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)
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
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
As of November 8, 2022, there were
MESO NUMISMATICS, INC.
TABLE OF CONTENTS
i
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
MESO NUMISMATICS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (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 | ||||||||
| Stock payable – related party | ||||||||
| Stock payable | ||||||||
| 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 | $ | $ | ||||||
| * |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Page 1 of 42
MESO NUMISMATICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ||||||||||||||||
| Gross profit (loss) | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Advertising and marketing | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Officer compensation | ||||||||||||||||
| Depreciation and amortization expense | ||||||||||||||||
| Investor relations | ||||||||||||||||
| General and administrative- related party | — | — | ||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on change in fair value of derivative financial instruments | — | |||||||||||||||
| Other expense | ( | ) | ||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Page 2 of 42
MESO NUMISMATICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited)
For the Nine Months Ended September 30, 2022
| Series
CC Preferred Stock | Series
AA Preferred Stock | Series
DD Preferred Stock | Common Stock | Additional Paid In | Accumulated | |||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Issuance of stock for services | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of preferred series DD for services | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
For the Three Months Ended September 30, 2022
| Series
CC Preferred Stock |
Series
AA Preferred Stock |
Series
DD Preferred Stock |
Common Stock | Additional Paid In |
Accumulated | |||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||||||||
| Balance, July 1, 2022 | $ | $ | $ | |
$ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
Page 3 of 42
MESO NUMISMATICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
For the Nine Months Ended September 30, 2021
(Unaudited)
| Series CC Preferred Stock | Series AA Preferred Stock | Series BB Preferred Stock | Series DD Preferred Stock | Common Stock | Additional Paid In | Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | $ | - | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Debt settlement | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for services | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of preferred series DD for services-related party | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Cancellation of preferred series BB | - | - | ( | ) | ( | ) | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Cancellation of preferred series CC-related party | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of preferred series AA for acquisition of Global Stem Cell Group, Inc. | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of preferred series DD for acquisition of Global Stem Cell Group, Inc. | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Imputed interest on debt | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Fair value of warrants | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income (Loss) | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
Page 4 of 42
MESO NUMISMATICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
For the Three Months Ended September 30, 2021
(Unaudited)
| Series CC Preferred Stock | Series AA Preferred Stock | Series BB Preferred Stock | Series DD Preferred Stock | Common Stock | Additional Paid In | Accumulated | ||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||||||||||||||
| Balance, July 1, 2021 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Issuance of preferred series DD for services-related party | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Cancellation of preferred series CC-related party | ( | ) | ( | ) | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of preferred series AA for acquisition of Global Stem Cell Group, Inc. | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of preferred series DD for acquisition of Global Stem Cell Group, Inc. | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
| Imputed interest on debt | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income (Loss) | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
Page 5 of 42
MESO NUMISMATICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| 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 | ||||||||
| Change in derivative liabilities | ( | ) | ||||||
| Loss on legal settlement | ||||||||
| Common shares issued for services | ||||||||
| Preferred shares issued for services | — | |||||||
| Imputed interest on debt | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Prepaid expense | ( | ) | ||||||
| Stock payable | — | |||||||
| Due to related party | — | |||||||
| Accounts payable and accrued liabilities | ||||||||
| CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Cash acquired in business combination, net of cash paid | ||||||||
| Purchase of property and equipment | ( | ) | ||||||
| CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of debt | ||||||||
| Proceeds from note receivable | — | ( | ) | |||||
| Principal payment of debt | ( | ) | ( | ) | ||||
| CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES | ( | ) | ||||||
| Net increase (decrease) in cash | ( | ) | ||||||
| Cash, beginning of year | ||||||||
| Cash, end of year | $ | $ | ||||||
| Cash paid for income tax | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| NON-CASH FINANCING ACTIVITIES: | ||||||||
| Issuance of preferred series DD | $ | $ | ||||||
| Issuance of common shares for services | $ | $ | ||||||
| Warrants discount issued on debt | $ | $ | ||||||
| Cancellation of preferred series BB | $ | $ | ||||||
| Shares issued for legal settlement | $ | $ | ||||||
| Cancellation of preferred series CC | $ | $ | ||||||
| Issuance of preferred series AA for acquisition | $ | $ | ||||||
| Issuance of preferred series DD for acquisition | $ | $ | ||||||
| Deposit on acquisition | $ | $ | ||||||
| Original issue discount on convertible debt and promissory notes | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
Page 6 of 42
MESO NUMISMATICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Nature of Business
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 revenues and product marketing.
Meso Numismatics, Inc. 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 complete 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 Meso Numismatics, Inc. 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 on September 26, 2018, the new ticker symbol MSSV became effective on October 16, 2018.
On July 2, 2018, the Board of Directors authorized and shareholders approved a 1-for-1,000 reverse stock split of its issued and outstanding shares of common stock held by the holders of record. The prior year financials have been changed to reflect the 1-for-1,000 reverse stock split.
On November 27, 2019, Meso Numismatics, Inc. entered
into an Assignment and Assumption Agreement with Lans Holdings Inc., whereby Lans Holdings Inc. assigned all of its rights to, obligations
and interest in a Binding Letter of Intent entered into on May 23, 2019 with Global Stem Cells Group Inc. and Benito Nova, setting forth
the principal terms pursuant to which the Company will acquire
In consideration for the Assignment, Meso Numismatics, Inc.:
Page 7 of 42
| ● | Issue to Lans Holdings Inc. |
The consideration for the assignment of $
On November 27, 2019, and in connection with the execution of the Assignment, the Company’s Board of Directors appointed Mr. David Christensen, former director and CEO of Lans Holdings Inc., to serve as director and president of the Company.
On December 23, 2019, the Company entered into the Post Closing Amendment to the Assignment and Assumption Agreement originally entered into on November 27, 2019 with Global Stem Cells Group Inc., Benito Novas, and Lans Holdings Inc., whereby the Original Agreement is amended to extend the deadline to enter into the New LOI to 120 days from the execution of the Post Closing Amendment and option to receive Series CC Convertible Preferred Stock granted to Lans Holdings Inc. has been extended to 120 days from the execution of the Post Closing Amendment.
On April 22, 2020, the Company entered into a Second Post Closing Amendment to the Assignment and Assumption Agreement originally entered into on November 27, 2019 with Global Stem Cells Group Inc., Benito Novas, and Lans Holdings Inc., which Assignment was first amended pursuant to the Post Closing Amendment to the Assignment and Assumption Agreement entered into on December 23, 2019. The Original Agreement is amended to extend the deadline to enter into the New LOI to 150 days from the execution of the Second Amendment and option to receive Series CC Convertible Preferred Stock granted to Lans Holdings Inc. has been extended to 150 days from the execution of the Second Amendment.
On June 25, 2020, Mr. Martin Chuah submitted his resignation as Director of the Company, effective June 26, 2020. There are no disagreements between Mr. Chuah and Meso Numismatics, Inc. on any matter relating to its operations, policies or practices.
On June 26, 2020, the Company completed the repurchase
of
On June 26, 2020, Mr. Melvin Pereira submitted his resignation as Chief Executive Officer, Chief Financial Officer, Secretary and Director of Meso Numismatics, Inc., effective June 26, 2020. There are no disagreements between Mr. Pereira and Meso Numismatics, Inc. on any matter relating to its operations, policies or practices.
On June 26, 2020, due to Mr. Pereira’s resignation,
Meso Numismatics, Inc.’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
On September 16, 2020, Meso Numismatics, Inc. entered into a Third Post Closing Amendment to the Assignment and Assumption Agreement originally entered into on November 27, 2019 with Global Stem Cells Group Inc., Benito Novas, and Lans Holdings Inc., which Assignment was first amended pursuant to the Post Closing Amendment to the Assignment and Assumption Agreement entered into on December 23, 2019. The Original Agreement is amended to extend the deadline to enter into the New LOI to 180 days from the execution of the Third Amendment and option to receive Series CC Convertible Preferred Stock granted to Lans Holdings Inc. has been extended to 180 days from the execution of the Third Amendment.
Page 8 of 42
On March 12, 2021, Meso Numismatics, Inc. entered into a Fourth Post Closing Amendment to the Assignment and Assumption Agreement originally entered into on November 27, 2019 with Global Stem Cells Group Inc., Benito Novas, and Lans Holdings Inc., which Assignment was first amended pursuant to the Post Closing Amendment to the Assignment and Assumption Agreement entered into on December 23, 2019. The Original Agreement is amended to extend the deadline to enter into the New LOI to 90 days from the execution of the Fourth Amendment and option to receive Series CC Convertible Preferred Stock granted to Lans Holdings Inc. has been extended to 90 days from the execution of the Fourth Amendment.
On June 22, 2021, Meso Numismatics, Inc. entered into a Fifth Post Closing Amendment to the Assignment and Assumption Agreement originally entered into on November 27, 2019 with Global Stem Cells Group Inc., Benito Novas, and Lans Holdings Inc.
| 1. | Pursuant to the terms of the Fifth Post Closing Amendment, and as full and total consideration for the Assignment and Assumption Agreement and in addition to the assumption of the New LOI and the assumption of the Assigned Debt (both terms as defined in the Assignment and Assumption Agreement ), the option granted to Lans Holdings Inc. pertaining to the issuance of the Company’s Series CC Convertible Preferred Stock was terminated and replaced with a cash payment as consideration, upon the following terms: |
| a. | The Company paid Lans Holdings Inc., by delivery to escrow, an amount equal to USD $ |
On June 22, 2021, the Company entered into a stock
purchase agreement with Global Stem Cells Group Inc and Benito Novas. Pursuant to the terms of the stock purchase agreement, the Company
shall acquire
| a. |
| b. |
| c. | An amount equal to USD $ |
The closing of the stock purchase agreement occurred August 18, 2021.
On June 22, 2021, Meso Numismatics, Inc. entered
into a Secured Loan Agreement with an otherwise unaffiliated third-party investor, pursuant to which Meso Numismatics, Inc. agreed to
issue to the Investor a $
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 1,000,000 shares of Series AA Preferred Stock in the Company, 8,974 shares of Series DD Preferred Stock in the Company and $225,000 USD (the final payment of $50,000 was made on July 2, 2021).
Page 9 of 42
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
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Pure Hospitality Solutions, Inc., Meso Numismatics, Corp., and Global Stem Cells Group Inc. (since August 18, 2021). 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 and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022. 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, 2021, filed on May 5, 2022, 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.
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 September 30, 2022 and December 31, 2021, all of the Company’s
cash was deposited in major banking institutions. There were no cash equivalents as of September 30, 2022 and December 31, 2021. 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 $
Page 10 of 42
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 quarter ended September 30, 2022.
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.
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
Goodwill represents the excess acquisition cost over the fair value of net tangible and intangible assets acquired. Goodwill is not amortized and is subject to annual impairment testing on or between annual tests if an event or change in circumstance occurs that would more likely than not reduce the fair value of a reporting unit below its carrying value. In testing for goodwill impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company concludes that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is not required. If the Company concludes otherwise, the Company is required to perform the two-step impairment test. The goodwill impairment test is performed at the reporting unit level by comparing the estimated fair value of a reporting unit with its respective carrying value. If the estimated fair value exceeds the carrying value, goodwill at the reporting unit level is not impaired. If the estimated fair value is less than the carrying value, further analysis is necessary to determine the amount of impairment, if any, by comparing the implied fair value of the reporting unit’s goodwill to the carrying value of the reporting unit’s goodwill.
Page 11 of 42
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.
Revenue Recognition
Effective January 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:
| ● | 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 Institute for Testing and Certificating, Inc. SVT Kits are paid for upfront and shipped from third party directly to physicians. Revenue is recognized by GSCG when product is shipped. |
| ● | 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-MESO acquires rare coins and banknotes from Latin 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 or services.
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.
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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
Diluted net loss per share is calculated by including any potentially dilutive share issuances in the denominator. The following securities are excluded from the calculation of weighted average diluted shares at September 30, 2022 and December 31, 2021, respectively, because their inclusion would have been anti-dilutive.
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| 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 September 30, 2022 and December 31, 2021, 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 September 30, 2022 and December 31, 2021, the Company does not have any assets or liabilities except for convertible notes payable required to be measured at fair value in accordance with FASB ASC Topic 820, Fair Value Measurement.
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The following presents the Company’s fair value hierarchy for those assets and liabilities measured at fair value as of September 30, 2022 and December 31, 2021:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| September 30, 2022 | ||||||||||||||||
| Derivative liability | - | - | ||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| December 31, 2021 | ||||||||||||||||
| Derivative liability | - | - | ||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
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 September 30, 2022 and December 31, 2021, the Company had no items that represent comprehensive income or 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 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 the London 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 between January 1, 2020 through December 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.
In October 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.
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In November 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
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 $
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
On January 1, 2018, the Company adopted ASU 2014-09 Revenue from Contracts with Customers and all subsequent amendments to the ASU (collectively, “ASC 606”), the Company recognizes revenue from the sales 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 |
| (5) | Recognize revenue when each performance obligation is satisfied |
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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 or services.
The following table presents the Company’s revenue by product category for the nine months ended September 30, 2022 and 2021:
| For the Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Coins and banknotes | $ | $ | ||||||
| Training | ||||||||
| Product supplies | ||||||||
| Equipment | ||||||||
| Total revenue | $ | $ | ||||||
Listed below are the revenues, cost of revenues, gross profits, assets and net loss by Company:
| For the Nine Months Ended | ||||||||||||
| September 30, 2022 | ||||||||||||
| Global Stem | Meso | |||||||||||
| Cells Group | Numismatics | Total | ||||||||||
| Revenue | $ | $ | $ | |||||||||
| Cost of revenue | ||||||||||||
| Gross profit | $ | $ | $ | |||||||||
| Gross Profit % | % | % | % | |||||||||
| Assets | $ | $ | $ | |||||||||
| Net 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 has resulted in a widespread health crisis adversely affecting our 2022 and 2021 business, results of operations and financial condition.
The outbreak of COVID-19 has resulted in a widespread health crisis that adversely affected the economies and financial markets in which we operate. Restrictions in travel along with in person meetings limited our training of new customers along with selling them products and equipment.
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NOTE 4 – NOTES PAYABLE
Convertible Notes Payable
On November 25, 2019, Meso Numismatics, Inc. 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 $
The balance of the convertible notes as of September 30, 2022 and December 31, 2021 is as follows:
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Convertible notes payable | $ | $ | ||||||
| Less: Discount | ( | ) | ( | ) | ||||
| Convertible notes payable, net | $ | $ | ||||||
As of September 30, 2022 and December 31, 2021,
the Company had approximately $
As of September 30, 2022 and December 31, 2021,
the principal balance of outstanding convertible notes payable was $
Promissory Notes Payable
During 2015, the Company entered into line of
credit with Digital Arts Media Network treated as a promissory note. The promissory note bear interest at ten (
On November 25, 2019, Meso Numismatics, Inc. 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 $
On December 3, 2019, Melvin Pereira, the CEO,
converted
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At December 7, 2020 the Company exchanged $5,379,624 of principal, default penalty and accrued but unpaid interest on convertible notes for $5,379,624 promissory notes and cashless warrants to purchase 15,000,000 shares of our common stock with three separate lenders. The new notes have a maturity date of November 23, 2023 and an aggregate principal amount of $5,379,624 shall bear interest at a fifteen (15%) percentage compounded annual interest rate and, as an incentive; we have issued cashless warrants to purchase 15,000,000 shares of our common stock at an exercise price of $0.03 per share in connection with the restructuring. The Company recorded the fair value of the 15,000,000 warrants issued with debt at approximately $262,376 at December 31, 2020 as a discount. Lender is granted security interest and lien in all rights, title and interest in the assets and property of the as collateral.
On December 9, 2020,
On January 6, 2021, the Company entered into a Promissory Debentures with a lender in the amount of $1,000,000 which bear interest at fifteen (15%) percent and have a one (1) year maturity date and cashless warrants to purchase 10,000,000 shares of our common stock, at exercise prices of $0.03 per share. The notes may be repaid in whole or in part at any time prior to maturity. The lender had advanced a total of $900,000, net of discount in the amount of $100,000 to the Company. The Company recorded the fair value of the 10,000,000 warrants issued with debt at approximately $237,811 at the date of issuance as a discount. This debt instrument is currently in default as of January 6, 2022.
On June 22, 2021,
On August 18, 2021, through a Stock Purchase Agreement in which 100% of the outstanding shares of Global Stem Cell Group, Inc. the Company acquired a 2018 Jaguar F-Pace which was acquired from Benito Novas for $45,000 on January 8, 2019 and assumed the related auto loan, with an original loan amount of $20,991 at 8.99% interest for 48 months and monthly payments of $504.94. As of September 30, 2022, the principal balance of the outstanding auto loan was $1,494.
On August 18, 2021, through a Stock Purchase Agreement in which 100% of the outstanding shares of Global Stem Cell Group, Inc. the Company assumed the November 17, 2020, agreement with an Investor for proceeds in the amount of $400,000 treated as a promissory note. In exchange for the gross proceeds, the Investor shall receive the right to a perpetual 7.75% (payment percentage) of the revenues of Global Stem Cell Group. The payments of the payment percentage shall be calculated by multiplying the gross quarterly revenues appearing in the financial statements by the payment percentage and treated as accrued interest. Payments shall be made ninety (90) days from the end of each respective fiscal quarter with the first payment to be made on the quarter ending December 31, 2020. Payments may be accrued and deferred if payment would deplete cash, cash equivalent and/or short term investment balances on each respective fiscal quarter by more than twenty (20%) percent. As of September 30, 2022, the principal balance of the outstanding loan was $400,000 and accrued interest totals $161,892. This debt instrument is currently in default due to the non-payment of interest.
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On September 20, 2021, the Company entered into a Promissory Debentures with a lender in the amount of $1,100,000 which bear interest at twelve (12%) percent and have a three (3) year maturity date and cashless warrants to purchase 7,500,000 shares of our common stock, at exercise prices of $0.085 per share. The notes may be repaid in whole or in part at any time prior to maturity. The lender had advanced a total of $1,000,000, net of discount in the amount of $100,000 to the Company. The Company recorded the fair value of the 7,500,000 warrants issued with debt at approximately $360,607 at the time of issuance as a discount.
On December 30, 2021, the parties wished to modify the terms of the Promissory Debentures dated July 13, 2020 in the amount of $6,000 and accrued interest in the amount of $1,578 by issuing a new promissory note and extend the date of maturity. In consideration for the new terms, the Promissory Debenture dated December 30, 2021 shall include a five (5%) percent premium for a total of $7,958 which bear interest at twelve (12%) percent and have a seventeen (17) months maturity date. The notes may be repaid in whole or in part at any time prior to maturity.
On December 30, 2021,
The balance of the promissory as of September 30, 2022 and December 31, 2021 is as follows:
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Promissory notes payable | $ | $ | ||||||
| Less: Discount | ( | ) | ( | ) | ||||
| Less: Deferred finance costs | ( | ) | ( | ) | ||||
| Promissory notes payable, net | $ | $ | ||||||
During the periods ending September 30, 2022 and
December 31, 2021, the Company made $
Derivatives Liabilities
The Company determined that the convertible notes outstanding as of September 30, 2022 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.
The Company determined the fair values of the embedded convertible notes derivatives and tainted convertible notes using a lattice valuation model with the following assumptions:
| September 30, | ||||
| 2022 | ||||
| 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 | ||||
Page 19 of 42
The balance of the fair value of the derivative liability as of September 30, 2022 and December 31, 2021 is as follows:
| Balance at December 31, 2020 | $ | |||
| Additions | ||||
| Fair value loss | ( | ) | ||
| Conversions | ||||
| Balance at December 31, 2021 | ||||
| Additions | ||||
| Fair value gain | ( | ) | ||
| Conversions | ( | ) | ||
| Balance at September 30, 2022 | $ |
NOTE 5 – CONVERTIBLE PREFERRED STOCK
Designation of Series CC 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, as amended (the “Articles of Incorporation”),
authorizing one thousand (
At any time prior to November 25, 2022 (“Automatic Conversion Date”) the Company may redeem for cash out of funds legally available therefore, any or all of the outstanding Series CC Convertible Preferred Stock at a price equal to $1,000 per share. If not converted prior, on the Automatic Conversion Date, any and all remaining issued and outstanding shares of Series CC Convertible Preferred Stock shall automatically convert at the Conversion Price, which is a price per share determined by dividing the number of issued and outstanding shares of (common) stock of the Company on the date of conversion by 1,000 and multiply the results by 0.8.
Each holder of outstanding shares of Series CC
Convertible Preferred Stock shall be entitled to convert prior to the Automatic Conversion Date, convert 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
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.
On November 27, 2019, Meso Numismatics, Inc. entered into an Assignment and Assumption Agreement with Global Stem Cells Group Inc., a corporation duly formed under the laws of the State of Florida, Benito Novas and Lans Holdings Inc. a Nevada Corporation whose securities ceased to be registered as of September 18, 2019, whereby Lans Holdings Inc. assigned all of its rights, obligations and interest in, the Letter of Intent it previously entered into with Global Stem Cells Group Inc. and Benito Novas.
In consideration for the Assignment, Meso Numismatics,
Inc. issued to Lans Holdings Inc.
Page 20 of 42
On November 12, 2020, the Company filed with the
Secretary of State in Nevada the amendment to Certificate of Designation authorizing the increase from
On June 22, 2021, Meso Numismatics, Inc. entered
into a Fifth Post Closing Amendment to the Assignment and Assumption Agreement originally entered into on November 27, 2019 with Global
Stem Cells Group Inc., Benito Novas, and Lans Holdings Inc. 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
As of September 30, 2022 and December 31, 2021, the Company has no preferred shares of Series CC Preferred Stock issued and outstanding, respectively. During the period of these financial statements, no dividend was declared or paid on the Series CC preferred shares.
NOTE 6 – STOCKHOLDERS EQUITY
Common Shares
The Board of Directors and shareholders were required to increase the number of authorized shares of common stock from (a) 200,000,000 to 500,000,000 during June 2015, (b) 500,000,000 to 1,500,000,000 during July 2015, and (c) 1,500,000,000 to 6,500,000,000 during March 2016, to adhere to the Company’s contractual obligation to maintain the required reserve share amount for debtholders.
2021 Transactions
On February 24, 2021, the Company issued
On April 16, 2021, the Company issued
On June 28, 2021, the Company issued
On December 23, 2021, the Company issued
2022 Transactions
On March 23, 2022, the Company issued
On May 5, 2022, the Company issued
As of September 30, 2022 and December 31, 2021,
the Company has
Page 21 of 42
Warrants
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
The following table summarizes the Company’s warrant transactions during the periods ended September 30, 2022 and year ended December 2021:
| Number of Warrants | Weighted Average Exercise Price | |||||||
| Outstanding at year ended December 31, 2020 | $ | |||||||
| Granted | ||||||||
| Exercised | ||||||||
| Expired | ||||||||
| Outstanding at year ended December 31, 2021 | $ | |||||||
| Granted | ||||||||
| Exercised | ||||||||
| Expired | ||||||||
| Outstanding at quarter ended September 30, 2022 | $ | |||||||
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
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 one million (1,000,000) shares of a new series of preferred stock, par value $0.001 per share, designated “Series AA Super Voting Preferred Stock,” for which the board of directors established the rights, preferences and limitations thereof.
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 (
Page 22 of 42
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,
Meso Numismatics, Inc.’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 $166,795 value of the 50,000 shares of Series AA Super Voting Preferred Stock to Mr. David Christensen is based on the 10,000 votes per preferred share to one vote per common share. Valuation based on definition of control premium is defined as the price to which a willing buyer and willing seller would agree in any arms-length transaction to acquire control of the Company. The premium paid above the market value of the company is real economic benefit to controlling the Company. Historically, the average control premium applied in M&A transactions averages approximately 30%, which represents the value of control.
On August 18, 2021, Meso Numismatics, Inc., 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 Series AA Preferred shares issued on August 18, 2021, were valued based upon industry specific control premiums and the Company’s market cap at the time of the transaction. The $963,866 value of the 1,000,000 shares of Series AA Super Voting Preferred Stock issued to Benito Novas were valued based on a calculation by a third party independent valuation specialist.
As of September 30, 2022 and December 31, 2021,
the Company has
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 (
Page 23 of 42
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, 81,043 Preferred Series BB shares were exchanged for an aggregate of $97,252 convertible notes and 276,723 Preferred Series BB shares were exchanged for an aggregate of $332,068 promissory notes of which 78,620 were returned and cancelled and 279,146 were still outstanding at December 31, 2020. During the three months ended March 31, 2021, the remaining 279,146 were returned and cancelled.
As of September 30, 2022 and December 31, 2021, the Company had no preferred shares of Series BB Preferred Stock issued and outstanding. During the period of these financial statements, no dividend was declared or paid on the Series BB preferred shares.
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 (10,000) shares of a new series of preferred stock, par value $0.001 per share, designated “Series DD Convertible Preferred Stock,” for which the board of directors established the rights, preferences and limitations thereof.
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, Meso Numismatics, Inc., 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 1,000,000 shares of Series AA Preferred Stock in the Company, 8,974 shares of Series DD Preferred Stock in the Company and $225,000 USD (the final payment of $50,000 was made on July 2, 2021).
The $5,038,576 value of the 8,974 shares of Series DD Convertible Preferred Stock to Benito Novas 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. The $5,038,576 value of the 8,974 shares of Series DD Convertible Preferred Stock represents the fair value of the consideration paid allocated to the assets and liabilities acquired from Global Stem Cells Group Inc.
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 $90,000, starting January 1, 2022. Additionally, the agreement included an issuance of 896 shares of Series DD Preferred Stock of the Company. An amount of 448 shares were issued on August 18, 2021 and the remaining 448 were issued February 18, 2022.
Page 24 of 42
On February 18, 2022, the Company issued to Dave
Christensen, CEO, the
As of September 30, 2022 and December 31, 2021,
the Company had
NOTE 7 – RELATED PARTY TRANSACTIONS
The Company paid Lans Holdings Inc., by delivery
in escrow on November 3, 2021, an amount equal to USD $
On August 18, 2021, through a Stock Purchase Agreement
in which
On August 18, 2021, through a Stock Purchase Agreement
the Company acquired
Benito Novas’, (CEO of Global Stem Cell
Group, Inc.) brother, sister and nephew provide marketing/administrative and training/R&D services to Global Stem Cells Group and
were paid as consultants during the periods ending September 30, 2022 and December 31, 2021 in aggregate of $
NOTE 8 – COMMITMENTS AND CONTINGENCIES
On May 12, 2015, the Company issued a convertible
promissory Note (the “Note”) in the principal amount of $
Page 25 of 42
On June 23, 2021, the Company entered into a settlement
agreement for an outstanding lawsuit for consideration of $
On June 28, 2021, the Company paid $
Per 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
Right from the Investor. The consideration for the Right shall be equal to the fair value (“FV”) of the Assets at the time
of the Asset Disposition (the “Asset Disposition Payment”). The Asset Disposition Payment shall not exceed
NOTE 9 – PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of the following:
| September 30, 2022 | December 31, 2021 | |||||||
| Computer, equipment and vehicles ( | $ | $ | ||||||
| Leasehold improvements ( | - | |||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total property and equipment, net | $ | $ | ||||||
During the period ending June 30, 2022, the Cancun
lab was completed and $
Depreciation expense for the nine months ended
September 30, 2022 and September 30, 2021 was $
NOTE 10 – ACQUISITION
On August 18, 2021, through a Stock Purchase Agreement
in which
The preliminary purchase price for the merger was determined to be $6.229 million, which consists of (i) 1 million shares of Series AA preferred stock valued at approximately $964,000, (ii) 8,974 shares of Series DD preferred stock valued at approximately $5.04 million and (iii) $225,000 in cash of which $175,000 was advanced in prior to closing of the transaction.
The Company accounted for the Stock Purchase Agreement as a business combination under the acquisition method of accounting. Under ASC 805 Business Acquisitions, determination of the accounting acquirer follows the requirements for control contained within ASC 810 Consolidations. Meso Numismatics, Inc. was determined to be the accounting acquirer based upon the terms of the Stock Purchase Agreement and other factors including the voting provisions contained within the Series AA preferred stock. Those voting provisions require that for (1) any change of control or (2) for any change in directors that the Series AA can only vote in a unanimous fashion, therefore the shares held by the current CEO and board Chairman prior to the date of the acquisition remain in control of the combined entity. In addition, no new officers or directors were brought on board as a result of the acquisition.
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The following table presents an allocation of the purchase price to the net assets acquired, inclusive of intangible assets, with the 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.
| Description | As of August 18, 2021 | |||
| Cash Payments to GSCG | $ | |||
| Fair value of | ||||
| Fair value of | ||||
| Accounts payable and accrued liabilities | ||||
| Note payables | ||||
| Due to MESO | ||||
| Total consideration | $ | |||
| Cash and cash equivalents | ||||
| Accounts receivable | ||||
| Property and equipment, net | ||||
| Intangible assets, net | ||||
| Total fair value of assets acquired | ||||
| Consideration paid in excess of fair value (Goodwill) (1) | $ | |||
| (1) | The consideration paid in excess of the net fair value of assets acquired and liabilities assumed has been recognized as goodwill. |
The following table presents the supplemental consolidated financial results of the Company on an unaudited pro forma basis, as if the acquisition had been consummated on January 1, 2021 through the periods shown below. The primary adjustments reflected in the pro forma results relate to (1) adjustment to remove transaction costs associated with the acquisition of Global Stem Cells Group Inc from the pro forma income statements, (2) adjustments to recorded depreciation and amortization expenses as a result of the acquisition, and (3) the income tax effect of the unaudited pro forma adjustments above using statutory tax rates.
The unaudited pro forma financial information presented below does not purport to represent the actual results of operations that Meso Numismatics, Inc and Global Stem Cells Group Inc would have achieved had the companies been combined during the periods presented and is not intended to project the future results of operations that the combined company may achieve after the acquisition. The unaudited pro forma financial information does not reflect any potential cost savings, operating efficiencies, long-term debt pay down estimates, financial synergies or other strategic benefits that may be realized as a result of the acquisition and also does not reflect any restructuring costs to achieve those benefits.
| For the Nine Months Ended September 30, | ||||
| 2021 | ||||
| Revenue | $ | |||
| Net loss | $ | ( | ) | |
| Earnings per share | $ | ( | ) | |
Under the provisions of purchase accounting, the Company has up to 1 year from the date of the acquisition to finalize the accounting for the assets acquired and liabilities assumed. The amounts included in the table above are therefore still subject to revision should additional information become available to the Company regarding the assets acquired and liabilities assumed.
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NOTE 11 – 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.
The Fair Value of the intangible assets as of the Valuation Date is reasonably represented as:
| September 30, 2022 | December 31, 2021 | |||||||
| 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 12 – OPERATING LEASES
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
The following table summarizes the Company’s undiscounted cash payment obligations for its non-cancelable lease liabilities through the end of the expected term of the lease:
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Total undiscounted cash payments | ||||
| Less interest | ( | ) | ||
| Present value of payments | $ |
NOTE 13 – OTHER ASSETS
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
NOTE 14 – PREPAID EXPENSES
During the period ending March 31, 2022, Global
Stem Cell Group, Inc. had made prepayments towards the buildout of the clinic at the Tulum Trade Center and purchase of equipment in the
amount of $
During the period ending June 30, 2022, the Cancun
lab was completed and $
NOTE 15 – SUBSEQUENT EVENTS
On October 28, 2022, we 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
As a result of this transaction, we are no longer engaged in the sale of coins, paper currency, bullion and medals and we have moved into what we believe is a more lucrative opportunity for our company, the operations of Global Stem Cell Group.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, cybersecurity, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further, information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.
Overview
Since the acquisition of Global Stem Cell Group in August last year, our focus has been mainly dedicated to its operations serving the markets in the regenerative medicine industry. We still have numismatics operation, but the overall plan for the company is too move from the sale of coins, paper currency, bullion and medals into what we believe is a more lucrative opportunity for our company.
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.
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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 look to recover in 2022, we are integrating every aspect of the regenerative medicine industry. During 2022, we plan 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 2022 and beyond.
Results of Operations
Results of Operations for the Three Months Ended September 30, 2022 and 2021.
Below is a summary of the results of operations for the three months ended September 30, 2022 and 2021.
| For the Three Months Ended September 30, | ||||||||||||||||
| 2022 | 2021 | $ Change | % Change | |||||||||||||
| Revenue | $ | 374,359 | $ | 165,042 | $ | 209,317 | 126.83 | % | ||||||||
| Cost of revenue | 109,364 | 88,520 | 20,844 | 23.55 | % | |||||||||||
| Gross profit | 264,995 | 76,522 | 188,473 | 246.30 | % | |||||||||||
| Operating expenses | ||||||||||||||||
| Advertising and marketing | 80,931 | 22,351 | 58,580 | 262.09 | % | |||||||||||
| Professional fees | 143,118 | 336,299 | (193,181 | ) | -57.44 | % | ||||||||||
| Officer compensation | 22,500 | 518,833 | (496,333 | ) | -95.66 | % | ||||||||||
| Depreciation and | ||||||||||||||||
| amortization expense | 39,882 | 12,947 | 26,935 | 208.04 | % | |||||||||||
| Investor relations | 32,749 | 32,574 | 175 | 0.54 | % | |||||||||||
| General and administrative- related party | - | 8,116,269 | (8,116,269 | ) | -100 | % | ||||||||||
| General and administrative | 107,908 | 52,651 | 55,257 | 104.95 | % | |||||||||||
| Total operating expenses | 427,088 | 9,091,924 | (8,664,836 | ) | -95.30 | % | ||||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense | (1,183,166 | ) | (900,039 | ) | (283,127 | ) | 31.46 | % | ||||||||
| Derivative financial | ||||||||||||||||
| instruments | 876 | — | 876 | 00 | % | |||||||||||
| Net loss | $ | (1,344,383 | ) | $ | (9,915,441 | ) | $ | 8,571,058 | -86.44 | % | ||||||
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Revenue
Revenue increased by 126.83% in the amount of $209,317 for the three months ended September 30, 2022, compared to the same period in 2021. The key reason for the increase in revenue was a result of the acquisition of Global Stem Cells Group, Inc. on August 18, 2021. Revenue from viable cell therapy and immune support related products along with physician training increased by $214,114 offset by a decrease in sale of coins, metals and paper money of $4,797 for the three months ended September 30, 2022, compared to the same period in 2021.
Listed below are the revenues, cost of revenues and gross profits by Company for the three months ended September 30, 2022:
| For the Three Months Ended September 30, 2022 | ||||||||||||
| Global Stem Cells Group | Meso Numismatics | Total | ||||||||||
| Revenue | $ | 367,697 | $ | 6,662 | $ | 374,359 | ||||||
| Cost of revenue | 102,779 | 6,585 | 109,364 | |||||||||
| Gross profit | $ | 264,918 | $ | 77 | $ | 264,995 | ||||||
| Gross profit % | 72.05 | % | 1.16 | % | 70.79 | % | ||||||
We expect to increase our revenues in future quarters from our operations associated with Global Stem Cells with less expected revenues in future quarters associated with our numismatic operations.
Operating expenses
Operating expenses decreased by 95% in the amount of $8,664,836 for the three months ended September 30, 2022, compared to the same period in 2021. Listed below are the major changes to operating expenses:
Advertising and marketing fees increased by $58,580 for the three months ended September 30, 2022, compared to the same period in 2021, primarily due to the acquisition of Global Stem Cells Group, Inc. on August 18, 2021.
Professional fees decreased by $193,181 for the three months ended September 30, 2022, compared to the same period in 2021, primarily due to audit and accounting expenses due to the acquisition of Global Stem Cells Group, Inc. on August 18, 2021.
Officer compensation decreased by $496,333 for the three months ended September 30, 2022, compared to the same period in 2021, primarily due to the issuance of 896 shares of Series DD Preferred Stock of the Company to Dave Christensen, current Director, President, Chief Executive Officer, Chief Financial Officer and Secretary as compensation pursuant to the Professional 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.
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Depreciation and amortization increased by $26,935 for the three months ended September 30, 2022, compared to the same period in 2021, primarily due to completion of Cancun lab in May 2022.
General and administrative-related party expense decrease by $8,116,269 for the three months ended September 30, 2022, compared to the same period in 2021, primarily due to the issuance of the 1,000 shares of the Company’s Series CC Convertible Preferred Stock to Lans Holdings Inc. terminated and replaced with a cash payment as consideration. The Company paid Lans 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.
General and administrative expense increase by $55,257 for the three months ended September 30, 2022, compared to the same period in 2021, primarily due to the acquisition of Global Stem Cells Group, Inc. on August 18, 2021.
Other expense
Other expense increased by $282,251 for the three months ended September 30, 2022, compared to the same period in 2021, primarily as a result of the increase in interest on promissory notes. During the nine months ended September 30, 2021, we received $11,400,000 in proceeds received from the issuance of promissory notes. We expect other expense to increase in future quarters as a result of the interest on the new debt.
Net Loss
We recorded a net loss of $1,344,383 for the three months ended September 30, 2022, as compared with a net loss of $9,915,441 for the same in 2021.
Results of Operations for the Nine Months Ended September 30, 2022 and 2021.
Below is a summary of the results of operations for the nine months ended September 30, 2022 and 2021.
| For the Nine Months Ended September 30, | ||||||||||||||||
| 2022 | 2021 | $ Change | % Change | |||||||||||||
| Revenue | $ | 988,958 | $ | 185,254 | $ | 803,704 | 433.84 | % | ||||||||
| Cost of revenue | 468,838 | 115,170 | 353,668 | 307.08 | % | |||||||||||
| Gross profit | 520,120 | 70,084 | 450,036 | 642.14 | % | |||||||||||
| Operating expenses | ||||||||||||||||
| Advertising and marketing | 216,506 | 22,732 | 193,774 | 852.43 | % | |||||||||||
| Professional fees | 735,186 | 665,544 | 69,642 | 10.46 | % | |||||||||||
| Officer compensation | 67,500 | 552,932 | (485,432 | ) | -87.79 | % | ||||||||||
| Depreciation and | ||||||||||||||||
| amortization expense | 102,184 | 13,347 | 88,837 | 665,59 | % | |||||||||||
| Investor relations | 127,633 | 53,046 | 74,587 | 140.61 | % | |||||||||||
| General and administrative- related party | - | 8,116,269 | (8,116,269 | ) | -100.00 | % | ||||||||||
| General and administrative | 341,131 | 69,206 | 271,925 | 392.92 | % | |||||||||||
| Total operating expenses | 1,590,140 | 9,493,076 | (7,902,936 | ) | -83.25 | % | ||||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense | (3,454,874 | ) | (1,659,724 | ) | 1,795,150 | 108.16 | % | |||||||||
| Derivative financial | ||||||||||||||||
| instruments | 10,482 | — | 10,482 | 0.00 | % | |||||||||||
| Other expense | — | (231,109 | ) | 231,109 | -100.00 | % | ||||||||||
| Net loss | $ | (4,514,412 | ) | $ | (11,313,825 | ) | $ | 6,799,413 | -60.10 | % | ||||||
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Revenue
Revenue increased by 433.84% in the amount of $803,704 for the nine months ended September 30, 2022, compared to the same period in 2021. The key reason for the increase in revenue was a result of the acquisition of Global Stem Cells Group, Inc. on August 18, 2021. Revenue from viable cell therapy and immune support related products along with physician training increased by $810,384 offset by a decrease in sale of coins, metals and paper money of $6,680 for the nine months ended September 30, 2022, compared to the same period in 2021.
Listed below are the revenues, cost of revenues and gross profits by Company for the nine months ended September 30, 2022:
| For the Nine Months Ended September 30, 2022 | ||||||||||||
| Global Stem Cells Group | Meso Numismatics | Total | ||||||||||
| Revenue | $ | 963,967 | $ | 24,991 | $ | 988,958 | ||||||
| Cost of revenue | 445,814 | 23,024 | 468,838 | |||||||||
| Gross profit | $ | 518,153 | $ | 1,967 | $ | 520,120 | ||||||
| Gross profit % | 53.75 | % | 7.87 | % | 52.59 | % | ||||||
We expect to increase our revenues in future quarters from our operations associated with Global Stem Cells with less expected revenues in future quarters associated with our numismatic operations.
Operating expenses
Operating expenses decreased by 83.25% in the amount of $7,902,936 for the nine months ended September 30, 2022, compared to the same period in 2021. Listed below are the major changes to operating expenses:
Advertising and marketing fees increased by $193,774 for the nine months ended September 30, 2022, compared to the same period in 2021, primarily due to the acquisition of Global Stem Cells Group, Inc. on August 18, 2021.
Professional fees increased by $69,642 for the nine months ended September 30, 2022, compared to the same period in 2021, primarily due to audit and accounting expenses.
Officer compensation decreased by $485,432 for the nine months ended September 30, 2022, compared to the same period in 2021, primarily due to the issuance of 896 shares of Series DD Preferred Stock of the Company to Dave Christensen, current Director, President, Chief Executive Officer, Chief Financial Officer and Secretary as compensation pursuant to the Professional 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.
Depreciation and amortization increased by $88,837 for the nine months ended September 30, 2022, compared to the same period in 2021, primarily due to completion of Cancun lab in May 2022.
General and administrative-related party expense decrease by $8,116,269 for the nine months ended September 30, 2022, compared to the same period in 2021, primarily due to the issuance of the 1,000 shares of the Company’s Series CC Convertible Preferred Stock to Lans Holdings Inc. terminated and replaced with a cash payment as consideration. The Company shall pay Lans 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.
General and administrative expense increase by $271,925 for the nine months ended September 30, 2022, compared to the same period in 2021, primarily due to the acquisition of Global Stem Cells Group, Inc. on August 18, 2021.
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Other expense
Other expense increased by $1,553,559 for the nine months ended September 30, 2022, compared to the same period in 2021, primarily as a result of the increase in interest on promissory notes. During the nine months ended September 30, 2021, we received $11,400,000 in proceeds received from the issuance of promissory notes. We expect other expense to increase in future quarters as a result of the interest on the new debt.
Net Loss
We recorded a net loss of $4,514,412 for the nine months ended September 30, 2022, as compared with a net loss of $11,313,825 for the same in 2021.
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 September 30, 2022 and December 31, 2021.
| September 30, | December 31, | $ | % | |||||||||||||
| 2022 | 2021 | Change | Change | |||||||||||||
| Cash and cash equivalents | $ | 1,769,636 | $ | 2,978,525 | $ | (1,208,889 | ) | -40.59 | % | |||||||
Summary of Cash Flows
Below is a summary of the Company’s cash flows for the nine months ended September 30, 2022 and 2021.
| For the Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Net cash used in operating activities | $ | (1,064,706 | ) | $ | (1,129,835 | ) | ||
| Net cash provided by (used in) investing activities | (129,901 | ) | 666,647 | |||||
| Net cash provided by (used in) financing activities | (14,282 | ) | 11,149,546 | |||||
| Net increase (decrease) in cash and cash equivalents | $ | (1,208,889 | ) | $ | 10,686,358 | |||
Operating activities
Net cash used in operating activities was $1,064,706 during the nine months ended September30, 2022 and consisted of a net loss of $4,514,412, which was offset by a net change in operating assets and liabilities of $2,038,208 and non-cash items of $1,411,498. The non-cash items for the nine months ended September 30, 2022, consisted of depreciation and amortization expenses of $102,184 and amortization of debt discount of $1,319,796, partially offset by the change in derivative liabilities of $10,482. 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.
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Net cash used in operating activities was $1,129,835 during the nine months ended September 30, 2021 and consisted of a net loss of $11,313,825, which was offset by a net change in operating assets and liabilities of $9,161,467 and non-cash items of $1,022,522. The primary non-cash items for the nine months ended September 30, 2021, consisted of amortization of debt discount of $500,338 and shares issued for services and settlement of debt of $464,645. The significant change in operating assets and liabilities was an increase in accounts payable and accrued liabilities along with amount due Lans Holdings.
Investing activities
Net cash used in investing activities was $129,901 consisted of purchase of property and equipment associated with the completion of the Cancun lab during the nine months ended September 30, 2022.
Net cash provided by investing activities was $666,647 consisted of cash acquired in business combination and cash to Global Stem Cells Group Inc. during the nine months ended September 30, 2021.
Financing activities
Net cash used in financing activities was $14,282 consisted of principal payment of debt for the nine months ended September 30, 2022.
Net cash provided by financing activities was $11,149,546 consisted of proceeds received from the issuance of promissory notes of $11,400,000 offset by proceeds from note receivable of $250,000 and principle payment on debt of $454 for the nine months ended September 30, 2021.
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 $51 million and a working capital deficit of $4,221,015 as of September 30, 2022 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 September 30, 2022, the Company had no off-balance sheet arrangements.
Critical Accounting Policies
Our critical accounting policies have not materially changed during the nine months ended September 30, 2022. 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 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.
New Accounting Pronouncements
In March 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 the London 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 between January 1, 2020 through December 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.
In October 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.
In November 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
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Revenue Recognition
Effective January 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 |
| (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 Institute for Testing and Certificating, Inc. SVT Kits are paid for upfront and shipped from third party directly to physicians. Revenue is recognized by GSCG when product is shipped. |
| ● | 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-MESO acquires rare coins and banknotes from Latin 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 or services.
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 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.
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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 September 30, 2022 and December 31, 2021, 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 September 30, 2022 and December 31, 2021, the Company does not have any assets or liabilities except for derivative liabilities and 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.
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.
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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 nine months ended September 30, 2022. 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 September 30, 2022. The Company plans to take remedial action to address these weaknesses during the fiscal year ended 2022.
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 quarter ended June 30, 2022 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
Other than described below, 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.
On May 12, 2015, the Company issued a convertible promissory Note (the “Note”) in the principal amount of $25,000 to Tarpon Bay Partners, LLC (“Tarpon Bay”), whose principal at the time, is now known as a “Bad Actor” under SEC rules. On or about January 23, 2017, Tarpon Bay elected to convert principal and interest under the Note into shares of the Company’s common stock. On or about June 6, 2017 the Note was assigned to J.P. Carey Enterprises, Inc. (“J.P.”). On or about June 7, 2017, J.P. elected to convert principal and interest under the Note into shares of the Company’s common stock. Joseph Canouse, a principal at J.P. initiated a lawsuit against the Company in Fulton County Court, in Georgia for, amongst other things, breach of contract. A default judgment was entered into against the Company for failure to response to these claims. The court then issued an Order of Judgement against the Company in the amount of $282,500 which was recorded in accounts payable as of December 31, 2017. The Company appealed the Courts’ decision and in November 2018, while the Court of Appeals affirmed liability under the judgment, the Court of Appeals vacated the award of the entire judgment amount and remanded the case back to the trial court with instructions. The case is awaiting a trial date.
Item 1A. Risk Factors
See risk factors included in our Annual Report on Form 10-K for 2021, filed with the SEC on May 5, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
N/A
Item 5. Other Information
None.
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Item 6. Exhibits
| Exhibit Number | Description of Exhibit | |
| 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.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 November 8, 2022 | MESO NUMISMATICS, INC. | |
| By: | /s/ David Christensen | |
| David Christensen | ||
|
President, Chief Executive Officer, (Principal Executive Officer) (Principal Financial Officer) (Principal Accounting Officer) | ||
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