UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended:
or
For the transition period from __________ to __________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (IRS Employer Identification No.) |
(Address of principal executive offices)
(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 | ||
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 past 12 months,
and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller Reporting Company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 15, 2024, there were
MESO NUMISMATICS, INC.
TABLE OF CONTENTS
i
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
MESO NUMISMATICS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | * | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Other assets | ||||||||
| Intangible assets, net | ||||||||
| Right of use asset, net | ||||||||
| Goodwill | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Accrued interest | ||||||||
| Customer advances | ||||||||
| Derivative liability | ||||||||
| Lease liability, current portion | ||||||||
| Notes payable, net | ||||||||
| Total current liabilities | ||||||||
| Long term liabilities | ||||||||
| Lease liability, net of current portion | ||||||||
| Convertible notes payable, net of discount | ||||||||
| Notes payable – related parties | ||||||||
| Notes payable, net of discount | ||||||||
| Total liabilities | ||||||||
| Stockholders’ deficit | ||||||||
| Preferred stock, $ | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
| * | Derived from audited information |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Page 1 of 35
MESO NUMISMATICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenue | $ | $ | ||||||
| Cost of revenue | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| Advertising and marketing | ||||||||
| Professional fees | ||||||||
| Officer compensation | ||||||||
| Depreciation and amortization expense | ||||||||
| Investor relations | ||||||||
| General and administrative | ||||||||
| Total operating expenses | ||||||||
| Other income (expense) | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Gain (loss) on derivative financial instruments | ( | ) | ||||||
| Gain on settlement of debt | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted earnings (loss) per share from: | ||||||||
| $ | ( | ) | $ | ( | ) | |||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Page 2 of 35
MESO NUMISMATICS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
For the Three Months Ended March 31, 2024
(Unaudited)
| Series AA Preferred Stock | Series DD Preferred Stock | Common Stock | Additional Paid In | Accumulated | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
For the Three Months Ended March 31, 2023
(Unaudited)
| Series AA Preferred Stock | Series DD Preferred Stock | Common Stock | Additional Paid In | Accumulated | ||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
Page 3 of 35
MESO NUMISMATICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Non-cash adjustments to reconcile net loss to net cash: | ||||||||
| Amortization of debt discount | ||||||||
| Depreciation and amortization expense | ||||||||
| Loss (gain) from changes in derivative liability fair values | ( | ) | ||||||
| Gain from settlement of debt | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Prepaid expenses | ( | ) | ||||||
| Other asset | ( | ) | ||||||
| Accounts payable and accrued liabilities | ||||||||
| CASH PROVIDED BY OPERATING ACTIVITIES | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| CASH USED BY INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Principal payment on debt | ( | ) | ||||||
| CASH USED BY FINANCING ACTIVITIES | ( | ) | ||||||
Net increase (decrease) in cash | ( | ) | ||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
Page 4 of 35
MESO NUMISMATICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Organization and History
Meso Numismatics, Inc. (the “Company”) was originally organized under the laws of Washington State in 1999, as Spectrum Ventures, LLC to develop market and sell VOIP (Voice over Internet Protocol) services. In 2002, the Company changed its name to Nxtech Wireless Cable Systems, Inc. In August 2007, the Company changed its name to Oriens Travel & Hotel Management Corp. In November 2014, the Company changed its name to Pure Hospitality Solutions, Inc.
On November 16, 2016, the Company entered into an Agreement and Plan of Merger between the Company and Meso Numismatics Corp. (“Meso”). The acquisition of Meso is to support the Company’s overall mission of specializing in ventures related to Central America and the Latin countries of the Caribbean; not limited to tourism. Meso is a small but scalable numismatics operation that the Company can leverage for low-cost cost revenues and product marketing.
The Company maintains an online store with eBay (www.mesocoins.com) and participates in live auctions with major companies such as Heritage Auctions, Stacks Bowers Auctions and Lyn Knight Auctions.
The acquisition was completed on August 4, 2017,
following the Company issuance of
On September 4, 2017, the Company decided to suspend its booking operations, Oveedia, to focus on continuing to build its numismatic business, Meso Numismatics. Inc. The Company did, however, use its footprint within the Latin American region to expand the Company at a much quicker rate.
In September 2018, the Company changed its name to Meso Numismatics, Inc. and FINRA provided a market effective date and the new ticker symbol MSSV became effective on October 16, 2018.
On August 18, 2021, the Company completed its
acquisition of Global Stem Cells Group Inc., through a Stock Purchase Agreement acquiring all the outstanding capital stock of Global
Stem Cells Group Inc. and paid the purchase price of a total of
Pursuant to the terms of the Fifth Post Closing
Amendment along with the completion of the acquisition of Global Stem Cells Group Inc., the issuance of the
Page 5 of 35
On October 28, 2022, the Company entered into
an Agreement of Conveyance, Transfer and Assignment of Subsidiary with our prior officer and director, Mr. Melvin Pereira, pursuant to
which we agreed to sell Mr. Pereira
Description of Business
As a result of this transaction, the Company is no longer engaged in the sale of coins, paper currency, bullion and medals and it has moved into what is believed to be a more lucrative opportunity for the Company - the operations of Global Stem Cell Group.
The Company believes stem cell therapy is becoming an increasingly effective clinical solution for treating conditions that traditional or conventional medicine only offers within palliative care and pain management. The Company works with doctors and their staff to provide products, solutions, equipment, services, and training to help them be successful in the application of Stem Cell Therapies. The Company combines solutions from extensive clinical research with the manufacturing and commercialization of viable cell therapy and immune support related products that it believes will change the course of traditional medicine around the world forever. The Company’s revenue comes directly from the training and the seminars, from the resale of these kits, products, and equipment, services, and from the reoccurring application of the Company’s process using the kits and solutions it provides.
Name Change
As of January 26, 2024, the Board and Majority Stockholders have approved a change in the name of the company to “Regenerative Medical Technology Group Inc.” The Company has applied to FINRA, and the corporate action is expected to become effective upon on the market effective date established by FINRA.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Global Stem Cells Group Inc. (since August 18, 2021) and Cellular Hope Institute, wholly-owned subsidiary of Global Stem Cells Group Inc. These condensed consolidated financial statements have been prepared and, in the opinion of management, contain all the adjustments (consisting of those of a normal recurring nature) considered necessary to present fairly the consolidated financial position and the consolidated statements of income and consolidated cash flows for the periods presented in conformity with generally accepted accounting principles for interim consolidated financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X, Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2024. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2023, filed on April 15, 2024, which can be found at www.sec.gov. All significant intercompany transactions have been eliminated in consolidation.
Use of Estimates in Financial Statement Presentation
The preparation of these financial statements in conformity 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 at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The significant estimates included in these financial statements are associated with accounting for the goodwill, derivative liability, valuation of preferred stock, and for the valuation of assets and liabilities in business combination.
Page 6 of 35
Reclassifications
Certain amounts for the prior year have been revised or reclassified to conform to the current year presentation. No change in net loss resulted from these reclassifications.
Cash and Cash Equivalents
The Company considers all highly liquid accounts
with original maturities of three months or less to be cash equivalents. At March 31, 2024 and December 31, 2023, all of the Company’s
cash was deposited in major banking institutions. There were no cash equivalents as of March 31, 2024 and December 31, 2023. Our cash
balances at financial institutions may exceed the Federal Deposit Insurance Company’s (FDIC) insured limit of $
Accounts Receivable
Accounts receivable are recorded at original invoice
amount less an allowance for uncollectible accounts that management believes will be adequate to absorb estimated losses on existing balances.
Management estimates the allowance based on collectability of accounts receivable and prior bad debt experience. Accounts receivable balances
are written off against the allowance upon management’s determination that such accounts are uncollectible. Recoveries of accounts
receivable previously written off are recorded when received. Management believes that credit risks on accounts receivable will not be
material to the financial position of the Company or results of operations. The allowance for doubtful accounts was $
Intangible Assets
Intangible assets with finite lives are amortized over their estimated useful lives. Intangible assets with indefinite lives are not amortized, but are tested for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. No impairment was recognized for the three months ended March 31, 2024 and the year ended December 31, 2023.
Lease Accounting
The Company leases office space and clinical space under a lease arrangement. These properties are generally leased under non-cancelable agreements that contain lease terms in excess of twelve months on the date of entry as well as renewal options for additional periods. The agreements, which have been classified as operating leases, generally provide for base minimum rental payment, as well non-lease components including insurance, taxes, maintenance, and other common area costs.
At the lease commencement date, the Company recognizes a right-of-use asset and a lease liability for all leases, except short-term leases with an original term of twelve months or less. The right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease. The right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, plus any prepayments to the lessor and initial direct costs such as brokerage commissions, less any lease incentives received. All right-of-use assets are periodically reviewed for impairment in accordance with standards that apply to long-lived assets. The lease liability is initially measured at the present value of the lease payments, discounted using the rate implicit in the contract if available or an estimate of our incremental borrowing rate for a collateralized loan with the same term as the underlying lease. The discount rates used for the initial measurement of lease liabilities as of the date of entry were based on the original lease terms.
Page 7 of 35
Lease payments included in the measurement of lease liabilities consist of (i) fixed lease payments for the non-cancelable lease term, (ii) fixed lease payments for optional renewal periods where it is reasonably certain the renewal option will be exercised, and (iii) variable lease payments that depend on an underlying index or rate, based on the index or rate in effect at lease commencement. Certain real estate lease agreements require payments for non-lease costs such as utilities and common area maintenance. The Company has elected an accounting policy to not separate implicit components of the contract that may be considered non-lease related.
Lease expense for operating leases consists of the fixed lease payments recognized on a straight-line basis over the lease term plus variable lease payments as incurred. The lease payments are allocated between a reduction of the lease liability and interest expense. Depreciation of the right-of-use asset for operating leases reflects the use of the asset on straight-line basis over the expected term of the lease.
Goodwill
We test our reporting unit for impairment annually at year end or more frequently if events or circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the carrying amount of a reporting unit exceeds its estimated fair value, we record an impairment loss based on the difference between fair value and carrying amount of the reporting unit, not to exceed to the associated carrying amount of goodwill. (see Note 11 for detail of goodwill).
Derivative Instruments
The derivative instruments are accounted for as liabilities, the derivative instrument is initially recorded at its fair market value and is then re-valued at each reporting date, with changes in fair value recognized in operations for each reporting period. The Company uses the Monte Carlo option pricing model to value the derivative instruments.
Revenue Recognition
The Company recognizes revenue from the sale of products under ASC 606 by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer or services are provided. Revenue is measured based on the consideration the Company receives in exchange for those products.
Income Taxes
The Company uses the liability method to record income tax activity. Deferred taxes are determined based upon the estimated future tax effects of differences between the financial reporting and tax reporting bases of assets and liabilities, given the provisions of currently enacted tax laws.
The accounting for uncertainty in income taxes recognized in an enterprise’s financial statements uses the threshold of more-likely-than-not to be sustained upon examination for inclusion or exclusion. Measurement of the tax uncertainty occurs if the recognition threshold has been met.
Net Earnings (Losses) Per Common Share
The Company accounts for net loss per share in accordance with Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”), which requires presentation of basic and diluted earnings per share (“EPS”) on the face of the statement of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS.
Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during each period. It excludes the dilutive effects of any potentially issuable common shares. The effect of common stock equivalents is anti-dilutive with respect to losses and therefore basic and dilutive is the same.
Page 8 of 35
Diluted net loss per share is calculated by including
any potentially dilutive share issuances in the denominator.
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Convertible notes outstanding | ||||||||
| Convertible preferred stock outstanding | ||||||||
| Shares underlying warrants outstanding | ||||||||
Fair Value of Financial Instruments
The fair value of financial instruments, which include cash, accounts payable and accrued expenses and advances from related parties were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments. Management is of the opinion that the Company is not exposed to significant interest, currency or credit risks arising from financial instruments.
Fair value is defined as the price which would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-tier fair value hierarchy which prioritizes the inputs used in the valuation methodologies is as follows:
| Level 1 | Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. |
| Level 2 | Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means. |
| Level 3 | Inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities. |
At March 31, 2024 and December 31, 2023, the carrying amounts of the Company’s financial instruments, including cash, account payables, and accrued expenses, approximate their respective fair value due to the short-term nature of these instruments.
At March 31, 2024 and December 31, 2023, the Company does not have any assets or liabilities except for derivative liabilities related to convertible notes payable required to be measured at fair value in accordance with FASB ASC Topic 820, Fair Value Measurement.
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| March 31, 2024 | ||||||||||||||||
| Derivative liability | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| December 31, 2023 | ||||||||||||||||
| Derivative liability | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
Page 9 of 35
Comprehensive Income
The Company records comprehensive income as the change in equity of a business during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. Other comprehensive income (loss) includes foreign currency translation adjustments and unrealized gains and losses on available-for-sale securities. As of March 31, 2024 and December 31, 2023, the Company had no items that represent comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.
Stock Based Compensation
Share-based compensation issued to employees is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period. The Company measures the fair value of the share-based compensation issued to non-employees at the grant date using the stock price observed in the trading market (for stock transactions) or the fair value of the award (for non-stock transactions), which were considered to be more reliably determinable measures of fair value than the value of the services being rendered.
New Accounting Pronouncements
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedient and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of interbank offered rates and, particularly, the risk of cessation of the London Interbank Offered Rate (“LIBOR”), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction-based and less susceptible to manipulation. The ASU provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform—Scope, which clarified the scope and application of the original guidance. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform—Deferral of the Sunset Date of Topic 848. This update extends the sunset provision of ASU 2020-04 to December 31, 2024. The Company has not yet adopted this ASU and is evaluating the effect of adopting this new accounting guidance.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For companies that qualified as Smaller Reporting Companies as defined by the SEC as of November 19, 2019, ASU 2016-13 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company is evaluating the impact of the guidance on its financial statements.
Other accounting standards and amendments to existing accounting standards that have been issued and have future effective dates are not applicable or are not expected to have a significant impact on the Company’s consolidated financial statements
Going Concern
The financial statements have been prepared assuming
the Company will continue as a going concern. The Company has incurred losses since inception, resulting in an accumulated deficit of
$
Page 10 of 35
The ability of the Company to continue its operations as a going concern is dependent on management’s plans, which include the raising of capital through debt and/or equity markets with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements.
The Company will require additional funding to finance the growth of its current and expected future operations as well to achieve its strategic objectives. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 3 – REVENUE RECOGNITION
In accordance with FASB ASC 606, Revenue from Contracts with Customers, we determine revenue recognition through the following steps:
| (1) | Identify the contract with a customer |
| (2) | Identify the performance obligations in the contract |
| (3) | Determine the transaction price |
| (4) | Allocate the transaction price to each performance obligation in the contract |
| (5) | Recognize revenue when each performance obligation is satisfied |
There was no material impact on the Company’s financial statements as a result of adopting Topic 606 for the three months ended March 31, 2024 and year ended December 31, 2023.
The Company’s main source of revenue is comprised of the following:
| ● | Training-GSCG offers a Stem Cell & Exosomes Certification Program where physicians attending these training sessions will take advantage of a full review of stem cell biology, characterization and regenerative properties of cells and cell products, cytokines and growth factors and how they can be applied in a clinic setting. The physicians will pay for the training sessions upfront and receive all the material and certificate upon completion of seminar. Completion of the seminar is when control is transferred and when revenue is recognized. |
| ● | Products-Physicians can order SVF Kits through GSCG, which includes EC Certificate from Institute for Testing and Certificating, Inc. SVT Kits are paid for upfront and shipped from a third party directly to physicians. Transfer of control is when the product is shipped, which is when revenue is recognized. |
| ● | Equipment- Physicians can order equipment through GSCG, which includes a warranty from the manufacturer of equipment. Equipment is paid for upfront and shipped from the manufacturer directly to physicians. Transfer of control is when the equipment is shipped, which is when revenue is recognized. |
| ● | Patient procedures are the treatments GSCG is offering at its Cancun clinic. The transfer of control is when the procedures are completed, which is when revenue is recognized. |
The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer or as services are rendered. Revenue is measured based on the consideration the Company receives in exchange for those products.
Page 11 of 35
| For the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Training | $ | $ | ||||||
| Product supplies | ||||||||
| Equipment | ||||||||
| Patient procedures | ||||||||
| Total revenue | $ | $ | ||||||
| For the Three Months Ended March 31, 2024 | ||||||||||||
| Global Stem Cells Group | Meso Numismatics | Total | ||||||||||
| Revenue | $ | $ | $ | |||||||||
| Cost of revenue | ||||||||||||
| Gross profit | $ | $ | $ | |||||||||
| Gross Profit % | % | % | % | |||||||||
| Assets | $ | $ | $ | |||||||||
| Net profit (loss) | $ | $ | ( | ) | $ | ( | ) | |||||
COVID-19
In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China and other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020 the World Health Organization characterized the outbreak as a “pandemic”.
The significant outbreak of COVID-19 resulted in a widespread health crisis that adversely affected the economies and financial markets in which we operate. Restrictions in international travel along with in person meetings limited our training of new customers along with selling them products and equipment which adversely affecting our results of operations and financial condition during 2021 and the first six months of 2022.
During the fourth quarter of 2022 and into 2023 we started recovering from the COVID-19 pandemic with restrictions in international travel removed along with the opening of the Cancun facility in the second half of 2022, which provided a facility for physicians to come for training and preform patient procedures.
The full extent of the future impacts of COVID-19 on the Company’s operations is uncertain. A prolonged outbreak could have a material adverse impact on financial results and business operations of the Company, including the timing and ability of the Company to collect accounts receivable and the ability of the Company to continue to provide high-quality services and equipment. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities at the date of issuance of these financial statements. These estimates may change as new events occur and additional information is obtained.
Page 12 of 35
NOTE 4 – NOTES PAYABLE
Convertible Notes Payable
On November 25, 2019, the Company, pursuant to
the certificate of designation of the Series BB Preferred Stock, elected to exchange the preferred shares for other indebtedness calculated
at a price per share equal to $
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Convertible notes payable | $ | $ | ||||||
| Less: Discount | ( | ) | ( | ) | ||||
| Convertible notes payable, net | $ | $ | ||||||
During the periods ending March 31, 2024 and December
31, 2023, the Company incurred $
Promissory Notes Payable
During 2015, the Company entered into line of
credit with Digital Arts Media Network that was treated as a promissory note. The promissory note bears interest at ten (
On November 25, 2019, pursuant to the certificate
of designation of the Series BB Preferred Stock, the Company elected to exchange the preferred shares for other indebtedness calculated
at a price per share equal to $
Page 13 of 35
On December 3, 2019, Melvin Pereira, the prior
CEO, converted
At December 7, 2020, the Company exchanged $
On November 20, 2023, both the Company and two
separate lenders agreed to terminate the notes in the amount of $
The new notes have a maturity date of November
20, 2028, an aggregate principal amount of $
On December 9, 2020, the Company entered into
a Promissory Debenture with a lender in the amount of $
On January 6, 2021, the Company entered into a
Promissory Debenture with a lender in the amount of $
On June 22, 2021, the Company entered into a Promissory
Debenture with a lender in the amount of $
Page 14 of 35
On August 18, 2021, through a Stock Purchase Agreement
in which the Company acquired
On August 18, 2021, through a Stock Purchase Agreement
in which the Company acquired
On September 20, 2021, the Company entered into
a Promissory Debenture with a lender in the amount of $
On December 30, 2021, the parties modified the
terms of the Promissory Debenture dated July 13, 2020 in the amount of $
On December 30, 2021, the parties modified the
terms of the Promissory Debenture dated July 15, 2020 in the amount of $
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Promissory notes payable | $ | $ | ||||||
| Promissory notes payable-related party | ||||||||
| Less: Discount | ( | ) | ( | ) | ||||
| Less: Deferred finance costs | ( | ) | ( | ) | ||||
| Promissory notes payable, net | $ | $ | ||||||
Page 15 of 35
During the periods ending March 31, 2024 and December
31, 2023, the Company made $
Derivatives Liabilities
The Company determined that the convertible notes outstanding as of March 31, 2024 contained an embedded derivative instrument as the conversion price was based on a variable that was not an input to the fair value of a “fixed-for-fixed” option as defined under FASB ASC Topic No. 815 – 40.
| March 31, | ||||
| 2024 | ||||
| Common stock issuable | ||||
| Market value of common stock on measurement date | $ | |||
| Adjusted exercise price | $ | |||
| Risk free interest rate | % | |||
| Instrument lives in years | ||||
| Expected volatility | % | |||
| Expected dividend yields | ||||
At December 7, 2020, the Company exchanged $
| Balance at December 31, 2022 | $ | |||
| Additions | ||||
| Fair value loss | ( | ) | ||
| Conversions | ( | ) | ||
| Balance at December 31, 2023 | ||||
| Additions | ||||
| Fair value loss | ||||
| Conversions | ||||
| Balance at March 31, 2024 | $ |
NOTE 5 – STOCKHOLDERS EQUITY
Common Shares
The Board of Directors and shareholders were required
to increase the number of authorized shares of common stock from (a)
As of January 26, 2024, the Board and Majority
Stockholders have approved a reduction in the authorized Common Stock from
Page 16 of 35
2024 Transactions
The Company has not issued any of its authorized capital stock for the quarter ended March 31, 2024.
2023 Transactions
On December 8, 2023, the Company issued
As of March 31, 2024 and December 31, 2023, the
Company has
Warrants
During the year ended December 31, 2020, the Company
issued warrants to purchase
On January 6, 2021, the Company issued warrants
to purchase
On June 22, 2021, the Company issued warrants
to purchase
On September 20, 2021, the Company issued warrants
to purchase
| Number of Shares Underlying Warrants | Weighted Average Exercise Price | |||||||
| Outstanding at year ended December 31, 2022 | $ | |||||||
| Granted | ||||||||
| Exercised | ||||||||
| Expired | ( | ) | - | |||||
| Outstanding at year ended December 31, 2023 | $ | |||||||
| Granted | ||||||||
| Exercised | ||||||||
| Expired | ( | ) | - | |||||
| Outstanding at quarter ended March 31, 2024 | $ | |||||||
Warrants granted in the year ended December 31,
2020 were valued using the Black Scholes Merton Model with the risk-free interest rate of
Warrants granted in the year ended December 31,
2021 were valued using the Black Scholes Merton Model with the risk-free interest rate within ranges between
Page 17 of 35
Designation of Series AA Super Voting Preferred Stock
On June 30, 2014, the Company filed with the Secretary
of State with Nevada an amendment to the Company’s Articles of Incorporation, authorizing the issuance of up to eleven million (
On May 2, 2014, the Company filed with the Secretary
of State with Nevada in the form of a Certificate of Designation that authorized the issuance of up to
All of the Holders of the Series AA Super Voting
Preferred Stock together, voting separately as a class, shall have an aggregate vote equal to sixty-seven (
The holders of the Series AA Super Voting Preferred Stock shall not be entitled to receive dividends paid on the Company’s common stock.
Upon liquidation, dissolution and winding up of the affairs of the Company, whether voluntary or involuntary, the holders of the Series AA Super Voting Preferred Stock shall not be entitled to receive out of the assets of the Company, whether from capital or earnings available for distribution, any amounts which will be otherwise available to and distributed to the common shareholders.
The shares of the Series AA Super Voting Preferred Stock will not be convertible into the shares of the Company’s common stock.
On November 26, 2019, the Company filed with the
Secretary of State with Nevada an amendment to the Company’s Articles of Incorporation, authorizing the increase to
On June 26, 2020, Meso Numismatics, Inc. completed
the repurchase of
On June 26, 2020, due to Mr. Pereira’s resignation,
the Company’s Board of Directors appointed Mr. David Christensen, current Director and President of the Company, to serve as Chief
Executive Officer, Chief Financial Officer and Secretary, effective June 27, 2020 and granted
The $
On August 18, 2021, the Company completed its
acquisition of Global Stem Cells Group Inc., through a Stock Purchase Agreement acquiring all the outstanding capital stock of Global
Stem Cells Group Inc and paid the purchase price of a total of
Page 18 of 35
The Series AA Super Voting Preferred Stock issued
on August 18, 2021, was valued based upon industry specific control premiums and the Company’s market cap at the time of the transaction.
The $
As of March 31, 2024 and December 31, 2023, the
Company had
Designation of Series BB Preferred Stock
On March 29, 2017, the Company filed with the
Secretary of State with Nevada in the form of a Certificate of Designation that authorized the issuance of up to one million (
Each holder of outstanding shares of Series BB Preferred Stock shall be entitled to convert on a 1 for 1 basis into shares of the Company’s common stock, any or all of their shares of Series BB Preferred Stock after a minimum of six (6) months have elapsed from the issuance of the preferred stock to the holder. The Series BB Preferred Stock has no voting rights until the Holder redeems the preferred stock into the Company’s common stock. The Series BB Preferred Stock shall not be adjusted by the Corporation.
The holders of the Series BB Preferred Stock shall not be entitled to receive dividends paid on the Company’s common stock.
The Series BB Preferred Stock has a liquidation
value of $
As of December 31, 2019,
The Company previously designated
As of March 31, 2024 and December 31, 2023, the Company had no preferred shares of Series BB Preferred Stock issued and outstanding.
Designation of Series CC Preferred Stock
At any time prior to
November 25, 2022 (“Automatic Conversion Date”) the Company may redeem for cash out of funds legally available therefor, any
or all of the outstanding Series CC Convertible Preferred Stock at a price equal to $
Each holder of outstanding
shares of Series CC Convertible Preferred Stock shall be entitled to convert, prior to the Automatic Conversion Date, part or all of its
shares of Series CC Convertible Preferred Stock into a number of fully paid and nonassessable shares of common stock at a price per share
determined by dividing the number of issued and outstanding shares of stock of the Company on the date of conversion by
Page 19 of 35
The holders of the Series CC Convertible Preferred Stock shall not be entitled to receive dividends paid on the Company’s common stock.
The holders of the Series CC Convertible Preferred Stock shall not be entitled to vote on any matter submitted to the shareholders of the Company for their vote, waiver, release or other action.
The Company previously designated
As of March 31, 2024 and December 31, 2023, the Company had no preferred shares of Series CC Preferred Stock issued and outstanding.
Designation of Series DD Convertible Preferred Stock
On November 26, 2019, the Company filed with the
Secretary of State with Nevada an amendment to the Company’s Articles of Incorporation, authorizing ten thousand (
Each holder of outstanding shares of Series DD
Convertible Preferred Stock shall be entitled to its shares of Series DD Convertible Preferred Stock into a number of fully paid and nonassessable
shares of common stock determined by multiplying the number of issued and outstanding shares of common stock of the Company on the date
of conversion by
The holders of the Series DD Convertible Preferred Stock shall not be entitled to receive dividends paid on the Company’s common stock.
The holders of the Series DD Convertible Preferred Stock shall not be entitled to vote on any matter submitted to the shareholders of the Company for their vote, waiver, release or other action.
On August 18, 2021, the Company completed its
acquisition of Global Stem Cells Group Inc., through a Stock Purchase Agreement acquiring all the outstanding capital stock of Global
Stem Cells Group Inc and paid the purchase price of a total of
The $
In consideration of mutual covenants set forth
in the Professional Service Consulting Agreement, Dave Christensen, current Director, President, Chief Executive Officer, Chief Financial
Officer and Secretary, shall be compensated monthly based on annual rate of $
The $
As of March 31, 2024 and December 31, 2023, the
Company had
Page 20 of 35
NOTE 6 – RELATED PARTY TRANSACTIONS
In consideration of mutual covenants set forth
in the Professional Service Consulting Agreement, Dave Christensen, current Director, President, Chief Executive Officer, Chief Financial
Officer and Secretary, shall be compensated monthly based on an annual rate of $
On August 18, 2021, through a Stock Purchase Agreement
in which the Company acquired
Benito Novas’ brother, sister and nephew
provide marketing/administrative and training/R&D services to Global Stem Cells Group and were paid $
NOTE 7 – COMMITMENTS AND CONTINGENCIES
Pursuant to an Agreement between Global Stem Cell
Group and a lender dated November 17, 2020, in the event that any of Global Stem Cell Group, and/or the Entities and /or Parent (individually
the “Company” and collectively the “Companies”) dispose of any assets to any party or third party or parties (an
“Asset Disposition”), then Global Stem Cell Group shall undertake to cause such party, third party or parties to acquire the
perpetual right of a percentage of Global revenues from the investor. The consideration for the right shall be equal to the fair value
of the assets at the time of the Asset Disposition (the “Asset Disposition Payment”). The Asset Disposition Payment shall
not exceed
In exchange for the gross proceeds in the amount of $
During the period ending December 31, 2021, Global
Stem Cell Group, Inc. entered into the Cancun lease with HELLIMEX, S.A. DE CV beginning January 16 2022 and ending on January 15, 2024.
The property is located in the Tulum Trade Center, consisting of
Due to the expansion of the Cancun Clinic, an
additional
During the three months ended March 31, 2024 and
the three months ended March 31, 2023 the Company paid $
NOTE 8 – PROPERTY AND EQUIPMENT, NET
| March 31, 2024 | December 31, 2023 | |||||||
| Computer, equipment and vehicles ( | $ | $ | ||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total property and equipment, net | $ | $ | ||||||
Depreciation expense for the three months ended
March 31, 2024 and three months ended March 31, 2023 was $
Page 21 of 35
We evaluate the carrying value of long-lived assets for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. Further testing of specific assets or grouping of assets is required when undiscounted future cash flows associated with the assets is less than their carrying amounts. An asset is considered to be impaired when the anticipated undiscounted future cash flows of an asset group are estimated to be less than its carrying value. The amount of impairment recognized is the difference between the carrying value of the asset group and its fair value. Fair value estimates are based on assumptions concerning the amount and timing of estimated future cash flows. We recorded no impairment of long-lived assets for the period ended March 31, 2024 and the year ended December 31, 2023.
NOTE 9 – INTELLECTUAL PROPERTY
A third party independent valuation specialist was asked to determine the value of Global Stem Cell Group, Inc., tangible and intangible assets assuming the offering price was at fair value. In order to perform the purchase price allocation, the tangible and intangible assets were valued as of August 18, 2021.
| March 31, 2024 | December 31, 2023 | |||||||
| Tradename - Trademarks | $ | $ | ||||||
| Intellectual Property / Licenses | ||||||||
| Customer Base | ||||||||
| Intangible assets | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Total intangible assets, net | $ | $ | ||||||
Amortization is computed on straight-line method
based on estimated useful lives of
NOTE 10 – OPERATING LEASES
During the period ending December 31, 2021, Global
Stem Cell Group, Inc. entered into the Cancun lease with HELLIMEX, S.A. DE CV beginning January 16, 2022 and ending on January 15, 2024.
The property is located in the Tulum Trade Center, consisting of
In January 2022, the Company began the buildout of the clinic and began to order equipment. The Cancun facility was inaugurated in May 2022 and is accredited both by the Mexican General Health Council and Cofepris (Mexican FDA).
Due to the expansion of the Cancun Clinic, an
additional
Page 22 of 35
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Total undiscounted cash payments | ||||
| Less interest | ( | ) | ||
| Present value of payments | $ |
NOTE 11 – GOODWILL
On August 18, 2021, through a Stock Purchase Agreement,
we acquired
The preliminary purchase price for the merger
was determined to be $
Under the acquisition method, the purchase price must be allocated to the reporting units net assets acquired, inclusive of intangible assets, with any excess fair value recorded to goodwill. The goodwill, which is not deductible for tax purposes, is attributable to the assembled workforce of Global Stem Cells Group, planned growth in new markets, and synergies expected to be achieved from the combined operations of Meso Numismatics, Inc. and Global Stem Cells Group.
| Goodwill | ||||
| Balance at December 31, 2022 | $ | |||
| Acquisition | ||||
| Impairment | ( | ) | ||
| Balance at December 31, 2023 | $ | |||
| Acquisition | ||||
| Impairment | ( | ) | ||
| Balance at March 31, 2024 | $ | |||
During each fiscal year, we periodically assess whether any indicators of impairment exist which would require us to perform an interim impairment review was based on the five year revenue and cash from operations projections of the Global Stem Cell unit of the company. As of each interim period end during each fiscal year, we concluded that a triggering event had not occurred that would more likely than not reduce the fair value of our reporting unit below their carrying values. We performed our annual test of goodwill for impairment as of December 31, 2023.
The Company has recognized impairment of $
NOTE 12 – SUBSEQUENT EVENTS
In accordance with ASC 855-10, we have analyzed events and transactions that occurred subsequent to March 31, 2024 through the date these financial statements were issued and have determined that we do not have any other material subsequent events to disclose or recognize in these financial statements.
Page 23 of 35
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This quarterly report contains forward-looking statements. Forward-looking statements are projections of events, revenues, income, future economic performance or management’s plans and objectives for our future operations. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” and the risks set out below, any of which may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks include, by way of example and not in limitation:
| ◾ | the uncertainty of profitability based upon our history of losses; |
| ◾ | legislative or regulatory changes concerning regenerative medicine and therapies; |
| ◾ | risks related to our outstanding secured and unsecured loans and our ability to service debt; |
| ◾ | risks related to failure to obtain adequate financing on a timely basis and on acceptable terms to continue as going concern; |
| ◾ | risks related to our operations and uncertainties related to our business plan and business strategy; |
| ◾ | changes in economic conditions; |
| ◾ | uncertainty with respect to intellectual property rights, protecting those rights and claims of infringement of other’s intellectual property; |
| ◾ | competition; and |
| ◾ | cybersecurity concerns. |
This list is not an exhaustive list of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully, including those contained in our Annual Report on Form 10-K under “Risk Factors” for the year ended December 31, 2023, and readers should not place undue reliance on our forward-looking statements. Forward looking statements are made based on management’s beliefs, estimates and opinions on the date the statements are made, and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
Overview
Since the acquisition of Global Stem Cell Group in August of 2021, our focus has been mainly dedicated to its operations serving the markets in the regenerative medicine industry. We believe stem cell therapy is becoming an increasingly effective clinical solution for treating conditions that traditional or conventional medicine only offers within palliative care and pain management. Patients around the world are seeking a natural regenerative alternative without the potential risks and side effects sometimes associated with conventional pharmaceuticals.
We work with doctors and their staff to provide products, solutions, equipment, services, and training to help them be successful in the application of Stem Cell Therapies. Our team combines solutions from extensive clinical research with the manufacturing and commercialization of viable cell therapy and immune support related products that we believe will change the course of traditional medicine around the world forever. Our strategy allows us the ability to create immediate revenue streams through product sales, distribution, and clinical applications, driven by our extensive education platform. Our revenue comes directly from the training and the seminars, from the resale of these kits, products, and equipment, services, and from the reoccurring application of our process using the kits and solutions we provide.
Page 24 of 35
Global Stem Cells Group is a leader in the Stem Cell and Regenerative Medicine fields, covering clinical research, patient applications, along with physician training through our state-of-the-art global network of companies. The Company’s mission is to enable physicians to make the benefits of stem cell medicine a reality for patients around the world. They have been educating doctors on the science and application of cell-based therapeutics for the past 10 years. Our professional trademarked association “ISCCA” INTERNATIONAL SOCIETY FOR STEM CELL APPLICATION is a global network of medical professionals that leverages these multinational relationships to build best practices and further our mission.
The Company envisions the ability to improve “health-span” through the discovery and developments of new cellular therapy products, and cutting-edge technology.
Global Stem Cells Group, as almost everyone else in the world, was severely affected by the covid 19 pandemic. As we have been recovering in 2022 and into 2023, we are integrating every aspect of the regenerative medicine industry. During 2024, we plan to continue to add manufacturing and commercialization of viable cell therapy and immune support related products that we believe will change the course of traditional medicine around the world forever.
We believe this strategy will allow us the ability to increase our current revenues and create immediate revenue streams through product sales, distribution, and clinical applications, driven by our extensive education platform here are our main projects and revenue generators for 2024 and beyond.
Results of Operations
Below is a summary of the results of operations for the three months ended March 31, 2024 and 2023.
| For the Three Months Ended March 31, | ||||||||||||||||
| 2024 | 2023 | $ Change | % Change | |||||||||||||
| Revenue | $ | 817,034 | $ | 786,198 | $ | 30,836 | 3.92 | % | ||||||||
| Cost of revenue | 248,043 | 249,397 | (1,354 | ) | -0.54 | % | ||||||||||
| Gross profit | 568,991 | 536,801 | 32,190 | 6.00 | % | |||||||||||
| Operating expenses | ||||||||||||||||
| Advertising and marketing | 144,283 | 141,637 | 2,646 | 1.87 | % | |||||||||||
| Professional fees | 248,382 | 209,371 | 39,011 | 18.63 | % | |||||||||||
| Officer compensation | 22,500 | 22,500 | - | 0.00 | % | |||||||||||
| Depreciation and amortization expense | 76,572 | 56,628 | 19,944 | 35.22 | % | |||||||||||
| Investor relations | 23,268 | 2,250 | 21,018 | 934.13 | % | |||||||||||
| General and administrative | 159,091 | 178,626 | (19,535 | ) | -10.94 | % | ||||||||||
| Total operating expenses | 674,096 | 611,012 | 63,084 | 10.32 | % | |||||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense | (1,854,417 | ) | (1,600,426 | ) | (253,991 | ) | 15.87 | % | ||||||||
| Gain (loss) on derivative financial instruments | (1,498 | ) | 1,927 | (3,425 | ) | -177.74 | % | |||||||||
| Gain on settlement of debt | - | 2,463 | (2,463 | ) | -100.00 | % | ||||||||||
| Net loss | $ | (1,961,020 | ) | $ | (1,670,247 | ) | $ | (290,773 | ) | 17.41 | % | |||||
Page 25 of 35
Revenue
Revenue increased by 3.92% in the amount of $30,836 for the three months ended March 31, 2024, compared to the same period in 2023. The increase in revenue was a result of marketing and sales efforts to increase brand recognition and exposure in the industry. We experienced more lead generation in 2023 increasing equipment, products, and training sales in regions like Southeast Asia and the Middle East. The opening of the Cancun facility in the second half of 2022 also increased sales by providing a facility for physicians to come for training and preform patient procedures. Additional, Global Stem Cells Group, like almost everyone else in the world, was severely affected by the Covid 19 pandemic during 2021 and the first six months of 2022, restrictions our international travel along with in person meetings limited our training of new customers along with selling them products and equipment which adversely affecting our results of operations.
We expect that our revenues will increase in future quarters as a result of our ongoing marketing and brand awareness campaigns, training seminars, lectures and other efforts we engage in that expand our presence in the industry and provide us more opportunities to sell our products.
The following table presents our revenue by product category for the three months ended March 31, 2024 and 2023:
| For the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Training | $ | 110,333 | $ | 181,320 | ||||
| Product supplies | 355,481 | 433,673 | ||||||
| Equipment | 96,810 | 93,690 | ||||||
| Patient procedures | 254,410 | 77,515 | ||||||
| Total revenue | $ | 817,034 | $ | 786,198 | ||||
Operating expenses
Operating expenses increased by 10.32% in the amount of $63,084 for the three months ended March 31, 2024, compared to the same period in 2023. Listed below are the major changes to operating expenses:
Advertising and marketing fees increased by $2,646 for the three months ended March 31, 2024, compared to the same period in 2023, primarily due to an increase in advertising by Global Stem Cells Group.
Professional fees increased by $39,011 for the three months ended March 31, 2024, compared to the same period in 2023, primarily due to legal and accounting fees.
Depreciation and amortization increased by $19,944 for the three months ended March 31, 2024, compared to the same period in 2023, primarily due to expansion of the Cancun facility.
Investor relations decreased by $21,018 for the three months ended March 31, 2024, compared to the same period in 2023, primarily due to an agreement with an investor relation firm in February, 2024.
General and administrative expense decrease by $19,535 for the three months ended March 31, 2024, compared to the same period in 2023, primarily due to a decrease in travel by Global Stem Cells Group.
We expect our overall operating expenses to increase on a quarterly basis for the balance of the year and into 2024 as we further implement our business plan. We expect increases in future quarters over all major categories as we engage in efforts to increase brand awareness with our products and services, including advertising campaigns and investor relation services. We also expect an increase in general operating costs and growth initiatives as we ramp up operations and seek to expand them.
Page 26 of 35
Other expense
Other expense increased by $259,879 for the three months ended March 31, 2024, compared to the same period in 2023, primarily as a result of a inecrease in amortization of debt discount on promissory notes.
We had interest expense of $1,854,417 and $1,600,426 for the three months ended March 31, 2024 and 2023, respectively.
We expect to continue to experience high interest payments in the future as a result of our outstanding liabilities. If we are unable to generate sufficient revenues and/or additional financing to service this debt, there is a risk the lenders will call the notes and we will be unable to repay the loans. If this happens, we could go out of business.
Net Loss
We recorded a net loss of $1,961,020 for the three months ended March 31, 2024, as compared with a net loss of $1,670,247 for the same period in 2023.
Liquidity and Capital Resources
Since inception, we have financed our operations through private placements and convertible notes. The following is a summary of the cash and cash equivalents as of March 31, 2024 and December 31, 2022.
| March
31, 2024 | December 31, 2023 | $ Change | % Change | |||||||||||||
| Cash and cash equivalents | $ | 579,352 | $ | 530,540 | $ | 48,812 | 9.20 | % | ||||||||
Summary of Cash Flows
Below is a summary of our cash flows for the three months ended March 31, 2024 and 2023.
| For the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Net cash provided in operating activities | $ | 107,966 | $ | 6,775 | ||||
| Net cash used in investing activities | (59,154 | ) | (5,486 | ) | ||||
| Net cash used in financing activities | - | (9,850 | ) | |||||
| Net increase (decrease) in cash and cash equivalents | $ | 48,812 | $ | (8,561 | ) | |||
Operating activities
Net cash provided by operating activities was $107,966 during the three months ended March31, 2024 and consisted of a net loss of $1,961,020, which was offset by a net change in operating assets and liabilities of $966,138 and non-cash items of $1,102,848. The non-cash items for the three months ended March31, 2024, consisted of depreciation and amortization expenses of $76,572, amortization of debt discount of $1,024,778, and change in derivative liabilities of $1,498. The significant change in operating assets and liabilities was an increase in accounts payable and accrued liabilities, partially offset by the decrease in accounts receivable and prepaid expense.
Net cash provided by operating activities was $6,775 during the three months ended March 31, 2023 and consisted of a net loss of $1,670,247, which was offset by a net change in operating assets and liabilities of $858,821 and non-cash items of $818,201. The non-cash items for the three months ended March 31, 2023, consisted of depreciation and amortization expenses of $56,628 and amortization of debt discount of $765,963, partially offset by the change in derivative liabilities of $1,927 and gain on settlement of debt of $2,463. The significant change in operating assets and liabilities was an increase in accounts payable and accrued liabilities, partially offset by the decrease in accounts receivable and prepaid expense.
Page 27 of 35
Investing activities
Net cash used in investing activities was $59,154 and consisted of the purchase of property and equipment associated with the expansion of the Cancun facility during the three months ended March 31, 2024.
Net cash used in investing activities was $5,486 and consisted of purchase of property and equipment associated with the Cancun lab during the three months ended March 31, 2023.
Financing activities
Net cash used in financing activities was $9,850 and consisted of principal payment of debt for the three months ended March 31, 2023.
We may expect to continue to experience high interest payments in the future as a result of our outstanding liabilities. Additionally, as of the date of this report, there are a number of secured promissory notes with an aggregate principal amount of approximately $$2,872,797 that have matured. Finally, we also have a number of unsecured promissory notes with an aggregate principal amount of $1,629,428 that have matured. The company is currently in debt restructuring talks, and there are also other lenders as well who have demonstrated interest in assuming this debt. However, if we are unable to generate sufficient revenues and/or additional financing to service this debt, there is a risk the lenders will call the notes, secure our assets, as to those applicable secured notes, and demand payment. If after all these recourses are exhausted and the debt becomes unresolvable, like any other company, there’s a risk we could go out of business.
Going Concern
The financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred losses since inception, resulting in an accumulated deficit of approximately $63,951,151 and a working capital deficit of $23,688,329 as of March 31, 2024 and future losses are anticipated. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.
The ability of the Company to continue its operations as a going concern is dependent on management’s plans, which include the raising of capital through debt and/or equity markets with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements.
The Company will require additional funding to finance the growth of its current and expected future operations as well to achieve its strategic objectives. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
Off-Balance Sheet Arrangements
As of March 31, 2024, the Company had no off-balance sheet arrangements.
Critical Accounting Policies
Our critical accounting policies have not materially changed during the three months ended March 31, 2024. Furthermore, the preparation of our financial statements is in conformity with generally accepted accounting principles in the United States of America, or GAAP. The preparation of our financial statements requires management to make judgments and estimates that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting period. Our management believes that we consistently apply these judgments and estimates, and the financial statements fairly represent all periods presented. However, any differences between these judgments and estimates and actual results could have a material impact on our statements of income and financial position.
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Derivative Instruments
The derivative instruments are accounted for as liabilities, the derivative instrument is initially recorded at its fair market value and is then re-valued at each reporting date, with changes in fair value recognized in operations for each reporting period. The Company uses the Monte Carlo option pricing model to value the derivative instruments.
Stock Based Compensation
Share-based compensation issued to employees is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period. The Company measures the fair value of the share-based compensation issued to non-employees at the grant date using the stock price observed in the trading market (for stock transactions) or the fair value of the award (for non-stock transactions), which were considered to be more reliably determinable measures of fair value than the value of the services being rendered.
New Accounting Pronouncements
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedient and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of interbank offered rates and, particularly, the risk of cessation of the London Interbank Offered Rate (“LIBOR”), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction-based and less susceptible to manipulation. The ASU provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform—Scope, which clarified the scope and application of the original guidance. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform—Deferral of the Sunset Date of Topic 848. This update extends the sunset provision of ASU 2020-04 to December 31, 2024. The Company has not yet adopted this ASU and is evaluating the effect of adopting this new accounting guidance.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For companies that qualified as Smaller Reporting Companies as defined by the SEC as of November 19, 2019, ASU 2016-13 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company is evaluating the impact of the guidance on its financial statements.
Other accounting standards and amendments to existing accounting standards that have been issued and have future effective dates are not applicable or are not expected to have a significant impact on the Company’s consolidated financial statements.
Goodwill
Goodwill represents the excess of fair value over identifiable tangible and intangible net assets acquired in business combinations. Goodwill is not amortized, instead goodwill is reviewed for impairment at least annually, or on an interim basis between annual tests when events or circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value.
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Revenue Recognition
In accordance with FASB ASC 606, Revenue from Contracts with Customers, we determine revenue recognition through the following steps:
| (1) | Identify the contract with a customer |
| (2) | Identify the performance obligations in the contract |
| (3) | Determine the transaction price |
| (4) | Allocate the transaction price to each performance obligation in the contract |
| (5) | Recognize revenue when each performance obligation is satisfied |
There was no material impact on the Company’s financial statements as a result of adopting Topic 606 for the three months ended March 31, 2024 and the year ended December 31, 2023.
The Company’s main source of revenue is comprised of the following:
| ● | Training-GSCG offers a Stem Cell & Exosomes Certification Program where physicians attending these training sessions will take advantage of a full review of stem cell biology, characterization and regenerative properties of cells and cell products, cytokines and growth factors and how they can be applied in a clinic setting. The physicians will pay for the training sessions upfront and receive all the material and certificate upon completion of seminar. Completion of the seminar is when control is transferred and when revenue is recognized. |
| ● | Products-Physicians can order SVF Kits through GSCG which includes EC Certificate from Institute for Testing and Certificating, Inc. SVT Kits are paid for upfront and shipped from a third party directly to physicians. Transfer of control is when the product is shipped which is when revenue is recognized. |
| ● | Equipment- Physicians can order equipment through GSCG which includes a warranty from the manufacturer of equipment. Equipment is paid for upfront and shipped from the manufacturer directly to physicians. Transfer of control is when the equipment is shipped which is when revenue is recognized. |
| ● | Patient procedures are the treatments GSCG is offering at its Cancun clinic. The transfer of control is when the procedures are completed which is when revenue is recognized. |
The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer or as services are rendered. Revenue is measured based on the consideration the Company receives in exchange for those products.
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Use of Estimates
The preparation of these financial statements in conformity 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 at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The significant estimates included in these financial statements are associated with accounting for the goodwill, derivative liability valuations, valuation of preferred stock, fair value estimates, valuation of assets and liabilities in business combination and in its going concern analysis.
Fair Value of Financial Instruments
The fair value of financial instruments, which include cash, accounts payable and accrued expenses and advances from related parties were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments. Management is of the opinion that the Company is not exposed to significant interest, currency or credit risks arising from financial instruments.
Fair value is defined as the price which would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-tier fair value hierarchy which prioritizes the inputs used in the valuation methodologies, as follows:
| Level 1 | Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. |
| Level 2 | Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means. |
| Level 3 | Inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities. |
At March 31, 2024 and December 31, 2023, the carrying amounts of the Company’s financial instruments, including cash, account payables, and accrued expenses, approximate their respective fair value due to the short-term nature of these instruments.
At March 31, 2024 and December 31, 2023, the Company does not have any assets or liabilities except for derivative liabilities related to convertible notes payable required to be measured at fair value in accordance with FASB ASC Topic 820, Fair Value Measurement.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are not required to provide the information required by this Item because we are a smaller reporting company.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports, filed under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
As required by the SEC Rules 13a-15(b) and 15d-15(b), we carried out an evaluation under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below.
| 1. | We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us for the three months ended March 31, 2024. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness. |
| 2. | We have inadequate controls to ensure that information necessary to properly record transactions is adequately communicated on a timely basis from non-financial personnel to those responsible for financial reporting. Management evaluated the impact of the lack of timely communication between non–financial personnel and financial personnel on our assessment of our reporting controls and procedures and has concluded that the control deficiency represented a material weakness. | |
| 3. | The Company failed to account for the acquisition of GSCG using the full purchase accounting method in accordance with ASC 805. |
To address these material weaknesses, management engaged financial consultants, performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented. We have not remedied the material weaknesses as of March 31, 2024. The Company plans to take remedial action to address these weaknesses during the fiscal year ended December 31, 2024.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) of the Exchange Act that occurred during the three months ended March 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, except the implementation of the controls identified above.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
To the Company’s knowledge, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or of our Company’s or our Company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
Item 1A. Risk Factors
See risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed on April 15, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
The current portion of notes payable on the Company’s Condensed Consolidated Balance Sheets above contains, at March 31, 2024, certain promissory notes on which the Company was in arrears on payments of principal as follows:
| ◾ | On December 7, 2020, the Company entered into a secured promissory note in the amount of $2,872,797. Pursuant to the terms of the note, the note bears fifteen (15%) interest, unsecured and is due on November 23, 2023. As of March 31, 2024, the Company accrued $1,731,198 in interest expense. The note is currently in default. |
| ◾ | On December 9, 2020, the Company entered into an unsecured promissory note in the amount of $110,000. Pursuant to the terms of the note, the note bears fifteen (15%) interest, unsecured and is due on December 9, 2023. As of March 31, 2024, the Company accrued $66,160 in interest expense. The note is currently in default |
| ◾ | On January 6, 2021, the Company entered into an unsecured promissory note in the amount of $1,000,000. Pursuant to the terms of the note, the note bears fifteen (15%) interest, unsecured and is due on January 6, 2022. As of March 31, 2024, the Company accrued $601,480 in interest expense. The note is currently in default |
| ◾ | On November 17, 2020, the Company entered into an unsecured promissory note in the amount of $400,000. Pursuant to the terms of the note, the investor shall receive the right to a perpetual 7.75% (payment percentage) of the revenues of Global Stem Cell Group. As of March 31, 2024, the Company accrued $455,871 in interest expense. The note is currently in default due to the non-payment of interest. |
| ◾ | On December 30, 2021, the Company entered into an unsecured promissory note in the amount of $7,958. Pursuant to the terms of the note, the note bears twelve (12%) interest, unsecured and is due on July 30, 2023. As of March 31, 2024, the Company accrued $2,145 in interest expense. The note is currently in default. |
| ◾ | On December 30, 2021, the Company entered into an unsecured promissory note in the amount of $111,470. Pursuant to the terms of the note, the note bears twelve (12%) interest, unsecured and is due on July 30, 2023. As of March 31, 2024, the Company accrued $30,052 in interest expense. The note is currently in default. |
At March 31, 2024 and December 31, 2023, the Company had insufficient cash on hand to repay these notes. None of these notes have been paid, and management has indicated that no demand for payment for any of these notes has been received by the Company as of the date of this report. If we are unable to generate sufficient revenues and/or additional financing to service this debt, there is a risk the lenders will call the notes, secure our assets, as to those applicable secured notes, and demand payment. If this happens, we could go out of business.
Item 4. Mine Safety Disclosures
N/A
Item 5. Other Information
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Item 6. Exhibits
| Exhibit Number |
Description of Exhibit | |
| 3.1** | Amendment to Articles of Incorporation, dated March 6, 2024 | |
| 31.1** | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2** | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1** | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101** | The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 formatted in Extensible Business Reporting Language (XBRL). | |
| 101.INS** | Inline XBRL Instance Document. | |
| 101.SCH** | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL** | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF** | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB** | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE** | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| ** | Provided herewith |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.
| Dated May 20, 2024 | MESO NUMISMATICS, INC. | |
| By: | /s/ David Christensen | |
| David Christensen | ||
|
President, Chief Executive Officer, Chief Financial Officer, Secretary and Director (Principal Executive Officer) (Principal Financial Officer) (Principal Accounting Officer) | ||
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