UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
☒ ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For
the Fiscal Year Ended June 30, 2021
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission
file number: 000-55320
NEXIEN
BIOPHARMA, INC.
(Exact
name of registrant as specified in its charter)
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Delaware |
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26-2049376 |
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(State
or other jurisdiction of
incorporation
or organization)
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(I.R.S.
Employer
Identification
No.)
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4340
East Kentucky Avenue, Suite 206, Glendale, Colorado |
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80246 |
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(Address
of principal executive offices) |
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(Zip
Code) |
Registrant’s
telephone number, including area code: (303)
495-7583
Securities
registered pursuant to Section 12(b) of the Act:
None
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Title
of each class |
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Trading
symbol(s) |
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Name
of each exchange on which registered |
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Securities
registered pursuant to Section 12(g) of the Act: Common Stock,
$0.0001 par value
Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No
☒
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 preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically
every Interactive Data Fail required to be submitted pursuant to
Rule 405 of Regulation S-T during the preceding 12 months (or for
such shorter period that the registrant was required to submit such
files). Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
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Large
accelerated filer ☐ |
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Accelerated
filer ☐ |
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Non-accelerated
filer ☐ |
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Smaller
reporting company ☒ |
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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 Act. ☐
Indicate
by check mark whether the registrant has filed a report on and
attestation to its management’s assessment of the effectiveness of
its internal control over financial reporting under Section 404(b)
of the Sarbanes-Oxley Act by the registered public accounting firm
that prepared or issued its audit report. ☐
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Act). Yes ☐ No ☒
State
the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at
which the common equity was last sold, or the average bid and asked
price of such common equity, as of the last business day of the
registrant’s most recently completed second fiscal quarter:
$1,660,792 as of December 31, 2020.
Indicate
the number of shares outstanding of each of the registrant’s
classes of common stock, as of the latest practicable date:
55,772,196 shares as of October 12, 2021.
DOCUMENTS
INCORPORATED BY REFERENCE
List
hereunder the following documents if incorporated by reference and
the Part of the Form 10-K into which the document is incorporated:
None
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
report contains, in addition to historical information, certain
information, assumptions and discussions that may constitute
forward-looking statements. Such statements are subject to certain
risks and uncertainties which could cause actual results to differ
materially than those projected or anticipated. Actual results
could differ materially from those projected in the forward-looking
statements. Although the Company believes its assumptions
underlying the forward-looking statements are reasonable, the
Company cannot assure a reader that the forward-looking statements
set out in this report will prove to be accurate. The Company’s
business can be affected by, without limitation, such things as
natural disasters, economic trends, international strife or
upheavals, consumer demand patterns, labor relations, existing and
new competition, consolidation, and growth patterns within the
industries in which the Company competes and any deterioration in
the economy may individually or in combination impact future
results.
TABLE
OF CONTENTS
PART I
In
this report, unless the context requires otherwise, references to
the “Company”, “BioPharma”, “we”, “us” and “our” are to Nexien
BioPharma, Inc., a Delaware corporation, formerly Intiva BioPharma
Inc.
Corporate
History
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. Since bankruptcy liquidation in June 2000, the
Company has not had any operations and adopted “fresh-start”
accounting as of June 21, 2000, in accordance with procedures
specified by AICPA Statement of Position No. 90-7, “Financial
Reporting by Entities in Reorganization under the Bankruptcy
Code.”
As of
October 13, 2017, the Company completed a reverse acquisition (the
“Share Exchange Transaction”) of Intiva BioPharma Inc., a private
Colorado corporation (“Colorado BioPharma”). In connection with the
completion of the reverse merger the Company changed its name to
Intiva BioPharma Inc. on November 8, 2017.
Colorado
BioPharma was formed under the laws of the State of Colorado in
March 2017 as a wholly-owned subsidiary of Kanativa USA Inc.
(formerly Intiva USA Inc.) engaged in the business of developing
drugs containing cannabinoids for the treatment of various
diseases, disorders and medical conditions; the development or
licensing of proprietary delivery systems for
cannabinoid-based1 pharmaceutical medications; and the
investment in companies and the acquisition of technologies or
medications, focused on cannabinoid-based science through special
purpose vehicles, discussed more fully below. Kanativa USA Inc. is
a wholly-owned subsidiary of Kanativa Inc., formerly Intiva Inc.,
an Ontario, Canada corporation.
The
Company changed its name to Nexien BioPharma, Inc. in September
2018.
On
October 26, 2018, we 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 our common stock
(the “Acquisition”). CRx was 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) optimization. The
Acquisition transaction was consummated on October 26, 2018. By
acquiring CRx as a wholly-owned subsidiary, we acquired all of its
assets, which consisted 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, we 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 were to be released from
forfeiture restrictions in three equal tranches upon each
anniversary of the closing of the Acquisition. Any Seller who was
not then providing services to us or any of our subsidiaries on any
vesting date, whether through voluntary termination or termination
“for cause,” would forfeit his unvested shares, which would be
cancelled.
Effective
December 31, 2018, one of the Sellers resigned from the Company and
forfeited 1,732,500 unvested shares previously issued. In May 2019,
that Seller returned to the Company an additional 142,500 vested
shares issued in accordance with the Purchase Agreement. The fair
value of the returned shares was credited to the operations as of
June 30, 2019. In March 2021, four of the Sellers terminated their
relationships with the Company and forfeited their remaining
2,409,000 unvested shares, valued at the original issuance price of
$1,830,840 ($0.76 per share).
1
A cannabinoid is one of a class of diverse chemical compounds that
acts on cannabinoid receptors in cells that alter neurotransmitter
release in the brain. Ligands for these receptor proteins include
the endocannabinoids (produced naturally in the body by animals),
the phytocannabinoids (found in cannabis and some other plants),
and synthetic cannabinoids (manufactured artificially). The most
notable cannabinoid is the phytocannabinoid tetrahydrocannabinol
(THC), the primary psychoactive compound in cannabis. Cannabidiol
(CBD) is another major constituent of the plant. There are at least
113 different cannabinoids isolated from cannabis, exhibiting
varied effects.
Business
Plan
The
Company’s business objective is to develop and commercialize novel
FDA-compliant cannabinoid pharmaceuticals, drug delivery systems,
and related technologies for diseases, disorders and medical
conditions. The Company is utilizing cannabinoids as the active
pharmaceutical ingredients to develop synthetic pharmaceuticals in
strict accordance with the U.S. Food and Drug Administration
(“FDA”) pre-clinical and clinical pathways.
The
Company’s current flagship research and development programs are
focused on advancing formulations that have the potential to
significantly improve the treatment outcomes of certain convulsive
disorders and neuromuscular disorders. As of the date of this
report, work on these research and development programs has ceased
due to the lack of sufficient funding. The Company is currently
seeking a business combination opportunity and maintaining the
intellectual property assets which management believes have the
most potential.
Our
Drug Development Activities
Due
to the significant amount of financing needed to develop and
commercialize a new drug and the Company’s limited resources, it is
focusing its efforts on advancing formulations that have the
potential to significantly improve the treatment of epilepsy and
myotonic dystrophy.
Convulsive Disorders: Epilepsy and Refractory
Epilepsy
Epilepsy
is a neurological disorder marked by sudden recurrent episodes of
sensory disturbance, loss of consciousness, or convulsions,
associated with abnormal electrical activity in the brain. It is
caused by an imbalance in inhibitory and excitatory
neurotransmission resulting in synchronous neural activity.
Refractory epilepsy occurs when standard of care medicine is not
bringing seizures under control. This condition, which may be
called by other names, such as uncontrolled, intractable, or
drug-resistant epilepsy, is not age specific. Up to one of every
three epilepsy patients will develop what is considered refractory
epilepsy.
Our
near-term objective is to secure adequate funding to engage in
sponsored research collaboration with a leading Ivy League
university medical school in order to develop a pre-clinical proof
of concept for the Company’s proposed parenteral-delivered
formulations. CRx had entered into discussions and subsequently,
into a Master Service Agreement (MSA) with the medical school prior
to its acquisition by the Company. The study design involves
pre-clinical mouse models in two phases: I – MTD and PK/PD
modeling, and II – efficacy modeling in mice bred to be genetically
prone to convulsions/seizures, with a primary focus of advancing a
rigorous study design and improving new meritorious research and
development by continued collaboration with our academic
partners.
Myotonic Dystrophy
Myotonic
dystrophy (“DM”) is part of a group of genetic disorders called
muscular dystrophies, and is the most common form of muscular
dystrophy that begins in adulthood. DM is characterized by
progressive muscle wasting and weakness. People with this disorder
often have prolonged muscle contractions (myotonia) and are not
able to relax certain muscles after use. Also, affected people may
have slurred speech or temporary locking of their jaw. Signs and
symptoms overlap between DM Type 1 (“DM1”) and Type 2 (“DM2”),
although DM2 tends to be milder than DM1. The muscle weakness
associated with DM1 particularly affects the lower legs, hands,
neck and face, while muscle weakness in DM2 primarily involves the
muscles of the neck, shoulders, elbows, and hips. The two types of
DM are caused by mutations in different genes.
The
use of cannabinoid receptor modulators and/or terpenes for clinical
symptom relief in DM patients has not been explored. Current
scientific knowledge of the effects of cannabis on skeletal muscles
or other multiple system symptoms in DM is rather limited. However,
some anecdotal reports suggest that cannabis may be supportive in
relief of the most common symptoms in both DM1 and DM2.
Unfortunately, currently there is no standard treatment for these
symptoms.
Our
patent applications relate to methods and compositions for treating
such diseases with the use of cannabinoids and covers the
administration of the drug(s) by such delivery systems as topical,
oral, nasal, inhalation or a combination thereof. On July 07, 2020,
a utility patent was granted (US10702,495) relating to a method for
treating the symptoms of myotonia with a therapeutically effective
amount of cannabidiol and tetrahydrocannabinol in a subject.
Corresponding claims were also submitted in Europe.
In
April 2018, the Company retained Dr. Benedikt Schoser, a
world-renowned expert in DM, to advise the Company. To elicit
further information regarding whether DM patients have had any
experience with cannabis and if so whether such experience has
resulted in any symptom relief, a questionnaire was sent to a
number of DM 1 and DM 2 patients by patient organizations. The
results of the questionnaire suggest further exploration is
appropriate. The survey was published in the Journal of Neurology,
Neurosurgery & Psychiatry.
On
August 13, 2019 we filed a pre-IND meeting request (the “Request”)
to discuss the requirements for submission of an Investigation New
Drug Application for a combination of Cannabidiol and THC
Sublingual Tablet for muscle relaxation in patients with myotonic
dystrophy and for the treatment of myotonia. On October 8, 2019 we
received written responses from the FDA to the questions we raised
in the pre-IND meeting request. We are presently evaluating the
responses as we seek to move our development plan
forward.
The
FDA pathway for the development of drugs for certain of these
genetic muscular diseases may fall under the Orphan Drug Act of
1983, which was passed by the U.S. Congress to facilitate the
development of orphan drugs. The FDA may grant orphan drug
designation to drugs intended to treat a rare disease or condition
that affects fewer than 200,000 individuals annually in the United
States. Such an orphan drug designation may entitle a recipient to
financial incentives, such as opportunities for grant funding
towards clinical trial costs, tax credits for certain research and
user fee waivers under certain circumstances. See risk factor
“We may apply for orphan drug status granted by the FDA for some
of our drug candidates for the treatment of rare diseases”
below.
An
additional utility patent application (US16/435,756) was filed as a
continuation-in-part on June 10, 2019, resulting in the issuance of
patent US10,702,495 on July 07, 2020, to incorporate some early
formulation concepts that may show use in the relief of these DM
symptoms. A corresponding application has been filed at the
European Patent Office (EP19179559.0).
Our
Drug Delivery System Development Activities
Accu-Break License Agreement
On
February 28, 2018, we obtained a worldwide exclusive license from
Accu-Break Pharmaceuticals, Inc., a Florida corporation
(“Accu-Break”) with respect to a proprietary delivery system for
cannabinoid-based medications. We are required to use commercially
reasonable efforts to develop and commercialize one or more
products utilizing the licensed technology and will be responsible
for the costs and efforts associated with the design,
manufacturing, preclinical, clinical, and regulatory development
activities of these licensed products worldwide.
Commencing
with the first commercial sale in any country worldwide of any
licensed product by the Company or any of its affiliates or
sublicensees, the Company shall pay to Accu-Break royalties for
licensed products sold, equal to 4% of the Company’s net sales of
licensed products or 25% of the total revenue received by the
Company for sales of licensed products by sublicensees. Such
royalties shall continue so long as the manufacture, use, sale,
import or offer for sale of the licensed product infringes a valid
claim of Accu-Break’s licensed technology.
In
addition to the royalty payments described above, and as
consideration for entering into the agreement, the Company agreed
to pay Accu-Break a license fee of $100,000, which has been paid in
full.
The
Company is also required to pay in cash or, at its option in shares
of its Common Stock, milestone payments as follows:
|
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● |
$100,000
upon approval of filing by each regulatory authority of each
pharmaceutical licensed product; |
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● |
$100,000
upon approval by each regulatory authority of each pharmaceutical
licensed product; |
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● |
$50,000
upon achievement of $10,000,000 of cumulative net sales for any and
all of the licensed products; |
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● |
$50,000
upon achievement of $25,000,000 of cumulative net sales for any and
all of the licensed products; and |
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● |
$50,000
upon achievement of $50,000,000 of cumulative net sales for any and
all of the licensed products. |
The
license fee and milestone payments shall be offset against any
amounts due to Accu-Break for royalties and sublicensee
payments.
The
license granted to the Company shall continue on a country by
country basis and licensed product by licensed product basis so
long as the manufacture, use, sale, import or offer for sale of
such licensed product infringes a valid claim of any of
Accu-Break’s licensed technology. Upon such expiration, the
license, with respect to such country and such licensed product,
will be automatically converted to a fully paid-up royalty-free
perpetual license.
The
license may be terminated by Accu-Break only for the Company’s
default under the Agreement, which default shall not have been
corrected within 60 days of having received notice of such
default.
Due
to the Company’s limited financial and personnel resources ,the
Company estimated that it would not be able to recover the $65,000
of costs capitalized under the Accu-Break License Agreement, and
recognized an impairment of $65,000 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 both of these license
agreements.
Patents,
Intellectual Property and Proprietary Rights
Our
current patent applications are related to our drug development
projects and their respective drug candidates. We intend to seek
patent protection in the U.S. and other countries as appropriate,
related to methods and compositions and proprietary technologies
for the use of cannabinoids receptor modulators and/or terpenes to
treat certain diseases, disorders and medical
conditions.
To
date, we have filed three provisional patent applications all
related to our drug development projects, specifically the use of
cannabinoid receptor modulators and/or terpenes to treat certain
diseases or medical conditions. Assuming the successful completion
of clinical trials, of which there can be no assurance, we believe
that we will be able to secure patent protection and retain
applicable intellectual property rights.
The
table below depicts the Company’s patent applications:
|
Description
of the Patent Application filed with USPTO |
|
Date |
| Method
and Compositions for Treating Dystrophies and Myotonia |
|
Granted
July 07, 2020 |
| Method
and Compositions for Parenteral Administration of Cannabidiol in
the treatment of Convulsive Disorders |
|
July
31, 2020 |
| Method
and Compositions for Parenteral Administration of Cannabidiol in
the treatment and prevention of Chronic Traumatic
Encephalopathy |
|
July
31, 2020 |
| Method
and Compositions for the treatment of Neuropathic Pain by
Parenteral Administration of Cannabinoids |
|
July
31, 2020 |
In
addition, on June 8, 2018, a U.S. Patent Application was filed
relating to the use of cannabinoid receptor modulators and/or
terpenes to treat extreme health hazards due to exposure to
organophosphorus nerve agents and/or organophosphorus insecticides.
A continuation was filed on August 01, 2020 relating to a compound
disclosed in the patent application with pending applications in
Europe and Canada. An Israeli patent (238946) was granted on July
01, 2019 for the Use of Cannabinoids and Terpenes for Treatment of
Organophosphate and Carbamate Toxicity based on licensed technology
from Kotzker Consulting LLC.
Competition
The
emerging markets for cannabinoid-based drug research and
development is and will likely remain competitive. In general, the
biotechnology and pharmaceutical industries are characterized by
rapidly advancing technologies, intense competition, and a strong
emphasis on proprietary drugs.
We
expect that we will be required to compete with a variety of
multinational pharmaceutical companies and specialized
biotechnology companies, as well as drugs and processes being
developed at universities and other research institutions. Our
competitors may develop or may already have developed drugs
comparable or competitive with our drug candidates. Competitive
therapeutic treatments for diseases, disorders and medical
conditions that are included in our drug development projects have
already been approved and accepted by the medical community and any
new treatments that may enter the market would face fierce
competition.
We
are aware of a number of companies that are engaged in
cannabinoid-based drug development. In addition, several other
U.S.-based companies are in early stage discovery and preclinical
development utilizing synthetic and/or plant-derived CBD and/or
THC.
Established
companies may have a competitive advantage due to their size and
experiences, positive cash flows and institutional networks. Many
of our competitors may have significantly greater financial,
technical and human resources than we do. Due to these factors, our
competitors may have a range of competitive advantages and may
obtain regulatory approval of their drug candidates before we are
able to develop or commercialize our drug candidates. Our
competitors may also develop drugs that are safer, more effective,
more widely used and less expensive than ours. Furthermore, some of
these competitors may make acquisitions or establish collaborative
relationships among themselves or with third parties to increase
their ability to rapidly gain market share and/or increase their
drug line.
Mergers
and acquisitions in the pharmaceutical and biotechnology industries
may result in even more resources being concentrated among a
smaller number of competitors. Smaller and other early-stage
companies, such as ours, may also prove to be significant
competitors, particularly through collaborative arrangements with
large and established companies. We compete with large and small
companies in recruiting and retaining qualified scientific,
management and commercial personnel, establishing clinical trial
sites and subject registration for clinical trials, as well as in
acquiring technologies complementary to our research
projects.
Government
Laws and Regulations
As a
development stage company that intends to have its drug candidates
approved in the U.S., we are subject to extensive regulation by
regulatory agencies. The U.S. Food, Drug, and Cosmetic Act
and its implementing regulations set forth, among other things,
requirements for the research, testing, development, manufacture,
quality control, safety, effectiveness, approval, labeling,
storage, record keeping, reporting, distribution, import, export,
advertising and promotion of our drugs. Generally, our activities
in other countries will be subject to regulations that are similar
in nature and scope as those in the United States, although there
can be important differences. Additionally, some significant
aspects of regulation in the European Union are addressed in a
centralized way through the European Medicines Agency (“EMA”) and
the European Commission, but country-specific regulation remains
essential in many respects. The process of obtaining regulatory
marketing approvals and the subsequent compliance with appropriate
federal, state, local and foreign statutes and regulations require
the expenditure of substantial time and financial resources and we
may not be successful.
The US Regulatory Framework for the Marijuana
Industry
On
January 4, 2018, United States Attorney General Jeff Sessions and
the Department of Justice (“DOJ”) issued a Memorandum for all
United States Attorneys entitled “Marijuana Enforcement” (the
“Sessions Memo”). The effect of the Sessions Memo has been to
rescind the guidance issued on August 29, 2013 relative to medical
marijuana enforcement under the Cole Memorandum (the “Cole
Memo”).
The
Sessions Memo instructs federal prosecutors to disregard the
previous Obama-era Cole Memo guidance, and instead follow “the
well-established principles that govern all federal prosecutions as
reflected in chapter 9-27.000 of the U.S. Attorney’s Manual.” The
Sessions Memo continues, stating, “[t]hese principles require
federal prosecutors deciding which cases to prosecute to weigh all
relevant considerations, including federal law enforcement
priorities set by the Attorney General, the seriousness of the
crime, the deterrent effect of criminal prosecution, and the
cumulative impact of particular crimes in the
community.”
The
effect of the Cole Memo’s rescission remains to be seen. Since
1980, when chapter 9-27.000 of the U.S. Attorney’s Manual was
originally promulgated, the United States has undergone a dramatic
shift in both national and state-level marijuana policy. In 1980,
there were no states in the U.S. with marijuana decriminalization
or legalization statutes. As of June 30, 2021, a majority of the
states and the District of Columbia have enacted medical marijuana
legislation in some form, with additional states considering
similar legalization measures. As a result, the manner in which the
factors identified in chapter 9-27.000 of the U.S. Attorney’s
Manual (e.g. “seriousness of the crime,” “deterrent effect of
criminal prosecution,” and cumulative impact . . . in the
community”) are considered and interpreted today as a matter of
prosecutorial discretion, will likely be different than the way in
which they were considered and interpreted in 1980.
On
the same day of the Sessions Memo’s release, numerous government
officials, legislators and federal prosecutors in states with
medical and recreational marijuana statutes announced their
intention to continue the Cole Memo-era status quo despite the
DOJ’s decision to rescind it. The impact that this lack of
uniformity between state and federal authorities could have on
individual state cannabis markets and the businesses that operate
within them is unclear and the enforcement of relevant federal laws
is a significant risk. Please see disclosure under Item 1A -
“Risk Factors” below.
The
Department of Justice under the current Biden administration has
not yet issued an official memorandum on this subject.
We
intend to conduct some of our research and development relating to
our drug candidates in the United States, at which time, our
research and development, future manufacturing, distribution and
sale of our drugs will become subject to the United States
Federal Controlled Substances Act of 1970 and regulations
promulgated thereunder. While cannabis is a Schedule I controlled
substance, drugs approved for medical use in the United States that
contain cannabis or cannabis extracts must be placed in Schedules
II-V, since approval by the FDA satisfies the “accepted medical
use” requirement. If any of our drug candidates will receive
approval by the FDA, it must be listed by the DEA as a Schedule II
or III controlled substance to be allowed for commercialization.
Consequently, the manufacture, importation, exportation, domestic
distribution, storage, sale and legitimate use of our future drugs
will be subject to a significant degree of regulation by the DEA.
In addition, individual states in the United States have also
established controlled substance laws and regulations. Though
state-controlled substances laws often mirror federal law, because
the states are separate jurisdictions, they may separately schedule
our drugs.
Regulations
Related to the Drug Regulatory Process
We
operate in a highly controlled regulatory environment. Strict
regulations establish requirements relating to analytical,
toxicological and clinical standards and protocols in respect to
the testing of pharmaceuticals. Regulations also cover research,
development, manufacturing and reporting procedures, both pre- and
post-approval. Failure to comply with regulations can result in
stringent sanctions, including product recalls, withdrawal of
approvals, seizure of products and criminal prosecution. Further,
many countries have stringent regulations relating to the
possession and use of cannabis or drugs derived from
cannabis
Before
obtaining regulatory approvals for the commercial sale of our
future drug candidates, we must demonstrate through preclinical
studies and clinical trials that our drug candidates are safe and
effective. Historically, the results from preclinical studies and
early clinical trials often have not accurately predicted results
of later clinical trials. In addition, many pharmaceuticals have
shown promising results in clinical trials but subsequently failed
to establish sufficient safety and efficacy results to obtain
necessary regulatory approvals.
We
expect to incur substantial expense for, and devote a significant
amount of time to, preclinical studies and clinical trials. Many
factors can delay the commencement and rate of completion of
clinical trials, including the inability to recruit patients at the
expected rate, the inability to follow patients adequately after
treatment, the failure to manufacture sufficient quantities of
materials used for clinical trials, and the emergence of unforeseen
safety issues and governmental and regulatory delays. If a drug
candidate fails to demonstrate safety and efficacy in clinical
trials, this failure may delay development of other drug candidates
and hinder our ability to conduct related preclinical studies and
clinical trials. Additionally, if we have failures, we may also be
expected to experience challenges, delays or even the inability to
obtain additional financing at acceptable terms and
conditions.
Governmental
authorities in all major markets require that a new drug be
approved or exempted from approval before it is marketed, and have
established high-standards for technical appraisal, which can
result in an expensive and lengthy approval process. The time to
obtain approval varies by country and some drugs are never
approved. The lengthy process of conducting clinical trials,
seeking approval and the subsequent compliance with applicable
statutes and regulations, if approval is obtained, are very costly
and require the expenditure of substantial resources.
In
the United States, the Public Health Service Act and the
Federal Food, Drug, and Cosmetic Act, as amended, and the
regulations promulgated thereunder, and other federal and state
statutes and regulations govern, among other things, the safety and
effectiveness standards for our drugs and the raw materials and
components used in the production of, testing, manufacture,
labeling, storage, record keeping, approval, advertising and
promotion of drug candidates on a product-by-product
basis.
Preclinical
tests include in vitro and in vivo evaluation of the drug
candidate, its chemistry, formulation and stability, and animal
studies to assess potential safety and efficacy. Certain
preclinical tests must be conducted in compliance with good
laboratory practice regulations. Violations of these regulations
can, in some cases, lead to invalidation of the studies, requiring
them to be replicated. After laboratory analysis and preclinical
testing, testing, a sponsor files an Investigational New Drug
Application, or IND, to begin human testing. Typically, a
manufacturer conducts a three-phase human clinical testing program
which itself is subject to numerous laws and regulatory
requirements, including adequate monitoring, reporting, record
keeping and informed consent. In Phase I, small clinical trials are
conducted to determine the safety and proper dose ranges of drug
candidates. In Phase II, clinical trials are conducted to assess
safety and gain preliminary evidence of the efficacy of drug
candidates. In Phase III, clinical trials are conducted to provide
sufficient data for the statistically valid evidence of safety and
efficacy. The time and expense that will be required for us to
perform this clinical testing can vary and is substantial. We
cannot be certain that we will successfully complete Phase I, Phase
II or Phase III testing within any specific period, if at all.
Furthermore, the FDA, the IRB are responsible for approving and
monitoring the clinical trials at a given site, the Data Safety
Monitoring Board, where one is used, or we may suspend the clinical
trials at any time on various grounds, including a finding that
subjects or patients are exposed to unacceptable health
risk.
If
the clinical data from these clinical trials (Phases I, II and III)
are deemed to support the safety and effectiveness of the drug
candidate for its intended use, then we may proceed to seek to file
with the FDA, a New Drug Application, or NDA, seeking approval to
market a new drug for one or more specified intended uses. We have
not completed our clinical trials for any candidate drug for any
intended use and therefore, we cannot ascertain whether the
clinical data will support and justify filing an NDA. Nevertheless,
if and when we are able to ascertain that the clinical data
supports and justifies filing an NDA, we intend to make such
appropriate filing.
The
purpose of the NDA is to provide the FDA with sufficient
information so that it can assess whether it should approve the
drug candidate for marketing for specific intended uses. The fact
that the FDA has designated a drug as an orphan drug for a specific
intended use does not mean that the drug has been approved for
marketing. Only after an NDA has been approved by the FDA is
marketing allowed. A request for orphan drug status must be filed
before the NDA is filed. The orphan drug designation, though,
provides certain benefits, including a seven-year period of market
exclusivity subject to certain exceptions.
The
NDA normally contains, among other things, sections describing the
chemistry, manufacturing, and controls, non-clinical pharmacology
and toxicology, human pharmacokinetics and bioavailability,
microbiology, the results of the clinical trials, and the proposed
labeling which contains, among other things, the intended uses of
the candidate drug.
We
cannot take any action to market any new drug or biologic drug in
the United States until our appropriate marketing application has
been approved by the FDA. The FDA has substantial discretion over
the approval process and may disagree with our interpretation of
the data submitted. The process may be significantly extended by
requests for additional information or clarification regarding
information already provided. As part of this review, the FDA may
refer the application to an appropriate advisory committee,
typically a panel of clinicians. Satisfaction of these and other
regulatory requirements typically takes several years, and the
actual time required may vary substantially based upon the type,
complexity and novelty of the drug. Government regulation may delay
or prevent marketing of potential drugs for a considerable period
and impose costly procedures on our activities. We cannot be
certain that the FDA or other regulatory agencies will approve any
of our drugs on a timely basis, if at all. Success in preclinical
or early stage clinical trials does not assure success in
later-stage clinical trials. Even if a drug receives regulatory
approval, the approval may be significantly limited to specific
indications or uses and these limitations may adversely affect the
commercial viability of the drug. Delays in obtaining, or failures
to obtain regulatory approvals, would have a material adverse
effect on our business.
Even
after we obtain FDA approval, we may be required to conduct further
clinical trials (i.e., Phase IV trials) and provide additional data
on safety and effectiveness. We are also required to gain separate
approval for the use of an approved drug as a treatment for
indications other than those initially approved. In addition, side
effects or adverse events that are reported during clinical trials
can delay, impede or prevent marketing approval. Similarly, adverse
events that are reported after marketing approval can result in
additional limitations being placed on the drug’s use and,
potentially, withdrawal of the drug from the market. Any adverse
event, either before or after marketing approval, can result in
product liability claims against us.
As an
alternate path for FDA approval of new indications or new
formulations of previously-approved drugs, a company may file a
Section 505(b)(2) NDA, instead of a “stand-alone” or “full” NDA.
Section 505(b)(2) of the Food, Drug, and Cosmetic Act was
enacted as part of the Drug Price Competition and Patent Term
Restoration Act of 1984, otherwise known as the Hatch-Waxman
Amendments. Section 505(b)(2) permits the submission of an NDA
where at least some of the information required for approval comes
from studies not conducted by or for the applicant and for which
the applicant has not obtained a right of reference. Some examples
of drugs that may be allowed to follow a 505(b)(2) path to approval
are drugs that have a new dosage form, strength, route of
administration, formulation or indication. The Hatch-Waxman
Amendments permit the applicant to rely upon certain published
nonclinical or clinical studies conducted for an approved drug or
the FDA’s conclusions from prior review of such studies. The FDA
may require companies to perform additional studies or measurements
to support any changes from the approved drug. The FDA may then
approve the new drug for all or some of the labeled indications for
which the referenced listed drug has been approved, as well as for
any new indication supported by the NDA. While references to
nonclinical and clinical data not generated by the applicant or for
which the applicant does not have a right of reference are allowed,
all development, process, stability, qualification and validation
data related to the manufacturing and quality of the new drug must
be included in an NDA submitted under Section 505(b)(2).
To
the extent that the Section 505(b)(2) applicant is relying on the
FDA’s conclusions regarding studies conducted for an already
approved drug, the applicant is required to certify to the FDA
concerning any patents listed for the approved drug in the FDA’s
“Orange Book” publication. Specifically, the applicant must certify
that: (i) the required patent information has not been filed; (ii)
the listed patent has expired; (iii) the listed patent has not
expired, but will expire on a particular date and approval is
sought after patent expiration; or (iv) the listed patent is
invalid or will not be infringed by the new drug. The Section
505(b)(2) application also will not be approved until any
non-patent exclusivity, such as exclusivity for obtaining approval
of a new chemical entity, listed in the Orange Book for the
reference drug has expired. Thus, the Section 505(b)(2) applicant
may invest a significant amount of time and expense in the
development of its drugs only to be subject to significant delay
and patent litigation before its drugs may be
commercialized.
In
addition to regulating and auditing human clinical trials, the FDA
regulates and inspects equipment, facilities, laboratories and
processes used in the manufacturing and testing of such drugs prior
to providing approval to market a drug.
Orphan
Drug Designation in the U.S.
Under
the Orphan Drug Act, the FDA may grant orphan drug
designation to a drug intended to treat a rare disease or
condition, which is a disease or condition that affects fewer than
200,000 individuals in the United States. If the disease or
condition affects more than 200,000 individuals in the United
States, orphan drug designation may nevertheless be available if
there is no reasonable expectation that the cost of developing and
making the drug would be recovered from sales in the United States.
In the United States, a drug that has received orphan drug
designation is eligible for financial incentives, such as
opportunities for grant funding towards clinical trial costs, tax
credits for certain research and user fee waivers under certain
circumstances. The Orphan Drug Act provides that, if a designated
drug is approved for the rare disease or condition for which it was
designated, the approved drug will be granted seven years of orphan
drug exclusivity, which means the FDA generally will not approve
any other application for a drug containing the same active moiety
for the same indication for a period of seven years, except in
limited circumstances, such as a showing of clinical superiority
over the drug with orphan drug exclusivity. Orphan drug exclusivity
does not prevent the FDA from approving a different drug for the
same disease or condition, or the same drug for a different disease
or condition. In the European Union, orphan drug designation also
entitles a party to financial incentives such as a reduction of
fees or fee waivers and ten years of market exclusivity following
drug approval. This period may be reduced to six years if the
orphan drug designation criteria are no longer met, including where
it is shown that the drug is sufficiently profitable not to justify
maintenance of market exclusivity.
Orphan
drug designation must be requested before submission of an
application for marketing approval. Products that qualify for
orphan designation may also qualify for other FDA programs that are
intended to expedite the development and approval process and, as a
practical matter, clinical trials for orphan products may be
smaller, simply because of the smaller patient population.
Nonetheless, the same approval standards apply to orphan-designated
products as for other drugs. Orphan drug designation does not
convey any advantage in, or shorten the duration of, the regulatory
review and approval process.
Employees
As of
the date of this report, all of our officers are serving without
compensation and have no employees. To the extent not covered by
the services of our offices, we expect to use third-party firms and
individuals for our drug candidate development and
management.
Our
employees are not subject to any collective bargaining
agreement.
Research
and Development Activities
We
have incurred no costs during the fiscal years ended June 30, 2021
and 2020, on research and development for the Company.
You
should carefully consider the risks, uncertainties and other
factors described below because they could materially and adversely
affect our business, financial condition, operating results and
prospects and could negatively affect the market price of our
Common Stock. Also, you should be aware that the risks and
uncertainties described below are not the only ones facing us.
Additional risks and uncertainties that we do not yet know of, or
that we currently believe are immaterial, may also impair our
business operations and financial results. Our business, financial
condition or results of operations could be harmed by any of these
risks. The trading price of our Common Stock could decline due to
any of these risks, and you may lose all or part of your
investment.
In
assessing these risks, you should also refer to the other
information contained in or incorporated by reference to this
Annual Report on Form 10-K, including our financial statements and
the related notes.
Risks Related to Our Financial Position and Capital
Requirements
Our
independent registered public accounting firm has expressed
substantial doubt as to our ability to continue as a going
concern.
The
audited financial statements of BioPharma included in this Annual
Report have been prepared assuming that we will continue as a going
concern and do not include any adjustments that might result if we
cease to continue as a going concern. 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 June 30, 2021, the Company had a
working capital deficit of $13,775. 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. We have
incurred an accumulated deficit of $10,307,101 since our inception.
We have funded these losses primarily through the sale of
restricted shares of our Common Stock.
Based
on our financial history, in its report on the financial statements
for the year ended June 30, 2021, our independent registered public
accounting firm has expressed substantial doubt as to our ability
to continue as a going concern. To date, we have not generated any
revenues and we do not anticipate generating any significant
revenues during the current fiscal year.
Notwithstanding
BioPharma’s success in raising approximately $2.1 million from the
sale of its securities from inception in 2017 through June 2021,
there can be no assurance that we will be able to continue to raise
equity and/or debt capital from investors on terms and conditions
satisfactory to the Company, find strategic or financial partners
for a specific drug candidate, or have adequate capital resources
required by us to fund our current and future planned operations.
If we are unable to obtain adequate capital resources to fund
operations, we may be required to delay, scale back or eliminate
some or all of our plan of operations, which may have a material
adverse effect on our business, results of operations and ability
to operate as a going concern.
The
Company has negative cash flow for the financial year ended June
30, 2021.
The
Company had negative operating cash flow for the financial year
ended June 30, 2021. To the extent that the Company has negative
operating cash flow in future periods, it may need to allocate a
portion of its cash reserves to fund such negative cash flow. The
Company may also be required to raise additional funds through the
issuance of equity or debt securities. There can be no assurance
that the Company will be able to generate a positive cash flow from
its operations, that additional capital or other types of financing
will be available when needed or that these financings will be on
terms favorable to the Company.
We
face many of the risks and difficulties frequently encountered by
relatively new companies with respect to our
operations.
The
Company’s business objective is to conduct scientific research and
development related to the use of cannabinoid receptor modulators
and/or terpenes for medical treatment of certain medical conditions
and diseases. We have no operating history as a medical research
company engaged in cannabinoid-based research upon which an
evaluation of the Company and its prospects could be based. There
can be no assurance that our management will be successful in being
able to commercially exploit the results, if any, from our drug
development research projects or that we will be able to develop
drugs and treatments that will enable us to generate sufficient
revenues to meet our expenses or to achieve and/or maintain
profitability.
If we
are unable to raise sufficient capital as needed, we may be
required to reduce the scope of our planned research and
development activities, which could harm our business plans,
financial condition and operating results, or cease our operations
entirely, in which case, you will lose all your
investment.
We
currently have no revenues and may never become
profitable.
Our
ability to generate revenue and become profitable depends upon our
ability to obtain regulatory approval for any of our drug
development projects. Even if we are able to successfully achieve
regulatory approval for any of our drug candidates, we do not know
when any of these drugs will generate revenues, if at all. We have
not generated, and do not expect to generate, any product revenue
for the foreseeable future, and we expect to continue to incur
significant operating losses for the foreseeable future due to the
cost of research and development, preclinical studies and clinical
trials and the regulatory approval process for our drug candidates.
The amount of future losses is uncertain and will depend, in part,
on the rate of growth of our research and development expenses as
well as other operating expenses. We are unable to predict the
timing or amount of these expected increases in operating expenses.
If we are able to obtain approval for any of our drug candidates,
we will incur significant costs associated with commercializing our
drug candidates.
We
will require additional capital to fund our operations and if we
fail to obtain necessary financing, we will not be able to complete
any of our drug development projects
Our
research operations are expected to require significant cash
expenditures. We expect to spend substantial and increasing amounts
to conduct our planned research and development, including
preclinical testing and clinical trials of our drug candidates, to
seek regulatory approvals to eventually market and commercialize
any of our drug candidates. As of June 30, 2021, we had only
$18,041 in cash and cash equivalents. Through June 2021, we have
raised approximately $2.1 million in equity under private placement
offerings. We believe that current cash is not sufficient to fund
our overhead operations through the remainder of calendar 2021. We
estimate that we will require additional capital of at least
$40,000 for the remainder of calendar 2021 to maintain our
existence as a public reporting company. As discussed below,
determining a budget is subject to a number of factors. In general,
this estimate may higher if our research efforts prove to be
successful or lower if the research efforts are not fruitful. Any
progress we make in our research efforts is uncertain because it is
difficult to predict our budget for our drug development activities
due to numerous factors, including, without limitation, the rate of
progress of preclinical studies, clinical trials, the results of
preclinical studies and clinical trials for such indication and the
costs and timing of seeking and obtaining regulatory approvals for
clinical trials. Moreover, changing circumstances may cause us to
expend cash significantly faster than we currently anticipate, and
we may need to spend more cash than currently anticipated due to
changing circumstances beyond our control. Our future capital
requirements may depend on a wide range of factors, including, but
not limited to:
|
● |
the
costs related to initiation, progress, timing, costs and results of
preclinical studies and clinical trials for our drug
candidates; |
|
● |
any
change in the clinical development plans for these drug
candidates; |
|
● |
the
number and characteristics of drug candidates that we
develop; |
|
● |
the
terms of any future collaboration agreements we may choose to
enter; |
|
● |
the
events related to the outcome, timing and cost of meeting
regulatory requirements established by the DEA, the FDA, the
European Medicines Agency (“EMA”) or other comparable foreign
regulatory authorities; |
|
● |
the
potential costs of filing, prosecuting, defending and enforcing our
patent claims and other intellectual property; |
|
● |
the
cost of defending intellectual property disputes; and |
|
● |
the
cost of marketing and generating revenues for any of our drug
candidates. |
We
cannot be certain that additional funding will be available on
acceptable terms, if at all. If we are unable to raise additional
capital on terms acceptable to us, we may have to significantly
delay, scale back or discontinue one or more of our drug
development projects.
Raising
additional capital may cause dilution to our existing stockholders
and restrict our operations.
We
may seek additional capital through a combination of private and
public equity offerings, debt financings, strategic partnerships
and alliances, and licensing arrangements. To the extent that we
raise additional capital through the sale of equity or convertible
debt securities, existing ownership interests will be diluted, and
the terms of such financings may include liquidation or other
preferences that adversely affect the rights of existing
stockholders. Debt financings may be coupled with an equity
component, such as warrants to purchase shares, which could also
result in dilution of our existing stockholders’ ownership. The
incurrence of indebtedness would result in increased fixed payment
obligations and could also result in certain restrictive covenants,
such as limitations on our ability to incur additional debt,
limitations on our ability to acquire or license intellectual
property rights and other operating restrictions that could
adversely impact our ability to conduct our business and may result
in liens being placed on our assets and intellectual property. If
we were to default on such indebtedness, we could lose such assets
and intellectual property. If we raise additional funds through
strategic partnerships and alliances and licensing arrangements
with third parties, we may have to relinquish valuable rights to
our drug candidates.
The
Company’s officers and directors may be engaged in a range of
business activities resulting in potential conflicts of
interest.
The
Company may be subject to various potential conflicts of interest
because some of its officers and directors may be engaged in a
range of business activities. In addition, the Company’s executive
officers and directors may devote time to their outside business
interests, so long as such activities do not materially or
adversely interfere with their duties to the Company. In some
cases, the Company’s executive officers and directors may have
fiduciary obligations associated with these business interests that
interfere with their ability to devote time to the Company’s
business and affairs and that could adversely affect the Company’s
operations. These business interests could require significant time
and attention of the Company’s executive officers and
directors.
In
addition, the Company may also become involved in other
transactions which conflict with the interests of its directors and
the officers who may from time to time deal with persons, firms,
institutions or companies with which the Company may be dealing, or
which may be seeking investments similar to those desired by it.
The interests of these persons could conflict with those of the
Company. In addition, from time to time, these persons may be
competing with the Company for available investment opportunities.
Conflicts of interest, if any, will be subject to the procedures
and remedies provided under applicable laws. In particular, if such
a conflict of interest arises at a meeting of the Company’s
directors, a director who has such a conflict will abstain from
voting for or against the approval of such participation or such
terms. In accordance with applicable laws, the directors of the
Company are required to act honestly, in good faith and in the best
interests of the Company.
The
Company is subject to uncertainty regarding legal and regulatory
status and changes.
Achievement
of the Company’s business objectives is also contingent, in part,
upon compliance with other regulatory requirements enacted by
governmental authorities and obtaining other required regulatory
approvals. The regulatory regime applicable to the cannabis
business in the U.S. is currently undergoing significant proposed
changes and the Company cannot predict the impact of the regime on
its business once the structure of the regime is finalized.
Similarly, the Company cannot predict the timeline required to
secure all appropriate regulatory approvals for its products, or
the extent of testing and documentation that may be required by
governmental authorities. Any delays in obtaining, or failing to
obtain, required regulatory approvals may significantly delay or
impact the development of markets, products and sales initiatives
and could have a material adverse effect on the business, results
of operations and financial condition of the Company. The Company
will incur ongoing costs and obligations related to regulatory
compliance. Failure to comply with regulations may result in
additional costs for corrective measures, penalties or in
restrictions on the Company’s operations. In addition, changes in
regulations, more vigorous enforcement thereof or other
unanticipated events could require extensive changes to the
Company’s operations, increased compliance costs or give rise to
material liabilities, which could have a material adverse effect on
the business, results of operations and financial condition of the
Company.
Risks Relating to Our Drug Development Projects
Our
future success will largely depend on the success of our drug
candidates, which development will require significant capital
resources and years of clinical development effort.
We
currently have no drug products on the market, and none of our drug
development projects has reached preclinical study or clinical
trial status. Our business depends almost entirely on the
successful clinical development, regulatory approval and
commercialization of our drug candidates. Investors need to be
aware that substantial additional investments including clinical
development and regulatory approval efforts will be required before
we are permitted to market and commercialize our drug candidates,
if ever. It may be several years before we can commence clinical
trials, if ever. Any clinical trial will be subject to extensive
and rigorous review and regulation by numerous government
authorities in the United States, the European Union, and other
jurisdictions where we intend, if approved, to market our drug
candidates. Before obtaining regulatory approvals for any of our
drug candidates, we must demonstrate through preclinical testing
and clinical trials that the drug candidate is safe and effective
for its specific application. This process can take many years and
may include post-marketing studies and surveillance, which would
require the expenditure of substantial resources. Of the large
number of drugs in development for approval in the United States
and the European Union, only a small percentage will successfully
complete the FDA regulatory approval process or be granted
authorization to be marketed in the European Commission or the
other competent authorities in the European Union (“EU”) Member
States. Accordingly, even if we obtain the sufficient financing to
fund our planned research, development and clinical programs, we
cannot assure you that any of our drug candidates will be
successfully developed or commercialized.
We
may be unable to formulate or scale-up any or all of our drug
candidates. There is no guarantee that any of the drug candidates
will be or are able to be produced in a manner to meet the FDA’s
criteria for product stability, content uniformity and all other
criteria necessary for product approval in the United States and
other markets. Any of our drug candidates may fail to achieve their
specified endpoints in clinical trials. Furthermore, drug
candidates may not be approved even if they achieve their specified
endpoints in clinical trials. The FDA may disagree with our trial
design and our interpretation of data from clinical trials, or may
change the requirements for approval even after it has reviewed and
commented on the design for our clinical trials. The FDA may also
approve a drug for fewer or more limited indications than we
request, or may grant approval contingent on the performance of
costly post-approval clinical trials (i.e., Phase IV trials). In
addition, the FDA may not approve the labeling claims that we
believe are necessary or desirable for the successful
commercialization of our drug candidates.
If we
are unable to expand our pipeline and obtain regulatory approval
for our drug candidates on the timelines we anticipate, we will not
be able to execute our business strategy effectively and our
ability to substantially grow our revenues will be limited, which
would have a material adverse impact on our long-term business,
results of operations, financial condition, and
prospects.
Our
drug development projects, if approved, may be unable to achieve
the expected market acceptance and, consequently, limit our ability
to generate revenue.
Even
when drug development is successful and regulatory approval has
been obtained, our ability to generate significant revenue depends
on the acceptance of our drug candidates by physicians and
patients. We cannot assure you that any of our drug candidates will
achieve the expected market acceptance and revenue, if and when we
obtain the regulatory approvals. The market acceptance of any drug
depends on a number of factors, including the indication statement
and warnings approved by regulatory authorities for the drug label,
continued demonstration of efficacy and safety in commercial use,
physicians’ willingness to prescribe the drug, reimbursement from
third-party payers such as government health care systems and
insurance companies, the price of the drug, the nature of any
post-approval risk management plans mandated by regulatory
authorities, competition, and marketing and distribution support.
Any factors preventing or limiting the market acceptance of our
drugs could have a material adverse effect on our business, results
of operations and financial condition.
Results
of preclinical studies and earlier clinical trials are not
necessarily predictive indicators of future results.
Any
positive results from future preclinical testing of our drug
candidates and potential clinical trials may not necessarily be
predictive of the results from Phase 1, Phase 2 or Phase 3 clinical
trials. In addition, our interpretation of results derived from
clinical data or our conclusions based on our preclinical data may
prove inaccurate. Frequently, pharmaceutical and biotechnology
companies have suffered significant setbacks in clinical trials
after achieving positive results in preclinical testing and early
clinical trials, and we cannot be certain that we will not face
similar setbacks. These setbacks may be caused by the fact that
preclinical and clinical data can be susceptible to varying
interpretations and analyses. Furthermore, certain drug candidates
may perform satisfactorily in preclinical studies and clinical
trials, but nonetheless fail to obtain FDA approval, a marketing
authorization granted by the European Commission, or appropriate
approvals by government authorities in other countries. If we fail
to produce positive results in our clinical trials for our drug
candidates, the development timeline and regulatory approval and
commercialization prospects for them and as a result our business
and financial prospects, would be materially adversely
affected.
The
regulatory approval processes with the FDA, the EMA and other
comparable foreign regulatory authorities is lengthy and inherently
unpredictable.
We
are not permitted to market our drug candidates in the United
States or the European Union until we receive approval of a New
Drug Application (“NDA”) from the FDA or a Marketing Authorization
Application (“MAA”) from the European Commission, respectively, or
in any foreign countries until we receive the approval from the
regulatory authorities of such countries. Prior to submitting an
NDA to the FDA or an MAA to the EMA for approval of our drug
candidates we will need to have completed our preclinical studies
and clinical trials. Successfully completing any clinical program
and obtaining approval of an NDA or MAA is a complex, lengthy,
expensive and uncertain process, and the FDA or EMA may delay,
limit or deny approval of drug candidates for many reasons,
including, among others, because:
|
● |
an
inability to demonstrate that our drug candidates are safe and
effective in treating patients to the satisfaction of the FDA or
EMA; |
| ● |
results
of clinical trials that may not meet the level of statistical or
clinical significance required by the FDA or EMA; |
| ● |
disagreements
with the FDA or EMA with respect to the number, design, size,
conduct or implementation of clinical trials; |
| ● |
requirements
by the FDA and EMA to conduct additional clinical
trials; |
| ● |
disapproval
by the FDA or EMA or other applicable foreign regulatory
authorities of certain formulations, labeling or specifications of
drug candidates; |
| ● |
findings
by the FDA or EMA that the data from preclinical studies and
clinical trials are insufficient; |
| ● |
the
FDA or EMA may disagree with the interpretation of data from
preclinical studies and clinical trials; and |
| ● |
the
FDA, European Commission or other applicable foreign regulatory
agencies may change their approval policies or adopt new
regulations. |
Any
of these factors, many of which are beyond our control, could
increase development costs or jeopardize our ability to obtain
regulatory approval for our drug candidates.
We
may apply for orphan drug status granted by the FDA for some of our
drug candidates for the treatment of rare diseases.
Regulatory
authorities in some jurisdictions, including the United States and
the European Union, may designate drugs for relatively small
patient populations as orphan drugs. The FDA may grant orphan drug
designation to drugs intended to treat a rare disease or condition
that affects fewer than 200,000 individuals annually in the United
States. In the European Union, the EMA’s Committee for Orphan
Medicinal Products grants orphan drug designation to promote the
development of drugs that are intended for the diagnosis,
prevention or treatment of life-threatening or chronically
debilitating conditions affecting not more than five in 10,000
persons in the European Union. Additionally, such designation is
granted for drugs intended for the diagnosis, prevention or
treatment of a life-threatening, seriously debilitating or serious
and chronic condition and when, without incentives, it is unlikely
that sales of the drug in the European Union would be sufficient to
justify the necessary investment in developing the drug.
In
the United States, orphan drug designation entitles a party to
financial incentives, such as opportunities for grant funding
towards clinical trial costs, tax credits for certain research and
user fee waivers under certain circumstances. In addition, if a
drug receives the first FDA approval for the drug and indication
for which it has orphan drug designation, the drug is entitled to
seven years of market exclusivity, which means the FDA may not
approve any other application for the same drug for the same
indication for a period of seven years, except in limited
circumstances, such as a showing of clinical superiority over the
drug with orphan drug exclusivity. Orphan drug exclusivity does not
prevent the FDA from approving a different drug for the same
disease or condition, or the same drug for a different disease or
condition. In the European Union, orphan drug designation also
entitles a party to financial incentives such as reduction of fees
or fee waivers and ten years of market exclusivity following drug
approval. This period may be reduced to six years if the orphan
drug designation criteria are no longer met, including where it is
shown that the drug is sufficiently profitable so that market
exclusivity is no longer justified.
Our
drug candidates may become subject to controlled substance laws and
regulations in the U.S.
While
cannabis is a controlled substance under the CSA in the United
States, we plan to initially focus our drug development projects
using cannabinoids that are synthetically produced. Some of these
synthetics, such as dronabinol, have been approved by the FDA for
various medical research and conditions. While plant-derived
cannabinoids are categorized as Schedule I substances under the
CSA, dronabinol, which is synthetic tetrahydrocannabinol, or THC is
a Schedule III substance in capsule form, although it is a Schedule
I substance in bulk form. Even though dronabinol is still a
controlled substance, research based on Schedule III substances,
including trials in the United States, are substantially less
restrictive.
However,
if we decide to proceed with clinical trials using plant-derived
cannabinoids, and are conducting those trials in the United States,
we will become subject to the CSA laws and regulation in addition
to FDA regulations. Currently the Company does not intend to
proceed with clinical trials using cannabis-derived cannabinoids in
the U.S. If the Company decides to proceed with plant-derived
cannabinoids, it will evaluate where to conduct its research and
preclinical trials.
At
present we have no guaranteed or reliable source of synthetic
cannabinoids at an economically feasible price – even though we
intend to focus on the utilization of synthetic
cannabinoids
Our
primary objective is to focus our initial drug development
utilizing synthetic cannabinoids. While we currently have
arrangements with sources from which we are obtaining synthetic
cannabinoids, without any guarantees of supply, there is no
assurance that we will be able to access synthetic cannabinoids in
the future, or at an economically feasible price for a reasonable
period of time that would enable us to implement and execute our
business plan.
Laws
and regulations affecting therapeutic uses of cannabis are
constantly evolving.
The
potential ongoing evolution of laws and regulations affecting the
research and development of cannabinoid-based medical drugs and
treatments could detrimentally affect our business. Laws and
regulations related to the therapeutic uses of cannabis and
cannabinoid-based drugs may be subject to changing interpretations.
These changes may require us to incur substantial costs associated
with legal and compliance fees and may ultimately require us to
alter our business plan. Furthermore, violations or alleged
violation of these laws could disrupt our business and result in a
material adverse effect on our operations. In addition, we cannot
predict the nature of any future laws, regulations, interpretations
or applications of laws and regulations and it is possible that new
laws and regulations may be enacted in the future that will be
directly applicable to our business.
Our
research activities in the cannabinoid drug industry may make it
difficult to obtain insurance coverage.
In
the event that we decide to commence research based on
plant-derived cannabinoids in the U.S., obtaining and maintaining
necessary insurance coverage, for such things as workers
compensation, general liability, product liability and directors
and officers liability insurance, may be more difficult and/or
expensive for us to find because of our research directions
utilizing synthetic and/or plant-derived cannabinoids. There can be
no assurance that we will be able to find such insurance, if
needed, or that the cost of coverage will be affordable or
cost-effective. If, either because of unavailability or cost
prohibitive reasons, we are compelled to operate without insurance
coverage, we may be prevented from entering certain business
sectors, experience inhibited growth potential and/or expose us to
additional risks and financial liabilities.
We
face a potentially highly competitive market.
Demand
for cannabinoid-derived drugs will likely be dependent on a number
of social, political and economic factors that are beyond our
control. While we believe that there will be a demand for such
drugs, and that the demand will grow, there is no assurance that
such demand will happen, that we will benefit from any demand or
that our business, in fact, will ever generate revenues from our
drug development activities or become profitable.
The
emerging markets for cannabinoid-derived drugs and medical research
and development is and will likely remain competitive. The
development and commercialization of drugs is highly competitive.
We compete with a variety of multinational pharmaceutical companies
and specialized biotechnology companies, as well as products and
processes being developed by universities and other research
institutions. Many of our competitors have developed, are
developing, or will develop drugs and processes competitive with
our drug candidates. Competitive therapeutic treatments include
those that have already been approved and accepted by the medical
community and any new treatments that may enter the market. For
some of our drug development directions, other treatment options
are currently available, under development, and may become
commercially available in the future. If any of our drug candidates
is approved for the diseases and conditions we are currently
pursuing, they may compete with a range of therapeutic treatments
that are either in development or currently marketed.
Our
failure to comply with existing and potential future laws and
regulations relating to drug development could harm our plan of
operations.
Our
business is, and will be, subject to wide-ranging existing federal
and state laws and regulations and other governmental bodies in
each of the countries we may develop and/or market our drug
candidates. We must comply with all regulatory requirements if we
expect to be successful.
If
any of our cannabinoid-derived drug candidates are approved in the
United States, they will be subject to ongoing regulatory
requirements including federal and state requirements. As a result,
we and our collaborators and/or joint venture partners must
continue to expend time, money and effort in all areas of
regulatory compliance, including, if applicable, manufacturing,
production, quality control and assurance and, of upmost
importance, clinical trials. We will also be required to report
certain adverse reactions and production problems, if any and
applicable, to the FDA, and to comply with advertising and
promotion requirements for our cannabinoid-derived drug
candidates.
Any
failure to comply with ongoing regulatory requirements may
significantly and adversely affect our ability to conduct clinical
trials which are prerequisites to our ability to commercialize our
cannabinoid-based drugs and related treatments. If regulatory
sanctions are applied or if regulatory approval, once obtained, is
for any reason withdrawn, the value of our business and our
operating results could be materially adversely
affected.
Changes
in legislation or regulation in the health care systems in the
United States and foreign jurisdictions may affect
us.
Our
ability to successfully commercialize our drugs may depend on how
the U.S. and other governments and/or health administrations
provide coverage and/or reimbursements for any drugs that we are
successful in developing. The ongoing efforts of governments,
insurance companies, and other participants in the health care
services industry to trim health care costs may adversely affect
our ability to achieve profitability.
In certain
foreign markets, including countries in the European Union, pricing
of prescription pharmaceuticals is subject to governmental control.
Price negotiations with governmental authorities may range from 6
to 12 months or longer after the receipt of regulatory marketing
approval for a drug. Our business could be detrimentally affected
if reimbursements of our drugs is unavailable or limited, if
pricing is set at unacceptable levels.
We
will need to increase the size of our organization and may
experience difficulties in managing growth.
At
present, we are a very small company. We expect to experience a
period of expansion in headcount, infrastructure and overhead and
anticipate that further expansion will be required to address
potential growth and market opportunities. Future growth will
impose significant added responsibilities on members of management,
including the need to identify, recruit, maintain and integrate new
members of our management team, employees including researchers,
and consultants. Our future financial performance and our ability
to compete effectively will depend, in part, on our ability to
manage any future growth effectively.
We
may not be able to successfully expand our business through
acquisitions.
We
may review corporate and product acquisition candidates as a part
of our growth strategy. If we decide to undertake an acquisition to
obtain, what we view as promising drug candidates, we may not be
able to successfully integrate it in order to realize the full
benefit of such acquisition. Factors which may affect our ability
to grow successfully through acquisitions include:
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inability
to identify suitable targets given the relatively narrow scope of
our drug candidates; |
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● |
difficulties
and expenses in connection with integrating the acquired companies
and achieving the expected benefits; |
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diversion
of management’s attention from current operations; |
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● |
the
possibility that we may be adversely affected by risk factors
facing the acquired companies; |
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● |
possible
dilution of earnings, or in the case of acquisitions made through
the issuance of our common shares to the stockholders of the
acquired company, dilution in the percentage of ownership of our
existing stockholders; |
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● |
potential
losses resulting from undiscovered liabilities of acquired
companies not covered by the indemnification we may obtain from the
seller; and |
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loss
of key employees of the acquired companies. |
Risks Related to Collaboration with Third Parties and Intellectual
Property Rights
We
will depend on third parties to conduct our research
activities.
We
will rely on third parties such as clinical data management
organizations and consultants to design, conduct, supervise and
monitor our preclinical studies and clinical trials (the “Third
Parties”). We and the Third Parties are required to comply with
various regulations and guidelines from regulatory authorities to
ensure that the health, safety and rights of patients are protected
in clinical development and clinical trials, and that trial data
integrity is assured. Relying on Third Parties does not relieve us
of certain responsibilities and requirements. If we or any of the
Third Parties fail to comply with applicable requirements, the
clinical data generated in our clinical trials may be deemed
unreliable and the FDA, the EMA or other comparable foreign
regulatory authorities may require us to perform additional
clinical trials before approving our marketing applications. There
is no assurance that upon inspection by a given regulatory
authority, such regulatory authority will determine that any of our
clinical trials comply with such requirements. Failure to comply
with these regulations may require us to repeat preclinical studies
and clinical trials, which would delay the regulatory approval
process.
The
Third Parties will not be designated as our employees. We therefore
cannot control whether they devote sufficient time and resources to
our ongoing clinical and preclinical programs. If the Third Parties
do not successfully carry out their contractual duties or if the
quality or accuracy of the clinical data they obtain is compromised
due to their failure to adhere to clinical protocols and/or
regulatory requirements, our clinical trials may be extended,
delayed or terminated and we may not be able to obtain regulatory
approval for, or successfully commercialize our drug candidates. As
a result, our commercial prospects for our drug candidates would be
harmed, our costs could increase and our ability to generate
revenue could be delayed or reduced.
Clinical
trials are very expensive, time consuming and difficult to design
and implement. Our drug candidates are in preclinical development,
which is an extremely preliminary stage of development that
includes no regulatory input. We estimate that clinical trials for
these drug candidates, if and when initiated, may continue for
several years and may take significantly longer than expected to
complete. In addition, we, the FDA, an institutional review board
(IRB), or other regulatory authorities, including state and local
authorities, may suspend, delay or terminate our clinical trials at
any time, or the DEA could suspend or terminate the registrations
and quota allotments we require in order to procure and handle
controlled substances, for various reasons, including:
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● |
Lack
of effectiveness of any product candidate during clinical
trials; |
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● |
Discovery
of serious or unexpected toxicities or side effects experienced by
study participants or other safety issues; |
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● |
Slower
than expected rates of subject recruitment and enrollment rates in
clinical trials; |
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● |
Difficulty
in retaining subjects who have initiated a clinical trial but who
may withdraw at any time due to adverse side effects from the
therapy, insufficient efficacy, fatigue with the clinical trial
process, or for any other reason; |
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● |
Delays
or inability in manufacturing or obtaining sufficient quantities of
materials for use in clinical trials, in particular, obtaining
sufficient quantities of synthetic or plant-derived cannabinoids
due to regulatory and manufacturing constraints. |
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● |
Inadequacy
of or changes in our manufacturing process or product
formulation; |
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● |
Delays
in obtaining regulatory authorization to commence a study, or
“clinical holds” or delays requiring suspension or termination of a
study by a regulatory agency, including by the FDA, before or after
a study is commenced; |
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● |
DEA-related
recordkeeping, reporting, or security violations at a clinical
site, leading the DEA or state authorities to suspend or revoke the
site’s controlled substance license and causing a delay or
termination of planned or ongoing studies; |
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● |
Changes
in applicable regulatory policies and regulations; |
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● |
Delays
or failure in reaching agreement(s) on acceptable terms in clinical
trial contracts or protocols with prospective clinical trial
sites; |
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● |
Uncertainty
regarding proper dosing; |
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● |
Unfavorable
results from ongoing clinical trials and preclinical
studies; |
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● |
Failure
of the Third Parties or other third-party contractors to comply
with all contractual and regulatory requirements or to perform
their services in a timely or acceptable manner; |
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● |
Failure
by us, our employees, our consultants, the Third Parties, or their
employees to comply with all applicable FDA, DEA or other
regulatory requirements relating to the conduct of clinical trials
or the handling, storage, security and recordkeeping for controlled
substances; |
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● |
Scheduling
conflicts with participating clinicians and clinical
institutions; |
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● |
Failure
to design appropriate clinical trial protocols; |
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● |
Insufficient
data to support regulatory approval; |
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● |
Inability
or unwillingness of medical investigators to follow our clinical
protocols; |
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● |
Difficulty
in maintaining contact with subjects during or after treatment,
which may result in incomplete data; or |
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● |
Regulatory
concerns with cannabinoid-derived drugs generally and the potential
for abuse of the drugs. |
Generally,
there is a high rate of failure for drug candidates proceeding
through clinical trials. We may suffer significant setbacks in our
clinical trials similar to the experience of many other companies
in the pharmaceutical and biotechnology industries, even after
receiving promising results in early trials. Further, even if we
view the results of a clinical trial to be positive, the FDA or
other regulatory authorities may disagree with our interpretation
of the data. In the event that we abandon or are delayed in our
clinical development efforts related to our drug candidates, we may
not be able to execute on our business plan effectively, we may not
be able to generate revenues from our drug development activities,
become profitable, resulting in our reputation in the industry and
in the investment community likely becoming significantly damaged
and this could adversely affect the price of our shares.
We
intend to rely upon Third Parties to formulate and produce our drug
candidates in accordance with our clinical protocols and all
applicable regulatory requirements, including the FDA’s good
clinical practice regulations and current good manufacturing
practices and DEA and state regulations governing the handling,
storage, security and recordkeeping for controlled substances.
These Third Parties are anticipated to play a significant role in
the formulation process and the development of our drug candidates.
We intend to likely rely on these Third Parties for the formulation
and development of the products to be utilized in our clinical and
preclinical studies, and we will likely control minimally certain
aspects of their activities.
We
intend to rely on Third Parties to conduct and oversee our clinical
trials. If these Third Parties do not meet our deadlines or
otherwise conduct the trials as required, we may not be able to
obtain regulatory approval for or commercialize our drug candidates
when expected or at all.
We
may also rely upon various medical institutions, clinical
investigators and contract laboratories to conduct our trials in
accordance with our clinical protocols and all applicable
regulatory requirements, including the FDA’s good clinical practice
regulations and DEA and state regulations governing the handling,
storage, security and recordkeeping for controlled substances.
These Third Parties are anticipated to play a significant role in
the conduct of these trials and the subsequent collection and
analysis of data from the clinical trials. We intend to rely
heavily on these parties for the execution of our clinical and
preclinical studies, and control only certain aspects of their
activities.
If
any of our clinical trial sites terminate their involvement in one
of our clinical trials for any reason, we may experience the loss
of follow-up information on patients enrolled in our ongoing
clinical trials unless we are able to transfer the care of those
patients to another qualified clinical trial site. In addition,
principal investigators for our clinical trials may serve as
scientific advisors or consultants to us from time to time and
receive cash or equity compensation in connection with their
services. If these relationships and any related compensation
result in perceived or actual conflicts of interest, the integrity
of the data generated at the applicable clinical trial site may be
questioned by the FDA.
If
we are unable to protect our intellectual property rights or if our
intellectual property rights are inadequate for our drug
candidates, our competitive position could be
harmed.
Our
commercial success will depend in large part on our ability to
obtain and maintain patent and other intellectual property
protection in the U.S. and other countries with respect to our
proprietary technology and drug candidates. We will rely on trade
secret, patent, copyright and trademark laws, and confidentiality
and other agreements with employees and third parties, all of which
offer only limited protection. We are seeking to protect our
proprietary positions by filing patent applications in the United
States and abroad related to our novel technologies and drugs that
are important to our business.
We do
not know whether any of the pending patent applications for any of
our drug candidates will result in the issuance of patents. The
patent positions of biotechnology and pharmaceutical companies
generally are highly uncertain, involve complex legal and factual
questions and have often been the subject of litigation. As a
result, the issuance, scope, validity, enforceability and
commercial value of any of our potential future patents are highly
uncertain. The steps we will take to protect our proprietary rights
may not be adequate to preclude misappropriation of our proprietary
information or infringement of our intellectual property rights,
both inside and outside the United States. Patent examination
processes may require us to narrow the claims for our pending
patent applications, which may limit the scope of patent protection
that may be obtained if the patents are granted. The rights to be
granted under future patents issued to us may not provide us with
the proprietary protection or competitive advantages we seek. If we
are unable to obtain and maintain patent protection for our
technology and drugs, or if the scope of the patent protection
obtained is not sufficient, our competitors could develop and
commercialize technology and drugs similar or superior to ours, and
our ability to successfully commercialize our technology and drugs
may be adversely affected.
The
issuance of a patent may not always be conclusive as to its
inventorship, scope, validity or enforceability. Our issued patents
may be challenged in the courts or patent offices in the U.S. and
abroad. Such challenges may result in the loss of patent
protection, the narrowing of claims in such patents or the
invalidity or unenforceability of such patents, which could limit
our ability to stop others from using or commercializing similar or
identical technology and drugs, or limit the duration of the patent
protection for our technology and drugs.
Costly
litigation may be necessary to protect our intellectual property
rights and we may be subject to claims alleging the violation of
the intellectual property rights of others.
We
may face significant expense and liability due to litigation or
other proceedings relating to patents and other intellectual
property rights of others. If another party has also filed a patent
application or been issued a patent relating to an invention or
technology claimed by us in pending applications, we may be
required to participate in an interference proceeding declared by
the U.S. Patent and Trademark Office to determine priority of
invention, which could result in substantial uncertainties and
costs for us, even if the eventual outcome were favorable to us.
We, or our licensors, also could be required to participate in
interference proceedings involving issued patents and pending
applications of another entity. An adverse outcome in an
interference proceeding could require us to cease using the
technology or to license rights from prevailing third
parties.
The
cost to us of any patent application or patent litigation, even if
resolved in our favor, could be substantial. Our ability to enforce
our patent protection could be limited by our financial resources,
and may be subject to lengthy delays.
A
third party may claim that we use inventions claimed by their
patents and may go to court to stop us from engaging in research,
development and/or the sale of any of our future drugs. Such
lawsuits are expensive and would consume time and other resources.
There is a risk that the court will decide that we are infringing
on the third party’s patents and will order us to stop the
activities claimed by the patents. In addition, there is a risk
that a court will order us to pay the other party damages for
having infringed their patents.
Moreover,
there is no guarantee that any prevailing patent owner would offer
us a license so that we could continue to engage in activities
claimed by the patent, or that such a license, if made available to
us, could be acquired on commercially acceptable terms. In
addition, third parties may in the future, assert other
intellectual property infringement claims against us with respect
to our drug candidates, technologies or other matters.
We
will rely on confidentiality agreements that could be breached and
may be difficult to enforce, which could result in third parties
using our intellectual property to compete against
us.
We
will take reasonable steps to protect our intellectual property,
including the use of agreements relating to the non-disclosure of
confidential information to third parties, as well as agreements
that purport to require the disclosure and assignment to us of the
rights to the ideas, developments, discoveries and inventions of
our employees and consultants while we employ them. These
agreements may be difficult and costly to enforce. Although we will
seek to obtain these types of agreements from these Third Parties,
to the extent that employees and consultants utilize or
independently develop intellectual property in connection with any
of our projects, disputes may arise as to the intellectual property
rights associated with our drug candidates. If a dispute arises, a
court may determine that the right belongs to a third party.
Enforcement of our rights can be costly and unpredictable. Despite
the protective measures we intent to employ, we will still face the
risk that:
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● |
these
agreements may be breached; |
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● |
these
agreements may not provide adequate remedies for the applicable
type of breach; |
|
● |
our
trade secrets or proprietary know-how will otherwise become known;
or |
|
● |
our
competitors will independently develop similar technology or
proprietary information. |
Intellectual
property rights may not necessarily address all potential threats
to our competitive advantage.
The
degree of future protection afforded by our intellectual property
rights may be uncertain because intellectual property rights have
limitations, and may not adequately protect us to enable us to
maintain any competitive advantage. The following factors may
weaken our protection:
|
● |
compounds
may be made by others that are the same or similar to our drug
candidates, but are not covered by our patent claims; |
|
● |
inventions
covered by our future patents or pending patent may have been
discovered by others previously; |
|
● |
independently
developed similar or alternative technologies may duplicate any of
our technologies without infringing our intellectual property
rights; |
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● |
pending
patents may not lead to issued patents; |
|
● |
our
future issued patents may not provide us with any competitive
advantages, or may be held invalid or unenforceable as a result of
legal challenges; |
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● |
our
competitors might conduct research and development activities in
the United States and other countries that provide a safe harbor
from patent infringement claims for certain research and
development activities, as well as in countries where we do not
have patent rights; and |
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● |
the
patents of others may have an adverse effect on our
business. |
Risks Related to Our Common Stock
There
can be no assurance of a liquid public trading market for our
Common Stock or whether investors will be able to readily be able
to sell their shares of Common Stock.
At
present, our Common Stock is subject to quotation on the OTCQB
under the symbol “NXEN”. There is only a limited and non-liquid
public trading market for our Common Stock and there can be no
assurance that a more liquid market will ever develop or be
sustained. Market liquidity will depend on the perception of our
business and any steps that our management might take to bring
public awareness of our business to the investing public within the
parameters of the federal securities laws. We can provide no
assurance that there will be any awareness generated or sustained.
Consequently, investors may not be able to liquidate their
investment or liquidate it at a price paid by investors equal to or
greater than their initial investment in our Common Stock. As a
result, holders of our Common Stock may not find purchasers for
their shares should they to decide to sell the Common Stock held by
them at any specific time, if ever. Consequently, our Common Stock
should be purchased only by investors who have no immediate need
for liquidity from their investment and who can hold our Common
Stock potentially for a prolonged period of time.
In
the event an active trading market develops for our Common Stock,
the market price may, from time-to-time, be
volatile.
In
the event an active trading market develops for our Common Stock,
the market price of our Common Stock may be highly volatile. Some
of the factors that may materially affect the market price of our
Common Stock are beyond our control, such as changes in conditions
or trends in the industry in which we operate, general market and
economic conditions both in the United States and globally, as well
as the number of our shares of Common Stock being purchased and
sold at any particular time. These factors may materially adversely
affect the market price of our Common Stock, regardless of our
historic business performance or future business prospects. In
addition, the public stock markets have experienced and may be
expected to experience extreme price and trading volume volatility.
These market fluctuations may adversely affect the market price of
our Common Stock.
A
large number of additional shares will be available for resale into
the public market pursuant to Rule 144, which may cause the market
price of our Common Stock to decline significantly.
Sales
of a substantial number of shares of our Common Stock in the public
market will become available pursuant to Rule 144 promulgated by
the SEC under the Act, and could adversely affect the market price
of our Common Stock. As of October 12, 2021, we have 55,772,196
shares of Common Stock outstanding, of which 44,367,782 are
restricted due to applicable federal securities laws. As
restrictions on the resale of shares of Common Stock expire,
pursuant to the provisions of Rule 144 or otherwise, the market
price could drop significantly if the holders of these restricted
shares sell them or are perceived by the market as intending to
sell them at any given date or over any particular period of
time.
If
holders of restricted securities sell a large number of shares
pursuant to Rule 144, they could adversely affect the market price
for our Common Stock, over which we will likely have no
control.
You
may experience dilution of your ownership interest because of the
potential of future issuance of additional shares of our Common
Stock or our preferred stock.
In
the future, we may issue our authorized but previously unissued
equity securities, including shares of our Common Stock, resulting
in the dilution of the ownership interests of our present
stockholders. We are authorized to issue an aggregate of
200,000,000 shares of Common Stock, par value $0.0001 per share, of
which 55,772,196 shares of Common Stock are outstanding as of
October 12, 2021.
We
may also issue additional shares of our Common Stock, warrants or
other securities that are convertible into or exercisable for the
purchase of shares of our Common Stock in connection with hiring
and/or retaining employees or consultants, future acquisitions,
future sales of our securities for capital raising purposes, or for
other business purposes. The future issuance of any such additional
shares of our Common Stock or other securities, for any reason
including those stated above, may have a negative impact on the
market price of our Common Stock. There can be no assurance that
the issuance of any additional shares of Common Stock, warrants or
other convertible securities may not be at a price (or exercise
prices) below the then prevailing price at which shares of our
Common Stock will be quoted in the U.S. over-the-counter
market.
We
may never pay any dividends to our stockholders.
We
currently intend to retain any future earnings for use in the
operation and expansion of our business. Accordingly, we do not
expect to pay any dividends in the foreseeable future, but will
review this policy as circumstances dictate. The declaration and
payment of all future dividends, if any, will be at the sole
discretion of our board of directors, which retains the right to
change our dividend policy at any time. Consequently, stockholders
must rely on sales of their Common Stock after price appreciation,
which may never occur, as the only way to realize any future gains
on their investment.
Insiders
will continue to have substantial control over us and will be able
to influence corporate matters.
As of
October 12, 2021, our directors and executive officers and
stockholders holding more than 5% of our Common Stock own of record
and beneficially, in the aggregate, approximately 74% of our
outstanding Common Stock. As a result, if these stockholders were
to choose to act together, they would be able to exercise
considerable influence over all matters requiring stockholder
approval, including the election of directors and approval of
significant corporate transactions, such as a merger or other sale
of our Company or all or a significant percentage of our assets.
This concentration of ownership could limit your ability to
influence corporate matters and may have the effect of delaying or
preventing a third party from acquiring control over us. For
information regarding the ownership of our outstanding stock by our
executive officers and directors and their affiliates, see the
disclosure under Item 12 - “Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder
Matters.”
We
cannot assure you that the interests of our management and
affiliated persons will coincide with the interests of other
stockholders. As long as our management and affiliated persons
collectively control a substantial portion of our Common Stock,
these individuals and/or entities controlled by them, including
Kanativa USA Inc., will continue to collectively be able to
strongly influence or effectively control our decisions.
Our
Common Stock is thinly traded, so stockholders may be unable to
sell at or near ask prices, or at all, if they need to sell shares
to raise money or otherwise desire to liquidate their
shares.
Our
Common Stock is “thinly-traded,” meaning that the number of persons
interested in purchasing our Common Stock at or near ask prices at
any given time may be relatively small or non-existent. This
situation is attributable to a number of factors, including the
fact that we are a small company that is relatively unknown to
stock analysts, stock brokers, institutional investors and others
in the investment community that generate or influence sales
volume, and that even if we came to the attention of such persons,
they tend to be risk-averse and would be reluctant to follow an
unproven company such as ours, or purchase or recommend the
purchase of our shares until such time as we become more seasoned
and viable. As a consequence, there may be periods of several days
or longer when trading activity in our Common Stock is minimal or
non-existent, as compared to a seasoned issuer which has a large
and steady volume of trading activity that will generally support
continuous sales without an adverse effect on its share price. We
cannot give stockholders any assurance that a broader or more
active public trading market for our Common Stock will develop or
be sustained, or that current trading levels will be
sustained.
Anti-takeover
provisions of the Delaware General Corporation Law may discourage
or prevent a change of control, even if an acquisition would be
beneficial to our stockholders, which could reduce our stock
price.
We
are subject to the provisions of Section 203 of the Delaware
General Corporation Law, which may prohibit certain business
combinations with stockholders owning 15% or more of our
outstanding voting stock. These and other provisions in our
certificate of incorporation, bylaws and Delaware law could make it
more difficult for stockholders or potential acquirers to obtain
control of our board of directors or initiate actions that are
opposed by our then-current board of directors, including a merger,
tender offer or proxy contest involving our Company. Any delay or
prevention of a change of control transaction or changes in our
board of directors could cause the market price of our Common Stock
to decline.
State
Blue Sky registration and potential limitations on resale of our
Common Stock.
The
holders of our shares of Common Stock and those persons who desire
to purchase our Common Stock in any trading market, should be aware
that there may be state blue-sky law restrictions upon the ability
of investors to resell our securities. Accordingly, investors
should consider the secondary market our securities to be a limited
one.
Our
Common Stock is considered a Penny Stock, which may be subject to
restrictions on marketability, so you may not be able to sell your
shares.
We
are subject to the Penny Stock rules since our shares of Common
Stock sell below $5.00 per share. Penny stocks generally are equity
securities with a price of less than $5.00. The penny stock rules
require broker-dealers to deliver a standardized risk disclosure
document prepared by the SEC which provides information about penny
stocks and the nature and level of risks in the penny stock market.
The broker-dealer must also provide the customer with current bid
and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson, and monthly account statements
showing the market value of each penny stock held in the customer’s
account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information must be given to the customer
orally or in writing prior to completing the transaction and must
be given to the customer in writing before or with the customer’s
confirmation.
In
addition, the penny stock rules require that prior to a
transaction, the broker dealer must make a special written
determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser’s written agreement to the
transaction. The penny stock rules are burdensome and may reduce
purchases of any offerings and reduce the trading activity for
shares of our Common Stock. As long as our shares of Common Stock
are subject to the penny stock rules, the holders of such shares of
Common Stock may find it more difficult to sell their
securities.
The
control deficiencies in our internal control over financial
reporting may until remedied cause errors in our financial
statements or cause our filings with the SEC to not be
timely.
There
may be errors in our financial statements that could require a
restatement, or our filings may not be timely made with the SEC.
Based on the work undertaken and performed by us, however, we
believe the financial statements contained in our reports filed
with the SEC are fairly stated in all material respects in
accordance with generally accepted accounting principles (“GAAP”)
for each of the periods presented.
At
present, our internal control over financial reporting or
disclosure controls and procedures are not effective. We identified
material weaknesses including lack of sufficient internal
accounting personnel in order to ensure complete documentation of
complex transactions and adequate financial reporting during the
years ended June 30, 2021 and 2020.
We
intend to implement additional corporate governance and control
measures to strengthen our control environment as we are able, but
we may not achieve our desired objectives. We may identify material
weaknesses and control deficiencies in our internal control over
financial reporting in the future that may require remediation and
could lead investors losing confidence in our reported financial
information, which could lead to a decline in our stock
price.
Reporting
requirements under the Exchange Act and compliance with the
Sarbanes-Oxley Act of 2002 (SOX), including establishing and
maintaining acceptable internal controls over financial reporting,
are costly and may increase substantially.
The
rules and regulations of the SEC require a public company to
prepare and file periodic reports under the Securities Exchange
Act of 1934 (the “Exchange Act”), which will require that the
Company engage legal, accounting, auditing and other professional
service providers. The engagement of such services is costly and
continuing. Additionally, SOX requires, among other things, that we
design, implement and maintain adequate internal controls and
procedures over financial reporting. The costs of complying with
SOX and the limited technically qualified personnel we have may
make it difficult for us to design, implement and maintain adequate
internal controls over financial reporting. We expect these costs
to be approximately $40,000 per year or perhaps more as our
operations increase in scope and magnitude. If we fail to maintain
an effective system of internal controls or discover material
weaknesses in our internal controls, we may not be able to produce
reliable financial reports and/or discover and report fraud, which
may harm our overall financial condition and result in loss of
investor confidence and a decline in our share price.
Our
by-laws provide for indemnification of our directors and the
purchase of D&O insurance at our expense and limit their
potential or actual liability which may result in a significant
cost to us and damage the interests of our
stockholders.
The
Company’s By-Laws include provisions that eliminate the personal
liability of the directors of the Company for monetary damages to
the fullest extent possible under the laws of the State of Delaware
as well as other applicable laws. These provisions eliminate the
liability of directors to the Company and its stockholders for
monetary damages arising out of any violation of a director of his
fiduciary duty of due care. Under Delaware law, however, such
provisions do not eliminate the personal liability of a director
for: (i) breach of the director’s duty of loyalty; (ii) acts or
omissions not in good faith or involving intentional misconduct or
knowing violation of law; (iii) payment of dividends or repurchases
of stock other than from lawfully available funds; or (iv) any
transaction from which the director derived an improper benefit.
These provisions do not affect a director’s liabilities under the
federal securities laws or the recovery of damages by third
parties.
Financial
Industry Regulatory Authority, Inc. (“FINRA”) sales
practice requirements may limit a stockholder’s ability to buy and
sell our Common Stock.
In
addition to the “penny stock” rules described above, FINRA has
adopted rules that require that in recommending an investment to a
customer, a broker-dealer must have reasonable grounds for
believing that the investment is suitable for that customer. Prior
to recommending speculative low-priced securities to their
non-institutional customers, broker-dealers must make reasonable
efforts to obtain information about the customer’s financial
status, tax status, investment objectives and other information.
Under interpretations of these rules, FINRA believes that there is
a high probability that speculative low-priced securities will not
be suitable for at least some customers. FINRA requirements make it
more difficult for broker-dealers to recommend that their customers
buy our Common Stock, which may limit your ability to buy and sell
our stock and have an adverse effect on the market for our
shares.
If
we fail to maintain effective internal controls over financial
reporting, the price of our Common Stock may be adversely
affected.
Our
internal control over financial reporting may have weaknesses and
conditions that could require correction or remediation, the
disclosure of which may have an adverse impact on the price of our
Common Stock. We are required to establish and maintain appropriate
internal controls over financial reporting. Failure to establish
those controls, or any failure of those controls once established,
could adversely affect our public disclosures regarding our
business, prospects, financial condition or results of operations.
In addition, management’s assessment of internal controls over
financial reporting may identify weaknesses and conditions that
need to be addressed or other matters that may raise concerns for
investors. Any actual or perceived weaknesses and conditions that
need to be addressed in our internal control over financial
reporting or disclosure of management’s assessment of our internal
controls over financial reporting may have an adverse impact on the
price of our Common Stock.
We
are required to comply with certain provisions of Section 404 of
SOX and if we fail to comply in a timely manner, our business could
be harmed and our stock price could decline.
Rules
adopted by the SEC pursuant to Section 404 of SOX require an annual
assessment of internal controls over financial reporting, and for
certain issuers an attestation of this assessment by the issuer’s
independent registered public accounting firm. The standards that
must be met for management to assess the internal controls over
financial reporting as effective are evolving and complex, and
require significant documentation, testing, and possible
remediation to meet the detailed standards. We expect to incur
expenses and to devote resources to Section 404 compliance on an
ongoing basis. It is difficult for us to predict how long it will
take or costly it will be to complete the assessment of the
effectiveness of our internal control over financial reporting for
each year and to remediate any deficiencies in our internal control
over financial reporting. As a result, we may not be able to
complete the assessment and remediation process on a timely basis.
In addition, although attestation requirements by our independent
registered public accounting firm are not presently applicable to
us, we could become subject to these requirements in the future and
we may encounter problems or delays in completing the
implementation of any resulting changes to internal controls over
financial reporting. If our Chief Executive Officer or Chief
Financial Officer determines that our internal controls over
financial reporting are not effective as defined under Section 404,
we cannot predict how the market prices of our shares will be
affected; however, we believe that there is a risk that investor
confidence and share value may be negatively affected.
Our
share price could be volatile and our trading volume may fluctuate
substantially.
The
price of our common shares has been and may in the future continue
to be extremely volatile, with the sale price fluctuating from a
low of pennies per share to a high of $0.44 during the two most
recently completed fiscal years. Many factors could have a
significant impact on the future price of our common shares,
including:
|
● |
our
inability to raise additional capital to fund our operations,
whether through the issuance of equity securities or
debt; |
|
● |
our
failure to successfully implement our business objectives and
strategic growth plans; |
|
● |
compliance
with ongoing regulatory requirements; |
|
● |
market
acceptance of our drug candidates, once approved for
sale; |
|
● |
changes
in government regulations; |
|
● |
general
economic conditions and other external factors; and |
|
● |
actual
or anticipated fluctuations in our quarterly financial and
operating results; and |
|
● |
the
degree of trading liquidity in our common shares. |
Our
annual and quarterly results may fluctuate greatly, which may cause
substantial fluctuations in our Common Stock price.
Our
annual and quarterly operating results may in the future fluctuate
significantly depending on a number of factors. Any unfavorable
change in these or other factors could have a material adverse
effect on our operating results for a particular quarter or year,
which may cause downward pressure on our Common Stock price. We
expect quarterly and annual fluctuations to continue for the
foreseeable future.
Risks Related to the Regulation of Cannabis in the United
States
While
cannabis is legal in many U.S. state jurisdictions, it continues to
be a controlled substance under the United States
CSA.
In
the United States, cannabis is largely regulated at the state
level. To the Company’s knowledge, a majority of the states, plus
the District of Columbia, Puerto Rico and Guam, that have legalized
cannabis in some form. Notwithstanding the permissible regulatory
environment of medical cannabis at the state level, cannabis
continues to be categorized as a controlled substance under the CSA
and as such, violates federal law in the United States.
Violations
of federal laws and regulations could result in significant fines,
penalties, administrative sanctions, convictions or settlements
arising from civil proceedings conducted by either the federal
government or private citizens, or criminal charges, including, but
not limited to, disgorgement of profits, cessation of business
activities or divestiture. This could have a material adverse
effect on the Company, including its reputation and ability to
conduct business, the listing of its securities on various stock
exchanges, its financial position, operating results, profitability
or liquidity or the market price of its publicly traded shares. In
addition, it is difficult for the Company to estimate the time or
resources that would be needed for the investigation of any such
matters or its final resolution because, in part, the time and
resources that may be needed are dependent on the nature and extent
of any information requested by the applicable authorities
involved, and such time or resources could be
substantial.
Currently
the Company does not intend to proceed with clinical trials using
cannabis-derived cannabinoids in the U.S. If the Company decides to
proceed with plant-derived cannabinoids, it could become subject to
risks relating to the characterization of cannabis as a controlled
substance.
The
approach to the enforcement of cannabis laws may be subject to
change or may not proceed as previously outlined.
As a
result of the conflicting views between state legislatures and the
federal government regarding cannabis, involvement in the cannabis
industry in the United States is subject to inconsistent
legislation and regulation. If we decide to proceed with clinical
trials using plant-derived cannabinoids, and are conducting those
trials in the United States, we could be subject to risks relating
to the enforcement of cannabis laws.
Regulatory
scrutiny of the Company’s industry may negatively impact its
ability to raise additional capital.
The
Company’s business activities rely on newly established and/or
developing laws and regulations in multiple jurisdictions. These
laws and regulations are rapidly evolving and subject to change
with minimal notice. Regulatory changes may adversely affect the
Company’s potential for profitability or cause it to cease
operations entirely. The cannabis industry may come under scrutiny
by the U.S. FDA, the SEC, the DOJ, the Financial Industry
Regulatory Authority or other federal or other applicable state or
nongovernmental regulatory authorities or self-regulatory
organizations that supervise or regulate the production,
distribution, sale or use of cannabis for medical or non-medical
purposes in the U.S. It is impossible to determine the extent of
the impact of any new laws, regulations or initiatives that may be
proposed, or whether any proposals will become law. The regulatory
uncertainty surrounding the Company’s industry may adversely affect
the business and operations of the Company, including without
limitation, the costs to remain compliant with applicable laws and
the impairment of its ability to raise additional capital, create a
public trading market in the U.S. or elsewhere for securities of
the Company, which could reduce, delay or eliminate any return on
investment in the Company.
State
and local laws and regulations may heavily regulate brands and
forms of cannabis products and there is no guarantee that the
Company’s proposed products and brands will be approved for sale
and distribution in any state.
States
generally only allow the manufacture, sale and distribution of
cannabis products that are grown in that state and may require
advance approval of such products. Certain states and local
jurisdictions have promulgated certain requirements for approved
cannabis products based on the form of the product and the
concentration of the various cannabinoids in the product. If the
Company produces products that are derived from plant-based (rather
than synthetic) cannabinoids, the Company intends to follow the
guidelines and regulations of each applicable state and local
jurisdiction in preparing products for sale and distribution, there
is no guarantee that such products will be approved to the extent
necessary. If the products are approved, there is a risk that any
state or local jurisdiction may revoke its approval for such
products based on changes in laws or regulations or based on its
discretion or otherwise.
We
may have difficulties accessing the services of banks in the United
States due to the nature of our business.
The
use, sale, or possession of all forms of cannabis in the United
States is illegal under federal law. As a Schedule I drug under the
federal Controlled Substances Act of 1970, cannabis is
considered to have “no accepted medical use” and have a high
potential for abuse and physical or psychological dependence. As a
result, historically many banks have not accepted for deposit funds
from persons/entities that are engaged in cannabis-related
businesses, including those engaged in developing drugs containing
cannabinoids such as our Company. As described above, on February
14, 2014, the Financial Crimes Enforcement Network (“FinCEN”)
released guidance to banks “clarifying Bank Secrecy Act
expectations for financial institutions seeking to provide services
to cannabis-related businesses.” In addition, U.S. Rep. Jared Polis
(D-CO) has stated he will seek an amendment to banking regulations
and laws in order to allow banks to transact business with
state-authorized medical marijuana treatment programs. While these
are positive developments, there can be no assurance this
legislation will be successful, or that, even with the FinCEN
guidance, banks will decide to do business with corporations that
are in the business of developing drugs containing cannabinoids, or
that, in the absence of actual legislation, state and federal
banking regulators will not strictly enforce current prohibitions
on banks handling funds generated from an activity that is illegal
under federal law. While the Company has not, to date, experienced
any difficulty in opening accounts and otherwise using the services
of banks, any changes in this regard could materially harm our
business.
Due
to the classification of cannabis as a Schedule I controlled
substance under the CSA, banks and other financial institutions
which service the cannabis industry are at risk of violating
certain financial laws, including anti-money laundering
statutes.
Because
the manufacture, distribution, and dispensation of cannabis remains
illegal under the CSA, banks and other financial institutions
providing services to cannabis-related businesses risk violation of
federal anti-money laundering statutes (18 U.S.C. §§ 1956 and
1957), the unlicensed money-remitter statute (18 U.S.C. § 1960) and
the U.S. Bank Secrecy Act. These statutes can impose
criminal liability for engaging in certain financial and monetary
transactions with the proceeds of a “specified unlawful activity”
such as distributing controlled substances which are illegal under
federal law, including cannabis, and for failing to identify or
report financial transactions that involve the proceeds of
cannabis-related violations of the CSA. The Company may also be
exposed to the foregoing risks if it produces drugs derived from
plant-based (rather than synthetic) cannabinoids.
Any
re-classification of cannabis or changes in U.S. controlled
substance laws and regulations may affect the Company’s
business.
If
cannabis and/or CBD is re-categorized as a Schedule II or lower
controlled substance, the ability to conduct research on the
medical benefits of cannabis would most likely be simpler and more
accessible; however, if cannabis is re-categorized as a Schedule II
or other controlled substance, the resulting re-classification
would result in the requirement for FDA approval if medical claims
were made for any of the Company’s products, such as medical
cannabis. As a result, the manufacture, importation, exportation,
domestic distribution, storage, sale and use of such products may
be subject to a significant degree of regulation by the DEA. In
that case, the Company may be required to be registered (licensed)
to perform these activities and have the security, control,
recordkeeping, reporting and inventory mechanisms required by the
DEA to prevent drug loss and diversion. Obtaining the necessary
registrations may result in delay of the manufacturing or
distribution of the Company’s anticipated products. The DEA
conducts periodic inspections of certain registered establishments
that handle controlled substances. Failure to maintain compliance
could have a material adverse effect on the Company’s business,
financial condition and results of operations. The DEA may seek
civil penalties, refuse to renew necessary registrations, or
initiate proceedings to restrict, suspend or revoke those
registrations. In certain circumstances, violations could lead to
criminal proceedings. Furthermore, if the FDA, DEA, or any other
regulatory authority determines that the Company’s products may
have potential for abuse, it may require the Company to generate
more clinical or other data than the Company currently anticipates
establishing whether or to what extent the substance has an abuse
potential, which could increase the cost and/or delay the launch of
that product.
CBD
is classified as Schedule I controlled substance. The DEA recently
published a final rule in the Federal Register creating a new drug
code for “marijuana extracts”.
In
connection with the new drug code, the DEA has determined that all
CBD products, regardless of origin, shall be considered Schedule I
controlled substances. The Company is unable to determine what the
impact of this will be on its business.
U.S.
federal trademark and patent protection may not be available for
the intellectual property of the Company due to the current
classification of cannabis as a Schedule I controlled
substance.
As
long as cannabis remains illegal under U.S. federal law as a
Schedule I controlled substance pursuant to the CSA, the benefit of
certain federal laws and protections which may be available to most
businesses, such as federal trademark and patent protection
regarding the intellectual property of a business, may not be
available to the Company if it determines to produce drugs using
cannabis. As a result, the Company’s intellectual property may
never be adequately or sufficiently protected against the use or
misappropriation by third-parties. In addition, since the
regulatory framework of the cannabis industry is in a constant
state of flux, the Company can provide no assurance that it will
ever obtain any protection of its intellectual property, whether on
a federal, state or local level.
The
Company’s contracts may not be legally enforceable in the United
States.
If,
in the future, the Company enters into contracts that involve
cannabis and/or other activities that are not legal under U.S.
federal law and in some jurisdictions, the Company may face
difficulties in enforcing its contracts in U.S. federal and certain
state courts.
|
ITEM
1B. |
UNRESOLVED STAFF
COMMENTS. |
Not
Applicable.
Our
principal office is located at 4340 East Kentucky Avenue, Suite
206, Glendale, Colorado 80246. Our telephone number is (303)
495-7583. Our offices consist of approximately 300 square feet of
executive offices and we believe that these facilities will be
sufficient for the next twelve months.
|
ITEM
3. |
LEGAL PROCEEDINGS. |
There
are no pending legal proceedings to which the Company is a party,
and the Company’s property is not the subject of any pending legal
proceedings.
|
ITEM
4. |
MINE SAFETY
DISCLOSURES. |
Not
Applicable.
PART II
|
ITEM
5. |
MARKET FOR REGISTRANT’S COMMON EQUITY,
RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES. |
Market
Price Information
Our
Common Stock is currently quoted on the OTCQB Market under the
symbol NXEN. For the periods indicated, the following table sets
forth the high and low bid prices per share of Common Stock. The
below prices represent inter-dealer quotations without retail
markup, markdown, or commission and may not necessarily represent
actual transactions.
| |
|
Price
Range |
| Period |
|
High |
|
Low |
| Year Ended June 30, 2020: |
|
|
|
|
| First
Quarter |
|
$ |
0.10 |
|
|
$ |
0.0443 |
|
| Second
Quarter |
|
$ |
0.0915 |
|
|
$ |
0.035 |
|
| Third Quarter |
|
$ |
0.0659 |
|
|
$ |
0.031 |
|
| Fourth
Quarter |
|
$ |
0.074 |
|
|
$ |
0.0092 |
|
| Year Ended June 30, 2021: |
|
|
|
|
|
|
|
|
| First Quarter |
|
$ |
0.445 |
|
|
$ |
0.0394 |
|
| Second
Quarter |
|
$ |
0.12 |
|
|
$ |
0.028 |
|
| Third Quarter |
|
$ |
0.2585 |
|
|
$ |
0.0635 |
|
| Fourth
Quarter |
|
$ |
0.22 |
|
|
$ |
0.0605 |
|
As of
October 5, 2021, the closing price for the Common Stock was $0.078
per share.
As of
September 29, 2021, our shares of Common Stock were held by 701
stockholders of record. The transfer agent of our Common Stock is
Standard Registrar and Transfer Company, Inc., whose telephone
number is: (801) 571-8844.
Dividends
Holders
of Common Stock are entitled to dividends when, as, and if declared
by the Board of Directors, out of funds legally available therefor.
We have never declared cash dividends on our Common Stock and our
Board of Directors does not anticipate paying cash dividends in the
foreseeable future as it intends to retain future earnings to
finance the growth of our businesses. There are no restrictions in
our certificate of incorporation or bylaws that restrict us from
declaring dividends.
Securities
Authorized for Issuance Under Equity Compensation
Plans
Equity
Compensation Plan Information as of June 30, 2021
|
Plan category |
|
Number of securities to be issued upon exercise of outstanding
options, warrants and rights |
|
Weighted-average exercise price of outstanding options, warrants
and rights |
|
Number of securities remaining available for future issuance under
equity compensation plans (excluding securities reflected in column
(a)) |
|
Equity compensation plans approved by security holders |
|
|
7,995,000 |
|
|
$ |
0.26 |
|
|
|
3,331,000 |
|
| Equity
compensation plans not approved by security holders |
|
|
-0- |
|
|
|
— |
|
|
|
-0- |
|
| Total |
|
|
7,995,000 |
|
|
|
|
|
|
|
3,331,000 |
|
On
August 10, 2017, BioPharma adopted its 2017 Stock Incentive Plan
under which the board of directors is authorized the grant up to
7,200,000 shares of its common stock. 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) were granted. 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,
2021, all 5,233,333 shares issued have been vested.
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 reserved 8,000,000 shares of Common Stock
for issuance under the terms of that Plan. The total number of
shares reserved and available for grant and issuance under the 2018
Plan is 8,000,000 shares, plus any reserved shares not issued or
subject to outstanding grants under the 2017 Stock Plan and shares
that cease to be subject to awards under the 2017 Stock Plan
because of forfeiture. In addition, the number of shares available
for grant and issuance under the 2018 Plan will be increased on
July 1 of each of the next ten calendar years by the lesser of (a)
15% of the number of shares issued during the most recently
completed fiscal year or (b) such number of shares determined by
the board of directors. The 2018 Plan permits the board to grant a
variety of incentive awards: stock options, restricted stock
awards, stock bonus awards, and stock appreciation rights.
Stockholder approval was obtained on March 29, 2019. As of June 30,
2021, 7,995,000 stock options were granted and
exercisable.
Recent
Sales of Unregistered Securities
During
the quarter ended June 30, 2021, we issued 2,250,000 shares of
common stock as compensation to our officers and
directors.
Issuer
Purchases of Securities
None.
|
ITEM
6. |
SELECTED FINANCIAL
DATA. |
Not
applicable.
|
ITEM
7. |
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Forward-Looking
Statements
The
following plan of operation provides information which management
believes is relevant to an assessment and understanding of our
results of operations and financial condition. The discussion
should be read along with our financial statements and notes
thereto. This section includes a number of forward-looking
statements that reflect our current views with respect to future
events and financial performance. Certain statements that the
Company may make from time to time, including all statements
contained in this report that are not statements of historical
fact, constitute “forward-looking statements”. Forward-looking
statements may be identified by words such as “plans,” “expects,”
“believes,” “anticipates,” “estimates,” “projects,” “will,”
“should,” and other words of similar meaning used in conjunction
with, among other things, discussions of future operations,
financial performance, product development and new product
launches, market position and expenditures. You should not place
undue certainty on these forward-looking statements. These
forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially
from our predictions.
The
following Management’s Discussion and Analysis of Financial
Condition and Results of Operations (“MD&A”) is intended to
help you understand our historical results of operations during the
periods presented and our financial condition for the years ended
June 30, 2021 and 2020. This MD&A should be read in conjunction
with our financial statements as of June 30, 2021 and 2020. See
section entitled “Forward-Looking Statements”
above.
Overview
We
are engaged in pursuing pre-clinical and drug development
activities for certain pharmaceutical formulations that include
cannabinoids. We have filed three provisional patent applications,
and acquired a license covering certain intellectual property
related to a drug delivery system. In October 2018, we acquired all
of the membership interest in CRx Bio Holdings LLC, which also
engaged in the research and development of advanced cannabinoid
formulations and drug delivery systems, by issuing 11,000,000
shares of our common stock. As part of the CRx acquisition, we also
acquired three additional patent applications. CRx had an agreement
with a major university to perform pre-clinical research related to
the parenteral administration of cannabinoid formulations. As this
research was common to both the CRx programs and the Nexien
programs, we consolidated this research for the purposes of the
Nexien capital expenditure budget. In March 2021, four of the
Sellers terminated their relationships with the Company and
forfeited their remaining 2,409,000 unvested shares, valued at the
original issuance price of $1,830,840 ($0.76 per share).
As a
relatively new business engaged in start-up operations and
activities, we will require substantial additional funding to
successfully complete any of our drug development programs. At
present, we cannot estimate the substantial capital requirements
needed to secure regulatory approvals for our drug candidates. We
estimate that we will need to raise at a minimum $40,000 just to
maintain our existence as a public company for the remainder of the
current calendar year.
We
are a start-up company with no revenues from operations.
Notwithstanding our successful raise of $2,076,158, net of offering
costs, in equity capital since inception to June 30, 2021 there is
substantial doubt that we can continue as an on-going business for
the next twelve months without a significant infusion of capital or
entering into a business combination transaction. We do not
anticipate that Nexien BioPharma will generate revenues from its
research and development activities related to its drug development
projects in the near future, due to the protracted revenue model of
pursuing pharmaceutical drug development in accordance with the
pathway set forth by the FDA.
Results
of Operations
Net
loss for the year ended June 30, 2021 was $1,859,942 as compared to
the net loss for the year ended June 30, 2020 of $2,671,617, a
decrease of $811,675. As explained below, most of the loss is
attributable to significant stock-based compensation costs, the
fair value of common stock issued for the CRx acquisition, and the
impairment charge related to license fees.
The
Company incurred professional fees of $43,710 for the year ended
June 30, 2021, a decrease of $6,821 from $50,531 for the year ended
June 30, 2020. Fees for 2021 and 2020 were for SEC regulatory and
statutory filings, audit fees, filings with the U.S. Patent Office
and the FDA, and patent related filing fees in Canada and
Europe.
General
and administrative costs of $1,800,057 incurred for the year ended
June 30, 2021 includes $306,250 of non-cash stock-based
compensation costs for common shares issued to officers and
directors and the fair value of vested stock options granted of
$348,953.,. Also included in general and administrative expenses
for 2021 is a non-cash charge of $1,093,667 for the vesting of
shares issued to CRx subject to forfeiture. General and
administrative costs for the year ended June 30, 2020 of,$2,495,386
includes $52,137 of non-cash stock-based compensation costs for:
vesting of common shares previously issued to management valued at
$18,750; and the fair value of vested stock options granted of
$33,387. Also included in general and administrative expenses for
2020 is a non-cash charge of $2,303,195 for the vesting of shares
issued to CRx subject to forfeiture.
Exclusive
of stock-based compensation costs, general and administrative costs
for the year ended June 30, 2021 were $94,895 a decrease of $45,162
from the June 30, 2020 comparable costs of $140,057. The decrease
of $45,162 was attributable to cost containment efforts instituted
by the Company during the 2020 fiscal year to preserve capital.
During the year ended June 30, 2020, the Company charged to
operations $90,667 for management fees to a related party which
were classified as prepaid expenses at June 30, 2019.
During
the year ended June 30, 2021, the Board of Directors granted
options to purchase a total of 5,000,000 shares of common stock to
officers of the Company, exercisable for a period of seven years at
an exercise price of $0.08 per share.
There
were no research and development costs incurred for the years ended
June 30, 2021 and 2020, due to the Company’s limited financial
resources and availability of research personnel.
The
Company has 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
the agreement with Kotzker, and assigned the licensed intellectual
property back to Kotzker, issuing 150,000 restricted shares of
common stock, valued at $13,500 ($0.09 per share) as a final
payment for consulting fees owed.
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 AccuBreak license
agreement.
The
Company incurred interest expense of $3,234 and $33, respectively,
during the years ended June 30, 2021 and 2020 for interest on debt
offerings during the periods. At June 30, 2021 and 2020, the
Company had outstanding notes in the principal amounts of $65,000
and $12,000, respectively.
During
the year ended June 30, 2021, the Company incurred $12,941 for
interest and amortization of discount related to the convertible
debt financings.
Liquidity
and Capital Resources
At
June 30, 2021, we had a working capital deficit of $13,775 and cash
of $18,041 as compared to a working capital deficit of $6,365 and
cash of $10,786 at June 30, 2020. The increase in working capital
was due primarily to the Company’s utilization of existing funds
for operating activities. We used $90,745 of cash for operating
activities, and had increase in liquidity from financing of $98,000
from a convertible debt loan from our CEO and a major shareholder
and a $20,000 advance for operating activities from our CEO during
the year ended June 30, 2021. Operating and investing activities
utilized cash of $147,570 during fiscal 2020, with cash provided
from financing activities of $12,000 from a loan from our
CEO.
The
unsecured convertible promissory notes issued during the fiscal
year ended June 30, 2021 are due in three years (November 24, 2023)
and accrue 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 Note was 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 same 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. In June 2021, the Company’s CEO advanced $20,000
to the Company for operating capital purposes.
In
June 2021, the Company’s Chief Executive Officer advanced $20,000
to the Company for working capital and operating purposes. The
advance is non-interest bearing and is repayable on
demand.
While
management of the Company believes that the Company will be
successful in its current and planned activities, there can be no
assurance that the Company will be successful in its drug
development activities, and raise sufficient equity, debt capital
or strategic relationships to sustain the operations of the
Company.
Our
ability to create sufficient working capital to sustain us over the
next twelve-month period, and beyond, is dependent on our raising
additional equity or debt capital, or entering into strategic
arrangements with one or more third parties.
There
can be no assurance that sufficient capital will be available to
us. We currently have no agreements, arrangements or understandings
with any person to obtain funds through bank loans, lines of credit
or any other sources.
Availability
of Additional Capital
Notwithstanding
our success in raising gross proceeds of $2.1 million from the
private sale of equity securities through June 30, 2021, there can
be no assurance that we will continue to be successful in raising
equity capital and have adequate capital resources to fund our
operations or that any additional funds will be available to us on
favorable terms or in amounts required by us. We estimate that we
will need to raise at a minimum $40,000 just to maintain our
existence as a public company for the remainder of the current
calendar year.
Any
additional equity financing may be dilutive to our stockholders,
new equity securities may have rights, preferences or privileges
senior to those of existing holders of our shares of Common Stock.
Debt or equity financing may subject us to restrictive covenants
and significant interest costs.
Capital
Expenditure Plan During the Next Twelve Months
To
date, we raised approximately $2.1 million, in equity capital
(including exercised warrants) and we may be expected to require a
minimum of $40,000 in capital during the remainder of the current
calendar year to continue our existence as a public company. There
can be no assurance that we will continue to be successful in
raising capital in sufficient amounts and/or at terms and
conditions satisfactory to the Company. Our revenues are expected
to come from our drug development projects. As a result, we will
continue to incur operating losses unless and until we have
obtained regulatory approval with respect to one of our drug
development projects and commence to generate sufficient cash flow
to meet our operating expenses. There can be no assurance that we
will obtain regulatory approval and the market will adopt our
future drugs. In the event that we are not able to successfully:
(i) raise equity capital and/or debt financing; or (ii) market our
drugs after obtaining regulatory approval, our financial condition
and results of operations will be materially and adversely
affected.
Going
Concern Consideration
Our
registered independent auditors have issued an opinion on our
financial statements as of June 30, 2021 which includes a statement
describing our going concern status. This means that there is
substantial doubt that we can continue as an on-going business for
the next twelve months unless we obtain additional capital to pay
our bills and meet our other financial obligations. This is because
we have not generated any revenues and no revenues are anticipated
until we begin marketing any drugs that we successfully develop.
Accordingly, we must raise capital from sources other than the
actual sale from any drugs that we develop. We must raise capital
to continue our drug development activities and stay in
business.
Off-Balance
Sheet Arrangements
At
June 30, 2021 and 2020, we did not have any off-balance sheet
arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K
promulgated under the Securities Act of 1934.
Contractual
Obligations and Commitments
On
September 19, 2017, we entered into an agreement with a contract
manufacturer with significant expertise in pre-clinical and
clinical trial development and regulatory approvals to develop an
injectable formulation for our drug candidate in the Kotzker
Development Project with the objective of applying for FDA
approval. It is anticipated that the drug candidate will be
developed utilizing the new drug application 505(b)(2) regulatory
pathway for use in the treatment during and immediately following
exposure to organophosphorus nerve agents. The formulation of the
drug candidate will be based on one or more synthetic cannabinoids.
We paid $75,000 to the contract manufacturer upon signing the
contract, which further provides that we pay an additional $20,000
upon completion of the drug formulation and $20,000 upon completion
of Phase 1 development. No payment schedule has yet been agreed to
upon completion of Phase 2 and Phase 3 development stage and the
contract may be terminated by either party.
On
February 28, 2018, we obtained a worldwide exclusive license with
respect to a proprietary delivery system for cannabinoid-based
medications. Upon execution of the agreement, as amended September
18, 2018, $35,000 was paid to the licensor. An additional $10,000
was paid on November 1, 2018, $20,000 was paid on February 28, 2019
and a final payment, in cash or stock at the option of the Company,
of $35,000, due August 31, 2019, was paid in shares of our common
stock. We are required to pay milestone payments upon obtaining
regulatory approval of pharmaceutical licensed products and
royalties based upon sales of licensed products. We may grant
sublicenses under the terms of the agreement. The Company
determined that it may not be able to recover the $65,000 of costs
capitalized under the Accu-Break License Agreement, and has
recognized an impairment of $65,000 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.
Critical
Accounting Policies
Our
significant accounting policies are described in the notes to our
financial statements as of June 30, 2021 and 2020 and are included
elsewhere in this report.
|
ITEM
7A. |
QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK. |
As a
“smaller reporting company”, we are not required to provide this
information.
|
ITEM
8. |
FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA. |
Consolidated
Financial Statements
Nexien
BioPharma, Inc.
For
the years ended June 30, 2021 and 2020
Table
of contents
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholders of Nexien BioPharma,
Inc.
Opinion
on the Financial Statements
We have audited the accompanying consolidated balance sheets
of Nexien
BioPharma, Inc. (the Company) as of
June 30, 2021 and 2020, and the related consolidated statements of
operations, stockholders’ deficit, and cash flows for each of the
two-year periods ended June 30, 2021 and 2020, and the related
notes (collectively referred to as the “financial statements”). In
our opinion, the financial statements present fairly, in all
material respects, the financial position of the Company as of June
30, 2021 and 2020, and the results of its operations and its cash
flows for each of the years in the two-year period ended June 30,
2021 and 2020 in conformity with accounting principles generally
accepted in the United States of America.
Going
Concern
The
accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note
2 to the financial statements, the Company has suffered a net loss
from operations and has a net capital deficiency, which raises
substantial doubt about its ability to continue as a going concern.
Management’s plans regarding those matters are discussed in Note 2.
The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Basis
for Opinion
These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting
Oversight Board
(United
States) (PCAOB) and are required to be independent with respect to
the Company
in
accordance with the U.S.
federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error
or fraud.
The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting.
As part of our audits, we are required to obtain an understanding
of internal control over financial reporting, but not for the
purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly,
we express no such opinion.
Our
audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and the significant estimates made by management,
as well as evaluating the overall presentation of the financial
statements. We believe our audits provide a reasonable basis for
our opinion.
Critical
Audit Matters
The
critical audit matter communicated below is a matter arising from
the current period audit of the consolidated financial statements
that was communicated or required to be communicated to the audit
committee and that: (1) relate to accounts or disclosures that are
material to the financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way
our opinion on the financial statements, taken as a whole, and we
are not, by communicating the critical audit matter below,
providing separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Going
Concern
As
discussed in Note 2 to the financial statements, the Company had a
going concern due to a negative working capital and losses from
operations.
Auditing
management’s evaluation of a going concern can be a significant
judgment given the fact that the Company uses management estimates
on future revenues and expenses which are not able to be
substantiated.
To
evaluate the appropriateness of the going concern, we examined and
evaluate the financial information that was the initial cause along
with managements’ plans to mitigate the going concern and
managements’ disclosure on going concern.
|
/s/ M&K CPAS, PLLC |
|
| |
|
| We have served
as the Company’s auditor since 2017 |
|
| |
|
| Houston,
TX |
|
| |
|
| October
12, 2021 |
|
Nexien
BioPharma, Inc.
Consolidated Balance
Sheets
June
30, 2021 and 2020
| |
|
2021 |
|
|
2020 |
|
| |
|
|
|
|
|
|
| Assets |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Current Assets |
|
|
|
|
|
|
|
|
| Cash |
|
$ |
18,041 |
|
|
$ |
10,786 |
|
|
Prepaid - other |
|
|
7,500 |
|
|
|
12,000 |
|
| |
|
|
|
|
|
|
|
|
| Total
current assets |
|
|
25,541 |
|
|
|
22,786 |
|
| |
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
25,541 |
|
|
$ |
22,786 |
|
| |
|
|
|
|
|
|
|
|
| Liabilities and
Stockholders’ (Deficit) |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Current
Liabilities |
|
|
|
|
|
|
|
|
| Accounts payable
and accrued expenses |
|
$ |
6,375 |
|
|
$ |
17,151 |
|
| Due to
officer |
|
|
20,000 |
|
|
|
- |
|
|
Convertible note payable - related party, net of discount of
$52,059 at June 30, 2021 |
|
|
12,941 |
|
|
|
12,000 |
|
| |
|
|
|
|
|
|
|
|
| Total
current liabilities |
|
|
39,316 |
|
|
|
29,151 |
|
| |
|
|
|
|
|
|
|
|
| Commitments and
Contingencies |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Stockholders’
(Deficit) |
|
|
|
|
|
|
|
|
| Preferred stock -
$.0001 par value; 10,000,000 authorized; none issued- |
|
|
- |
|
|
|
|
|
| Common stock -
$.0001 par value; 200,000,000 shares authorized; 55,772,196 shares
issued and outstanding -June 30, 2021; 53,984,004 shares issued and
outstanding -June 30, 2020 |
|
|
5,577 |
|
|
|
5,398 |
|
| Additional paid in
capital |
|
|
10,476,004 |
|
|
|
11,583,159 |
|
| Stock payable |
|
|
35,000 |
|
|
|
- |
|
| Common stock
subject to forfeiture |
|
|
(223,255 |
) |
|
|
(3,147,763 |
) |
|
Accumulated deficit |
|
|
(10,307,101 |
) |
|
|
(8,447,159 |
) |
| |
|
|
|
|
|
|
|
|
| Total
Stockholders’ Equity (Deficit) |
|
|
(13,775 |
) |
|
|
(6,365 |
) |
| |
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ (Deficit) |
|
$ |
25,541 |
|
|
$ |
22,786 |
|
The
accompanying notes area an integral part of these consolidated
financial statements.
Nexien
BioPharma, Inc.
Consolidated Statements of
Operations
Years
Ended June 30, 2021 and 2020
| |
|
2021 |
|
|
2020 |
|
| |
|
|
|
|
|
|
| Revenue |
|
$ |
- |
|
|
$ |
- |
|
| |
|
|
|
|
|
|
|
|
| Operating
expenses |
|
|
|
|
|
|
|
|
|
Professional fees |
|
|
43,710 |
|
|
|
50,531 |
|
| General and
administrative |
|
|
1,800,057 |
|
|
|
2,495,386 |
|
| Impairment of
license fees |
|
|
- |
|
|
|
35,000 |
|
|
Management fees-related |
|
|
- |
|
|
|
90,667 |
|
| Total operating
expenses |
|
|
1,843,767 |
|
|
|
2,671,584 |
|
| |
|
|
|
|
|
|
|
|
| Other income
(expense) |
|
|
|
|
|
|
|
|
| Interest expense -
related |
|
|
(3,234 |
) |
|
|
(33 |
) |
|
Amortization of discount on convertible notes |
|
|
(12,941 |
) |
|
|
- |
|
| Total
other income (expense) |
|
|
(16,175 |
) |
|
|
(33 |
) |
| |
|
|
|
|
|
|
|
|
| Net
loss |
|
$ |
(1,859,942 |
) |
|
$ |
(2,671,617 |
) |
| |
|
|
|
|
|
|
|
|
| Loss
per share - basic and diluted |
|
$ |
(0.03 |
) |
|
$ |
(0.05 |
) |
| |
|
|
|
|
|
|
|
|
| Weighted average shares outstanding
- |
|
|
|
|
|
|
|
|
|
basic and diluted |
|
|
55,399,643 |
|
|
|
53,912,852 |
|
The
accompanying notes area an integral part of these consolidated
financial statements.
Nexien
BioPharma, Inc.
Consolidated Statements of
Stockholders’ (Deficit)
Years
ended June 30, 2020 and 2021
| |
|
Shares |
|
|
Common Stock |
|
|
Additional Paid in Capital |
|
|
Stock Payable |
|
|
Comon Stock Subject to
Forfeiture |
|
|
Accumulated Deficit |
|
|
Total
Stockholders’
(Deficit) |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, June 30, 2019 |
|
|
53,510,718 |
|
|
$ |
5,351 |
|
|
$ |
11,505,819 |
|
|
$ |
- |
|
|
$ |
(5,469,708 |
) |
|
$ |
(5,775,542 |
) |
|
$ |
265,920 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of stock for accounts payable at $0.09 per share |
|
|
16,667 |
|
|
|
1 |
|
|
|
1,499 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,500 |
|
| Issuance
of stock for license at $0.09 per share |
|
|
381,619 |
|
|
|
38 |
|
|
|
34,962 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
35,000 |
|
| Issuance
of stock for services at $0.10 per share |
|
|
75,000 |
|
|
|
8 |
|
|
|
7,492 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7,500 |
|
| Vesting of management shares subject
to forfeiture |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
18,750 |
|
|
|
- |
|
|
|
18,750 |
|
| Amortization of CRx
shares |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,303,195 |
|
|
|
- |
|
|
|
2,303,195 |
|
| Fair value of options and warrants issued
for services |
|
|
- |
|
|
|
- |
|
|
|
33,387 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
33,387 |
|
| Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,671,617 |
) |
|
|
(2,671,617 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance,
June 30, 2020 |
|
|
53,984,004 |
|
|
|
5,398 |
|
|
|
11,583,159 |
|
|
|
- |
|
|
|
(3,147,763 |
) |
|
|
(8,447,159 |
) |
|
|
(6,365 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issuance of stock for conversion of
related party note payable and
interest at $0.014 per share |
|
|
1,797,192 |
|
|
|
180 |
|
|
|
24,981 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
25,161 |
|
| Issuance
of stock for accounts payable at $0.09 per share |
|
|
150,000 |
|
|
|
15 |
|
|
|
13,485 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
13,500 |
|
| Issuance
of common stock to officers & director |
|
|
2,250,000 |
|
|
|
225 |
|
|
|
271,025 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
271,250 |
|
| Amortization of CRx
shares |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,093,668 |
|
|
|
- |
|
|
|
1,093,668 |
|
| Fair value of options
granted |
|
|
- |
|
|
|
- |
|
|
|
348,953 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
348,953 |
|
| Discount
on convertible debt |
|
|
- |
|
|
|
- |
|
|
|
65,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
65,000 |
|
| Common
stock issuable to officers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000 |
|
|
|
|
|
|
|
|
|
|
|
35,000 |
|
| Cancellation of unvested CRx
shares |
|
|
(2,409,000 |
) |
|
|
(241 |
) |
|
|
(1,830,599 |
) |
|
|
- |
|
|
|
1,830,840 |
|
|
|
- |
|
|
|
- |
|
| Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,859,942 |
) |
|
|
(1,859,942 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, June 30, 2021 |
|
|
55,772,196 |
|
|
$ |
5,577 |
|
|
$ |
10,476,004 |
|
|
$ |
35,000 |
|
|
$ |
(223,255 |
) |
|
$ |
(10,307,101 |
) |
|
$ |
(13,775 |
) |
The
accompanying notes area an integral part of these consolidated
financial statements.
Nexien
BioPharma, Inc.
Consolidated Statements of Cash
Flows
Years
Ended June 30, 2021 and 2020
| |
|
2021 |
|
|
2020 |
|
| |
|
|
|
|
|
|
| Cash flows from
operating activities |
|
|
|
|
|
|
|
|
| Net
loss |
|
$ |
(1,859,942 |
) |
|
$ |
(2,671,617 |
) |
| Adjustments to
reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
|
|
| Stock based
compensation |
|
|
348,953 |
|
|
|
52,137 |
|
| Fair value of
shares issued for CRx Acquisition |
|
|
1,093,668 |
|
|
|
2,303,195 |
|
| Stock issued for
services and license fee |
|
|
- |
|
|
|
42,500 |
|
| Stock issued to
officers and director |
|
|
271,250 |
|
|
|
- |
|
| Stock issuable to
officers |
|
|
35,000 |
|
|
|
- |
|
| Discount on
convertible debt |
|
|
12,941 |
|
|
|
- |
|
| Management fees -
related party |
|
|
- |
|
|
|
90,667 |
|
| Changes is assets
and liabilities |
|
|
|
|
|
|
|
|
| Decrease in
prepaids |
|
|
4,500 |
|
|
|
61,647 |
|
|
Increase (decrease) in accounts payable and accrued expenses |
|
|
2,885 |
|
|
|
(26,099 |
) |
| Cash
used in operating activities |
|
|
(90,745 |
) |
|
|
(147,570 |
) |
| |
|
|
|
|
|
|
|
|
| Cash flows from
investing activities |
|
|
|
|
|
|
|
|
| Cash
used in investing activities |
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
| Cash flows from
financing activities |
|
|
|
|
|
|
|
|
| Cash proceeds from
convertible note payable - related |
|
|
78,000 |
|
|
|
12,000 |
|
|
Advance from officer |
|
|
20,000 |
|
|
|
- |
|
| Cash
provided by financing activities |
|
|
98,000 |
|
|
|
12,000 |
|
| |
|
|
|
|
|
|
|
|
| Net increase in
cash and cash equivalents |
|
|
7,255 |
|
|
|
(135,570 |
) |
| Cash
and cash equivalents, beginning of period |
|
|
10,786 |
|
|
|
146,356 |
|
| Cash
and cash equivalents, end of period |
|
$ |
18,041 |
|
|
$ |
10,786 |
|
| |
|
|
|
|
|
|
|
|
| Supplemental
disclosure of non-cash investing and financing activities |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Shares issued for settlement of accounts payable |
|
$ |
13,500 |
|
|
$ |
1,500 |
|
|
Shares issued for conversion of related party note and
interest |
|
$ |
25,161 |
|
|
$ |
- |
|
The
accompanying notes are an integral part of these consolidated
financial statements.
NEXIEN
BIOPHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
Years
Ended June 30, 2021 and 2020
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 3, 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 June 30, 2021 and 2020 and for the years 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 $10,307,101. 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 June 30, 2021, the Company had a
working capital deficit of $13,775. 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
Years
Ended June 30, 2021 and 2020
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 June 30, 2021 and
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
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 June 30, 2020 and 2019, 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
Years
Ended June 30, 2021 and 2020
Note
3 – Summary of Significant Accounting Policies
(continued)
Fair
Value Measurements (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
assets 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 June 30, 2021 and 2020, there were no significant
transfers of financial assets or financial liabilities between the
hierarchy levels.
As of
June 30, 2021, 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, Earning 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.
Certain
estimates and judgments must be made in determining income tax
expense for financial statement purposes. These estimates and
judgments occur in the calculation of certain tax assets and
liabilities, which arise from differences in the timing of
recognition of revenue and expense for tax and financial statement
purposes.
Deferred
tax assets and liabilities are determined based on the differences
between financial reporting and the tax basis of assets and
liabilities using the tax rates and laws in effect when the
differences are expected to reverse. ASC 740 provides for the
recognition of deferred tax assets if realization of such assets is
more likely than not to occur. Realization of the Company’s net
deferred tax assets is dependent upon generating sufficient taxable
income in future years in appropriate tax jurisdictions to realize
benefit from the reversal of temporary differences and from net
operating loss, or NOL, carryforwards. Management has determined it
more likely than not that these timing differences will not
materialize and has provided a valuation allowance against
substantially all the Company’s net deferred tax assets.
Management
will continue to evaluate the realization of the deferred tax
assets and its related valuation allowance. If assessment of the
deferred tax assets or the corresponding valuation allowance were
to change, the Company would record the related adjustment to
income during the period in which the determination is
made.
NEXIEN
BIOPHARMA, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Years
Ended June 30, 2021 and 2020
Note
3 – Summary of Significant Accounting Policies
(continued)
Income
Taxes (continued)
In
addition, the calculation of the Company’s tax liabilities involves
dealing with uncertainties in the application of complex tax
regulations. Liabilities for anticipated tax audit issues in the
U.S. are recognized based on the estimate of whether, and to the
extent to which, additional taxes will be due. If it is ultimately
determined that payment of these amounts is unnecessary, the
liability will be reversed and a tax benefit will be recognized
during the period in which it is determined that the liability is
no longer necessary. The Company will record an additional charge
to the provision for taxes in the period in which it is determined
that the recorded tax liability is less than the Company expects
the ultimate assessment to be.
ASC
740 which requires recognition of estimated income taxes payable or
refundable on income tax returns for the current year and for the
estimated future tax effect attributable to temporary differences
and carry-forwards. Measurement of deferred income tax is based on
enacted tax laws including tax rates, with the measurement of
deferred income tax assets being reduced by available tax benefits
not expected to be realized.
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.
There
was no impact on the Company’s financial statements as a result of
adopting Topic 606 for years ended June 30, 2021 and
2020.
Research
and Development Expenses
Research
and development expenses are charged to operations as
incurred.
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 FASB ASC 718, 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.
NEXIEN
BIOPHARMA, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Years
Ended June 30, 2021 and 2020
Note
3 – Summary of Significant Accounting Policies
(continued)
Reclassifications
Certain
amounts in the consolidated financial statements for prior year
periods have been reclassified to conform with the current year
periods 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 June 30, 2021 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).
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 includes 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 shall use its commercially reasonable
efforts to develop and commercialize the licensed products, and, in
particular, will 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 recent private placement to third parties of Kanativa
Inc.’s common stock). The Company has also capitalized legal fees
of $29,040 incurred in conjunction with acquiring the license
agreement. The license agreement terminates, 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 is marketed in the
particular country.
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 is anticipated that
the product will 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 is to consist of a synthetic cannabinoid and a
blend of terpenes in an injectable vehicle.
NEXIEN
BIOPHARMA, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Years
Ended June 30, 2021 and 2020
Note
5 – License Agreements (continued)
Kotzker
License Agreement (continued)
The
Company has estimated that it may not be able to recover the
$302,915 carrying value of costs capitalized under the Kotzker
License Agreement and, 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 estimated that it may not be able to recover the
$65,000 of costs capitalized under the Accu-Break License
Agreement, and has recognized an impairment of $65,000 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 both of these license
agreements.
Note
6 - Stockholders’ Equity
Common
stock
During
the year ended June 30, 2021, the Company issued shares of its
common stock as follows:
|
|
● |
1,000,000
shares to each of the Company’s Chief Executive Officer and Chief
Financial Officer as consideration for their services to the
Company. |
| |
|
|
| |
● |
250,000
shares to the independent member of the Board of Directors for
services rendered. The shares were valued at $0.09 per share, the
closing trading price of the Company’s common stock as of the date
of issuance. |
| |
|
|
| |
● |
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 (Note
5). |
In May
2021, the Board of Directors authorized the issuance of a total of
2,500,000 shares of common stock of the Company to each of its
Chief Executive Officer and Chief Financial Officer, with 250,000
of such shares to be issued to each of them every quarter beginning
July 1, 2021 and continuing every three months through October 1,
2023, it being the intent of the Board that the issuance of these
shares represents compensation for services rendered for the then
completed calendar quarter (See Note 8).
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). |
NEXIEN
BIOPHARMA, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Years
Ended June 30, 2021 and 2020
Note
6 - Stockholders’ Equity (continued)
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 was 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 were to
be released from forfeiture restrictions in three equal tranches
upon each anniversary of the closing of the Acquisition. Any Seller
who was not then providing services to the Company or any of its
subsidiaries on any vesting date, whether through voluntary
termination or termination “for cause,” would forfeit his unvested
shares, which would be cancelled.
The
transaction was 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
was charged to stockholders’ equity as a contra equity account, and
was being amortized over the vesting periods. The net amount
charged to stockholder’s equity was $0 on the date of the
acquisition.
Effective
December 31, 2018, one of the Sellers resigned from the Company and
forfeited 1,732,500 unvested shares previously issued. In May 2019,
that Seller returned to the Company an additional 142,500 vested
shares issued in accordance with the Purchase Agreement. The fair
value of the returned shares was credited to the operations as of
June 30, 2019. In March 2021, four of the Sellers terminated their
relationships with the Company and forfeited their remaining
2,409,000 unvested shares, valued at the original issuance price of
$1,830,840 ($0.76 per share).
As at
June 30, 2021 and June 30, 2020, an aggregate $4,880,904 and
$3,787,237, respectively, was charged to operations for the value
of vested shares issued and the amortization of the unvested CRX
shares.
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.
NEXIEN
BIOPHARMA, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Years
Ended June 30, 2021 and 2020
Note
6 - Stockholders’ Equity (continued)
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% |
(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 $348,953 was charged to
operations during the year ended June 30, 2021. As of June 30,
2021, all options granted were fully vested.
NEXIEN
BIOPHARMA, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Years
Ended June 30, 2021 and 2020
Note
6 - Stockholders’ Equity (continued)
A
summary of option activity during the year ended June 30, 2021 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 and exercisable –
June 30, 2021 |
|
|
7,995,000 |
|
|
$ |
0.26 |
|
|
4.5 |
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).
The
following table summarizes information about warrants outstanding
at June 30, 2021:
|
|
|
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% |
A
summary of warrant activity during the year ended June 30, 2021 is
presented below:
| |
|
Shares |
|
|
Weighted
Average
Exercise Price |
|
|
Weighted
Average Remaining Contractual
Life (Years) |
| |
|
|
|
|
|
|
|
|
| Outstanding and exercisable – June 30, 2020 |
|
|
- |
|
|
|
|
|
|
|
| Granted |
|
|
5,181,897 |
|
|
$ |
0.0429 |
|
|
|
| Exercised |
|
|
- |
|
|
|
|
|
|
|
| Expired/Canceled |
|
|
- |
|
|
|
|
|
|
|
| Outstanding and exercisable –
June 30, 2021 |
|
|
5,181,897 |
|
|
$ |
0.0429 |
|
|
4.4 |
NEXIEN
BIOPHARMA, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Years
Ended June 30, 2021 and 2020
Note
7 – Convertible Notes Payable -Related
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.
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 same 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 $65,000 for the expense
portion of the notes is being amortized over the term of the notes.
As the warrants exceeded the value of the notes themselves, the
discount is the entire amount 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. The note holders have
agreed not to convert the loans unless sufficient shares of common
stock are available for conversion.
During
the year ended June 30, 2021, $12,941 was charged to operations for
amortization during the period of the Beneficial Conversion
Feature.
Note
8– Related Party Transactions
In
June 2021, the Company’s Chief Executive Officer advanced $20,000
to the Company for working capital and operating purposes. The
advance is non-interest bearing and is repayable on
demand.
During
the year ended June 30, 2021, the Board of Directors authorized the
issuance of a total of 2,500,000 shares of common stock of the
Company to each of its Chief Executive Officer and Chief Financial
Officer, with 250,000 of such shares to be issued to each of them
every quarter beginning July 1, 2021 and continuing every three
months through October 1, 2023. At June 30, 2021, the Company has
recorded as a component of stockholders’ equity the $35,000 fair
value of the 250,000 shares to be issued each quarter to each of
the individuals effective July 1, 2021.
The
Board of Directors also authorized the issuance of 250,00 shares to
its independent member. These shares were valued at $22,500 ($0.09
per share), based on the closing trading price of the Company’s
common stock as of the date of issuance.
NEXIEN
BIOPHARMA, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Years
Ended June 30, 2021 and 2020
Note
8– Related Party Transactions (continued)
As
discussed in Note 7, in November 2020, the Company entered into
convertible debt financing agreements with two individuals, its CEO
and a shareholder, for aggregate borrowings of $65,000.
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 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 NexN in the amount
of $201,228. Included in the consideration for the issuance of the
common stock is $172,915 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 3). 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.
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.
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.
Note
9 – Income Taxes
The
Company accounts for income taxes in accordance with standards of
disclosure propounded by the FASB, and any related interpretations
of those standards sanctioned by the FASB. Accordingly, deferred
tax assets and liabilities are determined based on differences
between the financial statement and tax bases of assets and
liabilities, as well as a consideration of net operating loss and
credit carry forwards, using enacted tax rates in effect for the
period in which the differences are expected to impact taxable
income. A valuation allowance is established, when necessary, to
reduce deferred tax assets to the amount that is more likely than
not to be realized. On December 22, 2017, the 2017 Tax Cuts and
Jobs Act (the Tax Act) was enacted into law and the new legislation
contains several key tax provisions that affected us, including a
reduction of the corporate income tax rate to 21% effective January
1, 2018.
No
provision for income taxes has been recorded due to the net
operating loss carryforwards totaling approximately $2,818,000 as
of June 30, 2021 that will be offset against future taxable income.
The available net operating loss carry forwards expire in various
years through 2041. No tax benefit has been reported in the
financial statements because the Company believes there is a 50% or
greater chance the carry forwards will expire unused. There were no
uncertain tax positions taken by the Company.
NEXIEN
BIOPHARMA, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
Years
Ended June 30, 2021 and 2020
The
deferred tax asset and valuation account is as follows at June
30:
| |
|
2021 |
|
|
2020 |
|
| Deferred tax asset |
|
|
|
|
|
|
|
|
| Net operating loss
carryforward (at combined 24% statutory rate of 21% Federal and 3%
State) |
|
$ |
677,977 |
|
|
$ |
564,973 |
|
| Valuation
allowance |
|
|
(677,977 |
) |
|
|
(564,973 |
) |
| Total |
|
$ |
- |
|
|
$ |
- |
|
The
components of income tax expense are as follows for the years ended
June 30:
| |
|
2021 |
|
|
2020 |
|
| |
|
|
|
|
|
|
| Change in net operating
loss benefit |
|
$ |
(113,004 |
) |
|
$ |
(94,745 |
) |
| Change in
valuation allowance |
|
|
113,004 |
|
|
|
94,745 |
|
| Total |
|
$ |
- |
|
|
$ |
- |
|
Note
10- Commitments and Contingencies
At
June 30, 2021, there were no legal proceedings against the
Company.
Note
11 – Subsequent Events
In
October 2021, the Company’s Chief Executive Officer advanced
$10,000 to the Company for working capital and operating purposes.
The advance is non-interest bearing and is repayable on
demand.
The
Company has analyzed its operations subsequent June 30, 2021
through the date these financial statements were issued, and has
determined that it does not have any additional material subsequent
events to disclose.
|
ITEM
9. |
CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
Not
applicable.
|
ITEM
9A. |
CONTROLS AND
PROCEDURES. |
Evaluation
of Disclosure Controls and Procedures
We
have carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)) as of June 30, 2021. Based on such
evaluation, we have concluded that, as of such date, our disclosure
controls and procedures were not effective to ensure that
information required to be disclosed by us in our Exchange Act
reports is recorded, processed, summarized and reported within the
time periods specified in applicable SEC 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 discussions regarding required
disclosure.
Management’s
Report on Internal Control over Financial Reporting
Our
management is responsible for establishing and maintaining internal
control over financial reporting for our internal control system
was designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles. Internal control over our financial
reporting includes those policies and procedures that:
|
(1) |
pertain
to the maintenance of records that in reasonable detail accurately
and fairy reflect our transactions. |
|
|
|
|
(2) |
provide
reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with
generally accepted accounting principles, and that our receipts and
expenditures are being made only in accordance with authorization
of our management and directors; and |
|
|
|
|
(3) |
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that
could have a material effect on our financial
statements. |
All
internal control systems, no matter how well designed, have
inherent limitations, including the possibility of human error or
circumvention through collusion of improper overriding of controls.
Therefore, even those internal control systems determined to be
effective can provide only reasonable assurance with respect to
financial statement preparation. Further, because of changes in
conditions, the effectiveness of internal control may vary over
time.
Our
management assessed the effectiveness of our internal control over
financial reporting as of June 30, 2021. In making its assessment
of internal control over financial reporting, management used the
criteria set forth by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO) in Internal-Control-Integrated
Framework - 2013 and implemented a process to monitor and
assess both the design and operating effectiveness of our internal
controls. Based on this assessment, management believes that as of
June 30, 2021, our internal control over financial reporting was
not effective.
As of
June 30, 2021, we did not establish a formal written policy for the
approval, identification, and authorization of related party
transactions.
Changes
in Internal Control Over Financial Reporting
Our
management has evaluated, with the participation of our Chief
Executive Officer/Chief Financial Officer, changes in our internal
controls over financial reporting (as defined in Rule 13a-15(f) of
the Exchange Act) during the fourth quarter of fiscal 2021. In
connection with such evaluation, there have been no changes to our
internal control over financial reporting that occurred during
fiscal year ended June 30, 2021 that have materially affected, or
are reasonably likely to materially affect our internal control
over financial reporting. While there have been no changes, we have
assessed our internal controls as being deficient and will be
taking steps beginning in 2021 to remedy such
deficiencies.
|
ITEM
9B. |
OTHER INFORMATION. |
There
are no further disclosures.
PART III
|
ITEM
10. |
DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE |
Our
directors were elected to serve until the next annual meeting of
shareholders and until their respective successors will have been
elected and will have qualified. The following table sets forth the
name, age and position held with respect to our present executive
officers and directors:
|
Name |
|
Age |
|
Title |
| Richard
Greenberg |
|
72 |
|
Chief
Executive Officer and Chairman of the Board of
Directors |
| Evan
Wasoff |
|
74 |
|
Chief
Financial Officer |
| Robert
I. Goldfarb |
|
66 |
|
Chief
Operating Officer |
| Lindy
Snider |
|
59 |
|
Director |
Richard
Greenberg, 72, Chief Executive Officer and Director, has been a
director since its inception in March 2017 and the Chief Executive
Officer since March 2020. He has also served as Executive Vice
President and a Director of Kanativa Inc. (formerly Intiva Inc).
and Kanativa USA since their inception in February 2014 and August
2014, respectively. Mr. Greenberg has over 30 years of legal,
consulting, and regulatory compliance experience. Mr. Greenberg has
served as a Subcommittee Counsel for the U.S. House of
Representatives, and as a Senior Enforcement Attorney for the U.S.
Environmental Protection Agency. Mr. Greenberg was a founder of
TechLaw, Inc., a national consulting firm serving both the federal
government and industry clients. Previous management roles include
Director of Environmental Management Consulting Services for
PricewaterhouseCoopers. Mr. Greenberg received a B.A. degree from
City University of New York – Queens College and a J.D. degree from
Rutgers University School of Law.
Evan
Wasoff, 74, Chief Financial Officer, has over 40 years of
experience as a certified public accountant. Mr. Wasoff also serves
as CFO of Kanativa Inc. (formerly Intiva Inc.) From 2005 to 2012,
Mr. Wasoff served as the Chief Financial Officer and compliance
officer at Falcon Oil and Gas Ltd., a Canadian oil and gas
exploration company with activities in Hungary, Australia, Canada
and the United States. Since 2012, he has been the principal of
AZCO Financial Management, LLC, located in Boulder Colorado,
providing business advisory and consulting services and outsourced
CFO and controllership services to publicly-reporting and private
companies. Mr. Wasoff holds a Certified Public Accounting license
in Colorado. He received a B.S. degree in accounting from the State
University of New York at Albany, and an MBA in Finance from the
University of Colorado.
Robert
Goldfarb, 66, Chief Operating Officer, has over 37 years of
legal experience, with much of that focused on the pharmaceutical
industry. Since 2007, Mr. Goldfarb has been President and general
counsel for privately-held Accu-Break Pharmaceuticals, Inc. Since
2011, he has been a director of privately-held Sustained Nano
Systems LLC. Mr. Goldfarb obtained his bachelor’s degree from the
University of Connecticut and his J.D. from the University of
Florida. He is a member of the Florida Bar.
Lindy
Snider, 59, Director, is an active entrepreneur, philanthropist
and advocate for the benefits of medical cannabis. In 2003, Ms.
Snider founded and created the Pennsylvania-based Lindi Skin, the
first-ever skincare collection dedicated to help relieve the
often-debilitating skin side-effects of individuals undergoing
cancer therapies including chemotherapy and radiation. Lindi Skin
represents an entirely new niche in dermatology and oncology,
providing cancer patients with skin care products that bring a
sense of wellness and control as they deal with the side effects of
their chemotherapy and radiation treatment, which include widely
known conditions of hair loss and nausea, among other side-effects.
Lindi Skin helps patients address the lesser known skin
side-effects of sores, rashes, burns, flaky skin and loss of skin
elasticity that often result.
Ms.
Snider, as an active and dedicated philanthropist, is also an
active board member of many Philadelphia and national charitable
and other philanthropic organization, which include: Cancer
Forward; PSPCA; National Museum of American Jewish History; Shoah
Foundation’s Next Generation Council; Philadelphia Orchestra; Fox
Chase Cancer Foundation; and the Snider Foundation. Ms. Snider is a
founder and director of Athletes for Care, an organization
dedicated to creating a community where former professional athlete
can find support, opportunity and purpose in life after a career in
sports. The organization is a strong advocate of the use of medical
cannabis, as well as a director of Stem Holdings Inc., which owns
and leases real estate to the marijuana industry. The common stock
of Stem Holdings is registered under the Securities Exchange Act of
1934 and trades on the OTCQB under the symbol “STMH”. Ms. Snider is
chair of the Entrepreneurship and Social Impact Initiative of The
Lambert Center for the Study of Medicinal Cannabis and Hemp at
Thomas Jefferson University in Philadelphia and is also an
associate fellow of the Institute of Emerging Health Professions,
Thomas Jefferson University.
Our
directors, officers or affiliates have not, within the past five
years, filed any bankruptcy petition, been convicted in or been the
subject of any pending criminal proceedings, or is any such person
the subject or any order, judgment or decree involving the
violation of any state or federal securities laws.
Audit
Committee, Compensation Committee and Nominations
Committee
We do
not have any of the above-mentioned standing committees because our
corporate financial affairs and corporate governance are simple in
nature at this stage of development and each financial transaction
is approved by our entire board of directors.
Code
of Ethics
We do
not currently have a Code of Ethics applicable to our principal
executive officers; however, the Company plans to implement such a
code in the near future.
Potential
Conflicts of Interest
Since
we do not have a compensation committee comprised of independent
Directors, the functions that would have been performed by such
committee are performed by our Board of Directors. Thus, there is a
potential conflict of interest in that our Directors have the
authority to determine issues concerning management compensation,
in essence their own. There is also a potential conflict in that
Messrs. Greenberg and Wasoff are either officers and/or directors
of Kanativa USA Inc., and its parent, Kanativa Inc. which owns
approximately 34.1% of outstanding shares of the
Company.
We
are not aware of any other conflicts of interest with any of our
Executives or Directors.
Board’s
Role in Risk Oversight
The
Board assesses on an ongoing basis the risks faced by the Company.
These risks include financial, technological, competitive, and
operational risks. The Board’s Audit Committee is responsible for
the assessment and oversight of the Company’s financial risk
exposures.
Involvement
in Certain Legal Proceedings
We
are not aware of any material legal proceedings that have occurred
within the past ten years concerning any Director or control person
which involved a criminal conviction, a pending criminal
proceeding, a pending or concluded administrative or civil
proceeding limiting one’s participation in the securities or
banking industries, or a finding of securities or commodities law
violations.
Delinquent
Section 16(a) Reports
Section
16(a) of the Exchange Act requires our Company’s officers,
directors and persons who beneficially own more than 10% of a
registered class of our Company’s equity securities to file reports
of ownership and changes in ownership with the SEC, and to furnish
to our Company copies of such reports.
Based
solely on the review of Forms 3 and 4 received by our Company
during the June 30, 2021 fiscal year, as required under Section
16(a)(2) of the Exchange Act, we do not believe that any Section
16(a) reports were delinquent.
|
ITEM
11. |
EXECUTIVE COMPENSATION |
The
following table sets forth information about the remuneration of
our principal executive officer for services rendered during our
fiscal years ended June 30, 2021 and 2020, and our other executive
officers that had total compensation of $100,000 or more for our
last completed full fiscal year (the “Named Officers”). Certain
tables and columns have been omitted as no information was required
to be disclosed under those tables or columns.
SUMMARY
COMPENSATION TABLE
|
Name and principal position |
|
Fiscal year |
|
|
Salary ($) |
|
|
Stock
awards
($)(1)
|
|
|
Option
awards
($)(2)
|
|
|
All
other compensation
($)
|
|
|
Total
($)
|
|
| Richard Greenberg (Chief Executive
Officer) (2) |
|
|
2021
2020
|
|
|
|
-0-
-0-
|
|
|
|
124,000
-0- |
|
|
|
174,477
-0- |
|
|
|
-0-
-0- |
|
|
|
298,477
-0-
|
|
| Alex Wasyl (Chief
Executive Officer) (3) |
|
|
2020 |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
| Evan Wasoff (Chief Financial
Officer |
|
|
2021
2020
|
|
|
|
-0-
-0-
|
|
|
|
124,000
-0- |
|
|
|
104,686
-0- |
|
|
|
-0-
-0- |
|
|
|
228,686
-0-
|
|
|
|
(1) |
The
shares were valued at $0.124 per share, the closing trading price
of the Company’s common stock as of the date of
issuance. |
| |
(2) |
The
fair value was determined using the Black-Scholes option pricing
model with the following assumptions: volatility at 152%; risk free
interest rate of 0.23%; expected life of 4 years; and expected
dividend rate of 0%. |
| |
(3) |
Mr.
Greenberg has served in this capacity since March 31,
2020. |
| |
(4) |
Mr.
Wasyl has served in this capacity from October 26, 2018 to March
31, 2020. |
Due
to the Company’s limited cash resources, no cash compensation is
being paid to the Company’s three officers. On August 19, 2020, the
Board of Directors authorized the grant of options to purchase an
aggregate of 5,000,000 shares of common stock at a price of $0.08
per share. The options are exercisable for a period of seven years.
Two-thirds of the options (3,333,334) vested immediately, as such
options represented compensation for services rendered through June
30, 2020. The remaining 1,666,666 options vested quarterly over the
next four calendar quarters beginning September 30, 2020, and are
now fully vested.
The
following table sets forth information with respect to stock awards
for the Named Officers.
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
| |
|
Option Awards |
|
Name |
|
Number of securities underlying
unexercised options (#) exercisable |
|
Number of
securities
underlying unexercised
options (#) unexercisable
|
|
Equity incentive
plan awards: Number of securities underlying
unexercised unearned options
(#)
|
|
Option exercise price
($) |
|
Option expiration
date |
| Richard Greenberg |
|
150,000
100,000
2,500,000
|
|
-0-
-0-
-0-
|
|
-0-
-0-
-0-
|
|
0.54
0.655
0.08
|
|
7/25/2025
10/26/2025
8/19/2027
|
| Alex
Wasyl |
|
-0- |
|
-0- |
|
-0- |
|
— |
|
— |
| Evan
Wasoff |
|
420,000
200,000
1,500,000
|
|
-0-
-0-
-0-
|
|
-0-
-0-
-0-
|
|
0.54
0.655
0.08
|
|
7/25/2025
10/26/2025
8/19/2027
|
Employment
Contracts and Termination of Employment and Change-in-Control
Arrangements
None
of our executive officers or directors are parties to any
employment contracts. No retirement, pension, profit sharing, or
insurance programs or other similar programs have been adopted by
the Company for the benefit of the Company’s employees.
Director
Compensation
We
currently do not compensate our directors in cash for acting as
such. We reimburse our directors for reasonable expenses incurred
in connection with their service as directors. We issued Lindy
Snider, our sole non-officer director, 250,000 shares as
compensation for serving as a director for the fiscal year ended
June 30, 2021. The shares were valued at $0.09 per share, the
closing trading price of the Company’s common stock as of the date
of issuance.
|
ITEM
12. |
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS |
The
following table sets forth information regarding the beneficial
ownership of our shares of Common Stock as of October 12, 2021. The
information in this table provides the ownership information for:
each person known by us to be the beneficial owner of more than 5%
of our common stock; each of our directors; each of our executive
officers; and our executive officers and directors as a
group.
|
Name of Beneficial Owner (1) |
|
Common
Stock
Beneficially
Owned (2)
|
|
|
Percentage
of Common
Stock
Owned (2)
|
|
| Kanativa USA Inc. (3) |
|
|
19,000,000 |
|
|
|
34.1 |
% |
| Richard Greenberg, Chief Executive
Officer and Director (4) |
|
|
10,937,004 |
|
|
|
18.7 |
% |
| Vyta USA Inc. |
|
|
5,000,000 |
|
|
|
9.0 |
% |
| Evan Wasoff, Chief Financial Officer
(5) |
|
|
4,370,000 |
|
|
|
7.6 |
% |
| Alex Wasyl |
|
|
3,811,500 |
|
|
|
6.8 |
% |
| Robert Goldfarb, Chief Operating
Officer (6) |
|
|
2,028,800 |
|
|
|
3.6 |
% |
| Lindy Snider, Director (7) |
|
|
830,000 |
|
|
|
1.5 |
% |
| All Officers and
Directors (4 persons) (8) |
|
|
18,165,804 |
|
|
|
29.4 |
% |
|
|
(1) |
The
address of each beneficial owner is 4340 E. Kentucky Avenue, Suite
206, Denver, Colorado 80246. |
| |
(2) |
Applicable
percentage ownership is based on 55,772,196 Shares of Common Stock
outstanding as of October 12, 2021. Beneficial ownership is
determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock that are
currently exercisable or exercisable within 60 days of October 12,
2021 are deemed to be beneficially owned by the person holding such
securities for the purpose of computing the percentage of ownership
of such person, but are not treated as outstanding for the purpose
of computing the percentage ownership of any other
person. |
| |
(3) |
Kanativa
USA, Inc. is a Colorado corporation that is a wholly-owned
subsidiary of Kanativa Inc., a Canadian corporation. |
| |
(4) |
Includes
2,750,000 shares purchasable under immediately exercisable stock
options, 3,188,859 shares purchasable under exercisable warrants,
1,062,958 shares issuable upon the conversion of a promissory note,
and 250,000 shares issuable as of October 1, 2021 for
compensation. |
| |
(5) |
Includes
2,120,000 shares purchasable under immediately exercisable stock
options and 250,000 shares issuable as of October 1, 2021 for
compensation. |
| |
(6) |
Includes
1,000,000 shares purchasable under immediately exercisable stock
options. |
| |
(7) |
Includes
100,000 shares purchasable under immediately exercisable stock
options. |
| |
(8) |
Includes
5,970,000 shares purchasable under immediately exercisable stock
options, 3,188,859 shares purchasable under exercisable warrants,
1,062,958 shares issuable upon the conversion of a promissory note,
and 500,000 shares issuable as of October 1, 2021 for
compensation. |
To
the knowledge of the Company, there are no arrangements, the
operation of which may at a subsequent date result in a change in
control of the Company.
Long-Term
Incentive Plan (“LTIP”) and Awards
2017
Stock Incentive Plan
On
August 10, 2017, BioPharma adopted the “2017 Stock Incentive Plan”
under which the board of directors is authorized to grant up to
7,200,000 shares of its common stock. 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) were granted. In
March 2018, 1,166,667 unvested shares (valued at $145,833)
previously issued to the Company’s former Chief Executive Officer
were canceled. As of June 30, 2021, all of the remaining 5,233,333
shares issued (valued at $654,167) have been vested.
2018
Equity Incentive Plan
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 reserved 8,000,000 shares of Common Stock
for issuance under the terms of that Plan. The total number of
shares reserved and available for grant and issuance under the 2018
Plan is 8,000,000 shares, plus any reserved shares not issued or
subject to outstanding grants under the 2017 Stock Plan and shares
that cease to be subject to awards under the 2017 Stock Plan
because of forfeiture. In addition, the number of shares available
for grant and issuance under the 2018 Plan will be increased on
July 1 of each of the next ten calendar years by the lesser of (a)
15% of the number of shares issued during the most recently
completed fiscal year or (b) such number of shares determined by
the board of directors. The 2018 Plan permits the board to grant a
variety of incentive awards: stock options, restricted stock
awards, stock bonus awards, and stock appreciation rights.
Stockholder approval was obtained on March 29, 2019. As of June 30,
2021, 7,995,000 stock options granted under the 2018 Plan are
outstanding.
|
ITEM
13. |
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
Certain
Related Party Transactions
The
Company’s wholly-owned subsidiary, Intiva BioPharma Inc., a
Colorado corporation (“Colorado BioPharma”) was formed as a
subsidiary of Kanativa USA, Inc. (formerly Intiva USA, Inc.) in
March 2017. At June 30, 2017, Colorado BioPharma was owed $141,329
from Kanativa USA for advances made by Colorado BioPharma on behalf
of Kanativa USA in conjunction with the Share Exchange Transaction.
As of March 31, 2020, an aggregate $50,662 was repaid by Kanativa
USA, including $15,000 and $9,000 during the year ended June 30,
2019 and nine months ended March 31, 2020, respectively. The
remaining balance of $90,667 was due on March 1, 2020. On May 1,
2020, Colorado 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.
On
June 11, 2020, Richard Greenberg, the Company’s Chief Executive
Officer agreed to loan the Company up to $25,000 under a promissory
note that bore interest at 5% per annum and was due on demand. At
the option of Mr. Greenberg, the unpaid principal and interest
could be converted into shares of the Company’s common stock at the
lesser of (1) $0.014, being the closing price of the Company’s
common stock as of the date of the note, or (2) the volume-weighted
average price of the Company’s common stock over the ten trading
days immediately preceding the date of conversion. Mr. Greenberg
advanced $12,000 on June 11, 2020 and $13,000 on July 10, 2020.
Accrued interest on the note at June 30, 2020 was $33. On August
12, 2020, Mr. Greenberg notified the Company of his election to
convert all of the $25,000 in outstanding principal and $161 in
accrued interest into a total of 1,797,192 shares at the conversion
price of $0.014 per share.
On
November 24, 2020, the Company entered into financing agreements
with two individuals, Mr. Greenberg and a stockholder. 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. Mr. Greenberg 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.
In
May 2021, the Board of Directors authorized the issuance of a total
of 2,500,000 shares of common stock of the Company to each of its
Chief Executive Officer and Chief Financial Officer, with 250,000
of such shares to be issued to each of them every quarter beginning
July 1, 2021 and continuing every three months through October 1,
2023, it being the intent of the Board that the issuance of these
shares represents compensation for services rendered for the then
completed calendar quarter. At June 30, 2021, accounts payable
includes $35,000 for the fair value of the 250,000 shares to be
issued to each of the individuals effective July 1, 2021. The Board
of Directors also authorized the issuance of 250,00 shares to its
independent member. These shares were valued at $22,500 ($0.09 per
share), based on the closing trading price of the Company’s common
stock as of the date of issuance.
In
June 2021 and October 2021, the Company’s Chief Executive Officer
advanced $20,000 and $10,000, respectively, to the Company for
working capital and operating purposes. The advances are
non-interest bearing and are repayable on demand.
Our
two directors, Richard Greenberg and Lindy Snider, are two of
Kanativa’s six-person board of directors. Evan Wasoff, the
Company’s Chief Financial Officer, and Richard Greenberg are also
officers of Kanativa and serve in similar positions with other
subsidiaries and affiliated entities of Kanativa.
Indebtedness
of Management
No
officer, director or security holder known to us to own of record
or beneficially more than 5% of our Common Stock or any member of
the immediate family or sharing the household (other than a tenant
or employee) of any of the foregoing persons is indebted to us in
the year 2021 and to date.
Director
Independence
NASDAQ
Rule 5605, which sets forth several tests to determine whether a
director of a listed Company is independent, provides that a
director would not be considered independent if the director or an
immediate family member accepted any compensation from the listed
Company in excess of $120,000 during any period of 12 consecutive
months within the three years preceding the determination of
independence (excluding compensation for board or board committee
service, compensation paid to an immediate family member as a
non-executive employee, benefits paid under a tax-qualified
retirement plan and non-discretionary compensation).
In
determining whether our directors are considered independent, the
Company used the definition of independence as defined in NASDAQ
Rule 4200. Based on that definition we believe that Lindy Snider
and Courtney Clark are our independent directors.
|
ITEM
14. |
PRINCIPAL ACCOUNTING FEES AND
SERVICES |
The
following table is a summary of the fees billed to us by M&K
CPAS for professional services for the fiscal years as disclosed in
the table below:
| Fee
Category |
|
Fees Billed for
Fiscal 2021 |
|
|
Fees Billed for
Fiscal 2020 |
|
| |
|
|
|
|
|
|
| Audit Fees (1) |
|
$ |
16,550 |
|
|
$ |
15,500 |
|
| Audit-Related Fees (2) |
|
|
- |
|
|
|
- |
|
| Tax Fees |
|
|
– |
|
|
|
– |
|
| All Other
Fees |
|
|
– |
|
|
|
– |
|
| Total Fees |
|
$ |
16,550 |
|
|
$ |
15,500 |
|
|
|
(1) |
Includes
audit of annual financial statements and review of unaudited
quarterly financial statements. |
| |
|
|
| |
(2) |
Includes
review of our registration statement. |
Audit
Committee Pre-Approval Policies and Procedures
According
to the Audit Committee Charter, the Audit Committee is to review
and preapprove both audit and non-audit services to be provided by
the independent auditor. The authority to grant preapprovals may be
delegated to one or more designated members of the audit committee,
whose decisions will be presented to the full audit committee at
its next regularly scheduled meeting.
PART IV
|
ITEM
15. |
EXHIBITS, FINANCIAL STATEMENT
SCHEDULES. |
The
following exhibits are filed as part of this Form 10-K:
|
Exhibit
Number |
|
Description |
|
Incorporated
by Reference to: |
|
2.1 |
|
Limited
Liability Company Interest Purchase Agreement by and among the
Members of CRX Bio Holdings LLC and Nexien BioPharma, Inc. dated
October 26, 2018 |
|
Exhibit
2.1 to the registrant’s current report on form 8-K filed October
30, 2018 |
|
3.1 |
|
Certificate
of Incorporation |
|
Exhibit
3.1 to the registrant’s registration statement on Form 10 filed
November 14, 2014 |
|
3.2 |
|
Certificate
of Merger |
|
Exhibit
3.1(i) to the registrant’s registration statement on Form 10 filed
November 14, 2014 |
|
3.3 |
|
Certificate
of Amendment to Certificate of Incorporation |
|
Exhibit
3.1(ii) to the registrant’s registration statement on Form 10 filed
November 14, 2014 |
|
3.4 |
|
Certificate
of Amendment to Certificate of Incorporation |
|
Exhibit
3.4 to the registrant’s quarterly report on Form 10-Q filed May 15,
2018 |
|
3.5 |
|
Certificate
of Amendment to Certificate of Incorporation |
|
Exhibit
3.4 to the registrant’s annual report on Form 10-K filed October 1,
2018 |
|
3.6 |
|
Bylaws |
|
Exhibit
3.2 to the registrant’s Form 10 registration statement filed
November 14, 2014 |
|
10.1# |
|
2017
Stock Incentive Plan |
|
Exhibit
10.1 to the registrant’s quarterly report on Form 10-Q filed May
15, 2018 |
|
10.2 |
|
Licensing
Agreement between the Company and Kotzker Consulting
LLC |
|
Exhibit
10.2 to the registrant’s quarterly report on Form 10-Q filed May
15, 2018 |
|
10.3 |
|
Exclusive
License Agreement between the Company and Accu-Break
Pharmaceuticals, Inc. |
|
Exhibit
10.3 to the registrant’s quarterly report on Form 10-Q filed May
15, 2018 |
|
10.4# |
|
2018
Equity Incentive Plan |
|
Exhibit
10.4 to the registrant’s quarterly report on Form 10-Q filed May
15, 2018 |
|
10.5 |
|
First
Amendment to Exclusive License Agreement between the Company and
Accu-Break Pharmaceuticals, Inc. dated September 18,
2018 |
|
Exhibit
10.6 to the registrant’s annual report on Form 10-K filed October
1, 2018 |
|
10.6 |
|
Demand
Convertible Promissory Note dated June 11, 2020 to Richard
Greenberg |
|
Exhibit
10.6 to the registrant’s annual report on Form 10-K filed September
28, 2020 |
|
10.7 |
|
Convertible
Promissory Note and Warrants dated November 24, 2020 to Richard
Greenberg |
|
Exhibit
10.7 to the registrant’s quarterly report on Form 10-Q filed
February 11, 2021 |
|
21.1 |
|
Subsidiaries
of the Registrant |
|
Exhibit
21.1 to the registration statement on Form S-1 (File No.
333-225477) filed June 7, 2018 |
|
31.1 |
|
Rule
13a-14(a) Certification of Richard Greenberg |
|
|
|
31.2 |
|
Rule
13a-14(a) Certification of Evan Wasoff |
|
|
|
32.1 |
|
Certification
of Richard Greenberg Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 |
|
|
|
32.2 |
|
Certification
of Evan Wasoff Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 |
|
|
|
101* |
|
Financial
statements from the Annual Report on Form 10-K of Nexien BioPharma,
Inc. for the fiscal year ended June 30, 2021, formatted in XBRL:
(i) the Balance Sheets; (ii) the Statements of Operations; (iii)
the Statements of Stockholders’ Deficit; (iv) the Statements of
Cash Flows; and (v) the Notes to Financial Statements. |
|
|
|
# |
Indicates
a management contract or compensatory plan or
arrangement. |
| * |
In
accordance with Rule 406T of Regulation S-T, the information in
these exhibits shall not be deemed to be “filed” for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended, or
otherwise subject to liability under that section, and shall not be
incorporated by reference into any registration statement or other
document filed under the Securities Act of 1933, as amended, except
as expressly set forth by specific reference in such
filing. |
|
ITEM
16. |
FORM 10-K SUMMARY. |
Not
applicable.
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 to
be signed on its behalf by the undersigned, thereunto duly
authorized.
| |
NEXIEN
BIOPHARMA, INC. |
|
|
|
|
| Dated:
October 12, 2021 |
By: |
/s/
Richard Greenberg |
| |
|
Richard
Greenberg, Chief Executive Officer |
Pursuant
to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates
indicated.
|
Signature |
|
Title |
|
Date |
|
|
|
|
|
|
|
/s/
Richard Greenberg |
|
Chief
Executive Officer (Principal Executive Officer) and
Director |
|
October
12, 2021
|
|
Richard
Greenberg |
|
|
|
|
| |
|
|
|
|
|
/s/
Evan Wasoff
|
|
Chief
Financial Officer (Principal Financial and Principal Accounting
Officer) |
|
October
12, 2021
|
|
Evan
Wasoff |
|
|
|
|
|
|
|
|
|
|
|
/s/
Lindy Snider |
|
Director |
|
October
12, 2021 |
|
Lindy
Snider |
|
|
|
|
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