NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
1 – Nature of Business and Basis of Presentation
Nexien
BioPharma, Inc. (the “Company” or “Nexien”) was incorporated in the State of Michigan on November 10, 1952 as
Gantos, Inc., and was reincorporated in the State of Delaware in 2008, changing its name to Kinder Holding Corp. In October 2017, the
Company completed a reverse acquisition of Intiva BioPharma Inc., a Colorado corporation (“BioPharma”), incorporated on March
27, 2017, through an exchange of shares (the “Share Exchange Transaction”) and changed its name to Intiva BioPharma Inc.
In September 2018, the Company changed its name to Nexien BioPharma, Inc.
As
further described in Note 4, BioPharma became a wholly-owned subsidiary of the Company. Since this transaction resulted in the existing
shareholders of BioPharma acquiring control of the Company, for financial reporting purposes, the business combination has been accounted
for as an additional capitalization of the Company (a reverse acquisition with BioPharma as the accounting acquirer). The operations
of BioPharma were the only continuing operations of the Company.
BioPharma
was incorporated 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.
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 $10,649,006. The development of pharmaceuticals with the objective of obtaining approval by the FDA and other
international regulatory authorities is not a short-term endeavor for any specific drug candidate. It also requires extremely significant
amounts of capital funding for clinical trials and other matters. At December 31, 2021, the Company had negative working capital $62,425.
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 has a funding commitment which will enable it to continue its research operations for approximately
the next twelve months (See Note 10). These and other factors raise substantial doubt about the Company’s ability to continue as
a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability
and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company
to continue as a going concern.
NEXIEN
BIOPHARMA, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
3 – Summary of Significant Accounting Policies
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statement and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from the estimates.
Cash
and Cash Equivalents
For
financial statement presentation purposes, the Company considers those short-term, highly liquid investments with original maturities
of three months or less to be cash or cash equivalents. There were no cash equivalents at December 31, 2021 and June 30, 2021.
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 December 31, 2021 and June 30, 2021, the carrying value of certain financial instruments (cash and cash equivalents, accounts
payable and accrued expenses) approximates fair value due to the short-term nature of the instruments or interest rates, which are comparable
with current rates.
Fair
Value Measurements
The
Company measures fair value under a framework that utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques
used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets
or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of inputs
which prioritize the inputs used in measuring fair value are:
Level
1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company
has the ability to access.
Level
2: Inputs to the valuation methodology include:
|
●
|
Quoted
prices for similar assets or liabilities in active markets;
|
|
●
|
Quoted
prices for identical or similar assets or liabilities in inactive markets;
|
|
●
|
Inputs
other than quoted prices that are observable for the asset or liability;
|
|
●
|
Inputs
that are derived principally from or corroborated by observable market data by correlation or other means.
|
NEXIEN
BIOPHARMA, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
3 – Summary of Significant Accounting Policies (continued)
If
the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the
asset or liability.
Level
3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The
asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input
that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize
the use of unobservable inputs.
When
the Company changes its valuation inputs for measuring financial assets and liabilities at fair value, either due to changes in current
market conditions or other factors, it may need to transfer those assets or liabilities to another level in the hierarchy based on the
new inputs used. The Company recognizes these transfers at the end of the reporting period that the transfers occur. For the periods
ended December 31, 2021 and June 30, 2021, there were no significant transfers of financial assets or financial liabilities between the
hierarchy levels.
As
at December 31, 2021 and 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.
Revenue
Recognition
The
Company has adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial
sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract
with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction
price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
Research
and Development Expenses
Research
and development expenses are charged to operations as incurred.
NEXIEN
BIOPHARMA, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
3 – Summary of Significant Accounting Policies (continued)
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.
Reclassifications
Certain
amounts in the consolidated financial statements for prior year periods have been reclassified to conform with the current period presentation.
Recent
Accounting Pronouncements
Although
there are several other new accounting pronouncements issued or proposed by the FASB, which the Company has adopted or will adopt, as
applicable, the Company does not believe any of these accounting pronouncements has had or will have a material impact on its consolidated
financial position or results of operations. Management has evaluated accounting standards and interpretations issued but not yet effective
as of December 31, 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
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), whose President was an affiliate of the Company as of the date of the agreement.
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.
NEXIEN
BIOPHARMA, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
5 – License Agreements (continued)
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.
Note
6– Stockholders’ Equity
Common
stock
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 December 31, 2021, the Company has included
as a component of Stockholders’ Equity the $35,000 fair value of the aggregate 500,000 shares issued January 1, 2022 for the quarter
ended December 31, 2021. During the six months ended December 31, 2021, the Company issued, pursuant to the agreement, an aggregate 1,000,000
shares, valued at $70,000, for the quarters ended September 30, 2021 and June 30, 2021.
During
the six months ended December 31, 2020, the Company issued shares of its common stock as follows:
|
●
|
1,797,192
shares, at $0.014 per share, to its CEO for conversion of a note payable in the principal amount of $25,000 and accrued interest
of $161. No gain or loss was recognized on conversion as the conversion was made under the terms of the note agreement.
|
|
|
|
|
●
|
150,000
shares valued at $13,500, $0.09 per share, as consideration for consulting services.
|
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.
NEXIEN
BIOPHARMA, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
6- Stockholders’ Equity (continued)
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 December 31, 2021, all shares issued were fully vested and an aggregate $5,104,159 was charged to operations for the value of vested
shares issued and the amortization of the unvested CRX shares. For the six months ended December 31, 2021 and 2020, $223,255,000 and
$1,308,049, respectively, has been charged to operations for the amortization of unvested CRX shares during each of the periods.
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. All 5,233,333 shares issued (valued at $654,167) have been vested.
2018
Equity Incentive Plan
(i)
On March 30, 2018, the Company’s board of directors approved and recommended for adoption by the stockholders of the Company a
2018 Equity Incentive Plan and has reserved 8,000,000 shares of Common Stock for issuance under the terms of that Plan.
In
July 2018, the Board of Directors granted options to purchase a total of 1,810,000 shares of Common Stock, exercisable for a period of
seven years, to officers/directors/consultants of the Company at an exercise price of $0.54 per share.
In
August 2018, the Board of Directors granted options to purchase a total of 150,000 shares of Common Stock, exercisable for a period of
seven years, to two individuals, (i) a director and (ii) a consultant of the Company, at an exercise price of $0.38 per share. All options
granted have been fully vested.
NEXIEN
BIOPHARMA, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
6-Stockholders’ Equity (continued)
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:
Schedule of Fair Value of Stock Options Assumptions
Average risk-free interest rates
|
|
|
2.3%
- 2.8
|
%
|
Average expected life (in years)
|
|
|
4.0
to 7.0
|
|
Volatility
|
|
|
160%
to 296
|
%
|
(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:
Schedule of Fair Value of Stock Options Assumptions
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 vested 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:
Schedule of Fair Value of Stock Options Assumptions
Average risk-free interest rates
|
|
|
0.23
|
%
|
Average expected life (in years)
|
|
|
4.0
|
|
Volatility
|
|
|
152
|
%
|
The
fair value of the vested options granted of $315,350 was charged to operations during the year ended June 30, 2021.
A
summary of option activity during the six months ended December 31, 2021 is presented below:
Schedule of Stock Option Activity
|
|
Shares
|
|
|
Weighted
Average Exercise Price
|
|
|
Weighted
Average Remaining Contractual Life (Years)
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding and exercisable –
June 30, 2021
|
|
|
7,995,000
|
|
|
$
|
0.26
|
|
|
|
4.5
|
|
Granted
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Expired/Canceled
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Outstanding and exercisable
-December 31, 2021
|
|
|
7,995,000
|
|
|
$
|
0.26
|
|
|
|
4.2
|
|
NEXIEN
BIOPHARMA, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
6 – Stockholders’ Equity (continued)
Warrants
On
November 24, 2020, the Company issued warrants for the acquisition of common shares as partial consideration for the issuance of convertible
notes.
The
following table summarizes information about warrants outstanding at December 31, 2021:
Schedule of Warrants Outstanding
|
|
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:
Schedule of Fair Value of Warrants Assumptions
Average risk-free interest rates
|
|
|
.39
|
%
|
Average expected life (in years)
|
|
|
2.5
|
|
Volatility
|
|
|
153
|
%
|
The
relative fair value of the warrants granted of $252,104 was charged to operations at the date of grant.
Note
7 – Convertible Notes Payable
On
November 24, 2020, the Company entered into financing agreements with two individuals, its CEO and a shareholder. Under the agreements,
the Company issued unsecured convertible promissory notes due in three years (November 24, 2023) with accrued interest at the rate of
8% per annum, compounded annually. The notes and accrued interest are convertible at the option of the holders at any time into restricted
shares of the Company’s common stock at a price of $0.037631, being the volume-weighted average price of the common stock over
the 10 trading days immediately preceding the date the notes were funded. The CEO was issued a note in the principal amount of $40,000,
which included a $15,000 advance made in October 2020 and an additional loan of $25,000. A stockholder of the Company loaned $25,000
on these terms. Both lenders were also issued three types of warrants, exercisable for a five-year period, at prices of $0.040265, $0.043276,
and $0.045157, to purchase a total of 5,181,897 shares (Note 6).
The
Company has recorded the conversion feature as a Beneficial Conversion Feature. The fair value of $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. During the six months ended December 31, 2021, $10,863
was charged to operations for amortization during the period of the Beneficial Conversion Feature.
Note
8 – Related Party Transactions
BioPharma
was formed as a subsidiary of Kanativa USA, which is a subsidiary of Kanativa Inc. Kanativa USA was issued 24,000,000 shares of BioPharma’s
common stock as consideration for its contribution of 100% of the ownership of NexN, and costs and expenses incurred on behalf of BioPharma
and NexN in the amount of $201,228.
NEXIEN
BIOPHARMA, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
8 – Related Party Transactions (continued)
In
May 2021, the Company’s 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 December 31, 2021, the Company has recorded as a
component of stockholders’ equity the $35,000 fair value of the aggregate 500,000 shares issued January 1, 2022 for the quarter
ended December 31, 2021.
During
the three months ended December 31, 2021, the Company’s Chief Executive Officer advanced an aggregate $15,000 to the Company for
working capital and operating purposes. The advances are non-interest bearing and are repayable on demand.
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- Commitments and Contingencies
At
December 31, 2021, there were no legal proceedings against the Company.
Note
10 – Subsequent Events
Note
Purchase Agreement
On
January 18, 2022, the Company entered into a note purchase agreement with Quick Capital, LLC, a Wyoming limited liability company (“Quick
Capital”), pursuant to which the Company issued Quick Capital a twelve-month convertible promissory note in the principal amount
of $170,454 (the “Note”) for a $150,000 investment, which included an original issuance discount of 12%. In connection with
the Note issuance, Quick Capital was also issued 500,000 restricted shares of the Company’s common stock and a three-year warrant
(the “Warrant”) to purchase up to an aggregate of 347,512 restricted shares of the Company’s common stock at an exercise
price of $0.075 per share (the “Warrant Shares”). The Company received the $146,750 net proceeds from the note, after Quick
Capital’s legal fees of $3,250.
Quick
Capital is entitled to a cash payment of $20,000 as liquidated damages for any failure to include all shares issuable upon the conversion
of the Note (the “Conversion Shares”) and the Warrant Shares on any registration statement filed with the Securities and
Exchange Commission. For twelve months following the issuance of the Quick Note, Quick Capital will have the right of first refusal to
participate in future financings proposed to the Company by bonafide third parties on the same terms as such third parties and participation
rights to purchase up to $1,000,000 of securities in other offerings, subject to certain exceptions.
The
Note is convertible into shares of common stock at a conversion price of $0.035 per share. The Note may be prepaid at any time within
the first six months at 130% of face value. Thereafter, the Note can only be prepaid at Quick Capital’s discretion.
If
an event of default (as described in the Note) occurs, the Note will become immediately due and payable in an amount equal to 150% of
the then outstanding principal amount of the Note plus any interest or amounts owing to Quick Capital.
The
Note may not be converted and the Warrant may not be exercised if after giving effect to such conversion or exercise, as the case may
be, Quick Capital and its affiliates would beneficially own more than 9.99% of the outstanding common stock of the Company.
NEXIEN
BIOPHARMA, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
10 – Subsequent Events (continued)
On
or after May 7, 2022 and upon the mutual agreement of the Company and Quick Capital, Quick Capital may purchase additional note(s) in
an aggregate amount not to exceed $350,000 on similar terms.
In
connection with this transaction, the Company issued, as a consulting fee, a one-year warrant to purchase 2,250,000 restricted shares
of the Company’s common stock at an exercise price of $0.001 per share to One Eyed Jack Enterprises LLC. The warrant was exercised
on January 25, 2022.
In
January 2022, the Company issued an aggregate 500,000 shares of common stock as compensation to two officers, pursuant to Board of Directors
authorization, for quarterly services rendered through December 31, 2021.
Advance
from Officer
Subsequent
to December 31, 2021, the Company’s Chief Executive Officer advanced an additional $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 to December 31, 2021 through the date these financial statements were issued, and has
determined that it does not have any additional material subsequent events to disclose.