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Form 10-Q Sigyn Therapeutics, Inc. For: Jun 30

August 15, 2022 6:31 AM EDT

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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 $