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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2022

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to _________

 

Commission File Number 000-55575

 

SIGYN THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   47-2573116
(State or other jurisdiction of incorporation)   (IRS Employer File Number)
     
2468 Historic Decatur Road Ste., 140, San Diego, California   92106
(Address of principal executive offices)   (zip code)

 

(619) 353-0800

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
None        

 

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.0001 Par Value

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by checkmark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
(Do not check if a smaller reporting company)      
    Emerging Growth Company

 

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

As of August 15, 2022, there were 37,295,813 shares of common stock outstanding.

 

 

 

 
 

 

SIGYN THERAPEUTICS, INC.

 

TABLE OF CONTENTS

 

Heading Page
   
PART I – FINANCIAL INFORMATION  
   
Item 1. Financial Statements 4
     
  Unaudited Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021 4
     
  Unaudited Condensed Consolidated Statements of Operations for the Three and Six months ended June 30, 2022 and 2021 5
     
  Unaudited Condensed Consolidated Statements of Stockholders’ Deficit for the Three and Six months ended June 30, 2022 and 2021 6
     
  Unaudited Condensed Consolidated Statements of Cash Flows for the Six months ended June 30, 2022 and 2021 7
     
  Notes to the Unaudited Condensed Consolidated Financial Statements 8
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk 35
   
Item 4. Controls and Procedures 35
     
PART II – OTHER INFORMATION  
   
Item 1. Legal Proceedings 37
   
Item1A. Risk Factors 37
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 37
   
Item 3. Defaults Upon Senior Securities 37
   
Item 4. Mine Safety Disclosure 37
   
Item 5. Other Information 38
     
Item 6. Exhibits 38
     
SIGNATURES 40

 

2
 

 

DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

 

This report contains forward-looking statements. The forward-looking statements are contained principally in the sections entitled “Description of Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “seeks,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “would” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. These risks and uncertainties include, but are not limited to, the factors described in the section captioned “Risk Factors” below. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Such statements may include, but are not limited to, information related to: anticipated operating results; licensing arrangements; relationships with our customers; consumer demand; financial resources and condition; changes in revenues; changes in profitability; changes in accounting treatment; cost of sales; selling, general and administrative expenses; interest expense; the ability to secure materials and subcontractors; the ability to produce the liquidity or enter into agreements to acquire the capital necessary to continue our operations and take advantage of opportunities; legal proceedings and claims.

 

Also, forward-looking statements represent our estimates and assumptions only as of the date of this report. You should read this report and the documents that we reference and filed as exhibits to this report completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.

 

USE OF CERTAIN DEFINED TERMS

 

Except as otherwise indicated by the context, references in this report to “we,” “us,” “our,” “our Company,” or “the Company” is of Sigyn Therapeutics, Inc.

 

In addition, unless the context otherwise requires and for the purposes of this report only:

 

  “Sigyn” refers to Sigyn Therapeutics, Inc., a Delaware corporation;
  “Commission” refers to the Securities and Exchange Commission;
  “Exchange Act” refers to the Securities Exchange Act of 1934, as amended; and
  “Securities Act” refers to the Securities Act of 1933, as amended.


 

3
 

 

PART 1. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

SIGYN THERAPEUTICS, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

                 
    June 30,     December 31,  
    2022     2021  
             
ASSETS                
Current assets:                
Cash   $ 7,291     $ 340,956  
Inventories     50,000       50,000  
Other current assets     47,706       2,075  
Total current assets     104,997       393,031  
                 
Property and equipment, net     25,482       28,046  
Intangible assets, net     3,900       5,700  
Operating lease right-of-use assets, net     240,818       262,771  
Other assets     20,711       20,711  
Total assets   $ 395,908     $ 710,259  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
Current liabilities:                
Accounts payable   $ 299,317     $ 39,853  
Accrued payroll and payroll taxes     69,842       1,072  
Short-term convertible notes payable, less unamortized debt issuance costs of $333,097 and $53,614, respectively     945,219       647,202  
Current portion of operating lease liabilities     49,545       46,091  
Total current liabilities     1,363,923       734,218  
Long-term liabilities:                
Operating lease liabilities, net of current portion     215,146       240,625  
Total long-term liabilities     215,146       240,625  
Total liabilities     1,579,069       974,843  
                 
Stockholders’ deficit:                
Preferred stock, $0.0001 par value, 10,000,000 shares authorized; no shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively     -       -  
Common stock, $0.0001 par value, 1,000,000,000 shares authorized; 37,295,813 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively     3,730       3,730  
Additional paid-in capital     4,423,239       3,997,445  
Accumulated deficit     (5,610,130 )     (4,265,759 )
Total stockholders’ deficit     (1,183,161 )     (264,584 )
Total liabilities and stockholders’ deficit   $ 395,908     $ 710,259  

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

4
 

 

SIGYN THERAPEUTICS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

                                 
    Six Months Ended June 30,     Three Months Ended June 30,  
    2022     2021     2022     2021  
                         
Net revenues   $ -     $ -     $ -     $ -  
                                 
Gross Profit     -       -       -       -  
                                 
Operating expenses:                                
Marketing expenses     381       164,500       131       82,250  
Research and development     383,025       256,252       154,683       139,736  
General and administrative     758,625       423,163       377,981       219,832  
Total operating expenses     1,142,031       843,915       532,795       441,818  
Loss from operations     (1,142,031 )     (843,915 )     (532,795 )     (441,818 )
                                 
Other expense:                                
Interest expense     31       -       -       -  
Interest expense - debt discount     160,854       236,642       108,597       185,783  
Interest expense - original issuance costs     41,455       30,986       24,933       22,260  
Total other expense     202,340       267,628       133,530       208,043  
                                 
Loss before income taxes     (1,344,371 )     (1,111,543 )     (666,325 )     (649,861 )
Income taxes     -       -       -       -  
                                 
Net loss   $ (1,344,371 )   $ (1,111,543 )   $ (666,325 )   $ (649,861 )
                                 
Net loss per share, basic and diluted   $ (0.04 )   $ (0.03 )   $ (0.02 )   $ (0.02 )
                                 
Weighted average number of shares outstanding                                
Basic and diluted     37,295,803       35,841,627       37,295,803       36,410,334  

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

5
 

 

SIGYN THERAPEUTICS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

 

                                         
    Common Stock     Additional Paid     Accumulated     Total Stockholders’  
    Shares     Amount     in Capital     Deficit     Deficit  
Balance as of December 31, 2020     35,201,513     $ 3,520     $ 1,356,799     $ (1,261,140 )   $ 99,179  
Common stock issued to third party for services     47,000       5       82,245       -       82,250  
Warrants issued to third parties in conjunction with debt issuance     -       -       113,910       -       113,910  
Beneficial conversion feature in conjunction with debt issuance     -       -       86,090       -       86,090  
Net loss     -       -       -       (461,682 )     (461,682 )
Balance as of March 31, 2021     35,248,513     $ 3,525     $ 1,639,044     $ (1,722,822 )   $ (80,253 )
                                         
Common stock issued to third party for services     47,000       5       82,245       -       82,250  
Warrants issued to third parties in conjunction with debt issuance     -       -       34,118       -       34,118  
Beneficial conversion feature in conjunction with debt issuance     -       -       15,882       -       15,882  
Common stock issued for cash     1,172,000       118       1,464,882       -       1,465,000  
Common stock issued to third parties in conjunction with conversion of debt     157,143       16       109,984       -       110,000  
Net loss     -       -       -       (649,861 )     (649,861 )
Balance as of June 30, 2021     36,624,656     $ 3,663     $ 3,346,157     $ (2,372,683 )   $ 977,137  
                                         
Balance as of December 31, 2021     37,295,803     $ 3,730     $ 3,997,445     $ (4,265,759 )   $ (264,584 )
Warrants issued to third parties in conjunction with debt issuance     -       -       162,362       -       162,362  
Amortization of warrants issued in connection with a debt modification     -       -       48,699       -       48,699  
Net loss     -       -       -       (678,046 )     (678,046 )
Balance as of March 31, 2022     37,295,803     $ 3,730     $ 4,208,506     $ (4,943,805 )   $ (731,569 )
                                         
Warrants issued to third parties in conjunction with debt issuance     -       -       168,991       -       168,991  
Amortization of warrants issued in connection with a debt modification     -       -       49,240       -       49,240  
Fees associated with filing of Form S-1     -       -       (3,498 )     -       (3,498 )
Net loss     -       -       -       (666,325 )     (666,325 )
Balance as of June 30, 2022     37,295,803     $ 3,730     $ 4,423,239     $ (5,610,130 )   $ (1,183,161 )

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

6
 

 

SIGYN THERAPEUTICS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

                 
    Six Months Ended June 30,  
    2022     2021  
             
             
Cash flows from operating activities:                
Net loss   $ (1,344,371 )   $ (1,111,543 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation expense     3,423       847  
Amortization expense     1,800       14,406  
Stock issued for services     -       164,500  
Accretion of debt discount     160,854       236,644  
Accretion of original issuance costs     41,455       30,986  
Changes in operating assets and liabilities:                
Other current assets     (45,631 )     (27,370 )
Other assets     -       (20,711 )
Accounts payable     259,464       24,661  
Accrued payroll and payroll taxes     68,698       5,020  
Other current liabilities     -       1,026  
Net cash used in operating activities     (854,308 )     (681,534 )
                 
Cash flows from investing activities:                
Purchase of property and equipment     (859 )     (2,871 )
Net cash used in investing activities     (859 )     (2,871 )
                 
Cash flows from financing activities:                
Proceeds from short-term convertible notes     525,000       250,000  
Repayment of short-term convertible notes     -       (55,000 )
Common stock issued for cash     -       1,465,000  
Fees associated with filing of Form S-1     (3,498 )     -  
Net cash provided by financing activities     521,502       1,660,000  
                 
Net decrease in cash     (333,665 )     975,595  
                 
Cash at beginning of period     340,956       84,402  
Cash at end of period   $ 7,291     $ 1,059,997  
                 
Supplemental disclosures of cash flow information:                
Cash paid during the period for:                
Interest   $ -     $ -  
Income taxes   $ -     $ -  
                 
Non-cash investing and financing activities:                
Beneficial conversion feature in conjunction with debt issuance   $ -     $ 101,972  
Amortization of warrants issued in connection with a debt modification   $ 97,939     $ -  
Warrants issued to third parties in conjunction with debt issuance   $ 331,353     $ 148,028  
Original issue discount issued in conjunction with debt   $ 52,500     $ 25,000  
Common stock issued to third parties in conjunction with conversion of debt   $ -     $ 110,000  

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

7
 

 

SIGYN THERAPEUTICS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES

 

Corporate History and Background

 

Sigyn Therapeutics, Inc. (“Sigyn” or the “Company”) is a development-stage medical technology company headquartered in San Diego, California. Our focus is directed toward the creation of therapeutic solutions that address unmet needs in global health.

 

Sigyn Therapy™ is a broad-spectrum blood purification technology to address life-threatening infections and inflammatory disorders for which effective drug therapies are not available. Sigyn Therapy extracts pathogen sources of life-threatening inflammation in concert with dampening down the dysregulated overproduction of inflammatory cytokines (the cytokine storm), which plays a prominent role in each of our candidate treatment indications.

 

Based on its unprecedented ability to isolate and remove viral pathogens, bacterial toxins, and inflammatory cytokines from the bloodstream, Sigyn Therapy is a candidate to treat pathogen-associated sepsis (leading cause of hospital deaths), community acquired pneumonia (a leading cause of death among infectious diseases), emerging pandemic threats, and hyperinflammation & endotoxemia in end-stage renal disease patients.

 

Since initiating the development of Sigyn Therapy in 2020, we completed a series of in vitro studies that demonstrated the ability of Sigyn Therapy to extract pathogen sources of inflammation from human blood plasma. These include endotoxin (a gram-negative bacterial toxin), peptidoglycan and lipoteichoic acid (gram-positive bacterial toxins), and viral pathogens, including COVID-19.

 

We also completed studies that demonstrated the ability of Sigyn Therapy to extract inflammatory cytokines from human blood plasma. These include interleukin-1 beta (IL-1b), interleukin-6 (IL-6), and tumor necrosis factor alpha (TNF-a). In a related study, we reduced the circulating presence of 104 nanometer liposomes as a model to evaluate the potential of Sigyn Therapy to address CytoVesicles that transport inflammatory cytokine cargos throughout the bloodstream.

 

Additionally, we validated the rapid reduction of hepatic (liver) toxins from human blood plasma, which included ammonia, bile acid and bilirubin. Based on these outcomes, we may further investigate the potential of Sigyn Therapy to address acute forms of liver failure.

 

Subsequent to our in vitro milestone achievements, we completed in vivo animal studies at the University of Michigan, which demonstrated Sigyn Therapy to be well tolerated. In the studies, Sigyn Therapy was administered via standard dialysis machines utilizing conventional blood-tubing sets, for periods up to six hours in eight porcine (pig) subjects. Important criteria for treatment safety, including hemodynamic parameters, serum chemistries and hematologic measurements, were stable across all eight subjects.

 

The data resulting from our in vivo and in vitro studies is being incorporated into an Investigational Device Exemption (IDE) that we are drafting for submission to the U.S. Food and Drug Administration (“FDA”) to support the potential initiation of human feasibility studies in the United States.

 

8
 

 

Merger Transaction

 

On October 19, 2020, Sigyn Therapeutics, Inc, a Delaware corporation (the “Registrant”) formerly known as Reign Resources Corporation, completed a Share Exchange Agreement (the “Agreement”) with Sigyn Therapeutics, Inc., a private entity incorporated in the State of Delaware on October 19, 2019.

 

In the Share Exchange Agreement, we acquired 100% of the issued and outstanding shares of privately held Sigyn Therapeutics common stock in exchange for 75% of the fully paid and nonassessable shares of our common stock outstanding (the “Acquisition”). In conjunction with the transaction, we changed our name from Reign Resources Corporation to Sigyn Therapeutics, Inc. pursuant to an amendment to our articles of incorporation that was filed with the State of Delaware. Subsequently, our trading symbol was changed to SIGY. The Acquisition was treated by the Company as a reverse merger in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). For accounting purposes, Sigyn is considered to have acquired Reign Resources Corporation as the accounting acquirer because: (i) Sigyn stockholders own 75% of the combined company, on an as-converted basis, immediately following the Closing Date, (ii) Sigyn directors hold a majority of board seats in the combined company and (iii) Sigyn management held all key positions in the management of the combined company. Accordingly, Sigyn’s historical results of operations will replace Reign Resources Corporation’s historical results of operations for all periods prior to the Acquisition and, for all periods following the Acquisition, the results of operations of the combined company will be included in the Company’s financial statements. The Acquisition was treated as a “tax-free exchange” under Section 368 of the Internal Revenue Code of 1986 and resulted in the private Sigyn Therapeutics corporate entity (established on October 29, 2019) to become a wholly owned subsidiary of Reign Resources Corporation. Among the conditions for closing the acquisition, the Reign Resources Corporation extinguished all previously reported liabilities, its preferred class of shares, and all stock purchase options. As a result, the reported liabilities totaling $3,429,516 were converted into a total of 7,907,351 common shares. Additionally, assets held on the books of Reign Resources Corporation, such as Gem inventory, was kept in the Company and therefore recorded as assets on the Share Exchange date. Upon the closing of the Acquisition, we appointed James A. Joyce and Craig P. Roberts to serve as members of our Board of Directors.

 

As of August 15, 2022, we have a total 37,295,813 shares issued and outstanding, of which 11,655,813 shares are held by non-affiliate stockholders.

 

NOTE 2 – BASIS OF PRESENTATION

 

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include all adjustments necessary for the fair presentation of the Company’s financial position and results of operations for the periods presented.

 

The Company currently operates in one business segment. The Company is not organized by market and is managed and operated as one business. A single management team reports to the chief operating decision maker, the Chief Executive Officer, who comprehensively manages the entire business. The Company does not currently operate any separate lines of businesses or separate business entities.

 

Going Concern

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. The Company had an accumulated deficit of $5,610,130 at June 30, 2022 and $4,265,759 at December 31, 2021, had a working capital deficit of $1,258,926 and $341,187 at June 30, 2022 and December 31, 2021, respectively, had a net loss of $1,344,371 and $1,111,543 for the six months ended June 30, 2022 and 2021, respectively, and net cash used in operating activities of $854,308 and $681,534 for the six months ended June 30, 2022 and 2021, respectively, with no revenue earned since inception, and a lack of operational history. These matters raise substantial doubt about the Company’s ability to continue as a going concern.

 

While the Company is attempting to expand operations and increase revenues, the Company’s cash position may not be significant enough to support the Company’s daily operations. Management intends to raise additional funds by way of a private offering or an asset sale transaction. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern. While management believes in the viability of its strategy to generate revenues and in its ability to raise additional funds or transact an asset sale, there can be no assurances to that effect or on terms acceptable to the Company. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate revenues.

 

The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

9
 

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to GAAP and have been consistently applied in the preparation of the financial statements.

 

Use of Estimates

 

The preparation of these financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements and the reported amounts of net sales and expenses during the reported periods. Actual results may differ from those estimates and such differences may be material to the financial statements. The more significant estimates and assumptions by management include among others: common stock valuation, and the recoverability of intangibles. The current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions.

 

Cash

 

The Company’s cash is held in bank accounts in the United States and is insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. The Company has not experienced any cash losses.

 

Income Taxes

 

Income taxes are accounted for under an asset and liability approach. This process involves calculating the temporary and permanent differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The temporary differences result in deferred tax assets and liabilities, which would be recorded on the Balance Sheets in accordance with ASC 740, which established financial accounting and reporting standards for the effect of income taxes. The likelihood that its deferred tax assets will be recovered from future taxable income must be assessed and, to the extent that recovery is not likely, a valuation allowance is established. Changes in the valuation allowance in a period are recorded through the income tax provision in the consolidated Statements of Operations.

 

ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an entity’s consolidated financial statements and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under ASC 740-10, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC 740-10 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the implementation of ASC 740-10 and currently, the Company does not have a liability for unrecognized income tax benefits.

 

Advertising and Marketing Costs

 

Advertising expenses are recorded as general and administrative expenses when they are incurred. The Company had advertising expenses of $131 and $381 and $82,250 and $164,500 for the three and six months ended June 30, 2022 and 2021, respectively.

 

10
 

 

Inventories

 

In conjunction with the October 19, 2020 Share Exchange Agreement, the Company kept the gem inventory of Reign Resources Corporation. Inventories are stated at the lower of cost or market (net realizable value) on a lot basis each quarter. A lot is determined by the cut, clarity, size, and weight of the sapphires. Inventory consists of sapphire jewels that meet rigorous grading criteria and are of cuts and sizes most commonly used in the jewelry industry. As of June 30, 2022 and December 31, 2021, the Company carried primarily loose sapphire jewels, jewelry for sale on our website, and jewelry held as samples. Samples are used to show potential customers what the jewelry would look like. Promotional items given to customers that are not expected to be returned will be removed from inventory and expensed. There have been no promotional items given to customers as of June 30, 2022. The Company performs its own in-house assessment based on gem guide and the current market price for metals to value its inventory on an annual basis or if circumstances dictate sooner to determine if the estimated fair value is greater or less than cost. In addition, the inventory is reviewed each quarter by the Company against industry prices from gem-guide and if there is a potential impairment, the Company would appraise the inventory. The estimated fair value is subject to significant change due to changes in popularity of cut, perceived grade of the clarity of the sapphires, the number, type and size of inclusions, the availability of other similar quality and size sapphires, and other factors. As a result, the internal assessed value of the sapphires could be significantly lower from the current estimated fair value. Loose sapphire jewels do not degrade in quality over time.

 

Based on the significant advancement of Sigyn Therapy, the Company decided in the 4th quarter of 2021 to assess the value of retail business operations that were a focus of the Company prior to the merger transaction consummated on October 19, 2020.

 

Related to this assessment, management determined the wholesale liquidation value of its sapphire gem inventory to be 5-10% of the previously reported retail value, based on communications with certified gemologists, the variance between retail and wholesale valuations, and current market conditions. As a result, the Company has valued the inventory at $50,000 and recorded an impairment of assets of $536,047 in the year ended December 31, 2021.

 

Property and Equipment

 

Property and equipment are carried at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets, generally five years. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition.

 

Intangible Assets

 

Intangible assets consist primarily of website development costs. Our intangible assets are being amortized on a straight-line basis over a period of three years.

 

Impairment of Long-lived Assets

 

We periodically evaluate whether the carrying value of property, equipment and intangible assets has been impaired when circumstances indicate the carrying value of those assets may not be recoverable. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value is not recoverable, the impairment loss is measured as the excess of the asset’s carrying value over its fair value.

 

Our impairment analyses require management to apply judgment in estimating future cash flows as well as asset fair values, including forecasting useful lives of the assets, assessing the probability of different outcomes, and selecting the discount rate that reflects the risk inherent in future cash flows. If the carrying value is not recoverable, we assess the fair value of long-lived assets using commonly accepted techniques, and may use more than one method, including, but not limited to, recent third-party comparable sales and discounted cash flow models. If actual results are not consistent with our assumptions and estimates, or our assumptions and estimates change due to new information, we may be exposed to an impairment charge in the future. As of June 30, 2022 and December 31, 2021, the Company had not experienced impairment losses on its long-lived assets.

 

Fair Value of Financial Instruments

 

The provisions of accounting guidance, FASB Topic ASC 825 requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value, and defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. As of June 30, 2022 and December 31, 2021, the fair value of cash, accounts payable, accrued expenses, and notes payable approximated carrying value due to the short maturity of the instruments, quoted market prices or interest rates which fluctuate with market rates.

 

11
 

 

Fair Value Measurements

 

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:

 

  Level 1 – Quoted prices in active markets for identical assets or liabilities.

 

  Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
     
  Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities

 

The carrying value of financial assets and liabilities recorded at fair value are measured on a recurring or nonrecurring basis. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. There were no financial assets or liabilities carried and measured on a nonrecurring basis during the reporting periods. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. There have been no transfers between levels.

 

Debt

 

The Company issues debt that may have separate warrants, conversion features, or no equity-linked attributes.

 

Embedded Conversion Features

 

The Company evaluates embedded conversion features within convertible debt under ASC 815, Derivatives and Hedging, to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20, Debt with Conversion and Other Options, for consideration of any beneficial conversion feature.

 

Derivative Financial Instruments

 

The Company evaluates all of it financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income.

 

For option-based simple derivative financial instruments, the Company uses the Monte Carlo simulations to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. There were no derivative financial instruments as of June 30, 2022 and December 31, 2021 and no charges or credits to income for the three and six months ended June 30, 2022.

 

12
 

 

Debt Issue Costs and Debt Discount

 

The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash or equity (such as warrants). These costs are amortized to interest expense through the maturity of the debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately expensed. Any unamortized debt issue costs and debt discount are presented net of the related debt on the consolidated balance sheets.

 

Original Issue Discount

 

For certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The original issue discount would be recorded to debt discount, reducing the face amount of the note and is amortized to interest expense through the maturity of the debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amounts is immediately expensed. Any unamortized original issue discounts are presented net of the related debt on the consolidated balance sheets.

 

If the conversion feature does not qualify for either the derivative treatment or as a BCF, the convertible debt is treated as traditional debt.

 

Basic and diluted earnings per share

 

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted earnings (loss) per share are computed on the basis of the weighted average number of common shares (including common stock subject to redemption) plus dilutive potential common shares outstanding for the reporting period. In periods where losses are reported, the weighted-average number of common stock outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.

 

Basic and diluted earnings (loss) per share are the same since net losses for all periods presented and including the additional potential common shares would have an anti-dilutive effect.

 

Stock Based Compensation

 

In accordance with ASC No. 718, Compensation – Stock Compensation (“ASC 718”), we measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.

 

Non-Employee Stock-Based Compensation

 

In accordance with ASC 505, Equity Based Payments to Non-Employees, issuances of the Company’s common stock or warrants for acquiring goods or services are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for the fair value of the equity instruments issued to consultants or vendors is determined at the earlier of (i) the date at which a commitment for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance is complete. Although situations may arise in which counter performance may be required over a period of time, the equity award granted to the party performing the service is fully vested and non-forfeitable on the date of the agreement. As a result, in this situation in which vesting periods do not exist as the instruments fully vested on the date of agreement, the Company determines such date to be the measurement date and will record the estimated fair market value of the instruments granted as a prepaid expense and amortize such amount to general and administrative expense in the accompanying statement of operations over the contract period. When it is appropriate for the Company to recognize the cost of a transaction during financial reporting periods prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is measured at the then-current fair values at each of those interim financial reporting dates.

 

13
 

 

Reclassifications

 

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. An adjustment has been made to the Unaudited Condensed Consolidated Statements of Operations for three months ended March 31, 2021, to reclass $93,266 of costs to research and development previously classified in general and administrative. In addition, an adjustment has been made to the Unaudited Condensed Consolidated Balance Sheets as of December 31, 2021, to reclass $1,072 of other current liabilities previously classified in accrued payroll and payroll taxes.

 

Concentrations, Risks, and Uncertainties

 

Business Risk

 

Substantial business risks and uncertainties are inherent to an entity, including the potential risk of business failure.

 

The Company is headquartered and operates in the United States. To date, the Company has generated no revenues from operations. There can be no assurance that the Company will be able to raise additional capital and failure to do so would have a material adverse effect on the Company’s financial position, results of operations and cash flows. Also, the success of the Company’s operations is subject to numerous contingencies, some of which are beyond management’s control. Currently, these contingencies include general economic conditions, price of components, competition, and governmental and political conditions.

 

Interest rate risk

 

Financial assets and liabilities do not have material interest rate risk.

 

Credit risk

 

The Company is exposed to credit risk from its cash in banks. The credit risk on cash in banks is limited because the counterparties are recognized financial institutions.

 

Seasonality

 

The business is not subject to substantial seasonal fluctuations.

 

Major Suppliers

 

Sigyn Therapy is comprised of components that are supplied by various industry vendors. Additionally, the Company is reliant on third-party organizations to conduct clinical development studies that are necessary to advance Sigyn Therapy toward the marketplace.

 

Should the relationship with an industry vendor or third-party clinical development organization be interrupted or discontinued, it is believed that alternate component suppliers and third-party clinical development organizations could be identified to support the continued advancement of Sigyn Therapy.

 

Recent Accounting Pronouncements

 

In August 2020, the FASB issued ASU No. 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. This ASU is effective for annual reporting periods beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The Company adopted ASU No. 2020-06 in the first quarter of fiscal 2021, coinciding with the standard’s effective date, and had an immaterial impact from this standard.

 

Other recently issued accounting updates are not expected to have a material impact on the Company’s unaudited condensed consolidated financial statements.

 

14
 

 

NOTE 4 – PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following as of:

        June 30,     December 31,  
    Estimated Life   2022     2021  
                 
Office equipment   5 years   $ 29,040     $ 28,181  
Computer equipment   3 years     3,157       3,157  
Accumulated depreciation         (6,715 )     (3,292 )
        $ 25,482     $ 28,046  

 

Depreciation expense was $1,719 and $3,423 and $503 and $847 for the three and six months ended June 30, 2022 and 2021, respectively, and is classified in general and administrative expenses in the unaudited condensed consolidated Statements of Operations.

 

NOTE 5 – INTANGIBLE ASSETS

 

Intangible assets consisted of the following as of:

                     
    Estimated life   June 30,
2022
    December 31,
2021
 
Website   3 years   $ 10,799     $ 10,799  
Accumulated amortization         (6,899 )     (5,099 )
Intangible assets, net       $ 3,900     $ 5,700  

 

As of June 30, 2022, estimated future amortization expenses related to intangible assets were as follows:

         
    Intangible Assets  
2022 (remaining 6 months)   $ 1,800  
2023     2,100  
Intangible assets, net   $ 3,900  

 

The Company had amortization expense of $900 and $1,800 and $4,052 and $14,406 for the three and six months ended June 30, 2022 and 2021, respectively.

 

On January 8, 2020, James Joyce, the Company’s CEO and Craig Roberts, the Company’s CTO, assigned to the Company the rights to patent 62/881,740 pertaining to the devices, systems and methods for the broad-spectrum reduction of pro-inflammatory cytokines in blood.

 

15
 

 

NOTE 6 – Convertible Promissory DEBENTURES

 

Convertible notes payable consisted of the following:

 

   

June 30,

2022

   

December 31,

2021

 
             
      457,380       457,380  
January 28, 2020 ($457,380) – 0% interest per annum outstanding principal and interest due October 20, 2022 (“Note 1”)   $ 457,380     $ 457,380  
June 23, 2020 ($60,500) – 0% interest per annum outstanding principal and interest due October 20, 2022 (“Note 2”)     60,500       60,500  
September 17, 2020 ($199,650) – 0% interest per annum outstanding principal and interest due October 20, 2022. On October 28, 2021, Osher elected to convert $16,714 of the aggregate principal amount of the Note of $199,650, into 42,857 common shares (“Note 3”).     182,936       182,936  
March 23, 2022 ($220,000) – 0% interest per annum outstanding principal and interest due March 23, 2023 (“Note 4”)     220,000       -  
April 28, 2022 ($110,000) – 0% interest per annum outstanding principal and interest due April 28, 2023 (“Note 5”)     110,000       -  
May 10, 2022 ($110,000) – 0% interest per annum outstanding principal and interest due May 10, 2023 (“Note 6”)     110,000       -  
June 1, 2022 ($55,000) – 0% interest per annum outstanding principal and interest due June 1, 2023 (“Note 7”)     55,000       -  
June 22, 2020 ($82,500) – 0% interest per annum outstanding principal and interest due June 22, 2023 (“Note 8”)     82,500       -  
                 
Total convertible notes payable     1,278,316       700,816  
Original issue discount     (64,659 )     (53,614 )
Debt discount     (268,438 )     -  
                 
Total convertible notes payable   $ 945,219     $ 647,202  

 

Principal payments on convertible promissory debentures are due as follows:

 

       
Year ending December 31,      
2022   $ 700,816  
2023     577,500  
 Long-Term Debt   $ 1,278,316  

 

16
 

 

Changes in convertible notes were as follows:

                                                                         
    Note 1     Note 2     Note 3     Note 4     Note 5     Note 6     Note 7     Note 8     Totals  
Convertible notes payable as of January 1, 2021   $ 385,000     $ 50,000     $ 181,500     $ -     $ -     $ -     $ -     $ -     $ 616,500  
Extension of convertible note payable     72,380       10,500       18,150       -       -       -       -       -       101,030  
Exchange of convertible note payable for common stock     -       -       (16,714 )     -       -       -       -       -       (16,714 )
Convertible notes payable, net, as of December 31, 2021     457,380       60,500       182,936       -       -       -       -       -       700,816  
                                                                         
Convertible notes payable issued in 2022     -       -       -       220,000       110,000       110,000       55,000       82,500       577,500  
Convertible notes payable as of June 30, 2022   $ 457,380     $ 60,500     $ 182,936     $ 220,000     $ 110,000     $ 110,000     $ 55,000     $ 82,500     $ 1,278,316  

 

Changes in note discounts were as follows:

 

                                                                         
    Note 1     Note 2     Note 3     Note 4     Note 5     Note 6     Note 7     Note 8     Totals  
Note discounts as of January 1, 2021   $ 73,418     $ 5,830     $ 18,584     $ -     $ -     $ -     $ -     $ -     $ 97,832  
Note discounts in conjunction with extension of convertible note     41,580       5,500       18,150       -       -       -       -       -       65,230  
2021 accretion of note discounts     (80,822 )     (6,809 )     (21,817 )     -       -       -       -       -       (109,448 )
Note discounts as of December 31, 2021     34,176       4,521       14,917       -       -       -       -       -       53,614  
                                                                         
Note discounts issued in conjunction with debt     -       -       -       182,362       60,874       60,877       31,303       48,437       383,853  
2022 accretion of note discounts     (20,620 )     (2,727 )     (9,000 )     (49,462 )     (10,507 )     (8,506 )     (2,487 )     (1,061 )     (104,370 )
Note discounts as of June 30, 2022   $ 13,556     $ 1,794     $ 5,917     $ 132,900     $ 50,367     $ 52,371     $ 28,816     $ 47,376     $ 333,097  
                                                                         
Convertible notes payable, net, as of December 31, 2021   $ 423,204     $ 55,979     $ 168,019     $ -     $ -     $ -     $ -     $ -     $ 647,202  
Convertible notes payable, net, as of June 30, 2022   $ 443,824     $ 58,706     $ 177,019     $ 87,100     $ 59,633     $ 57,629     $ 26,184     $ 35,124     $ 945,219  
                                                                         
2021 Effective interest rate     24 %     11 %     12 %     -%       -%       -%       -%       -%       16 %
2022 Effective interest rate     5 %     5 %     5 %     22 %     10 %     8 %     5 %     1 %     8 %

 

Current Noteholders

 

Osher – $82,500

 

On June 22, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”) of (i) $82,500 aggregate principal amount of Note due June 22, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 165,000 shares of the Company’s Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from the previous noteholder for the issuance of the Note and Warrants was $75,000 which was issued at a $7,500 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

17
 

 

Osher – $55,000

 

On June 1, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”) of (i) $55,000 aggregate principal amount of Note due June 1, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 110,000 shares of the Company’s Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from the previous noteholder for the issuance of the Note and Warrants was $50,000 which was issued at a $5,000 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

Brio – $110,000

 

On May 10, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect to the sale and issuance to institutional investor Brio Capital Master Fund Ltd. (“Brio”) of (i) $110,000 aggregate principal amount of Note due May 10, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 220,000 shares of the Company’s Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from the previous noteholder for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

Osher – $110,000

 

On April 28, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”) of (i) $110,000 aggregate principal amount of Note due April 28, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 220,000 shares of the Company’s Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from the previous noteholder for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

Osher – $110,000

 

On March 23, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”) of (i) $110,000 aggregate principal amount of Note due March 23, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 220,000 shares of the Company’s Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from the previous noteholder for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

Brio – $110,000

 

On March 23, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect to the sale and issuance to institutional investor Brio Capital Master Fund Ltd. (“Brio”) of (i) $110,000 aggregate principal amount of Note due March 23, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 220,000 shares of the Company’s Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from the previous noteholder for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

18
 

 

Osher – $457,380

 

On January 28, 2020 (the “Original Issue Date”), the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with respect to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”) of (i) $385,000 aggregate principal amount of Original Issue Discount Senior Convertible Debenture due January 26, 2021, based on $1.00 for each $0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants to purchase up to an aggregate of 80,209 shares of the Company’s Common Stock at an exercise price of $7.00 per share. The aggregate cash subscription amount received by the Company from Osher for the issuance of the note and warrants was $350,005 which was issued at a $34,995 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.094 per share, as amended on October 20, 2020, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

The Company and Osher amended the convertible debt agreement as follows on October 20, 2020:

 

  The parties amended the Warrants dated January 28, 2020, for the number of warrant shares from 80,209 warrant shares to 4,113,083 warrant shares at an exercise price of $0.14 per share.
  The parties amended the Note to provide for interest at 8% per annum.
  The parties amended the Note for the maturity date from June 23, 2021 to October 20, 2021.

 

On October 22, 2021, the Company and Osher amended convertible debt agreements as follows:

 

  The parties amended the October 20, 2020 Notes for the maturity date from October 20, 2021 to October 20, 2022.
     
  The parties amended the October 20, 2020 Notes for the aggregate principal amount and accrued interest from $652,300 to $717,530 which is issued at a $65,230 original issue discount from the face value of the October 20, 2020 Notes now due October 20, 2022.
     
  In exchange for the extension of the Note, the Company issued Osher five-year warrants to purchase an aggregate of 450,000 shares of the Company’s common stock at an exercise price of $1.00 per share.

 

Osher – $60,500 (as amended on October 20, 2020 to $55,000)

 

On June 23, 2020 (the “Original Issue Date”), the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with respect to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”) of (i) $50,000 aggregate principal amount of Original Issue Discount Senior Convertible Debenture (the “Note”) due June 23, 2021, based on $1.00 for each $0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants (“Warrants”) to purchase up to an aggregate of 10,000 shares of the Company’s Common Stock at an exercise price of $30.00 per share. The aggregate cash subscription amount received by the Company from Osher for the issuance of the Note and Warrants was $50,005 which was issued at a $0 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.39 per share, as amended on October 20, 2020, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

The Company and Osher amended the convertible debt agreement as follows on October 20, 2020:

 

  The parties amended the Note for the aggregate principal amount from $50,000 to $55,000. The aggregate cash subscription amount received by the Company from Osher for the issuance of the Note and Warrants was $50,005 which was issued at an amended $4,995 original issue discount from the face value of the Note.
  The parties amended the Warrants dated June 23, 2020, for the number of warrant shares from 10,000 warrant shares to 141,020 warrant shares at an exercise price of $0.59 per share.
  The parties amended the Note for the maturity date from June 23, 2021 to October 20, 2021.

 

19
 

 

On October 22, 2021, the Company and Osher amended convertible debt agreements as follows:

 

  The parties amended the October 20, 2020 Notes for the maturity date from October 20, 2021 to October 20, 2022.
     
  The parties amended the October 20, 2020 Notes for the aggregate principal amount and accrued interest from $652,300 to $717,530 which is issued at a $65,230 original issue discount from the face value of the October 20, 2020 Notes now due October 20, 2022.
     
  In exchange for the extension of the Note, the Company issued Osher five-year warrants to purchase an aggregate of 450,000 shares of the Company’s common stock at an exercise price of $1.00 per share.

 

Osher – $199,650

 

On September 17, 2020 (the “Original Issue Date”), the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with respect to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”) of (i) $181,500 aggregate principal amount of Original Issue Discount Senior Convertible Debenture (the “Note”) due September 30, 2021, based on $1.00 for each $0.90909 paid by Osher and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 8,250 shares of the Company’s Common Stock at an exercise price of $30.00 per share. The aggregate cash subscription amount received by the Company from Osher for the issuance of the Note and Warrants was $165,000 which was issued at a $16,500 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.39 per share, as amended on October 20, 2020, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

The Company and Osher amended the convertible debt agreement as follows on October 20, 2020:

 

  The parties amended the Warrants dated September 17, 2020, for the number of warrant shares from 8,250 warrant shares to 465,366 warrant shares at an exercise price of $0.59 per share.
  The parties amended the Note for the maturity date from September 30, 2021 to October 20, 2021.

 

On October 22, 2021, the Company and Osher amended convertible debt agreements as follows:

 

  The parties amended the October 20, 2020 Notes for the maturity date from October 20, 2021 to October 20, 2022.
     
  The parties amended the October 20, 2020 Notes for the aggregate principal amount and accrued interest from $652,300 to $717,530 which is issued at a $65,230 original issue discount from the face value of the October 20, 2020 Notes now due October 20, 2022.
     
  In exchange for the extension of the Note, the Company issued Osher five-year warrants to purchase an aggregate of 450,000 shares of the Company’s common stock at an exercise price of $1.00 per share.

 

On October 28, 2021, Osher elected to convert $16,714 of the aggregate principal amount of the Note of $199,650, into 42,857 common shares.

 

Previous Noteholders

 

Previous notes were detailed in our Form 10-K filed on March 31, 2022. No changes occurred related to these notes during the period covered by this Form 10-Q.

 

NOTE 7 – STOCKHOLDERS’ DEFICIT

 

Preferred Stock

 

The Company authorized 10,000,000 shares of par value $0.0001 preferred stock, of which none are issued and outstanding at June 30, 2022, and December 31, 2021, respectively.

 

20
 

 

Common Stock

 

The Company has authorized 1,000,000,000 shares of par value $0.0001 common stock, of which 37,295,813 shares are outstanding as of June 30, 2022, and December 31, 2021, respectively.

 

Warrants

 

On October 22, 2021, the Company and Osher amended convertible debt agreements for the maturity date from October 20, 2021 to October 20, 2022. In exchange for the extension of the Note, the Company issued Osher 450,000 warrants to purchase an aggregate of 450,000 shares of the Company’s common stock, valued at $197,501 (based on the Black Scholes valuation model on the date of grant) (see Note 6). The warrants are exercisable for a period of five years at $1.00 per share in whole or in part, as either a cash exercise or as a cashless exercise, and fully vest at grant date. The Company is accreting the value of the warrants ratably through October 20, 2022. The Company recorded $48,699 and $0 for the three months ended June 30, 2022 and 2021, respectively, and is classified in other expenses in the consolidated Statements of Operations. See Notes 6 and 7 for further warrant discussions.

 

NOTE 8 – OPERATING LEASES

 

On May 27, 2021, the Company entered into a sixty-three month lease for its corporate office at $5,955 per month commencing June 15, 2021 maturing September 30, 2026. The Company accounts for this lease in accordance with ASC 842. Adoption of the standard resulted in the initial recognition of operating lease ROU asset of $290,827 and operating lease liability of $290,827 as of June 15, 2021.

 

Operating lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Generally, the implicit rate of interest in arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The operating lease ROU asset includes any lease payments made and excludes lease incentives. Our variable lease payments primarily consist of maintenance and other operating expenses from our real estate leases. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

 

We have lease agreements with lease and non-lease components. We have elected to account for these lease and non-lease components as a single lease component. We are also electing not to apply the recognition requirements to short-term leases of twelve months or less and instead will recognize lease payments as expense on a straight-line basis over the lease term.

 

The components of lease expense and supplemental cash flow information related to leases for the period are as follows:

 

In accordance with ASC 842, the components of lease expense were as follows:

 

                                 
    Six Months ended June 30,     Three Months ended June 30,  
    2022     2021     2022     2021  
Operating lease expense   $ 35,838     $ 3,289     $ 17,919     $ 3,289  
Short term lease cost   $ -     $ -     $ -     $ -  
Total lease expense   $ 35,838     $ 3,289     $ 17,919     $ 3,289  

 

21
 

 

In accordance with ASC 842, other information related to leases was as follows:

 

                 
Six Months Ended June 30   2022     2021  
Operating cash flows from operating leases   $ 35,910     $ 3,919  
Cash paid for amounts included in the measurement of lease liabilities   $ 35,910     $ 3,919  
                 
Weighted-average remaining lease term—operating leases      4.2 years        5.2 years  
Weighted-average discount rate—operating leases     10 %     10 %

 

In accordance with ASC 842, maturities of operating lease liabilities as of June 30, 2022 were as follows:

 

         
    Operating  
Year ending:   Lease  
2022 (remaining 6 months)   $ 36,803  
2023     74,895  
2024     77,142  
2025     79,456  
2026     54,225  
Total undiscounted cash flows   $ 322,521  
         
Reconciliation of lease liabilities:        
Weighted-average remaining lease terms      4.2 years  
Weighted-average discount rate     10 %
Present values   $ 264,691  
         
Lease liabilities—current     49,545  
Lease liabilities—long-term     215,146  
Lease liabilities—total   $ 264,691  
         
Difference between undiscounted and discounted cash flows   $ 57,830  

 

Operating lease cost was $17,919 and $35,838 and $3,289 and $3,289 for the three and six months ended June 30, 2022 and 2021, respectively.

 

NOTE 9 – Related Party Transactions

 

Other than as set forth below, and as disclosed in Notes 5 and 7, there have not been any transaction entered into or been a participant in which a related person had or will have a direct or indirect material interest.

 

Employment Agreements

 

Mr. Ferrell was hired March 9, 2022 as the Company’s Chief Financial Officer. Mr. Ferrell receives an annual base salary of $250,000, plus discretionary bonus compensation not to exceed 40% of salary. Mr. Ferrell’s employment also provides for medical insurance, disability benefits and three months of severance pay if his employment is terminated without cause or due to a change in control. Additionally, Mr. Ferrell will be granted up to 600,000 options to purchase 600,000 of the Company’s common shares upon the implementation of a Company employee option plan. The Company incurred compensation expense of $63,588 and $74,004 and $0 and $0 and employee benefits of $6,365 and $7,716 and $0 and $0 for the three and six months ended June 30, 2022 and 2021, respectively.

 

NOTE 10 – EARNINGS PER SHARE

 

FASB ASC Topic 260, Earnings Per Share, requires a reconciliation of the numerator and denominator of the basic and diluted earnings (loss) per share (EPS) computations.

 

Basic earnings (loss) per share are computed by dividing net earnings available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. In periods where losses are reported, the weighted-average number of common stock outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.

 

Basic and diluted earnings (loss) per share are the same since net losses for all periods presented and including the additional potential common shares would have an anti-dilutive effect.

 

22
 

 

The following table sets forth the computation of basic and diluted net income per share:

 SCHEDULE OF COMPUTATION OF BASIC AND DILUTED NET INCOME PER SHARE

                                 
    Six Months Ended June 30,     Three Months Ended June 30,  
    2022     2021     2022     2021  
                         
Net loss attributable to the common stockholders   $ (1,344,371 )   $ (1,111,543 )   $ (666,325 )   $ (649,861 )
                                 
Basic weighted average outstanding shares of common stock     37,295,803       35,841,627       37,295,803       36,410,334  
Dilutive effect of options and warrants     -       -       -       -  
Diluted weighted average common stock and common stock equivalents     37,295,803       35,841,627       37,295,803       36,410,334  
                                 
Loss per share:                                
Basic and diluted   $ (0.04 )   $ (0.03 )   $ (0.02 )   $ (0.02 )

 

NOTE 11 – COMMITMENTS AND CONTINGENCIES

 

Legal

 

From time to time, various lawsuits and legal proceedings may arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any legal proceedings or claims that it believes will have a material adverse effect on its business, financial condition or operating results.

 

NOTE 12 – SUBSEQUENT EVENTS

 

The Company evaluated all events or transactions that occurred after June 30, 2022 up through the date the financial statements were available to be issued. During this period, the Company did not have any material recognizable subsequent events required to be disclosed as of and for the period ended June 30, 2022 except for the following:

 

In July 2022, the Company entered into an Original Issue Discount Senior Convertible Debentures (the “July 2022 Notes”) totaling (i) $313,500 aggregate principal amount of Note (total of $285,000 cash was received) due in various dates in July 2023 based on $1.00 for each $0.90909 paid by the previous noteholder and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 627,000 shares of the Company’s Common Stock at an exercise price of $0.50 per share. The conversion price for the principal in connection with voluntary conversions by the holders of the convertible notes is $0.50 per share.

 

23
 

 

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

 

Special Note Regarding Forward Looking Statements.

 

This quarterly report on Form 10-Q of Sigyn Therapeutics, Inc. for the period ended June 30, 2022 contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. To the extent that such statements are not recitations of historical fact, such statements constitute forward looking statements which, by definition, involve risks and uncertainties. In particular, statements under the Sections; Description of Business, Management’s Discussion and Analysis of Financial Condition and Results of Operations contain forward looking statements. Where in any forward-looking statements, the Company expresses an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished.

 

The following are factors that could cause actual results or events to differ materially from those anticipated and include but are not limited to: general economic, financial and business conditions; changes in and compliance with governmental regulations; changes in tax laws; and the cost and effects of legal proceedings.

 

You should not rely on forward looking statements in this quarterly report. This quarterly report contains forward looking statements that involve risks and uncertainties. We use words such as “anticipates,” “believes,” “plans,” “expects,” “future,” “intends,” and similar expressions to identify these forward-looking statements. Prospective investors should not place undue reliance on these forward-looking statements, which apply only as of the date of this quarterly report. Our actual results could differ materially from those anticipated in these forward-looking statements.

 

Recent Developments

 

Convertible Promissory Debentures

 

July 2022

 

In July 2022, the Company entered into an Original Issue Discount Senior Convertible Debentures (the “July 2022 Notes”) totaling (i) $313,500 aggregate principal amount of Note (total of $285,000 cash was received) due in various dates in July 2023 based on $1.00 for each $0.90909 paid by the previous noteholder and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 627,000 shares of the Company’s Common Stock at an exercise price of $0.50 per share. The conversion price for the principal in connection with voluntary conversions by the holders of the convertible notes is $0.50 per share.

 

Osher – $82,500

 

On June 22, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”) of (i) $82,500 aggregate principal amount of Note due June 22, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 165,000 shares of the Company’s Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from the previous noteholder for the issuance of the Note and Warrants was $75,000 which was issued at a $7,500 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

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Osher – $55,000

 

On June 1, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”) of (i) $55,000 aggregate principal amount of Note due June 1, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 110,000 shares of the Company’s Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from the previous noteholder for the issuance of the Note and Warrants was $50,000 which was issued at a $5,000 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

Brio – $110,000

 

On May 10, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect to the sale and issuance to institutional investor Brio Capital Master Fund Ltd. (“Brio”) of (i) $110,000 aggregate principal amount of Note due May 10, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 220,000 shares of the Company’s Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from the previous noteholder for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

Osher – $110,000

 

On April 28, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”) of (i) $110,000 aggregate principal amount of Note due April 28, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 220,000 shares of the Company’s Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from the previous noteholder for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

Osher – $110,000

 

On March 23, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect to the sale and issuance to institutional investor Osher Capital Partners LLC (“Osher”) of (i) $110,000 aggregate principal amount of Note due March 23, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 220,000 shares of the Company’s Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from the previous noteholder for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

Brio – $110,000

 

On March 23, 2022, the Company entered into an Original Issue Discount Senior Convertible Debenture (the “Note”) with respect to the sale and issuance to institutional investor Brio Capital Master Fund Ltd. (“Brio”) of (i) $110,000 aggregate principal amount of Note due March 23, 2023 based on $1.00 for each $0.90909 paid by the previous noteholder and (ii) five-year Common Stock Purchase Warrants (“Warrants’) to purchase up to an aggregate of 220,000 shares of the Company’s Common Stock at an exercise price of $0.50 per share. The aggregate cash subscription amount received by the Company from the previous noteholder for the issuance of the Note and Warrants was $100,000 which was issued at a $10,000 original issue discount from the face value of the Note. The conversion price for the principal in connection with voluntary conversions by a holder of the convertible notes is $0.50 per share, subject to adjustment as provided therein, such as stock splits and stock dividends.

 

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Limited Operating History; Need for Additional Capital

 

There is limited historical financial information about us on which to base an evaluation of our performance. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, and possible cost overruns due to increases in the cost of services. To become profitable and competitive, we must receive additional capital. We have no assurance that future financing will materialize. If that financing is not available, we may be unable to continue operations.

 

Business Overview

 

Sigyn Therapeutics, Inc. (“Sigyn” or the “Company”) is a development-stage medical technology company headquartered in San Diego, California. Our focus is directed toward the creation of therapeutic solutions that address unmet needs in global health.

 

Sigyn Therapy™ is a broad-spectrum blood purification technology to address life-threatening infections and inflammatory disorders for which effective drug therapies are not available. Sigyn Therapy extracts pathogen sources of life-threatening inflammation in concert with dampening down the dysregulated overproduction of inflammatory cytokines (the cytokine storm), which plays a prominent role in each of our candidate treatment indications.

 

Based on its unprecedented ability to isolate and remove viral pathogens, bacterial toxins, and inflammatory cytokines from the bloodstream, Sigyn Therapy is a candidate to treat pathogen-associated sepsis (leading cause of hospital deaths), community acquired pneumonia (a leading cause of death among infectious diseases), emerging pandemic threats, and hyperinflammation & endotoxemia in end-stage renal disease patients.

 

Since initiating the development of Sigyn Therapy in 2020, we completed a series of in vitro studies that demonstrated the ability of Sigyn Therapy to extract pathogen sources of inflammation from human blood plasma. These include endotoxin (a gram-negative bacterial toxin), peptidoglycan and lipoteichoic acid (gram-positive bacterial toxins), and viral pathogens, including COVID-19.

 

We also completed studies that demonstrated the ability of Sigyn Therapy to extract inflammatory cytokines from human blood plasma. These include interleukin-1 beta (IL-1b), interleukin-6 (IL-6), and tumor necrosis factor alpha (TNF-a). In a related study, we reduced the circulating presence of 104 nanometer liposomes as a model to evaluate the potential of Sigyn Therapy to address CytoVesicles that transport inflammatory cytokine cargos throughout the bloodstream.

 

Additionally, we validated the rapid reduction of hepatic (liver) toxins from human blood plasma, which included ammonia, bile acid and bilirubin. Based on these outcomes, we may further investigate the potential of Sigyn Therapy to address acute forms of liver failure.