The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements.
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 target LSD1, which is 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
inflation and the economic environment on the Company, and has concluded that while it is reasonably possible that inflation could have
a negative effect on the Company’s financial position, results of its operations and/or ability to secure additional cash resources,
there is no current impact as cash resources are currently secured by existing shareholders. The financial statements do not include any
adjustments that might result from 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 for the Fiscal
year ended September 30, 2022.
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, 2022 and notes thereto included in the Company’s
Annual Report on Form 10-K filed with the SEC on February 9, 2023. 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, 2022 may not be indicative of the results that may be expected for the year ending September 30, 2023.
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
income 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 shares issuable on the exercise of options
and warrants have been excluded from the computation of diluted weighted average shares outstanding as they would be anti-dilutive.
| | |
December 31,
2022 | | |
December 31,
2021 | |
| Stock options | |
| 990,675 | | |
| 3,648,675 | |
| Warrants | |
| 1,926,501 | | |
| 1,926,501 | |
| Convertible notes and associated fees | |
| 208,086,667 | | |
| 92,744,106 | |
| Total shares issuable upon exercise or conversion | |
| 211,003,843 | | |
| 98,319,282 | |
Recent Accounting Pronouncements
The Company
has determined that all other 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.
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 and as of December 31, 2022, had an accumulated deficit of $24,370,911, a net loss
for the three months ended December 31, 2022 of $149,844 and net cash used in operating activities of $1,390.
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. CONVERTIBLE NOTES
The table below summarizes outstanding convertible notes as of December
31, 2022 and December 31, 2021:
| Balance of related party notes payable, net as of September 30, 2022 | |
$ | 20,900 | |
| Issuance of debt | |
| 30,000 | |
| Accrued Interest | |
| 6,854 | |
| Accretion of debt discount | |
| 16,186 | |
| Beneficial conversion feature related to issuance of convertible notes | |
| (28,800 | ) |
| Derivative liabilities in connection with issuance of convertible notes | |
| (1,200 | ) |
| Balance of related notes payable, net as of December 31, 2022 | |
$ | 43,940 | |
| | |
| | |
| Balance of non-related notes payable, net as of September 30, 2021 | |
$ | 356,702 | |
| Principal value of Related Party Notes | |
| 100,000 | |
| Accrued Interest | |
| 32,194 | |
| Balance of non-related notes payable, net as of December 31, 2021 | |
$ | 488,896 | |
| | |
| | |
| Balance of related notes payable, net as of September 30, 2021 | |
$ | 90,262 | |
| Principal value of Related Party Notes | |
| 190,000 | |
| Accrued Interest | |
| 17,696 | |
| Beneficial conversion feature related to issuance of convertible notes | |
| (81,818 | ) |
| Balance of related notes payable, net as of December 31, 2021 | |
$ | 216,140 | |
On December 23, 2022, the Company entered into
a 16% Convertible Promissory Note 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 $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) $0.001 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.
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 three months to December 31, 2022, the Company recognized an additional
$1,200 due to the issuance of the convertible notes.
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 was limited to the gross proceeds
less any debt discounts. As at December 31, 2022 this amounted to $28,800 for the new notes issued. As at December 31, 2021
the beneficial conversion feature amounted to $524,480 for the amended and new notes issued.
5. NOTE PAYABLE
On May 15, 2022, the Company entered into a one-year
Directors and Officers Liability Insurance agreement for $89,242. Under the terms of the agreement, the Company made a down payment of
$10,210, with the remaining balance financed over the remaining term at an annual percentage rate of 7.328%. Beginning in May 2022, the
Company is making 8 monthly payments of $10,210, with the last payment made in December 2022. At December 31, 2022, the note was fully
paid. The interest expense for the three months ending December 31, 2022 was $186.
6. RELATED PARTY TRANSACTIONS
The following is a summary of the related party
transactions for the periods presented.
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. Keeren Shah, the Company’s Chief Financial Officer,
is also Chief Financial Officer of Tiziana, and the Company’s directors, Willy Simon and John Brancaccio are
also non-executive directors of Tiziana.
As of December 31, 2022 and September 30, 2022,
$16,774 and $20,321 respectively was due to Tiziana under 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, 2022, the amounts due to Tiziana under
this loan facility were $87,840. The amount due to Tiziana under this agreement as of September 30, 2022 was $86,400.
In July 2022, Tiziana extended another loan facility
to Rasna of $85,000. The loan is repayable within 18 months and is incurring an interest charge of 16% per annum. As of December 31, 2022,
the amounts due to Tiziana under this loan facility were $95,376. The amount due to Tiziana under this agreement as of September 30, 2022
was $91,967.
Panetta Partners/ Gabriele Cerrone
Panetta Partners Limited, a shareholder of Rasna,
is a company in which Gabriele Cerrone is a major shareholder and also serves as a director. As of December 31, 2022, and September 30,
2022, the balance due to Gabriele Cerrone was $175,000 for past consultancy services.
In July 2022, the Company entered into a promissory
note with Panetta Partners Ltd for $165,000. The note carries an interest rate of 16% with a conversion price of $0.001 and is due for
repayment by December 31, 2024. As at December 31, 2022, $177,980 was due with respect to notes issued. As at September 30, 2022 $171,233
was due with respect to notes issued.
In December 2022, the Company entered into an
additional promissory note with Panetta Partners Ltd for $30,000 under the same terms. As at December 31, 2022, $30,107 was due with respect
to this note 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.
7. SUBSEQUENT EVENTS
In January 2023, after receiving approval by stockholders we filed a Certificate of Amendment to our Articles of Incorporation in Nevada, increasing the authorized shares to 1,520,000,000 consisting of 1,500,000,000 shares of common stock and 20,000,000 shares of preferred stock.
In January 23, 2023,
the outstanding notes with Panetta Partner loans were converted resulting in the issuance of 209,773,333 shares of common stock to Panetta
Partners.
On
January 24, 2023, the Company issued 382,058,666 shares of common stock to Panetta Partners Limited as additional consideration for their
continued financial support to the Company at $0.001 per share.