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 nine months ended March 31, 2022 and 2021. This MD&A should be read in
conjunction with our audited financial statements as of June 30, 2021 and 2020.
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.
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 $50,000 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 March 31, 2022, and the receipt of $146,750, net of financing
costs, from a debt issuance in January 2022, 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 had to cease research and development activities due to the
lack of sufficient working capital. In January 2022 the Company received a
funding commitment from a third-party lender and will be recommencing research
and development activities on its myotonic dystrophy project. While management
continues its efforts to raise additional capital for the Company, it is also
seeking merger or other business combination or restructuring opportunities.
Results of Operations for the three months ended March 31, 2022 as compared to
March 31, 2021
Net loss for the three months ended March 31, 2022 was $187,451, an increase in
loss of $398,649 from the net income of $211,198 reported for the three months
ended March 31, 2021.
General and administrative costs of $153,113 incurred for the three months ended
March 31, 2022 includes non-cash charges of $110,264 for the fair value of the
warrants granted to an unrelated party for consulting services and $35,000 as
the value of non-cash stock-based compensation costs for common shares issued to
officers.
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General and administrative costs for the three months ended March 31, 2021
includes a non-cash adjustment of $273,729 to the amortization of the fair value
of the shares issued for the acquisition of CRx, as well as non-cash stock-based
compensation costs for the period of $33,274 for the fair value of options
previously granted. In March 2021, four of the CRx shareholders terminated their
relationships with the Company and forfeited their remaining 2,409,000 unvested
shares. The reduction in amortization of the fair value of shares issued related
to the CRx acquisition of $273,729 is due to an adjustment of the fair value
previously recorded for those forfeited shares.
General and administrative expenses, exclusive of non-cash compensation costs,
were consistent during the 2022 and 2021 periods, and consisted predominately of
costs and expenses associated with the Company's maintaining its public company
status.
During the three months ended March 31, 2022 and 2021, the Company incurred
$13,696 and $6,233, respectively, for amortization of discount related to the
convertible debt financings. Interest expense, all related to convertible debt
financings, for the 2022 and 2021 periods was $9,352 and $1,282, respectively.
The increase in interest expense for 2022 is attributable to the convertible
debt financing of January 2022.
There were no research and development costs for the periods ended March 31,
2022 and 2021 due to the Company's limited financial resources and availability
of research personnel.
Professional fees of $11,290 for the three months ended March 31, 2022 increased
by $2,130 from $9,160 for the period ended March 31, 2021. Fees for the 2022 and
2021 periods consisted of legal fees for securities related matters and fees for
auditor quarterly review and other required tax and regulatory filings.
Results of Operations for the nine months ended March 31, 2022 as compared to
March 31, 2021
Net loss for the nine months ended March 31, 2022 was $529,356, a decrease of
$1,148,900 from the net loss of $1,678,256 for the nine months ended March 31,
2021.
During the nine months ended March 31, 2022, the Company had limited financial
resources and substantially all available funds were utilized for maintaining
corporate operations as a public company. In January 2022, the Company completed
a debt financing agreement resulting in the receipt of $146,750. These funds
will be utilized for maintaining corporate operations and continuance of the
Company's research for myotonic dystrophy and myotonia.
General and administrative costs of $464,068 incurred for the nine months ended
March 31, 2022 includes non-cash charges of $110,264 for the fair value of the
warrants granted to an unrelated party for consulting services, $223,255 for the
fair value of the shares issued for the acquisition of CRX Bio Holdings LLC and
$105,000 as the value of non-cash stock-based compensation costs for common
shares issued to its officers.
General and administrative costs for the nine months ended March 31, 2021
include a non-cash charge of $1,034,319 for the fair value of the shares issued
for the acquisition of CRx, as well as non-cash stock-based compensation costs
for the period of $315,350 for the fair value of options granted and $252,104
for the fair value of warrants issued in conjunction with convertible debt
financing during the 2021 period. In March 2021, four of the CRx shareholders
terminated their relationships with the Company and forfeited their remaining
2,409,000 unvested shares. The reduction in amortization of the fair value of
shares issued related to the CRx acquisition of $273,729 is due to an adjustment
of the fair value previously recorded for those forfeited shares.
General and administrative expenses, exclusive of non-cash compensation costs,
were consistent during the 2022 and 2021 periods, consisting predominately of
costs and expenses associated the Company's maintaining its public company
status.
During the nine months ended March 31, 2022 and 2021, the Company incurred
$24,559 and $7,539, respectively, for amortization of discount related to the
convertible debt financings. Interest expense, all related to convertible debt
financings, for the 2022 and 2021 periods was $11,959 and $1,937, respectively.
The increase in interest expense for 2022 is attributable to the convertible
debt financing of January 2022.
During the nine months ended March 31, 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. No additional options have been granted through March 31, 2022.
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Professional fees of $28,770 for the nine months ended March 31, 2022 decreased
by $3,380 from $32,150 for the nine months ended March 31, 2021. Fees for both
the 2022 and 2021 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 March 31,
2022 and 2021 due to the Company's limited financial resources and availability
of research personnel.
During the nine months ended March 31, 2022, the Company issued 750,000 shares
of common stock to each of two officers for services rendered to the Company.
Liquidity and Capital Resources
At March 31, 2022, we had a working capital deficit of $63,260 and cash of
$140,217, as compared to a working capital deficit of $13,775 and cash of
$18,041 at June 30, 2021. The increase in both working capital and cash was due
primarily to additional funding from a convertible debt financing received in
January 2022. Substantially all available funds were being utilized solely for
maintaining corporate operations as a public company. We used $51,824 of cash
for operating activities, and received a $25,000 advance from one of our
officers during the nine months ended March 31, 2022.
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 March 31, 2022, and the completion of
a debt financing agreement resulting in the receipt of $146,750 in January 2022,
there can be no assurance that we will continue to be successful in raising
additional funds through equity capital and/or debt financings 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 require at a minimum $50,000 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 $146,750 in debt financings, and we may be expected to
require a minimum of $50,000 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.
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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 March 31, 2022 and June 30, 2021, 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 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.
Critical Accounting Policies
Our significant accounting policies are described in the notes to our financial
statements as of March 31, 2022 and are included elsewhere in this report.
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NEXIEN BIOPHARMA, INC. 
