ACTAVIA LIFE SCIENCES, INC. Forward-Looking Statements
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the related notes and other information that are included elsewhere in this Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the cautionary note regarding "Forward-Looking Statements" contained elsewhere in this Form 10-K. Additionally, you should read the "Risk Factors" section of this Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. 50
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Our audited financial statements are stated in
We assume no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
Unless expressly indicated or the context requires otherwise, the terms
"Rasna,"," the "Company," "we," "us," and "our" refer to
Company Background Overview To date, we have devoted substantially all of our resources to research and development efforts relating to our therapeutic candidates, including conducting clinical trials and developing manufacturing capabilities, in-licensing related intellectual property, protecting our intellectual property and providing general and administrative support for these operations. Since our inception, we have funded our operations primarily through the issuance of equity securities.
We anticipate that our expenses will increase substantially if and as we:
continue enrollment in our ongoing clinical trials;
initiate new clinical trials;
seek to identify, assess, acquire and develop other products, therapeutic
candidates and technologies;
seek regulatory and marketing approvals in multiple jurisdictions for our
therapeutic candidates that successfully complete clinical studies;
establish collaborations with third parties for the development and
commercialization of our products and therapeutic candidates;
make milestone or other payments under our agreements pursuant to which we
have licensed or acquired rights to intellectual property and technology
seek to maintain, protect, and expand our intellectual property portfolio;
seek to attract and retain skilled personnel;
incur the administrative costs associated with being a public company and
related costs of compliance;
create additional infrastructure to support our operations as a commercial
stage public company and our planned future commercialization efforts; and
experience any delays or encounter issues with any of the above.
We expect to continue to incur significant expenses and increasing losses for at least the next several years. Accordingly, we anticipate that we will need to raise additional capital in addition to the net proceeds from this offering in order to obtain regulatory approval for, and the commercialization of our therapeutic candidates. Until such time that we can generate meaningful revenue from product sales, if ever, we expect to finance our operating activities through public or private equity or debt financings, government or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or a combination of these approaches. If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs or the commercialization of any approved therapies or products or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially adversely affect our business, financial condition and results of operations.
On
OnApril 27, 2016 ,Rasna Therapeutics Limited , a private limited company incorporated inEngland andWales under theU.K. Companies Act ("RasnaUK ") sold its stake inFalconridge Holdings Limited , or Falconridge, to Rasna DE for$1 . This entity had no operations, assets or liabilities as of this date. OnMay 17, 2016 , Rasna DE and its subsidiary Falconridge entered into an Agreement of Merger and Plan of Reorganization (the "Merger Agreement") withArna Therapeutics Limited , aBritish Virgin Islands company, or Arna, which was a clinical stage biotechnology company focused on drugs to treat diseases in oncology and immunology, mainly focusing on the treatment of leukemia. Pursuant to the Merger Agreement, Arna was merged into Falconridge and the shareholders of Arna were issued shares of Rasna DE in exchange for shares of Arna. 51
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OnAugust 15, 2016 , Active WithMe, Inc. , or AWM, entered into an Agreement of Merger and Plan of Reorganization with Rasna DE, and Rasna Acquisition, providing for the merger of Rasna Acquisition with and into Rasna DE, (the "Merger"), with Rasna DE, surviving the Merger as a wholly-owned subsidiary of AWM. As a result of the Merger, the resulting company,Rasna Therapeutics, Inc. , is a biotechnology company that is engaged in modulating the molecular targets NPM1 and LSD1, which are implicated in the disease progression of leukemia and lymphoma. The Merger has been treated as a reverse recapitalization effected by a share exchange for financial accounting and reporting purposes since substantially all of AWM's operations were disposed of prior to the consummation of the transaction. Rasna DE is treated as the accounting acquirer as its stockholders control us after the Merger Agreement, even though AWM was treated as the legal acquirer. As a result of the Merger, the assets and liabilities and the historical operations that are reflected in our financial statements are those of Rasna DE as if Rasna DE had always been the reporting company. Since the transaction was treated as a reverse recapitalization for accounting purposes, no goodwill or other intangible assets were recorded by us as a result of the Merger Agreement. Thereafter, pursuant to a Stock Purchase Agreement, the Company transferred all of the outstanding capital stock of Rasna DE to a former officer and director of AWM in exchange for cancellation of an aggregate of 1,500,000 shares of Rasna DE's common stock held by such person. In connection with the share exchange, each share of Rasna DE was exchanged for the right to receive .33 shares in AWM. Once issued, the new shares were combined with the 3,305,000 common shares held by legacy AWM shareholders. Immediately following the Merger, 1,500,000 shares were canceled, which related to one legacy AWM shareholder that effectively spun off the remaining assets of AWM in connection with the transaction. Finally, subsequent to the transaction, the legal acquirer executed a 3.25 for 1 stock split on its common shares. Historical common stock amounts and additional paid-in capital have been retroactively adjusted for the effect of the share splits executive in connection with the Merger transaction. OnSeptember 20, 2016 , we filed a Certificate of Change inNevada which effected a 3.25 for 1 forward stock split of our common stock for shareholders of record as ofAugust 16, 2016 and increased the authorized number of shares of common stock to 200,000,000 shares.
We only have one segment of activity which is that of a clinical stage biotechnology company focused on targeted drugs to treat diseases in oncology and immunology, mainly focusing on the treatment of leukemia.
Acquisitions
The following transactions were accounted for using the purchase accounting method which requires, among other things, that the assets acquired and liabilities assumed are recognized at their acquisition date fair value.
OnMay 5, 2016 , RasnaUK sold its intellectual property to Falconridge, a subsidiary of Rasna DE, for a note payable in the amount of$236,269 . The fair value of the intellectual property was determined to be$236,269 based on the consideration received. OnMay 17, 2016 , Arna was merged into Falconridge and the shareholders of Arna were issued shares of Rasna DE, in exchange for shares of Arna. On this day, Rasna DE, and its subsidiary Falconridge entered into an Agreement of Merger and Plan of Reorganization with Arna. Pursuant to the agreement, Arna was merged into Falconridge and the shareholders of Arna were issued shares of Rasna DE, in exchange for shares of Arna. Arna was deemed to be the accounting acquirer becauseRasna DE and Falconridge Holdings Limited were non-trading holding companies and Arna's operations will comprise the ongoing operations of the combined entity and its senior management will serve as the senior management of the combined entity. Further, 65% of the voting interest in Rasna DE, was acquired in connection with the transaction. Therefore, the assets and liabilities of the acquired entity, Rasna DE, were written to fair value in accordance with the Acquisition Method prescribed in Accounting Standards Codification ("ASC") 805, Business Combinations. The consideration transferred was measured based upon the share price recently received during a non-public equity raise in Rasna DE, during which non-related investors paid$0.40 per share of common stock. During the acquisition transaction, 19,187,500 of 54,837,790 shares were issued to legacy Rasna DE shareholders, which results in consideration transferred to the acquiree's shareholders of$7,675,000 .
In addition,
Critical Accounting Policies and Estimates
This discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles inthe United States of America , or GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. In accordance with US GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. 52
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While our significant accounting policies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this Annual Report, we believe the following accounting policies are critical to the process of making significant judgments and estimates in the preparation of our financial statements. Basis of preparation The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted inthe United States of America ("US GAAP"). Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification ("ASC") and Accounting Standards Updates ("ASU") of theFinancial Accounting Standards Board ("FASB"). Principles of Consolidation In accordance with ASC 810, Consolidation, the Company consolidates any entity in which it has a controlling financial interest. Further, the Company consolidates any variable interest entity that it is deemed to be the primary beneficiary of, and have the power to direct its significant activities. Upon review of the relationship betweenRasna Therapeutics ("RasnaUK ") and the Company, Management determined that the equity investment in RasnaUK was not sufficient to fund its operations. Accordingly, the Company is considered to be the primary beneficiary of the assets held within RasnaUK , which primarily consist of cash received from the Company to fund its operations, and has power to direct its significant activities. As a result, the Company consolidates this variable interest entity., which has minimal activity and is in the process of being liquidated. The consolidated financial statements include the financial statements of the Company and its wholly owned subsidiary, Rasna DE, and Rasna DE's subsidiary,Arna Therapeutics Limited . All significant intercompany accounts and transactions have been eliminated in the preparation of the accompanying consolidated financial statements. Business Combinations Management accounts for business combinations under the provisions of ASC Topic 805-10, Business Combinations, which requires that the purchase method of accounting be used for all business combinations. Assets acquired and liabilities assumed, including non-controlling interests, are recorded at the date of acquisition at their respective fair values. ASC 805-10 also specifies criteria that intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill.Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. Acquisition-related expenses are recognized separately from the business combinations and are expensed as incurred. Management is required to complete the purchase price allocation within 12 months of the acquisition date. If such completion of the allocation results in a change in the preliminary values, the measurement period adjustment will be recognized in the period in which the adjustment amount is determined in accordance with ASU 2015-16. The amounts reflected within the consolidated financial statements are the results of a purchase price allocation based on a final valuation report. Going Concern We are subject to a number of risks similar to those of other pre-commercial stage companies, including its dependence on key individuals, uncertainty of product development and generation of revenues, dependence on outside sources of capital, risks associated with research, development, testing, and obtaining related regulatory approvals of its pipeline products, suppliers and collaborators, successful protection of intellectual property, competition with larger, better-capitalized companies, successful completion of our development programs and, ultimately, the attainment of profitable operations are dependent on future events, including obtaining adequate financing to fulfill its development activities and generating a level of revenues adequate to support the Company's cost structure. We have experienced net losses and significant cash outflows from cash used in operating activities over the past two years, and as ofSeptember 30, 2019 , had an accumulated deficit of$17,311,809 , a net loss for the year endedSeptember 30, 2019 of$936,380 and net cash used in operating activities of$92,625 . These conditions indicate that there is substantial doubt about our ability to continue as a going concern within the next twelve months from the filing date of this annual report on Form 10-K. We expect to continue to incur net losses and have significant cash outflows for at least the next twelve months. We have sufficient funds to continue operating until the end ofDecember 2020 , but will require significant additional cash resources to launch new development phases of existing products in its pipeline. In the event that we are unable to secure the necessary additional cash resources needed, we may need to slow current development phases or halt new development phases in order to mitigate the effects of the costs of development. The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern. This basis of accounting contemplates the recovery of our assets and the satisfaction of liabilities in the normal course of business. A successful transition to attaining profitable operations is dependent upon achieving a level of positive cash flows adequate to support our cost structure. 53
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Table of Contents Use of Estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. We evaluate our estimates on an ongoing basis, including those related to the fair values of stock based compensation awards, income taxes and contingent liabilities, among others. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities. Actual results could differ from those estimates and such differences could be material to our consolidated financial position and results of operations.
Fair Value of Financial Instruments
The carrying value of our financial instruments, including cash and cash equivalents, accounts payable and accrued liabilities, approximate fair value because of the short-term nature of such financial instruments. Management measures certain other assets, at fair value on a nonrecurring basis when they are deemed to be other-than-temporarily impaired. Concentration of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist principally of related party receivables.
Deposits held with banks, including those held in foreign branches of global banks, may exceed the amount of insurance provided on such deposits. These deposits may be redeemed upon demand and bear minimal risk. Management believes that the institutions that hold our instruments are financially sound and are subject to minimal credit risk. Cash and Cash Equivalents
Cash and cash equivalents consists of cash on deposit with banks with an original maturity of three months or less.
From time to time, our balances in its bank accounts exceedFederal Deposit Insurance Corporation limits. We will periodically evaluate the risk of exceeding insured levels and might transfer funds if it deems appropriate. We have not experienced any losses with regards to balances in excess of insured limits or as a result of other concentrations of credit risk
Intangible assets are made up of in-process research and development, ("IPR&D")
and certain intellectual property ("IP"). The balance of IPR&D represents IPR&D
acquired in 2013, which, at the time, was determined to have alternative future
uses. IPR&D assets also represent the fair value assigned to acquired
technologies in a business combination, which at the time of the business
combination have not reached technological feasibility and have no alternative
future use. IP assets represent the fair value assigned to technologies, which
at the time of acquisition have reached technological feasibility, however, have
not yet been put into service. Intangible assets are considered to have an
indefinite useful life until the completion or abandonment of the associated
research and development projects.
Goodwill represents the premium paid over the fair value of the net tangible and
intangible assets acquired in business combinations. Goodwill is not amortized;
rather, it is subject to a periodic assessment for impairment by applying a fair
value based test. Goodwill is assessed for impairment on an annual basis or more
frequently if events or changes in circumstances indicate that the asset might
be impaired. An impairment charge is recognized only when the implied fair value
of our reporting unit's goodwill is less than its carrying amount.
Management evaluates indefinite life intangible assets for impairment on an
annual basis and on an interim basis if events or changes in circumstances
between annual impairment tests indicate that the asset might be impaired. The
ongoing evaluation for impairment of its indefinite life intangible assets
requires significant management estimates and judgment. Management reviews
definite life intangible assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. There were no impairment charges as of September 30, 2019 and 2018.
Risks and Uncertainties
We intend to operate in an industry that is subject to rapid change. Our operations will be subject to significant risk and uncertainties including financial, operational, technological, regulatory, and other risks associated with an early stage company, including the potential risk of business failure.
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Table of Contents Research and development Expenditure on research and development is charged to the statement of operations in the year in which it is incurred with the exception of expenditures incurred in respect of the development of major new products where the outcome of those projects is assessed as being reasonably certain in regards to viability and technical feasibility. Such expenditure is capitalized and amortized straight line over the estimated period of sale for each product, commencing in the year that sales of the product are first made. To date, we have not capitalized any such expenditures other than certain IPR&D & IP recorded in connection with certain acquisition or equity transactions. Income Taxes We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Management considers many factors when assessing the likelihood of future realization of deferred tax assets, including recent earnings experience by jurisdiction, expectations of future taxable income, and the carryforward periods available for tax reporting purposes, as well as other relevant factors. A valuation allowance may be established to reduce deferred tax assets to the amount that management believes is more likely than not to be realized. Due to inherent complexities arising from the nature of the business, future changes in income tax law and variances between actual and anticipated operating results, management makes certain judgments and estimates. Therefore, actual income taxes could materially vary from these estimates. OnDecember 22, 2017 , The Tax Cuts and Jobs Act was signed into law and has resulted in significant change to theU.S corporate income tax system. These changes include a federal statutory rate reduction from 34% to 21%, a transition tax, which applies to the repatriation of foreign earnings and profits, the elimination or reduction of certain domestic deductions and credits and limitations on the deductibility of interest expense and executive compensation.
Changes in tax rates and tax laws are accounted for in the period of enactment.
We recognize in the financial statements the impact of a tax position, if that position is more likely than not to be sustained upon an examination, based on the technical merits of the position. We record a liability for the difference between the benefit recognized and measured and the tax position taken or expected to be taken on our tax return. To the extent that the assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. To the extent interest and penalties are not assessed with respect to uncertain tax positions, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision.We have incurred no liability and, therefore, did not need to record interest and penalties during the year endedSeptember 30, 2019 and 2018. Foreign Currency Items included in the financial statements are measured using their functional currency, which is the currency of the primary economic environment in which the company operates. The Company's consolidated financial statements are presented inUnited States Dollar ("USD"), which is the company's functional and presentational currency. Foreign currency transactions are translated using the rate of exchange applicable at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-translation at the year-end of monetary assets and liabilities denominated in foreign currencies are recognized in the statements of operations. Net Loss per Share Basic net loss per share is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net loss per share includes potentially dilutive securities such as outstanding options and warrants, using various methods such as the treasury stock or modified treasury stock method in the determination of dilutive shares outstanding during each reporting period. 55
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The following table sets forth potential common shares issuable upon the
exercise of outstanding options, the exercise of warrants and conversion of loan
notes, all of which have been excluded from the computation of diluted weighted
average shares outstanding as they would be anti-dilutive, including the impact
on dilutive net loss per share of in-the-money warrants as per ASC 260-10-45-35
through ASC 260-10-45-37:
September 30, 2019 September 30, 2018
Stock options 4,073,675 4,819,875
Warrants 1,926,501 1,926,501
Convertible Notes 1,723,333 900,000Total shares issuable upon exercise or conversion 7,723,509
7,646,376
Warrants
In August 2017 , in connection with the issuance of equity, we issued a ten year
warrant to purchase 112,000 shares of common stock at an exercise price of $0.65
per share, as offering costs to the placement agents.
In
We determined that in accordance with ASC 815-40-25-7, all the warrants are to be classified as equity in stockholder's equity.
Convertible Notes
InAugust 2018 , we entered into a 12% Convertible Promissory Note. The Note has an original purchase amount of$135,000 , bears interest at a rate of 12% per annum calculated on a 360-day year basis. InJuly 2019 , the maturity of the note was extended fromAugust 8, 2019 toAugust 8, 2020 , unless earlier paid, redeemed or converted in accordance with the terms of the Agreement. InOctober 2018 , we entered into an additional 12% Convertible Promissory Note. The Note has an original purchase amount of$100,000 , bears interest at a rate of 12% per annum calculated on a 360-day year basis. InJuly 2019 , the maturity of the note was extended fromOctober 20, 2019 toOctober 19, 2020 , unless earlier paid, redeemed or converted in accordance with the terms of the Agreement. OnNovember 12, 2019 , the Company issued a 12% convertible promissory note in the principal amount of$57,500 . The Note has a maturity date ofNovember 12, 2020 and is convertible by the holder at any time into shares of the Company's common stock at a conversion price equal to the lower of (i)$0.65 per share or (ii) the price of the next financing during the 180 days after the date of the Note. If the holder has not converted the Note into common stock by the maturity date, the Company must repay the outstanding principal amount plus accrued interest. Equity-Based Payments ASC Topic 718 "Compensation-Stock Compensation" requires companies to measure the cost of employee services received in exchange for the award of equity instruments based on the estimated fair value of the award at the date of grant. The expense is to be recognized over the period during which an employee is required to provide services in exchange for the award. We account for shares of common stock, stock options and warrants issued to employees based on the fair value of the stock, stock option or warrant, if that value is more reliably measurable than the fair value of the consideration or services received. We account for stock options issued and vesting to non-employees in accordance with ASC Topic 505-50 "Equity -Based Payment to Non-Employees" and accordingly the value of the stock compensation to non-employees is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Accordingly the fair value of these options is being "marked to market" quarterly until the measurement date is determined. Accounting Changes InFebruary 2016 , the FASB issued ASU 2016-02 - Leases (Topic 842). Under this ASU, lessees will recognize a right-of-use-asset and corresponding liability on the balance sheet for all leases, except for leases covering a period of fewer than 12 months. The liability is to be measured as the present value of the future minimum lease payments taking into account renewal options if applicable plus initial incremental direct costs such as commissions. The minimum payments are discounted using the rate implicit in the lease or, if not known, the lessee's incremental borrowing rate. The lessee's income statement treatment for leases will vary depending on the nature of what is being leased. A financing type lease is present when, among other matters, the asset is being leased for a substantial portion of its economic life or has an end-of-term title transfer or a bargain purchase option as in today's practice. The payment of the liability set up for such leases will be apportioned between interest and principal; the right-of use asset will be generally amortized on a straight-line basis. If the lease does not qualify as a financing type lease, it will be accounted for on the income statement as rent on a straight-line basis. The Company adopted the provisions of ASU 2016-02 effectiveOctober 1, 2018 and it did not have a material impact on the Company's consolidated financial statements. InJanuary 2017 , the FASB ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual financial reporting periods beginning afterDecember 15, 2017 . The Company adopted ASU 2017-01 onOctober 1, 2018 and has not had a material impact on our financial statements. In August, 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 320): Classification of Certain Cash Receipts and Cash Payments, seeking to eliminate diversity in practice related to how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments in ASU 2016-15 address eight specific cash flow issues. The Company adopted ASU 2016-15 effectiveOctober 1, 2018 and it did not have a material impact on the Company's consolidated financial statements. InMay 2017 , The FASB issued ASU 2017-09, Compensation- Stock Compensation (Topic 718) : Scope of Modification Accounting ("ASU 2017-09"). ASU 2017-09 clarifies when to account for a change to the terms and conditions of a share based payment award as a modification Under the new guidance, modification accounting is required only if the fair value, the vesting conditions or the classification of the award (as equity or liability) changes as a result of the change on the terms or conditions.. The Company adopted ASU-2017-09 effectiveOctober 1, 2018 on a prospective basis and it did not have a material impact on the Company's consolidated financial statements. 56
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Recent Accounting Pronouncements
InJuly 2017 , FASB, issued ASU, 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral. The ASU applies to issuers of financial instruments with down-round features. It amends (1) the classification of such instruments as liabilities or equity by revising the guidance in ASC 815 on the evaluation of whether instruments or embedded features with down-round provisions must be accounted for as derivative instruments and (2) the guidance on recognition and measurement of the value transferred upon the trigger of a down-round feature for equity-classified instruments by revising ASC 260. The ASU is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning afterDecember 15, 2018 . Early adoption is permitted. The Company is currently evaluating the impact f adopting ASU 2017-11 on our consolidated financial statements. InJanuary 2017 , the FASB issued ASU 2017-04, Intangibles -Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which addresses the concerns over the cost and complexity of the two-step impairment test, and removes the second step of the test. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The guidance is effective for annual and interim goodwill impairment tests performed for periods beginning afterDecember 15, 2019 . The Company is currently evaluating the impact of adopting this guidance on our consolidated financial statements. InJune 2018 , the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Non employee Share Based Payment Accounting, which simplifies several aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, to include share-based payment transactions for acquiring goods and services from nonemployees. Some of the areas for simplification apply only to nonpublic entities. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor's own operations by issuing share-based payment awards. The amendments in ASU 2018-07 also clarify that Topic 718does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. The amendments in this Update are effective for public business entities for fiscal years beginning afterDecember 15, 2018 , including interim periods within that fiscal year. Early adoption is permitted. We do not plan to early adopt this ASU. We are currently evaluating the potential impacts of this updated guidance on the Comapny's consolidated financial statements. InAugust 2018 , the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 removes certain disclosures, modifies certain disclosures and adds additional disclosures. The ASU is effective for annual periods, including interim periods within those annual periods, beginning afterDecember 15, 2019 . Early adoption is permitted. We are currently evaluating the effect that this update will have on its financial statements and related disclosures. 57
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Table of Contents Results of Operations
The following paragraphs set forth our results of operations for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of future results.
Results of Operations for the years ended
Revenues
There were no revenues for the year ended
Operating Expenses Operating expenses consisting of research and development costs, consultancy fees, legal and professional fees and general and administrative expenses for the year endedSeptember 30, 2019 decrease to$915,170 from$4,070,313 for the year endedSeptember 30, 2018 , a decrease of$3,155,143 . The decrease is primarily attributable to the pace of development of the LSD1, NPM1 and ACT D projects which decreased while the direction of the programs were being evaluated based on results achieved so far, along with a decrease in legal and professional fees and general administrative costs driven by our decreased activity and a reduction in employees. Net Loss
Net loss for the year ended
Liquidity and Capital Resources
On
OnOctober 19, 2018 , we entered into a 12% Convertible Promissory Note with a Holder pursuant to which we issued a Convertible Promissory Note to the Holder. The Holder provided us with$100,000 in cash, which we received inOctober 2018 . We will be required to raise additional capital to continue the development and commercialization of current product candidates and to fund operations. We cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that we raise additional funds by issuing equity securities, our shareholders may experience significant dilution. Any debt financing, if available, may (i) involve restrictive covenants that impact our ability to conduct, delay, scale back or discontinue the development and/or commercialization of one or more product candidates; (ii) seek collaborators for product candidates at an earlier stage than otherwise would be desirable and on terms that are less favorable than might otherwise be available; or (iii) relinquish or otherwise dispose of rights to technologies, product candidates or products that we would otherwise seek to develop or commercialize its self on unfavorable terms. Capital Resources
The following table summarizes total current assets, liabilities and working capital as of the periods indicated:
September 30, 2019 September 30, 2018 Change
Current assets $ 71,579 $ 347,495 $ (275,916 )
Current liabilities $ 2,405,496 $ 2,108,995 $ 296,501
Working capital deficiency $ (2,333,917) $ (1,761,500 ) $ (572,417) We had a cash balance of
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Liquidity
The following table sets forth a summary of our cash flows for the periods
indicated:
For the year ended For the year ended
September 30, September 30,
2019 2018 Increase/(Decrease)
Net cash used in operating activities
- $ (4,073 ) $ 4,073
Net cash provided by financing activities
(35,000 )
Net cash used in operating activities was$92,625 for the year endedSeptember 30, 2019 compared to$2,629,800 for the year endedSeptember 30, 2018 . The change is principally attributable to net loss of$936,380 excluding non-cash items such as share based compensation of$368,076 and changes in operating assets and liabilities of$452,225 and for the year endedSeptember 30, 2019 as compared to a net loss of$4,076,361 , adjusted for non-cash share based compensation of$621,931 and changes in operating assets and liabilities of$264,083 for the year endedSeptember 30, 2018 .
Net Cash Provided by Investing Activities
Net cash used in investing activities consists primarily of property and
equipment purchases of
Net Cash Provided by Financing Activities
Net cash provided by financing activities consists of proceeds from the issuance of a convertible note of$100,000 during the year endedSeptember 30, 2019 compared to$135,000 of proceeds from the issuance of a convertible note during the year endedSeptember 30, 2018 . 59
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Off-Balance Sheet Arrangements
We consolidate variable interest entities ("VIE") in which we hold a controlling
financial interest as evidenced by the power to direct the activities of a VIE
that most significantly impact its economic performance and the obligation to
absorb losses of, or the right to receive benefits from, the VIE that could
potentially be significant to the VIE and therefore are deemed to be the primary
beneficiary. We take into account our entire involvement in a VIE (explicit or
implicit) in identifying variable interests that individually or in the
aggregate could be significant enough to warrant our designation as the primary
beneficiary and hence require us to consolidate the VIE or otherwise require us
to make appropriate disclosures.
© Edgar Online, source
