NEXIEN BIOPHARMA, INC. - Quarter Report: 2018 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2018

Commission file number: 0-55320

Intiva BioPharma Inc.

(Exact Name of Registrant as Specified in its Charter)

4340 E Kentucky Ave., Suite 206, Glendale, CO 80246

(Address of principal executive offices) (Zip Code)

(303) 495-7583

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

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

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

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

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 43,772,096 shares as of May 9, 2018.

TABLE OF CONTENTS

PART 1 - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

Intiva BioPharma Inc.

Consolidated Balance Sheets

See accompanying notes to consolidated financial statements.

Intiva BioPharma Inc.

Consolidated Statements of Operations and Comprehensive Loss

For the Three and Nine Months Ended March 31, 2017 and 2018

(Unaudited)

See accompanying notes to consolidated financial statements.

Intiva BioPharma Inc.

Consolidated Statements of Cash Flows

For the Nine Months Ended March 31, 2017 and 2018

(Unaudited)

See accompanying notes to consolidated financial statements.

Intiva BioPharma Inc.

Notes to Consolidated Financial Statements

Unaudited

Note 1 – Nature of Business and Basis of Presentation

The Company was incorporated on November 10, 1952 in Michigan as Gantos, Inc. On July 21, 2008, the Company completed its change in domicile to Delaware and subsequently changed its name to Kinder Holding Corp. (the “Company”). As of October 13, 2017, the Company completed a reverse acquisition of Intiva BioPharma Inc., a Colorado corporation (“BioPharma”) through an exchange of shares (the “Share Exchange Transaction”). In connection with the Share Exchange Transaction, the Company changed its name to Intiva BioPharma Inc. on November 8, 2017.

As further described in Note 3, BioPharma became a wholly-owned subsidiary of the Company. Since this transaction resulted in the existing shareholders of BioPharma acquiring control of the Company, for financial reporting purposes, the business combination has been accounted for as an additional capitalization of the Company (a reverse acquisition with BioPharma as the accounting acquirer). The operations of BioPharma were the only continuing operations of the Company. The accompanying financial statements as of March 31, 2018 and for the three and nine-month periods ended March 31, 2017 and 2018 present the historical financial information of BioPharma.

BioPharma was incorporated under the laws of the State of Colorado on March 27, 2017 to pursue pre-clinical and drug development activities, in accordance with U.S. Food and Drug Administration (“FDA”) protocols, for certain pharmaceutical formulations that include cannabinoids. It is pursuing the formulation and development of cannabinoid-based drugs for medical conditions and disorders, and owns a license covering certain intellectual property, including certain patent applications, and has filed six of its own provisional patent applications for other drugs that include cannabinoids and other substances, including terpenes, that are intended to be developed with the objective of treating certain medical conditions and disorders. It was formed as a corporate subsidiary of the Colorado corporation Intiva USA Inc. (“Intiva USA”), which is a subsidiary of the Ontario, Canada corporation, INTIVA Inc., now known as Kanativa Inc.

All share and per share amounts have been adjusted in the footnotes and accompanying financial statements to give effect to the Share Exchange Transaction.

As disclosed in Note 3, for financial reporting purposes, the Share Exchange Transaction is accounted for as an additional capitalization of BioPharma with BioPharma as the accounting acquirer (reverse acquirer). The operations of BioPharma are the continuing operations of the Company.

Principles of Consolidation

The accompanying consolidated financial statements include BioPharma and its wholly owned subsidiaries: Intiva Kotzker Pharmaceuticals Inc. (“Intiva Kotzker”) and Intiva Sharir Inc. (collectively “the Company”), and were prepared from the accounts of the Company in accordance with accounting principles generally accepted in the United States of America (US GAAP). All significant intercompany transactions and balances have been eliminated on consolidation.

Basis of Presentation

The Financial Statements presented herein have been prepared in accordance with the accounting policies described in the June 30, 2017 audited financial statements and should be read in conjunction with the notes to financial statements which appear as part of those financial statements.

The preparation of these financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to intangible assets, income taxes, insurance obligations and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other resources. Actual results may differ from these estimates under different assumptions or conditions.

Intiva BioPharma Inc.

Notes to Consolidated Financial Statements

Unaudited

In the opinion of Management, the information furnished in these interim financial statements reflects all adjustments necessary for a fair statement of the financial position and results of operations and cash flows as of March 31, 2018 and for the three and nine-month periods ended March 31, 2017 and 2018. All such adjustments are of a normal recurring nature.

Note 2 – Recently Issued Accounting Pronouncements

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-04, Intangibles - Goodwill and Other (Topic 350). ASU 2017-04 simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires an entity to perform its annual, or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendment should be applied on a prospective basis. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company intends to early adopt the ASU in 2018.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The standard will be effective for the Company in the first quarter of 2018. Early adoption is permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements.

There are no other recently issued accounting pronouncements that the Company has yet to adopt that are expected to have a material effect on its financial position, results of operations, or cash flows.

Note 3 –Share Exchange Agreement and Acquisition Deposit

On August 8, 2017, the Company entered into a Share Exchange Agreement, as amended and restated on October 13, 2017, (the “Agreement”), with BioPharma. Pursuant to the terms of the Agreement, the Company agreed to issue to the shareholders of BioPharma 42,642,712 post-reverse stock-split shares of the Company’s common stock, par value $0.0001 (“Common Stock”), in exchange for all of the issued and outstanding shares of BioPharma capital stock, thereby making BioPharma a wholly-owned subsidiary of the Company. As part of the Closing of the Agreement, the 20,000,000 pre-reverse split shares of the Company’s Common Stock previously purchased by Intiva USA, effective on June 26, 2017 in a change in control transaction from the Company’s control shareholders, shall be canceled.

Subsequent to the Closing, the Company agreed to undertake to implement certain corporate actions, including filing with the State of Delaware a Certificate of Amendment to the Company’s Certificate of Incorporation to:

On October 13, 2017, the Closing of the Agreement became effective, and as a result of the Share Exchange, BioPharma became a wholly-owned subsidiary of the Company and the results of business will be consolidated on the Company’s consolidated financial statements. For financial reporting purposes, the transaction is to be accounted for as an additional capitalization of BioPharma with BioPharma as the accounting acquirer (reverse acquirer). The operations of BioPharma will be the continuing operations of the Company.

Intiva BioPharma Inc.

Notes to Consolidated Financial Statements

Unaudited

In June 2017, pursuant to a Debt Purchase Agreement, BioPharma paid $86,670 to a former director of the Company to satisfy the debt obligation of the Company to the director and for BioPharma to purchase the debt obligation. The amount paid and additional costs paid by BioPharma on behalf of the Company subsequent to June 30, 2017 of $12,900 aggregated $99,570, was classified as a non-current asset on the accompanying June 30, 2017 consolidated balance sheet.

Note 4 – License Agreement

In March 2017, Intiva Kotzker licensed certain intellectual property from Kotzker Consulting LLC (“Kotzker Consulting”), an unrelated entity. The licensed intellectual property includes patent applications relating to the use of cannabinoid receptor modulators and terpenes in the acute treatment during exposure to organophosphorus nerve agents and/or organophosphorus insecticides. Under terms of the agreement, Intiva Kotzker shall use its commercially reasonable efforts to develop and commercialize the licensed products, and, in particular, will be responsible for the design, manufacturing, preclinical, clinical, and regulatory development activities of the licensed products and shall bear the costs of such activities. As consideration for entering into the agreement, Intiva Kotzker agreed to: (i) pay Kotzker Consulting $180,000, (ii) pay patent prosecution costs incurred as of the date of the agreement of $15,000 and (iii) issue to Kotzker Consulting 31,550 shares of Intiva Inc.’s common stock valued at $78,875 ($2.50 per share based on recent private placement to third parties of Intiva Inc.’s common stock). The Company has capitalized legal fees of $29,040 incurred in conjunction with acquiring the license agreement, As of June 30, 2017, $65,000 was due under the license agreement, which amount was paid in August 2017. The total value ascribed to the License Agreement with Kotzker Consulting is $302,915. The license agreement terminates, on a country by country basis, upon the expiration of the licensed patent for the licensed intellectual property, or when a competitor generic product utilizing the licensed technology is marketed in the particular country.

On February 28, 2018, the Company obtained a worldwide exclusive license with respect to a proprietary delivery system for cannabinoid-based medications. Upon execution of the agreement, $35,000 was paid to the licensor, and payments of $30,000 and $35,000 are required by August 31, 2018 and February 28, 2019, respectively. The Company is required to pay milestone payments upon obtaining regulatory approval of pharmaceutical licensed products and royalties based upon sales of licensed products. The Company may grant sublicenses under the terms of the agreement.

Note 5 –Stockholders’ Equity

Common stock

In May 2017, BioPharma commenced a private placement of 1,116,400 units of Common Stock and Warrants at a price of $1.25 per unit. Each unit consisted of ten shares of Common Stock, one Class A Warrant to purchase one share of Common Stock at $0.25 per share, one Class B Warrant to purchase one share of Common Stock at $0.38 per share and one Class C Warrant to purchase one share of Common Stock at $0.50 per share. As of June 30, 2017, 778,400 units had been sold, for total gross proceeds of $973,000, including 387,200 units which were subscribed but for which funds had not been received. The 3,872,000 shares underlying the subscribed units in the amount of $484,000 were included as issued and outstanding shares at June 30, 2017, and the related $484,000 subscription receivable was recorded as a component of stockholders’ equity on the June 30, 2017 consolidated balance sheet. Subsequent to June 30, 2017, the Company received proceeds of $484,000 for the subscribed shares. In July and August 2017, BioPharma sold an additional 338,000 units (3,380,000 shares) for gross proceeds of $422,500.

On August 10, 2017, BioPharma adopted the “2017 Stock Incentive Plan” and granted an aggregate of 6,400,000 shares of BioPharma Common Stock to five officers and directors of the Company, valued at $800,000 ($0.125 per share). One-third of each grant vested as of the initial date of grant (August 10, 2017), and 8-1/3% upon the end of each calendar quarter beginning December 31, 2017. In March 2018, the Company cancelled 1,166,667 unvested shares previously issued to its former CEO. As of March 31, 2018, 2,200,008 of the shares issued (valued at $275,001) are subject to forfeiture until vesting occurs.

Intiva BioPharma Inc.

Notes to Consolidated Financial Statements

Unaudited

On August 25, 2017, BioPharma entered into consulting agreements with two unrelated individuals for (i) developing and maintaining social media portals and (ii) identifying and developing potential strategic partners for the Company’s various drug development activities. The agreements are each for a three-month term, payable monthly in shares of the Company’s common stock, valued at $0.125 per share, of an aggregate 304,800 shares and 138,000 shares, respectively. As of March 31, 2018, an aggregate 442,800 shares of common stock, valued at $55,350, representing all amounts due pursuant to the consulting agreements, have been issued to the two individuals.

On September 1, 2017, BioPharma commenced a private placement sale of its common stock at $0.25 per share. The Company sold 100,000 shares for gross proceeds of $25,000, before offering costs of $4,916.

In January 2018, BioPharma commenced a unit private placement of Common Stock and Warrants at a price of $2.10 per unit. Each Unit consisted of two shares of Common Stock and one Warrant to purchase an additional share of common stock at a price of $2.90 per share for a term of six months commencing with the date of acceptance of the underlying subscription agreement. As of March 31, 2018, the Company received proceeds of $25,200 from the sale of 12,000 units.

On March 31, 2018, the Company’s board of directors approved and recommended for adoption by the stockholders of the Company a 2018 Equity Incentive Plan and has reserved 8,000,000 shares of Common Stock for issuance under the terms of that Plan. No awards have been granted under this Plan as of the date of this report.

Warrants

The relative fair value of the warrants attached to the common stock issued in the May 2017 private placement of units was estimated at the date of grant using the Black-Sholes pricing model. The relative fair value attached to the common stock component is $1,139,573 and the relative fair value of the warrants is $255,927 as of the grant date.

The following table summarizes information about warrants outstanding at March 31, 2018:

During the quarter ended March 31, 2018, warrants were exercised as follows:

The relative fair value of the warrants attached to the common stock issued in the January 2018 private placement of units was estimated at the date of grant using the Black-Sholes pricing model. The relative fair value attached to the common stock component is $19,762 and the relative fair value of the warrants is $5,438 as of the grant date. As of March 31, 2018, there are 12,000 warrants exercisable at a price of $2.90 per share through July 15, 2018.

Intiva BioPharma Inc.

Notes to Consolidated Financial Statements

Unaudited

Note 6 –Related Party Transactions

BioPharma was formed as a subsidiary of Intiva USA, which is a subsidiary of Kanativa Inc. (formerly INTIVA Inc.).

At June 30, 2017, BioPharma was owed $141,329 from Intiva USA for advances made by BioPharma on behalf of Intiva USA in conjunction with the Share Exchange Agreement (See Note 3). During the nine months ended March 31, 2018, $26,662 was repaid by Intiva USA. The balance due from Intiva USA at March 31, 2018 of $114,667 is classified as a current asset on the accompanying March 31, 2018 consolidated balance sheet.

In March 2018, the Company cancelled 1,166,667 unvested shares of common stock previously issued to its former CEO under the Company’s 2017 Stock Incentive Plan.

The Company’s Chairman, and Chief Financial Officer are also officers and/or a director of Kanativa Inc., and other subsidiaries and affiliated entities of Kanativa Inc.

Note 7 – Subsequent Events

On April 22, 2018, the Company extended the expiration date of its Class B Warrants from May 7, 2018, to June 7, 2018.

Through May 2, 2018, 16,000 Class B warrants have been exercised at $0.38 per share for total proceeds of $6,080.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

Forward-Looking Statements

The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Certain statements that the Company may make from time to time, including all statements contained in this registration statement that are not statements of historical fact, constitute “forward-looking statements”. Forward-looking statements may be identified by words such as “plans,” “expects,” “believes,” “anticipates,” “estimates,” “projects,” “will,” “should,” and other words of similar meaning used in conjunction with, among other things, discussions of future operations, financial performance, product development and new product launches, market position and expenditures. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help you understand our historical results of operations during the periods presented and our financial condition for the three and nine months ended March 31, 2017 and 2018. This MD&A should be read in conjunction with our financial statements as of June 30, 2017 (audited). See section entitled “Forward-Looking Statements” above.

Overview

We are a start-up company with no revenues from operations. Notwithstanding our successful raise of $1,844,092 in equity capital during the period from April 2017 to March 31, 2018, there is substantial doubt that we can continue as an on-going business for the next twelve months without the success of our business operations. We do not anticipate that BioPharma will generate revenues from its research and development activates related to its drug development projects for the near future.

As a relatively new business engaged in start-up operations and activities, we will require substantial additional funding to successfully complete any of our drug development projects. At present, we cannot estimate the substantial capital requirements needed to secure regulatory approvals for our drug candidates. Nevertheless, we estimate we will need at a minimum $1 million during the next 12 months to commence our drug development projects. We also must fund the estimated $100,000 in operating costs related to being a public company. Failure to obtain this necessary capital at acceptable terms, if at all, when needed, may force us to delay, limit, or terminate our drug development efforts to secure regulatory approvals and would adversely impact our planned research and development efforts in connection with the Company’s future drugs, which may make it more difficult for us to attain profitability.

Results of Operations for the three and nine months ended March 31, 2018

Net loss for the nine months ended March 31, 2018 was $1,022,066, an increase of $267,728 from the net loss of $754,338 for the six months ended December 31, 2017.

During the three months and nine months ended March 31, 2018, the Company’s efforts were focused on equity private placement financing activities, consummation of the Share Exchange Transaction, filings with the U.S. Patent Office and FDA, and initial research and development activities on its products. Professional fees of $279,160 for the nine months ended March 31, 2018 consisted of legal fees to external counsels and our chief operating officer for patent and FDA related matters, legal fees for securities related matters and filings as the Company completed the Share Exchange transaction, and audit fees for the period ended June 30, 2017, quarterly financial statement review and other required regulatory filings.

General and administrative costs during the quarter ended March 31, 2018 consisted primarily of internal travel and promotion costs related to our financing activities, director and officer liability insurance, website development and technical consulting. General and administrative costs of $$217,670 include costs associated with the Company’s migration from a private to public entity, and incurring transfer agent and other external costs associated with the transition.

Research and development costs of $90,720 for the nine months ended March 31, 2018 includes $75,000 paid under an agreement with a contract manufacturer with significant expertise in pre-clinical and clinical trial development and regulatory approvals to develop an injectable formulation for our drug candidate (see “Contractual Obligations and Commitments” below).

On August 10, 2017, the Company granted an aggregate of 6,400,000 shares of BioPharma Common Stock to five officers and directors of the Company, subject to forfeiture restrictions. Restrictions lapsed as to one-third of each grant as of the initial date of grant, and restrictions as to one-twelfth of each grant will lapse quarterly for a two-year period commencing on the last day of each calendar quarter beginning on October 1, 2017. Stock based compensation for the three and nine months ended March 31, 2018 includes $45,833 and $434,516, respectively, as the value of shares vested under the grant. In March 2018, the Company cancelled 1,166,667 unvested shares previously issued to its former CEO. During the nine months ended March 31, 2018 the Company recorded $55,350 as the value of common stock issued to two individuals under consulting agreements.

Results of Operations for the three and nine months ended March 31, 2017

The Company was incorporated on March 27, 2017. The Company’s parent, Intiva USA, paid all operating costs and expenses and obligations related to acquisition of the license agreement, including costs incurred prior to incorporation of the Company, through March 31, 2017 in exchange for the issuance to Intiva USA of 24,000,000 shares of the Company’s common stock. During this initial period ended March 31, 2017, $61,196 was incurred for initial research and development of potential licenses and patents. General and administrative costs of $6,025 include internal costs associated with formation and potential fund raising.

Liquidity and Capital Resources

While management of the Company believes that the Company will be successful in its current and planned activities, there can be no assurance that the Company will be successful in its drug development activities, and raise sufficient equity, debt capital or strategic relationships to sustain the operations of the Company.

Our ability to create sufficient working capital to sustain us over the next twelve-month period, and beyond, is dependent on our raising additional equity or debt capital, or entering into strategic arrangements with one or more third parties.

There can be no assurance that sufficient capital will be available to us. We currently have no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources.

Availability of Additional Capital

Notwithstanding our success in raising gross proceeds of $1,539,000 from the private sale of equity securities through March 31, 2018 and approximately $305,000 from the exercise of common stock warrants, and our expectation that we will be successful in raising up to an additional $1million during the next twelve months, there can be no assurance that we will continue to be successful in raising equity capital and have adequate capital resources to fund our operations or that any additional funds will be available to us on favorable terms or in amounts required by us. If we determine that it is necessary to raise additional funds, we may choose to do so through public or private equity or debt financing, a bank line of credit, or other arrangements. If we are unable to obtain adequate capital resources to fund operations, we may be required to delay, scale back or eliminate some or all of our plan of operations, which may have a material adverse effect on our business, results of operations and ability to operate as a going concern.

Any additional equity financing may be dilutive to our stockholders, new equity securities may have rights, preferences or privileges senior to those of existing holders of our shares of common stock. Debt or equity financing may subject us to restrictive covenants and significant interest costs.

Capital Expenditure Plan During the Next Twelve Months

To date, we raised approximately $1.85 million, in equity capital (including exercised warrants) and we may be expected to require up to an additional $1 million in capital during the next 12 months to fully implement our business plan and fund our operations. Our plan is to utilize the capital that we raise to fund our ongoing research efforts, as well as the costs incurred by being a public reporting company. However, there can be no assurance that we will continue to be successful in raising capital in sufficient amounts and/or at terms and conditions satisfactory to the Company. Our revenues are expected to come from our drug development projects. As a result, we will continue to incur operating losses unless and until we have obtained regulatory approval with respect to one of our drug development projects and commence to generate sufficient cash flow to meet our operating expenses. There can be no assurance that we will obtain regulatory approval and the market will adopt our future drugs. In the event that we are not able to successfully: (i) raise equity capital and/or debt financing; or (ii) market our drugs after obtaining regulatory approval, our financial condition and results of operations will be materially and adversely affected.

Going Concern Consideration

Our registered independent auditors have issued an opinion on our financial statements as of June 30, 2017 which includes a statement describing our going concern status. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills and meet our other financial obligations. This is because we have not generated any revenues and no revenues are anticipated until we begin marketing any drugs that we successfully develop. Accordingly, we must raise capital from sources other than the actual sale from any drugs that we develop. We must raise capital to continue our drug development activities and stay in business.

Off-Balance Sheet Arrangements

As of June 30, 2017 and March 31, 2018, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Act of 1934.

Contractual Obligations and Commitments

As of June 30, 2017, we did not have any contractual obligations. On September 19, 2017, we entered into an agreement with a contract manufacturer with significant expertise in pre-clinical and clinical trial development and regulatory approvals to develop an injectable formulation for our drug candidate in the Kotzker Development Project with the objective of applying for FDA approval. It is anticipated that the drug candidate will be developed utilizing the new drug application 505(b)(2) regulatory pathway for use in the treatment during and immediately following exposure to organophosphorus nerve agents. The formulation of the drug candidate will be based on one or more synthetic cannabinoids. We paid $75,000 to the contract manufacturer upon signing the contract, which further provides that we pay an additional $20,000 upon completion of the drug formulation and $20,000 upon completion of Phase 1 development. No payment schedule has yet been agreed to upon completion of Phase 2 and Phase 3 development stage and the contract may be terminated by either party.

On February 28, 2018, we obtained a worldwide exclusive license with respect to a proprietary delivery system for cannabinoid-based medications. We paid $35,000 upon execution of the agreement, and payments of $30,000 and $35,000 are required by August 31, 2018 and February 28, 2019, respectively. We are required to pay milestone payments once we have obtained regulatory approval of pharmaceutical licensed products and royalties based upon sales of licensed products. We may grant sublicenses under the terms of our agreement.

Critical Accounting Policies

Our significant accounting policies are described in the notes to our financial statements as of March 31, 2018 and are included elsewhere in this report.

Plan of Operation

Our plan of operation now relates to our newly acquired subsidiary BioPharma. For a complete discussion of our plan of operation, see the Form 8-K filing announcing the acquisition filed October 16, 2017.

Accounting for a Business Combination

As a result of the closing of the share exchange agreement with BioPharma, the transaction will be accounted for as a reverse acquisition with us being the surviving registrant. As a result of any reverse acquisition, if the acquired entity’s stockholders will exercise control over us, the transaction will be deemed to be a capital transaction where we are treated as a non-business entity. Therefore, the accounting for the transaction is identical to that resulting from a reverse merger, except no goodwill or other intangible assets will be recorded. For accounting purposes, the acquired entity will be treated as the accounting acquirer and, accordingly, will be presented as the continuing entity.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.

As of March 31, 2018, the Company’s chief executive officer and chief financial officer conducted an evaluation regarding the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the evaluation of these controls and procedures as provided under the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013), our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this report.

Changes in internal controls.

During the quarterly period covered by this report, no changes occurred in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Risk Factors in our Form 8-K as filed with the SEC on October 16, 2017, which could materially affect our business, financial condition or future results. The risks described in our Form 8-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the quarter ended March 31, 2018 we issued and sold the unregistered securities set forth in the table below.

We relied upon the exemption from registration contained in Rule 506(b) of Regulation D under the Securities Act, as the securities were sold only to accredited investors, without the use of general solicitation or advertising. No underwriters or placement agents were used and no commissions were paid in the above stock transactions. Restrictive legends were placed on the certificates evidencing the securities issued in all of the above transactions.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURE

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.