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 three months ended September 30, 2020 and 2019. This MD&A should be read
in conjunction with our audited financial statements as of June 30, 2020 and
2019.
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.
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 September 30, 2020, 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.
The Company has had to cease research and development activities due to the lack
of sufficient working capital. While management continues its efforts to raise
capital for the Company, it is also seeking merger or other business combination
or restructuring opportunities.
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Results of Operations for the three months ended September 30, 2020 as compared
to September 30, 2019
Net loss for the three months ended September 30, 2020 was $1,061,417 an
increase of $319,515 from the three months ended September 30, 2019 net loss of
$741,902.
General and administrative costs of $1,045,699 incurred during the three months
ended September 30, 2020 includes non-cash charges of $1,035,141 comprised of
$786,997 for the fair value of the shares issued for the acquisition of CRX Bio
Holdings LLC, as well as non-cash stock-based compensation costs for the period
of $248,144 for the fair value of stock options granted during the quarter. In
comparison, general and administrative costs of $682,966 incurred during the
three months ended September 30, 2019 includes non-cash charges of $615,543
comprised of $578,945 for the fair value of the shares issued for the
acquisition of CRX Bio Holdings LLC, as well as non-cash stock-based
compensation costs for the period of $36,598. During the three months ended
September 30, 2020, 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.
Professional fees of $15,590 for the three months ended September 30, 2020
decreased by $8,346 from the $23,936 of costs incurred for the three months
ended September 30, 2019. Fees for both the 2020 and 2019 periods consisted of
legal fees for securities related matters and fees for annual audit and other
required regulatory filings.
There were no research and development costs for the periods ended September 30,
2020 and 2019.
We paid $35,000 in shares of our Common Stock with respect to a proprietary
delivery system for cannabinoid-based medications during the quarter ended
September 30, 2019.
Liquidity and Capital Resources
At September 30, 2020, we had a working capital deficit of $7,480 and cash of
$8,202, as compared to a working capital deficit of $6,365 and cash of $10,786
at June 30, 2020. The decrease in both working capital and cash was due
primarily to the Company's utilization of existing funds for operating
activities. We used $15,584 of cash for operating activities, and had increase
in liquidity from financing of $13,000 from a loan from our CEO during the three
months ended September 30, 2020.
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 September 30, 2020, 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.
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Capital Expenditure Plan During the Next Twelve Months
As the result of the acquisition of CRx Bio ("CRx"), we were able to eliminate
the salary of one officer of the Company. All other officers, including the new
management team from CRx, are not being paid any cash compensation. In addition,
by bringing on an in-house legal counsel with extensive patent experience, we
were able to bring all Intellectual Property ("IP") legal expenses in house.
This has substantially reduced most legal expenses, which is a significant
percentage of cash expenses. Finally, as CRx had been exploring similar research
for alternative delivery systems as Nexien, we will be able to consolidate this
research and maintain the original Nexien capital expenditure budget.
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, 2020 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 September 30, 2020 and June 30, 2020, we did not have any off-balance sheet
arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
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.
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Critical Accounting Policies
Our significant accounting policies are described in the notes to our financial
statements as of September 30, 2020 and are included elsewhere in this report.
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