NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
Note
1 – Nature of Business and Basis of Presentation
The
Company was incorporated on November 10, 1952 in Michigan as Gantos, Inc. On July 21, 2008, the Company completed its change in
domicile to Delaware and subsequently changed its name to Kinder Holding Corp. (the “Company”). As of October 13,
2017, the Company completed a reverse acquisition of Intiva BioPharma Inc., a Colorado corporation (“BioPharma”) through
an exchange of shares (the “Share Exchange Transaction”). In connection with the Share Exchange Transaction, the Company
changed its name to Intiva BioPharma Inc. on November 8, 2017 and, in September 2018, the Company changed its name to Nexien BioPharma,
Inc.
As
further described in Note 4, BioPharma became a wholly-owned subsidiary of the Company. Since this transaction resulted in the
existing shareholders of BioPharma acquiring control of the Company, for financial reporting purposes, the business combination
has been accounted for as an additional capitalization of the Company (a reverse acquisition with BioPharma as the accounting
acquirer). The operations of BioPharma were the only continuing operations of the Company. The accompanying financial statements
as of December 31, 2020 and for the three and six months then ended, and June 30, 2020, and year then ended, present the historical
financial information of BioPharma.
BioPharma
was incorporated under the laws of the State of Colorado on March 27, 2017 to pursue pre-clinical and drug development activities,
in accordance with U.S. Food and Drug Administration (“FDA”) protocols, for certain pharmaceutical formulations that
include cannabinoids. It is pursuing the formulation and development of drugs containing cannabinoids for the treatment of various
diseases, disorders and medical conditions, and owns a license covering certain intellectual property, including certain patent
applications, and has filed three of its own provisional patent applications for other drugs that include cannabinoids and other
substances, including terpenes, that are intended to be developed with the objective of treating certain medical conditions and
disorders. It was formed as a corporate subsidiary of the Colorado corporation Kanativa USA Inc. (“Kanativa USA”),
which is a subsidiary of the Ontario, Canada corporation, Kanativa Inc.
Principles
of Consolidation
The
accompanying consolidated financial statements include BioPharma and its wholly owned subsidiaries: Intiva BioPharma Inc. (a Colorado
corporation), NexN Inc. (“NexN”) and NexDM Inc. (collectively the “Company”), and were prepared from the
accounts of the Company in accordance with accounting principles generally accepted in the United States of America (US GAAP).
All significant intercompany transactions and balances have been eliminated on consolidation.
All
share and per share amounts have been adjusted in the footnotes and accompanying financial statements to give effect to the Share
Exchange Transaction. (See Note 4).
Note
2 - Going Concern Uncertainty
The
accompanying financial statements have been prepared in conformity with US GAAP, which contemplates continuation of the Company
as a going concern. The Company has not established any source of revenue to cover its operating costs, and as such, has incurred
an operating loss since inception of $10,336,610. The development of pharmaceuticals with the objective of obtaining approval
by the FDA and other international regulatory authorities is not a short-term endeavor for any specific drug candidate. It also
requires extremely significant amounts of capital funding for clinical trials and other matters. At December 31, 2020, the Company
had working capital $51,420. The Company will require significant additional capital to fund the implementation and execution
of its business plan. This capital, which likely will be millions of dollars for a single drug candidate, will be required for
research, regulatory applications, and clinical trials. At the present time, the Company does not have any commitments or known
sources for this level of funding. These and other factors raise substantial doubt about the Company’s ability to continue
as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible
inability of the Company to continue as a going concern.
NEXIEN
BIOPHARMA, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
Note
3 – Summary of Significant Accounting Policies
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from the estimates.
Cash
and Cash Equivalents
For
financial statement presentation purposes, the Company considers those short-term, highly liquid investments with original maturities
of three months or less to be cash or cash equivalents. There were no cash equivalents at December 31, 2020 and June 30, 2020.
Valuation
of Long-Lived Assets
The
Company reviews the recoverability of its long-lived assets including equipment, goodwill and other intangible assets, when events
or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of
possible impairment is based on the Company’s ability to recover the carrying value of the asset from the expected future
pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the
carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value.
The Company’s primary measure of fair value is based on discounted cash flows. The measurement of impairment requires management
to make estimates of these cash flows related to long-lived assets, as well as other fair value determinations.
Fair
Value of Financial Instruments
Financial
Accounting Standards Board (FASB) ASC 825, Financial Instruments, requires entities to disclose the fair value of financial instruments,
both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value.
FASB ASC 825 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current
transaction between willing parties. At December 31, 2020 and June 30, 2020, the carrying value of certain financial instruments
(cash and cash equivalents, accounts payable and accrued expenses) approximates fair value due to the short-term nature of the
instruments or interest rates, which are comparable with current rates.
Fair
Value Measurements
The
Company measures fair value under a framework that utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques
used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three
levels of inputs which prioritize the inputs used in measuring fair value are:
Level
1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that
the Company has the ability to access.
Level
2: Inputs to the valuation methodology include:
|
●
|
Quoted
prices for similar assets or liabilities in active markets;
|
|
●
|
Quoted
prices for identical or similar assets or liabilities in inactive markets;
|
|
●
|
Inputs
other than quoted prices that are observable for the asset or liability;
|
|
●
|
Inputs
that are derived principally from or corroborated by observable market data by correlation or other means.
|
NEXIEN
BIOPHARMA, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
Note
3 – Summary of Significant Accounting Policies (continued)
If
the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term
of the asset or liability.
Level
3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The
asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of
any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable
inputs and minimize the use of unobservable inputs.
When
the Company changes its valuation inputs for measuring financial assets and liabilities at fair value, either due to changes in
current market conditions or other factors, it may need to transfer those assets or liabilities to another level in the hierarchy
based on the new inputs used. The Company recognizes these transfers at the end of the reporting period that the transfers occur.
For the periods ended December 31, 2020 and June 30, 2020, there were no significant transfers of financial assets or financial
liabilities between the hierarchy levels.
As
at December 31, 2020 and June 30, 2020, no assets or liabilities were required to be measured at fair value on a recurring basis.
Earnings
per Common Share
The
Company computes net income (loss) per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of
both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income
(loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during
the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury
stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price
for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants.
Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
Income
Taxes
The
Company has adopted ASC 740, Accounting for Income Taxes. Pursuant to ASC 740, the Company is required to compute tax asset benefits
for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial
statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward
in future years.
Revenue
Recognition
The
Company has adopted ASC 606, Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial
sales of products, licensing agreements and contracts to perform pilot studies 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.
Research
and Development Expenses
Research
and development expenses are charged to operations as incurred.
NEXIEN
BIOPHARMA, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
Note
3 – Summary of Significant Accounting Policies (continued)
Concentrations
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents.
Cash and cash equivalents are deposited with major banks in the United States of America. Management believes that such financial
institutions are financially sound and, accordingly, minimal credit risk exists with respect to these financial instruments. The
Company does not have any significant off-balance-sheet concentration of credit risk.
Stock-based
compensation
Pursuant
to ASC 718, Compensation – Stock Compensation, all share-based payments to employees, including grants of employee stock
options, are recognized in the statement of operations based on their fair values.
Issuance
of shares for non-cash consideration
The
Company accounts for the issuance of equity instruments to acquire goods and/or services based on the fair value of the goods
and services or the fair value of the equity instrument at the time of issuance, whichever is more reliably determinable. The
Company’s accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services
follows the provisions of the standards issued by the FASB. The measurement date for the fair value of the equity instruments
issued is determined as the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached
or (ii) the date at which the consultant or vendor’s performance is complete. In the case of equity instruments issued to
consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.
Reclassifications
Certain
amounts in the consolidated financial statements for prior year periods have been reclassified to conform with the current period
presentation.
Recent
Accounting Pronouncements
Although
there are several other new accounting pronouncements issued or proposed by the FASB, which the Company has adopted or will adopt,
as applicable, the Company does not believe any of these accounting pronouncements has had or will have a material impact on its
consolidated financial position or results of operations. Management has evaluated accounting standards and interpretations issued
but not yet effective as of December 31, 2020 and does not expect such pronouncements to have a material impact on the Company’s
financial position, operations, or cash flows.
Note
4 – Share Exchange Agreement
On
August 8, 2017, the Company entered into a Share Exchange Agreement, as amended and restated on October 13, 2017 (the “Agreement”),
with BioPharma. Pursuant to the terms of the Agreement, the Company agreed to issue to the shareholders of BioPharma 42,642,712
post-reverse stock-split shares of the Company’s common stock, par value $0.0001 (“Common Stock”), in exchange
for all of the issued and outstanding shares of BioPharma capital stock, thereby making BioPharma a wholly-owned subsidiary of
the Company. As part of the Closing of the Agreement, the 20,000,000 pre-reverse split shares of the Company’s Common Stock
previously purchased by Kanativa USA, effective on June 26, 2017 in a change in control transaction from the Company’s control
shareholders, were canceled. Since this transaction resulted in the existing shareholders of BioPharma acquiring control of the
Company, for financial reporting purposes, the business combination has been accounted for as an additional capitalization of
the Company (a reverse acquisition with BioPharma as the accounting acquirer).
NEXIEN
BIOPHARMA, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
Note
5 – License Agreements
Kotzker
License Agreement
In
March 2017, the Company licensed certain intellectual property from Kotzker Consulting LLC (“Kotzker Consulting”),
an unrelated entity. The licensed intellectual property included patent applications relating to the use of cannabinoid receptor
modulators and terpenes in the acute treatment during exposure to organophosphorus nerve agents and/or organophosphorus insecticides.
Under terms of the agreement, the Company was required to use its commercially reasonable efforts to develop and commercialize
the licensed products, and, in particular, was to be responsible for the design, manufacturing, preclinical, clinical, and regulatory
development activities of the licensed products and shall bear the costs of such activities. As consideration for entering into
the agreement, the Company agreed to: (i) pay Kotzker Consulting $180,000, (ii) pay patent prosecution costs incurred as of the
date of the agreement of $15,000 and (iii) issue to Kotzker Consulting 31,550 shares of Kanativa Inc.’s common stock valued
at $78,875 ($2.50 per share based on a private placement to third parties of Kanativa Inc.’s common stock at that time).
The Company also capitalized legal fees of $29,040 incurred in conjunction with acquiring the license agreement. The license agreement
was to terminate, on a country by country basis, upon the expiration of the licensed patent for the licensed intellectual property,
or when a competitor generic product utilizing the licensed technology was marketed in the particular country.
The
Company was to be responsible for development milestone payments for (i) licensed products for use as a preventative and therapeutic
neuroprotective against nerve agents and pesticides and (ii) licensed products for treatment of diseases. Milestone payments for
each of the foregoing was to be due in two payments, the first payment no later than thirty (30) days from acceptance of submission
of the regulatory filing of the first licensed product and the second payment no later than thirty (30) days from approval of
the first licensed product. Royalties were to be due beginning with first commercial sale of developed products. The Company had
completed and submitted a Pre-Investigational New Drug meeting request and amendment thereto with the FDA.
In
September 2017, the Company entered into a contract with a contract manufacturing organization to develop an injectable formulation
of a drug product to be submitted to the FDA. It was anticipated that the product would be developed utilizing the new drug application
505(b) (2) regulatory pathway for use in the treatment during and immediately following exposure to organophosphorous nerve agents.
The drug product was to consist of a synthetic cannabinoid and a blend of terpenes in an injectable vehicle.
The
Company previously estimated that it may not be able to recover the $302,915 carrying value of costs capitalized under the Kotzker
License Agreement and recognized an impairment of the $302,915 at June 30, 2019. In December 2020, the Company elected to terminate
this agreement, assigned the licensed intellectual property back to Kotzker and issued 150,000 restricted shares of common stock,
valued at $13,500 ($0.09 per share) as a final payment for consulting fees owed.
Accu-Break
License Agreement
On
February 28, 2018, the Company obtained a worldwide exclusive license with respect to a proprietary delivery system for cannabinoid-based
medications from Accu-Break Pharmaceuticals Inc (Accu-Break). Upon execution of the agreement, as amended September 18, 2018,
$35,000 was paid to the licensor; an additional $30,000 was paid in cash during the year ended June 30, 2019; and a final payment
of $35,000 was paid in common stock of the Company during the year ended June 30, 2020. The Company is required to pay milestone
payments upon obtaining regulatory approval of pharmaceutical licensed products and royalties based upon sales of licensed products.
The Company may grant sublicenses under the terms of the agreement.
The
Company has previously estimated that it may not be able to recover the $65,000 of costs capitalized under the Accu-Break License
Agreement, and recognized an impairment of $65,000 for the license at June 30, 2019. The $35,000 value of common stock issued
in the year ended June 30, 2020 was charged to operations. Although the Company has recognized an impairment under Generally Accepted
Accounting Principles, it retains its rights under the Accu-Break license agreement.
NEXIEN
BIOPHARMA, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
Note
6– Stockholders’ Equity
Common
stock
During
the year ended June 30, 2020, the Company issued 473,286 shares of its common stock as follows:
|
●
|
16,667
shares, valued at $1,500 ($0.09 per share), as consideration for consulting services rendered.
|
|
●
|
75,000
shares, valued at $7,500 ($0.10 per share), as partial consideration for entering into an investor relations contract.
|
|
●
|
381,619
shares, valued at $35,000 ($0.092 per share), for final payment on the license agreement with respect to a proprietary delivery
system for cannabinoid-based medications (See Note 5).
|
During
the six months ended December 31, 2020, the Company issued shares of its common stock as follows:
|
●
|
1,797,192
shares, at $0.014 per share, to its CEO for conversion of a note payable in the principal amount of $25,000 and accrued interest
of $161.
|
|
●
|
150,000
shares valued at $13,500, $0.09 per share, as consideration for consulting services under the Kotzker License Agreement (Note5).
|
CRX
Limited Liability Company Interest Purchase Agreement
On
October 26, 2018, Company entered into a Limited Liability Company Interest Purchase Agreement (the “Purchase Agreement”)
with the members of CRX Bio Holdings LLC, a Delaware limited liability company (“CRX”), to acquire all of the membership
interest in CRX in exchange for 11,000,000 restricted shares of the Company’s common stock (the “Acquisition”),
valued at $0.76 per share. The transaction has been accounted for as an asset acquisition, and not a business combination, and
has been valued at the fair value of the common stock issued by the Company, as CRX’s cost basis was $0 in the assets. CRX
is engaged in the research and development of advanced cannabinoid formulations and drug delivery systems with a focus on bioavailability
and related pharmacokinetics and pharmacodynamics (PK/PD) enhancement. The Acquisition transaction was consummated on October
26, 2018. By acquiring CRX as a wholly-owned subsidiary, the Company acquired all of its assets, which consist primarily of three
U.S. provisional patent applications relating to cannabinoid formulations to treat convulsive disorders, chronic traumatic encephalopathy,
and neuropathic pain. At the closing, the Company issued to the six members of CRX (the “Sellers”) 1,100,000 shares
not subject to any forfeiture restrictions and 9,900,000 shares which shall be released from forfeiture restrictions according
to the following vesting schedule:
|
●
|
30%
shall be fully vested 12 months following the Closing (October 26, 2019);
|
|
●
|
30%
shall be fully vested 24 months following the Closing (October 26, 2020);
|
|
●
|
30%
shall be fully vested 36 months following the Closing (October 26, 2021).
|
Any
Seller who is not then providing services to the Company or any of its subsidiaries on any vesting date, whether through voluntary
termination or termination “for cause,” will forfeit his unvested shares, which will be cancelled.
The
transaction has been valued at $8,360,000, based on the fair value of the 11,000,000 shares issued of $0.76 per share, as per
the closing market price of the Company’s common stock on the date of the agreement. The $836,000 fair value of the 1,100,000
shares issued not subject to any forfeiture restrictions was charged to operations during the six months ended December 31, 2018.
The $7,524,000 fair value of the 9,900,000 shares subject to forfeiture has been charged to stockholders’ equity as a contra
equity account, and is being amortized over the vesting periods. The net amount charged to stockholder’s equity was $0 on
the date of the acquisition. As at December 31, 2020 and June 30, 2020, an aggregate $5,095,286 and $3,787,237, respectively,
has been charged to operations for the value of vested shares issued and the amortization of the unvested CRX shares. For the
three months ended December 31, 2020 and 2019, $521,051 and $625,513, respectively, has been charged to operations for the amortization
of unvested CRX shares during each of the periods.
NEXIEN
BIOPHARMA, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
Note
6 – Stockholders’ Equity (continued)
2017
Stock Incentive Plan
On
August 10, 2017, the Company adopted the “2017 Stock Incentive Plan” and granted an aggregate of 6,400,000 shares
of Common Stock to five officers and directors of the Company, valued at $800,000 ($0.125 per share). In March 2018, 1,166,667
unvested shares (valued at $145,833) previously issued to the Company’s former Chief Executive Officer were canceled. On
July 25, 2018, the Company accelerated the vesting of 1,083,342 unvested shares of Common Stock previously granted to its former
Chief Executive Officer and Chief Financial Officer. As of June 30, 2020, all 5,233,333 shares issued (valued at $654,167) have
been vested, of which 150,000 shares, valued at $18,750, were vested during the year ended June 30, 2020.
2018
Equity Incentive Plan
(i)
On March 30, 2018, the Company’s board of directors approved and recommended for adoption by the stockholders of the Company
a 2018 Equity Incentive Plan and has reserved 8,000,000 shares of Common Stock for issuance under the terms of that Plan.
In
July 2018, the Board of Directors granted options to purchase a total of 1,810,000 shares of Common Stock, exercisable for a period
of seven years, to officers/directors/consultants of the Company at an exercise price of $0.54 per share.
In
August 2018, the Board of Directors granted options to purchase a total of 150,000 shares of Common Stock, exercisable for a period
of seven years, to two individuals, (i) a director and (ii) a consultant of the Company, at an exercise price of $0.38 per share.
The
fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants under the fixed option plan:
Average risk-free interest rates
|
|
|
2.3%
- 2.8
|
%
|
Average expected life (in years)
|
|
|
4.0 to 7.0
|
|
Volatility
|
|
|
160% to 296
|
%
|
The
fair value of the options granted at June 30, 2020 is $867,715, including $33,307 for the fair value of options vested in 2020.
All options granted have been fully vested as of June 30, 2020.
(ii)
On October 17, 2018, the Board of Directors granted options to purchase an aggregate 800,000 shares of Common Stock, exercisable
for a period of seven years, to officers/directors of the Company at an exercise price of $0.655 per share and confirmed a grant
of options made as of October 1, 2018, to purchase 500,000 shares of Common Stock, exercisable for a period of seven years, to
an officer and director of the Company at an exercise price $0.48. All of the options were fully vested as of the date of grant.
The
fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants under the fixed option plan:
Average risk-free interest rates
|
|
|
2.88% - 2.93
|
%
|
Average expected life (in years)
|
|
|
4.0
|
|
Volatility
|
|
|
171% to 172
|
%
|
The
fair value of the fully vested options granted of $803,997 was charged to operations during the year ended June 30, 2019.
NEXIEN
BIOPHARMA, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
Note
6 – Stockholders’ Equity (continued)
(iii)
On August 19, 2020, the Board of Directors authorized the issuance of an aggregate 5,000,000 options to three officers of the
Company, exercisable at $0.08 per share for a seven-year period from the date of grant. As of the date of grant, 3,333,334 options
were fully vested and the balance of 1,666,666 options will vest quarterly over the next four calendar quarters beginning September
30, 2020.
The
fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants under the fixed option plan:
Average risk-free interest rates
|
|
|
.23
|
%
|
Average expected life (in years)
|
|
|
4.0
|
|
Volatility
|
|
|
152
|
%
|
The
fair value of the vested options granted of $282,116 was charged to operations during the six months ended December 31, 2020.
A
summary of option activity during the six months ended December 31, 2020 is presented below:
|
|
Shares
|
|
|
Weighted Average
Exercise
Price
|
|
|
Weighted Average Remaining Contractual
Life (Years)
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding and exercisable – June 30, 2020
|
|
|
2,995,000
|
|
|
$
|
0.55
|
|
|
|
|
|
Granted
|
|
|
5,000,000
|
|
|
$
|
0.08
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Expired/Canceled
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Outstanding– December 31, 2020
|
|
|
7,995,000
|
|
|
$
|
0.26
|
|
|
|
5.0
|
|
Exercisable – December 31, 2020
|
|
|
7,161,667
|
|
|
$
|
0.29
|
|
|
|
5.0
|
|
Warrants
On
November 24, 2020, the Company issued warrants for the acquisition of common shares as partial consideration for the issuance
of convertible notes (Note 7(b)).
The
following table summarizes information about warrants outstanding at December 31, 2020:
|
|
Number
|
|
|
Exercise Price
|
|
|
Expires
|
Class A
|
|
|
1,727,299
|
|
|
$
|
0.040265
|
|
|
November 24, 2025
|
Class B
|
|
|
1,727,299
|
|
|
$
|
0.043276
|
|
|
November 24, 2025
|
Class C
|
|
|
1,727,299
|
|
|
$
|
0.045157
|
|
|
November 24, 2025
|
The
fair value of the warrants granted is estimated on the date of grant using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants under the fixed option plan:
Average risk-free interest rates
|
|
|
.39
|
%
|
Average expected life (in years)
|
|
|
2.5
|
|
Volatility
|
|
|
153
|
%
|
The
relative fair value of the warrants granted of $252,104 was charged to operations at the date of grant.
NEXIEN
BIOPHARMA, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
Note
7 – Convertible Notes Payable
(a)
On June 11, 2020, the Company entered into a financing arrangement with its CEO under which he agreed to lend the Company up to
$25,000. The note bears interest at 5% per annum and is due upon demand. At the option of the lender, the unpaid principal and
interest may be converted, in whole or in part, into shares of the Company’s common stock at the lesser of (i) $0.014, being
the closing price of the Company’s common stock as of the date of the note, or (ii) the volume-weighted average price (VWAP)
of the Company’s common stock over the ten trading days immediately preceding the Company’s receipt of Notice of Conversion
from the lender. As the market price of the Company’s common stock and the VWAP were the same as of the date of the note,
no discount for beneficial conversion feature has been recorded. As of June 30, 2020, the lender had advanced $12,000 under the
arrangement; and accrued interest of $33 is included in accounts payable and accrued expenses at June 30, 2020. On July 10, 2020,
the Company’s CEO loaned the Company an additional $13,000 pursuant to the financing arrangement. On August 12, 2020, the
CEO sent notice to the Company that he was electing to convert the outstanding principal of $25,000 and accrued interest of $161
to 1,797,192 shares of common stock at the contractual conversion price of $0.014 per share. No gain or loss was recognized on
conversion as the conversion was made under the terms of the note agreement.
(b)
On November 24, 2020, the Company entered into financing agreements with two individuals, its CEO and a shareholder. Under the
agreements, the Company issued unsecured convertible promissory notes due in three years (November 24, 2023) with accrued interest
at the rate of 8% per annum, compounded annually. The notes and accrued interest are convertible at the option of the holders
at any time into restricted shares of the Company’s common stock at a price of $0.037631, being the volume-weighted average
price of the common stock over the 10 trading days immediately preceding the date the notes were funded. The CEO was issued a
note in the principal amount of $40,000, which included a $15,000 advance made in October 2020 and an additional loan of $25,000.
A stockholder of the Company loaned $25,000 on these terms. Both lenders were also issued three types of warrants, exercisable
for a five-year period, at prices of $0.040265, $0.043276, and $0.045157, to purchase a total of 5,181,897 shares (Note 6).
The
Company has recorded the conversion feature as a Beneficial Conversion Feature. The fair value of $38,638 for the expense portion
of the notes is being amortized over the term of the notes. This fair value has been determined based on the current trading prices
of the Company’s common stock. Management has determined that this treatment is appropriate given the uncertain nature of
the value of the Company and its stock, and there will be no revaluations until the note is paid or redeemed for stock. During
the three months ended December 31, 2020, $1,306 was charged to operations for amortization during the period of the Beneficial
Conversion Feature.
Note
8 – Related Party Transactions
BioPharma
was formed as a subsidiary of Kanativa USA, which is a subsidiary of Kanativa Inc. Kanativa USA was issued 24,000,000 shares of
BioPharma’s common stock as consideration for its contribution of 100% of the ownership of NexN, and costs and expenses
incurred on behalf of BioPharma and NexN in the amount of $201,228. Included in the consideration for the issuance of the common
stock is $172,915 of capitalized license agreement costs comprised of (i) the value of Kanativa Inc. common stock issued to Kotzker
Consulting of $78,875 and (ii) payments to Kotzker Consulting and legal costs in the aggregate of $94,040 (See Note 5).
At
June 30, 2017, BioPharma was owed $141,329 from Kanativa USA for advances made by BioPharma on behalf of Kanativa USA in conjunction
with the Share Exchange Agreement (See Note 4). As of June 30, 2020, an aggregate $50,662 was repaid by Kanativa USA, including
$15,000 and $9,000 during the years ended June 30, 2019 and June 30, 2020, respectively. The remaining balance of $90,667 was
due on March 1, 2020. On May 1, 2020, BioPharma and Kanativa USA entered into an agreement extending the due date for payment
of the remaining balance to June 30, 2020. Effective June 30, 2020, Kanativa USA determined that it would be unable to pay the
remaining balance of the advance. Accordingly, the Company wrote-off the remaining balance of $90,667 as a charge to operations
during the period ended June 30, 2020.
NEXIEN
BIOPHARMA, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
Note
8 – Related Party Transactions (continued)
On
August 10, 2017, the Company granted an aggregate of 6,400,000 shares of Common Stock to five officers and directors of the Company,
valued at $800,000 ($0.125 per share), under the Company’s 2017 Stock Incentive Plan. One-third of each grant vested as
of the initial date of grant (August 10, 2017), and 8-1/3% upon the end of each calendar quarter beginning December 31, 2017.
In March 2018, the Company cancelled 1,166,667 unvested shares previously issued to its former CEO. As of June 30, 2020, all granted
shares, valued at $654,167, were fully vested.
In
February 2018, the Company entered into an exclusive license agreement with Accu-Break whose President was an affiliate of the
Company at the time of the agreement (See Note 5).
The
members of the Company’s Board of Directors, its Chief Executive Office and its Chief Financial Officer are also directors
and officers of Kanativa Inc., and other subsidiaries and affiliated entities of Kanativa Inc.
In
June and November 2020, the Company issued convertible notes payable with its Chief Executive Officer and a shareholder of the
Company (See Note 7).
Note
9- Commitments and Contingencies
At
December 31, 2020, there were no legal proceedings against the Company.
Note
10 – Subsequent Event
On February 3, 2021, the Company entered
into an agreement with an investor relations firm to provide services for shareholder information and relations. The agreement
is for an initial one-year period. Under the terms of the agreement, the Company shall pay a retainer of $2,500 per
month for the first three months and $10,000 per month thereafter. The agreement may be terminated by the Company after the initial
three months, at which time the Company would be obligated to pay an additional one month’s retainer.
The Company has analyzed its operations
subsequent to December 31, 2020 through the date these financial statements were issued, and has determined that it does not have
any other additional material subsequent events to disclose.