UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the Quarterly Period Ended
OR
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TABLE OF CONTENTS
i
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RASNA THERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| December 31, 2021 | September 30, 2021 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Liabilities: | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Related party payables | ||||||||
| Loan payable and accrued interest, related party | ||||||||
| Convertible notes payable, net - related party | ||||||||
| Convertible notes payable, net | ||||||||
| Derivative liabilities | ||||||||
| Total Current Liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Shareholders’ deficit | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and shareholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
RASNA THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Revenue | $ | $ | ||||||
| Cost of revenue | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| General and administrative | ||||||||
| Research and development | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income/(expense): | ||||||||
| Accretion of debt discount | ( | ) | ||||||
| Gain on derivative liability | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Foreign currency transaction gain | ||||||||
| Total other income expense | ( | ) | ( | ) | ||||
| Loss from operations before income taxes | ( | ) | ( | ) | ||||
| Income tax provision | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted net loss per share attributable to common shareholders | ||||||||
| Basic and diluted weighted average common shares outstanding | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
RASNA THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY/(DEFICIT)
(UNAUDITED)
| Three Months Ended December 31, 2021 | ||||||||||||||||||||
| Common Stock | Additional Paid-In | Accumulated | Total Shareholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance at October 1, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Beneficial conversion feature related to convertible notes | — | |||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Three Months Ended December 31, 2020 | ||||||||||||||||||||
| Common Stock | Additional Paid-In | Accumulated | Total Shareholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance at October 1, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Share based compensation | — | |||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance at December 31, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
RASNA THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Three Months Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Share based compensation | ||||||||
| Depreciation | ||||||||
| Non-cash interest expense | ||||||||
| Accretion of debt discount | ||||||||
| Derivative liability | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Related party payable | ||||||||
| Prepaid expenses | ||||||||
| Related party receivable | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from issuance of convertible notes | ||||||||
| Net change in cash | ( | ) | ||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Derivative liabilities in connection with issuance and extension of convertible notes | $ | $ | ||||||
| Beneficial conversion feature related to issuance and extension of convertible notes | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
RASNA THERAPEUTICS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL INFORMATION
Rasna Therapeutics, Inc. “Rasna Inc.” or the “Company”), is a biotechnology company incorporated in the State of Delaware on March 28, 2016. The Company is engaged in modulating the molecular targets NPM1 and LSD1, which are implicated in the disease progression of leukemia and lymphoma.
These unaudited condensed consolidated 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.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or ability to secure additional cash resources, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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. There have been no material changes in the Company’s significant accounting policies as compared to the significant accounting policies described in the Company’s annual report on Form 10-K/A for the year ended September 30, 2021.
Basis of preparation
These unaudited condensed consolidated financial statements have been prepared following the requirements of the Securities and Exchange Commission (the “SEC”) and United States generally accepted accounting principles (“US GAAP”) for interim reporting. The principles for condensed interim financial information do not require the inclusion of all the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the year ended September 30, 2021 and notes thereto included in the Company’s Annual Report on Form 10-K/A filed with the SEC on June 9, 2022. The accompanying unaudited condensed consolidated financial statements have not been audited by an independent registered public accounting firm in accordance with the standards of the Public Company Accounting Oversight Board (United States), but in the opinion of management, such financial statements include all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s interim financial information.
The results of the operations for the three months ended December 31, 2021 may not be indicative of the results that may be expected for the year ending September 30, 2022.
Principles of Consolidation
The consolidated financial statements include the financial statements of the Company and its wholly owned subsidiary, Rasna Research Inc, and Rasna Research Inc’s subsidiary, Arna Therapeutics Limited. All significant intercompany accounts and transactions have been eliminated in the preparation of the accompanying consolidated financial statements.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The Company evaluates its estimates on an ongoing basis, including those related to the fair values of share 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 Company’s consolidated financial position and results of operations.
5
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, warrants and convertible loan notes, using various methods such as the treasury stock, modified treasury stock, and if converted methods 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 and convertible loan notes, all of which have been excluded from the computation of diluted weighted average shares outstanding as they would be anti-dilutive:
| Dec.
31, 2021 |
Dec.
31, 2020 |
|||||||
| Stock options | ||||||||
| Warrants | ||||||||
| Convertible notes & associated fees | ||||||||
| Total shares issuable upon exercise or conversion | ||||||||
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, which simplifies the guidance on the issuer’s accounting for convertible debt instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature in such debt and will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that is within the scope of ASU 2020-06. Also, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and treasury stock method will be no longer available. ASU 2020-06 is applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company does not intend to early adopt and continues to evaluate the impact of the provisions of ASU 2020-06 on its consolidated financial statements.
In December 2019, the FASB issued ASU 2019 -12, Income Taxes – Simplifying the Accounting for Income Taxes (“ASU 2019-12”). Among other items, the amendments in ASU 2019-12 simplify the accounting treatment of tax law changes and year-to-date losses in interim periods. An entity generally recognizes the effects of a change in tax law in the period of enactment; however, there is an exception for tax laws with delayed effective dates. Under current guidance, an entity may not adjust its annual effective tax rate for a tax law change until the period in which the law is effective. This exception was removed under ASU 2019-12, thereby providing that all effects of a tax law change are recognized in the period of enactment, including adjustment of the estimated annual effective tax rate. Regarding year-to-date losses in interim periods, an entity is required to estimate its annual effective tax rate for the full fiscal year at the end of each interim period and use that rate to calculate its income taxes on a year-to-date basis. However, current guidance provides an exception that when a loss in an interim period exceeds the anticipated loss for the year, the income tax benefit is limited to the amount that would be recognized if the year-to-date loss were the anticipated loss for the full year. ASU 2019-12 removes this exception and provides that, in this situation, an entity would compute its income tax benefit at each interim period based on its estimated annual effective tax rate. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those annual periods. Early adoption is permitted. The Company has implemented this and the effect of this amendment is immaterial on its consolidated financial statements and related disclosures.
The Company has determined that all recently issued accounting pronouncements will not have a material impact on its consolidated financial position, results of operations and cash flows, or do not apply to its operations.
6
3. LIQUIDITY AND GOING CONCERN
The Company has no present revenue and has experienced net losses and significant cash outflows from cash used in operating activities since inception.
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 two years, and
as of December 31, 2021, had an accumulated deficit of $
The Company expects to continue to incur net losses and have significant cash outflows for at least the next 12 months and 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 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 for a period of one year from the date of this filing. The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern one year from the date of this filing. 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.
4. SHARE-BASED COMPENSATION
For
the three months ended December 31, 2021, and December 31, 2020, $
7
5. CONVERTIBLE NOTES
The table below summarizes outstanding convertible notes as of December 31, 2021and December 31, 2020:
| Balance of non-related notes payable, net as of September 30, 2021 | $ | |||
| Accrued Interest | ||||
| Accretion of debt discount | ||||
| Beneficial conversion feature related to issuance and extension of convertible notes | ( | ) | ||
| Derivative liabilities in connection with issuance and extension of convertible notes | ( | ) | ||
| Balance of non-related notes payable, net as of December 31 2021 | $ | |||
| Balance of related party notes payable, net as of September 30, 2021 | $ | |||
| Issuance of debt | ||||
| Accrued Interest | ||||
| Accretion of debt discount | ||||
| Beneficial conversion feature related to issuance and extension of convertible notes | ( | ) | ||
| Derivative liabilities in connection with issuance and extension of convertible notes | ( | ) | ||
| Balance of related party notes payable, net as of December 31, 2021 | $ | |||
| Balance of related notes payable, net as of September 30, 2020 | $ | |||
| New convertible notes issued | ||||
| Accrued Interest | ||||
| Balance of related notes payable, net as of December 31 2020 | $ | |||
| Balance of non-related notes payable, net as of September 30, 2020 | $ | |||
| Accrued Interest | ||||
| Balance of non-related notes payable, net as of December 31, 2020 | $ |
On
November 18, 2021, the Company entered into an eleventh
On November 29, 2021, the Company entered into the
twelfth Convertible Promissory Note again with Panetta Partners Ltd. (the “Holder”) pursuant to which the Company
issued a Convertible Promissory Note to the Holder. The Holder provided the Company with $
Amendment
On
December 31, 2021, all previously outstanding notes due December 31, 2021 were modified with amended expiry terms. The expiry of the
notes was amended to
The
Company determined that the extension of maturity dates resulted in extinguishment for Notes carrying interest at
8
The Company measured the present value of future cash flows that existed just prior to the earliest restructuring in the twelve-month period, which was used to apply the 10% test, since the earlier restructurings was accounted for as a modification. As the change in cash flows for all Notes carrying interest at 12% was greater than 10%, the term amendment was accounted for as an extinguishment. Under extinguishment accounting, the debt was remeasured and recorded at fair value. There was no difference between the carrying value of the debt, prior to the extinguishment, and the new fair value of the debt..
The Company also noted that the stock was thinly traded with any trading activity resulting in a disproportionate effect on the stock price. Therefore, a Black Scholes valuation was deemed to be inappropriate in this case.
Embedded Derivative Liability
Under
the promissory note agreement, the interest rate will reset upon the event of a default and an additional penalty of
The
embedded derivatives for the notes are carried on the Company’s balance sheet at fair value. During the period to Dec 31, 2021,
the Company recognized an additional $
The
Company noted due to the short-term nature of the note in addition to the relatively small incremental increase in the interest rate
in the event of default (
Management will continue to assess the valuation of the embedded derivative at each reporting period and will record any changes in value through other income and expenses.
Beneficial Conversion Feature
The conversion features for all notes issued are
in the money as of the issuance date and accordingly a beneficial conversion feature was recorded upon issuance. As the intrinsic value
of the Beneficial Conversion Feature exceeds the face value, the recorded Beneficial Conversion Feature will be limited to the gross proceeds
less any debt discounts. As at December 31, 2021 this amounted to $
9
6. RELATED PARTY TRANSACTIONS
The following is a summary of the related party transactions for the periods presented.
Eurema Consulting
Eurema Consulting S.r.l. is a significant
shareholder of the Company. During the three months ended December 31, 2021 and December 31, 2020 Eurema Consulting did
not supply the Company with consulting services. As of December 31, 2021, and September 30, 2021, the balance due to Eurema Consulting
S.r.l. was $
Gabriele Cerrone
Gabriele
Cerrone is the majority shareholder of Panetta Partners, one of the Company’s principal shareholders. As of December
31, 2021, and September 30, 2021, the balance due to Gabriele Cerrone was $
Roberto Pellicciari and TES Pharma
Roberto Pellicciari is the majority shareholder
of TES Pharma Srl, one of the Company’s principal shareholders. During the three months ended December 31, 2021 and December
31, 2020 Roberto Pellicciari did not supply the Company with consulting services. As of December 31, 2021, and September 30, 2021, the
balance due to Roberto Pellicciari was $
Tiziana Life Sciences Plc (“Tiziana”)
The Company is party to a Shared Services Agreement with Tiziana, whereby the Company is charged for shared services and rent. Tiziana had previously agreed to waive all charges for shared services from October 2018 onwards, until further notice since the amounts due for such services are de minimis. Notice was given and recharges from October 1, 2020 were resumed. Keeren Shah, the Company’s Finance Director, is also Finance Director of Tiziana, and the Company’s directors, Willy Simon and John Brancaccio are also non-executive directors of Tiziana.
During the three months ended December 31,
2021, $
In March 2020, Tiziana extended a loan facility
to Rasna of $
10
Panetta Partners
Panetta Partners
Limited, a shareholder of Rasna, is a company in which Gabriele Cerrone is a major shareholder and also serves as a director.
The Company has entered into numerous
Apart from the Convertible Promissory Notes, 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.
7. SUBSEQUENT EVENTS
In February 2022, Panetta Partners Ltd advanced
$
In March 2022, Panetta Partners Ltd advanced
an additional $
In March 2022, the Company agreed to return back to TES Pharma S.R.L and Eurema Consulting S.R.L all intellectual property rights and assignments relating to NPM1. In exchange for this, TES Pharma S.R.L and Eurema Consulting S.R.L agreed to waive any payments due to them and their affiliates by Rasna.
On
May 13, 2022, the Company received notice from all noteholders that all notes were to be converted into stock. The Company issued
11
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 Annual Report on Form 10-K filed on January 15, 2021 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 and convertible notes.
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. |
12
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.
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.
The Company is currently looking into raising funds to progress its R&D pipeline.
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 US 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 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.
In December 2019, the FASB issued ASU 2019 -12, Income Taxes – Simplifying the Accounting for Income Taxes (“ASU 2019-12”). Among other items, the amendments in ASU 2019-12 simplify the accounting treatment of tax law changes and year-to-date losses in interim periods. An entity generally recognizes the effects of a change in tax law in the period of enactment; however, there is an exception for tax laws with delayed effective dates. Under current guidance, an entity may not adjust its annual effective tax rate for a tax law change until the period in which the law is effective. This exception was removed under ASU 2019-12, thereby providing that all effects of a tax law change are recognized in the period of enactment, including adjustment of the estimated annual effective tax rate. Regarding year-to-date losses in interim periods, an entity is required to estimate its annual effective tax rate for the full fiscal year at the end of each interim period and use that rate to calculate its income taxes on a year-to-date basis. However, current guidance provides an exception that when a loss in an interim period exceeds the anticipated loss for the year, the income tax benefit is limited to the amount that would be recognized if the year-to-date loss were the anticipated loss for the full year. ASU 2019-12 removes this exception and provides that, in this situation, an entity would compute its income tax benefit at each interim period based on its estimated annual effective tax rate. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those annual periods. Early adoption is permitted. The Company has implemented this and the effect of this amendment is immaterial on its consolidated financial statements and related disclosures.
Basis of preparation
The accompanying financial statements have been prepared in conformity with US GAAP. Any reference in these notes to applicable guidance is meant to refer to US GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“the FASB”).
Liquidity and 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 no present revenue and have experienced net losses and significant cash outflows from cash used in operating activities since inception, and at December 31, 2021, had a working capital deficit of $2,503,963 at December 31, 2021.
13
We expect to continue to incur net losses and have significant cash outflows for at least the next twelve months and 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 our ability to continue as a going concern one year from the date of this filing. The accompanying condensed consolidated financial statements have been prepared assuming that we will continue as a going concern one year from the date of this filing. 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.
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 December 31, 2021 and 2020
The following table sets forth the summary statements of operations for the periods indicated:
| For the Three Months Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue | $ | — | $ | — | ||||
| Cost of revenue | — | — | ||||||
| Gross profit | — | — | ||||||
| Operating expenses: | ||||||||
| Research and Development | 9,135 | — | ||||||
| General and administrative | 72,656 | 154,941 | ||||||
| Total operating expenses | 81,791 | 154,941 | ||||||
| Loss from operations | (81,791 | (154,941 | ) | |||||
| Other expense: | ||||||||
| Accretion of debt discount | (203,399 | ) | — | |||||
| Gain on derivative liability | 28,855 | — | ||||||
| Interest on convertible notes payable | (18,296 | ) | (17,077 | ) | ||||
| Foreign currency transaction gain | — | 156 | ||||||
| Other expense | (192,840 | ) | (16,921 | ) | ||||
| Net loss | $ | (274,631 | ) | $ | (171,862 | ) | ||
Revenues
There were no revenues for the three months ended December 31, 2021, and 2020 because the Company does not have any commercial biopharmaceutical products.
14
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 December 31, 2021 decreased to $81,791 from $154,941 for the three months ended December 31, 2020, a decrease of $73,150. The decrease is attributable to a reduction in the overall activities of the Company.
Other expense
During the three months ended December 31, 2021, other expense increased to $192,840 from $16,921 for the three months ended December 31, 2020. This is due to accretion of debt discount by $203,399 caused by the modification and new issuances of convertible debt during the quarter, and interest expense of $18,296 offset by a gain on the adjustment of a derivative liability of $28,855.
Net Loss
Net loss for the three months ended December 31, 2021 increased to $274,631 from $171,862 for the three months ended December 31, 2020, an increase of $102,769. This is due to accretion of debt discount by $203,399 and interest expense of $18,296 offset by a gain on the adjustment of a derivative liability of $28,855 and a decrease in general expenses due to a reduction of activity in the company.
Liquidity and Capital Resources
We believe we will require significant additional cash resources to continue to launch new development phases of existing products in the Company’s 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 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 November 18, 2021, the Company entered into an eleventh 12% Convertible Promissory Note with Panetta Partners Ltd. (the “Holder”) with a maturity date of December 31, 2023. The Holder provided the Company with $30,000 in cash. The Note provides the Holder with the right to convert, at any time, all or any part of the outstanding principal and accrued but unpaid interest into shares of the Company’s common stock at a conversion price equal to the lower of (i) $0.01 per share or (ii) the price of the next equity financing, which raises at least US $1,000,000, subject to adjustments noted within the Agreement. The number of shares issuable upon a conversion shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of the Note to be converted by (y) the Conversion Price. The Note requires the Company to reserve and keep available out of its authorized and unissued shares of common stock the amount of shares that would be issued upon conversion of the Note, which includes the outstanding principal amount of the Note and interest accrued and to be accrued through the date of maturity.
On November 29, 2021, the Company entered into another 12% Convertible Promissory Note again with Panetta Partners Ltd. (the “Holder”) pursuant to which the Company issued a Convertible Promissory Note to the Holder. The Holder provided the Company with $55,000 in cash. All other terms were the same as the note before.
15
Capital Resources
The following table summarizes total current assets, liabilities and working capital deficiency as of the periods indicated:
| December 31, 2021 (Unaudited) | September 30, 2021 (Unaudited) | Change | ||||||||||
| Current assets | $ | 33,455 | $ | 44,577 | $ | (11,122 | ) | |||||
| Current liabilities | 2,537,418 | 2,798,389 | (260,971 | ) | ||||||||
| Working capital deficit | $ | (2,503,963 | ) | $ | (2,753,812 | ) | $ | 249,849 | ||||
We had a cash balance of $21,064 and $10,848 on December 31, 2021, and September 30, 2021, respectively.
Liquidity
The following table sets forth a summary of our cash flows for the periods indicated:
| For the Three months ended December 31, | ||||||||||||
| 2021 | 2020 | Increase/ (Decrease) | ||||||||||
| Net cash used in operating activities | $ | (74,784 | ) | $ | (50,890 | ) | $ | 23,894 | ||||
| Net cash used in investing activities | $ | - | - | - | ||||||||
| Net cash provided by financing activities | $ | 85,000 | $ | 40,000 | $ | 45,000 | ||||||
Net Cash Used in Operating Activities
Net 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 $74,784 for the three months ended December 31, 2021 compared to $50,890 for the three months ended December 31, 2020. The net loss of $274,631 for the three months ended December 31, 2021 was partially offset primarily by interest accrued on the Convertible Loan Notes of $18,296, accretion of debt discount of $203,399, reversal of a derivative liability of ($28,855) and changes in operating assets and liabilities of $7,007.
Net Cash Provided by Financing Activities
Net cash provided by financing activities consists of proceeds from the issuance of convertible notes of $85,000 for the three months ended December 31, 2021 compared to proceeds from the issuance of convertible notes of $40,000 for the three months ended December 31, 2020.
16
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, 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, the Chief Executive 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.
17
PART II – OTHER INFORMATION
ITEM 1A. RISK FACTORS
There have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K as of and for the year ended September 30, 2020, filed with the SEC on February 15, 2021.
ITEM 6. EXHIBITS
| 31.1 | Certification of Principal Executive Officer and Principal Financial and Accounting Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002. | |
| 32.1 | Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002. | |
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
18
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. | |||
| June 16, 2022 | By: | /s/ Keeren Shah | |
| Name: | Keeren Shah | ||
| Title: | Chief Financial Officer, (Principal Executive Officer and Principal Financial and Accounting Officer) | ||
19
Exhibit 31.1
CERTIFICATION BY PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER
I, Keeren Shah, 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: June 16, 2022
| /s/ Keeren Shah | |
Name: Keeren Shah | |
|
Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER 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 December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Keeren Shah, 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: June 16, 2022
| /s/ Keeren Shah | |
| Name: Keeren Shah Title: Principal Executive Officer and Principal Financial Officer |
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) |
Dec. 31, 2021 |
Sep. 30, 2021 |
|---|---|---|
| Current assets: | ||
| Cash | $ 21,064 | $ 10,848 |
| Prepaid expenses | 12,391 | 33,729 |
| Total current assets | 33,455 | 44,577 |
| Current liabilities: | ||
| Accounts payable and accrued expenses | 1,488,989 | 1,516,001 |
| Related party payables | 574,127 | 561,446 |
| Loan payable and accrued interest, related party | 82,080 | 80,640 |
| Convertible notes payable, net - related party | 43,920 | 230,287 |
| Convertible notes payable, net | 267,619 | 371,997 |
| Derivative liabilities | 80,683 | 38,018 |
| Total Current Liabilities | 2,537,418 | 2,798,389 |
| Commitments and contingencies | ||
| Shareholders’ deficit | ||
| Common stock, $0.001 par value; 200,000,000 shares authorized; 68,908,003 shares issued and outstanding | 68,909 | 68,909 |
| Additional paid-in capital | 21,236,238 | 20,711,758 |
| Accumulated deficit | (23,809,110) | (23,534,479) |
| Total shareholders’ deficit | (2,503,963) | (2,753,812) |
| Total liabilities and shareholders’ deficit | $ 33,455 | $ 44,577 |
Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) - $ / shares |
Dec. 31, 2021 |
Sep. 30, 2021 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Common stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 200,000,000 | 200,000,000 |
| Common stock, shares issued | 68,908,003 | 68,908,003 |
| Common stock, shares outstanding | 68,908,003 | 68,908,003 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Income Statement [Abstract] | ||
| Revenue | ||
| Cost of revenue | ||
| Gross profit | ||
| Operating expenses: | ||
| General and administrative | 72,656 | 154,941 |
| Research and development | 9,135 | |
| Total operating expenses | 81,791 | 154,941 |
| Loss from operations | (81,791) | (154,941) |
| Other income/(expense): | ||
| Accretion of debt discount | (203,399) | |
| Gain on derivative liability | 28,855 | |
| Interest expense | (18,296) | (17,077) |
| Foreign currency transaction gain | 156 | |
| Total other income expense | (192,840) | (16,921) |
| Loss from operations before income taxes | (274,631) | (171,862) |
| Income tax provision | ||
| Net loss | $ (274,631) | $ (171,862) |
| Basic and diluted net loss per share attributable to common shareholders (in Dollars per share) | $ 0 | $ 0 |
| Basic and diluted weighted average common shares outstanding (in Shares) | 68,908,003 | 68,908,003 |
Condensed Consolidated Statements of Changes in Shareholders’ Equity/(Deficit) (Unaudited) - USD ($) |
Common Stock |
Additional Paid-In Capital |
Accumulated Deficit |
Total |
|---|---|---|---|---|
| Balance at Sep. 30, 2020 | $ 68,909 | $ 19,914,884 | $ (22,658,481) | $ (2,674,688) |
| Balance (in Shares) at Sep. 30, 2020 | 68,908,003 | |||
| Share based compensation | 18,192 | 18,192 | ||
| Net loss | (171,862) | (171,862) | ||
| Balance at Dec. 31, 2020 | $ 68,909 | 19,933,076 | (22,830,343) | (2,828,358) |
| Balance (in Shares) at Dec. 31, 2020 | 68,908,003 | |||
| Balance at Sep. 30, 2021 | $ 68,909 | 20,711,758 | (23,534,479) | (2,753,812) |
| Balance (in Shares) at Sep. 30, 2021 | 68,908,003 | |||
| Beneficial conversion feature related to convertible notes | 524,480 | 524,480 | ||
| Net loss | (274,631) | (274,631) | ||
| Balance at Dec. 31, 2021 | $ 68,909 | $ 21,236,238 | $ (23,809,110) | $ (2,503,963) |
| Balance (in Shares) at Dec. 31, 2021 | 68,908,003 |
General Information |
3 Months Ended |
|---|---|
Dec. 31, 2021 | |
| Accounting Policies [Abstract] | |
| GENERAL INFORMATION | 1. GENERAL INFORMATION
Rasna Therapeutics, Inc. “Rasna Inc.” or the “Company”), is a biotechnology company incorporated in the State of Delaware on March 28, 2016. The Company is engaged in modulating the molecular targets NPM1 and LSD1, which are implicated in the disease progression of leukemia and lymphoma.
These unaudited condensed consolidated 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.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or ability to secure additional cash resources, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. |
Accounting Policies |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| 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. There have been no material changes in the Company’s significant accounting policies as compared to the significant accounting policies described in the Company’s annual report on Form 10-K/A for the year ended September 30, 2021.
Basis of preparation
These unaudited condensed consolidated financial statements have been prepared following the requirements of the Securities and Exchange Commission (the “SEC”) and United States generally accepted accounting principles (“US GAAP”) for interim reporting. The principles for condensed interim financial information do not require the inclusion of all the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the year ended September 30, 2021 and notes thereto included in the Company’s Annual Report on Form 10-K/A filed with the SEC on June 9, 2022. The accompanying unaudited condensed consolidated financial statements have not been audited by an independent registered public accounting firm in accordance with the standards of the Public Company Accounting Oversight Board (United States), but in the opinion of management, such financial statements include all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s interim financial information.
The results of the operations for the three months ended December 31, 2021 may not be indicative of the results that may be expected for the year ending September 30, 2022.
Principles of Consolidation
The consolidated financial statements include the financial statements of the Company and its wholly owned subsidiary, Rasna Research Inc, and Rasna Research Inc’s subsidiary, Arna Therapeutics Limited. All significant intercompany accounts and transactions have been eliminated in the preparation of the accompanying consolidated financial statements.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The Company evaluates its estimates on an ongoing basis, including those related to the fair values of share 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 Company’s consolidated financial position and results 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, warrants and convertible loan notes, using various methods such as the treasury stock, modified treasury stock, and if converted methods 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 and convertible loan notes, all of which have been excluded from the computation of diluted weighted average shares outstanding as they would be anti-dilutive:
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, which simplifies the guidance on the issuer’s accounting for convertible debt instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature in such debt and will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that is within the scope of ASU 2020-06. Also, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and treasury stock method will be no longer available. ASU 2020-06 is applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company does not intend to early adopt and continues to evaluate the impact of the provisions of ASU 2020-06 on its consolidated financial statements.
In December 2019, the FASB issued ASU 2019 -12, Income Taxes – Simplifying the Accounting for Income Taxes (“ASU 2019-12”). Among other items, the amendments in ASU 2019-12 simplify the accounting treatment of tax law changes and year-to-date losses in interim periods. An entity generally recognizes the effects of a change in tax law in the period of enactment; however, there is an exception for tax laws with delayed effective dates. Under current guidance, an entity may not adjust its annual effective tax rate for a tax law change until the period in which the law is effective. This exception was removed under ASU 2019-12, thereby providing that all effects of a tax law change are recognized in the period of enactment, including adjustment of the estimated annual effective tax rate. Regarding year-to-date losses in interim periods, an entity is required to estimate its annual effective tax rate for the full fiscal year at the end of each interim period and use that rate to calculate its income taxes on a year-to-date basis. However, current guidance provides an exception that when a loss in an interim period exceeds the anticipated loss for the year, the income tax benefit is limited to the amount that would be recognized if the year-to-date loss were the anticipated loss for the full year. ASU 2019-12 removes this exception and provides that, in this situation, an entity would compute its income tax benefit at each interim period based on its estimated annual effective tax rate. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those annual periods. Early adoption is permitted. The Company has implemented this and the effect of this amendment is immaterial on its consolidated financial statements and related disclosures.
The Company has determined that all recently issued accounting pronouncements will not have a material impact on its consolidated financial position, results of operations and cash flows, or do not apply to its operations. |
|||||||||||||||||||||||||||||||||||||||||||||
Liquidity and Going Concern |
3 Months Ended |
|---|---|
Dec. 31, 2021 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| LIQUIDITY AND GOING CONCERN | 3. LIQUIDITY AND GOING CONCERN
The Company has no present revenue and has experienced net losses and significant cash outflows from cash used in operating activities since inception.
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 two years, and as of December 31, 2021, had an accumulated deficit of $23,809,110, a net loss for the year ended December 31, 2021 of $274,631 and net cash used in operating activities of $74,784.
The Company expects to continue to incur net losses and have significant cash outflows for at least the next 12 months and 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 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 for a period of one year from the date of this filing. The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern one year from the date of this filing. 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. |
Share-Based Compensation |
3 Months Ended |
|---|---|
Dec. 31, 2021 | |
| Share-based Payment Arrangement [Abstract] | |
| SHARE-BASED COMPENSATION | 4. SHARE-BASED COMPENSATION
For the three months ended December 31, 2021, and December 31, 2020, $0 and $18,192 related to share based compensation to directors and employees respectively, has been included within the general and administrative expense category in the accompanying unaudited condensed consolidated interim financial statements. No costs related to non-employees have been included within the consultancy fees expense category in the unaudited condensed consolidated interim financial statements in the three months ended December 31, 2021 and the three months ended December 31, 2020. |
Convertible Notes |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Convertible Notes [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CONVERTIBLE NOTES | 5. CONVERTIBLE NOTES
The table below summarizes outstanding convertible notes as of December 31, 2021and December 31, 2020:
On November 18, 2021, the Company entered into an eleventh 12% Convertible Promissory Note with Panetta Partners Ltd. (the “Holder”) with a maturity date of December 31, 2023. The Holder provided the Company with $30,000 in cash. The Note provides the Holder with the right to convert, at any time, all or any part of the outstanding principal and accrued but unpaid interest into shares of the Company’s common stock at a conversion price equal to the lower of (i) $0.01 per share or (ii) the price of the next equity financing, which raises at least US $1,000,000, subject to adjustments noted within the Agreement. The number of shares issuable upon a conversion shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of the Note to be converted by (y) the Conversion Price. The Note requires the Company to reserve and keep available out of its authorized and unissued shares of common stock the amount of shares that would be issued upon conversion of the Note, which includes the outstanding principal amount of the Note and interest accrued and to be accrued through the date of maturity.
On November 29, 2021, the Company entered into the twelfth Convertible Promissory Note again with Panetta Partners Ltd. (the “Holder”) pursuant to which the Company issued a Convertible Promissory Note to the Holder. The Holder provided the Company with $55,000 in cash. All other terms were the same as the eleventh note. Amendment
On December 31, 2021, all previously outstanding notes due December 31, 2021 were modified with amended expiry terms. The expiry of the notes was amended to December 31, 2023.
The Company determined that the extension of maturity dates resulted in extinguishment for Notes carrying interest at 12%, while the Notes carrying interest at 1% resulted in modification.
The Company measured the present value of future cash flows that existed just prior to the earliest restructuring in the twelve-month period, which was used to apply the 10% test, since the earlier restructurings was accounted for as a modification. As the change in cash flows for all Notes carrying interest at 12% was greater than 10%, the term amendment was accounted for as an extinguishment. Under extinguishment accounting, the debt was remeasured and recorded at fair value. There was no difference between the carrying value of the debt, prior to the extinguishment, and the new fair value of the debt..
The Notes carrying interest at 1% did not have a change in cash flows greater than 10%, so these Notes were accounted for as a modification.
The Company also noted that the stock was thinly traded with any trading activity resulting in a disproportionate effect on the stock price. Therefore, a Black Scholes valuation was deemed to be inappropriate in this case.
Embedded Derivative Liability
Under the promissory note agreement, the interest rate will reset upon the event of a default and an additional penalty of 6% will be accrued. The Company analyzed the conversion features of the note agreement for derivative accounting consideration under ASC 815, Derivatives and Hedging, and determined the interest rate resets met the definition of a derivative. It also noted that the Contingent Interest Rate feature required bifurcation from the host note contract and was to be accounted for at fair value. In accordance with ASC 815-15, the Company bifurcated the Contingent Interest Rate feature of the note and recorded a derivative liability.
The embedded derivatives for the notes are carried on the Company’s balance sheet at fair value. During the period to Dec 31, 2021, the Company recognized an additional $71,520 due to the extension and issuance of the convertible notes. Additionally, the Company recognized a gain of $28,855 on the extinguishment of convertible notes.
The Company noted due to the short-term nature of the note in addition to the relatively small incremental increase in the interest rate in the event of default (6%) the maximum overall impact would be approximately $61,320 for the extinguished notes and $10,200 for the new notes issued (calculated as the increase in interest rate multiplied by the principal balance). In addition, the Company assessed all Events of Default and concluded that they are generally within the Company’s control and have a very low probability of occurrence.
Management will continue to assess the valuation of the embedded derivative at each reporting period and will record any changes in value through other income and expenses.
Beneficial Conversion Feature
The conversion features for all notes issued are in the money as of the issuance date and accordingly a beneficial conversion feature was recorded upon issuance. As the intrinsic value of the Beneficial Conversion Feature exceeds the face value, the recorded Beneficial Conversion Feature will be limited to the gross proceeds less any debt discounts. As at December 31, 2021 this amounted to $524,483 for the amended and new notes issued. |
Related Party Transactions |
3 Months Ended |
|---|---|
Dec. 31, 2021 | |
| Related Party Transactions [Abstract] | |
| RELATED PARTY TRANSACTIONS | 6. RELATED PARTY TRANSACTIONS
The following is a summary of the related party transactions for the periods presented.
Eurema Consulting
Eurema Consulting S.r.l. is a significant shareholder of the Company. During the three months ended December 31, 2021 and December 31, 2020 Eurema Consulting did not supply the Company with consulting services. As of December 31, 2021, and September 30, 2021, the balance due to Eurema Consulting S.r.l. was $200,000 for past consultancy services. See note 7 for subsequent events information.
Gabriele Cerrone
Gabriele Cerrone is the majority shareholder of Panetta Partners, one of the Company’s principal shareholders. As of December 31, 2021, and September 30, 2021, the balance due to Gabriele Cerrone was $175,000 for past consultancy services. In March 2020, the Company entered into a 12% Convertible Promissory Note with Gabriele Cerrone for $20,000 with an extended maturity date of December 31, 2023. In February 2021, Gabriele Cerrone assigned the Note to Panetta Partners Ltd. In November 2021, the Company entered into two 12% Convertible Promissory Notes with Panetta Partners Ltd for the aggregate amount of $85,000.
Roberto Pellicciari and TES Pharma
Roberto Pellicciari is the majority shareholder of TES Pharma Srl, one of the Company’s principal shareholders. During the three months ended December 31, 2021 and December 31, 2020 Roberto Pellicciari did not supply the Company with consulting services. As of December 31, 2021, and September 30, 2021, the balance due to Roberto Pellicciari was $175,000 for past consultancy services. At December 31, 2021 and September 30, 2021, TES Pharma was owed $75,000. See note 7 for subsequents events information
Tiziana Life Sciences Plc (“Tiziana”)
The Company is party to a Shared Services Agreement with Tiziana, whereby the Company is charged for shared services and rent. Tiziana had previously agreed to waive all charges for shared services from October 2018 onwards, until further notice since the amounts due for such services are de minimis. Notice was given and recharges from October 1, 2020 were resumed. Keeren Shah, the Company’s Finance Director, is also Finance Director of Tiziana, and the Company’s directors, Willy Simon and John Brancaccio are also non-executive directors of Tiziana.
During the three months ended December 31, 2021, $12,681 was charged under this shared services agreement. As of December 31, 2021, $24,127 was due to Tiziana for services charged under the shared services agreement. This is recorded as a related party payable in the accompanying condensed consolidated balance sheets.
In March 2020, Tiziana extended a loan facility to Rasna of $65,000. The loan is repayable within 18 months and is incurring an interest charge of 8% per annum. In April 2020, the loan facility was extended by a further $7,000, so the loan facility totals $72,000. As of December 31, 2021, the amounts due to Tiziana under this loan facility were $82,080. Interest expense for the period ended December 31, 2021 and 2020 was $1,440, respectively.
Panetta Partners
Panetta Partners Limited, a shareholder of Rasna, is a company in which Gabriele Cerrone is a major shareholder and also serves as a director. The Company has entered into numerous 12% Convertible Promissory Notes with Panetta Partners for a total of $361,000. The amount due for these notes as at December 31, 2021, with respect to the principal and accrued interest is $392,225. As at September 30, 2021 $276,303 was due with respect to notes issued.
Apart from the Convertible Promissory Notes, 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. |
Subsequent Events |
3 Months Ended |
|---|---|
Dec. 31, 2021 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | 7. SUBSEQUENT EVENTS
In February 2022, Panetta Partners Ltd advanced $30,000 to the Company. This advance was converted into promissory notes, at an interest rate of 16% with a conversion price of $0.005.
In March 2022, Panetta Partners Ltd advanced an additional $45,000 to the Company. This advance was converted into promissory notes, at an interest rate of 16% with a conversion price of $0.005.
In March 2022, the Company agreed to return back to TES Pharma S.R.L and Eurema Consulting S.R.L all intellectual property rights and assignments relating to NPM1. In exchange for this, TES Pharma S.R.L and Eurema Consulting S.R.L agreed to waive any payments due to them and their affiliates by Rasna.
On May 13, 2022, the Company received notice from all noteholders that all notes were to be converted into stock. The Company issued 111,071,358 of common stock on May 13, 2022 in respect of these conversions. |
Accounting Policies, by Policy (Policies) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| 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 (the “SEC”) and United States generally accepted accounting principles (“US GAAP”) for interim reporting. The principles for condensed interim financial information do not require the inclusion of all the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the year ended September 30, 2021 and notes thereto included in the Company’s Annual Report on Form 10-K/A filed with the SEC on June 9, 2022. The accompanying unaudited condensed consolidated financial statements have not been audited by an independent registered public accounting firm in accordance with the standards of the Public Company Accounting Oversight Board (United States), but in the opinion of management, such financial statements include all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s interim financial information.
The results of the operations for the three months ended December 31, 2021 may not be indicative of the results that may be expected for the year ending September 30, 2022.
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| Principles of Consolidation | Principles of Consolidation
The consolidated financial statements include the financial statements of the Company and its wholly owned subsidiary, Rasna Research Inc, and Rasna Research Inc’s subsidiary, Arna Therapeutics Limited. All significant intercompany accounts and transactions have been eliminated in the preparation of the accompanying consolidated financial statements.
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| Use of Estimates | Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The Company evaluates its estimates on an ongoing basis, including those related to the fair values of share 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 Company’s consolidated financial position and results of operations.
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| 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, warrants and convertible loan notes, using various methods such as the treasury stock, modified treasury stock, and if converted methods 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 and convertible loan notes, all of which have been excluded from the computation of diluted weighted average shares outstanding as they would be anti-dilutive:
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| Recent Accounting Pronouncements | Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, which simplifies the guidance on the issuer’s accounting for convertible debt instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature in such debt and will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that is within the scope of ASU 2020-06. Also, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and treasury stock method will be no longer available. ASU 2020-06 is applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company does not intend to early adopt and continues to evaluate the impact of the provisions of ASU 2020-06 on its consolidated financial statements.
In December 2019, the FASB issued ASU 2019 -12, Income Taxes – Simplifying the Accounting for Income Taxes (“ASU 2019-12”). Among other items, the amendments in ASU 2019-12 simplify the accounting treatment of tax law changes and year-to-date losses in interim periods. An entity generally recognizes the effects of a change in tax law in the period of enactment; however, there is an exception for tax laws with delayed effective dates. Under current guidance, an entity may not adjust its annual effective tax rate for a tax law change until the period in which the law is effective. This exception was removed under ASU 2019-12, thereby providing that all effects of a tax law change are recognized in the period of enactment, including adjustment of the estimated annual effective tax rate. Regarding year-to-date losses in interim periods, an entity is required to estimate its annual effective tax rate for the full fiscal year at the end of each interim period and use that rate to calculate its income taxes on a year-to-date basis. However, current guidance provides an exception that when a loss in an interim period exceeds the anticipated loss for the year, the income tax benefit is limited to the amount that would be recognized if the year-to-date loss were the anticipated loss for the full year. ASU 2019-12 removes this exception and provides that, in this situation, an entity would compute its income tax benefit at each interim period based on its estimated annual effective tax rate. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim periods within those annual periods. Early adoption is permitted. The Company has implemented this and the effect of this amendment is immaterial on its consolidated financial statements and related disclosures.
The Company has determined that all recently issued accounting pronouncements will not have a material impact on its consolidated financial position, results of operations and cash flows, or do not apply to its operations. |
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Accounting Policies (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of potential common shares issuable upon the exercise of outstanding options and the exercise of warrants |
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Convertible Notes (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Convertible Notes [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of convertible notes |
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Accounting Policies (Details) - Schedule of potential common shares issuable upon the exercise of outstanding options and the exercise of warrants - shares |
3 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total shares issuable upon exercise or conversion | 98,319,282 | 7,957,868 |
| Warrants [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total shares issuable upon exercise or conversion | 1,926,501 | 1,926,501 |
| Stock options [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total shares issuable upon exercise or conversion | 3,648,675 | 3,648,675 |
| Convertible notes & associated fees [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total shares issuable upon exercise or conversion | 92,744,106 | 2,382,692 |
Liquidity and Going Concern (Details) - Liquidity and Going Concern [Member] |
3 Months Ended |
|---|---|
|
Dec. 31, 2021
USD ($)
| |
| Liquidity and Going Concern (Details) [Line Items] | |
| Accumulated deficit | $ 23,809,110 |
| Net loss | (274,631) |
| Net cash used in operating activities | $ (74,784) |
Share-Based Compensation (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Share-based Payment Arrangement [Abstract] | ||
| Share based compensation to directors | $ 0 | |
| Share based compensation to employees | $ 18,192 | |
Convertible Notes (Details) - USD ($) |
1 Months Ended | 3 Months Ended | |
|---|---|---|---|
Nov. 29, 2021 |
Nov. 18, 2021 |
Dec. 31, 2021 |
|
| Convertible Notes (Details) [Line Items] | |||
| Convertible promissory note in percentage | 12.00% | ||
| Maturity date | Dec. 31, 2023 | Dec. 31, 2023 | |
| Cash | $ 30,000 | ||
| Conversion, description | The Note provides the Holder with the right to convert, at any time, all or any part of the outstanding principal and accrued but unpaid interest into shares of the Company’s common stock at a conversion price equal to the lower of (i) $0.01 per share or (ii) the price of the next equity financing, which raises at least US $1,000,000, subject to adjustments noted within the Agreement. | ||
| Carrying interest rate | 1.00% | ||
| Expiry date | Dec. 31, 2023 | ||
| Convertible notes description | The Company measured the present value of future cash flows that existed just prior to the earliest restructuring in the twelve-month period, which was used to apply the 10% test, since the earlier restructurings was accounted for as a modification. As the change in cash flows for all Notes carrying interest at 12% was greater than 10%, the term amendment was accounted for as an extinguishment. Under extinguishment accounting, the debt was remeasured and recorded at fair value. There was no difference between the carrying value of the debt, prior to the extinguishment, and the new fair value of the debt.. The Notes carrying interest at 1% did not have a change in cash flows greater than 10%, so these Notes were accounted for as a modification | ||
| Interest rate | 6.00% | ||
| Recognized an additional | $ 71,520 | ||
| Gain of extinguishment of convertible notes | 28,855 | ||
| Extinguished notes | 61,320 | ||
| Notes issued | $ 10,200 | ||
| Convertible Promissory Note [Member] | |||
| Convertible Notes (Details) [Line Items] | |||
| Cash | $ 55,000 | ||
| Carrying interest rate | 12.00% | 12.00% | |
| Interest rate | 6.00% | ||
| Beneficial Conversion Feature [Member] | |||
| Convertible Notes (Details) [Line Items] | |||
| Notes issued | $ 524,483 |
Subsequent Events (Details) - USD ($) |
1 Months Ended | ||
|---|---|---|---|
Mar. 31, 2022 |
Feb. 28, 2022 |
May 13, 2022 |
|
| Subsequent Event [Member] | |||
| Subsequent Events (Details) [Line Items] | |||
| Additional amount | $ 45,000 | $ 30,000 | |
| Interest rate in percentage | 16.00% | 16.00% | |
| Conversion price | $ 0.005 | $ 0.005 | |
| Forecast [Member] | |||
| Subsequent Events (Details) [Line Items] | |||
| Common stock shares issued | 111,071,358 | ||