REGENERATIVE MEDICAL TECHNOLOGY GROUP INC. General
The following is a discussion by management of its view of the Company's business, financial condition, and corporate performance for the past year. The purpose of this information is to give management's recap of the past year, and to give an understanding of management's current outlook for the near future. This section is meant to be read in conjunction with the Financial Statements of this Annual Report on Form 10-K. Results of Operations Below is a summary of the results of operations for the years endedDecember 31, 2021 and 2020. For the Years Ended December 31 2021 2020 $ Change % Change Revenue$ 475,261 $ 55,082 $ 420,179 762.82 % Cost of revenue 330,013 43,954 286,059 650.81 % Gross profit 145,248 11,128 134,120 1,205.25 % Operating expenses Advertising and marketing 134,144 247 133,897 54,209.31 % Professional fees 966,974 145,624 821,350 564.02 % Officer compensation 567,932 270,581 297,351 109.89 % Depreciation and amortization 40,858 800 40,058 5,007.25 % Investor relations 100,496 12,430 88,066 708.50 % General and administrative-related party 8,116,269 - 8,116,269 0.00 % General and administrative 151,339 29,866 121,473 406.73 % Total operating expenses 10,078,012 459,548
9,618,464 2,093.03 %
Other income (expense) Interest expense (2,724,351 ) (4,204,326 ) 1,479,975 -35.20 % Loss on conversion of debt - (9,663 ) 9,663 -100.00 % Derivative financial instruments 3,744 (1,233,277 )
1,237,021 -100.00 %
Settlement of lawsuit (231,109 ) - (231,109 ) 0.00 %
Net income (loss) $ (12,884,480 ) $ (5,895,686 ) $ (6,988,794 ) 118.54 %
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Revenue
Revenue increased by 762.82% in the amount of$420,179 for the years endedDecember 31, 2021 , compared to the same period in 2020. The key reason for the increase in revenue was a result of the acquisition ofGlobal Stem Cells Group, Inc. onAugust 18, 2021 . Revenue from viable cell therapy and immune support related products along with physician training was$437,887 fromAugust 19, 2021 toDecember 31, 2021 , offset by a decrease in sale of coins, metals and paper money of$17,708 for the years endedDecember 31, 2021 , compared to the same period in 2020.
Listed below are the revenues, cost of revenues and gross profits by Company for
the years ended
For the Year Ended
December 31, 2021
Global Stem Meso
Cells Group Numismatics Total
Revenue $ 437,887 $ 37,374 $ 475,261
Cost of revenue 287,750 42,263 330,013
Gross profit $ 150,137 $ (4,889 ) $ 145,248
Gross Profit % 34.29 % -13.08 % 30.56 %
Operating expenses
Operating expenses increased by 2,093.03% in the amount of $9,618,464 for the
years ended December 31, 2021 , compared to the same period in 2020. Listed below
are the major changes to operating expenses:
Professional fees increased by
Officer compensation increased by$297,351 for the years endedDecember 31, 2021 , compared to the same period in 2020, primarily due to the issuance of 896 shares of Series DD Preferred Stock of the Company toDave Christensen , current Director, President, Chief Executive Officer, Chief Financial Officer and Secretary as compensation pursuant to theProfessional Service Consulting Agreement. The$503,072 value of the 896 shares of Series DD Convertible Preferred Stock is based on converting 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 3.17 conversion price offset by the$166,795 value of the 50,000 shares of Series AA Super Voting Preferred Stock to Mr.David Christensen in 2020 along with$45,000 toMelvin Pereira in 2020. General and administrative-related party expense increase by$8,116,269 for the years endedDecember 31, 2021 , compared to the same period in 2020, primarily due to the issuance of the 1,000 shares of the Company's Series CC Convertible Preferred Stock toLans Holdings Inc. terminated and replaced with a cash payment as consideration. The Company paidLans Holdings Inc. , by delivery in escrow, an amount equal to$8,200,000 , offset by$83,731 the value of the 1,000 shares of the Company's Series CC Convertible Preferred Stock terminated. 22 Other expense Other expense decreased by$2,495,550 for the years endedDecember 31, 2021 , compared to the same period in 2020, primarily as a result of the change in fair market value of the convertible notes in 2020 offset by increase in amortization of discounts and settlement of lawsuit in 2021. Net Loss We recorded a net loss of$12,884,480 for the years endedDecember 31, 2021 , as compared with a net loss of$5,895,686 for the same period endedDecember 31, 2020 .
Liquidity and Capital Resources
Since inception, the Company has financed its operations through private
placements and convertible notes. The following is a summary of the cash and
cash equivalents as of
December 31, December 31,
2021 2020 $ Change % Change
Cash and cash equivalents $ 2,978,525 $ 42,534 $ 2,935,991 6,903 %
Summary of Cash Flows
Below is a summary of the Company's cash flows for the years ended December 31,
2021 and 2020.
For the Years
Ended December 31,
2021 2020
Net cash used in operating activities $ (9,878,664 ) $ (322,745 )
Net cash provided by (used in) investing activities 666,467 (175,000 )
Net cash provided by financing activities 12,148,188 516,900
Net increase in cash and cash equivalents$ 2,935,991 $
19,155 Operating activities
Net cash used in operating activities was$9,878,664 during the year endedDecember 31, 2021 and consisted of a net loss of$12,884,480 , which was offset by a net change in operating assets and liabilities of$1,545,861 and non-cash items of$1,459,955 . The primary non-cash items for the year endedDecember 31, 2021 , consisted of amortization of debt discount of$893,959 and shares issued for services and settlement of debt of$494,645 . The significant change in operating assets and liabilities was an increase in accounts payable and accrued liabilities. Net cash used in operating activities was$322,745 during the year endedDecember 31, 2020 and consisted of a net loss of$5,895,686 , which was offset by a net change in operating assets and liabilities of$1,092,756 and non-cash items of$4,480,184 . The primary non-cash items for the year endedDecember 31, 2020 , consisted of amortization of debt discount of$1,851,882 , penalty on debt of$1,183,530 , preferred shares issued for services of$166,795 and by change in derivative liabilities of$1,233,277 . The significant change in operating assets and liabilities was an increase in accounts payable and accrued liabilities. Investing activities Net cash provided by investing activities was$666,467 consisted of cash acquired in business combination and cash toGlobal Stem Cells Group Inc. during the year endedDecember 31, 2021 , as compared to net cash paid for deposit on acquisition of$175,000 during the same period in 2020. 23 Financing activities Net cash provided by financing activities was$12,148,188 consisted of proceeds received from the issuance of promissory notes offset by principle payment on debt for the year endedDecember 31, 2021 , as compared to net cash provided by financing activities of$516,900 during the same period in 2020 consisted of proceeds received from the issuance of promissory notes of$701,900 offset by$160,000 from repurchase of preferred stock. 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$46,669,643 and a working capital deficit of$1,200,000 as ofDecember 31, 2021 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. We currently do not see any need to raise additional capital at this time. Our current capital investors are on favorable terms, and we expect that we will be able to execute our business plan, grow the business and start generating greater revenue. We have no current plans to restrict our operations at this time. The Company may 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
Critical Accounting Policies Our critical accounting policies have not materially changed during the year endedDecember 31, 2020 . Furthermore, the preparation of our financial statements is in conformity with generally accepted accounting principles inthe 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. 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 Binomial 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.
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New Accounting Pronouncements
InMarch 2020 , the FASB issued optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting and subsequently issued clarifying amendments. The guidance provides optional expedients and exceptions for accounting for contracts, hedging relationships, and other transactions that reference theLondon Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform. The optional guidance is effective upon issuance and can be applied on a prospective basis at any time betweenJanuary 1, 2020 throughDecember 31, 2022 . The Company is currently evaluating the impact of adoption on its consolidated financial statements. The Company is progressing in its evaluation of LIBOR cessation exposures, including the review of debt-related contracts, leases, business development and licensing arrangements, royalty and other agreements. The Company has amended certain agreements and continues to review other agreements for potential impacts. With regard to debt-related exposures in particular, all existing interest rate swaps linked to LIBOR will mature in 2022. The Company is still evaluating the impact to its LIBOR-based debt. Based on its evaluation thus far, the Company does not anticipate a material impact to its consolidated financial statements as a result of reference rate reform. InOctober 2021 , the FASB issued amended guidance that requires acquiring entities to recognize and measure contract assets and liabilities in a business combination in accordance with existing revenue recognition guidance. The amended guidance is effective for interim and annual periods in 2023 and is to be applied prospectively. Early adoption is permitted on a retrospective basis to the beginning of the fiscal year of adoption. The adoption of this guidance will not have a material impact on the Company's consolidated financial statements for prior acquisitions; however, the impact in future periods will be dependent upon the contract assets and contract liabilities acquired in future business combinations.
InNovember 2021 , the FASB issued new guidance to increase the transparency of transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy. The guidance requires annual disclosures of such transactions to include the nature of the transactions and the significant terms and conditions, the accounting treatment and the impact to the company's financial statements. The guidance is effective for annual periods beginning in 2022 and is to be applied on either a prospective or retrospective basis. The Company is currently evaluating the impact of adoption on its consolidated 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 Revenue Recognition EffectiveJanuary 1, 2018 , the Company adopted ASC 606 - Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the sale of products 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's main sources of revenue are comprised of the following:
? Revenue is derived from activities in training, reselling equipment, products,
and services.
? Training-GSCG offers a Stem Cell & Exosomes Certification Program where
physicians attending this 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 can be apply in
the clinic. The physicians will pay for the training sessions upfront and
receives all the material and certificate upon completion of seminar which is
when revenue is recognized by GSCG.
? Products-Physicians can order SVF Kits through GSCG which includes EC
Certificate from
paid for upfront and shipped from third party directly to physicians. Revenue
is recognized by GSCG when product is shipped.
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? Equipment- Physicians can order equipment through GSCG which includes warranty
from manufacture of equipment. Equipment is paid for upfront and shipped from
manufacture directly to physicians. Revenue is recognized by GSCG when product
is shipped.
? Rare coins and banknotes-
America at reduced costs and sales through its website and auctions. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer. Revenue is measured based on the consideration the Company receives in exchange for those products. Use of Estimates
The preparation of these financial statements in conformity with accounting principles generally accepted inthe 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 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. AtDecember 31, 2021 andDecember 31, 2020 , 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. AtDecember 31, 2021 andDecember 31, 2020 , 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.
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