10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2018

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from ___ to ___

Commission file number 333-191083

RASNA THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Nevada	39-2080103
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

420 Lexington Ave, Suite 2525, New York, NY 10170

(Address of principal executive offices)   (Zip Code)

Telephone: (646) 396-4087

(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.   Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes ☒   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ☐	Accelerated filer  ☒
Non-accelerated filer  ☐	Smaller reporting company ☐
(Do not check if a smaller reporting company)	Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes ☐    No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 68,908,003  shares of common stock were issued and outstanding as of August 8, 2018.

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TABLE OF CONTENTS

		PAGE
PART I	FINANCIAL INFORMATION
ITEM 1.	Financial statements	3
	Condensed Consolidated Balance Sheets - June 30, 2018 (Unaudited) and September 30, 2017	3
	Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2018 and 2017	4
	Unaudited Condensed Consolidated Statement of Changes in Shareholders’ Equity for the Nine Months Ended June 30, 2018	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2018 and 2017	6
	Notes to the Condensed Consolidated Interim Financial Statements	7
ITEM 2.	Management’s discussion and analysis of financial condition and results of operations	22
ITEM 3.	Controls and procedures	31
PART II	OTHER INFORMATION
ITEM 1A.	Risk factors	32
ITEM 6.	Exhibits	32
SIGNATURES		33

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PART I – FINANCIAL INFORMATION 

ITEM 1. FINANCIAL STATEMENTS

RASNA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2018			September 30, 2017
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	20,357		$	2,537,611
Prepayments and other receivables	161,800			129,157
Related party receivable	105,274			28,931
Total current assets	287,431			2,695,699
Property and equipment, net	6,762			7,047
Intellectual property	236,269			236,269
In-process research and development	613,100			613,100
Indefinite lived intangible asset	1,300,000			1,300,000
Goodwill	2,722,985			2,722,985
Total non-current assets	4,879,116			4,879,401
Total assets	$	5,166,547		$	7,575,100
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Current liabilities:
Accounts payable and accrued expenses	$	1,177,942		$	978,839
Taxes payable	8,525			8,525
Related parties payable	550,000			550,000
Total current liabilities	1,736,467			1,537,364
Total liabilities	1,736,467			1,537,364
Commitments and Contingencies (Note 9)
Shareholders' equity
Common stock, $0.001 par value, respectively; 200,000,000 shares authorized, of which 68,908,003 are issued and outstanding.	68,909			68,909
Additional paid-in capital	19,331,217			18,267,895
Accumulated deficit	(15,970,046		)	(12,299,068		)
Total shareholders' equity	3,430,080			6,037,736
Total liabilities and shareholders' equity	$	5,166,547		$	7,575,100

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

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RASNA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the Three Months Ended June 30,						For the Nine Months Ended June 30,
	2018			2017			2018			2017
Revenue	$	—		$	—		$	—		$	—
Cost of revenue	—			—				—			—
Gross profit	—			—				—			—
Operating expenses:
General and administrative*	644,545			620,788				2,343,296			1,704,860
Research and development	136,131			277,326				345,645			974,585
Consultancy fees third parties and related parties**	(100,192		)	49,126				454,218			56,541
Legal and professional fees	128,901			283,132				521,868			862,134
Total operating expenses	809,385			1,230,372				3,665,027			3,598,120
Loss from operations	(809,385		)	(1,230,372		)		(3,665,027	)		(3,598,120	)
Other income/(expense):
Foreign currency transaction (loss)/gain	5,420			16,816				(5,951	)		80,551
Total Other income/(expense)	5,420			16,816				(5,951	)		80,551
Loss from operations before income taxes	(803,965		)	(1,213,556		)		(3,670,978	)		(3,517,569	)
Income tax provision	—			—				—			—
Net loss	$	(803,965	)	$	(1,213,556	)	$	(3,670,978	)	$	(3,517,569	)
Basic and diluted loss per share attributable to common shareholders	$	(0.01	)	$	(0.02	)	$	(0.05	)	$	(0.05	)
Basic and diluted weighted average common shares outstanding	68,908,003			68,046,465				68,908,003			65,802,020

* Share based payments to employees have been reclassified from consultancy fees third parties to general and administrative expenses for the three and nine months ended June 30, 2017 to conform to current year presentation.

** Consultancy fees to related parties three and nine months ended June 30, 2017 have been combined and included with consultancy fees third parties in both periods presented.

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

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RASNA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(UNAUDITED)

	Common Stock			Additional Paid-In		Accumulated			Total Shareholders’
	Shares	Amount		Capital		Deficit			Equity
Balance at September 30, 2017	68,908,003	$	68,909	$	18,267,895	$	(12,299,068	)	$	6,037,736
Share based compensation	—	—		540,972		—			540,972
Warrants issued for consulting services	—	—		522,350		—			522,350
Net loss	—	—		—		(3,670,978		)	(3,670,978		)
Balance at June 30, 2018	68,908,003	$	68,909	$	19,331,217	$	(15,970,046	)	$	3,430,080

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

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RASNA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Nine Months Ended June 30,
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(3,670,978	)	$	(3,517,569	)
Adjustments to reconcile net loss to net cash used in operating activities:
Share based compensation	540,972			763,532
Warrants issued for consulting services	522,350			—
Depreciation	4,358			4,328
Related party receivable write off	28,931			—
Changes in operating assets and liabilities:
Prepayments and other receivables	(32,643		)	(149,716		)
Related party receivable	(105,274		)	12,056
Accounts payable and accrued expenses	199,105			686,747
Related party payable	—			(100,000		)
Net cash used in operating activities	(2,513,179		)	(2,300,622		)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment	(4,073		)	(10,493		)
Net cash used in investing activities	(4,073		)	(10,493		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of shares of common stock	—			2,007,500
Net cash provided by financing activities	—			2,007,500
Effect of foreign exchange rate	(2		)	(112,976		)
Net (Decrease) in cash and cash equivalents	(2,517,254		)	(416,591		)
Cash and cash equivalents, beginning of period	2,537,611			3,695,323
Cash and cash equivalents, end of period	$	20,357		$	3,278,732

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

6

 RASNA THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1.    GENERAL INFORMATION  

Rasna Therapeutics, Inc. (“Rasna DE" or "Rasna Inc.”), is a company incorporated in the State of Delaware on March 28, 2016.

On October 11, 2017, the Company changed its fiscal year end from March 31 to September 30 and  filed a Form 10-KT on November 30, 2017.

On April 27, 2016, Rasna Therapeutics Limited, a private limited company incorporated in England and Wales under the U.K. Companies Act (“Rasna UK”) sold its stake in Falconridge Holdings Limited, or Falconridge, to Rasna DE for  $1. This entity had no operations, no assets or liabilities as of this date.

On May 17, 2016, Rasna DE and its subsidiary Falconridge entered into an Agreement of Merger and Plan of Reorganization (“Merger Agreement”) with Arna Therapeutics Limited, a British 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 agreement, Arna was merged into Falconridge and the shareholders of Arna were issued shares of Rasna DE in exchange for shares of Arna.

On August 15, 2016, Active With Me, Inc., or AWM, entered into an Agreement of Merger and Plan of Reorganization (the “Merger Agreement”) 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. 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 the Company after the Merger and  AWM was the legal acquirer.  As a result, the assets and liabilities and the historical operations that are reflected in the financial statements are those of Rasna DE as if Rasna DE had always been the reporting company. Since AWM had no operations upon the Merger Agreement taking place, the transaction was treated as a reverse recapitalization for accounting purposes and no goodwill or other intangible assets were recorded by the Company as a result of the Merger Agreement.

These financial statements are presented in United States dollars (“USD”) which is also the functional currency of the primary economic environment in which the Company operates. See Note 2, Foreign currency policy. 

2.    ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these unaudited condensed consolidated financial statements are set out below. These policies have been applied consistently to all the periods presented unless otherwise stated.

Basis of preparation 

These unaudited condensed consolidated financial statements have been prepared following the requirements of the Securities and Exchange Commission (“SEC”) and United States generally accepted accounting principles (“GAAP”) for interim reporting. In the opinion of management, the accompanying consolidated financial statements include all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s interim financial information.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements as of and for the six months ended September 30, 2017, contained in the Company's annual report on Form 10-KT filed with the SEC on November 30, 2017.

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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 between Rasna Therapeutics Limited (“Rasna UK”) and Rasna Inc., Management noted that equity investment in Rasna UK was not sufficient to fund its operations. Accordingly, Rasna Inc. was considered to be the primary beneficiary of the assets held within Rasna UK, which primarily consist of cash received from Rasna Inc. to fund its operations, and has power to direct its significant activities. As a result, Rasna Inc. 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 subsidiary, Arna Therapeutics Limited and its variable interest entity, Rasna Therapeutics Ltd, as well as the operations of Rasna Inc. for the period from May 17, 2016 through June 30, 2018. 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 Accounting Standards Codification ("ASC") Topic 805-10, Business Combinations ("ASC 805-10"), which requires that the acquisition 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.

The amounts reflected within the Note 3 - Acquisitions are the results of the final valuation report of the purchase price allocation.

Going Concern

The Company is 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 the Company's 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.

The Company has experienced net losses and significant cash outflows from cash used in operating activities over the past years, and at June 30, 2018, had an accumulated deficit of $15,970,046, a net loss for the nine months ended June 30, 2018 of $3,670,978 and net cash used in operating activities of $2,513,179.  

We expect to continue to incur net losses and have significant cash outflows for at least the next 12 months. The Company believes it has sufficient funds to continue operating until the end of  October 2018, but will require significant additional cash resources to launch new development phases of existing products in its pipeline.

In the event that the Company is unable to secure the necessary additional cash resources needed, the Company may slow current development phases or halt new development phases in order to mitigate the effects of the costs of development. These conditions, among others, raise substantial doubt about the Company's ability to continue as a going concern. The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company's 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 the Company's cost structure.

Use of Estimates

The preparation of financial statements in conformity with 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. The Company evaluates its estimates on an ongoing basis, including those related to the fair values of stock based awards, income taxes and contingent liabilities, among others. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates and such differences could be material to the consolidated financial position and results of operations.

8

Fair Value

The carrying value of the Company’s financial instruments, including cash and cash equivalents, related party balances,  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

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, the Company’s balances in its bank accounts exceed Federal Deposit Insurance Corporation limits. The Company will periodically evaluate the risk of exceeding insured levels and might transfer funds if it deems appropriate. The Company has not experienced any losses with regards to balances in excess of insured limits or as a result of other concentrations of credit risk.

Prepayments and other receivables

Prepayments consists of prepaid Directors and Officers liability insurance, payroll and rental expenses incurred under the shared services agreement with Tiziana Life Sciences PLC and prepaid consultancy fees.

Property and Equipment

Expenditures for additions, renewals and improvements are capitalized at cost. Depreciation is computed in a straight line method based on the estimated useful lives of the related assets. The estimated useful lives of the major classes of depreciable assets are 2 to 5 years for equipment and furniture and fixtures. Expenditures for repairs and maintenance are charged to operations as incurred. The Company periodically evaluates whether current events or circumstances indicate that the carrying life of the depreciable assets may not be recoverable.

Goodwill and Intangible assets

Intangible assets are made up of indefinite lived intangible assets, in-process research and development, (“IPR&D”) and certain intellectual property (“IP”). The balance of the indefinite lived intangible assets represents the platform technology that was acquired in 2013, which, at the time, was determined to have alternative future uses. IPR&D assets 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 the Company’s 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 indefinite 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 during the nine months ended June 30, 2018 and 2017.

9

Risks and Uncertainties

The Company intends to operate in an industry that is subject to rapid change. The Company’s 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.

Reclassifications

Certain prior period amounts have been reclassified for comparative purposes to conform to the fiscal 2018 presentation. These reclassifications have no impact on the previously reported net loss.

Research and development

Expenditure on research and development is charged to the statements 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, the Company has not capitalized any such expenditures other than certain IPR&D & IP recorded in connection with certain acquisition or equity transactions.

Foreign Currency

Items included in the financial statements are measured using their functional currency, being the currency of the primary economic environment in which the company operates. The financial statements are presented in United 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 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.

The following table sets forth potential common shares issuable upon the exercise of outstanding options and the exercise of warrants, all of which have been excluded from the computation of diluted weighted average shares outstanding as they would be anti-dilutive:

	June 30, 2018		June 30, 2017
Stock options		4,829,875		3,162,375
Warrants		1,926,501		1,440,501
Total shares issuable upon exercise or conversion		6,756,376		4,602,876

10

The following is the computation of net loss per share for the following periods:

	For the Three Months Ended June 30,
	2018			2017
	(Unaudited)			(Unaudited)
Net loss for the period	$	(803,965	)	$	(1,213,556	)
Weighted average number of shares	68,908,003			68,046,465
Net loss per share (basic and diluted)	$	(0.01	)	$	(0.02	)

	For the Nine Months Ended June 30,
	2018			2017
	(Unaudited)			(Unaudited)
Net loss for the period	$	(3,670,978	)	$	(3,517,569	)
Weighted average number of shares	68,908,003			65,802,020
Net loss per share (basic and diluted)	$	(0.05	)	$	(0.05	)

Warrants

In April 2016, the Company committed to issue warrants as compensation to the placement agents relating to fundraising. On February 28, 2017, the Company issued a ten year warrant to purchase 1,440,501 shares of common stock at an exercise price of $0.37 per share.

The Company had determined that the service inception date preceded the grant date, and accordingly, recorded a liability to issue warrants in the Company as of the date that the equity was issued, with an offset charge to additional paid-in capital as these are offering costs. The liability to issue warrants was marked to market each period until the grant date, at which point the Company determined that in accordance with ASC 815-40-25-7, the warrants should be classified in stockholder’s equity. See Note 7 for additional information.

In July 2017, the Company committed to issue warrants as compensation to the placement agents relating to fundraising. On August 31, 2017, the Company issued a ten year warrant to purchase 112,000 shares of common stock at an exercise price of $0.65 per share.

On August 31, 2017, the Company entered into consulting agreements with placement agents who were providing consulting services in the areas of capital market advisory and investor relations. In lieu of fees for these consulting services, on September 1, 2017, the Company issued ten year warrants to purchase 374,000 shares of common stock at an exercise price of $0.60 per share. The Company determined that the service inception date did not preceed the grant date, and accordingly classifies the warrants in stockholder's equity, in accordance with ASC 815-40-25-7. See Note 7 for additional information.

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. The Company accounts 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.

The Company accounts 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.

Income taxes

On December 22, 2017, The Tax Cuts and Jobs Act was signed into law and has resulted in significant change to the U.S corporate income tax system.  These changes include a federal statutory rate reduction from 35% to 21%, a transition tax which applies to the repatriate 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. During the nine month period ended June 30, 2018, the tax impact of the  2017 Tax Cuts and Jobs Act was immaterial to the financial statements.

11

Recent Accounting Pronouncements Not Yet Adopted

On August 26, 2016, the FASB issued Accounting Standards Update (ASU) 2016-15, 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 and apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of cash flows under FASB Accounting Standards Codification (FASB ASC) 230, Statement of Cash Flows.

The amendments in ASU 2016-15 are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The amendments in ASU 2016-15 should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company expects to adopt this ASU described above in its Consolidated Financial Statements beginning in October 1, 2018. Management has evaluated and concluded that there will be no material impact on its consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230) Restricted Cash a consensus of the FASB Emerging Issues Task Force (“ASU 2016-18”). ASU 2016-18 requires restricted cash and cash equivalents to be included with cash and cash equivalents on the statement cash flows. The new standard is expected to be effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted. Management has evaluated the effects of ASU 2016-18 and concluded that there will be no material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-1, 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 after December 15, 2017. The Company expects to adopt this ASU described above in its Consolidated Financial Statements beginning in October 1, 2018. Management has evaluated and concluded that there will be no material impact on its consolidated financial statements.

In January 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 after December 15, 2019 with early adoption permitted in January 2017. Management has evaluated and concluded that there will be no material impact on its consolidated financial statements.

In July 2017, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or 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 after December 15, 2018. For all other companies, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted. Management has evaluated and concluded that there will be no material impact on its consolidated financial statements. 

In June 2018, the FASB issued ASU 2018-07, which simplifies several aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation-Stock Compensation, 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 also clarify that Topic 718 does 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 after December 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, and do not expect the adoption of this guidance to have a material impact on our consolidated financial statements and related disclosures.

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3.    ACQUISITIONS

The following transactions were accounted for using the acquisition accounting method which requires, among other things, that the assets acquired and liabilities assumed are recognized at their acquisition date fair value.

On May 5, 2016, Rasna UK sold its intellectual property to Falconridge, a subsidiary of Rasna, for a note payable in the amount of $236,269. Rasna UK is considered a VIE and consolidated in these financial statements, however, is not an entity under common control as Rasna controlled both Falconridge and Rasna UK at the time of the transaction, this transaction eliminates on consolidation.

On May 17, 2016, Rasna 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 in exchange for shares of Arna. Arna was deemed to be the accounting acquirer because Rasna 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 was acquired by Arna shareholders in connection with the transaction. Therefore, the assets and liabilities of the acquired entity, Rasna, were written to fair value in accordance with the Acquisition Method prescribed in ASC 805, Business Combinations.

The consideration transferred was measured based upon the share price recently received during a non-public equity raise in Rasna, 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 shareholders, which results in consideration transferred to the acquiree’s shareholders of $7,675,000.

In addition, $607,159 of a related party receivable due to Arna from Rasna UK, was forgiven as part of the consideration transferred.

The purchase price allocation as of the date of acquisition is set forth in the table below. As per the purchase accounting method, the tangible and identifiable intangible assets acquired and liabilities assumed were recorded at fair value as of the date of acquisition, with the remaining purchase price recorded as goodwill.

The Company’s allocation of the purchase price in connection with the acquisition was calculated as follows:

	Balance as of
	May 17, 2016
Share consideration transferred	$	7,675,000
Forgiveness of receivable	607,159
Consideration transferred	$	8,282,159
Less: Fair value of assets acquired
Cash and cash equivalents	(5,116,609		)
Other receivables	(14,187		)
Prepayment	(66,856		)
Related party receivables	(20,412		)
Intellectual property	(236,269		)
In-Process research and development	(613,100		)
Plus: Liabilities assumed
Accounts payable and accrued expenses	492,603
Related party payables	15,656
Goodwill	$	2,722,985

Of the above assets acquired and liabilities assumed, the intellectual property acquired was owned by Falconridge  and the residual assets acquired and liabilities assumed comprised the VIE that was controlled by Rasna, Inc.

 Acquired In-Process Research and Development

Acquired IPR&D is the fair value of the LSD-1 asset at the acquisition date. The Company determined that the fair value of LSD-1 was $613,100 as of the acquisition date using the cost approach. This was based on the fact that LSD-1 was not yet technologically feasible or in use as of the valuation date. Also as no prospective revenue stream could be determined, the cost approach was deemed to be the most appropriate.

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The Company retained a Clinical Research Organisation ("CRO") to perform all related research and development associated with LSD-1. As all research and development associated with LSD‐1 was performed by the CRO and no other contributions to LSD‐1 IPR&D were made beyond payments to the CRO, the Company considered the payments made to estimate the fair value of LSD‐1.

Active With Me, Inc.

On August 15, 2016, Active With Me, Inc., entered into an Agreement of Merger and Plan of Reorganization (the “Merger Agreement”) with Rasna, Inc., and Rasna Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Active With Me, Inc. (“Merger Sub”), providing for the merger of Merger Sub with and into Rasna, Inc. (the “Merger”), with Rasna, Inc. surviving the Merger as a wholly-owned subsidiary of Active With Me, Inc. 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 was treated as a reverse recapitalization effected by a share exchange for financial accounting and reporting purposes since substantially all of Active With Me’s operations were disposed of prior to the consummation of the transaction.  Rasna Successor is treated as the accounting acquirer as its stockholders control the Company after the Exchange Agreement, even though Active With Me, Inc. was the legal acquirer.  As a result, the assets and liabilities and the historical operations that are reflected in these financial statements are those of Rasna Successor as if Rasna Successor had always been the reporting company.  Since Active With Me, Inc. had no operations upon the Merger Agreement taking place, the transaction was treated as a reverse recapitalization for accounting purposes and no goodwill or other intangible assets were recorded by the Company 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 Successor to a former officer and director of Active With Me, Inc. in exchange for cancellation of an aggregate of 1,500,000 shares of Rasna Successor’s common stock held by such person.

In connection with the share exchange, each share of Rasna, Inc was exchanged for the right to receive .33 shares in Active With Me, Inc. Once issued, the new shares were combined with the 3,305,000 common shares held by legacy Active With Me, Inc. shareholders. Immediately following the Merger, 1,500,000 shares were canceled, which related to one legacy Active With Me shareholder that effectively spun off the remaining assets of Active With Me 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. Following the closing of the Merger and Rasna Successor’s cancellation of 1,500,000 shares in the Split-Off, there were 19,901,471 shares of Rasna Successor issued and outstanding, which once effected for the 3.25 for 1 reverse stock split, resulted in 64,679,798 shares outstanding in the combined entity.

4.    GOODWILL AND INTANGIBLE ASSETS

As noted in Note 3 - Acquisitions, on May 17, 2016, there was a transaction where the Company acquired an entity and, at initial purchase price, it was determined that there was $236,269 of intellectual property, $613,100 of In-process research and development, and $2,722,985 of goodwill.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in business combinations accounted for under the purchase method of accounting. The following table summarizes the Company’s goodwill for the periods indicated resulting from the acquisitions by the Company:

	June 30,		September 30,
	2018		2017
Goodwill	$	2,722,985	$	2,722,985

The Company  performed an impairment analysis and no impairment was determined. Therefore no impairment was recorded for the nine months ended June 30, 2018 and the period ended September 30, 2017.

Intangible Assets

On December 17, 2013 the Company’s shareholder, Panetta Partners Limited, transferred 5,000,000 of its shares in Arna Therapeutics Limited to Eurema Consulting S.r.l. and 5,000,000 shares in Arna Therapeutics Limited to TES Pharma S.r.l. In exchange for the shares, Panetta Partners Limited obtained intellectual property ("Platform Technology") from TES Pharma S.r.l and Eurema Consulting S.r.l. Panetta Partners Limited then assigned the Platform Technology to Arna Therapeutics Limited, which was accounted for as a capital contribution. The fair value of the shares exchanged for the IPR&D was $0.13 per share; in addition the issue price for shares in October 2013 was $0.13 per share (shares issued post acquisition of the IPR&D were issued at $0.28) and accordingly the Company valued the Platform Technology at $1.3 million.

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IPR&D relating to LSD-1, was acquired in the reverse acquisition of Rasna UK by Arna as of May 17, 2016. The Company retained a Clinical Research Organisation ("CRO") to perform all related research and development associated with LSD‐1. Based on review of the license agreement dated January 1, 2015, between the CRO and Rasna, the Company agreed to pay 100,002 Euros for costs incurred to date and to perform research and development on a going forward basis. Additionally, the Company entered into an amended license agreement whereby Rasna agreed to pay TTFactor an additional 435,000 Euros as of May 17, 2016, regarding services rendered between September 9, 2014 to May 17, 2016. Based on the cost approach, the IPR&D was valued at $613,100.

At the time of the acquisition, the Company had reasonably expected to use the Platform Technology, in the asset’s then current state, in two independent research projects that had not commenced as of the date of the acquisition. The Company’s research projects applied the conclusions reached in the Platform Technology to develop treatments for AML through reformulation of certain available pharmaceuticals and independent development of a new pharmaceutical treatment. Both research projects were initiated shortly after the Platform Technology was acquired and continue through the date of the financial statements.

At the time of acquisition, and at present, no legal, regulatory, contractual, competitive, economic, or other factors were present that would constrain the useful life of the asset to the Company. The agreement to purchase the asset has no provisions that would limit the timeframe of use, legally, contractually or economically, and the asset remains a competitive platform for results in the treatment of Acute Myeloid Leukemia and lymphoma. Specifically, the agreement irrevocably assigns all rights and title to the Asset, without limitation or contingencies. No limitations or alternative technology has emerged that would suggest obsolescence or a change in the competitive landscape for the Platform Technology as of the most recent reporting period. In addition, the Company has concluded that the useful life of the Platform Technology at the time of acquisition was beyond a foreseeable horizon, and therefore the asset is classified as an indefinite lived intangible asset.

The IPR&D and intellectual property are considered to have an indefinite life and there were no impairment charges recognized during the nine months ended June 30, 2018 and the period ended September 30, 2017.

The following table summarizes the Company’s intangible assets as of the following periods: 

	June 30,		September 30,
	2018		2017		Estimated
	(Unaudited)				Useful Life
In-process research and development	$	613,100	$	613,100	Indefinite
Intellectual Property		236,239		236,269	Indefinite
Indefinite lived intangible asset		1,300,000		1,300,000	Indefinite
	$	2,149,339	$	2,149,369

5.    ACCOUNTS PAYABLE AND ACCRUED EXPENSES

The following table summarizes the Company’s accounts payable and accrued expenses as of the following periods:

	June 30, 2018
	(Unaudited)		September 30, 2017
Accounts payable	$	570,411	$	658,921
Accrued expenses	607,531		319,918
	$	1,177,942	$	978,839

Accounts payable is predominantly made up of unpaid invoices relating to research and development, accounting and professional fees. Included within the accrued expenses balance of $607,531 at June 30, 2018 is approximately $193,000 relating to vendors for research and development expenses, $138,000 relating to an accrual for directors fees, approximately $21,000 relating payroll accruals, approximately $63,000 related to travel and entertainment expenses and approximately $193,000 of accrued legal and other costs.

Included within the accrued expenses balance of $319,918 at September 30, 2017 is $128,000 of accrued legal, accounting and professional fees, $60,000 for payroll related expenses and $50,000 for Directors fees.

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6.    STOCK-BASED COMPENSATION

2016 EQUITY INCENTIVE PLAN

On July 19, 2016, the Company adopted its 2016 Equity Incentive Plan (the "Equity Incentive Plan"). The plan was established to attract, motivate, retain and reward selected employees and other eligible persons. For the Equity Incentive Plan, employees, officers, directors and consultants who provide services to the Company or one of the Company’s subsidiaries may be selected to receive awards. A total of 9,750,000 shares of the Company’s common stock was authorized for issuance with respect to awards granted under the Equity Incentive Plan.

The fair values of stock option grants during the nine months ended June 30, 2018 were calculated on the date of the grant using the Black-Scholes option pricing model. Compensation expense is recognized over the period of service, generally the vesting period. During the nine months ended June 30, 2018, no options were granted by the Company. The following assumptions were used in the Black-Scholes options pricing model to estimate the fair value of stock options for the nine months ended June 30, 2018:

	Employee – Vesting Period				Non- Employee – Vesting Period
	1 Year	2 Years	3 Years	4Years	1 Year	2 Years	3 Years
Stock Price	$0.85	$0.85	$0.85	$0.85	$1.10	$1.10	$1.10
Expected life (years)	5.50	5.75	6.00	6.25	5.50	5.75	6.00
Expected volatility	82.40%	82.20%	81.90%	81.70%	100.80%	102.30%	103.50%
Expected dividend yield	—%	—%	—%	—%	—%	—%	—%
Risk-free interest rate	1.57%	1.57%	1.57%	1.57%	2.66%	2.67%	2.68%

The input assumptions used are as follows:

Discount rate —Based on the daily yield curve rates for U.S. Treasury obligations with maturities which correspond to the expected term of the Company’s stock options.

Dividend yield —The Company has not paid any dividends on common stock since its inception and does not anticipate paying dividends on its common stock in the foreseeable future.

Expected volatility —Based on the historical volatility of seven different comparable Companys’ stock.

Expected term —The Company has had no stock options exercised since inception. The expected option term represents the period that stock-based awards are expected to be outstanding based on the simplified method provided in Staff Accounting Bulletin (“SAB”) No. 107, Share-Based Payment , (“SAB No. 107”), which averages an award’s weighted-average vesting period and expected term for “plain vanilla” share options. Under SAB No. 107, options are considered to be “plain vanilla” if they have the following basic characteristics: (i) granted “at-the-money”; (ii) exercisability is conditioned upon service through the vesting date; (iii) termination of service prior to vesting results in forfeiture; (iv) limited exercise period following termination of service; and (v) options are non-transferable and non-hedgeable.

The Company will continue to use the simplified method for the expected term until it has the historical data necessary to provide a reasonable estimate of expected life in accordance with SAB No. 107, as amended by SAB No. 110. For the expected term, the Company has “plain-vanilla” stock options, and therefore used a simple average of the vesting period and the contractual term for options granted subsequent to January 1, 2006 as permitted by SAB No. 107.

Forfeitures —ASC Topic 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company has estimated zero forfeiture.

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The following table summarizes stock option activity for the nine months ended June 30, 2018:

	Number of Options	Weighted Average Exercise Price Per Option	Weighted Average remaining Contractual Life (years)	Aggregate Intrinsic Value
Outstanding balance at September 30, 2017	4,829,875	0.56	8.22	$	16,636,397
Granted	—	—	—	—
Exercised	—	—	—	—
Forfeited and Expired	—	—	—	—
Outstanding balance at June 30, 2018	4,829,875	0.56	7.48	$	2,898,009
Options exercisable at June 30, 2018	2,795,706	0.34	6.72	$	2,112,591

There were no options exercised during the nine months ended June 30, 2018. As of June 30, 2018, there was approximately $779,253 of total unrecognized compensation cost related to stock options. The cost is expected to be recognized over a weighted average period of 1.0 years.

For the three and nine months ended June 30, 2018, $193,540 and $692,634 related to share based compensation to directors and employees respectively, has been included within the general and administrative expense category in the unaudited condensed consolidated interim financial statements. An additional ($120,192) and ($151,662) related to non-employees respectively, has been included within the Consultancy fees third parties and related parties expense category in the unaudited condensed consolidated interim financial statements.

For the three and nine months ended June 30, 2017, $231,878 and $644,520 related to share based compensation to directors and employees respectively, has been included within the general and administrative expense category in the unaudited condensed consolidated interim financial statements. An additional $89,960 and $119,012 related to non-employees respectively, has been included within the Consultancy fees third parties and related parties expense category in the unaudited condensed consolidated interim financial statements.

7.    WARRANTS

On April 10, 2016, the Company incurred the obligation to issue warrants to placement agents relating to fundraising. The Company accounted for the obligation based on an estimate of the fair value of warrants issued using the Black-Scholes Model (“BSM”) and the Company recorded $484,009 as a liability and a reduction to proceeds of the equity offering (additional paid-in-capital). The Company assessed the fair value for each reporting period of the liability and recorded changes to additional paid-in capital. At February 28, 2017, the date the warrants were issued, the obligation was reversed to additional paid-in capital and no outstanding liability existed. Based upon the Company’s analysis of the criteria contained in ASC Topic 815-40, “Derivatives and Hedging - Contracts in an Entity’s Own Equity”, the Company determined that the warrants issued as placement agent warrants are classified as equity in additional paid-in capital. 

On July 3, 2017, the Company entered into a finders agreement with a placement agent whereby they incurred an obligation to issue warrants once a private placement has successfully been entered into. On August 31, 2017, the performance condition had been satisfied and the Company issued the related warrants. Based upon the Company’s analysis of the criteria contained in ASC Topic 815-40, “Derivatives and Hedging - Contracts in an Entity’s Own Equity”, the Company determined that the warrants issued as placement agent warrants are classified as equity in additional paid-in capital.

On September 1, 2017, the Company issued warrants to placement agents in lieu of fees for consultancy services to be provided over a period of 6 months. Based upon the Company’s analysis of the criteria contained in ASC Topic 815-40, “Derivatives and Hedging - Contracts in an Entity’s Own Equity”, the Company determined that the warrants issued in lieu of consultancy fees are classified as equity in additional paid in-capital.

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The fair value of the warrants at the date of issuance has been calculated based on the following inputs and assumptions using the Black-Scholes Model:

	September 1, 2017	August 31, 2017	February 28, 2017
Fair value at issuance date	$1,420,456	$424,179	$2,914,884
Warrants issued	374,000	112,000	1,440,501
Exercise Price	$0.60	$0.65	$0.37
Stock Price	$4.00	$4.00	$2.10
Expected Term (Years)	10	10	10
Volatility %	91%	91%	105%
Discount Rate - Bond Equivalent Yield	2.35%	2.35%	2.55%
Dividend Yield	—%	—%	—%

The input assumptions used are as follows:

Discount rate —Based on the daily yield curve rates for U.S. Treasury obligations with maturities which correspond to the expected term of the Company’s stock options.

Dividend yield —The Company has not paid any dividends on common stock since its inception and does not anticipate paying dividends on its common stock in the foreseeable future.

Expected volatility —Based on the historical volatility of seven different comparable Companies’ stock.

Expected term —The Company has used the life of the warrant.

The following table summarizes warrant activity for the nine months ended June 30, 2018:

	Number of Warrants	Weighted Average Exercise Price Per Option	Weighted Average remaining Contractual Life (years)	Aggregate Intrinsic Value
Outstanding balance at September 30, 2017	1,926,501	0.43	8.86	6,875,819
Granted	—	—	—	—
Forfeited	—	—	—	—
Outstanding balance at June 30, 2018	1,926,501	0.43	8.11	$	1,288,966
Warrants exercisable at June 30, 2018	1,926,501	0.43	8.11	$	1,288,966

The performance related warrants issued on August 31, 2017 are fully vested and do not have any forfeiture conditions attached.

During the three and nine months ended June 30, 2018, $0 and $522,350 of costs were recognized for consultancy related warrants respectively. These costs are included within the Consultancy fees third parties and related parties expense category in the consolidated financial statements. As of February 28, 2018, the consultancy warrants were fully vested.

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8.    RELATED PARTY TRANSACTIONS

During the normal course of its business, the Company enters into various transactions with entities that are both businesses and individuals. The following is a summary of the related party transactions during the three and  nine months ended June 30, 2018 and 2017.

Eurema Consulting

Eurema Consulting S.r.l. was a significant shareholder of Arna Therapeutics Limited. During the three and nine months ended June 30, 2018 and 2017, Eurema Consulting S.r.l. did not supply the Company with consulting services. As of June 30, 2018, and September 30, 2017, Eurema Consulting S.r.l was owed $200,000 and $200,000, respectively, by the Company for past consultancy services.

Gabriele Cerrone

Gabriele Cerrone was a Director of Arna Therpeutics Limited. During the three and nine months ended June 30, 2018 and 2017, Gabriele Cerrone did not supply the Company with consulting services. As of June 30, 2018, and September 30, 2017, the balance due to Gabriele Cerrone was $175,000 and $175,000, respectively for past consultancy services.

Roberto Pellicciari

Roberto Pellicciari was a Director of Arna Therpeutics Limited and sole shareholder of TES Pharma Srl. During the three and nine months ended June 30, 2018 and 2017, Roberto Pellicciari did not supply the Company with consulting services. As of June 30, 2018, and September 30, 2017, the balance due to Roberto Pellicciari was $175,000 and $175,000, respectively for past consultancy services.

Other related party transactions are discussed in Note 9, Commitments and contingencies.

There is no interest charged on the balances with related parties. There are no defined repayment terms and such amounts can be called for payment at any time.

9.    COMMITMENTS AND CONTINGENCIES

License Agreements

In November 2016, the Company entered into a license agreement with Profs. Falini and Martelli, wherein it obtained the exclusive rights related to the use or reformulation of Actinomycin D and intends to utilize these rights for the development of new product. In connection with this agreement, the Company was committed to paying milestone payments, the first being a EUR 50,000 payment to be paid six months after the agreement was signed. The payment was made to Profs. Falini and Martelli in June 2017.

During the nine months ended June 30, 2018, the second milestone was achieved triggering a payment EUR 50,000. This was paid in March 2018.

The specific timing of the remaining milestones cannot be predicted and depends upon research and clinical developments. The Company expects to incur further payments of EUR 400,000 in respect of this agreement once milestones are achieved.

Lease Agreements

In February 2018, the Company renewed its lease agreement with the same terms, with Bucks County Biotechnology Centre Inc in Doylestown Pennsylvania, where certain employees of the Company are based. The lease provides for annual basic lease payments from February 1, 2018 to January 31, 2019 of $13,480, plus and utility expense estimate of $237 per month. During the three and nine months ended June 30, 2018, the Company had incurred approximately $4,000 and $12,000 respectively, of rental expenses related to this and the prior agreement.

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Employment and Consultancy Agreements

In October 2015, Rasna Therapeutics Ltd entered into a consultancy agreement with James Tripp in which he agreed to consult on clinical operations for a fee of  $10,000 per calendar quarter. Mr. Tripp's consultancy agreement ended in May 2017 and all outstanding obligations were settled with him.

In September 2016, the board of directors awarded Mr Tripp 125,000  options to vest over a 3 year period, with an exercise price of  $0.40. Upon the end of Mr Tripp's consultancy agreement in May 2017, all options were forfeited.

In October 2016, the Company entered into a consultancy agreement with Tiziano Lazzaretti in which he agreed to serve as Chief Financial Officer for a fee of  $50,000  per year. This was increased to  $80,000  a year in April 2017 by the Company's compensation committee. During the three and nine months ended June 30, 2018, the Company had incurred approximately $20,000 and $60,000 respectively, of consultancy expenses related to this agreement. An additional $13,333 has been prepaid for fees relating to July and August 2018.

On May 24, 2017, the Company entered into an executive employment agreement with Kunwar Shailubhai to serve as Chief Executive Officer and Chief Scientific Officer for a renumeration of  $300,000  per annum. Also included within the agreement is a performance related bonus of  35%  of base salary. Based on Board discretion, it is not probable that this bonus will be paid out for the period October 1, 2017 to June 30, 2018, therefore no bonus has been accrued as of June 30, 2018. During the three and nine months ended June 30, 2018, the Company had incurred approximately $75,000 and $225,000 respectively, of salary expenses related to this appointment.

In June 2017, the board of directors awarded Dr Shailubhai 1,700,000 options to vest over a 4 year period, with an exercise price of $0.85 and a fair value at grant date of $985,081. During the three and nine months ended June 30, 2018, the Company had incurred approximately $77,000 and $331,000 respectively, of expenses related to these options.

The Company has entered a number of employment agreements commencing in January 2017. These agreements relate to clinical and non clinical employees, and are reviewable on an annual basis. The Company's committed to paying approximately $499,000 of salary and bonus expenses for the 12 month period to June 2019.

Shared Services Agreement

The Company has entered into a shared services agreement with Tiziana Life Sciences Plc. Under the terms of this agreement, the Company will be charged for shared services including payroll and rent for the Lexington Avenue premises, on a monthly basis based on allocated costs incurred. This agreement is effective from January 1, 2017. At June 30, 2018 $37,012 is due to Tiziana Life Sciences PLC. During the three and nine months ended June 30, 2018, the Company had incurred approximately $61,000 and $159,000 of payroll and $30,000 and $88,000 of rental expenses respectively, related to this agreement. During the three and nine months ended June 30, 2017, the Company had incurred approximately $19,000  and $130,000 of payroll and $23,000 and $84,000 of rental expenses respectively, related to this agreement. 

As at June 30, 2018, the Company had also prepaid $48,946 of payroll and $59,489 of rental expenses respectively for the period July to December 2018 related to this agreement.

In addition to this, as at June 30, 2018, the Company is also owed $105,274 from Tiziana Life Sciences Plc. The majority of the $105,274 were a transfer of funds to Tiziana Life Sciences PLC that were repaid back to Rasna in July 2018.  

Other Commitments

The Company may enter into certain licensing agreements for products currently under development. The Company may be obligated in future periods to make additional payments, which would become due and payable only upon the achievement of certain research and development, regulatory, and approval milestones. The specific timing of such milestones cannot be predicted and depend upon future discretionary research and clinical developments, as well as, regulatory agency actions. Further, under the terms of certain agreements the Company may be obligated to pay commercial milestones contingent upon the realization of sales revenues and sublicense revenues. Due to the long range nature of such commercial milestones, they are neither probable at this time nor predictable, and consequently are not considered contingent milestone payment amounts.

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10.    SUBSEQUENT EVENTS

On August 8, 2018 the Company issued a 12% convertible promissory note (the “Note”) in the principal amount of $135,000. The Note has a maturity date of August 8, 2019 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.

The Note contains an anti-dilution provision which adjusts the conversion price in the event of an issuance by the Company of common stock below the then effective conversion price.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements 

This section and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms. Forward-looking statements are not guarantees of future performance and the Company’s actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in the Company’s Transitional Report on Form 10-KT filed on November, 30, 2017 under the heading “Risk Factors,” which are incorporated herein by reference.

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 Rasna Therapeutics, Inc., a Nevada corporation, and, where appropriate, its wholly owned subsidiaries.

Company Background

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:

• 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.

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On October 11, 2017, we changed our fiscal year end from June 30 to September 30 and we filed a Form 10-KT on November 30, 2017.

On April 27, 2016, Rasna Therapeutics Limited, a private limited company incorporated in England and Wales under the U.K. Companies Act (“Rasna UK”) sold its stake in Falconridge Holdings Limited, or Falconridge, to Rasna DE for $1. This entity had no operations, no assets or liabilities as of this date.

On May 17, 2016, Rasna DE and its subsidiary Falconridge entered into an Agreement of Merger and Plan of Reorganization (“Merger Agreement”) with Arna Therapeutics Limited, a British 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 agreement, Arna was merged into Falconridge and the shareholders of Arna were issued shares of Rasna DE in exchange for shares of Arna.

On August 15, 2016, Active With Me, Inc., or AWM, entered into an Agreement of Merger and Plan of Reorganization (the “Merger Agreement”) 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 the legal acquirer.  As a result, 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 AWM had no operations upon the Merger Agreement taking place, the transaction was treated as a reverse recapitalization for accounting purposes and 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.

On September 20, 2016, we filed a Certificate of Change in Nevada which effected a 3.25 for 1 forward stock split of our common stock for shareholders of record as of August 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 biotechnology company focused on targeted drugs to treat diseases in oncology and immunology, mainly focusing on the treatment of leukemia and lymphoma.

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 in the 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.

While our significant accounting policies are more fully described in Note 2 to our unaudited condensed consolidated financial statements appearing elsewhere in this Quarterly 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 financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“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 the Financial Accounting Standards Board (“FASB”).

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Principles of Consolidation

In accordance with ASC 810, Consolidation, we consolidate any entity in which we have a controlling financial interest. Further, we consolidate any variable interest entity that we are deemed to be the primary beneficiary of, and have the power to direct its significant activities. Upon review of the relationship between Rasna Therapeutics (“Rasna UK”) and Rasna, Management noted that equity investment in Rasna UK is not sufficient to fund its operations. Accordingly, Rasna is considered to be the primary beneficiary of the assets held within Rasna UK, which primarily consist of cash received from Rasna to fund its operations, and has power to direct its significant activities. As a result, Rasna consolidates this variable interest entity, which has minimal activity and is in the process of being liquidated.  

The interim condensed consolidated financial statements include the financial statements of the Company and its subsidiary, Arna Therapeutics Limited and its variable interest entity, Rasna Therapeutics Ltd, as well as the operations of Rasna Inc. for the period from May 17, 2016 through June 30, 2018. All significant intercompany accounts and transactions have been eliminated in the preparation of the accompanying condensed consolidated financial statements.

Going Concern

We are subject to a number of risks similar to those of other pre-commercial stage companies, including our 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 our development activities and generating a level of revenues adequate to support our cost structure. 

We have experienced net losses and significant cash outflows from cash used in operating activities over the past years, and at June 30, 2018, had an accumulated deficit of $15,970,046, a net loss for the nine months ended June 30, 2018 of $3,670,978 and net cash used in operating activities of $2,513,179.

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 of October 2018, but will require significant additional cash resources to launch new development phases of existing products in its pipeline. In the event that the Company is unable to secure the necessary additional cash resources needed, we may slow current development phases or halt new development phases in order to mitigate the effects of the costs of development. These conditions, among others, raise substantial doubt about the our ability to continue as a going concern. The accompanying condensed 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.

Use of Estimates

The preparation of financial statements in conformity with 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 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 values 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, related party balances, accounts payable and accrued liabilities, approximate fair value because of the short-term nature of such financial instruments. Management measures certain other assets, including nonmarketable equity securities, at fair value on a nonrecurring basis when they are deemed to be other-than-temporarily impaired.

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Concentration of Credit Risk

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 our bank accounts exceed Federal Deposit Insurance Corporation limits. We will periodically evaluate the risk of exceeding insured levels and might transfer funds if we deem 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.

Goodwill and Intangible assets

Intangible assets are made up of indefinite lived intangible assets, in-process research and development, (“IPR&D”) and certain intellectual property (“IP”). The balance of the indefinite lived intangible assets represents the platform technology that was acquired in 2013, which, at the time, was determined to have alternative future uses. IPR&D assets 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 the Company’s 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 the nine months ended June 30, 2018 or 2017.

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.

Reclassifications

Certain prior period amounts have been reclassified for comparative purposes to conform to the fiscal 2018 presentation. These reclassifications have no impact on the previously reported net loss.

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Research and development

Expenditure on research and development is charged to the statements of operation 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.

Foreign Currency

Items included in the financial statements are measured using their functional currency, being the currency of the primary economic environment in which the company operates. The financial statements are presented in United 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.

The following table sets forth potential common shares issuable upon the exercise of outstanding options and the exercise of warrants, 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:

	June 30, 2018		June 30, 2017
Stock options		4,829,875		3,162,375
Warrants		1,926,501		1,440,501
Total shares issuable upon exercise or conversion		6,756,376		4,602,876

Equity-Based Payments to Non-Employees

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. The Company accounts 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.

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Income taxes

On December 22, 2017, the Tax Cuts and Jobs Act was signed into law and has resulted in significant change to the U.S corporate income tax system.  These changes include a federal statutory rate reduction from 35% to 21%, a transition tax which applies to the repatriate 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. During the nine month period ended June 30, 2018, the tax impact of the  2017 Tax Cuts and Jobs Act was immaterial to the financial statements.

Recent Accounting Pronouncements Not Yet Adopted

On August 26, 2016, the FASB issued Accounting Standards Update (ASU) 2016-15, 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 and apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of cash flows under FASB Accounting Standards Codification (FASB ASC) 230, Statement of Cash Flows.

The amendments in ASU 2016-15 are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The amendments in ASU 2016-15 should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. We expect to adopt this ASU described above in our Consolidated Financial Statements beginning in October 1, 2018. Management has evaluated and concluded that there will be no material impact on our consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230) Restricted Cash a consensus of the FASB Emerging Issues Task Force (“ASU 2016-18”). ASU 2016-18 requires restricted cash and cash equivalents to be included with cash and cash equivalents on the statement cash flows. The new standard is expected to be effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted. Management has evaluated the effects of ASU 2016-18 and concluded that there will be no material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-1, 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 after December 15, 2017. We expect to adopt this ASU described above in our Consolidated Financial Statements beginning in October 1, 2018. Management has evaluated and concluded that there will be no material impact on our consolidated financial statements.

In January 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 after December 15, 2019 with early adoption permitted in January 2017. Management has evaluated and concluded that there will be no material impact on our consolidated financial statements.

In July 2017, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or 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 after December 15, 2018. For all other companies, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted. Management has evaluated and concluded that there will be no material impact on our consolidated financial statements.

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In June 2018, the FASB issued ASU 2018-07, which simplifies several aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation-Stock Compensation, 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 also clarify that Topic 718 does 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 after December 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, and do not expect the adoption of this guidance to have a material impact on our consolidated financial statements and related disclosures.

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 Three Months Ended June 30, 2018 and 2017

The following table sets forth the summary statements of operations for the periods indicated:

	For the Three Months Ended June 30,
	2018			2017
	(Unaudited)			(Unaudited)
Revenue	$	—		$	—
Cost of revenue	—			—
Gross profit	—			—
Operating expenses:
General and administrative	644,545			620,788
Research and development	136,131			277,326
Consultancy fees third parties and related parties	(100,192		)	49,126
Legal and professional fees	128,901			283,132
Total operating expenses	809,385			1,230,372
Loss from operations	(809,385		)	(1,230,372		)
Other income/(expense):
Foreign currency transaction gain	5,420			16,816
Other income	5,420			16,816
Net loss	$	(803,965	)	$	(1,213,556	)

Revenues

There were no revenues for the three months ended June 30, 2018 and 2017 because the Company does not have any commercial biopharmaceutical products.

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Operating Expenses

Operating expenses consisting of, research and development costs, consultancy fees, legal and professional fees and general and administrative expenses for the three months ended June 30, 2018 decreased to $809,385 from $1,230,372 for the three months ended June 30, 2017, a decrease of $420,987. The decrease is primarily attributable to a reduction in R&D related activities in the quarter (approximately $141,000), a reduction in professional fees relating to patent costs ($130k) as in this fiscal year the patents were maintained rather than filed, as they were in 2017 and a reduction in consultancy fees due to the options fair value charge driven by an adverse movement in the share price from $2 to $1.1 (approximately $149,000).  

Net Loss

Net loss for the three months ended June 30, 2018 decreased to $803,965 from $1,213,556 for the three months ended June 30, 2017, a decrease of $409,591.  The decrease is primarily attributable to a reduction in R&D related activities in the quarter (approximately $141,000), a reduction in professional fees relating to patent costs ($130k) and a reduction in consultancy fees due to the options fair value charge driven by an adverse movement in the share price from $2 to $1.1 (approximately $149,000).  

Results of Operations for the Nine Months Ended June 30, 2018 and 2017

The following table sets forth the summary statements of operations for the periods indicated:

	For the Nine Months Ended June 30,
	2018			2017
	(Unaudited)			(Unaudited)
Revenue	$	—		$	—
Cost of revenue	—			—
Gross profit	—			—
Operating expenses:
General and administrative	2,343,296			1,704,860
Research and development	345,645			974,585
Consultancy fees third parties and related parties	454,218			56,541
Legal and professional fees	521,868			862,134
Total operating expenses	3,665,027			3,598,120
Loss from operations	(3,665,027		)	(3,598,120		)
Other income/(expense):
Foreign currency transaction gain	(5,951		)	80,551
Other income	(5,951		)	80,551
Net loss	$	(3,670,978	)	$	(3,517,569	)

Revenues

There were no revenues for the nine months ended June 30, 2018 and 2017 because the Company does not have any commercial biopharmaceutical products.

Operating Expenses

Operating expenses consisting of, research and development costs, consultancy fees, legal and professional fees and general and administrative expenses for the nine months ended June 30, 2018 increased to $3,665,027 from $3,598,120, an increase of $66,907.  The increase is primarily attributable to payroll and rental expenditure incurred due to the hiring additional employees (approximately $638,000), an increase in the fair value charge for consultancy and performance related warrants (approximately $397,000), offset by a reduction in R&D related activities in the period ($628,000) and legal and professional fees (approximately $340,000) and the absence of any foreign exchange gain. 

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Net Loss

Net loss for the nine months ended June 30, 2018 decreased to $3,670,978 from $3,517,569 for the nine months ended June 30, 2017, a decrease of $153,409. The decrease is primarily attributable to an increase in payroll and rental expenditure incurred due to the hiring additional employees (approximately $638,000), an increase in the fair value charge for consultancy and performance related warrants (approximately $397,000), offset by a reduction in R&D related activities in the period ($628,000) and legal and professional fees (approximately $340,000) and the impact of less costs being incurred in a foreign currency  (approximately $86,000).

Liquidity and Capital Resources 

We believe we have sufficient cash to carry out our activities until October 2018, 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 slow current development phases or halt new development phases in order to mitigate the effects of the costs of development. These conditions, among others, raise substantial doubt about the our ability to continue as a going concern. A successful transition to attaining profitable operations is dependent upon achieving a level of positive cash flows adequate to support our cost structure. 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. 

On August 8, 2018, we issued  a 12% convertible promissory note (the “Note”) to an investor, in the principal amount of $135,000. The Note has a maturity date of August 8, 2019 and  is convertible by the holder at any time into shares of our 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, we must repay the outstanding principal amount plus accrued interest.  

The Note contains an anti-dilution provision which adjusts the conversion price in the event of an issuance by us of common stock below the then effective conversion price.

Capital Resources

The following table summarizes total current assets, liabilities and working capital as of the periods indicated:

	June 30, 2018			September 30, 2017		Change
	(Unaudited)
Current assets	$	287,431		$	2,695,699	$	(2,408,268	)
Current liabilities	$	1,736,467		$	1,537,364	$	199,103
Working capital	$	(1,449,036	)	$	1,158,335	$	(2,607,371	)

We had a cash balance of $20,357 and $2,537,611 at June 30, 2018 and September 30, 2017, respectively. 

Liquidity

The following table sets forth a summary of our cash flows for the periods indicated:

	For the Nine Months Ended June 30,
	2018			2017			Increase/(Decrease)
Net cash used in operating activities	$	(2,513,179	)	$	(2,300,622	)	$	(212,557	)
Net cash used in investing activities	$	(4,073	)	$	(10,493	)	$	6,420
Net cash provided by financing activities	$	—		$	2,007,500		$	(2,007,500	)

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Cash Used in Operating Activities

Cash used in operating activities consists of net loss adjusted for the effect of changes in operating assets and liabilities.

Net cash used in operating activities was $2,513,179 for the nine months ended June 30, 2018 compared to $2,300,622 for the nine months ended June 30, 2017. The change is principally attributable to net loss of $3,670,978 excluding non-cash items such as share based compensation of $540,972, consulting expense for warrants issued of $522,350 and changes in operating assets and liabilities of $61,188.

Cash Used in Investing Activities

Cash used in investing activities consists of fixed assets acquired. This was $4,073 for the nine months ended June 30, 2018 compared to $10,493 for the nine months ended June 30, 2017.

Cash Provided by Financing Activities

Cash provided by financing activities consists of proceeds received from the sale of shares of common stock issued in a private placement to accredited investors. This was $0 for the nine months ended June 30, 2018 compared to $2,007,500 for the nine months ended June 30, 2017.

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. 

ITEM 3. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized, and reported within the required time periods. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

As of the end of the period covered by this Report, the Company’s Chief Executive Officer and Chief Financial Officer (the “Certifying Officers”), evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. Based on that evaluation, each officer concluded that, as of the date of the evaluation, the Company’s disclosure controls and procedures were not effective to provide reasonable assurance that the information required to be disclosed in the Company’s periodic filings under the Securities Exchange Act of 1934 is accumulated and communicated to management to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors disclosed in our Form 10-KT as of and for the period ended  September 30, 2017. 

ITEM 6. EXHIBITS

10.1*	Form of 12% Convertible Promissory Note
31.1*	Certification of Principal Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial and Accounting Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
32.1*	Certification of Principal Executive Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
32.2*	Certification of Principal Financial Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
101.INS*	XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH*	XBRL Taxonomy Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase

* Filed Herewith

32

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Rasna Therapeutics, Inc.
August 9, 2018	By:	/s/ Kunwar Shailubhai
		Name: Kunwar Shailubhai Title: Chief Executive Officer
August 9, 2018	By:	/s/ Tiziano Lazzaretti
		Name: Tiziano Lazzaretti Title: Chief Financial Officer

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EX-31.1

Exhibit 31.1

CERTIFICATION BY PRINCIPAL EXECUTIVE OFFICER

I, Kunwar Shailubhai, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Rasna Therapeutics, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: August 9, 2018 

/s/ Kunwar Shailubhai

Name: Kunwar Shailubhai
Title: Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION BY PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER

I, Tiziano Lazzaretti, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Rasna Therapeutics, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

Dated: August 9, 2018

/s/ Tiziano Lazzaretti

Name: Tiziano Lazzaretti

Title: Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Rasna Therapeutics, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kunwar Shailubhai, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that: 

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Dated: August 9, 2018 

/s/ Kunwar Shailubhai

Name: Kunwar Shailubhai
Title: Director and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Rasna Therapeutics, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Tiziano Lazzaretti, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Dated: August 9, 2018

/s/ Tiziano Lazzaretti

Name: Tiziano Lazzaretti

Title: Chief Financial Officer

EX-10.1

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAS BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE AND HAS BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO BORROWER. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

Original Issue Date: August 8, 2018

$135,000

12% CONVERTIBLE PROMISSORY NOTE

DUE AUGUST 8, 2019

THIS CONVERTIBLE PROMISSORY NOTE is one of a series of duly authorized and validly issued Notes of Rasna Therapeutics, Inc., a Nevada corporation, (the “Borrower”), having its principal place of business at 420 Lexington Avenue, Suite 2525, New York, New York 10170, due August 8, 2019 (this note, the “Note” and, collectively with the other notes of such series, the “Notes”).

FOR VALUE RECEIVED, Borrower promises to pay to _________________, or its registered assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of $135,000.00 on August 8, 2019 (the “Maturity Date”) or such earlier date as this Note is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Note in accordance with the provisions hereof. Notwithstanding the foregoing, in the event the Company raises $1,000,000 or more in financing during the 30 days after the date of this Note, the Holder shall have the right to demand immediate payment of this Note and any accrued but unpaid interest.This Note is subject to the following additional provisions:

Section 1.          Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Note, the following terms shall have the following meanings:

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

“Alternate Consideration” shall have the meaning set forth in Section 5(e).

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“Bankruptcy Event” means any of the following events: (a) Borrower or any Subsidiary thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to Borrower or any Subsidiary thereof, (b) there is commenced against Borrower or any Subsidiary thereof any such case or proceeding that is not dismissed within 15 days after commencement, (c) Borrower or any Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) Borrower or any Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 15 calendar days after such appointment, (e) Borrower or any Subsidiary thereof makes a general assignment for the benefit of creditors, (f) Borrower or any Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) Borrower or any Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

“Beneficial Ownership Limitation” shall have the meaning set forth in Section 4(d).

“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

“Change of Control Transaction” means, the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of Borrower, by contract or otherwise) of in excess of 50% of the voting securities of Borrower, (b) Borrower merges into or consolidates with any other Person, or any Person merges into or consolidates with Borrower and, after giving effect to such transaction, the stockholders of Borrower immediately prior to such transaction own less than 50% of the aggregate voting power of Borrower or the successor entity of such transaction, (c) Borrower sells or transfers all or substantially all of its assets to another Person and the stockholders of Borrower immediately prior to such transaction own less than 50% of the aggregate voting power of the acquiring entity immediately after the transaction, (d) a replacement at one time or within a three year period of more than one-half of the members of the Board of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the Original Issue Date (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors was approved by a majority of the members of the Board of Directors who are members on the date hereof), or (e) the execution by Borrower of an agreement to which Borrower is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (d) above.

“Closing Price” means on any particular date (a) the last reported closing bid price per share of Common Stock on such date on the Trading Market (as reported by Bloomberg L.P. at 4:15 p.m. (New York City time)), or (b) if there is no such price on such date, then the closing bid price on the Trading Market on the date nearest preceding such date (as reported by Bloomberg L.P. at 4:15 p.m. (New York City time)), or (c)  if the Common Stock is not then listed or quoted on a Trading Market and if prices for the Common Stock are then reported in the “pink sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) if the shares of Common Stock are not then publicly traded the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Borrower and reasonably acceptable to Holder, the fees and expenses of which shall be paid by Borrower.

2

“Common Stock Equivalents” means any securities of the Borrower or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

“Conversion” shall have the meaning ascribed to such term in Section 4.

“Conversion Date” shall have the meaning set forth in Section 4(a).

“Conversion Price” shall have the meaning set forth in Section 4(b).

“Conversion Shares” means, collectively, the shares of Common Stock issuable upon conversion of this Note in accordance with the terms hereof.

“Event of Default” shall have the meaning set forth in Section 6(a).

“Fundamental Transaction” shall have the meaning set forth in Section 5(d).

“Liens” means a lien, charge, pledge, security interest, or encumbrance.

“Material Adverse Effect” shall mean the result of any of the following: (i) a material adverse effect on the legality, validity or enforceability of this Note, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Borrower and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Borrower’s ability to perform in any material respect on a timely basis its obligations under this Note.

“New York Courts” shall have the meaning set forth in Section 8(d).

“Note Register” shall have the meaning set forth in Section 3(c).

“Notice of Conversion” shall have the meaning set forth in Section 4(a).

“Original Issue Date” means the date of the first issuance of the Notes, regardless of any transfers of any Note and regardless of the number of instruments which may be issued to evidence such Notes.

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

3

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Share Delivery Date” shall have the meaning set forth in Section 4(c)(ii).

“Subsidiary” means with respect to any entity at any date, any direct or indirect corporation, limited or general partnership, limited liability company, trust, estate, association, joint venture or other business entity of which (A) more than 30% of (i) the outstanding capital stock having (in the absence of contingencies) ordinary voting power to elect a majority of the board of directors or other managing body of such entity, (ii) in the case of a partnership or limited liability company, the interest in the capital or profits of such partnership or limited liability company or (iii) in the case of a trust, estate, association, joint venture or other entity, the beneficial interest in such trust, estate, association or other entity business is, at the time of determination, owned or controlled directly or indirectly through one or more intermediaries, by such entity, or (B) is under the actual control of the Borrower.

“Successor Entity” shall have the meaning set forth in Section 5(d).

“Trading Day” means a day on which the principal Trading Market is open for trading.

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, the OTC Bulletin Board, the OTCQB or the OTCQX (or any successors to any of the foregoing).

Section 2.         Interest Payment.

a)Interest in Cash. Interest shall be payable on the Maturity Date, accelerated or otherwise, when the principal and accrued but unpaid interest shall be due and payable, or sooner as described below.Interest will be payable in cash.

b)Conversion Privileges.The Conversion Rights set forth in Section 4 shall remain in full force and effect immediately from the date hereof and until the Note is paid in full regardless of the occurrence of an Event of Default.This Note shall be payable in full on the Maturity Date, unless previously converted into Common Stock in accordance with Section 4 hereof.

c)         Application of Payments .   Interest on this Note accrues at a rate of 12% per annum and shall be calculated on the basis of a 360-day year and the actual number of days elapsed.Payments made in connection with this Note shall be applied first to amounts due hereunder other than principal and interest, thereafter to interest and finally to principal.

d)         Pari Passu.   Except as otherwise set forth herein, all payments made on this Note and all actions taken by the Borrower with respect to this Note, shall be made and taken pari passu with respect to this Note.Notwithstanding anything to the contrary contained herein, it shall not be considered non-pari passu for a Holder to elect to receive interest paid in shares of Common Stock or for the Borrower to actually pay interest in shares of Common Stock to such electing Holder.

e)Manner and Place of Payment.Principal and interest on this Note and other payments in connection with this Note shall be payable at the Holder’s offices as designated above in lawful money of the United States of America in immediately available funds without set-off, deduction or counterclaim.Upon assignment of the interest of Holder in this Note, Borrower shall instead make its payment pursuant to the assignee’s instructions upon receipt of written notice thereof.Notwithstanding the foregoing, this Note may be prepaid, in whole or in part, at any time prior to the Maturity Date, without premium or penalty.

f)Intentionally omitted.

4

Section 3.           Registration of Transfers and Exchanges.

a)          Different Denominations. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.

b)          Transfer and Exchange. This Note may be transferred or exchanged only in compliance with the applicable federal and state securities laws and regulations.

c)         Reliance on Note Register. Prior to due presentment for transfer to Borrower of this Note, Borrower and any agent of Borrower may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither Borrower nor any such agent shall be affected by notice to the contrary.

Section 4.           Conversion.

a)          Voluntary Conversion. At any time after the Original Issue Date until this Note is no longer outstanding, this Note shall be convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time (subject to the conversion limitations set forth in Section 4(d) hereof). The Holder shall effect conversions by delivering to Borrower a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”), specifying therein the principal amount of this Note to be converted and the date on which such conversion shall be effected (such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder. To effect conversions hereunder, the Holder shall not be required to physically surrender this Note to Borrower unless the entire principal amount of this Note has been so converted. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Note in an amount equal to the applicable conversion. The Holder and Borrower shall maintain records showing the principal amount(s) converted and the date of such conversion(s). Borrower may deliver an objection to any Notice of Conversion within one (1) Business Day of delivery of such Notice of Conversion. In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error. The Holder, and any assignee by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note may be less than the amount stated on the face hereof.

b)          Conversion Price. The conversion price for the principal and interest in connection with voluntary conversions by the Holder shall be to the lower of (i) $0.65 or (ii) the price of the next financing during the 180 days after the date of this Note, subject to adjustment herein (the “Conversion Price”). The Conversion Price is subject to adjustment as described in this Note.Adjustments made after conversions which result in a reduction of the Conversion Price shall not have any retroactive effect.

5

c)          Mechanics of Conversion.

i.        Conversion Shares Issuable Upon Conversion of Principal Amount. The number of Conversion Shares issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note to be converted plus interest elected by the Holder to be converted by (y) the Conversion Price.

ii.        Delivery of Certificate Upon Conversion. Not later than three (3) Trading Days after each Conversion Date (the “Share Delivery Date”), Borrower shall deliver, or cause to be delivered, to the Holder a certificate or certificates representing the Conversion Shares.

iii.        Failure to Deliver Certificates. If, in the case of any Notice of Conversion, such certificate or certificates are not delivered to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to Borrower at any time on or before its receipt of such certificate or certificates, to rescind such Conversion, in which event Borrower shall promptly return to the Holder any original Note delivered to Borrower and the Holder shall promptly return to Borrower the Common Stock certificates issued to such Holder pursuant to the rescinded Conversion Notice.

iv.        Obligation Absolute. Borrower’s obligations to issue and deliver the Conversion Shares upon conversion of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to Borrower or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of Borrower to the Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery shall not operate as a waiver by Borrower of any such action Borrower may have against the Holder.

v.        Reservation of Shares Issuable Upon Conversion. Borrower covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of this Note as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Notes), not less than such aggregate number of shares of the Common Stock as shall be issuable (taking into account the adjustments and restrictions of Section 5) upon the conversion of the then outstanding principal amount of this Note and interest which has accrued and would accrue on such principal amount, assuming such principal amount was not converted through the Maturity Date. Borrower covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.

6

vi.        Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Note. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, Borrower shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share.

vii.        Transfer Taxes and Expenses. The issuance of certificates representing Conversion Shares shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that, Borrower shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Note so converted and Borrower shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to Borrower the amount of such tax or shall have established to the satisfaction of Borrower that such tax has been paid. Borrower shall pay all Transfer Agent fees required for same-day processing of any Notice of Conversion.

d)          Intentionally omitted.  

Section 5.           Certain Adjustments.

a)          Stock Dividends and Stock Splits. If Borrower, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by Borrower upon conversion of the Notes), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of Borrower, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of Borrower) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

b)          Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 5(a) above, if at any time Borrower grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

7

c)          Pro Rata Distributions. During such time as this Note is outstanding, if Borrower shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Note, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Note (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

d)Subsequent Equity Sales. From 180 days after the date of issuance of this Note until Maturity, if the Company or any Subsidiary shall issue any Common Stock or Common Stock Equivalents, in a transaction other than in an Exempt Transaction (“Subsequent Financing”) entitling any person or entity to acquire shares of Common Stock at an effective price per share less than the Conversion Price (subject to prior adjustment for reverse and forward stock splits and the like) (the “Discounted Conversion Price,” as further defined below), then, the Conversion Price shall be reduced then to an amount equal to the Discounted Conversion Price. The sale of Common Stock Equivalents shall be deemed to have occurred at the time of the issuance of the Common Stock Equivalents and the Discounted Conversion Price covered thereby shall also include the actual exercise or conversion price thereof at the time of the conversion or exercise (in addition to the consideration per share of Common Stock underlying the Common Stock Equivalents received by the Company upon such sale or issuance of the Common Stock Equivalents). In the case of any Subsequent Financing involving an “MFN Transaction” (as defined below), the Discounted Conversion Price shall be deemed to be the lowest adjustment price. If shares are issued for a consideration other than cash, the per share selling price shall be the fair value of such consideration as determined in good faith by the Board of Directors of the Company. The term “MFN Transaction” shall mean a transaction in which the Company issues or sells any securities in a capital raising transaction or series of related transactions which grants to an investor the right to receive additional shares based upon future transactions of the Company on terms more favorable than those granted to such investor in such offering. The Company shall not refuse to adjust the Conversion Price hereunder based on any claim that such Purchaser or any one associated or affiliated with such Purchaser has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice, restraining and or enjoining an issuance hereunder shall have been sought and obtained. Nothing herein shall limit a Purchaser’s right to pursue actual damages for the Company's failure to adjust the Conversion Price hereunder and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. Notwithstanding anything to the contrary herein, this Section 5(d) shall not apply in respect of an Exempt Issuance. The Holder’s rights under this Section 5(d) shall terminate upon the earlier of (i) the Company completing a Subsequent Financing at an effective price per share equal to or greater than the Conversion Price to institutional investors which results in minimum gross proceeds to the Company of $15 million or (ii) listing of the Company’s Common Stock on the NYSE MKT or The NASDAQ Stock Market.

8

e)          Fundamental Transaction. If, at any time while this Note is outstanding, (i) Borrower, directly or indirectly, in one or more related transactions effects any merger or consolidation of Borrower with or into another Person, (ii) Borrower, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by Borrower or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) Borrower, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, (v) Borrower, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent conversion of this Note, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section 4(c) on the conversion of this Note), the number of shares of Common Stock of the successor or acquiring corporation or of Borrower, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Note is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 4(c) on the conversion of this Note). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of Common Stock in such Fundamental Transaction, and Borrower shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Note following such Fundamental Transaction. Borrower shall cause any successor entity in a Fundamental Transaction in which Borrower is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of Borrower under this Note in accordance with the provisions of this Section 5(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Note, deliver to the Holder in exchange for this Note a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Note which is convertible for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this Note (without regard to any limitations on the conversion of this Note) prior to such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Note immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note referring to the “Borrower” shall refer instead to the Successor Entity), and may exercise every right and power of Borrower and shall assume all of the obligations of Borrower under this Note with the same effect as if such Successor Entity had been named as Borrower herein.

9

f)         Calculations. All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of Borrower) issued and outstanding.

g)          Notice to the Holder.

i.            Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, Borrower shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

ii.          Notice to Allow Conversion by Holder. If (A) Borrower shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) Borrower shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) Borrower shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of Borrower shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which Borrower is a party, any sale or transfer of all or substantially all of the assets of Borrower, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) Borrower shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of Borrower, then, in each case, Borrower shall cause to be filed at each office or agency maintained for the purpose of conversion of this Note, and shall cause to be delivered to the Holder at its last address as it shall appear upon the Note Register, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding Borrower or any of the Subsidiaries, Borrower shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to convert this Note during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

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Section 6.             Events of Default.

a)           “Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

i.           any default in the payment of (A) the principal amount of any Note or (B) liquidated damages and other amounts owing to a Holder on any Note, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default, solely in the case of any other default under clause (B) above, is not cured within 3 Trading Days;

ii.         Borrower shall fail to observe or perform any other covenant or agreement contained in the Notes (other than a breach by Borrower of its obligations to deliver shares of Common Stock to the Holder upon conversion) which failure is not cured, if possible to cure, within the earlier to occur of (A) 5 Trading Days after notice of such failure sent by the Holder or by any Other Holder to Borrower and (B) 10 Trading Days after Borrower has become or should have become aware of such failure;

iii.a default or event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument) shall occur under any other material agreement, lease, document or instrument to which Borrower or any Subsidiary is obligated (and not covered by clause (vi) below);

iv.any representation or warranty made in this Note, any written statement pursuant hereto or thereto or any other report, financial statement or certificate made or delivered to the Holder or any Other Holder shall be untrue or incorrect in any material respect as of the date when made or deemed made;

v.Borrower or any Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) shall be subject to a Bankruptcy Event;

vi.Borrower or any Subsidiary shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation greater than  $250,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;

11

vii.Borrower does not meet the current public information requirements under Rule 144;

viii.Borrower shall fail for any reason to deliver certificates to a Holder prior to the fifth Trading Day after a Conversion Date pursuant to Section 4(c) or Borrower shall provide at any time notice to the Holder, including by way of public announcement, of Borrower’s intention to not honor requests for conversions of any Notes in accordance with the terms hereof;

ix.any monetary judgment, writ or similar final process shall be entered or filed against Borrower, any subsidiary or any of their respective property or other assets for more than $50,000, and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed for a period of 45 calendar days;

x.any dissolution, liquidation or winding up by Borrower or a material Subsidiary of a substantial portion of their business;

xi.cessation of operations by Borrower or a material Subsidiary;

xii.The failure by Borrower or any material Subsidiary to maintain any material intellectual property rights, personal, real property, equipment, leases or other assets which are necessary to conduct its business (whether now or in the future) and such breach is not cured with twenty (20) days after written notice to the Borrower from the Holder;

xiii.An event resulting in the Common Stock no longer being listed or quoted on a Trading Market, or notification from a Trading Market that the Borrower is not in compliance with the conditions for such continued quotation and such non-compliance continues for twenty (20) days following such notification;

xiv.a Commission or judicial stop trade order or OTCBB suspension;

xv.a failure by Borrower to notify Holder of any material event of which Borrower is obligated to notify Holder pursuant to the terms of this Note;

xvi.a default by the Borrower of a material term, covenant, warranty or undertaking of any other agreement to which the Borrower and Holder are parties, or the occurrence of an event of default under any such other agreement to which Borrower and Holder are parties which is not cured after any required notice and/or cure period; or

xvii.the occurrence of an Event of Default under any Other Note.

12

b)          Remedies Upon Event of Default. If any Event of Default occurs, the outstanding principal amount of this Note, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable in cash at the Mandatory Default Amount. Commencing on the Maturity Date and also five (5) days after the occurrence of any Event of Default interest on this Note shall accrue at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted under applicable law. Upon the payment in full of the Mandatory Default Amount, the Holder shall promptly surrender this Note to or as directed by Borrower. In connection with such acceleration described herein, the Holder need not provide, and Borrower hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as the Holder receives full payment pursuant to this Section 6(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

Section 7Intentionally omitted.

Section 8.         Miscellaneous.

a)Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice.Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: (i) if to Borrower, to: Rasna Therapeutics, Inc., Attn: Kunwar Shailubhai, facsimile: ________, with a copy by fax only to (which shall not constitute notice): Sheppard Mullin Richter & Hampton LLP, 30 Rockefeller Plaza, New York, NY 10112, Attn: Jeffrey Fessler, Esq., facsimile: (212) 930-9725, and (ii) if to the Holder, to: the address and fax number indicated on the front page of this Note, with an additional copy by fax only to (which shall not constitute notice): __________ facsimile: _______.

13

b)          Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of Borrower, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of Borrower. This Note ranks pari passu with all other Notes now or hereafter issued under the terms set forth herein.         

c)Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or destroyed, Borrower shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to Borrower.

d)Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated hereby (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in New York, New York (the “New York Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

e)Waiver. Any waiver by Borrower or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of Borrower or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other occasion. Any waiver by Borrower or the Holder must be in writing.

14

f)         Severability. If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances.

g)Usury. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. Borrower covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive Borrower from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and Borrower (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.

h)Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

i)Headings. The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.

j)Amendment. Unless otherwise provided for hereunder, this Note may not be modified or amended or the provisions hereof waived without the written consent of Borrower and the Holder.

k)Facsimile Signature.In the event that the Borrower’s signature is delivered by facsimile transmission, PDF, electronic signature or other similar electronic means, such signature shall create a valid and binding obligation of the Borrower with the same force and effect as if such signature page were an original thereof.

*********************

(Signature Pages Follow)

15

              IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by an authorized officer as of the 8th day of August 2018.

RASNA THERAPEUTICS, INC.

By: ___________________________________

Name: Kunwar Shailubhai

Title: Chief Executive Officer

WITNESS:

______________________________________

16

ANNEX A

NOTICE OF CONVERSION

The undersigned hereby elects to convert principal under the Convertible Promissory Note due August 8, 2018 of Rasna Therapeutics, Inc., a Nevada corporation (the “Borrower”), into shares of common stock (the “Common Stock”), of Borrower according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by Borrower in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.

The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.

Conversion calculations:

Date to Effect Conversion: ____________________________

Principal Amount of Note to be Converted: $__________________

Number of shares of Common Stock to be issued: ______________

Signature: _________________________________________

Name: ____________________________________________

Address for Delivery of Common Stock Certificates: __________

_____________________________________________________ 

_____________________________________________________

Or

DWAC Instructions: _________________________________

Broker No:_____________

Account No: _______________

XML

Document And Entity Information - shares	9 Months Ended
	Jun. 30, 2018	Aug. 08, 2018
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Entity Registrant Name	Rasna Therapeutics Inc.
Entity Central Index Key	0001582249
Current Fiscal Year End Date	--09-30
Entity Filer Category	Accelerated Filer
Trading Symbol	RASP
Entity Common Stock, Shares Outstanding		68,908,003

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Jun. 30, 2018	Sep. 30, 2017
Current assets:
Cash and cash equivalents	$ 20,357	$ 2,537,611
Prepayments and other receivables	161,800	129,157
Related party receivable	105,274	28,931
Total current assets	287,431	2,695,699
Property and equipment, net	6,762	7,047
Intellectual property	236,269	236,269
In-process research and development	613,100	613,100
Indefinite lived intangible asset	1,300,000	1,300,000
Goodwill	2,722,985	2,722,985
Total non-current assets	4,879,116	4,879,401
Total assets	5,166,547	7,575,100
Current liabilities:
Accounts payable and accrued expenses	1,177,942	978,839
Taxes payable	8,525	8,525
Related parties payable	550,000	550,000
Total current liabilities	1,736,467	1,537,364
Total liabilities	1,736,467	1,537,364
Commitments and Contingencies (Note 9)
Shareholders' equity
Common stock, $0.001 par value, respectively; 200,000,000 shares authorized, of which 68,908,003 are issued and outstanding.	68,909	68,909
Additional paid-in capital	19,331,217	18,267,895
Accumulated deficit	(15,970,046)	(12,299,068)
Total shareholders' equity	3,430,080	6,037,736
Total liabilities and shareholders' equity	$ 5,166,547	$ 7,575,100

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (PARENTHETICAL) - $ / shares	Jun. 30, 2018	Sep. 30, 2017
Statement of Financial Position [Abstract]
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	200,000,000	200,000,000
Common stock, shares issued (in shares)	68,908,003	68,908,003
Common stock, shares outstanding (in shares)	68,908,003	68,908,003

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($)		3 Months Ended		9 Months Ended
		Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Income Statement [Abstract]
Revenue		$ 0	$ 0	$ 0	$ 0
Cost of revenue		0	0	0	0
Gross profit		0	0	0	0
Operating expenses:
General and administrative	[1]	644,545	620,788	2,343,296	1,704,860
Research and development		136,131	277,326	345,645	974,585
Consultancy fees third parties and related parties	[2]	(100,192)	49,126	454,218	56,541
Legal and professional fees		128,901	283,132	521,868	862,134
Total operating expenses		809,385	1,230,372	3,665,027	3,598,120
Loss from operations		(809,385)	(1,230,372)	(3,665,027)	(3,598,120)
Other income/(expense):
Foreign currency transaction (loss)/gain		5,420	16,816	(5,951)	80,551
Total Other income/(expense)		5,420	16,816	(5,951)	80,551
Loss from operations before income taxes		(803,965)	(1,213,556)	(3,670,978)	(3,517,569)
Income tax provision		0	0	0	0
Net loss		$ (803,965)	$ (1,213,556)	$ (3,670,978)	$ (3,517,569)
Basic and diluted loss per share attributable to common shareholders (in dollars per share)		$ (0.01)	$ (0.02)	$ (0.05)	$ (0.05)
Basic and diluted weighted average common shares outstanding (in shares)		68,908,003	68,046,465	68,908,003	65,802,020

[1] Share based payments to employees have been reclassified from consultancy fees third parties to general and administrative expenses for the three and nine months ended June 30, 2017 to conform to current year presentation.

[2] Consultancy fees to related parties three and nine months ended June 30, 2017 have been combined and included with consultancy fees third parties in both periods presented.

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED) - 9 months ended Jun. 30, 2018 - USD ($)	Total	Common Stock	Additional Paid-In Capital	Accumulated Deficit
Balance at Sep. 30, 2017	$ 6,037,736	$ 68,909	$ 18,267,895	$ (12,299,068)
Balance (in shares) at Sep. 30, 2017		68,908,003
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Share based compensation	540,972		540,972
Warrants issued for consulting services	522,350		522,350
Net Loss	(3,670,978)			(3,670,978)
Balance at Jun. 30, 2018	$ 3,430,080	$ 68,909	$ 19,331,217	$ (15,970,046)
Balance (in shares) at Jun. 30, 2018		68,908,003

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($)	9 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (3,670,978)	$ (3,517,569)
Adjustments to reconcile net loss to net cash used in operating activities:
Share based compensation	540,972	763,532
Warrants issued for consulting services	522,350	0
Depreciation	4,358	4,328
Related party receivable write off	28,931	0
Changes in operating assets and liabilities:
Prepayments and other receivables	(32,643)	(149,716)
Related party receivable	(105,274)	12,056
Accounts payable and accrued expenses	199,105	686,747
Related party payable	0	(100,000)
Net cash used in operating activities	(2,513,179)	(2,300,622)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment	(4,073)	(10,493)
Net cash used in investing activities	(4,073)	(10,493)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of shares of common stock	0	2,007,500
Net cash provided by financing activities	0	2,007,500
Effect of foreign exchange rate	(2)	(112,976)
Net (Decrease) in cash and cash equivalents	(2,517,254)	(416,591)
Cash and cash equivalents, beginning of period	2,537,611	3,695,323
Cash and cash equivalents, end of period	$ 20,357	$ 3,278,732

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GENERAL INFORMATION

9 Months Ended

Jun. 30, 2018

GENERAL INFORMATION [Abstract]

GENERAL INFORMATION

1.    GENERAL INFORMATION  

Rasna Therapeutics, Inc. (“Rasna DE" or "Rasna Inc.”), is a company incorporated in the State of Delaware on March 28, 2016.

On October 11, 2017, the Company changed its fiscal year end from March 31 to September 30 and  filed a Form 10-KT on November 30, 2017.

On April 27, 2016, Rasna Therapeutics Limited, a private limited company incorporated in England and Wales under the U.K. Companies Act (“Rasna UK”) sold its stake in Falconridge Holdings Limited, or Falconridge, to Rasna DE for  $1. This entity had no operations, no assets or liabilities as of this date.

On May 17, 2016, Rasna DE and its subsidiary Falconridge entered into an Agreement of Merger and Plan of Reorganization (“Merger Agreement”) with Arna Therapeutics Limited, a British 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 agreement, Arna was merged into Falconridge and the shareholders of Arna were issued shares of Rasna DE in exchange for shares of Arna.

On August 15, 2016, Active With Me, Inc., or AWM, entered into an Agreement of Merger and Plan of Reorganization (the “Merger Agreement”) 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. 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 the Company after the Merger and  AWM was the legal acquirer.  As a result, the assets and liabilities and the historical operations that are reflected in the financial statements are those of Rasna DE as if Rasna DE had always been the reporting company. Since AWM had no operations upon the Merger Agreement taking place, the transaction was treated as a reverse recapitalization for accounting purposes and no goodwill or other intangible assets were recorded by the Company as a result of the Merger Agreement.

These financial statements are presented in United States dollars (“USD”) which is also the functional currency of the primary economic environment in which the Company operates. See Note 2, Foreign currency policy. 

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ACCOUNTING POLICIES

9 Months Ended

Jun. 30, 2018

ACCOUNTING POLICIES [Abstract]

ACCOUNTING POLICIES

2.    ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these unaudited condensed consolidated financial statements are set out below. These policies have been applied consistently to all the periods presented unless otherwise stated.

Basis of preparation 

These unaudited condensed consolidated financial statements have been prepared following the requirements of the Securities and Exchange Commission (“SEC”) and United States generally accepted accounting principles (“GAAP”) for interim reporting. In the opinion of management, the accompanying consolidated financial statements include all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s interim financial information.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements as of and for the six months ended September 30, 2017, contained in the Company's annual report on Form 10-KT filed with the SEC on November 30, 2017.

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 between Rasna Therapeutics Limited (“Rasna UK”) and Rasna Inc., Management noted that equity investment in Rasna UK was not sufficient to fund its operations. Accordingly, Rasna Inc. was considered to be the primary beneficiary of the assets held within Rasna UK, which primarily consist of cash received from Rasna Inc. to fund its operations, and has power to direct its significant activities. As a result, Rasna Inc. 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 subsidiary, Arna Therapeutics Limited and its variable interest entity, Rasna Therapeutics Ltd, as well as the operations of Rasna Inc. for the period from May 17, 2016 through June 30, 2018. 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 Accounting Standards Codification ("ASC") Topic 805-10, Business Combinations ("ASC 805-10"), which requires that the acquisition 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.

The amounts reflected within the Note 3 - Acquisitions are the results of the final valuation report of the purchase price allocation.

Going Concern

The Company is 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 the Company's 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.

The Company has experienced net losses and significant cash outflows from cash used in operating activities over the past years, and at June 30, 2018, had an accumulated deficit of $15,970,046, a net loss for the nine months ended June 30, 2018 of $3,670,978 and net cash used in operating activities of $2,513,179.  

We expect to continue to incur net losses and have significant cash outflows for at least the next 12 months. The Company believes it has sufficient funds to continue operating until the end of  October 2018, but will require significant additional cash resources to launch new development phases of existing products in its pipeline.

In the event that the Company is unable to secure the necessary additional cash resources needed, the Company may slow current development phases or halt new development phases in order to mitigate the effects of the costs of development. These conditions, among others, raise substantial doubt about the Company's ability to continue as a going concern. The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company's 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 the Company's cost structure.

Use of Estimates

The preparation of financial statements in conformity with 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. The Company evaluates its estimates on an ongoing basis, including those related to the fair values of stock based awards, income taxes and contingent liabilities, among others. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates and such differences could be material to the consolidated financial position and results of operations.

Fair Value

The carrying value of the Company’s financial instruments, including cash and cash equivalents, related party balances,  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

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, the Company’s balances in its bank accounts exceed Federal Deposit Insurance Corporation limits. The Company will periodically evaluate the risk of exceeding insured levels and might transfer funds if it deems appropriate. The Company has not experienced any losses with regards to balances in excess of insured limits or as a result of other concentrations of credit risk.

Prepayments and other receivables

Prepayments consists of prepaid Directors and Officers liability insurance, payroll and rental expenses incurred under the shared services agreement with Tiziana Life Sciences PLC and prepaid consultancy fees.

Property and Equipment

Expenditures for additions, renewals and improvements are capitalized at cost. Depreciation is computed in a straight line method based on the estimated useful lives of the related assets. The estimated useful lives of the major classes of depreciable assets are 2 to 5 years for equipment and furniture and fixtures. Expenditures for repairs and maintenance are charged to operations as incurred. The Company periodically evaluates whether current events or circumstances indicate that the carrying life of the depreciable assets may not be recoverable.

Goodwill and Intangible assets

Intangible assets are made up of indefinite lived intangible assets, in-process research and development, (“IPR&D”) and certain intellectual property (“IP”). The balance of the indefinite lived intangible assets represents the platform technology that was acquired in 2013, which, at the time, was determined to have alternative future uses. IPR&D assets 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 the Company’s 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 indefinite 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 during the nine months ended June 30, 2018 and 2017.

Risks and Uncertainties

The Company intends to operate in an industry that is subject to rapid change. The Company’s 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.

Reclassifications

Certain prior period amounts have been reclassified for comparative purposes to conform to the fiscal 2018 presentation. These reclassifications have no impact on the previously reported net loss.

Research and development

Expenditure on research and development is charged to the statements 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, the Company has not capitalized any such expenditures other than certain IPR&D & IP recorded in connection with certain acquisition or equity transactions.

Foreign Currency

Items included in the financial statements are measured using their functional currency, being the currency of the primary economic environment in which the company operates. The financial statements are presented in United 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 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.

The following table sets forth potential common shares issuable upon the exercise of outstanding options and the exercise of warrants, all of which have been excluded from the computation of diluted weighted average shares outstanding as they would be anti-dilutive:

	June 30, 2018		June 30, 2017
Stock options		4,829,875		3,162,375
Warrants		1,926,501		1,440,501
Total shares issuable upon exercise or conversion		6,756,376		4,602,876

The following is the computation of net loss per share for the following periods:

	For the Three Months Ended June 30,
	2018			2017
	(Unaudited)			(Unaudited)
Net loss for the period	$	(803,965	)	$	(1,213,556	)
Weighted average number of shares	68,908,003			68,046,465
Net loss per share (basic and diluted)	$	(0.01	)	$	(0.02	)

	For the Nine Months Ended June 30,
	2018			2017
	(Unaudited)			(Unaudited)
Net loss for the period	$	(3,670,978	)	$	(3,517,569	)
Weighted average number of shares	68,908,003			65,802,020
Net loss per share (basic and diluted)	$	(0.05	)	$	(0.05	)

Warrants

In April 2016, the Company committed to issue warrants as compensation to the placement agents relating to fundraising. On February 28, 2017, the Company issued a ten year warrant to purchase 1,440,501 shares of common stock at an exercise price of $0.37 per share.

The Company had determined that the service inception date preceded the grant date, and accordingly, recorded a liability to issue warrants in the Company as of the date that the equity was issued, with an offset charge to additional paid-in capital as these are offering costs. The liability to issue warrants was marked to market each period until the grant date, at which point the Company determined that in accordance with ASC 815-40-25-7, the warrants should be classified in stockholder’s equity. See Note 7 for additional information.

In July 2017, the Company committed to issue warrants as compensation to the placement agents relating to fundraising. On August 31, 2017, the Company issued a ten year warrant to purchase 112,000 shares of common stock at an exercise price of $0.65 per share.

On August 31, 2017, the Company entered into consulting agreements with placement agents who were providing consulting services in the areas of capital market advisory and investor relations. In lieu of fees for these consulting services, on September 1, 2017, the Company issued ten year warrants to purchase 374,000 shares of common stock at an exercise price of $0.60 per share. The Company determined that the service inception date did not preceed the grant date, and accordingly classifies the warrants in stockholder's equity, in accordance with ASC 815-40-25-7. See Note 7 for additional information.

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. The Company accounts 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.

The Company accounts 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.

Income taxes

On December 22, 2017, The Tax Cuts and Jobs Act was signed into law and has resulted in significant change to the U.S corporate income tax system.  These changes include a federal statutory rate reduction from 35% to 21%, a transition tax which applies to the repatriate 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. During the nine month period ended June 30, 2018, the tax impact of the  2017 Tax Cuts and Jobs Act was immaterial to the financial statements.

Recent Accounting Pronouncements Not Yet Adopted

On August 26, 2016, the FASB issued Accounting Standards Update (ASU) 2016-15, 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 and apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of cash flows under FASB Accounting Standards Codification (FASB ASC) 230, Statement of Cash Flows.

The amendments in ASU 2016-15 are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The amendments in ASU 2016-15 should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company expects to adopt this ASU described above in its Consolidated Financial Statements beginning in October 1, 2018. Management has evaluated and concluded that there will be no material impact on its consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230) Restricted Cash a consensus of the FASB Emerging Issues Task Force (“ASU 2016-18”). ASU 2016-18 requires restricted cash and cash equivalents to be included with cash and cash equivalents on the statement cash flows. The new standard is expected to be effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted. Management has evaluated the effects of ASU 2016-18 and concluded that there will be no material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-1, 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 after December 15, 2017. The Company expects to adopt this ASU described above in its Consolidated Financial Statements beginning in October 1, 2018. Management has evaluated and concluded that there will be no material impact on its consolidated financial statements.

In January 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 after December 15, 2019 with early adoption permitted in January 2017. Management has evaluated and concluded that there will be no material impact on its consolidated financial statements.

In July 2017, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or 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 after December 15, 2018. For all other companies, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted. Management has evaluated and concluded that there will be no material impact on its consolidated financial statements. 

In June 2018, the FASB issued ASU 2018-07, which simplifies several aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation-Stock Compensation, 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 also clarify that Topic 718 does 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 after December 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, and do not expect the adoption of this guidance to have a material impact on our consolidated financial statements and related disclosures.

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ACQUISITIONS

9 Months Ended

Jun. 30, 2018

ACQUISITIONS [Abstract]

ACQUISITIONS

3.    ACQUISITIONS

The following transactions were accounted for using the acquisition accounting method which requires, among other things, that the assets acquired and liabilities assumed are recognized at their acquisition date fair value.

On May 5, 2016, Rasna UK sold its intellectual property to Falconridge, a subsidiary of Rasna, for a note payable in the amount of $236,269. Rasna UK is considered a VIE and consolidated in these financial statements, however, is not an entity under common control as Rasna controlled both Falconridge and Rasna UK at the time of the transaction, this transaction eliminates on consolidation.

On May 17, 2016, Rasna 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 in exchange for shares of Arna. Arna was deemed to be the accounting acquirer because Rasna 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 was acquired by Arna shareholders in connection with the transaction. Therefore, the assets and liabilities of the acquired entity, Rasna, were written to fair value in accordance with the Acquisition Method prescribed in ASC 805, Business Combinations.

The consideration transferred was measured based upon the share price recently received during a non-public equity raise in Rasna, 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 shareholders, which results in consideration transferred to the acquiree’s shareholders of $7,675,000.

In addition, $607,159 of a related party receivable due to Arna from Rasna UK, was forgiven as part of the consideration transferred.

The purchase price allocation as of the date of acquisition is set forth in the table below. As per the purchase accounting method, the tangible and identifiable intangible assets acquired and liabilities assumed were recorded at fair value as of the date of acquisition, with the remaining purchase price recorded as goodwill.

The Company’s allocation of the purchase price in connection with the acquisition was calculated as follows:

	Balance as of
	May 17, 2016
Share consideration transferred	$	7,675,000
Forgiveness of receivable	607,159
Consideration transferred	$	8,282,159
Less: Fair value of assets acquired
Cash and cash equivalents	(5,116,609		)
Other receivables	(14,187		)
Prepayment	(66,856		)
Related party receivables	(20,412		)
Intellectual property	(236,269		)
In-Process research and development	(613,100		)
Plus: Liabilities assumed
Accounts payable and accrued expenses	492,603
Related party payables	15,656
Goodwill	$	2,722,985

Of the above assets acquired and liabilities assumed, the intellectual property acquired was owned by Falconridge  and the residual assets acquired and liabilities assumed comprised the VIE that was controlled by Rasna, Inc.

 Acquired In-Process Research and Development

Acquired IPR&D is the fair value of the LSD-1 asset at the acquisition date. The Company determined that the fair value of LSD-1 was $613,100 as of the acquisition date using the cost approach. This was based on the fact that LSD-1 was not yet technologically feasible or in use as of the valuation date. Also as no prospective revenue stream could be determined, the cost approach was deemed to be the most appropriate.

The Company retained a Clinical Research Organisation ("CRO") to perform all related research and development associated with LSD-1. As all research and development associated with LSD‐1 was performed by the CRO and no other contributions to LSD‐1 IPR&D were made beyond payments to the CRO, the Company considered the payments made to estimate the fair value of LSD‐1.

Active With Me, Inc.

On August 15, 2016, Active With Me, Inc., entered into an Agreement of Merger and Plan of Reorganization (the “Merger Agreement”) with Rasna, Inc., and Rasna Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Active With Me, Inc. (“Merger Sub”), providing for the merger of Merger Sub with and into Rasna, Inc. (the “Merger”), with Rasna, Inc. surviving the Merger as a wholly-owned subsidiary of Active With Me, Inc. 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 was treated as a reverse recapitalization effected by a share exchange for financial accounting and reporting purposes since substantially all of Active With Me’s operations were disposed of prior to the consummation of the transaction.  Rasna Successor is treated as the accounting acquirer as its stockholders control the Company after the Exchange Agreement, even though Active With Me, Inc. was the legal acquirer.  As a result, the assets and liabilities and the historical operations that are reflected in these financial statements are those of Rasna Successor as if Rasna Successor had always been the reporting company.  Since Active With Me, Inc. had no operations upon the Merger Agreement taking place, the transaction was treated as a reverse recapitalization for accounting purposes and no goodwill or other intangible assets were recorded by the Company 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 Successor to a former officer and director of Active With Me, Inc. in exchange for cancellation of an aggregate of 1,500,000 shares of Rasna Successor’s common stock held by such person.

In connection with the share exchange, each share of Rasna, Inc was exchanged for the right to receive .33 shares in Active With Me, Inc. Once issued, the new shares were combined with the 3,305,000 common shares held by legacy Active With Me, Inc. shareholders. Immediately following the Merger, 1,500,000 shares were canceled, which related to one legacy Active With Me shareholder that effectively spun off the remaining assets of Active With Me 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. Following the closing of the Merger and Rasna Successor’s cancellation of 1,500,000 shares in the Split-Off, there were 19,901,471 shares of Rasna Successor issued and outstanding, which once effected for the 3.25 for 1 reverse stock split, resulted in 64,679,798 shares outstanding in the combined entity.

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GOODWILL AND INTANGIBLE ASSETS

9 Months Ended

Jun. 30, 2018

GOODWILL AND INTANGIBLE ASSETS [Abstract]

GOODWILL AND INTANGIBLE ASSETS

4.    GOODWILL AND INTANGIBLE ASSETS

As noted in Note 3 - Acquisitions, on May 17, 2016, there was a transaction where the Company acquired an entity and, at initial purchase price, it was determined that there was $236,269 of intellectual property, $613,100 of In-process research and development, and $2,722,985 of goodwill.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in business combinations accounted for under the purchase method of accounting. The following table summarizes the Company’s goodwill for the periods indicated resulting from the acquisitions by the Company:

	June 30,		September 30,
	2018		2017
Goodwill	$	2,722,985	$	2,722,985

The Company  performed an impairment analysis and no impairment was determined. Therefore no impairment was recorded for the nine months ended June 30, 2018 and the period ended September 30, 2017.

Intangible Assets

On December 17, 2013 the Company’s shareholder, Panetta Partners Limited, transferred 5,000,000 of its shares in Arna Therapeutics Limited to Eurema Consulting S.r.l. and 5,000,000 shares in Arna Therapeutics Limited to TES Pharma S.r.l. In exchange for the shares, Panetta Partners Limited obtained intellectual property ("Platform Technology") from TES Pharma S.r.l and Eurema Consulting S.r.l. Panetta Partners Limited then assigned the Platform Technology to Arna Therapeutics Limited, which was accounted for as a capital contribution. The fair value of the shares exchanged for the IPR&D was $0.13 per share; in addition the issue price for shares in October 2013 was $0.13 per share (shares issued post acquisition of the IPR&D were issued at $0.28) and accordingly the Company valued the Platform Technology at $1.3 million.

IPR&D relating to LSD-1, was acquired in the reverse acquisition of Rasna UK by Arna as of May 17, 2016. The Company retained a Clinical Research Organisation ("CRO") to perform all related research and development associated with LSD‐1. Based on review of the license agreement dated January 1, 2015, between the CRO and Rasna, the Company agreed to pay 100,002 Euros for costs incurred to date and to perform research and development on a going forward basis. Additionally, the Company entered into an amended license agreement whereby Rasna agreed to pay TTFactor an additional 435,000 Euros as of May 17, 2016, regarding services rendered between September 9, 2014 to May 17, 2016. Based on the cost approach, the IPR&D was valued at $613,100.

At the time of the acquisition, the Company had reasonably expected to use the Platform Technology, in the asset’s then current state, in two independent research projects that had not commenced as of the date of the acquisition. The Company’s research projects applied the conclusions reached in the Platform Technology to develop treatments for AML through reformulation of certain available pharmaceuticals and independent development of a new pharmaceutical treatment. Both research projects were initiated shortly after the Platform Technology was acquired and continue through the date of the financial statements.

At the time of acquisition, and at present, no legal, regulatory, contractual, competitive, economic, or other factors were present that would constrain the useful life of the asset to the Company. The agreement to purchase the asset has no provisions that would limit the timeframe of use, legally, contractually or economically, and the asset remains a competitive platform for results in the treatment of Acute Myeloid Leukemia and lymphoma. Specifically, the agreement irrevocably assigns all rights and title to the Asset, without limitation or contingencies. No limitations or alternative technology has emerged that would suggest obsolescence or a change in the competitive landscape for the Platform Technology as of the most recent reporting period. In addition, the Company has concluded that the useful life of the Platform Technology at the time of acquisition was beyond a foreseeable horizon, and therefore the asset is classified as an indefinite lived intangible asset.

The IPR&D and intellectual property are considered to have an indefinite life and there were no impairment charges recognized during the nine months ended June 30, 2018 and the period ended September 30, 2017.

The following table summarizes the Company’s intangible assets as of the following periods: 

	June 30,		September 30,
	2018		2017		Estimated
	(Unaudited)				Useful Life
In-process research and development	$	613,100	$	613,100	Indefinite
Intellectual Property		236,239		236,269	Indefinite
Indefinite lived intangible asset		1,300,000		1,300,000	Indefinite
	$	2,149,339	$	2,149,369

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES

9 Months Ended

Jun. 30, 2018

ACCOUNTS PAYABLE AND ACCRUED EXPENSES [Abstract]

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

5.    ACCOUNTS PAYABLE AND ACCRUED EXPENSES

The following table summarizes the Company’s accounts payable and accrued expenses as of the following periods:

	June 30, 2018
	(Unaudited)		September 30, 2017
Accounts payable	$	570,411	$	658,921
Accrued expenses	607,531		319,918
	$	1,177,942	$	978,839

Accounts payable is predominantly made up of unpaid invoices relating to research and development, accounting and professional fees. Included within the accrued expenses balance of $607,531 at June 30, 2018 is approximately $193,000 relating to vendors for research and development expenses, $138,000 relating to an accrual for directors fees, approximately $21,000 relating payroll accruals, approximately $63,000 related to travel and entertainment expenses and approximately $193,000 of accrued legal and other costs.

Included within the accrued expenses balance of $319,918 at September 30, 2017 is $128,000 of accrued legal, accounting and professional fees, $60,000 for payroll related expenses and $50,000 for Directors fees.

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STOCK-BASED COMPENSATION

9 Months Ended

Jun. 30, 2018

STOCK-BASED COMPENSATION [Abstract]

STOCK-BASED COMPENSATION

6.    STOCK-BASED COMPENSATION

2016 EQUITY INCENTIVE PLAN

On July 19, 2016, the Company adopted its 2016 Equity Incentive Plan (the "Equity Incentive Plan"). The plan was established to attract, motivate, retain and reward selected employees and other eligible persons. For the Equity Incentive Plan, employees, officers, directors and consultants who provide services to the Company or one of the Company’s subsidiaries may be selected to receive awards. A total of 9,750,000 shares of the Company’s common stock was authorized for issuance with respect to awards granted under the Equity Incentive Plan.

The fair values of stock option grants during the nine months ended June 30, 2018 were calculated on the date of the grant using the Black-Scholes option pricing model. Compensation expense is recognized over the period of service, generally the vesting period. During the nine months ended June 30, 2018, no options were granted by the Company. The following assumptions were used in the Black-Scholes options pricing model to estimate the fair value of stock options for the nine months ended June 30, 2018:

	Employee – Vesting Period				Non- Employee – Vesting Period
	1 Year	2 Years	3 Years	4Years	1 Year	2 Years	3 Years
Stock Price	$0.85	$0.85	$0.85	$0.85	$1.10	$1.10	$1.10
Expected life (years)	5.50	5.75	6.00	6.25	5.50	5.75	6.00
Expected volatility	82.40%	82.20%	81.90%	81.70%	100.80%	102.30%	103.50%
Expected dividend yield	—%	—%	—%	—%	—%	—%	—%
Risk-free interest rate	1.57%	1.57%	1.57%	1.57%	2.66%	2.67%	2.68%

The input assumptions used are as follows:

Discount rate —Based on the daily yield curve rates for U.S. Treasury obligations with maturities which correspond to the expected term of the Company’s stock options.

Dividend yield —The Company has not paid any dividends on common stock since its inception and does not anticipate paying dividends on its common stock in the foreseeable future.

Expected volatility —Based on the historical volatility of seven different comparable Companys’ stock.

Expected term —The Company has had no stock options exercised since inception. The expected option term represents the period that stock-based awards are expected to be outstanding based on the simplified method provided in Staff Accounting Bulletin (“SAB”) No. 107, Share-Based Payment , (“SAB No. 107”), which averages an award’s weighted-average vesting period and expected term for “plain vanilla” share options. Under SAB No. 107, options are considered to be “plain vanilla” if they have the following basic characteristics: (i) granted “at-the-money”; (ii) exercisability is conditioned upon service through the vesting date; (iii) termination of service prior to vesting results in forfeiture; (iv) limited exercise period following termination of service; and (v) options are non-transferable and non-hedgeable.

The Company will continue to use the simplified method for the expected term until it has the historical data necessary to provide a reasonable estimate of expected life in accordance with SAB No. 107, as amended by SAB No. 110. For the expected term, the Company has “plain-vanilla” stock options, and therefore used a simple average of the vesting period and the contractual term for options granted subsequent to January 1, 2006 as permitted by SAB No. 107.

Forfeitures —ASC Topic 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company has estimated zero forfeiture.

The following table summarizes stock option activity for the nine months ended June 30, 2018:

	Number of Options	Weighted Average Exercise Price Per Option	Weighted Average remaining Contractual Life (years)	Aggregate Intrinsic Value
Outstanding balance at September 30, 2017	4,829,875	0.56	8.22	$	16,636,397
Granted	—	—	—	—
Exercised	—	—	—	—
Forfeited and Expired	—	—	—	—
Outstanding balance at June 30, 2018	4,829,875	0.56	7.48	$	2,898,009
Options exercisable at June 30, 2018	2,795,706	0.34	6.72	$	2,112,591

There were no options exercised during the nine months ended June 30, 2018. As of June 30, 2018, there was approximately $779,253 of total unrecognized compensation cost related to stock options. The cost is expected to be recognized over a weighted average period of 1.0 years.

For the three and nine months ended June 30, 2018, $193,540 and $692,634 related to share based compensation to directors and employees respectively, has been included within the general and administrative expense category in the unaudited condensed consolidated interim financial statements. An additional ($120,192) and ($151,662) related to non-employees respectively, has been included within the Consultancy fees third parties and related parties expense category in the unaudited condensed consolidated interim financial statements.

For the three and nine months ended June 30, 2017, $231,878 and $644,520 related to share based compensation to directors and employees respectively, has been included within the general and administrative expense category in the unaudited condensed consolidated interim financial statements. An additional $89,960 and $119,012 related to non-employees respectively, has been included within the Consultancy fees third parties and related parties expense category in the unaudited condensed consolidated interim financial statements.

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WARRANTS

9 Months Ended

Jun. 30, 2018

WARRANTS [Abstract]

WARRANTS

7.    WARRANTS

On April 10, 2016, the Company incurred the obligation to issue warrants to placement agents relating to fundraising. The Company accounted for the obligation based on an estimate of the fair value of warrants issued using the Black-Scholes Model (“BSM”) and the Company recorded $484,009 as a liability and a reduction to proceeds of the equity offering (additional paid-in-capital). The Company assessed the fair value for each reporting period of the liability and recorded changes to additional paid-in capital. At February 28, 2017, the date the warrants were issued, the obligation was reversed to additional paid-in capital and no outstanding liability existed. Based upon the Company’s analysis of the criteria contained in ASC Topic 815-40, “Derivatives and Hedging - Contracts in an Entity’s Own Equity”, the Company determined that the warrants issued as placement agent warrants are classified as equity in additional paid-in capital. 

On July 3, 2017, the Company entered into a finders agreement with a placement agent whereby they incurred an obligation to issue warrants once a private placement has successfully been entered into. On August 31, 2017, the performance condition had been satisfied and the Company issued the related warrants. Based upon the Company’s analysis of the criteria contained in ASC Topic 815-40, “Derivatives and Hedging - Contracts in an Entity’s Own Equity”, the Company determined that the warrants issued as placement agent warrants are classified as equity in additional paid-in capital.

On September 1, 2017, the Company issued warrants to placement agents in lieu of fees for consultancy services to be provided over a period of 6 months. Based upon the Company’s analysis of the criteria contained in ASC Topic 815-40, “Derivatives and Hedging - Contracts in an Entity’s Own Equity”, the Company determined that the warrants issued in lieu of consultancy fees are classified as equity in additional paid in-capital.

The fair value of the warrants at the date of issuance has been calculated based on the following inputs and assumptions using the Black-Scholes Model:

	September 1, 2017	August 31, 2017	February 28, 2017
Fair value at issuance date	$1,420,456	$424,179	$2,914,884
Warrants issued	374,000	112,000	1,440,501
Exercise Price	$0.60	$0.65	$0.37
Stock Price	$4.00	$4.00	$2.10
Expected Term (Years)	10	10	10
Volatility %	91%	91%	105%
Discount Rate - Bond Equivalent Yield	2.35%	2.35%	2.55%
Dividend Yield	—%	—%	—%

The input assumptions used are as follows:

Discount rate —Based on the daily yield curve rates for U.S. Treasury obligations with maturities which correspond to the expected term of the Company’s stock options.

Dividend yield —The Company has not paid any dividends on common stock since its inception and does not anticipate paying dividends on its common stock in the foreseeable future.

Expected volatility —Based on the historical volatility of seven different comparable Companies’ stock.

Expected term —The Company has used the life of the warrant.

The following table summarizes warrant activity for the nine months ended June 30, 2018:

	Number of Warrants	Weighted Average Exercise Price Per Option	Weighted Average remaining Contractual Life (years)	Aggregate Intrinsic Value
Outstanding balance at September 30, 2017	1,926,501	0.43	8.86	6,875,819
Granted	—	—	—	—
Forfeited	—	—	—	—
Outstanding balance at June 30, 2018	1,926,501	0.43	8.11	$	1,288,966
Warrants exercisable at June 30, 2018	1,926,501	0.43	8.11	$	1,288,966

The performance related warrants issued on August 31, 2017 are fully vested and do not have any forfeiture conditions attached.

During the three and nine months ended June 30, 2018, $0 and $522,350 of costs were recognized for consultancy related warrants respectively. These costs are included within the Consultancy fees third parties and related parties expense category in the consolidated financial statements. As of February 28, 2018, the consultancy warrants were fully vested.

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RELATED PARTY TRANSACTIONS

9 Months Ended

Jun. 30, 2018

RELATED PARTY TRANSACTIONS [Abstract]

RELATED PARTY TRANSACTIONS

8.    RELATED PARTY TRANSACTIONS

During the normal course of its business, the Company enters into various transactions with entities that are both businesses and individuals. The following is a summary of the related party transactions during the three and  nine months ended June 30, 2018 and 2017.

Eurema Consulting

Eurema Consulting S.r.l. was a significant shareholder of Arna Therapeutics Limited. During the three and nine months ended June 30, 2018 and 2017, Eurema Consulting S.r.l. did not supply the Company with consulting services. As of June 30, 2018, and September 30, 2017, Eurema Consulting S.r.l was owed $200,000 and $200,000, respectively, by the Company for past consultancy services.

Gabriele Cerrone

Gabriele Cerrone was a Director of Arna Therpeutics Limited. During the three and nine months ended June 30, 2018 and 2017, Gabriele Cerrone did not supply the Company with consulting services. As of June 30, 2018, and September 30, 2017, the balance due to Gabriele Cerrone was $175,000 and $175,000, respectively for past consultancy services.

Roberto Pellicciari

Roberto Pellicciari was a Director of Arna Therpeutics Limited and sole shareholder of TES Pharma Srl. During the three and nine months ended June 30, 2018 and 2017, Roberto Pellicciari did not supply the Company with consulting services. As of June 30, 2018, and September 30, 2017, the balance due to Roberto Pellicciari was $175,000 and $175,000, respectively for past consultancy services.

Other related party transactions are discussed in Note 9, Commitments and contingencies.

There is no interest charged on the balances with related parties. There are no defined repayment terms and such amounts can be called for payment at any time.

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Jun. 30, 2018

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

9.    COMMITMENTS AND CONTINGENCIES

License Agreements

In November 2016, the Company entered into a license agreement with Profs. Falini and Martelli, wherein it obtained the exclusive rights related to the use or reformulation of Actinomycin D and intends to utilize these rights for the development of new product. In connection with this agreement, the Company was committed to paying milestone payments, the first being a EUR 50,000 payment to be paid six months after the agreement was signed. The payment was made to Profs. Falini and Martelli in June 2017.

During the nine months ended June 30, 2018, the second milestone was achieved triggering a payment EUR 50,000. This was paid in March 2018.

The specific timing of the remaining milestones cannot be predicted and depends upon research and clinical developments. The Company expects to incur further payments of EUR 400,000 in respect of this agreement once milestones are achieved.

Lease Agreements

In February 2018, the Company renewed its lease agreement with the same terms, with Bucks County Biotechnology Centre Inc in Doylestown Pennsylvania, where certain employees of the Company are based. The lease provides for annual basic lease payments from February 1, 2018 to January 31, 2019 of $13,480, plus and utility expense estimate of $237 per month. During the three and nine months ended June 30, 2018, the Company had incurred approximately $4,000 and $12,000 respectively, of rental expenses related to this and the prior agreement.

Employment and Consultancy Agreements

In October 2015, Rasna Therapeutics Ltd entered into a consultancy agreement with James Tripp in which he agreed to consult on clinical operations for a fee of  $10,000 per calendar quarter. Mr. Tripp's consultancy agreement ended in May 2017 and all outstanding obligations were settled with him.

In September 2016, the board of directors awarded Mr Tripp 125,000  options to vest over a 3 year period, with an exercise price of  $0.40. Upon the end of Mr Tripp's consultancy agreement in May 2017, all options were forfeited.

In October 2016, the Company entered into a consultancy agreement with Tiziano Lazzaretti in which he agreed to serve as Chief Financial Officer for a fee of  $50,000  per year. This was increased to  $80,000  a year in April 2017 by the Company's compensation committee. During the three and nine months ended June 30, 2018, the Company had incurred approximately $20,000 and $60,000 respectively, of consultancy expenses related to this agreement. An additional $13,333 has been prepaid for fees relating to July and August 2018.

On May 24, 2017, the Company entered into an executive employment agreement with Kunwar Shailubhai to serve as Chief Executive Officer and Chief Scientific Officer for a renumeration of  $300,000  per annum. Also included within the agreement is a performance related bonus of  35%  of base salary. Based on Board discretion, it is not probable that this bonus will be paid out for the period October 1, 2017 to June 30, 2018, therefore no bonus has been accrued as of June 30, 2018. During the three and nine months ended June 30, 2018, the Company had incurred approximately $75,000 and $225,000 respectively, of salary expenses related to this appointment.

In June 2017, the board of directors awarded Dr Shailubhai 1,700,000 options to vest over a 4 year period, with an exercise price of $0.85 and a fair value at grant date of $985,081. During the three and nine months ended June 30, 2018, the Company had incurred approximately $77,000 and $331,000 respectively, of expenses related to these options.

The Company has entered a number of employment agreements commencing in January 2017. These agreements relate to clinical and non clinical employees, and are reviewable on an annual basis. The Company's committed to paying approximately $499,000 of salary and bonus expenses for the 12 month period to June 2019.

Shared Services Agreement

The Company has entered into a shared services agreement with Tiziana Life Sciences Plc. Under the terms of this agreement, the Company will be charged for shared services including payroll and rent for the Lexington Avenue premises, on a monthly basis based on allocated costs incurred. This agreement is effective from January 1, 2017. At June 30, 2018 $37,012 is due to Tiziana Life Sciences PLC. During the three and nine months ended June 30, 2018, the Company had incurred approximately $61,000 and $159,000 of payroll and $30,000 and $88,000 of rental expenses respectively, related to this agreement. During the three and nine months ended June 30, 2017, the Company had incurred approximately $19,000  and $130,000 of payroll and $23,000 and $84,000 of rental expenses respectively, related to this agreement. 

As at June 30, 2018, the Company had also prepaid $48,946 of payroll and $59,489 of rental expenses respectively for the period July to December 2018 related to this agreement.

In addition to this, as at June 30, 2018, the Company is also owed $105,274 from Tiziana Life Sciences Plc. The majority of the $105,274 were a transfer of funds to Tiziana Life Sciences PLC that were repaid back to Rasna in July 2018.  

Other Commitments

The Company may enter into certain licensing agreements for products currently under development. The Company may be obligated in future periods to make additional payments, which would become due and payable only upon the achievement of certain research and development, regulatory, and approval milestones. The specific timing of such milestones cannot be predicted and depend upon future discretionary research and clinical developments, as well as, regulatory agency actions. Further, under the terms of certain agreements the Company may be obligated to pay commercial milestones contingent upon the realization of sales revenues and sublicense revenues. Due to the long range nature of such commercial milestones, they are neither probable at this time nor predictable, and consequently are not considered contingent milestone payment amounts.

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SUBSEQUENT EVENTS

9 Months Ended

Jun. 30, 2018

SUBSEQUENT EVENTS [Abstract]

SUBSEQUENT EVENTS

10.    SUBSEQUENT EVENTS

On August 8, 2018 the Company issued a 12% convertible promissory note (the “Note”) in the principal amount of $135,000. The Note has a maturity date of August 8, 2019 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.

The Note contains an anti-dilution provision which adjusts the conversion price in the event of an issuance by the Company of common stock below the then effective conversion price.

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ACCOUNTING POLICIES (Policies)

9 Months Ended

Jun. 30, 2018

ACCOUNTING POLICIES [Abstract]

Basis of preparation

Basis of preparation 

These unaudited condensed consolidated financial statements have been prepared following the requirements of the Securities and Exchange Commission (“SEC”) and United States generally accepted accounting principles (“GAAP”) for interim reporting. In the opinion of management, the accompanying consolidated financial statements include all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s interim financial information.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements as of and for the six months ended September 30, 2017, contained in the Company's annual report on Form 10-KT filed with the SEC on November 30, 2017.

Principles of Consolidation

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 between Rasna Therapeutics Limited (“Rasna UK”) and Rasna Inc., Management noted that equity investment in Rasna UK was not sufficient to fund its operations. Accordingly, Rasna Inc. was considered to be the primary beneficiary of the assets held within Rasna UK, which primarily consist of cash received from Rasna Inc. to fund its operations, and has power to direct its significant activities. As a result, Rasna Inc. 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 subsidiary, Arna Therapeutics Limited and its variable interest entity, Rasna Therapeutics Ltd, as well as the operations of Rasna Inc. for the period from May 17, 2016 through June 30, 2018. All significant intercompany accounts and transactions have been eliminated in the preparation of the accompanying consolidated financial statements. 

Business Combinations

Business Combinations 

Management accounts for business combinations under the provisions of Accounting Standards Codification ("ASC") Topic 805-10, Business Combinations ("ASC 805-10"), which requires that the acquisition 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.

The amounts reflected within the Note 3 - Acquisitions are the results of the final valuation report of the purchase price allocation.

Going Concern

Going Concern

The Company is 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 the Company's 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.

The Company has experienced net losses and significant cash outflows from cash used in operating activities over the past years, and at June 30, 2018, had an accumulated deficit of $15,970,046, a net loss for the nine months ended June 30, 2018 of $3,670,978 and net cash used in operating activities of $2,513,179.  

We expect to continue to incur net losses and have significant cash outflows for at least the next 12 months. The Company believes it has sufficient funds to continue operating until the end of  October 2018, but will require significant additional cash resources to launch new development phases of existing products in its pipeline.

In the event that the Company is unable to secure the necessary additional cash resources needed, the Company may slow current development phases or halt new development phases in order to mitigate the effects of the costs of development. These conditions, among others, raise substantial doubt about the Company's ability to continue as a going concern. The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company's 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 the Company's cost structure.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with 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. The Company evaluates its estimates on an ongoing basis, including those related to the fair values of stock based awards, income taxes and contingent liabilities, among others. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates and such differences could be material to the consolidated financial position and results of operations.

Fair Value

Fair Value

The carrying value of the Company’s financial instruments, including cash and cash equivalents, related party balances,  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

Concentration of Credit Risk

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

Cash and cash equivalents consists of cash on deposit with banks with an original maturity of three months or less.

From time to time, the Company’s balances in its bank accounts exceed Federal Deposit Insurance Corporation limits. The Company will periodically evaluate the risk of exceeding insured levels and might transfer funds if it deems appropriate. The Company has not experienced any losses with regards to balances in excess of insured limits or as a result of other concentrations of credit risk.

Prepayments and other receivables

Prepayments and other receivables

Prepayments consists of prepaid Directors and Officers liability insurance, payroll and rental expenses incurred under the shared services agreement with Tiziana Life Sciences PLC and prepaid consultancy fees.

Property and Equipment

Property and Equipment

Expenditures for additions, renewals and improvements are capitalized at cost. Depreciation is computed in a straight line method based on the estimated useful lives of the related assets. The estimated useful lives of the major classes of depreciable assets are 2 to 5 years for equipment and furniture and fixtures. Expenditures for repairs and maintenance are charged to operations as incurred. The Company periodically evaluates whether current events or circumstances indicate that the carrying life of the depreciable assets may not be recoverable.

Goodwill and Intangible assets

Goodwill and Intangible assets

Intangible assets are made up of indefinite lived intangible assets, in-process research and development, (“IPR&D”) and certain intellectual property (“IP”). The balance of the indefinite lived intangible assets represents the platform technology that was acquired in 2013, which, at the time, was determined to have alternative future uses. IPR&D assets 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 the Company’s 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 indefinite 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 during the nine months ended June 30, 2018 and 2017.

Risks and Uncertainties

Risks and Uncertainties

The Company intends to operate in an industry that is subject to rapid change. The Company’s 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.

Reclassifications

Reclassifications

Certain prior period amounts have been reclassified for comparative purposes to conform to the fiscal 2018 presentation. These reclassifications have no impact on the previously reported net loss.

Research and development

Research and development

Expenditure on research and development is charged to the statements 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, the Company has not capitalized any such expenditures other than certain IPR&D & IP recorded in connection with certain acquisition or equity transactions.

Foreign Currency

Foreign Currency

Items included in the financial statements are measured using their functional currency, being the currency of the primary economic environment in which the company operates. The financial statements are presented in United 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

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 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.

The following table sets forth potential common shares issuable upon the exercise of outstanding options and the exercise of warrants, all of which have been excluded from the computation of diluted weighted average shares outstanding as they would be anti-dilutive:

	June 30, 2018		June 30, 2017
Stock options		4,829,875		3,162,375
Warrants		1,926,501		1,440,501
Total shares issuable upon exercise or conversion		6,756,376		4,602,876

The following is the computation of net loss per share for the following periods:

	For the Three Months Ended June 30,
	2018			2017
	(Unaudited)			(Unaudited)
Net loss for the period	$	(803,965	)	$	(1,213,556	)
Weighted average number of shares	68,908,003			68,046,465
Net loss per share (basic and diluted)	$	(0.01	)	$	(0.02	)

	For the Nine Months Ended June 30,
	2018			2017
	(Unaudited)			(Unaudited)
Net loss for the period	$	(3,670,978	)	$	(3,517,569	)
Weighted average number of shares	68,908,003			65,802,020
Net loss per share (basic and diluted)	$	(0.05	)	$	(0.05	)

Warrants

Warrants

In April 2016, the Company committed to issue warrants as compensation to the placement agents relating to fundraising. On February 28, 2017, the Company issued a ten year warrant to purchase 1,440,501 shares of common stock at an exercise price of $0.37 per share.

The Company had determined that the service inception date preceded the grant date, and accordingly, recorded a liability to issue warrants in the Company as of the date that the equity was issued, with an offset charge to additional paid-in capital as these are offering costs. The liability to issue warrants was marked to market each period until the grant date, at which point the Company determined that in accordance with ASC 815-40-25-7, the warrants should be classified in stockholder’s equity. See Note 7 for additional information.

In July 2017, the Company committed to issue warrants as compensation to the placement agents relating to fundraising. On August 31, 2017, the Company issued a ten year warrant to purchase 112,000 shares of common stock at an exercise price of $0.65 per share.

On August 31, 2017, the Company entered into consulting agreements with placement agents who were providing consulting services in the areas of capital market advisory and investor relations. In lieu of fees for these consulting services, on September 1, 2017, the Company issued ten year warrants to purchase 374,000 shares of common stock at an exercise price of $0.60 per share. The Company determined that the service inception date did not preceed the grant date, and accordingly classifies the warrants in stockholder's equity, in accordance with ASC 815-40-25-7. See Note 7 for additional information.

Equity-Based Payments

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. The Company accounts 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.

The Company accounts 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.

Income taxes

Income taxes

On December 22, 2017, The Tax Cuts and Jobs Act was signed into law and has resulted in significant change to the U.S corporate income tax system.  These changes include a federal statutory rate reduction from 35% to 21%, a transition tax which applies to the repatriate 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. During the nine month period ended June 30, 2018, the tax impact of the  2017 Tax Cuts and Jobs Act was immaterial to the financial statements.

Recent Accounting Pronouncements Not Yet Adopted

Recent Accounting Pronouncements Not Yet Adopted

On August 26, 2016, the FASB issued Accounting Standards Update (ASU) 2016-15, 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 and apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of cash flows under FASB Accounting Standards Codification (FASB ASC) 230, Statement of Cash Flows.

The amendments in ASU 2016-15 are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The amendments in ASU 2016-15 should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company expects to adopt this ASU described above in its Consolidated Financial Statements beginning in October 1, 2018. Management has evaluated and concluded that there will be no material impact on its consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230) Restricted Cash a consensus of the FASB Emerging Issues Task Force (“ASU 2016-18”). ASU 2016-18 requires restricted cash and cash equivalents to be included with cash and cash equivalents on the statement cash flows. The new standard is expected to be effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted. Management has evaluated the effects of ASU 2016-18 and concluded that there will be no material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-1, 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 after December 15, 2017. The Company expects to adopt this ASU described above in its Consolidated Financial Statements beginning in October 1, 2018. Management has evaluated and concluded that there will be no material impact on its consolidated financial statements.

In January 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 after December 15, 2019 with early adoption permitted in January 2017. Management has evaluated and concluded that there will be no material impact on its consolidated financial statements.

In July 2017, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or 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 after December 15, 2018. For all other companies, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted. Management has evaluated and concluded that there will be no material impact on its consolidated financial statements. 

In June 2018, the FASB issued ASU 2018-07, which simplifies several aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation-Stock Compensation, 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 also clarify that Topic 718 does 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 after December 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, and do not expect the adoption of this guidance to have a material impact on our consolidated financial statements and related disclosures.

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ACCOUNTING POLICIES (Tables)

9 Months Ended

Jun. 30, 2018

ACCOUNTING POLICIES [Abstract]

Schedule of potential common shares issuable upon the exercise of outstanding options and the exercise of warrants

The following table sets forth potential common shares issuable upon the exercise of outstanding options and the exercise of warrants, all of which have been excluded from the computation of diluted weighted average shares outstanding as they would be anti-dilutive:

	June 30, 2018		June 30, 2017
Stock options		4,829,875		3,162,375
Warrants		1,926,501		1,440,501
Total shares issuable upon exercise or conversion		6,756,376		4,602,876

Schedule of computation of net loss per share

The following is the computation of net loss per share for the following periods:

	For the Three Months Ended June 30,
	2018			2017
	(Unaudited)			(Unaudited)
Net loss for the period	$	(803,965	)	$	(1,213,556	)
Weighted average number of shares	68,908,003			68,046,465
Net loss per share (basic and diluted)	$	(0.01	)	$	(0.02	)

	For the Nine Months Ended June 30,
	2018			2017
	(Unaudited)			(Unaudited)
Net loss for the period	$	(3,670,978	)	$	(3,517,569	)
Weighted average number of shares	68,908,003			65,802,020
Net loss per share (basic and diluted)	$	(0.05	)	$	(0.05	)

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ACQUISITIONS (Tables)

9 Months Ended

Jun. 30, 2018

ACQUISITIONS [Abstract]

Schedule of allocation of the purchase price in connection with the acquisition

The Company’s allocation of the purchase price in connection with the acquisition was calculated as follows:

	Balance as of
	May 17, 2016
Share consideration transferred	$	7,675,000
Forgiveness of receivable	607,159
Consideration transferred	$	8,282,159
Less: Fair value of assets acquired
Cash and cash equivalents	(5,116,609		)
Other receivables	(14,187		)
Prepayment	(66,856		)
Related party receivables	(20,412		)
Intellectual property	(236,269		)
In-Process research and development	(613,100		)
Plus: Liabilities assumed
Accounts payable and accrued expenses	492,603
Related party payables	15,656
Goodwill	$	2,722,985

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GOODWILL AND INTANGIBLE ASSETS (Tables)

9 Months Ended

Jun. 30, 2018

GOODWILL AND INTANGIBLE ASSETS [Abstract]

Summary of goodwill

The following table summarizes the Company’s goodwill for the periods indicated resulting from the acquisitions by the Company:

	June 30,		September 30,
	2018		2017
Goodwill	$	2,722,985	$	2,722,985

Summary of intangible assets

The following table summarizes the Company’s intangible assets as of the following periods: 

	June 30,		September 30,
	2018		2017		Estimated
	(Unaudited)				Useful Life
In-process research and development	$	613,100	$	613,100	Indefinite
Intellectual Property		236,239		236,269	Indefinite
Indefinite lived intangible asset		1,300,000		1,300,000	Indefinite
	$	2,149,339	$	2,149,369

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables)

9 Months Ended

Jun. 30, 2018

ACCOUNTS PAYABLE AND ACCRUED EXPENSES [Abstract]

Accounts Payable and Accrued Expenses

The following table summarizes the Company’s accounts payable and accrued expenses as of the following periods:

	June 30, 2018
	(Unaudited)		September 30, 2017
Accounts payable	$	570,411	$	658,921
Accrued expenses	607,531		319,918
	$	1,177,942	$	978,839

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STOCK-BASED COMPENSATION (Tables)

9 Months Ended

Jun. 30, 2018

STOCK-BASED COMPENSATION [Abstract]

Schedule of assumptions used in Black-Scholes options pricing model to estimate the fair value of stock options

The following assumptions were used in the Black-Scholes options pricing model to estimate the fair value of stock options for the nine months ended June 30, 2018:

	Employee – Vesting Period				Non- Employee – Vesting Period
	1 Year	2 Years	3 Years	4Years	1 Year	2 Years	3 Years
Stock Price	$0.85	$0.85	$0.85	$0.85	$1.10	$1.10	$1.10
Expected life (years)	5.50	5.75	6.00	6.25	5.50	5.75	6.00
Expected volatility	82.40%	82.20%	81.90%	81.70%	100.80%	102.30%	103.50%
Expected dividend yield	—%	—%	—%	—%	—%	—%	—%
Risk-free interest rate	1.57%	1.57%	1.57%	1.57%	2.66%	2.67%	2.68%

Summary of stock option activity

The following table summarizes stock option activity for the nine months ended June 30, 2018:

	Number of Options	Weighted Average Exercise Price Per Option	Weighted Average remaining Contractual Life (years)	Aggregate Intrinsic Value
Outstanding balance at September 30, 2017	4,829,875	0.56	8.22	$	16,636,397
Granted	—	—	—	—
Exercised	—	—	—	—
Forfeited and Expired	—	—	—	—
Outstanding balance at June 30, 2018	4,829,875	0.56	7.48	$	2,898,009
Options exercisable at June 30, 2018	2,795,706	0.34	6.72	$	2,112,591

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WARRANTS (Tables)

9 Months Ended

Jun. 30, 2018

WARRANTS [Abstract]

Schedule of fair value of warrants

The fair value of the warrants at the date of issuance has been calculated based on the following inputs and assumptions using the Black-Scholes Model:

	September 1, 2017	August 31, 2017	February 28, 2017
Fair value at issuance date	$1,420,456	$424,179	$2,914,884
Warrants issued	374,000	112,000	1,440,501
Exercise Price	$0.60	$0.65	$0.37
Stock Price	$4.00	$4.00	$2.10
Expected Term (Years)	10	10	10
Volatility %	91%	91%	105%
Discount Rate - Bond Equivalent Yield	2.35%	2.35%	2.55%
Dividend Yield	—%	—%	—%

The following table summarizes warrant activity for the nine months ended June 30, 2018:

	Number of Warrants	Weighted Average Exercise Price Per Option	Weighted Average remaining Contractual Life (years)	Aggregate Intrinsic Value
Outstanding balance at September 30, 2017	1,926,501	0.43	8.86	6,875,819
Granted	—	—	—	—
Forfeited	—	—	—	—
Outstanding balance at June 30, 2018	1,926,501	0.43	8.11	$	1,288,966
Warrants exercisable at June 30, 2018	1,926,501	0.43	8.11	$	1,288,966

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GENERAL INFORMATION (Details)	Apr. 27, 2016 USD ($)
Falconridge Holdings Limited | Rasna DE
Organization, Consolidation and Presentation of Financial Statements [Line Items]
Consideration transferred	$ 1

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ACCOUNTING POLICIES - Narrative (Details) - USD ($)					3 Months Ended		9 Months Ended
	Dec. 22, 2017	Sep. 01, 2017	Aug. 31, 2017	Feb. 28, 2017	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Sep. 30, 2017
Accounting Policies [Line Items]
Accumulated deficit					$ (15,970,046)		$ (15,970,046)		$ (12,299,068)
Net Loss					$ (803,965)	$ (1,213,556)	(3,670,978)	$ (3,517,569)
Net cash used in operating activities							(2,513,179)
Impairment charge							$ 0	$ 0
Exercise price (in dollars per share)		$ 0.60	$ 0.65	$ 0.37	$ 0.43		$ 0.43		$ 0.43
Federal statutory rate	35.00%						21.00%
Minimum
Accounting Policies [Line Items]
Useful life							2 years
Maximum
Accounting Policies [Line Items]
Useful life							5 years
Placement Agent
Accounting Policies [Line Items]
Warrant term		10 years	10 years	10 years
Warrant to purchase number of shares (in shares)		374,000	112,000	1,440,501
Exercise price (in dollars per share)		$ 0.60	$ 0.65	$ 0.37

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ACCOUNTING POLICIES - Antidilutive Shares (Details) - shares	9 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Accounting Policies [Line Items]
Total shares issuable upon exercise or conversion	6,756,376	4,602,876
Warrants
Accounting Policies [Line Items]
Total shares issuable upon exercise or conversion	1,926,501	1,440,501
Stock options
Accounting Policies [Line Items]
Total shares issuable upon exercise or conversion	4,829,875	3,162,375

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ACCOUNTING POLICIES - Net Loss per Share (Details) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
ACCOUNTING POLICIES [Abstract]
Net loss for the period	$ (803,965)	$ (1,213,556)	$ (3,670,978)	$ (3,517,569)
Weighted average number of shares (in shares)	68,908,003	68,046,465	68,908,003	65,802,020
Net loss per share (basic and diluted) (in dollars per share)	$ (0.01)	$ (0.02)	$ (0.05)	$ (0.05)

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ACQUISITIONS - Narrative (Details)	Aug. 15, 2016 shareholder shares	May 17, 2016 USD ($) $ / shares shares	Jun. 30, 2018 shares	Sep. 30, 2017 shares	May 05, 2016 USD ($)
Business Acquisition [Line Items]
Shares issued (in shares)	3,305,000
Related party receivable forgiven | $		$ 607,159
Cancellation of shares (in shares)	1,500,000
Shares issued in exchange (in shares)	0.33
Number of legacy shareholders with canceled shares following Merger | shareholder	1
Reverse stock split	3.25 for 1
Shares outstanding (in shares)	64,679,798		68,908,003	68,908,003
Conversion ratio	3.25
Arna Therapeutics Limited
Business Acquisition [Line Items]
Voting interests acquired (as percent)		65.00%
Share price (in dollars per share) | $ / shares		$ 0.40
Shares issued (in shares)		19,187,500
Shares issuable pursuant to acquisition (in shares)		54,837,790
Consideration transferred | $		$ 7,675,000
Rasna, Inc.
Business Acquisition [Line Items]
Consideration transferred | $		8,282,159
Rasna, Inc. | IPR&D
Business Acquisition [Line Items]
Indefinite-lived intangible asset | $		$ 613,100
Rasna Therapeutics Inc. | Post Merger
Business Acquisition [Line Items]
Shares cancelled as result of split-off (in shares)	1,500,000
Shares outstanding (in shares)	19,901,471
Falconridge Holdings Limited
Business Acquisition [Line Items]
Notes payable | $					$ 236,269

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ACQUISITIONS - Allocation of Purchase Price (Details) - USD ($)	May 17, 2016	Jun. 30, 2018	Sep. 30, 2017
Plus: Liabilities assumed
Goodwill		$ 2,722,985	$ 2,722,985
Rasna, Inc.
Business Acquisition [Line Items]
Share consideration transferred	$ 7,675,000
Forgiveness of receivable	607,159
Consideration transferred	8,282,159
Less: Fair value of assets acquired
Cash and cash equivalents	(5,116,609)
Other receivables	(14,187)
Prepayment	(66,856)
Related party receivables	(20,412)
Plus: Liabilities assumed
Accounts payable and accrued expenses	492,603
Related party payables	15,656
Goodwill	2,722,985
Rasna, Inc. | Intellectual property
Less: Fair value of assets acquired
Indefinite-lived intangible asset	(236,269)
Rasna, Inc. | In-process research and development
Less: Fair value of assets acquired
Indefinite-lived intangible asset	$ (613,100)

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GOODWILL AND INTANGIBLE ASSETS - Narrative (Details)		6 Months Ended	9 Months Ended
	Dec. 17, 2013 USD ($) project $ / shares shares	Sep. 30, 2017 USD ($)	Jun. 30, 2018 USD ($)	May 17, 2016 EUR (€)	May 17, 2016 USD ($)	Jan. 01, 2015 EUR (€)	Oct. 31, 2013 $ / shares
Indefinite-lived Intangible Assets [Line Items]
Goodwill		$ 2,722,985	$ 2,722,985
Goodwill impairment		0	0
Number of independent research projects | project	2
Impairment charge		$ 0	$ 0
IPR&D
Indefinite-lived Intangible Assets [Line Items]
Price per share (in dollars per share) | $ / shares	$ 0.13
Shares issued (in dollars per share) | $ / shares	$ 0.28						$ 0.13
Indefinite-lived intangible asset acquired	$ 1,300,000
IPR&D | Eurema Consulting S.r.l.
Indefinite-lived Intangible Assets [Line Items]
Stock issued (in shares) | shares	5,000,000
IPR&D | TES Pharma S.r.l.
Indefinite-lived Intangible Assets [Line Items]
Stock issued (in shares) | shares	5,000,000
Clinical Research Organization | IPR&D
Indefinite-lived Intangible Assets [Line Items]
IPR&D costs | €						€ 100,002
Amended License Agreement | IPR&D
Indefinite-lived Intangible Assets [Line Items]
IPR&D costs | €				€ 435,000
Rasna, Inc.
Indefinite-lived Intangible Assets [Line Items]
Goodwill					$ 2,722,985
Rasna, Inc. | Intellectual property
Indefinite-lived Intangible Assets [Line Items]
IPR&D costs					236,269
Rasna, Inc. | IPR&D
Indefinite-lived Intangible Assets [Line Items]
IPR&D costs					$ 613,100

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GOODWILL AND INTANGIBLE ASSETS - Goodwill (Details)	Jun. 30, 2018 USD ($)
Goodwill [Roll Forward]
Goodwill	$ 2,722,985

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GOODWILL AND INTANGIBLE ASSETS - Intangible Assets (Details) - USD ($)	Jun. 30, 2018	Sep. 30, 2017
Indefinite-lived Intangible Assets [Line Items]
Intangible assets	$ 2,149,339	$ 2,149,369
In-process research and development
Indefinite-lived Intangible Assets [Line Items]
Intangible assets	613,100	613,100
Intellectual Property
Indefinite-lived Intangible Assets [Line Items]
Intangible assets	236,239	236,269
Indefinite lived intangible asset
Indefinite-lived Intangible Assets [Line Items]
Intangible assets	$ 1,300,000	$ 1,300,000

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES - Summary of Accounts Payable and Accrued Expenses (Details) - USD ($)	Jun. 30, 2018	Sep. 30, 2017
ACCOUNTS PAYABLE AND ACCRUED EXPENSES [Abstract]
Accounts payable	$ 570,411	$ 658,921
Accrued expenses	607,531	319,918
Accounts payable and accrued expenses	$ 1,177,942	$ 978,839

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES - Narrative (Details) - USD ($)	Jun. 30, 2018	Sep. 30, 2017
Accounts Payable and Accrued Liabilities [Line Items]
Accrued expenses	$ 607,531	$ 319,918
Accrual for director fees	138,000	50,000
Payroll accruals	21,000	60,000
Travel and entertainment expenses	63,000
Accrued legal, accounting and professional fees	193,000	$ 128,000
Vendors for research and development expenses
Accounts Payable and Accrued Liabilities [Line Items]
Accrued expenses	$ 193,000

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STOCK-BASED COMPENSATION - Narrative (Details)	3 Months Ended		9 Months Ended
	Jun. 30, 2018 USD ($) company shares	Jun. 30, 2017 USD ($)	Jun. 30, 2018 USD ($) company shares	Jun. 30, 2017 USD ($)	Jul. 19, 2016 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted (in shares)			0
Number of comparable companies | company	7		7
Estimated forfeitures (in shares)	0		0
Option exercised in period (in shares)			0
2016 Equity Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized (in shares)					9,750,000
Cost expected to be recognized over a weighted average period | $	$ 779,253		$ 779,253
Total unrecognized compensation cost related to stock options			1 year
General and Administrative Expense
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based compensation | $	193,540	$ 231,878	$ 692,634	$ 644,520
Consultancy Fees Third Parties
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share based compensation | $	$ 120,192	$ 89,960	$ 151,662	$ 119,012

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STOCK-BASED COMPENSATION - Fair Value Assumptions (Details) - $ / shares	9 Months Ended
	Jun. 30, 2018	Sep. 01, 2017	Aug. 31, 2017	Feb. 28, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock Price (in dollars per share)		$ 4.00	$ 4.00	$ 2.10
1 Year | Employee
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock Price (in dollars per share)	$ 0.85
Expected life (years)	5 years 6 months
Expected volatility	82.40%
Expected dividend yield	0.00%
Risk-free interest rate	1.57%
1 Year | Non-Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock Price (in dollars per share)	$ 1.10
Expected life (years)	5 years 6 months
Expected volatility	100.80%
Expected dividend yield	0.00%
Risk-free interest rate	2.66%
2 Years | Employee
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock Price (in dollars per share)	$ 0.85
Expected life (years)	5 years 9 months
Expected volatility	82.20%
Expected dividend yield	0.00%
Risk-free interest rate	1.57%
2 Years | Non-Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock Price (in dollars per share)	$ 1.10
Expected life (years)	5 years 9 months
Expected volatility	102.30%
Expected dividend yield	0.00%
Risk-free interest rate	2.67%
3 Years | Employee
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock Price (in dollars per share)	$ 0.85
Expected life (years)	6 years
Expected volatility	81.90%
Expected dividend yield	0.00%
Risk-free interest rate	1.57%
3 Years | Non-Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock Price (in dollars per share)	$ 1.10
Expected life (years)	6 years
Expected volatility	103.50%
Expected dividend yield	0.00%
Risk-free interest rate	2.68%
4Years | Employee
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock Price (in dollars per share)	$ 0.85
Expected life (years)	6 years 3 months
Expected volatility	81.70%
Expected dividend yield	0.00%
Risk-free interest rate	1.57%

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STOCK-BASED COMPENSATION - Stock Options (Details) - USD ($)	6 Months Ended	9 Months Ended
	Sep. 30, 2017	Jun. 30, 2018
Number of Options
Number of Options, Outstanding balance (in shares)		4,829,875
Number of Options, Granted (in shares)		0
Number of Options, Exercised (in shares)		0
Number of Options, Forfeited and Expired (in shares)		0
Number of Options, Outstanding balance (in shares)	4,829,875	4,829,875
Number of Options, Options exercisable (in shares)		2,795,706
Weighted Average Exercise Price Per Option
Weighted Average Exercise Price Per Option, Outstanding balance (in dollars per share)		$ 0.56
Weighted Average Exercise Price Per Option, Granted (in dollars per share)		0
Weighted Average Exercise Price Per Option, Exercised (in dollars per share)		0
Weighted Average Exercise Price Per Option, Forfeited and Expired (in dollars per share)		0
Weighted Average Exercise Price Per Option, Outstanding balance (in dollars per share)	$ 0.56	0.56
Weighted Average Exercise Price Per Option exercisable (in dollars per share)		$ 0.34
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]
Weighted Average remaining Contractual Life (years), Outstanding balance	8 years 2 months 19 days	7 years 5 months 23 days
Weighted Average remaining Contractual Life (years) Options exercisable		6 years 8 months 19 days
Aggregate Intrinsic Value Outstanding balance	$ 16,636,397	$ 2,898,009
Aggregate Intrinsic Value Options exercisable		$ 2,112,591

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WARRANTS - Narrative (Details)			3 Months Ended	9 Months Ended
	Sep. 01, 2017 USD ($)	Apr. 10, 2016 USD ($)	Jun. 30, 2018 USD ($) company	Jun. 30, 2018 USD ($) company	Aug. 31, 2017 USD ($)	Feb. 28, 2017 USD ($)
Class of Warrant or Right [Line Items]
Warrants issued for consulting services		$ 484,009		$ 522,350
Warrants provided for services, period for issue	6 months
Number of comparable companies | company			7	7
Fair value at issuance date	$ 1,420,456				$ 424,179	$ 2,914,884
Consultancy Fees Third Parties
Class of Warrant or Right [Line Items]
Warrant cost			$ 0	$ 522,350

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WARRANTS - Fair Value of Warrant Obligation (Details) - USD ($)	Sep. 01, 2017	Aug. 31, 2017	Feb. 28, 2017	Jun. 30, 2018	Sep. 30, 2017
Class of Warrant or Right [Line Items]
Fair value at issuance date	$ 1,420,456	$ 424,179	$ 2,914,884
Warrants to be issued and Issued respectively (in shares)	374,000	112,000	1,440,501	1,926,501	1,926,501
Exercise Price (in dollars per share)	$ 0.60	$ 0.65	$ 0.37	$ 0.43	$ 0.43
Stock Price (in dollars per share)	$ 4.00	$ 4.00	$ 2.10
Warrants
Class of Warrant or Right [Line Items]
Expected Term (Years)	10 years	10 years	10 years
Volatility %	91.00%	91.00%	105.00%
Discount Rate - Bond Equivalent Yield	2.35%	2.35%	2.55%
Dividend Yield	0.00%	0.00%	0.00%

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WARRANTS - Warrant Activity (Details) - USD ($)	6 Months Ended	9 Months Ended
	Sep. 30, 2017	Jun. 30, 2018
Number of Warrants
Beginning balance (in shares)		1,926,501
Granted (in shares)		0
Forfeited (in shares)		0
Ending balance (in shares)	1,926,501	1,926,501
Warrants exercisable (in shares)		1,926,501
Weighted Average Exercise Price Per Option
Beginning balance (in dollars per share)		$ 0.43
Granted, Weighted Average Exercise Price Option (in dollars per share)		0
Forfeited, Weighted Average Exercise Price Option (in dollars per share)		0
Ending balance (in dollars per share)	$ 0.43	0.43
Warrants exercisable (in dollars per share)		$ 0.43
Outstanding, Weighted Average remaining Contractual Life (years)	8 years 10 months 9 days	8 years 1 month 9 days
Outstanding, Aggregate Intrinsic Value	$ 6,875,819	$ 1,288,966
Warrants exercisable, Weighted Average remaining Contractual Life (years)		8 years 1 month 9 days
Warrants exercisable, Aggregate Intrinsic Value		$ 1,288,966

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RELATED PARTY TRANSACTIONS - Narrative (Details) - USD ($)	9 Months Ended
	Jun. 30, 2018	Sep. 30, 2017
Related Party Transaction [Line Items]
Due to related party	$ 550,000	$ 550,000
Interest expense	0
Eurema Consulting S.r.l.
Related Party Transaction [Line Items]
Due to related party	200,000	200,000
Gabriele Cerrone
Related Party Transaction [Line Items]
Due to related party	175,000	175,000
Roberto Pellicciari
Related Party Transaction [Line Items]
Due to related party	$ 175,000	$ 175,000

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COMMITMENTS AND CONTINGENCIES - Narrative (Details)		1 Months Ended						3 Months Ended		9 Months Ended
	May 24, 2017 USD ($)	Jun. 30, 2017 USD ($) $ / shares shares	Apr. 30, 2017 USD ($)	Jan. 31, 2017 USD ($)	Nov. 30, 2016 EUR (€)	Oct. 31, 2016 USD ($)	Sep. 30, 2016 $ / shares shares	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2018 EUR (€) shares	Jun. 30, 2018 USD ($) $ / shares shares	Jun. 30, 2017 USD ($)	Jun. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Oct. 31, 2015 USD ($)
Expected future payments | €										€ 400,000
Options granted (in shares) | shares										0	0
Exercise price of options granted (in dollars per share) | $ / shares											$ 0
Related party receivable													$ 105,274	$ 28,931
Bucks County Biotechnology Centre Inc. | Lease agreement
Future minimum payments due				$ 13,480
Estimated utility expense per month				237
Rent expense								$ 4,000			$ 12,000
License Agreement
Amount payable for making milestone | €					€ 50,000
Agreement term					6 months
Milestone payment achieved | €										€ 50,000
Employment and Consultancy Agreements
Other commitment				$ 499,000
Employment and Consultancy Agreements | James Tripp
Cash award granted per calendar quarter															$ 10,000
Options granted (in shares) | shares							125,000
Vesting period							3 years
Exercise price of options granted (in dollars per share) | $ / shares							$ 0.40
Employment and Consultancy Agreements | Chief Financial Officer
Officer's compensation			$ 80,000			$ 50,000
Consultancy expenses								20,000			60,000
Prepaid Officers Compensation													13,333
Employment and Consultancy Agreements | Chief Executive Officer
Officer's compensation	$ 300,000							75,000			225,000
Performance bonus (as percent)	35.00%
Bonus accrued													0
Employment and Consultancy Agreements | Dr. Shailubhai
Options granted (in shares) | shares		1,700,000
Vesting period		4 years
Exercise price of options granted (in dollars per share) | $ / shares		$ 0.85
Grant date fair value		$ 985,081
Expenses related to options								77,000			331,000
Shared Services Agreement | Tiziana Life Sciences PLC
Rent expense								30,000	$ 23,000		88,000	$ 84,000
Due to affiliates													37,012
Payroll								$ 61,000	$ 19,000		$ 159,000	$ 130,000
Prepaid payroll expense													48,946
Prepaid rent expense													59,489
Related party receivable													$ 105,274

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SUBSEQUENT EVENTS - Narrative (Details) - Subsequent Event - Convertible Promissory Note	Aug. 08, 2018 USD ($) $ / shares
SUBSEQUENT EVENTS
Interest rate (as percentage)	12.00%
Principal amount | $	$ 135,000
Conversion price (in dollars per share) | $ / shares	$ 0.65
Period after the date of the Note used to calculate the price of next financing	180 days