects in treatment of necrotic leg ulcers. 

·Our patent protected unique mixture of highly efficient endo and exopeptidases extracted from the digestive tract of the Antarctic Krill for use in the removal of dental plaque and other dental applications has not been recreated artificially. 

The DuraGraft platform provides a significant and substantial competitive advantage as:

·DuraGraft, CE marked in Europe, is “first-in-class” as the only approved product for sale in Europe for vein graft preservation. 

Our Growth Strategy

Our growth strategy is premised on (a) integrating the acquisition of the Somah assets and the engagement of the Somah personnel in connection with this acquisition; and (b) the successful completion of our Private Placement and other future capital raising offerings, either public or private.

We will strive to grow our business by pursuing the following key growth strategies:

·Complete the integration of the acquisition of the Somah assets and begin (i) the marketing and distribution of the Somah Products, particularly DuraGraft, in Europe and (ii) the development, regulatory approval and commercialization of DuraGraft and related Somah Products in the United States;  

·Begin to commercialize our Krillase platform through the development of (i) manufacturing and distribution in Europe and South America of a Krillase would healing product and (ii) additional Krillase based applications; and 

·Expand our product portfolio through the identification and acquisition of additional life science assets. 

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The strategic plans described above will require capital.  There can be no assurances that we will be able to raise the capital that we will need to execute our plans or that additional capital, whether through the Private Placement, other securities offerings, whether private or public, or otherwise, will be available to us on acceptable terms, if at all.  An inability to raise sufficient funds could cause us to scale back our development and growth plans or discontinue them altogether.

Impact of the Coronavirus

On January 30, 2020, the World Health Organization, or WHO, announced a global health emergency because of a new strain of coronavirus, COVID-19, originating in Wuhan, China and the risks to the international community as the virus spreads globally beyond its point of origin. On March 11, 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The COVID-19 pandemic is affecting the United States and global economies and may affect our prospective future revenues, and our operations and those of third parties with whom we might interact, including by causing disruptions in the development of our product candidates, product marketing efforts and the conduct of current and expected future clinical trials.

Emerging Growth Company

We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:

·have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; 

·comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis); 

·submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and 

·disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. 

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards.

In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our shares of common stock that are held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

FINANCIAL OPERATIONS OVERVIEW

As of June 30, 2020, our accumulated deficit is approximately $31.89 million. We expect to incur additional losses to perform further research and development activities and do not currently have any commercial biopharmaceutical products. We do not expect to have such for several years, if at all.

Our product development efforts are thus in their early stages and we cannot make estimates of the costs or the time they will take to complete. The risk of completion of any program is high because of the many uncertainties involved in bringing new drugs to market including the long duration of clinical testing, the specific performance of proposed products under stringent clinical trial protocols, the extended regulatory approval and review cycles, our ability to raise additional capital, the nature and timing of research and development expenses and competing technologies being developed by organizations with significantly greater resources.

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CRITICAL ACCOUNTING POLICIES

Financial Reporting Release No. 60 requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. Our accounting policies are described in ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA of our Annual Report on Form 10-K as of and for year ended December 31, 2019, filed with the SEC on April 14, 2020. There have been no changes to our critical accounting policies since December 31, 2019.

OFF-BALANCE SHEET ARRANGEMENTS

We had no off-balance sheet arrangements as of June 30, 2020.

RECENT ACCOUNTING PRONOUNCEMENTS

None

RESULTS OF OPERATIONS

Comparison of Three Months Ended June 30, 2020 and 2019

Revenues

Our total revenue was $0 for the three-month periods ended June 30, 2020 and 2019, respectively.

Cost of Goods Sold

Our cost of goods sold was $0 for the three-month periods ended June 30, 2020 and 2019, respectively.

Operating Expenses (including Selling, General and Administrative Expenses)

For the three months ended June 30, 2020, our operating expenses increased to $$434,911 from $237,362 for the three months ended June 30, 2019. The increase was primarily due to increased consulting, legal, filing and investor expenses.

Net Other Income (Expense)

Our net other income (expenses) was $0 for the three-month periods ended June 30, 2020 and 2019, respectively.

Income Tax Expense

Income tax expense was $0 and $0 for the three-month period ended June 30, 2019 and 2018, respectively.

Net Loss

As a result of the foregoing factors, we had a net loss of $434,911 for the three months ended June 30, 2020, as compared to $237,362 for the three months ended June 30, 2019.

Comparison of Six Months Ended June 30, 2020 and 2019

Revenues

Our total revenue was $0 for the six-month periods ended June 30, 2020 and 2019.

Cost of Goods Sold

For the six months ended June 30, 2020, our Cost of Goods Sold were $-0- from $-0- for the six months ended June 30, 2019.

Operating Expenses (including Selling, General and Administrative Expenses)

For the six months ended June 30, 2020, the Company’s Operating Expense increased to $906,281 from $305,603 for the six months ended June 30, 2019. The increase was primarily due to increased consulting, legal, filing and investor expenses.

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Net Other Income (Expense)

For the six months ended June 30, 2020 the Company had Net Other Income (Expense) of $-0- compared to Net Other Expenses of $-0- for the six months ended June 30, 2019.

Income Tax Expense

Income tax expense was $0 and $0 for the six-month period ended June 30, 2020 and 2019, respectively.

Net Loss

As a result of the foregoing factors, we had a net loss of $906,281 for six months ended June 30, 2020, as compared to $305,602 for the six months ended June 30, 2019.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2020, we had $4,454 in cash, compared to $90 at December 31, 2019. At June 30, 2020, our accumulated stockholders’ deficit was $31,886,862 compared to $30,980,581 at December 31, 2019. There is substantial doubt as to our ability to continue as a going concern.

We have generated minimal revenues to date and our cash balance as reported above is not sufficient to fund our current and planned operations for any period of time. To fully implement our plan of operations for the next 12-month period, we will need to raise a significant amount of capital through our Private Placement, of which we have conducted an initial closing, and through additional future offerings, either private or public.  There can be no assurances, however, that we will be successful in these capital raising efforts.

Subsequent Financing Activities

Private Placement

On August 3, 2020, we conducted an initial closing of the Private Placement pursuant to which we sold an aggregate of 4,609,984 Shares, at a purchase price of $1.25 per Share for an aggregate amount of $5,762,480.