Special Note Regarding Forward Looking Statements.
This quarterly report on Form 10-Q of Sigyn Therapeutics, Inc. for the period
ended September 30, 2022 contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, which are intended to be
covered by the safe harbors created thereby. To the extent that such statements
are not recitations of historical fact, such statements constitute forward
looking statements which, by definition, involve risks and uncertainties. In
particular, statements under the Sections; Description of Business, Management's
Discussion and Analysis of Financial Condition and Results of Operations contain
forward looking statements. Where in any forward-looking statements, the Company
expresses an expectation or belief as to future results or events, such
expectation or belief is expressed in good faith and believed to have a
reasonable basis, but there can be no assurance that the statement of
expectation or belief will result or be achieved or accomplished.
The following are factors that could cause actual results or events to differ
materially from those anticipated and include but are not limited to: general
economic, financial and business conditions; changes in and compliance with
governmental regulations; changes in tax laws; and the cost and effects of legal
proceedings.
You should not rely on forward looking statements in this quarterly report. This
quarterly report contains forward looking statements that involve risks and
uncertainties. We use words such as "anticipates," "believes," "plans,"
"expects," "future," "intends," and similar expressions to identify these
forward-looking statements. Prospective investors should not place undue
reliance on these forward-looking statements, which apply only as of the date of
this quarterly report. Our actual results could differ materially from those
anticipated in these forward-looking statements.
Recent Developments
Members of the Board of Directors
Effective October 10, 2022, the Company's Board of Directors appointed Ms. Richa
Nand, Mr. Jim Dorst, and Mr. Chris Wetzel as non-executive members to the
Company's Board of Directors ("Director"). Each Director shall receive an annual
retainer of $30,000 paid in equal quarterly amounts at the end of each quarter.
In addition, each Director shall receive a grant of restricted stock units of
$50,000, or at the discretion of the Board of Directors, options to acquire
shares of common stock. Restricted stock units will be valued based on the
average of the five trading days preceding and including the date of grant and
will vest at a rate determined by the Board of Directors over one year. If
options are granted, the options will be valued at the exercise price based on
the average of the five trading days preceding and including the date of grant,
have a ten year term, and will vest at a rate determined by the Board of
Directors.
Convertible Promissory Debentures
Osher - $110,000
On September 20, 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 September 20, 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 733,333 shares
of the Company's Common Stock at an exercise price of $0.25 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 $0.15 per share, subject to adjustment as
provided therein, such as stock splits and stock dividends.
25
Brio - $82,500
On September 9, 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) $82,500
aggregate principal amount of Note due September 9, 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 550,000 shares
of the Company's Common Stock at an exercise price of $0.25 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 $0.15 per share, subject to adjustment as
provided therein, such as stock splits and stock dividends.
Osher - $110,000
On August 31, 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 August 31, 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 733,333 shares
of the Company's Common Stock at an exercise price of $0.25 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 $0.15 per share, subject to adjustment as
provided therein, such as stock splits and stock dividends.
Other - $341,000
In July 2022, the Company entered into an Original Issue Discount Senior
Convertible Debentures (the "July 2022 Notes") totaling (i) $341,000 aggregate
principal amount of Note (total of $310,000 cash was received) due in various
dates in July 2023 based on $1.00 for each $0.90909 paid by the previous
noteholder and (ii) five-year Common Stock Purchase Warrants ("Warrants') to
purchase up to an aggregate of 676,936 shares of the Company's Common Stock at
an exercise price of $0.50 per share. The conversion price for the principal in
connection with voluntary conversions by the holders of the convertible notes is
$0.50 per share.
Osher - $82,500
On June 22, 2022, the Company entered into an Original Issue Discount Senior
Convertible Debenture (the "Note") with respect to the sale and issuance to
institutional investor Osher Capital Partners LLC ("Osher") of (i) $82,500
aggregate principal amount of Note due June 22, 2023 based on $1.00 for each
$0.90909 paid by the previous noteholder and (ii) five-year Common Stock
Purchase Warrants ("Warrants') to purchase up to an aggregate of 165,000 shares
of the Company's Common Stock at an exercise price of $0.50 per share. The
aggregate cash subscription amount received by the Company from the previous
noteholder for the issuance of the Note and Warrants was $75,000 which was
issued at a $7,500 original issue discount from the face value of the Note. The
conversion price for the principal in connection with voluntary conversions by a
holder of the convertible notes is $0.50 per share, subject to adjustment as
provided therein, such as stock splits and stock dividends.
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.
26
Brio - $110,000
On May 10, 2022, the Company entered into an Original Issue Discount Senior
Convertible Debenture (the "Note") with respect to the sale and issuance to
institutional investor Brio Capital Master Fund Ltd. ("Brio") of (i) $110,000
aggregate principal amount of Note due May 10, 2023 based on $1.00 for each
$0.90909 paid by the previous noteholder and (ii) five-year Common Stock
Purchase Warrants ("Warrants') to purchase up to an aggregate of 220,000 shares
of the Company's Common Stock at an exercise price of $0.50 per share. The
aggregate cash subscription amount received by the Company from the previous
noteholder for the issuance of the Note and Warrants was $100,000 which was
issued at a $10,000 original issue discount from the face value of the Note. The
conversion price for the principal in connection with voluntary conversions by a
holder of the convertible notes is $0.50 per share, subject to adjustment as
provided therein, such as stock splits and stock dividends.
Osher - $110,000
On April 28, 2022, the Company entered into an Original Issue Discount Senior
Convertible Debenture (the "Note") with respect to the sale and issuance to
institutional investor Osher Capital Partners LLC ("Osher") of (i) $110,000
aggregate principal amount of Note due April 28, 2023 based on $1.00 for each
$0.90909 paid by the previous noteholder and (ii) five-year Common Stock
Purchase Warrants ("Warrants') to purchase up to an aggregate of 220,000 shares
of the Company's Common Stock at an exercise price of $0.50 per share. The
aggregate cash subscription amount received by the Company from the previous
noteholder for the issuance of the Note and Warrants was $100,000 which was
issued at a $10,000 original issue discount from the face value of the Note. The
conversion price for the principal in connection with voluntary conversions by a
holder of the convertible notes is $0.50 per share, subject to adjustment as
provided therein, such as stock splits and stock dividends.
Osher - $110,000
On March 23, 2022, the Company entered into an Original Issue Discount Senior
Convertible Debenture (the "Note") with respect to the sale and issuance to
institutional investor Osher Capital Partners LLC ("Osher") of (i) $110,000
aggregate principal amount of Note due March 23, 2023 based on $1.00 for each
$0.90909 paid by the previous noteholder and (ii) five-year Common Stock
Purchase Warrants ("Warrants') to purchase up to an aggregate of 220,000 shares
of the Company's Common Stock at an exercise price of $0.50 per share. The
aggregate cash subscription amount received by the Company from the previous
noteholder for the issuance of the Note and Warrants was $100,000 which was
issued at a $10,000 original issue discount from the face value of the Note. The
conversion price for the principal in connection with voluntary conversions by a
holder of the convertible notes is $0.50 per share, subject to adjustment as
provided therein, such as stock splits and stock dividends.
Brio - $110,000
On March 23, 2022, the Company entered into an Original Issue Discount Senior
Convertible Debenture (the "Note") with respect to the sale and issuance to
institutional investor Brio Capital Master Fund Ltd. ("Brio") of (i) $110,000
aggregate principal amount of Note due March 23, 2023 based on $1.00 for each
$0.90909 paid by the previous noteholder and (ii) five-year Common Stock
Purchase Warrants ("Warrants') to purchase up to an aggregate of 220,000 shares
of the Company's Common Stock at an exercise price of $0.50 per share. The
aggregate cash subscription amount received by the Company from the previous
noteholder for the issuance of the Note and Warrants was $100,000 which was
issued at a $10,000 original issue discount from the face value of the Note. The
conversion price for the principal in connection with voluntary conversions by a
holder of the convertible notes is $0.50 per share, subject to adjustment as
provided therein, such as stock splits and stock dividends.
Limited Operating History; Need for Additional Capital
There is limited historical financial information about us on which to base an
evaluation of our performance. We cannot guarantee we will be successful in our
business operations. Our business is subject to risks inherent in the
establishment of a new business enterprise, including limited capital resources,
and possible cost overruns due to increases in the cost of services. To become
profitable and competitive, we must receive additional capital. We have no
assurance that future financing will materialize. If that financing is not
available, we may be unable to continue operations.
27
Business Overview
Sigyn Therapeutics, Inc. ("Sigyn" or the "Company") is a development-stage
medical technology company headquartered in San Diego, California. We are
focused on creating 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. We designed Sigyn Therapy to extract 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.
We are advancing Sigyn Therapy as a candidate to treat end-stage renal disease
(ESRD) patients with chronic inflammation and/or endotoxemia,
pathogen-associated sepsis (leading cause of hospital deaths), community
acquired pneumonia (a leading cause of death among infectious diseases), and
emerging pandemic threats.
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 in vitro 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
liposomes as a model system to evaluate the potential of Sigyn Therapy to
address CytoVesicles that transport inflammatory cytokine cargos throughout the
bloodstream.
Additionally, in vitro studies demonstrated the ability of Sigyn Therapy to
deplete 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 in future
studies.
Subsequent to our in vitro study results, we completed in vivo animal studies of
Sigyn Therapy at the University of Michigan. In these 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.
Beyond our focus to clinically advance Sigyn Therapy, we intend to develop a
pipeline of extracorporeal blood purification therapies. In this regard, we have
designed a therapeutic system to enhance the benefit of cancer chemotherapy. To
support this endeavor, we disclosed on October 6, 2022, that a patent
application entitled: "SYSTEM AND METHODS TO ENHANCE CHEMOTHERAPY DELIVERY AND
REDUCE TOXICITY" had been filed with the United States Patent and Trademark
Office ("USPTO"). On October 13, 2022, we subsequently disclosed that trademark
applications to register ChemoPrepTM and ChemoPureTM were filed with the USPTO".
Chemotherapeutic agents are the most commonly administered drugs to treat
cancer, which is the second leading cause of death in the United States. Despite
therapeutic advances, treatment toxicity, drug resistance and inadequate tumor
site delivery restrict the benefit of chemotherapy.
To overcome these challenges, our patent submission describes a therapeutic
device system whose primary objective is to enhance tumor site delivery of
chemotherapy and reduce its toxicity. A secondary objective of the system is to
reduce treatment dosing without sacrificing patient benefit, or conversely
increase chemotherapy dosing without added toxicity. In concert with these
objectives, the therapeutic system offers to inhibit the spread of cancer
metastasis reported to be induced by the administration of chemotherapy.
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Our proposed chemotherapy enhancement system is comprised of two blood
purification technologies. ChemoPrepTM, administered prior to chemotherapy to
optimize tumor site delivery and improve the benefit of ChemoPureTM, which is
deployed post-chemotherapy to reduce treatment toxicity and inhibit the
potential spread of cancer metastasis.
Sigyn Therapy Mechanism of Action
To overcome the limitations of previous drug and device therapies, we designed
Sigyn Therapy to have an expansive- mechanism of action. Pre-clinical invitro
studies have measured the ability of Sigyn Therapy the deplete the presence of
viral pathogens, bacterial toxins, and inflammatory mediators from human blood
plasma. Such capabilities establish Sigyn Therapy as a candidate to treat
pathogen-associated conditions that precipitate Sepsis, Community Acquired
Pneumonia, Emerging Bioterror and Pandemic threats, and End-Stage Renal Disease
with endotoxemia and elevated inflammatory cytokine production.
To support widespread implementation, Sigyn Therapy is a single-use disposable
device that is deployable on the global infrastructure of hemodialysis and
continuous renal replacement therapy (CRRT) machines already located in
hospitals and clinics. To reduce the risk of blood clotting and hemolysis, the
anticoagulant heparin is administered, which is the standard-of-care drug
administered in dialysis and CRRT therapies. During animal studies conducted at
the University of Michigan, Sigyn Therapy was deployed for use on a hemodialysis
machine manufactured by Fresenius Medical Care, the global leader in the
dialysis industry.
Incorporated with Sigyn Therapy is a "cocktail" of adsorbent components
formulated to optimize the broad-spectrum extraction of therapeutic targets from
the bloodstream. In the medical field, the term "cocktail" is a reference to the
simultaneous administration of multiple drugs (a drug cocktail) with differing
mechanisms of actions. While drug cocktails are emerging as potential mechanisms
to treat cancer, they are life-saving countermeasures to treat HIV and
Hepatitis-C viral infections. However, dosing of multi-drug agent cocktails is
limited by toxicity and adverse events that can result from deleterious drug
interactions.
Sigyn Therapy is not constrained by such limitations as active adsorbent
components are maintained within Sigyn Therapy and not introduced into the body.
As a result, we are able to incorporate a substantial quantity of adsorbent
components to capture therapeutic targets outside of the body as they circulate
through Sigyn Therapy. Each adsorbent component has differing capture
characteristics that contribute to optimizing the ability of Sigyn Therapy to
address a broad-spectrum of pathogenic and inflammatory targets that precipitate
the cytokine storm that underlies sepsis and other life-threatening inflammatory
disorders.
The adsorbent components incorporated within Sigyn Therapy provide more than
200,000 square meters (~50 acres) of surface area on which to adsorb and remove
circulating viruses, bacterial toxins, and inflammatory mediators. Beyond an
immense capacity to deplete circulating therapeutic targets, Sigyn Therapy is
also efficient. Based on blood flow rates of 350ml/min, a patient's entire
bloodstream can pass through Sigyn Therapy more than fifteen times during a
single four-hour treatment period.
From a technical perspective, Sigyn Therapy is a 325mm long polycarbonate column
that internally contains polyethersulphone hollow fibers that have porous walls
have a median pore size of ~200 nanometers (nm). As blood flows into Sigyn
Therapy, plasma and therapeutic targets below 200nm travel through the porous
walls as a result of blood-side pressure. As the hollow fiber bundle within
Sigyn Therapy creates a resistance to the flow of blood, a pressure drop is
created along the length of the device such that the blood-side pressure is
higher at the blood inlet and lower at the blood outlet. This allows for plasma
and therapeutic targets to flow away from the blood and into the extra-lumen
space (inside the polycarbonate shell, yet outside the hollow-fiber bundle) to
interact with Sigyn Therapy's adsorbent components in a low shear force
environment. In the distal third of the fiber bundle, the pressure gradient is
reversed, which allows for plasma to flow back through the fiber walls to be
reconvened into the bloodstream without the presence of therapeutic targets that
were captured by adsorbent components housed in the extra-lumen space of Sigyn
Therapy.
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Overview of Candidate Treatment Indications
Based on data resulting from in vitro blood purification studies, our candidate
treatment indications include, but are not limited to; pathogen-associated
conditions that precipitate Sepsis (leading cause of hospital deaths worldwide),
Community Acquired Pneumonia (a leading cause of death among infectious
diseases), Emerging Bioterror and Pandemic threats, and End-Stage Renal Disease
(ESRD) patients with endotoxemia and elevated inflammatory cytokine production.
However, there is no assurance that human feasibility and pivotal studies will
demonstrate Sigyn Therapy to be a safe and efficacious treatment for any of our
treatment indications.
End-Stage Renal Disease Endotoxemia and Inflammation
According to the United States Renal Data System (USRDS), more than 550,000
individuals suffer from end-stage renal disease (ESRD), which results in
approximately 85 million kidney dialysis treatments being administered in the
United States each year. Persistent inflammation is a hallmark feature of ESRD
as reflected by the excess production of inflammatory cytokines, including tumor
necrosis factor-? (TNF-?), interleukin-1? (IL-1?) and interleukin-6 (IL-6),
which contribute to increased all-cause mortality. ESRD inflammation also
induces intestinal permeability, which allows endotoxin (gram-negative bacterial
toxin) to translocate from the gut and into the bloodstream. Beyond fueling
further inflammation, endotoxin is potent activator of sepsis, which can lead to
multiple organ failure and death.
Sigyn Therapy establishes a candidate strategy to improve the health and
quality-of-life of ESRD patients. Beyond its ability to deplete endotoxin,
TNF-?, IL-1?, and IL-6 from human blood plasma, Sigyn Therapy can be
administered in series with dialysis therapy.
We are currently drafting an Investigational Device Exemption (IDE) for
submission to the U.S. Food and Drug Administration ("FDA") related to a human
feasibility study of Sigyn Therapy in End-Stage Renal Disease (ESRD) patients
with endotoxemia and elevated inflammatory cytokine production. As per the study
protocol, Sigyn Therapy will be administered in combination with the regularly
scheduled dialysis treatments of enrolled subjects. The primary study objective
will be to evaluate the safety of Sigyn Therapy in health compromised ESRD
patients. A secondary objective is to quantify changes in circulating levels of
endotoxin, tumor necrosis factor-? (TNF-?), interleukin-1? (IL-1?), and
interleukin-6 (IL-6) before and after each Sigyn Therapy administration.
Endotoxin and excess TNF-?, IL-1?, and IL-6 production are commonly associated
with each of our candidate treatment indications, including sepsis and
community-acquired pneumonia.
Sepsis
Sepsis is defined as a life-threatening organ dysfunction caused by a
dysregulated host response to infection. In January of 2020, a report entitled;
"Global, Regional, and National Sepsis Incidence and Mortality, 1990-2017:
Analysis for the Global Burden of Disease Study," was published in the Journal
Lancet. The publication reported 48.9 million cases of sepsis and 11 million
deaths in 2017. In that same year, an estimated 20.3 million sepsis cases and
2.9 million deaths were among children younger than 5-years old. The report
included a reference that sepsis kills more people around the world than all
forms of cancer combined. In the United States, sepsis was reported to be the
most common cause of hospital deaths with an annual financial burden that
exceeds $24 billion.
To date, more than 100 human studies have been conducted to evaluate the safety
and efficacy of candidate drugs to treat sepsis. With one brief exception
(Xigris, Eli Lilly), none of these studies resulted in a market cleared therapy.
As sepsis remains beyond the reach of single-target drugs, there is an emerging
interest in multi-mechanism therapies that can target both inflammatory and
pathogen associated targets. Sigyn Therapy addresses a broad-spectrum of
pathogen sources and the resulting dysregulated cytokine production (the
cytokine storm) that is the hallmark of sepsis. Additionally, we believe that
inflammatory cytokine cargos transported by CytoVesicles may represent a novel,
yet important therapeutic target.
Community Acquired Pneumonia
Community Acquired Pneumonia (CAP) represents a significant opportunity for
Sigyn Therapy to reduce the occurrence of sepsis. CAP is a leading cause of
death among infectious diseases, the leading cause of death in children under
five years of age, and a catalyst for approximately 50% of sepsis and septic
shock cases.
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In the United States, more than 1.5 million individuals are hospitalized with
CAP each year, resulting in an annual financial burden that exceeds $10 billion.
Statistically, a therapeutic strategy that reduced the incidence of CAP related
sepsis and septic shock would save thousands of lives each year. In a study of
4,222 patients, the all-cause mortality for adult patients with CAP was reported
to be 6.5% during hospitalization. However, the mortality of patients with CAP
related sepsis and septic shock rose to 51% during hospitalization.
CAP is further complicated by the fact that the pathogen sources of CAP are
identified in only 38% of patients, based on a study of 2,259 subjects whose
pneumonia diagnosis was confirmed by chest x-ray. Of the source pathogens
identified in the study, ninety seven percent (97%) were either viral or
bacterial in origin.
To reduce the occurrence of CAP related sepsis and septic shock, Sigyn Therapy
offers a broad-spectrum mechanism to reduce the circulating presence of viral
pathogens and bacterial toxins before and if they are identified as the CAP
pathogen source. Additionally, Sigyn Therapy may help to control the excess
production of inflammatory cytokines (the cytokine storm) that precipitate
sepsis and septic shock.
Emerging Pandemic Threats
Covid-19 affirmed the use of extracorporeal blood purification as a first-line
countermeasures to treat an emerging pandemic threat not addressed with an
approved drug or vaccine at the outset of an outbreak. On March 24, 2020, the
U.S. Department of Health and Human Services (HHS) declared that the emergence
of COVID-19 justified the Emergency-Use Authorization (EUA) of drugs, biological
products, and medical devices to combat the pandemic. Within a month of this HHS
declaration, FDA awarded an EUA to blood purification therapies from Terumo BCT,
ExThera Medical Corporation, CytoSorbents, Inc., and Baxter Healthcare
Corporation. In connection with these authorizations, FDA published a statement
that blood purification devices may be effective at treating patients with
confirmed COVID-19 by reducing various pathogens, cytokines, and other
inflammatory mediators from the bloodstream.
Consistent with FDA's statement, Sigyn Therapy is designed to address pathogen
sources of life-threatening inflammation in concert with the broad-spectrum
depletion of cytokines and other inflammatory mediators from the bloodstream.
Based on this mechanism, we believe that Sigyn Therapy provides a candidate
strategy to address future pandemic outbreaks, which are increasingly being
fueled by a confluence of global warming, urban crowding, and intercontinental
travel.
Additionally, as a majority of infectious human viruses are not addressed with a
corresponding drug or vaccine, there may be an ongoing need for blood
purification technologies that offer to reduce the severity of infection and
mitigate the excess production of inflammatory cytokines (the cytokine storm)
associated with high mortality in non-pandemic viral infections. In this regard,
we believe Sigyn Therapy also aligns with HHS initiatives established through
the Public Health Emergency Medical Countermeasure Enterprise (PHEMCE) that
support the development of broad-spectrum medical countermeasures that can
mitigate the impact of an emerging pandemic or bioterror threat, yet also have
viability in established disease indications.
Overview of Presentation
The following Management's Discussion and Analysis ("MD&A") or Plan of
Operations includes the following sections:
? Results of Operations
? Liquidity and Capital Resources
? Capital Expenditures
? Going Concern
? Critical Accounting Policies
? Off-Balance Sheet Arrangements
31
General and administrative expenses consist primarily of personnel costs and
professional fees required to support our operations and growth.
Depending on the extent of our future growth, we may experience significant
strain on our management, personnel, and information systems. We will need to
implement and improve operational, financial, and management information
systems. In addition, we are implementing new information systems that will
provide better record-keeping, customer service and billing. However, there can
be no assurance that our management resources or information systems will be
sufficient to manage any future growth in our business, and the failure to do so
could have a material adverse effect on our business, results of operations and
financial condition.
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 and nine months ended September,
2021, to reclass $177,844 and $392,496, respectively, 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.
Results of Operations
Three Months Ended September 30, 2022 Compared to Three Months Ended September
30, 2021
The following discussion represents a comparison of our results of operations
for the three months ended September 30, 2022 and 2021. The results of
operations for the periods shown in our audited condensed consolidated financial
statements are not necessarily indicative of operating results for the entire
period. In the opinion of management, the audited condensed consolidated
financial statements recognize all adjustments of a normal recurring nature
considered necessary to fairly state our financial position, results of
operations and cash flows for the periods presented.
Three Months Ended September 30,
2022 2021
Net revenues $ - $ -
Cost of sales - -
Gross Profit - -
Operating expenses 533,647 573,363
Other expense 192,862 92,541
Net loss before income taxes and discontinued operations $ (726,509 ) $ (665,904 )
Net Revenues
For the three months ended September 30, 2022 and 2021, we had no revenues.
Cost of Sales
For the three months ended September 30, 2022 and 2021, we had no cost of sales
as we had no revenues.
32
Operating expenses
Operating expenses decreased by $39,716, or 6.9%, to $533,647 for three months
ended September 30, 2022 from $573,363 for the three months ended September 30,
2021 primarily due to decreases in research and development costs of $93,733,
investor relations costs of $49,835, consulting fees of $40,048, and rent
expenses of $4,413, offset primarily by increases in compensation costs of
$54,994, professional fees of $16,428, depreciation costs of $1,283, marketing
costs of $65, insurance costs of $78,852, and general and administration costs
of $3,309, as a result of adding administrative infrastructure for our
anticipated business development. In 2022, the Company incurred compensation for
its CEO and CTO and hired a CFO resulting in increased compensation costs, has
increased professional fees (primarily legal), and has decreased investor
relations costs (primarily the fair value of common stock issued for services of
$47,000 in 2021). Research and development costs consist of a decrease of
$45,944 attributed to in house efforts and a decrease of $47,789 to third
parties for developmental services and testing.
For the three months ended September 30, 2022, we had marketing expenses of $65,
research and development costs of $133,770, and general and administrative
expenses of $399,812 primarily due to professional fees of $40,729, compensation
costs of $192,315, insurance expense of $78,852, rent of $19,999, depreciation
costs of $1,715, amortization costs of $900, investor relations costs of
$19,474, consulting fees of $41,775, and general and administration costs of
$4,053, as a result of adding administrative infrastructure for our anticipated
business development. In 2022, the Company incurred professional fees (primarily
legal and audit fees), incurred compensation for its CEO and CTO and hired a
CFO, incurred consulting costs (primarily for public relations and brand
awareness), had investor relations costs, and had rent through the lease of
office space. Research and development costs consist of $131,900 attributed to
in house efforts and $1,870 to third parties for developmental services and
testing.
For the three months ended September 30, 2021, we had research and development
costs of $227,503, and general and administrative expenses of $345,860 primarily
due to professional fees of $24,301, compensation costs of $137,321, rent of
$24,412, depreciation and amortization costs of $1,332, investor relations costs
of $69,309, consulting fees of $81,823, and general and administration costs of
$7,362, as a result of adding administrative infrastructure for our anticipated
business development. In 2021, the Company incurred marketing costs (primarily
the fair value of common stock issued for services), has incurred professional
fees (primarily legal and audit fees, and consulting costs), incurred
compensation for its CEO and CTO, incurred consulting costs (primarily for
public relations and brand awareness), had investor relations costs (primarily
the fair value of common stock issued for services of $47,000 in 2021), and had
rent through the lease of office space beginning in June 2021. Research and
development costs consist of $177,844 attributed to in house efforts and $49,659
to third parties for developmental services and testing.
Other Expense
Other expense for the three months ended September 30, 2022 totaled $192,862
primarily due to interest expense of $148,372 in conjunction with accretion of
debt discount and interest expense of $44,420 in conjunction with accretion of
original issuance discount, compared to other expense of $92,541 for the three
months ended September 30, 2021 primarily due to interest expense of $49,749 in
conjunction with accretion of debt discount and interest expense of $13,697 in
conjunction with accretion of original issuance discount.
Net loss before income taxes
Net loss before income taxes and discontinued operations for the three months
ended September 30, 2022 totaled $726,509 primarily due to (increases/decreases)
in compensation costs, professional fees, marketing costs, investor relations
costs, consulting fees, research and development costs, rent, and general and
administration costs compared to a loss of $665,904 for the three months ended
September 30, 2021 primarily due to (increases/decreases) in compensation costs,
professional fees, investor relations, consulting fees, research and development
costs, rent, and general and administration costs.
Assets and Liabilities
Assets were $362,273 as of September 30, 2022. Assets consisted primarily of
cash of $28,123, inventories of $50,000, other current assets of $7,254,
equipment of $23,767, intangible assets of $3,000, operating lease right-of-use
assets of $229,418, and other assets of $20,711. Liabilities were $2,104,375 as
of September 30, 2022. Liabilities consisted primarily of accounts payable of
$306,000, accrued payroll and payroll taxes of $30,124, convertible notes of
$1,515,443, net of $406,373 of unamortized debt discount and debt issuance
costs, and operating lease liabilities of $252,808.
33
Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30,
2021
The following discussion represents a comparison of our results of operations
for the nine months ended September 30, 2022 and 2021. The results of operations
for the periods shown in our audited condensed consolidated financial statements
are not necessarily indicative of operating results for the entire period. In
the opinion of management, the audited condensed consolidated financial
statements recognize all adjustments of a normal recurring nature considered
necessary to fairly state our financial position, results of operations and cash
flows for the periods presented.
Nine Months Ended September 30,
2022 2021
Net revenues $ - $ -
Cost of sales - -
Gross Profit - -
Operating expenses 1,675,677 1,417,278
Other expense 395,203 360,169
Net loss before income taxes and discontinued operations $ (2,070,880 ) $ (1,777,447 )
Net Revenues
For the nine months ended September 30, 2022 and 2021, we had no revenues.
Cost of Sales
For the nine months ended September 30, 2022 and 2021, we had no cost of sales
as we had no revenues.
Operating expenses
Operating expenses increased by $258,399, or 18.2%, to $1,675,677 for nine
months ended September 30, 2022 from $1,417,278 for the nine months ended
September 30, 2021 primarily due to increases in compensation costs of $199,796,
professional fees of $73,893, research and development costs of $33,041,
depreciation costs of $3,859, rent expenses of $27,905, and general and
administration costs of $5,267, offset primarily by a decrease in marketing
expenses of $164,054, consulting fees of $12,918, investor relations costs of
$78,386, and amortization costs of $12,606, as a result of adding administrative
infrastructure for our anticipated business development. In 2022, the Company
has incurred an increase in professional fees (primarily legal and audit fees),
incurred a full year of compensation for its CEO and CTO and hired a CFO
resulting in increased compensation costs, increased consulting costs (primarily
for public relations and brand awareness), has decreased investor relations
costs (primarily the fair value of common stock issued for services of $211,500
in 2021), and incurred a full year of rent from the lease of office space in
June 2021. Research and development costs consist of an increase of $46,618
attributed to in house efforts and a decrease of $13,577 to third parties for
developmental services and testing.
For the nine months ended September 30, 2022, we had marketing expenses of $446,
research and development costs of $516,796, and general and administrative
expenses of $1,158,435 primarily due to professional fees of $172,170,
compensation costs of $532,643, insurance expense of $182,689, rent of $56,590,
depreciation and amortization costs of $7,839, investor relations costs of
$43,465, consulting fees of $144,900, and general and administration costs of
$18,139, as a result of adding administrative infrastructure for our anticipated
business development. In 2022, the Company has incurred professional fees
(primarily legal and audit fees), incurred compensation for its CEO and CTO and
hired a CFO, incurred consulting costs (primarily for public relations and brand
awareness), had investor relations costs, and had rent through the lease of
office space. Research and development costs consist of $439,116 attributed to
in house efforts and $77,680 to third parties for developmental services and
testing.
34
For the nine months ended September 30, 2021, we had marketing expenses of
$164,500, research and development costs of $483,755, and general and
administrative expenses of $933,523 primarily due to professional fees of
$98,277, compensation costs of $332,847, rent of $28,685, depreciation and
amortization costs of $16,586, investor relations costs of $121,851, consulting
fees of $157,818, and general and administration costs of $12,959, as a result
of adding administrative infrastructure for our anticipated business
development. In 2021, the Company has incurred professional fees (primarily
legal and audit fees, and consulting costs), had investor relations costs
(primarily the fair value of common stock issued for services of $211,500), and
incurred compensation for its CEO and CTO. Research and development costs
consist of $392,498 attributed to in house efforts and $91,257 to third parties
for developmental services and testing.
Other Expense
Other expense for the nine months ended September 30, 2022 totaled $395,203
primarily due to interest expense of $309,226 in conjunction with accretion of
debt discount and interest expense of $85,875 in conjunction with accretion of
original issuance discount, compared to other expense of $360,169 for the nine
months ended September 30, 2021 primarily due to interest expense of $286,391 in
conjunction with accretion of debt discount and interest expense of $44,683 in
conjunction with accretion of original issuance discount.
Net loss before income taxes
Net loss before income taxes and discontinued operations for the nine months
ended September 30, 2022 totaled $2,070,880 primarily due to
(increases/decreases) in compensation costs, professional fees, marketing costs,
investor relations costs, consulting fees, research and development costs, rent,
and general and administration costs compared to a loss of $1,777,447 for the
nine months ended September 30, 2021 primarily due to (increases/decreases) in
compensation costs, professional fees, investor relations, consulting fees,
research and development costs, rent, and general and administration costs.
Liquidity and Capital Resources
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 $6,336,639 at September 30,
2022, had a working capital deficit of $1,817,541 and $341,187 at September 30,
2022 and December 31, 2021, respectively, had a net loss of $726,609 and
$2,070,880 and $665,904 and $1,777,447 for the three and nine months ended
September 30, 2022 and 2021, respectively, and net cash used in operating
activities of $1,378,475 and $1,221,221 for the nine months ended September 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
public 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 condensed consolidated financial statements do not include any adjustments
that might be necessary if we are unable to continue as a going concern.
General - Overall, we had a decrease in cash flows for the nine months ended
September 30, 2022 of $312,833 resulting from cash used in operating activities
of $1,378,475 and cash used in investing activities of $860, offset partially by
cash provided by financing activities of $1,066,502.
35
The following is a summary of our cash flows provided by (used in) operating,
investing, and financing activities during the periods indicated:
Nine Months Ended September 30,
2022 2021
Net cash provided by (used in):
Operating activities $ (1,378,475 ) $ (1,221,221 )
Investing activities (860 ) (20,205 )
Financing activities 1,066,502 1,660,000
$ (312,833 ) $ 418,574Cash Flows from Operating Activities - For the nine months ended September 30,
2022, net cash used in operations was $1,378,475 compared to net cash used in
operations of $1,221,221 for the nine months ended September 30, 2021. Net cash
used in operations was primarily due to a net loss of $2,070,880 for nine months
ended September 30, 2022 and the changes in operating assets and liabilities of
$289,465, primarily due to the increase in accounts payable of $266,147 and
accrued payroll and payroll taxes of $29,052, offset partially by other current
liabilities of $555 and other current assets of $5,179. In addition, net cash
used in operating activities includes adjustments to reconcile net profit from
depreciation expense of $5,139, amortization expense of $2,700, accretion of
original issuance costs of $85,875, and accretion of debt discount of $309,226.
For the nine months ended September 30, 2021, net cash used in operations was
$1,221,221. Net cash used in operations was primarily due to a net loss of
$1,777,447 for nine months ended September 30, 2021 and the changes in operating
assets and liabilities of $2,932, primarily due to the increase in accounts
payable of $16,869 and other current liabilities of $43,692, offset primarily by
other current assets of $27,509, other assets of $20,711, and accrued payroll
and payroll taxes of $15,273. In addition, net cash used in operating activities
includes adjustments to reconcile net profit from depreciation expense of
$1,279, amortization expense of $15,305, stock issued for services of $211,500,
accretion of original issuance costs of $44,683, and accretion of debt discount
of $286,391.
Cash Flows from Investing Activities - For the nine months ended September 30,
2022, net cash used in investing activities was $860 due to the purchase of
property and equipment compared to cash used in investing activities of $20,205
for the nine months ended September 30, 2021 due to the purchase of property and
equipment.
Cash Flows from Financing Activities - For the nine months ended September 30,
2022, net cash provided by financing was $1,066,502, due to proceeds from short
term convertible notes of $1,110,000 and fees associated with the filing of the
Company's Form S-1 of $43,498 compared to cash provided by financing activities
of $1,660,000 for the nine months ended September 30, 2021 due to proceeds from
common stock issued for cash of $1,465,000 and short term convertible notes
$250,000, and repayment of short term convertible notes of $55,000.
Financing - We expect that our current working capital position, together with
our expected future cash flows from operations will be insufficient to fund our
operations in the ordinary course of business, anticipated capital expenditures,
debt payment requirements and other contractual obligations for at least the
next twelve months. As stated above, Management intends to raise additional
funds by way of a public offering or an asset sale transaction, however there
can be no assurance that we will be successful in completing such transactions.
We have no present agreements or commitments with respect to any material
acquisitions of other businesses, products, product rights or technologies or
any other material capital expenditures. However, we will continue to evaluate
acquisitions of and/or investments in products, technologies, capital equipment
or improvements or companies that complement our business and may make such
acquisitions and/or investments in the future. Accordingly, we may need to
obtain additional sources of capital in the future to finance any such
acquisitions and/or investments. We may not be able to obtain such financing on
commercially reasonable terms, if at all. Due to the ongoing global economic
crisis, we believe it may be difficult to obtain additional financing if needed.
Even if we are able to obtain additional financing, it may contain undue
restrictions on our operations, in the case of debt financing, or cause
substantial dilution for our stockholders, in the case of equity financing.
36
Capital Expenditures
We expect to purchase approximately $30,000 of equipment in connection with the
expansion of our business during the next twelve months.
Fiscal year end
Our fiscal year end is December 31.
Critical Accounting Policies
Refer to Note 3 in the accompanying notes to the unaudited condensed
consolidated financial statements for critical accounting policies.
Recent Accounting Pronouncements
Refer to Note 3 in the accompanying notes to the condensed consolidated
financial statements.
Off-Balance Sheet Arrangements
As of September 30, 2022, we have not entered into any transaction, agreement or
other contractual arrangement with an entity unconsolidated under which it has:
? a retained or contingent interest in assets transferred to the unconsolidated
entity or similar arrangement that serves as credit;
? liquidity or market risk support to such entity for such assets;
? an obligation, including a contingent obligation, under a contract that would
be accounted for as a derivative instrument; or
? an obligation, including a contingent obligation, arising out of a variable
interest in an unconsolidated entity that is held by, and material to us,
where such entity provides financing, liquidity, market risk or credit risk
support to or engages in leasing, hedging, or research and development
services with us.
Inflation
We do not believe that inflation has had a material effect on our results of
operations.
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