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EX-32.2 - CERTIFICATION - Nascent Biotech Inc.nbio_ex322.htm
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EX-31.1 - CERTIFICATION - Nascent Biotech Inc.nbio_ex311.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

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

 
For the fiscal year ended March 31, 2016

 

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 
For the transition period from [________] to [________]

  

Commission file number 000-55299

 

NASCENT BIOTECH INC.

(Exact name of registrant as specified in its charter)

 

Nevada

45-0612715

(State or other jurisdiction of Incorporation or organization)

(I.R.S. Employer Identification No.)

 

601 21st Street, Suite 300 Vero Beach, FL

32960

(Address of principal executive offices)

(Zip Code)

 
Registrant's telephone number, including area code: (612) 961-5656
 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

Name of Each Exchange On Which Registered

N/A

N/A

 

Securities registered pursuant to Section 12(g) of the Act: Common Stock

 

Indicate by check mark if the registrant is a well-seasoned issuer, as defined in Rule 405 of the Securities Act ¨ Yes   x No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15d of the Act ¨ Yes   x No

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or such shorter period of 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 checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the previous 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes x No ¨

 

Indicate by checkmark if disclosure of delinquent filers to Item 405 of Regulation S-K (§229.405) is not contained herein and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K. x

 

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.

 

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨

Smaller reporting company

x

(Do not check if smaller reporting company

 

  

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

 

The number of shares outstanding of the Company's $.001 Par Value Common Stock as of July 14, 2016 was 21,767,565. The aggregate number of shares of the voting stock held by non-affiliates on September 30, 2015 was with a market value of $5,650,501. For the purposes of the foregoing calculation only, all directors and executive officers of the registrant have been deemed affiliates.

 

DOCUMENTS INCORPORATED BY REFERENCE: None.

 

 
 
 

TABLE OF CONTENTS

 

Page

FORWARD-LOOKING STATEMENTS

PART 1

Item 1.

Business

4

Item 1A.

Risk Factors

16

Item 1B.

Unresolved Staff Comments

21

Item 2.

Properties

21

Item 3.

Legal Proceedings

21

Item 4.

Mine Safety Disclosure

21

 

PART II

 

 

Item 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

21

 

Item 6.

Selected Financial Data

23

 

Item 7.

Management's Discussion and Analysis of Financial Conditions and Results of Operations

23

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

26

Item 8.

Financial Statements and Supplementary Data

26

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

26

Item 9A.

Controls and Procedures

27

Item 9B.

Other Information

27

 

PART III

Item 10.

Directors, Executive Officers and Corporate Governance

28

Item 11.

Executive Compensation

31

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

34

Item 13.

Certain Relationships and Related Transactions, and Director Independence

35

Item 14.

Principal Accounting Fees and Services

36

PART IV

Item 15.

Exhibits, Financial Statement Schedules

37

SIGNATURES

38

 

 
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FORWARD-LOOKING STATEMENTS

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

Various statements in this Annual Report on Form 10-K, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements. The forward-looking statements may include projections and estimates concerning the timing and success of our business activities, our revenues, income and capital spending. We generally identify forward-looking statements with the words "believe," "intend," "expect," "seek," "may," "should," "anticipate," "could," "estimate," "plan," "predict," "project" or their negatives, and other similar expressions. All statements we make relating to our estimated timelines and commencement of operations, and our projected earnings, costs, expenditures, cash flows, and financial results or to our expectations regarding future industry trends are forward-looking statements.

 

These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those that we expected. The forward-looking statements contained in this Form 10-K are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors and it is impossible for us to anticipate all factors that could affect our actual results. In addition, management's assumptions about future events may prove to be inaccurate. We caution all readers that the forward-looking statements contained in this Form 10-K are not guarantees of future performance, and we cannot assure any reader that such statements will prove correct or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to the numerous risks and uncertainties as described elsewhere in this Form 10-K.

 

 
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PART I

 

ITEM 1: BUSINESS.

 

Overview

 

NASCENT BIOTECH INC a Nevada corporation ("Nascent" or the "Company") is actively developing its primary asset Pritumumab for the treatment of brain cancer and pancreatic cancer. Nascent is also actively researching other cancers that have a high probability of benefiting from the therapeutic effects of Pritumumab because they share a common target. Pritumumab has shown to be very effective at low doses in previous clinical studies in Japan.

 

Current Business

 

We are a clinical-stage biopharmaceutical company that develops monoclonal antibodies for the treatment of various forms of cancer. We focus on biologic drug candidates that are undergoing or have already completed initial clinical testing for the treatment of cancer and then seek to further develop those drug candidates for commercial use. We currently own the license rights to a drug candidate, pritumumab, which we are developing.

  

We are initially primarily focused on developing pritumumab for the treatment of patients with brain cancer malignancies such as glioblastoma and malignant astrocytoma. Pritumumab is a monoclonal antibody that has been tested in Ministry of Health and Welfare approved clinical studies in 249 human brain cancer patients in the nation of Japan. The objective of the Phase I and Phase II human clinical trials were to determine the safety of pritumumab in humans and its efficacy in eliminating tumors or reducing tumor size in patients with brain cancer. These clinical trials were conducted at over 20 clinical sites within Japan during a 14-year time period (1988 to 2002). All patients were either treated with a 1mg dose of Pritumumab, either once or twice a week, for 24 weeks, and were evaluated over this 14 year period. The sponsor of those trials was the Hagiwara Institute of Health (HIH). Manufacturing of pritumumab was conducted by the Japanese contract research organization, Japan Pharmaceutical Development, and all pre-clinical development work was performed at HIH. At the end of the Phase II trials, data from 126 of these patients were analyzed – under then-current Japanese efficacy standards – and presented to the Japanese Ministry of Health & Welfare (MHW). The HIH was approved for expanded Phase III trials in humans; however, the founder of HIH passed away and the clinical development of pritumumab was abandoned by his surviving heirs. An issue at that time was the ability to manufacture enough pritumumab to continue clinical trials. The product has never been approved for sale in Japan or elsewhere. Currently, therapeutic strategies, such as the use of the chemotherapy drug Temodar, or surgical strategies, are used for the treatment of this cancer. However, there still exists a sizable need in the marketplace to develop safer, more effective drugs as Temodar is attributed to only median rates of survival and many brain tumors are ineligible for surgery. Moreover, even when removed, many brain tumors come back within one year post-operation. Today, with current standards of care, only 58% of all brain cancer patients will live past the first year after diagnosis, and with certain types of brain cancer, for example, anaplastic astrocytoma and glioblastoma, the five-year survival rates are 27% and 5%, respectively

 

 
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Based on pre-clinical and clinical studies to date, we believe that pritumumab may offer an advantage over existing treatments by binding to a molecule on the outer surface of cancer cells called ectodomain vimentin. This particular target, generally referred to as an antigen, is prevalent in many different tumor types and is not being targeted by any other biopharmaceutical companies. By binding to this target, pritumumab is able to make the tumor cells "known" to the body's immune system, resulting in an anti-idiotype immune-response and/or apoptosis leading to death of the cancer cell and overall depletion of the tumor.

 

Data from the Japanese clinical studies of pritumumab administered as a single agent to brain cancer patients with a range of tumor types (but primarily glioblastoma, astrocytoma and malignant astrocytoma) demonstrated an average objective response rate (from the various studies) of 25-30% (objective response rate is defined as a measurable reduction in tumor size (greater than 15% - in accord with then-current Japanese evaluation standards), including elimination of the tumor – as measured by a standard formulary from MRI and X-ray imaging). Additionally, data from the 126 patients treated with pritumumab submitted to the MWH also suggests a manageable and predictable safety profile. Of the 126 patients presented to the MHW, only 14 showed adverse events, 8 of which were judged to be possibly caused by administration of pritumumab, and all of which resolved over time. There were no serious adverse events noted.

 

We have licensed the exclusive worldwide rights to pritumumab from HIH. We expect to amplify on the past clinical development strategy in Japan and during the next 12 months plan to:

 

 

·

commence Phase I/II clinical trials in the United States, evaluating the use of pritumumab for patients with various brain malignancies;

 

·

commence ongoing studies with pritumumab for the treatment of lung cancer and breast cancer that has metastasized to the brain;

 

·

continue to evaluate the application of pritumumab in the treatment of other forms of ecodomain vimentin positive cancers (for example, cancers of epithelial origin such as pancreatic, lung and colon) where there may be unmet medical needs.

 

The Company plans to file an IND application with the US Food and Drug Administration for a Phase I/II clinical studies by the end of the fourth quarter of calendar year 2016 and will commence the trials at the earliest possible

 

Brain Cancer Incidence and Prevalence

 

In the United States, the annual estimated new cases of brain cancer each year are about 23,000, with estimated deaths about 15,000 per year. Brain cancer is the leading cause of cancer-related death in patients younger than age 20. Gliomas (a broad term which includes all tumors arising from the gluey or supportive tissue of the brain), the cancer type for which orphan drug designation has been granted by the FDA, account for 80% of all malignant brain tumors.

 

Secondary brain cancer (metastases to the brain from other sites) occurs in 20–40% of patients with metastatic disease and incidence increases with age. In the United States, over 100,000 cases of secondary brain cancer are diagnosed each year, with the majority of those metastases originating from lung (50%) and breast (15-20%).

 

 
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Our Goal and Strategy

 

Our goal is to become a leading oncology-focused biopharmaceutical company. The key elements of our strategy to achieve this goal are as follows:

 

 

·

Advance pritumumab, our drug candidate, toward regulatory approval and commercialization. We are primarily focused on developing pritumumab for the treatment of patients' brain tumors, as well as lung and breast cancer metastases to the brain. We plan to modify the previous clinical development strategy employed in Japan, by focusing our planned Phase I/II clinical trials on the use of pritumumab to include the metastatic treatment option, which we believe may be underserved by current treatment alternatives and where clinical trials have shown substantial levels of activity. We will employ much higher doses in the clinical protocol, compared to the studies in Japan, to test for safety and increased efficacy.

 

·

Expand our product pipeline by pursuing additional indications for pritumumab, due to the fact that the target antigen (ectodomain vimentin) is present in a variety of cancers apart from brain cancer. Nascent will seek to expand pritumumab into as many different indications as possible. We also believe pritumumab could be an effective carrier protein for other anti-cancer drugs (a cocktail approach in which an anti-cancer drug is attached to an antibody) and we also believe we can develop pritumumab as a diagnostic tool.

 

·

Evaluate the commercialization strategies on a product-by-product basis in order to maximize the value of each. As we move our drug candidates through development toward regulatory approval, we will evaluate several options for each drug candidate's commercialization strategy. These options include building our own internal sales force; entering into a joint marketing partnership with another pharmaceutical company or biotechnology company, whereby we jointly sell and market the product; and out-licensing our product, whereby another pharmaceutical company or biotechnology company sells and markets our product and pays us on a developmental milestone and royalty on sales basis. Our decision will be made separately for each product and will be based on a number of factors including capital necessary to execute on each option, size of the market that needs to be addressed and terms of potential offers from other pharmaceutical and biotechnology companies. It is too early for us to know which of these options we will pursue for our drug candidates, assuming their successful development.

 

Pritumumab in Cancer Patients

 

Our initial focus is on the development of pritumumab as an intravenous treatment of patients with various types of brain cancer, specifically gliomas and astrocytomas.

 

Advantages of Pritumumab

 

Based on pre-clinical and clinical studies to date, we believe that pritumumab may offer an advantage over existing treatments that are used in the treatment of patients' brain malignancies and other various forms of cancer. The antibody utilizes a fully human, natural approach which we believe results in the molecule posing very little toxicity to the patient, particularly in comparison to chemotherapies and cytokine approaches that currently dominate the marketplace. Further, the antibody binds to a very novel target that appears to be prevalent in a number of solid tumors. A fully human approach will mimic and harness the body's natural defense system to fight cancer and offer an efficacious and safer approach to other protocols, such as chemotherapy, radiation or surgery, which can be devastating and life threatening in and of themselves.

 

Disadvantages of Pritumumab

 

Given the low survival rates for current standard therapy in brain cancer, the Japanese clinical data indicating very few adverse events, both in percentage and type, and the general safety associated with monoclonal antibodies currently approved in the United States for a variety of therapeutic indications, we believe that there are no disadvantages of pritumumab to current therapy.

 

 
6
 

 

Development Plan

 

We plan to conduct a US-based clinical trial of pritumumab in patients with brain cancer over the next 12 to 18 months. In this trial, we also plan to further investigate the efficacy of Pritumumab on metastatic brain cancer and measure the effects on the primary tumor. Our Phase I/II trials are also planned as multiple ascending dose studies employing significantly higher doses, compared to the studies in Japan, to test for safety and improved efficacy.

 

We have not submitted our IND to the FDA for evaluation and comment; however, we believe that we can complete the Phase I/II studies indicated above within a period of about 36 months and for a total cost of less than $15 million dollars. This will, of course, require funding additional to our planned raises as discussed elsewhere in this document.

 

Clinical Testing of Our Products in Development

 

Each of our products in development, and likely all future drug candidates we, will require extensive pre-clinical and clinical testing to determine the safety and efficacy of the product prior to seeking and obtaining regulatory approval for marketing and sale of the product. This process is expensive and time consuming. In completing this pre-clinical and clinical testing, we are dependent upon third-party consultants, consisting mainly of investigators, collaborators, and contract research organizations, who will conduct such testing.

 

We and our third-party consultants conduct pre-clinical testing in accordance with Good Laboratory Practices, or GLPs, and clinical testing in accordance with Good Clinical Practices, or GCPs, which are international ethical and scientific quality standards utilized for pre-clinical and clinical testing, respectively. GCP is the standard for the design, conduct, performance, monitoring, auditing, recording, analysis and reporting of clinical trials, and is required by the FDA to be followed in conducting clinical trials. Additionally, any pre-clinical and clinical testing completed in the European Union, or the EU, is conducted in accordance with applicable EU standards, such as the EU Clinical Trials Directive (Directive 2001/20/EC of April 4, 2001), or the EU Clinical Trials Directive, and the national laws of the Member States of the EU implementing its provisions.

 

Intellectual Property

 

We hold a worldwide exclusive license under our license agreement to 11 granted U.S. and world patents and one pending U.S. patent application entitled "Enhanced Delivery of Pritumumab to the Brain (DOCS #3461895-26625)", as well as foreign counterparts and other patent applications and patents claiming priority therefrom. Out of the 11 granted patents, only 3 are still within issuance as 8 patents expired and were not renewed. The expired patents were deemed to have no value for the advancement of development of pritumumab and were not renewed by Nascent Biologics, Inc. prior to its acquisition by the Company. The value of all the patents has been impaired reducing the asset value to zero. Patents in effect through 2017 include 6,051,387, 6,051,693 and 6,165,467. In addition the US Food & Drug Administration has granted the Company orphan drug designation for use of pritumumab against gliomas and pancreatic cancer.

 

If we obtain marketing approval for pritumumab or other drug candidates in the United States or in certain jurisdictions outside of the United States, we may be eligible for regulatory protection, such as seven years of market exclusivity under FDA orphan drug designation, up to five years of patent term extension potentially available in the United States under the Hatch-Waxman Act, 8 to 11 years of data and marketing exclusivity potentially available for new drugs in the European Union, up to five years of patent extension in Europe (Supplemental Protection Certificate), and eight years of data exclusivity potentially available in Japan. There can be no assurance that we will qualify for any such regulatory exclusivity, or that any such exclusivity will prevent competitors from seeking approval solely on the basis of their own studies. See "Government Regulation" below.

 

 
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Our goal is to obtain, maintain and enforce patent protection for our products, formulations, processes, methods and other proprietary technologies, preserve our trade secrets, and operate without infringing on the proprietary rights of other parties, both in the United States and in other countries. Our policy is to actively seek to obtain, where appropriate, the broadest intellectual property protection possible for our current product candidates and any future product candidates, proprietary information and proprietary technology through a combination of contractual arrangements and patents, both in the United States and abroad. However, even patent protection may not always afford us with complete protection against competitors who seek to circumvent our patents. See "Risk Factors—Risks Related to Our Intellectual Property. Our proprietary rights may not adequately protect our intellectual property and potential products, and if we cannot obtain adequate protection of our intellectual property and potential products, we may not be able to successfully market our potential products."

 

We will depend upon the skills, knowledge and experience of our scientific and technical personnel, as well as that of our advisors, consultants and other contractors, none of which is patentable. To help protect our proprietary know-how, which is not patentable, and inventions for which patents may be difficult to obtain or enforce, we will in the future rely on trade secret protection and confidentiality agreements to protect our interests. To this end, we require all of our employees, consultants, advisors and other contractors to enter into confidentiality agreements that prohibit the disclosure of confidential information and, where applicable, require disclosure and assignment to us of the ideas, developments, discoveries and inventions important to our business.

 

License

 

The Company holds a license from a third party for certain patents and related material related to pritumumab. The license allows the Company to develop, manufacture and sell its product worldwide using the patents under the license agreement. The license was entered into by Nascent Biologics, Inc. in March 2009, granting rights to the development and certain patents. The license was granted for total consideration of $2,000,000, to be paid in six installments of $300,000 plus a final payment of $200,000 on January 1, 2016. In addition, the license provides the licensor with a royalty of 2% on the sales of the developed product, up to $10,000,000 in sales, and thereafter, a royalty of 1% for all sales over $10,000,000. Prior to the acquisition by the Company, Nascent Biologics allowed 10 patents to expire based on their assessment of the patents and their value relating to the Company's development of its product. Nascent Biologics and the licensor amended the license agreement requiring payments of $333,000 per year from January 1, 2012 through January 1, 2015. Such payments were not made by Nascent Biologics or the Company after the acquisition of Nascent Biologics. On September 20, 2015 the Company reached an agreement with the licensor paying the licensor $30,000 on the date of the agreement and $1,000 per month for 28 months with a balance payment of $5,000 with the last payment. As of March 31, 2016 the Company owed the Licensor $27,000.

 

The Company had determined the value of the license agreement has diminished materially due to the expiration of 10 of the patents and two year terms for the remaining three. In addition, the Company has advanced the development of Pritumumab and will continue to apply for further patent coverage as appropriate.

 

Manufacturing

 

We do not currently have our own manufacturing facilities. We intend to continue to use our financial resources to accelerate development of our drug candidates rather than diverting resources to establish our own manufacturing facilities. We intend to meet our pre-clinical and clinical trial manufacturing requirements by continuing established relationships with third-party manufacturers and other service providers to perform these services for us. We intend to continue these third party relationships to maintain our supply of Pritumumab. Should Pritumumab obtain marketing approval, we anticipate establishing relationships with third-party manufacturers and other service providers in connection with the commercial production of our product. We have some flexibility in securing other manufacturers to produce our drug candidates; however, our alternatives may be limited due to proprietary technologies or methods used in the manufacture of some of our drug candidates.

 

Competition

 

The development and commercialization of new products to treat cancer is highly competitive, and we expect considerable competition from major pharmaceutical, biotechnology and specialty cancer companies. As a result, there are and will likely continue to be extensive research and substantial financial resources invested in the discovery and development of new cancer products. Our potential competitors include, but are not limited to, Genentech, GlaxoSmithKline, Roche, Boehringer Ingelheim, Takeda, Array Biopharma and Ambit Biosciences. We are an early stage company with no history of operations and we only recently acquired the rights to the drug candidates we expect to develop. Many of our competitors have substantially more resources than we do, including both financial and technical. In addition, many of our competitors have more experience than us in pre-clinical and clinical development, manufacturing, regulatory and global commercialization. We are also competing with academic institutions, governmental agencies and private organizations that are conducting research in the field of cancer. We anticipate that we will face intense competition.

 

 
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We expect that our products under development and in clinical trials will address major markets within the cancer sector. Our competition will be determined in part by the indications for which drugs are developed and ultimately approved by regulatory authorities. Additionally, the timing of market introduction of some of our potential products or of competitors' products may be an important competitive factor. Accordingly, the speed with which we can develop products, complete pre-clinical testing, clinical trials and approval processes and supply commercial quantities to market are expected to be important competitive factors. We expect that competition among products approved for sale will be based on various factors, including product efficacy, safety, reliability, availability, price, reimbursement and patent position.

 

Government Regulation

 

United States—FDA Process

 

The research, development, testing, manufacture, labeling, promotion, advertising, distribution and marketing, among other things, of drug products are extensively regulated by governmental authorities in the United States and other countries. In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or the FDCA, and it's implementing regulations. Failure to comply with the applicable U.S. requirements may subject us to administrative or judicial sanctions, such as FDA refusal to approve pending New Drug Applications (NDAs) or Biologics License Applications (BLAs), warning letters, fines, civil penalties, product recalls, product seizures, total or partial suspension of production or distribution, injunctions and/or criminal prosecution. In the case of Pritumumab, it is a biologic drug and the appropriate route for approval will be to submit a BLA.

 

Drug Approval Process. None of our drug product candidates may be marketed in the United States until the drug has received FDA approval. The steps required before a drug may be marketed in the United States generally include the following:

 

 

·

completion of extensive pre-clinical laboratory tests, animal studies, and formulation studies in accordance with the FDA's GLP regulations;

 

·

Development of a manufacturing process in accordance with the FDA's Good Manufacturing Practice (GMP) regulations;

 

·

submission to the FDA of an Investigational New Drug application for human clinical testing, which must pass FDA review before human clinical trials may begin;

 

·

performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug for each proposed indication;

 

·

submission to the FDA of a BLA (Biologics License Application) after completion of all pivotal clinical trials;

 

·

satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the active pharmaceutical ingredient, or API, and finished drug product are produced and tested to assess compliance with current Good Manufacturing Practices (cGMPs); and

 

·

FDA review and approval of the BLA prior to any commercial marketing or sale of the drug in the United States.

 
The development and approval process requires substantial time, effort and financial resources, and we cannot be certain that any approvals for our product candidates will be granted on a timely basis, if at all.

 

 
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Pre-clinical tests include laboratory evaluation of product chemistry, toxicity and formulation, as well as animal studies. The conduct of the pre-clinical tests and formulation of the compounds for testing must comply with federal regulations and requirements. The results of the pre-clinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND, which must become effective before human clinical trials may begin. An IND will automatically become effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions about the conduct of the trial, such as whether human research subjects will be exposed to an unreasonable health risk. In such a case, the IND sponsor and the FDA must resolve any outstanding FDA concerns or questions before clinical trials can proceed. The Company cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin.

 

Clinical trials involve the administration of the investigational drug to human subjects under the supervision of qualified investigators. Clinical trials are conducted under protocols detailing the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. Each protocol must be provided to the FDA as part of a separate submission to the IND. Further, an Institutional Review Board (IRB) for each medical center proposing to conduct the clinical trial must review and approve the study protocol and informed consent information for study subjects for any clinical trial before it commences at that center, and it must monitor the study until it is completed. Study subjects must sign an informed consent form before participating in a clinical trial.

 

Clinical trials necessary for product approval typically are conducted in three sequential phases, but the phases may overlap. Phase 1 usually involves the initial introduction of the investigational drug into a limited population, typically healthy humans, to evaluate its short-term safety, dosage tolerance, metabolism, pharmacokinetics and pharmacologic actions, and, if possible, to gain an early indication of its effectiveness. Phase 2 usually involves trials in a limited patient population to (i) evaluate dosage tolerance and determine appropriate dosage; (ii) identify possible adverse effects and safety risks; and (iii) evaluate preliminarily the efficacy of the drug for specific targeted indications. Multiple Phase 2 clinical trials may be conducted by the sponsor to obtain information prior to beginning larger and more expensive Phase 3 clinical trials. Phase 3 trials, commonly referred to as pivotal studies, are undertaken in an expanded patient population at multiple, geographically dispersed clinical trial centers to further evaluate clinical efficacy and test further for safety by using the drug in its final form. There can be no assurance that Phase 1, Phase 2 or Phase 3 testing will be completed successfully within any specified period of time, if at all. Furthermore, the Company, the FDA or an IRB may suspend clinical trials at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk. Moreover, the FDA may approve a BLA for a product candidate, but require that the sponsor conduct additional clinical trials to further assess the drug after BLA approval under a post-approval commitment. Post-approval trials are typically referred to as Phase 4 clinical trials.

 

During the development of a new drug, sponsors are given an opportunity to meet with the FDA at certain time points. These points may be prior to submission of an IND, at the end of Phase 2, and before a BLA is submitted. Meetings at other times may be requested. These meetings can provide an opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and the FDA to reach an agreement on the next phase of development. Sponsors typically use the end of Phase 2 meeting to discuss their Phase 2 clinical results and present their plans for the pivotal Phase 3 clinical trial that they believe will support approval of the new drug. If a Phase 3 clinical trial is the subject of discussion at an end of Phase 2 meeting with the FDA, a sponsor may be able to request a Special Protocol Assessment, the purpose of which is to reach an agreement with the FDA on the design of the Phase 3 clinical trial protocol design and analysis that will form the primary basis of an efficacy claim. If such an agreement is reached, it will be documented and made part of the administrative record, and it will be binding on the FDA unless public health concerns unrecognized at the time of the protocol assessment are evident, and may not be changed except under a few specific circumstances.

 

Concurrent with clinical trials, companies usually complete additional animal safety studies and must also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the product in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the drug candidate and the manufacturer must develop and validate methods for testing the quality, purity and potency of the final drugs. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf-life.

 

Assuming successful completion of the required clinical testing, the results of the pre-clinical studies and of the clinical studies, together with other detailed information, including information on the manufacture and composition of the drug, are submitted to the FDA in the form of a BLA requesting approval to market the product for one or more indications. A BLA must be accompanied by a significant user fee, which we anticipate will be waived for the first BLA because NBI is a "qualified small business."

 

 
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The testing and approval process requires substantial time, effort and financial resources. The agency reviews the application and may deem it to be inadequate to support the registration, and companies cannot be sure that any approval will be granted on a timely basis, if at all. The FDA may also refer the application to the appropriate advisory committee, typically a panel of clinicians, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendations of the advisory committee, but it typically follows such recommendations.

 

Before approving a BLA, the FDA usually will inspect the facility or the facilities at which the drug is manufactured and will not approve the product unless the manufacturing is in compliance with cGMPs. If the FDA evaluates the BLA and the manufacturing facilities are deemed acceptable, the FDA may issue an approval letter, or in some cases, an approvable letter followed by an approval letter. Both letters usually contain a number of conditions that must be met in order to secure final approval of the BLA. When and if those conditions have been met to the FDA's satisfaction, the FDA will issue an approval letter. The approval letter authorizes commercial marketing of the drug for specific indications. As a condition of BLA approval, the FDA may require post-marketing testing and surveillance to monitor the drug's safety or efficacy, or impose other conditions.

 

The FDA may deny approval of a BLA by issuing a Complete Response Letter if the applicable regulatory criteria are not satisfied. A Complete Response Letter may require additional clinical data and/or an additional pivotal Phase 3 clinical trial(s), and/or other significant, expensive and time-consuming requirements related to clinical trials, pre-clinical studies or manufacturing. Data from clinical trials are not always conclusive and the FDA may interpret data differently than we or our collaborators interpret data. Alternatively, approval may occur with Risk Evaluation and Mitigation Strategies, or REMS, which limit the labeling, distribution or promotion of a drug product. Once issued, the FDA may withdraw product approval if ongoing regulatory requirements are not met or if safety problems occur after the product reaches the market. In addition, the FDA may require testing, including Phase 4 clinical trials, and surveillance programs to monitor the safety effects of approved products which have been commercialized, and the FDA has the power to prevent or limit further marketing of a product based on the results of these post-marketing programs or other information.

 

Expedited Review and Approval

 

The FDA has various programs, including Orphan Drug Designation and Fast Track approval, which are intended to expedite or simplify the process for reviewing drugs, and/or provide for accelerated approval. Even if a drug qualifies for one or more of these programs, the FDA may later decide that the drug no longer meets the conditions for qualification or that the time period for FDA review or approval will be shortened. Generally, drugs that may be eligible for these programs are those for serious or life-threatening conditions, those with the potential to address unmet medical needs, and those that offer meaningful benefits over existing treatments. For example, Fast Track is a process designed to facilitate the development, and expedite the review of drugs to treat serious diseases and fill an unmet medical need. Priority review is designed to give drugs that offer major advances in treatment or provide a treatment where no adequate therapy exist an initial review within six months as compared to a standard review time of 10 months. Although Fast Track and priority review do not affect the standards for approval, the FDA will attempt to facilitate early and frequent meetings with a sponsor of a Fast Track designated drug and expedite review of the application for a drug designated for priority review. As a condition of approval, the FDA may require that a sponsor of a drug receiving accelerated approval perform post-marketing clinical trials.

 

Post-Approval Requirements

 

Often times, even after a drug has been approved by the FDA for sale, the FDA may require that certain post-approval requirements be satisfied, including the conduct of additional clinical studies. In addition, certain changes to an approved product, such as adding new indications, making certain manufacturing changes, or making certain additional labeling claims, are subject to further FDA review and approval. Before a company can market products for additional indications, it must obtain additional approvals from the FDA, typically a new BLA or NDA. Obtaining approval for a new indication generally requires that additional clinical studies be conducted. A company cannot be sure that any additional approval for new indications for any product candidate will be approved on a timely basis, or at all.

 

 
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If post-approval conditions are not satisfied, the FDA may withdraw its approval of the drug. In addition, holders of an approved BLA are required to: (i) report certain adverse reactions to the FDA and maintain pharmacovigilance programs to proactively look for these adverse events, (ii) comply with certain requirements concerning advertising and promotional labeling for their products, and (iii) continue to have quality control and manufacturing procedures conform to cGMPs after approval. The FDA periodically inspects the sponsor's records related to safety reporting and/or manufacturing facilities; this latter effort includes assessment of ongoing compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance. We intend to use third-party manufacturers to produce our products in clinical and commercial quantities, and future FDA inspections may identify compliance issues at the facilities of our contract manufacturers that may disrupt production or distribution, or require substantial resources to correct. In addition, discovery of problems with a product after approval may result in restrictions on a product, manufacturer or holder of an approved BLA, including recall of the product from the market or withdrawal of approval of the BLA for that drug.

 

Patent Term Restoration and Marketing Exclusivity

 

Depending upon the timing, duration and specifics of FDA approval of the use of our drugs, some of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product's approval date. The patent term restoration period is generally one-half the time between the effective date of an IND, and the submission date of a BLA, plus the time between the submission date of a BLA and the approval of that application. Only one patent applicable to an approved drug is eligible for the extension and the extension must be applied for prior to expiration of the patent. The USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we intend to apply for restorations of patent term for some of our then currently owned or licensed patents to add patent life beyond their current expiration date, depending on the expected length of clinical trials and other factors involved in the submission of the relevant BLA.

 

Data and market exclusivity provisions under the FDCA also can delay the submission or the approval of certain applications. The FDCA provides a five-year period of non-patent data exclusivity within the United States to the first applicant to gain approval of a BLA for a new biologic drug. During the exclusivity period, the FDA may not accept for review an abbreviated biologics license application, or a 505(b)(2) BLA submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of marketing exclusivity for a BLA, 505(b) (2) BLA or supplement to an existing BLA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, for new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the conditions associated with the new clinical investigations and does not prohibit the FDA from approving accelerated biologics approvals or 505(b) (2) BLAs for drugs containing the original active agent. Five-year and three-year exclusivity will not delay the submission or approval of a full BLA; however, an applicant submitting a full BLA would be required to conduct or obtain a right of reference to all of the pre-clinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.

 

Foreign Regulation

 

In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our products. Whether or not we obtain FDA approval for a product, we must obtain approval by the comparable regulatory authorities of foreign countries before we can commence clinical trials and approval of foreign countries or economic areas, such as the EU, before we may market products in those countries or areas. The approval process and requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from place to place, and the time may be longer or shorter than that required for FDA approval.

 

 
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In the European Economic Area, or EEA (which is comprised of the 27 member states of the EU, or Member States, plus Norway, Iceland and Liechtenstein), medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA. There are two types of marketing authorizations:

 

 

·

The Community MA, which is issued by the European Commission through the Centralized Procedure, based on the opinion of the Committee for Medicinal Products for Human Use, or CHMP, of the European Medicines Agency, or EMA, and which is valid throughout the entire territory of the EEA. The Centralized Procedure is mandatory for certain types of products, such as biotechnology medicinal products, orphan medicinal products, and medicinal products indicated for the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and viral diseases. The Centralized Procedure is optional for products containing a new active substance not yet authorized in the EEA, or for products that constitute a significant therapeutic, scientific or technical innovation or which are in the interest of public health in the EU.

 

·

National MAs, which are issued by the competent authorities of the Member States of the EEA and only cover their respective territory, are available for products not falling within the mandatory scope of the Centralized Procedure. Where a product has already been authorized for marketing in a Member State of the EEA, this National MA can be recognized in another Member State through the Mutual Recognition Procedure. If the product has not received a National MA in any Member State at the time of application, it can be approved simultaneously in various Member States through the Decentralized Procedure. Under the Decentralized Procedure, an identical dossier is submitted to the competent authorities of each of the Member States in which the MA is sought, one of which is selected by the applicant as the Reference Member State. The competent authority of the Reference Member State prepares a draft assessment report, a draft summary of the specific product characteristics, or SPC, and a draft of the labeling and package leaflet, which are sent to the other Member States (referred to as the Member States Concerned) for their approval. If the Member States Concerned raise no objections, based on a potential serious risk to public health, to the assessment, SPC, labeling or packaging proposed by the Reference Member State, the product is subsequently granted a National MA in all the Member States (i.e., in the Reference Member State and the Member States Concerned).

 

Under the above described procedures, before granting the MA, the EMA or the competent authorities of the Member States of the EEA make an assessment of the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy.

 

As in the United States, it may be possible in foreign countries to obtain a period of market and/or data exclusivity that would have the effect of postponing the entry into the marketplace of a competitor's generic product. For example, if any of our products receive marketing approval in the EEA, we expect they will benefit from 8 years of data exclusivity and 10 years of marketing exclusivity. An additional non-cumulative one year period of marketing exclusivity is possible if during the data exclusivity period (the first 8 years of the 10 year marketing exclusivity period), we obtain an authorization for one or more new therapeutic indications that are deemed to bring a significant clinical benefit compared to existing therapies. The data exclusivity period begins on the date of the product's first marketing authorization in the EU and prevents generics from relying on the marketing authorization holder's pharmacological, toxicological and clinical data for a period of 8 years. After 8 years, a generic product application may be submitted and generic companies may rely on the marketing authorization holder's data. However, a generic cannot launch until 2 years later (or a total of 10 years after the first marketing authorization in the EU of the innovator product), or 3 years later (or a total of 11 years after the first marketing authorization in the EU of the innovator product) if the marketing authorization holder obtains marketing authorization for a new indication with significant clinical benefit within the 8 year data exclusivity period. In Japan our products may be eligible for eight years of data exclusivity. There can be no assurance that we will qualify for such regulatory exclusivity, or that such exclusivity will prevent competitors from seeking approval solely on the basis of their own studies.

 

When conducting clinical trials in the EU we must adhere to the provisions of the EU Clinical Trials Directive and the laws and regulations of the EU Member States implementing them. These provisions require, among other things, that the prior authorization of an Ethics Committee and the competent Member State authority is obtained before commencing the clinical trial.

 

 
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Pricing and Reimbursement

 

In the United States and internationally, sales of products that we market in the future, and our ability to generate revenues on such sales, are dependent, in significant part, on the availability of adequate coverage and reimbursement from third-party payers such as state and federal governments, managed care providers and private insurance plans. Private insurers, such as health maintenance organizations and managed care providers, have implemented cost-cutting and reimbursement initiatives and likely will continue to do so in the future. These include establishing formularies that govern the drugs and biologics that will be offered and also the out-of-pocket obligations of member patients for such products. We may need to conduct pharmacoeconomic studies to demonstrate the cost effectiveness of our products for formulary coverage and reimbursement. Even with studies, our products may be considered less safe, less effective or less cost-effective than existing products, and third-party payers may not provide coverage and reimbursement for our product candidates, in whole or in part.

 

In addition, particularly in the United States and increasingly in other countries, we are required to provide discounts and pay rebates to state and federal governments and agencies in connection with purchases of our products that are reimbursed by such entities. It is possible that future legislation in the United States and other jurisdictions could be enacted that could potentially impact the reimbursement rates for the products we are developing and may develop in the future and also could further impact the levels of discounts and rebates paid to federal and state government entities. Any legislation that impacts these areas could impact, in a significant way, our ability to generate revenues from sales of products that, if successfully developed, we bring to market.

 

Political, economic and regulatory influences are subjecting the healthcare industry in the United States to fundamental changes. There have been, and we expect there will continue to be, legislative and regulatory proposals to change the healthcare system in ways that could significantly affect our future business. For example, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or collectively, the PPACA, enacted in March 2010, substantially changes the way healthcare is financed by both governmental and private insurers. Among other cost containment measures, PPACA establishes:

 

 

·

an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents;

 

·

a new Medicare Part D coverage gap discount program, in which pharmaceutical manufacturers who wish to have their drugs covered under Part D must offer discounts to eligible beneficiaries during their coverage gap period, or the donut hole; and

 

·

a new formula that increases the rebates a manufacturer must pay under the Medicaid Drug Rebate Program.

 

In the future, there may continue to be additional proposals relating to the reform of the U.S. healthcare system. Future legislation, including the current versions being considered at the federal level in the United States or regulatory actions implementing recent or future legislation, may have a significant effect on our business. Our ability to successfully commercialize products depends in part on the extent to which reimbursement for the costs of our products and related treatments will be available in the United States and worldwide from government health administration authorities, private health insurers and other organizations. Because the adoption of certain proposals could limit the prices we are able to charge for our products, or the amounts of reimbursement available for our products, and could limit the acceptance and availability of our products, substantial uncertainty exists as to the reimbursement status of newly approved health care products by third-party payers.

 

Sales and Marketing

 

We currently have no marketing, sales or distribution capabilities. We do, however, have worldwide commercialization rights for our drug candidates. In order to commercialize any of our drug candidates if and when they are approved for sale in the United States or elsewhere, we will need to develop the necessary marketing, sales and distribution capabilities.

 

 
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The FDA regulates all advertising and promotion activities for products under its jurisdiction both prior to and after approval, including standards and regulations for direct-to-consumer advertising, dissemination of off-label information, industry-sponsored scientific and educational activities and promotional activities involving the Internet. Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved label. Further, if there are any modifications to the drug, including changes in indications, labeling, or manufacturing processes or facilities, we may be required to submit and obtain FDA approval of a new or supplemental NDA, which may require us to collect additional data or conduct additional pre-clinical studies and clinical trials. Failure to comply with applicable FDA requirements may subject a company to adverse publicity, enforcement action by the FDA, corrective advertising, consent decrees and the full range of civil and criminal penalties available to the FDA.

 

Physicians may prescribe legally available drugs for uses that are not described in the drug's labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties, and often reflect a physician's belief that the off-label use is the best treatment for the patients. The FDA does not regulate the behavior of physicians in their choice of treatments, but FDA regulations do impose stringent restrictions on manufacturers' communications regarding off-label uses. Failure to comply with applicable FDA requirements may subject a company to adverse publicity, enforcement action by the FDA, corrective advertising, consent decrees and the full range of civil and criminal penalties available to the FDA.

 

Outside the United States, our ability to market a product is contingent upon obtaining marketing authorization from the appropriate regulatory authorities. The requirements governing marketing authorization, pricing and reimbursement vary widely from country to country.

 

We may also be subject to various federal and state laws pertaining to health care "fraud and abuse," including anti-kickback laws and false claims laws. Anti-kickback laws make it illegal for a prescription drug manufacturer to solicit, offer, receive, or pay any remuneration in exchange for, or to induce, the referral of business, including the purchase or prescription of a particular drug. Due to the breadth of the statutory provisions and the absence of guidance in the form of regulations and very few court decisions addressing industry practices, it is possible that our practices might be challenged under anti-kickback or similar laws. False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be presented for payment to third-party payers (including Medicare and Medicaid) claims for reimbursed drugs or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. Our activities relating to the sale and marketing of our products may be subject to scrutiny under these laws.

 

Violations of fraud and abuse laws may be punishable by criminal and/or civil sanctions, including fines and civil monetary penalties, the possibility of exclusion from federal health care programs (including Medicare and Medicaid) and corporate integrity agreements, which impose, among other things, rigorous operational and monitoring requirements on companies. Similar sanctions and penalties also can be imposed upon executive officers and employees, including criminal sanctions against executive officers under the so-called "responsible corporate officer" doctrine, even in situations where the executive officer did not intend to violate the law and was unaware of any wrongdoing. Given the penalties that can be imposed on companies and individuals if convicted, allegations of such violations often result in settlements even if the company or individual being investigated admits no wrongdoing. Settlements often include significant civil sanctions, including fines and civil monetary penalties, and corporate integrity agreements. If the government was to allege or convict us or our executive officers of violating these laws, our business could be harmed. In addition, private individuals have the ability to bring similar actions. Our activities could be subject to challenge for the reasons discussed above and due to the broad scope of these laws and the increasing attention being given to them by law enforcement authorities. Further, there is an increasing number of state laws that require manufacturers to provide reports to states on pricing and marketing information. Many of these laws contain ambiguities as to what is required to comply with the laws. Given the lack of clarity in laws and their implementation, our reporting actions could be subject to the penalty provisions of the pertinent state authorities.

 

Other Laws and Regulatory Processes

 

We are subject to a variety of financial disclosure and securities trading regulations as a public company in the United States, including laws relating to the oversight activities of the Securities and Exchange Commission, or SEC, and, if our capital stock becomes listed on a national securities exchange, we will be subject to the regulations of such exchange on which our shares are traded. In addition, the Financial Accounting Standards Board, or FASB, the SEC, and other bodies that have jurisdiction over the form and content of our accounts, our financial statements and other public disclosure are constantly discussing and interpreting proposals and existing pronouncements designed to ensure that companies best display relevant and transparent information relating to their respective businesses.

 

Our present and future business has been and will continue to be subject to various other laws and regulations. Various laws, regulations and recommendations relating to safe working conditions, laboratory practices, the experimental use of animals, and the purchase, storage, movement, import and export and use and disposal of hazardous or potentially hazardous substances used in connection with our research work are or may be applicable to our activities. Certain agreements entered into by us involving exclusive license rights or acquisitions may be subject to national or supranational antitrust regulatory control, the effect of which cannot be predicted. The extent of government regulation, which might result from future legislation or administrative action, cannot accurately be predicted.

 

 
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Employees

 

As of the date of this prospectus, we have no full-time employees. Our officers and directors currently act as consultants to the Company in addition to their own jobs. To successfully develop our drug candidates, we must be able to attract and retain highly skilled personnel. We anticipate hiring full-time employees devoted to research, product and business development activities over the next few years. In addition, we intend to use clinical research organizations and other third parties to perform our clinical studies and manufacturing.

 

ITEM 1A: RISK FACTORS

 

There are numerous and varied risks, known and unknown, that may prevent us from achieving our goals. If any of these risks actually occur, our business, financial condition or results of operations may be materially adversely affected. In such case, the trading price of our common stock could decline and shareholders could lose all or part of their investment.

 

Risks Related to our Business

 

We currently have no product revenues and no products approved for marketing, and will need to raise additional capital to operate our business.

 

To date, we have generated no product revenues. Until, and unless, we receive approval from the U.S. Food and Drug Administration, or FDA, and other regulatory authorities overseas for one or more of our drug candidates, we cannot market or sell our products and will not have product revenues. Currently, our only drug candidate is pritumumab, and this product is not approved by the FDA for sale in the United States or by other regulatory authorities for sale outside the United States. We have not begun any clinical trial for pritumumab nor have we filed an investigational new drug (IND) application, which will be required before we may commence human clinical trials in the U.S.

 

Moreover, each of these drug candidates will require time and capital before we can even apply for an IND for approval from the FDA or commence clinical trials. Therefore, for the foreseeable future, we do not expect to achieve any product revenues and will have to fund all of our operations and capital expenditures from cash on hand, licensing fees and grants, and potentially, future offerings. We will need to seek additional sources of financing, which may not be available on favorable terms, if at all. If we do not succeed in timely raising additional funds on acceptable terms, we may be unable to complete planned pre-clinical and clinical trials or obtain approval of any drug candidates from the FDA and other regulatory authorities. In addition, we could be forced to discontinue product development and forego attractive business opportunities. Any additional sources of financing will likely involve the issuance of additional equity securities, which will have a dilutive effect on our stockholders.

 

We intend to use the services of outside service providers to conduct our clinical trials and manufacture our products. We have not entered into any agreements with any outside service providers to provide these services to us and there can be no assurance as to what it may cost the Company to secure these outside services.

 

Development, Regulatory Approval and Marketing of Products

 

The outcome of the lengthy and complex process of identifying new compounds and developing new products is inherently uncertain and involves a high degree of risk and cost. Drug discovery and development is time-consuming, expensive and unpredictable. The process from early discovery or design to development to regulatory approval can take many years. Drug candidates can fail at any stage of the process, including as the result of unfavorable clinical trial results. There can be no assurance regarding our ability to meet anticipated clinical trial commencement and completion dates, regulatory submission dates, and launch dates for product candidates, or as to whether or when we will receive regulatory approval for new products or for new indications or dosage forms for existing products. Decisions by regulatory authorities regarding labeling, ingredients and other matters could adversely affect the availability or commercial potential of our products, and there is no assurance that any of our proposed products will receive regulatory approval and/or be commercially successful.

 

 
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Post-Approval Data

 

As a condition to granting marketing approval of a product, the FDA may require a company to conduct additional clinical trials. The results generated in these Phase IV trials could result in loss of marketing approval, changes in product labeling, and/or new or increased concerns about the side effects or efficacy of a product. The Food and Drug Administration Amendments Act of 2007 (the FDAAA) gave the FDA enhanced post-market authority, including the explicit authority to require post-market studies and clinical trials, labeling changes based on new safety information, and compliance with FDA-approved risk evaluation and mitigation strategies. The FDA's exercise of its authority under the FDAAA has in some cases resulted, and in the future could result, in delays or increased costs during product development, clinical trials and regulatory review, increased costs to comply with additional post-approval regulatory requirements and potential restrictions on sales of approved products. Non-U.S. regulatory agencies often have similar authority and may impose comparable costs. Post-marketing studies, whether conducted by us or by others and whether mandated by regulatory agencies or voluntary, and other emerging data about marketed products, such as adverse event reports, may also adversely affect sales of our products. Further, the discovery of significant problems with a product similar to one of our products that implicate (or are perceived to implicate) an entire class of products could have an adverse effect on sales of the affected products. Accordingly, new data about our proposed products, or products similar to our proposed products, could negatively impact demand for these products due to real or perceived side effects or uncertainty regarding efficacy and, in some cases, could result in updated labeling, restrictions on use, product withdrawal or recall. Furthermore, new data and information, including information about product misuse, may lead government agencies, professional societies, practice management groups or organizations involved with various diseases to publish guidelines or recommendations related to the use of these products or the use of related therapies or place restrictions on sales. Such guidelines or recommendations may lead to lower sales of these products if and when they reach the market.

 

The expiration or loss of patent protection and licenses may affect future revenues and operating income.

 

The Company's proposed products will rely on patent and trademark and other intellectual property protection. To the extent any of the Company's intellectual property is successfully challenged, invalidated, or circumvented or to the extent it does not allow the Company to compete effectively, our business will suffer.

 

The Company was obligated under its license agreement to pay $1,792,650 to the patent holder and is presently delinquent under the original terms of the license agreement.

 

On September 21, 2015 the Company and the licensor amended their agreement where the licensor received a $30,000 cash payment and is receiving $1,000 per month for 28 months plus a $5,000 additional payment on the 28th month. In addition the licensor received 200,000 shares of the Company's common stock, plus will receive 1% of net sales of the Company's product up to $1,000,000 in royalties. As of March 31, 2016, we owed the licensor $27,000.

 

Competitors' intellectual property may prevent the Company from selling its proposed products or have a material adverse effect on the Company's future profitability and financial condition.

 

Competitors may claim that our product infringes upon their intellectual property. Resolving an intellectual property infringement claim can be costly and time consuming and may require the Company to enter into license agreements. The Company cannot guarantee that it would be able to obtain license agreements on commercially reasonable terms. A successful claim of patent or other intellectual property infringement could subject the Company to significant damages or an injunction preventing the manufacture, sale or use of affected products. Any of these events could have a material adverse effect on our profitability and financial condition.

 

The Company research and development efforts may not succeed in developing commercially successful products and technologies, which may cause revenue and profitability to decline.

 

The Company is committing substantial efforts, funds, and other resources to research and development of its proposed products. A high rate of failure is inherent in the research and development of new products and technologies. The Company will be required to make ongoing substantial expenditures without any assurance that its efforts will be commercially successful. Failure can occur at any point in the process, including after significant funds have been invested.

 

 
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Promising new product candidates may fail to reach the market or may only have limited commercial success because of efficacy or safety concerns, failure to achieve positive clinical outcomes, inability to obtain necessary regulatory approvals, limited scope of approved uses, excessive costs to manufacture, the failure to establish or maintain intellectual property rights, or infringement of the intellectual property rights of others. Even if the Company successfully develops new products or enhancements, they may be quickly rendered obsolete by changing customer preferences, changing industry standards, or competitors' innovations. Innovations may not be accepted quickly in the marketplace because of, among other things, entrenched patterns of clinical practice or uncertainty over third-party reimbursement. The Company cannot state with certainty when or whether any of its products under development will be launched, whether it will be able to develop, license, or otherwise acquire compounds or products, or whether any products will be commercially successful. Failure to launch successful new products or new indications for existing products may cause the Company's products to become obsolete, causing our revenue and operating results to suffer.

 

New products and technological advances by our competitors may negatively affect our results of operations.

 

Any products that the Company is able to develop will face intense competition from its competitors' products. Competitors' products may be safer, more effective; more effectively marketed or sold, or have lower prices or superior performance features than our products. We cannot predict with certainty the timing or impact of the introduction of competitors' products.

 

Product liability claims may occur for our products, which could have a material adverse effect on revenues and financial condition.

 

The Company, once its product(s) make it to market, may be subject to product liability claims and lawsuits alleging that its products have resulted or could result in an unsafe condition for or injury to patients. Product liability claims and lawsuits, safety alerts or product recalls, and other allegations of product safety or quality issues, regardless of their validity or ultimate outcome, may have a material adverse effect on our business and reputation and on our ability to attract and retain customers. Consequences may also include additional costs, a decrease in market share for the products, lower income or exposure to other claims. The Company will attempt to obtain sufficient product liability insurance but may not be able to obtain such coverage or obtain sufficient coverage to product itself completely from said potential claims. Product liability claims could have a material adverse effect on our profitability and financial condition.

 

We have a limited operating history and are not profitable and may never become profitable.

 

We have a history of operating losses and no meaningful operations upon which to evaluate our business. Our accumulated deficit since inception through March 31, 2016 is $10,380,227. We expect to incur substantial losses and negative operating cash flow for the foreseeable future as we commence development of our drug candidates, which we do not expect will be commercially available for a number of years, if at all. Even if we succeed in developing and commercializing one or more drug candidates, we expect to incur substantial losses for the foreseeable future and may never become profitable. The successful development and commercialization of any drug candidates will require us to perform a variety of functions, including:

 

 

·

undertaking pre-clinical development and clinical trials;

 

·

hiring additional personnel;

 

·

participating in the regulatory approval processes;

 

·

manufacturing and formulating products;

 

·

initiating and conducting sales and marketing activities; and,

 

·

implementing additional internal systems and infrastructure.

 

 
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We will need to raise additional capital in order to fund our business and generate significant revenue in order to achieve and maintain profitability. Additional financing may cause dilution to current investors and there can be no assurance that any additional financing will be on terms that are favorable to the Company and our shareholders. Without ongoing revenue, our ability to stay in business is contingent on outside capital and we currently have no commitments for such capital.

 

The departure of certain key personnel could affect the financial condition of the Company due to the loss of their expertise.

 

Our business plan was developed by our officers and will depend on their ability to develop pharmaceutical products. Without their expertise, it is unlikely we will be able to complete the development, testing and FDA approval process. We do not have the funds, at this time, to hire additional personnel and without our current management team; it is unlikely we would be able to obtain further funding. The loss of any member of management would severely hinder our ability to develop our proposed products. A failure on our part to retain the services of these key personnel could have a material adverse effect on our operating results and financial conditions. We do not maintain key man life insurance on any of our officers or employees.

 

Our auditors have expressed substantial doubt about our ability to continue as a going concern. If we do not have sufficient funding, we may have to suspend or cease operations within twelve months.

 

Our audited financial statements for the year ended March 31, 2016 were prepared using the assumption that we will continue our operations as a going concern. We were incorporated in 2009 and do not have a history of earnings in recent years. As a result, our independent registered public accounting firm, in their audit report, has expressed substantial doubt about our ability to continue as a going concern. Continued operations are dependent on our ability to complete equity or debt financing activities or to generate profitable operations. Such activities may not be available or may not be available on reasonable terms. We believe that if we do not have sufficient funding, we may have to suspend or cease operations within twelve months. Therefore, we may be unable to continue operations in the future as a going concern. If we cannot continue as a viable entity, our stockholders may lose some or all of their investment in the Company.

 

We may be exposed to risks relating to management's conclusion that our disclosure controls and procedures and internal controls over financial reporting are ineffective.

 

We do not have an independent audit committee and our Board of Directors may be unable to fulfill the functions of such a committee which may compromise the management of our business.

 

Currently, we do not have an independent audit committee. Our Board of Directors functions as our audit committee and is comprised of four directors, two of whom are not considered to be "independent" in accordance with the requirements of Rule 10A-3 under the Securities Exchange Act of 1934. An independent audit committee plays a crucial role in the corporate governance process, assessment of the Company's processes relating to its risks and control environment, oversight of financial reporting, and evaluation of internal and independent audit processes. The lack of an independent audit committee may prevent the Board of Directors from being independent in its judgments and decisions and its ability to pursue the committee's responsibilities, which could compromise the management of our business.

 

Risks Relating to Our Common Stock

 

We intend to take advantage of the disclosure requirements of the JOBS Act provided for emerging growth companies including not providing all of the accounting disclosure that other companies will be required to provide which may limit an investor's ability to compare our financial statements with other companies.

 

Under the JOBS Act, we can elect to not comply with new or revised accounting standards which will allow us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies. Until the standards are required for private companies, we will not have to adopt those standards. As such, our financial statements may not be comparable to companies that comply with public company effective dates. This could affect an investor's ability to evaluate our financial statements compared to other public companies. In addition to the financial statements, the JOBS Act along with being a "Smaller Reporting Company" allows us to provide less disclosure on certain issues such as executive compensation as other companies which could affect an investor's ability to compare us to other companies.

 

 
19
 

 

The Company's stock price may be volatile.

 

The market price of the Company's common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond the Company's control, including the following:

 

 

·

technological innovations or new products and services by the Company or its competitors;

 

·

additions or departures of key personnel;

 

·

the Company's ability to execute its business plan;

 

·

operating results that fall below expectations;

 

·

loss of any strategic relationship;

 

·

industry developments;

 

·

economic and other external factors; and,

 

·

period-to-period fluctuations in the Company's financial results.

 

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of the Company's common stock.

 

We may in the future issue additional shares of our common stock which would reduce investors' ownership interests in the Company and which may dilute our share value.

 

Our Articles of Incorporation authorizes the issuance of 100,000,000 shares of common stock, par value $0.001 per share and 10,000,000 shares of preferred stock, $.001 par value. The future issuance of all or part of our remaining authorized common stock may result in substantial dilution in the percentage of our common stock held by our then existing stockholders. We may value any common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and might have an adverse effect on any trading market for our common stock.

 

In the future, the Company might authorize a class of preferred stock with rights and preferences superior to those of the common stockholders and which might contain provisions giving them priority over the rights of the common stockholders. Any such class of preferred stock may result in substantial dilution to our common stockholders and have an adverse effect on any trading market for our common stock.

 

FINRA sales practice requirements may limit a stockholder's ability to buy and sell our stock.

 

The Financial Industry Regulatory Authority ("FINRA") has adopted rules that relate to the application of the SEC's penny stock rules in trading our securities and require that a broker/dealer have reasonable grounds for believing that the investment is suitable for that customer, prior to recommending the investment. Prior to recommending speculative, low priced securities to their non-institutional customers, broker/dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information.

 

 
20
 

 

Under interpretations of these rules, FINRA believes that there is a high probability that speculative, low priced securities will not be suitable for at least some customers. FINRA's requirements make it more difficult for broker/dealers to recommend that their customers buy our common stock, which may have the effect of reducing the level of trading activity and liquidity of our common stock. Further, many brokers charge higher transactional fees for penny stock transactions. As a result, fewer broker/dealers may be willing to make a market in our common stock, reducing a shareholder's ability to resell shares of our common stock.

 

The Company's common stock is currently deemed to be "penny stock", which makes it more difficult for investors to sell their shares.

 

The Company's common stock is and will be subject to the "penny stock" rules adopted under section 15(g) of the Exchange Act. The penny stock rules apply to companies whose common stock is not listed on the NASDAQ Stock Market or other national securities exchange and trades at less than $5.00 per share or that have tangible net worth of less than $5,000,000 ($2,000,000 if the company has been operating for three or more years). These rules require, among other things, that brokers who trade penny stock to persons other than "established customers" complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure document and quote information under certain circumstances. Many brokers have decided not to trade penny stocks because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. If the Company remains subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for the Company's securities. If the Company's securities are subject to the penny stock rules, investors will find it more difficult to dispose of the Company's securities.

 

ITEM 1B: UNSOLVED STAFF COMMENTS

 

As a "smaller reporting company", we are not required to provide the information required by this Item.

 

ITEM 2: PROPERTIES

 

Our principal executive offices are located at 601 21st Street Suite 300, Vero Beach Fl, which we rent on a month to month basis. Our telephone number is (612) 961-5656. We have no policies with respect to investments in real estate or interests in real estate, real estate mortgages, or securities of or interests in persons primarily engaged in real estate activities.

 

ITEM 3: LEGAL PROCEEDINGS

 

None

 

ITEM 4: MINE SAFETY DISCLOSURE

 

Not applicable

 

ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

 

Our shares of common stock are currently trading on the Over the Counter Market under the Symbol "NBIO". Our shares of common stock were initially approved for quotation on the OTC Bulletin Board under the name "Jin En International Group Holdings Inc." under the symbol, "JINE". On July 29, 2014, we changed our name to "Nascent Biotech Inc." upon completion of our merger with our wholly owned subsidiary, "Nascent Biotech Inc." and our trading symbol was changed to our current trading symbol, "NBIO".

 

The following quotations, obtained from www.nasdaq.com, reflect the high and low bids for our common shares.

 

 
21
 

 

The high and low bid prices of our common stock for the periods indicated below are as follows:

 

Quarter Ended

 

High

 

 

Low

 

March 31, 2016

 

 

0.44

 

 

 

0.13

 

December 31, 2015

 

 

0.32

 

 

 

0.14

 

September 30, 2015

 

 

1.59

 

 

 

0.30

 

June 30, 2015

 

 

1.51

 

 

 

1.05

 

March 31, 2015

 

 

1.60

 

 

 

0.80

 

December 31, 2014

 

 

1.51

 

 

 

1.00

 

September 30, 2014

 

 

1.01

 

 

 

0.06

 

June 30, 2014

 

 

0.06

 

 

 

0.06

 

 

(1)

Over-the-counter market quotations reflect inter-dealer prices without retail mark-up, mark-down or commission, and may not represent actual transactions.

  

Holders

 

As of July 14, 2016, there were approximately 128 holders of record of our common stock. As of such date, 21,767,565 common shares were issued and outstanding.

 

Our transfer agent is Transfer On Line, Inc. Its mailing address is 512 SE Salmon Street, Portland, OR, 97214 and its telephone number is (503) 227-2950.

 

Equity Compensation Plans

 

We have adopted a 2015 Stock Option Plan (the "2015 Plan") under which we are authorized to issue up to a maximum of 1,500,000 incentive stock options and non-qualified stock options to our directors, officers, employees and consultants. The 2015 Plan authorizes the Board of Directors or a committee thereof, to grant awards of incentive stock options and non-qualified stock options upon such terms and conditions as the Board may determine.

 

We currently have 395,000 options issued and outstanding under our 2015 Stock Option Plan which have been granted to four key employees and directors.

 

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

 

We did not purchase any of our shares of common stock or other securities during our fourth quarter of our fiscal year ended March 31, 2016.

 

 
22
 

 

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

 

During the year ended March 31, 2015, the Company issued an aggregate of 2,735,000 common shares for cash proceeds of $1,295,000.

 

During the year ended March 31, 2016 the Company issued 695,000 shares of common stock and 195,000 warrants exercisable at $0.01 per share into 195,000 shares of common stock for $695,000 in cash.

 

On September 21, 2015 the Company issued 200,000 shares of its common stock with a value of $150,000 as part of the settlement of the license agreement liability. The license agreement liability settled totaled $1,723,650 and the fair value of the stock was determined to be $150,000 resulting in a gain of $1,573,650.

 

During the year ended March 31, 2016 the Company issued an aggregate of 3,037,965 shares of common stock with a value of $3,784,598 for services and compensation.

 

During the year ended March 31, 2016 120,000 warrants were exercised into 120,000 shares of common stock for $1,200 in cash.

 

ITEM 6: SELECTED FINANCIAL DATA.

 

As a "smaller reporting company", we are not required to provide the information required by this Item.

 

ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

 

OVERVIEW

 

The following discussion should be read in conjunction with our audited financial statements and the related notes for the years ended March 31, 2016 and March 31, 2015 that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this annual report, particularly in the section entitled "Risk Factors".

 

Our consolidated financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

 

Results of Operations

 

The following summary of our results of operations should be read in conjunction with our consolidated financial statements for the year ended March 31, 2016, which are included herein.

 

 
23
 

 

Expenses

 

Operating expenses for the year ended March 31, 2016 were $3,870,726 including research and development cost $1,150,112 and general and administrative expenses of $4,294,264 offset by a gain on the settlement of license agreement of $1,573,650 which compares to the year ended March 31, 2015 in which our operating expenses of $2,123,076 with research and development costs of $1,674,925 and general and administrative costs of $469,835 offset by a gain on the settlement of accounts payable of $21,684, representing an increase of $1,747,650 in expenses incurred during fiscal 2016 over 2015. The increase was primarily due to stock based compensation which increased general and administrative expense.

 

Other expenses totaled $278,015 for the year ended March 31, 2016 compared to $29,053 for the same period in 2015. Interest expense of $280,499 for the year ended March 31, 2015 was the major impact on the higher other expense in 2016 over 2015.

 

Revenue, Net Income and Loss

 

We have had no revenues for the years ended March 31, 2016 and 2015.

 

Our net loss for the year ended March 31, 2016 was $4,148,740 compared to a net loss of $2,152,129 during the year ended March 31, 2015. The increase in net loss is primarily due general and administrative with stock for services of $3,784,598 in 2016 and none in the same period in 2015.

 

Our operations to date have been financed by the sale of our common stock and initial payment of a licenses sale. Our two largest expenses to date have been research and development and consulting fees. The research and development will grow as the product begins it clinical trials in the next fiscal year.

 

We do not anticipate generating revenues in the foreseeable future, and any revenues that we generate may not be sufficient to cover our operating expenses. If we do not succeed in raising additional capital, we may have to cease operations and you may lose your entire investment.

 

Liquidity and Capital Resources

 

At March 31, 2016 we had cash of $573,351 as compared to $107,571 in cash at March 31, 2015. Our accounts payable at March 31, 2016 were $2,339,244 as compared to $1,275,938 as of March 31, 2015. The accounts payable consist mainly of payables to two vendors, one that manufactured our product and one that is testing our products.

 

We have no revenues to satisfy our ongoing liabilities. Our auditors have issued a going concern opinion. Unless we secure equity or debt financing, of which there can be no assurance, we may not be able to continue any operations.

  

Working Capital

 

Our total current assets, as of March 31, 2016 consisted of $573,350 in cash as compared to total current assets of $109,637 consisting of cash of $107,571 and prepaid expenses of $2,066 as of March 31, 2015. The increase in current assets was entirely due to an initial cash payment for deferred revenue from a license sale.

 

Our total current liabilities as of March 31, 2016 were $2,970,093 as compared to total current liabilities of $3,084,590 as of March 31, 2015. The decrease in current liabilities was primarily attributed to in the settlement of the license liability of $1,792,650 offset by an increase in accounts payable.

 

As of March 31, 2016 the Company had negative working capital of $2,396,743 compared to negative working capital of $2,974,953 as of March 31, 2015. The decrease in negative working capital of $578,210 from 2015 to 2016 can be attributed to the settlement of the license liability offset by an increase in accounts payable in 2016 over 2015.

 

 
24
 

  

Cash Flows

 

Operating Activities

 

Cash used inoperating activities was $170,421 for the fiscal year ended March 31, 2016 compared to cash used in operating activities of $473,297 for the fiscal year ended March 31, 2015. The decrease in cash used in operating activities is attributed to stock based compensation being a large portion of the loss plus increased accounts payable in 2016 over 2015.

 

Investing Activities

 

Cash used in investing activities was zerofor the fiscal year ended March 31, 2016 compared to cash used in investing activities of $827,964 for the fiscal year ended March 31, 2015. The cash used in investing activities was for the purchase of materials held for research and development with alternative future use.

 

Financing Activities

 

Cash provided by financing activities during the fiscal year ended March 31, 2016 was $636,200, compared to $1,295,000 for the fiscal year ended March 31, 2015. The decrease in cash provided by financing activities is due to the sale of common stock of $695,000 and warrant exercises of $1,200 less the payment of a convertible debenture of $60,000 in 2016 with the sale of common stock of $1,295,000 for the same period in 2015.

 

Cash Requirements

 

We will require additional funds to fund our budgeted expenses over the next 12 months. These funds may be raised through equity financing, debt financing, or other sources, which may result in further dilution in the equity ownership of our shares. There is still no assurance that we will be able to maintain operations at a level sufficient for investors to obtain returns on their investments in our common stock. Further, we may continue to be unprofitable. We need to raise additional funds in the immediate future in order to proceed with our budgeted expenses.

  

Going Concern

 

The financial statements accompanying this report have been prepared on a going concern basis, which implies that our company will continue to realize its assets and discharge its liabilities and commitments in the normal course of business. Our company has not generated revenues since inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of our company as a going concern is dependent upon the continued financial support from our shareholders, the ability of our company to obtain necessary equity financing to achieve our operating objectives, and the attainment of profitable operations. As at March 31, 2016, our company has accumulated losses of $10,380,227 and a working capital deficit of $2,396,743. We do not have sufficient working capital to enable us to carry out our stated plan of operation for the next twelve months.

 

 
25
 

 

Due to the uncertainty of our ability to meet our current operating expenses and the capital expenses noted above in their report on the financial statements for the year ended March 31, 2016, MaloneBailey, LLP, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

 

The continuation of our business is dependent upon us raising additional financial support. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

 

Future Financings

 

We will require additional financing of an estimated $8,000,000 in order to enable us to proceed with our plan of operations, including our phase 1 and phase 2 clinical trials plus presentation of data to the FDA to proceed to phase 3 clinical trials. These cash requirements are in excess of our current cash and working capital resources. Accordingly, we will require additional financing in order to continue operations and to repay our liabilities. There is no assurance that any party will advance additional funds to us in order to enable us to sustain our plan of operations or to repay our liabilities.

 

We anticipate continuing to rely on equity sales of our common stock in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned business activities.

 

We presently do not have any arrangements for additional financing for the expansion of our exploration operations, and no potential lines of credit or sources of financing are currently available for the purpose of proceeding with our plan of operations.

 

If we are unable to raise the funds that we require to execute our plan of operation, we intend to scale back our operations commensurately with the funds available to us.

 

Off-Balance Sheet Arrangements

 

We currently have no off-balance sheet arrangements.

 

ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


As a "smaller reporting company", we are not required to provide the information required by this Item.

  

ITEM 8: FINANCIAL STATEMENTS and SUPPLEMENTARY DATA.

 

Financial statements are audited and included in this Form 10-K as an exhibit and are incorporated herein by this reference.

 

ITEM 9: CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE.

 

None

 

 
26
 

 

ITEM 9A: CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

For purposes of this section, the term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the "Act") (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. It should be noted that the design of any system of controls 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, regardless of how remote. As of the end of the period covered by this Annual Report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our CEO and CFO has concluded that the Company's disclosure controls and procedures are not effective because of the identification of a material weakness in our internal control over financial reporting which is identified below, which we view as an integral part of our disclosure controls and procedures.

 

Changes in Internal Controls over Financial Reporting

 

We have not made any changes in our internal controls over financial reporting that occurred during the period covered by this Form 10-K that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Management's Annual Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed 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. Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

  

Our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2016 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on its evaluation, our management concluded that there are material weaknesses in our internal control over financial reporting. We lack full time personnel in accounting and financial staff to sufficiently monitor and process financial transactions in an efficient and timely manner. This allows for insufficient segregation of duties and a lack of multiple levels of supervision and review. Our history of losses has severely limited our budget to hire and train enough accounting and financial personnel needed to adequately provide this function. Consequently, we lacked sufficient technical expertise, reporting standards and written policies and procedures. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

 

This Form 10-K does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting because the attestation report requirement has been removed for "smaller reporting companies" under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

 

ITEM 9B: OTHER INFORMATION

 

None

 

 
27
 

 

PART III

 

ITEM 10: DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

 

The following individuals serve as the directors and executive officers of our company as of the date of this annual report. All directors of our company hold office until the next annual meeting of our shareholders or until their successors have been elected and qualified. The executive officers of our company are appointed by our board of directors and hold office until their death, resignation or removal from office.

 

Name

Position Held with Our

Company

Age

Date First Elected or

Appointed

 

 

 

 

 

 

 

Sean Carrick

President, Secretary, and Director

48

July, 2014

Doug Karas

Independent Director

51

April, 2016

Lowell Holden

Chief Financial Officer and Director

73

July, 2014

Brandon Price

Senior VP Business Development and Director

68

July, 2014

 

Business Experience

 

The following is a brief account of the education and business experience during at least the past five years of each director, executive officer and key employee of our company, indicating the person's principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.

 

The business experience during the past five years of the person presently listed above as an Officer or Director of the Company is as follows:

 

Lowell Holden – Chief Financial Officer and Director - Lowell Holden has been the Chief Financial Officer and Chief Accounting Officer of the Company since May of 2014. Since 1983, Mr. Holden has owned and operated his own consulting firm, LS Enterprises, Inc., which provides business consulting, accounting and other services to businesses. Mr. Holden has a broad range of business experience including managing, securing financing, structuring of transactions, and is experienced and knowledgeable in managing relationships with customers, financing institutions and stockholders. Presently Mr. Holden serves as the Chief Financial Officer of Skkynet Cloud Systems, Inc (SKKY) and Chief Executive Officer and director of PTS, Inc (PTSH). Mr. Holden also has a background in assisting companies in fulfilling their financial auditing and SEC reporting requirements. Mr. Lowell Holden has a Bachelor's of Science degree from Iowa State University.

 

Dr. Brandon Price - Senior Vice President, Business Development and Director- Dr. Price has more than 30 years in the biopharmaceutical industry. Recently he co-founded Biogenin, a Mexican company that licenses, develops and registers human and veterinary products (pharmaceuticals, diagnostics and medical devices) for Latin American markets. Dr. Price has been CEO of four biotechnology start-ups (plant transgenic expression systems, stem cell therapies, chemical cancer drugs, synthetic vaccines), and has held senior management positions at Cardinal Health and Ortho Diagnostic Systems (a Johnson & Johnson company). In addition, he co-founded the Institute for Cell Analysis at the University of Miami (FL), and the International Center for Entrepreneurial Excellence at the University of Guadalajara. He has served as Board Chair of the Virginia Biotechnology Association, Maryland's counterpart, MdBIO, and was named 2001 Biotechnology Leader of the Year in Virginia. He currently sits on the board of directors of four companies, and chairs the Advisory Board for the Professional Science Management Program in Bioinformatics at Virginia Commonwealth University (Richmond, VA). Presently, he is Visiting Professor at the University of Guadalajara School of Business where he teaches the course "Entrepreneurism and Business Planning". He holds the B.S. and Ph.D. degrees in Biophysics from the University of Michigan in Ann Arbor and is the author of more than 50 articles in the scientific and business literature. Mr. Price served as President of GalenBio, Inc from 2007 through 2012. Mr. Price was associated with Falcon Ridge Associates, Inc from 2005 through 2013, was the cofounder, President and director of Biogenin SAPI de CV from 2012 to today and has been a Director and Senior Vice President of Nascent Biotech, Inc since 2014.

 

 
28
 

 

Sean Carrick – President and Director - Sean Carrick brings to Nascent a career that spans more than 25 years of experience building and leading successful medical device, Pharmaceutical and Biotech companies in large, mid-cap and venture-backed stages. Previously, Mr. Carrick served as President of Silver Star Mining Corporation from January 1, 2013 to November, 2013where he was responsible for all business management and strategic direction. Prior to Silverstar Mr. Carrick served as Director of Sales, Southern US, from August 2010 through November 2012 at Maquet Medical Systems and Florida Director of Sales at the Linvatec Division of Conmed Corporation (December 2007 through July 2010). Mr. Carrick holds a BS Degree in Economics and Business Administration from Duquesne University and strategic leadership and management certificates from the Cogency Group, Eckerd College and Maquet Medical Systems.

 

Douglas J. Karas – Independent Director - Douglas J. Karas is Vice President, Performance Analysis and Investment Risk for Franklin Templeton Companies LLC. Mr. Karas is responsible for investment Regulatory Governance, GIPSÒ Compliance, Fund Board, Sales and Marketing support. Mr. Karas brings cross-functional leadership and collaboration with a strong customer service focus at all organizational levels. Mr. Karas is an Affiliate member of the Tampa Bay CFA Society. Mr. Karas has been with Franklin Templeton Investments for 18 years. Prior to this position, he was the director- Financial Business Processes & Systems and was responsible for the firm's corporate finance applications including treasury, accounting, corporate and fund taxation and corporate development and planning. He has extensive operations management, consulting, risk and regulatory compliance, re-engineering, project management, and system development experience. Previous positions with Franklin Templeton include senior manager financial operations, manager financial program management office and manager treasury accounting control compliance. Mr. Karas' experience cuts across operations and applications and he has exposure to treasury cash, deal and risk; revenue calculations and recognition; external and internal financial reporting (including 10-K/10-Q, Business Line Profitability, Transfer Pricing and Fund Profitability), financial instruments (dollar rolls, derivatives, ABS and MBS- Security set-up and Maintenance, Pricing, Revenue Recognition, etc.); and Procedures of Portfolio Managers and Investment Advisors in accordance with the Securities Act of 1933 and 1934, Investment Company and Investment Advisor Acts of 1940. Prior to joining Franklin Templeton, Mr. Karas held positions with Transamerica Life Companies and Federated Investors. Mr. Karas graduated with a B.S. in business, accounting from the University of Pittsburgh and is a Certified Public Accountant.

 

Identification of Significant Employees

 

As of the date of this Report, other than our current directors and officers, we have no other full-time or part-time employees.

 

Family Relationships

 

There are no family relationships among any of our directors, executive officers and proposed directors or executive officers.

 

Compliance with Section 16(a) of the Securities Exchange Act of 1934

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, and the rules of the Securities and Exchange Commission (SEC) require our directors, executive officers and persons who own more than 10% of our Class A common stock to file reports of their ownership and changes in ownership of our Class A common stock with the SEC. Based solely upon a review of copies of such forms filed on Forms 3, 4, and 5, and amendments thereto furnished to us, we determined that four directors, executive officers or beneficial owners of more than 10% of our common stock failed to file a report on a timely basis during the year ended March 31, 2016.

 

 
29
 

 

Name

Position

Filed Reports Timely

Sean Carrick

Officer, Director

Late filing of Form 4

Mark Glassy

Shareholder

Yes

Brandon Price

Officer, Director

Late filing of Form 4

Douglas Karas

Director

Late filing Form 3

Lowell Holden

Officer, Director

Late filing of Form 4

 

Committees of the Board

 

All proceedings of our board of directors were conducted by resolutions consented to in writing by all the directors and filed with the minutes of the proceedings of the directors. Such resolutions consented to in writing by the directors entitled to vote on that resolution at a meeting of the directors are, according to the Incorporation laws of the state of Nevada and the bylaws of our company, as valid and effective as if they had been passed at a meeting of the directors duly called and held.

 

Our company currently does not have nominating, compensation committees or committees performing similar functions nor does our company have a written nominating, compensation or audit committee charter. Our board of directors does not believe that it is necessary to have such committees because it believes that the functions of such committees can be adequately performed by our directors.

 

Our company does not have any defined policy or procedure requirements for shareholders to submit recommendations or nominations for directors. The directors believe that, given the early stage of our development, a specific nominating policy would be premature and of little assistance until our business operations develop to a more advanced level. Our company does not currently have any specific or minimum criteria for the election of nominees to the board of directors and we do not have any specific process or procedure for evaluating such nominees. Our directors assess all candidates, whether submitted by management or shareholders, and make recommendations for election or appointment.

 

Audit Committee and Audit Committee Financial Expert

 

Our audit committee consists of our outside director Douglas Karas who serves as Chairman of the committee and sole member. Our board of directors has determined that none of the members of our audit committee qualifies as an "audit committee financial expert" as defined in Item 407(d)(5)(ii) of Regulation S-K, and is "independent" as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as amended.

 

We believe that the members of our board of directors are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting.

 

 
30
 

 

Code of Ethics

 

We adopted a Code of Ethics applicable to all of our directors, officers, employees and consultants, which is a "code of ethics" as defined by applicable rules of the SEC. If we make any amendments to our Code of Ethics other than technical, administrative, or other non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of our Code of Ethics to our chief executive officer, chief financial officer, or certain other finance executives, we will disclose the nature of the amendment or waiver, its effective date and to whom it applies in a Current Report on Form 8-K filed with the SEC.

  

ITEM 11: EXECUTIVE COMPENSATION.

 

The following tables sets for the compensation for all officers and directors during the past three years:

 

DIRECTORS AND OFFICERS - COMPENSATION

 

 

 

 

Annual compensation

 

 

Long-term compensation

 

 

 

 

 

 

 

 

 

 

 

 

Awards

 

 

Payouts 

 

 

 

 

 

 

Name and Principal

 

 

 

Salary

 

 

Bonus

 

 

Other
annual

compensation

 

 

Restricted

stock

award(s)

 

 

Securities
under-
lying
options/
SARs

 

 

LTIP
payouts

 

 

 

All other

compensation

 

 

Total

 

Position

 

Year

 

($)

 

 

($)

 

 

($)

 

 

($)

 

 

(#)

 

 

($)

 

 

($)

 

 

Compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brandon Price

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior VP Business

 

2016

 

 

24,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

24,000

 

Development,

 

2015

 

 

12,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

12,000

 

Director

 

2014

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sean Carrick

 

2016

 

 

99,250

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

99,250

 

President,

 

2015

 

 

39,500

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

39,500

 

Director

 

2014

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lowell Holden(1)

 

2016

 

 

55,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

55,000

 

CFO, Director

 

2015

 

 

44,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

44,000

 

 

 

2014

 

 

5,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5,000

 

__________

(1) Mr. Holden through his Company LS Enterprises, Inc received $5,000 consulting fee for accounting work in the year ended March 31, 2014.

 

As of March 31, 2016, the Company has no other Executive Compensation issues which would require the inclusion of other mandated table disclosures.

 

 
31
 

   

Narrative Disclosure to Summary Compensation Table

 

There are no employment contracts, compensatory plans or arrangements, including payments to be received from our company with respect to any executive officer, that would result in payments to such person because of his or her resignation, retirement or other termination of employment with our company, or its subsidiaries, any change in control, or a change in the person's responsibilities following a change in control of our company.

  

Stock Option Plan

 

We have adopted a 2015 Stock Option Plan (the "2015 Plan") under which we are authorized to issue up to a maximum of 1,500,000 incentive stock options and non-qualified stock options to our directors, officers, employees and consultants. The 2015 Plan was approved by our stockholders. The 2015 Plan authorizes the Board of Directors or a committee thereof, to grant awards of incentive stock options and non-qualified stock options upon such terms and conditions as the Board may determine. The 2015 Plan is administered by the Board of Directors.

 

As of March 31, 2016 the Company has 395,000 options issued and outstanding under our 2015 Stock Option Plan which have been granted to four key employees and directors and two consultants. Each of the foregoing individuals has been awarded options which will vest in equal annual installments over a four year period with the first 20% vesting at the date of grant. All of the options are exercisable between $0.30 and $0.50 per share.

 

The following table sets forth outstanding options and holders as of March 31, 2016:

 

Recipient

 

Title

 

 

Number
Options

 

Sean Carrick

 

Officer and Director

 

 

 

75,000

 

Brandon Price

 

Officer and Director

 

 

 

75,000

 

Lowell Holden

 

Officer and Director

 

 

 

75,000

 

Employees and consultants as a group

 

 

 

 

 

170,000

 

Total

 

 

 

 

 

 

395,000

 

 

 
32
 

 

Equity Compensation Plan Information

 

Plan Category

 

Number of securities to be issued upon exercise of outstanding options, warrants and rights

 

 

Weighted-average exercise price of outstanding options, warrants and rights

 

 

Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities reflected in column (a)

 

 

 

(a)

 

 

(b)

 

 

(c)

 

Equity compensation plans approved by security holders

 

 

1,500,000

 

 

 

--

 

 

 

1,105,000

 

Equity compensation plans not approved by security holders

 

 

--

 

 

 

--

 

 

 

--

 

Total

 

 

1,500,000

 

 

 

--

 

 

 

1,105,000

 

 

The Company utilizes the shares available under the Plan described above to issue shares of stock as compensation to employees, consultants and officers and directors. At the end of each quarter, the Board of Directors of the Company determines the amount of shares to be issued pursuant to the Plan.

 

Compensation of Directors

 

We reimburse our directors for expenses incurred in connection with attending board meetings. We have not paid any director's cash compensation for services rendered as a director since our inception through March 31, 2016.

 

We have no formal plan for compensating our directors for their service in their capacity as directors, although such directors have received stock options to purchase common shares as awarded by our board of directors. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. No director received and/or accrued any cash compensation for their services as a director, including committee participation and/or special assignments. The directors have been awarded an aggregate of 225,000 options for the efforts as directors.

 

Pension, Retirement or Similar Benefit Plans

 

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the board of directors or a committee thereof.

 

 
33
 

 

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS and MANAGEMENT and RELATED STOCKHOLDER MATTERS

 

The following table sets forth certain information concerning the number of shares of common stock owned beneficially as of March 31, 2016 by: (i) each of our directors; (ii) each of our named executive officers; and (iii) each person or group known by us to beneficially own more than 5% of our outstanding shares of common stock. Unless otherwise indicated, the shareholders listed below possess sole voting and investment power with respect to the shares of common stock they own.

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

 

 

 

 

 

 

 

 

 

Title of Class

 

Name and Address
of Beneficial Owner

 

Amount and Nature of Beneficial Ownership

 

 

Percentage
of Class(1)

 

 

 

 

 

 

 

 

 

 

 

 

Common

 

Douglas Karas- Director

601 21st Street, Suite 300

Vero Beach, FL 32960

 

 

10,000

 

 

 

0.00%

 

 

 

 

 

 

 

 

 

 

 

Common

 

Lowell Holden – CFO & Director

601 21st Street, Suite 300

Vero Beach, FL 32960

 

 

744,687

 

 

 

3.45%

 

 

 

 

 

 

 

 

 

 

 

Common

 

Brandon Price- Senior VP & Director

601 21st Street, Suite 300

Vero Beach, FL 32960

 

 

919,687

 

 

 

4.25%

 

 

 

 

 

 

 

 

 

 

 

Common

 

Sean Carrick CEO & Director

601 21st Street, Suite 300

Vero Beach, FL 32960

 

 

1,274,687

 

 

 

5.9%

 

 

 

 

 

 

 

 

 

 

 

Common

 

Mark Glassy- 5% shareholder

601 21st Street, Suite 300

Vero Beach, FL 32960

 

 

4,186,500

 

 

 

19.37%

 

 

 

 

 

 

 

 

 

 

 

Common

 

Darryl Goldstein – 5% shareholder

601 21st Street, Suite 300

Vero Beach, FL 32960

 

 

2,503,000

 

 

 

11.0%

 

 

 

 

 

 

 

 

 

 

 

Common

 

All directors and executive officers as a group (4 persons)

 

 

2,949,061

 

 

 

13.6%

 

We are unaware of any contract or other arrangement or provisions of our Articles or Bylaws the operation of which may at a subsequent date result in a change of control of our company. There are not any provisions in our Articles or Bylaws, the operation of which would delay, defer, or prevent a change in control of our company.

 

 
34
 

 

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

 

As of March 31, 2016 and March 31, 2015, the Company had accounts payable to officers and Directors of zero and $4,672, respectively. The amounts were unsecured, bearing no interest and were due on demand. The amounts were owed for services provided and advances. As of March 31, 2016, the balance was zero.

 

On January 27, 2015 the Company issued 300,000 options with an exercise price of $0.50 per share to four officers and directors.

 

On September 1, 2015 the Company entered into five (5) year employment contracts with three of its officers and directors. Under the terms of the agreements the Company issued shares of common stock to the officers and directors equaling 11% of the outstanding shares of the Company as of the date of the contracts. As additional future shares are issued, the officers and directors are entitled to additional shares so their aggregate ownership percentage remains at 11% of the outstanding shares of the Company. The following table sets forth the shares earned under these contracts during the year ended March 31, 2016:

 

Officer and Director

 

Initial Share
Awards Under the Contracts

 

 

Additional Shares Earned to Maintain Ownership Percentage

 

 

Total Shares
Earned

 

President

 

 

1,028,910

 

 

 

46,818

 

 

 

1,075,728

 

Chief Financial Officer

 

 

617,346

 

 

 

28,091

 

 

 

645,437

 

Senior Vice President

 

 

617,346

 

 

 

28,091

 

 

 

645,437

 

Total

 

 

2,263,602

 

 

 

103,000

 

 

 

2,366,602

 

 

In addition, if the officers and directors are removed from the company they are entitled to receive a cash severance payment per annum for each year of the term of the contract less salary payments received to date of termination. The table below sets forth the annual salary and annual severance amounts per the contracts:

 

Officer and Director

 

Annual Compensation
Paid

 

 

Annual Severance per Contract if Terminated

 

President

 

$99,250

 

 

$250,000

 

Chief Financial Officer

 

$55,000

 

 

$180,000

 

Senior Vice President

 

$24,000

 

 

$140,000

 

Total

 

$178,250

 

 

$570,000

 

 

 
35
 

 

During the years ended March 31, 2016 and 2015 the Company paid a consultant and former officer of the Company $60,000 and $43,000 in consulting fees respectively.

 

During the year ended March 31, 2016 the Company issued 535,000 shares of common stock to a related party for services.

 

Except as described above, none of the following persons has any direct or indirect material interest in any transaction to which we are a party during the past two years, or in any proposed transaction to which our company is proposed to be a party:

 

A.

any director or officer;

 

B.

any proposed nominee for election as a director;

 

C.

any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our common stock; or

 

D.

any relative or spouse of any of the foregoing persons, or any relative of such spouse, who has the same house as such person or who is a director or officer of any parent or subsidiary.

 

Board Independence

 

As currently constituted and applying the rules of NASDAQ one of the members of our Board of Directors is independent. We are committed to eventually establishing a board in which a majority of our members consist of independent directors, as defined under the NASDAQ rules. Our ability to implement this goal will depend upon the growth of the Company and our ability to attract and compensate strategic persons willing to serve in that function.

 

We currently act with four directors, consisting of Brandon Price, Lowell Holden, Doug Karas and Sean Carrick. We have a standing audit committee, but not a standing compensation or nominating committee, for which our entire board of director's act in such capacities. We believe that our members of our board of directors are capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting.

 

ITEM 14: PRINCIPAL ACCOUNTING FEES AND SERVICE.

 

The following tables present for each of the last two fiscal years the aggregate fees billed in connection with the audits of our financial statements and other professional services rendered by our independent registered public accounting firm MaloneBailey LLP:

 

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

 

 

Audit fees

 

$26,500

 

 

$25,200

 

Audit related fees

 

 

-

 

 

 

-

 

Tax fees

 

 

-

 

 

 

-

 

All other fees

 

 

26,500

 

 

 

25,200

 

 

 
36
 

 

Audit fees represent the professional services rendered for the audit of our annual financial statements and the review of our financial statements included in quarterly reports, along with services normally provided by the accounting firm in connection with statutory and regulatory filings or engagements. Audit-related fees represent professional services rendered for assurance and related services by the accounting firm that are reasonably related to the performance of the audit or review of our financial statements that are not reported under audit fees.

 

Tax fees represent professional services rendered by the accounting firm for tax compliance, tax advice, and tax planning. All other fees represent fees billed for products and services provided by the accounting firm, other than the services reported for in the other categories.

 

ITEM 15: EXHIBITS, FINANCIAL STATEMENT SECHEDULES.

 

(a)

Financial Statements

 

(1)

Financial statements for our company are listed in the index under Item 8 of this document

 

(2)

All financial statement schedules are omitted because they are not applicable, not material or the required information is shown in the financial statements or notes thereto.

 

(b)

Exhibits

 

Exhibit Number

Description

 

 

 

(31)

Section 302 Certifications

31.1*

Section 302 Certification under Sarbanes-Oxley Act of 2002 of the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer

(32)

Section 906 Certification

32.1*

Section 906 Certification under Sarbanes-Oxley Act of 2002 of the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer

101**

Interactive Data Files

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document.

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document.

 

 
37
 

 

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, thereto duly authorized.

 

 

NASCENT BIOTECH INC.

(Registrant)

 

 

 

 

Dated: July 14, 2016

By:

/s/ Sean Carrick

Sean Carrick, President

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Dated: July 14, 2016

By:

/s/ Sean Carrick

Sean Carrick, President, Secretary and Director

Dated: July 14, 2016

By:

/s/ Douglas Karas

Douglas Karas, Independent Director

Dated: July 14, 2016

By:

/s/ Lowell Holden

Lowell Holden, Chief Financial Officer and Director

Dated: July 14, 2016

By:

/s/ Brandon Price

Brandon Price, Senior VP Business Development and Director

 

 
38
 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

Board of Directors

Nascent Biotech, Inc.

Vero Beach, Florida

 

We have audited the accompanying consolidated balance sheets of Nascent Biotech, Inc. and subsidiary (collectively, the "Company") as of March 31, 2016 and 2015 and the related consolidated statements of operations, stockholders' deficit, and cash flows for each of the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Nascent Biotech, Inc. and subsidiary as of March 31, 2016 and 2015 and the consolidated results of their operations and their cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has a working capital deficit and an accumulated deficit which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters also are described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

/s/ MaloneBailey, LLP

www.malonebailey.com

Houston, Texas

July 14, 2016

 

 
39
 

 

NASCENT BIOTECH, INC.

CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31,

 

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

ASSETS

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$573,350

 

 

$107,571

 

Prepaid expenses

 

 

--

 

 

 

2,066

 

Total current assets

 

 

573,350

 

 

 

109,637

 

 

 

 

 

 

 

 

 

 

Materials held for research and development with alternative future use

 

 

827,964

 

 

 

827,964

 

Total assets

 

$1,401,314

 

 

$937,601

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$2,339,244

 

 

$1,275,938

 

Accounts payable to related parties

 

 

--

 

 

 

4,672

 

License agreement liability

 

 

27,000

 

 

 

1,792,650

 

Accrued interest

 

 

-

 

 

 

5,000

 

Derivate liability

 

 

3,849

 

 

 

6,330

 

Deferred revenue

 

 

600,000

 

 

 

--

 

Total current liabilities

 

 

2,970,093

 

 

 

3,084,590

 

 

 

 

 

 

 

 

 

 

Convertible note

 

 

--

 

 

 

60,000

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

2,970,093

 

 

 

3,144,590

 

 

 

 

 

 

 

 

 

 

Stockholders' deficit:

 

 

 

 

 

 

 

 

Preferred stock, $0.001par value, 10,000,000 authorized, none issued and outstanding

 

 

--

 

 

 

--

 

Common stock, $0.001 par value,100,000,000 authorized, 21,617,565 and 17,564,600 issued and outstanding, respectively

 

 

21,617

 

 

 

17,564

 

Additional paid-in capital

 

 

8,789,831

 

 

 

4,006,934

 

Accumulated deficit

 

 

(10,380,227)

 

 

(6,231,487)

Total stockholders' deficit

 

 

(1,568,779)

 

 

(2,206,989)

Total liabilities and stockholders' deficit

 

$1,401,314

 

 

$937,601

 

 

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

 

 
40
 

 

NASCENT BIOTECH, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR YEARS ENDED MARCH 31,

 

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

General and administrative expense

 

$4,294,264

 

 

$469,835

 

Gain on settlement of accounts payable

 

 

--

 

 

 

(21,684)

Gain on settlement of license agreement liability

 

 

(1,573,650)

 

 

--

 

Research and development

 

 

1,150,112

 

 

 

1,674,925

 

Loss from operations

 

 

(3,870,726)

 

 

(2,123,076)

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest income

 

 

4

 

 

 

61

 

Gain (loss) on change in fair value of derivative liabilities

 

 

2,481

 

 

 

(5,112)

Interest expense

 

 

(280,499)

 

 

(24,002)

Total other income (expense)

 

 

(278,014)

 

 

(29,053)

 

 

 

 

 

 

 

 

 

Net loss

 

$(4,148,740)

 

$(2,152,129)

 

 

 

 

 

 

 

 

 

Net loss per share, basic and diluted

 

$(0.21)

 

$(0.15)

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding, basic and diluted

 

 

19,773,297

 

 

 

13,986,980

 

 

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

 

 
41
 

 

NASCENT BIOTECH, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

YEARS ENDED MARCH 31, 2016 AND 2015

 

 

 

 

 

 

Additional

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2014

 

 

7,000,200

 

 

 

7,000

 

 

 

2,622,180

 

 

 

(4,079,358)

 

 

(1,450,178)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued in reverse merger

 

 

22,829,400

 

 

 

22,829

 

 

 

(41,829)

 

 

--

 

 

 

(19,000)

Cancellation of common stock

 

 

(15,000,000)

 

 

(15,000)

 

 

15,000

 

 

 

--

 

 

 

--

 

Common stock issued for cash

 

 

2,735,000

 

 

 

2,735

 

 

 

1,292,265

 

 

 

--

 

 

 

1,295,000

 

Option expense

 

 

--

 

 

 

--

 

 

 

119,318

 

 

 

--

 

 

 

119,318

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

--

 

 

 

--

 

 

 

--

 

 

 

(2,152,129)

 

 

(2,152,129)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2015

 

 

17,564,600

 

 

$17,564

 

 

$4,006,934

 

 

$(6,231,487)

 

$(2,206,989)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock and warrants issued for cash

 

 

695,000

 

 

 

695

 

 

 

694,305

 

 

 

--

 

 

 

695,000

 

Common stock issued for warrant exercise

 

 

120,000

 

 

 

120

 

 

 

1,080

 

 

 

--

 

 

 

1,200

 

Common stock issued for services

 

 

3,037,965

 

 

 

3,038

 

 

 

3,781,560

 

 

 

--

 

 

 

3,784,598

 

Common stock issued for settlement of license agreement liability

 

 

200,000

 

 

 

200

 

 

 

149,800

 

 

 

--

 

 

 

150,000

 

Option expense

 

 

--

 

 

 

--

 

 

 

156,152

 

 

 

--

 

 

 

156,152

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

--

 

 

 

---

 

 

 

--

 

 

 

(4,148,740)

 

 

(4,148,740)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2016

 

 

21,617,565

 

 

$21,617

 

 

$8,789,831

 

 

$(10,380,227)

 

$(1,568,779)

 

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

 

 
42
 

 

NASCENT BIOTECH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR YEARS ENDED MARCH 31,

 

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$(4,148,740)

 

$(2,152,129)
Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Stock based compensation

 

 

3,784,598

 

 

 

--

 

Option expense

 

 

156,152

 

 

 

119,318

 

Change in fair value of derivative liabilities

 

 

(2,481)

 

 

5,112

 

Derivative warrants issued for services

 

 

--

 

 

 

1,218

 

Gain on settlement of accounts payable

 

 

--

 

 

 

(21,684)

Gain on settlement of license agreement liability

 

 

(1,573,650)

 

 

--

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

 

1,058,306

 

 

 

1,255,051

 

Accounts payable to related party

 

 

(4,672)

 

 

(625)

License agreement liability

 

 

(42,000)

 

 

321,333

 

Prepaid expenses

 

 

2,066

 

 

 

(891)

Deferred revenue

 

 

600,000

 

 

 

-

 

Net cash used in operating activities

 

 

(170,421)

 

 

(473,297)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchase of materials held for research and development with alternative future use

 

 

--

 

 

 

(827,964)

Net cash (used in) provided by investing activities

 

 

--

 

 

 

(827,964)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from sale of common stock and warrants

 

 

695,000

 

 

 

1,295,000

 

Common stock issued for warrants

 

 

1,200

 

 

 

--

 

Principal payment on convertible debt

 

 

(60,000)

 

 

--

 

Net cash provided by financing activities

 

 

636,200

 

 

 

1,295,000

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash

 

 

465,779

 

 

 

(6,261)

Cash – beginning of year

 

 

107,571

 

 

 

113,832

 

Cash – end of year

 

$573,350

 

 

$107,571

 

 

 

 

 

 

 

 

 

 

SUPPLEMENT DISCLOSURES:

 

 

 

 

 

 

 

 

Interest paid

 

$8,550

 

 

$--

 

Income taxes paid

 

 

--

 

 

 

--

 

 

 

 

 

 

 

 

 

 

NON-CASH TRANSACTIONS

 

 

 

 

 

 

 

 

Common stock issued in reverse merger

 

$--

 

 

$19,000

 

Common stock issued for settlement of license agreement liability

 

 

150,000

 

 

 

--

 

Cancellation of common stock

 

 

--

 

 

 

15,000

 

 

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

 

 
43
 

 

NASCENT BIOTECH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS

 

Nascent Biotech, Inc ("Biotech") was incorporated on March 3, 2014 under the laws of the State of Nevada.

 

On July 15, 2014 Biotech entered into a reverse merger with Jin-En Group International Holding Company (Jin-En). Jin-En issued 7,500,200 shares of its common stock for all the outstanding shares of Nascent Biotech, Inc. In addition, Jin-En cancelled 15,000,000 shares of its common stock. Prior to the merger Jin-En had 22,829,400 shares outstanding. Jin-En changed its name to Nascent Biotech, Inc. Jin-En had $19,000 of net liabilities at the date of the merger.

 

The net liabilities of Jin-En consisted of the following as of the date of the merger:

 

Receivable from Biotech

 

$60,000

 

Accounts payable

 

 

(19,000)

Convertible note

 

 

(60,000)

Net liabilities

 

$(19,000)

 

Nascent Biotech is engaged in the research and development of the antibodies for control of brain and pancreatic cancer in humans.

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles. The Company has elected a fiscal year ending on March 31.

 

Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of Nascent Biotech, Inc. and its wholly-owned subsidiary Nascent Biologics, Inc. All intercompany accounts and transactions have been eliminated.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

 

 
44
 

 

Revenue Recognition

 

Revenues may be earned through the sale of product license agreements for the production and sale of the product within specific countries or territories. Revenue may include license sales and future royalties. Revenue will be recognized when (a) persuasive evidence of an arrangement exists, (b) delivery has occurred or services have been rendered, (c) the fee is fixed or determinable, and (d) collectability is reasonable assured.

 

Stock-Based Compensation

 

The Company accounts for stock-based compensation to employees and consultants in accordance with FASB ASC 718. Stock-based compensation to employees is measured at the grant date, based on the fair value of the award, and is recognized as expense over the requisite employee service period. The Company accounts for stock-based compensation to other than employees in accordance with FASB ASC 505-50. Equity instruments issued to other than employees are valued at the earlier of a commitment date or upon completion of the services, based on the fair value of the equity instruments and is recognized as expense over the service period. The Company estimates the fair value of stock-based payments using the Black Scholes option-pricing model for common stock options and warrants and the closing price of the Company's common stock for common share issuances.

 

Research and Development Expense

 

Research and development costs are expensed in the period they are incurred in accordance with ASC 730, Research and Development unless they meet specific criteria related to technical, market and financial feasibility, as determined by management, including but not limited to the establishment of a clearly defined future alternative use for the product, and the availability of adequate resources to complete the project. If all criteria are met, the costs are deferred and amortized over the expected useful life, or written off if a product is abandoned. At March 31, 2016 and 2015, the Company had $827,964 in deferred development costs associated with materials held with a future alternative use.

 

Materials Held for Research and Development with Future Alternative Use

 

The Company has incurred costs related to the production of 424 grams of Pritumumab a human mono-clinical antibody. Of the materials, 110 grams have been designated for use in the brain cancer clinical trials and has been expensed as of March 31, 2016 as research and development. The Company has determined the Pritumumab can be used in its current state in pancreatic, breast and lung cancer trials, none of which have commenced. Under the guidelines of ASC 730-10-25-2, Research and Development, the Company has capitalized the cost of the 314 grams of material that will not be used in the present trials but is available for future alternative use. The capitalize costs will be expensed as research and development as the materials are consumed in their use for alternative clinical trials.

 

Property and Equipment

 

Property and equipment is recorded at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the expected useful life of the asset (3 to 5 years), beginning when the asset is available and ready for use. Expenditures associated with upgrades and enhancements that improve, add functionality, or otherwise extend the life of property and equipment are capitalized, while expenditures that do not, such as repairs and maintenance, are expensed as incurred. For the years ended March 31, 2016 and 2015, depreciation expense totaled zero, respectively.

 

 
45
 

 

Impairment of Long-Lived Assets

 

The Company reviews the carrying value of its long-lived assets annually or whenever events or changes in circumstances indicate that the historical-cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the asset by comparing the undiscounted future net cash flows expected to result from the asset to its carrying value. If the carrying value exceeds the undiscounted future net cash flows of the asset, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived asset. Fair value is estimated based upon either discounted cash flow analysis or estimated salvage value. There was no impairment recognized during the years ended March 31, 2016 and 2015.

 

Income Taxes

 

Deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized.

 

The Company accounts for income taxes under the provisions of FASB ASC 740, Accounting for Income Taxes. It prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As a result, the Company has applied a more-likely-than-not recognition threshold for all tax uncertainties. The guidance only allows the recognition of those tax benefits that have a greater than 50% likelihood of being sustained upon examination by the various taxing authorities.

 

Basic and Diluted Net Loss per Share

 

Basic and diluted net loss per share calculations are calculated on the basis of the weighted average number of common shares outstanding during the year. Diluted loss per share calculations includes the dilutive effect of common stock. Basic and diluted net loss per share is the same due to the absence of common stock equivalents.

 

Fair Value of Financial Instruments

 

The Company's financial instruments consist of cash and cash equivalents, accounts payable and accrued expenses and shareholder loans. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.

 

Financial assets and liabilities recorded at fair value in our condensed consolidated balance sheets are categorized based upon a fair value hierarchy established by GAAP, which prioritizes the inputs used to measure fair value into the following levels:

 

Level 1— Quoted market prices in active markets for identical assets or liabilities at the measurement date.

 

Level 2— Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable and can be corroborated by observable market data.

 

Level 3— Inputs reflecting management's best estimates and assumptions of what market participants would use in pricing assets or liabilities at the measurement date. The inputs are unobservable in the market and significant to the valuation of the instruments.

 

A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

 

 
46
 

 

Financial assets and liabilities measured at fair value on a recurring basis are summarized below as of March 31, 2016 and 2015:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

As of March 31, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

None

 

$-

 

 

$-

 

 

$-

 

 

$-

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$-

 

 

$-

 

 

$6,330

 

 

$6,330

 

As of March 31, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

None

 

$-

 

 

$-

 

 

$-

 

 

$-

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$-

 

 

$-

 

 

$3,849

 

 

$3,849

 

 

On May 20, 2014 the Company granted 13,317 common stock warrants for services. The warrants vest immediately, are exercisable at $1.00 per share and expire on May 21, 2017. The Company determined that the warrants were not afforded equity classification because the warrants are not considered to be indexed to the Company's own stock due to the anti-dilution provision. Accordingly, the warrants are treated as a derivative liability and are carried at fair value. The Company estimated the fair value of these derivative warrants at each balance sheet date and the changes in fair value are recognized in earnings in the statement of operations under the caption "gain (loss) on change in fair value of derivative liability" until such time as the derivative warrants are exercised or expire. The Company used the Black-Scholes Option Pricing model to estimate the fair value of the derivative liability as of the date of issuance and as of March 31, 2016 and 2015 using the following key inputs: market price of the Company's common stock $0.10 to $1.51 per share in 2015 and $0.40 in 2016, volatility of 250% and discount rate of 0.13%. The fair value of the derivative liability was determined to be $6,330 as of March 31, 2015 and $3,849 as of March 31, 2016.

 

The following table summarizes the change in the fair value of the derivative liabilities during the years ended March 31, 2016 and 2015:

 

Fair value as of March 31, 2014

 

$--

 

Additions at fair value

 

 

1,218

 

Transfers in (out) of Level 3

 

 

--

 

Change in fair value

 

 

5,112

 

Fair value as of March 31, 2015

 

$6,330

 

Additions at fair value

 

 

--

 

Transfers in (out) of Level 3

 

 

--

 

Change in fair value

 

 

(2,481)

Fair value as of March 31, 2016

 

$3,849

 

 

Recent Accounting Pronouncements

 

On June 10, 2014, FASB issued Accounting Standards Update No. 2014-10, Development Stage Entities. The update removes the definition of a development stage entity from FASB ASC 915 and eliminates the requirement for development stage entities to present inception-to-date information on the statements of operations, cash flows and stockholders' deficit. The Company early adopted this standard for the period covered by the report herein.

 

 
47
 

  

NOTE 3 – GOING CONCERN

 

The Company's consolidated financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern that contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company, as shown in the accompanying consolidated balance sheets, has a working capital deficit of $2,396,743 and an accumulated deficit of $10,380,227 as of March 31, 2016. The Company does not have a source of revenue to cover its operating costs. These factors raise substantial doubt about the company's ability to continue as a going concern.

 

The Company will engage in research and development activities that must be satisfied in cash secured through outside funding. The Company will offer noncash consideration and seek equity lines as a means of financing its operations. If the Company is unable to obtain revenue producing contracts or financing or if the revenue or financing it does obtain is insufficient to cover any operating losses it may incur, it may substantially curtail or terminate its operations or seek other business opportunities through strategic alliances, acquisitions or other arrangements that may dilute the interests of existing stockholders.

 

NOTE 4 – RELATED PARTY TRANSACTIONS

 

As of March 31, 2015, the Company had accounts payable to officers and Directors of zero and $4,672, respectively. The amounts were unsecured, bear no interest and were due on demand. The amounts were owed for services provided and advances. As of March 31, 2016, the balance was zero.

 

On January 27, 2015 the Company issued 300,000 options with an exercise price of $0.50 per share to four officers and directors. (See Note 8 – Options)

 

On September 1, 2015 the Company entered into five year employment contracts with three of its officers and directors. Under the terms of the agreements the Company issued shares of common stock to the officers and directors equaling 11% of the outstanding shares of the Company as of the date of the contracts. As additional future shares are issued, the officers and directors are entitled to additional shares so their aggregate ownership percentage remains at 11% of the outstanding shares of the Company. The following table sets forth the shares earned under these contracts during the year ended March 31, 2016:

 

Officer and Director

 

Initial Share
Awards Under the Contracts

 

 

Additional Shares Earned to Maintain Ownership Percentage

 

 

Total Shares
Earned

 

President

 

 

1,028,910

 

 

 

46,818

 

 

 

1,075,728

 

Chief Financial Officer

 

 

617,346

 

 

 

28,091

 

 

 

645,437

 

Senior Vice President

 

 

617,346

 

 

 

28,091

 

 

 

645,437

 

Total

 

 

2,263,602

 

 

 

103,000

 

 

 

2,366,602

 

 

 
48
 

 

In addition, if the officers and directors are removed from the company they are entitled to receive a cash severance payment per annum for each year of the term of the contract less salary payments received to date of termination. The table below sets forth the annual salary and annual severance amounts per the contracts:

 

Officer and Director

 

Annual Compensation
Paid

 

 

Annual Severance per Contract if Terminated

 

President

 

$99,250

 

 

$250,000

 

Chief Financial Officer

 

$55,000

 

 

$180,000

 

Senior Vice President

 

$24,000

 

 

$140,000

 

Total

 

$178,250

 

 

$570,000

 

 

During the years ended March 31, 2016 and 2015 the Company paid a consultant and former officer of the Company $60,000 and $43,000 in consulting fees respectively.

 

During the year ended March 31, 2016 the company issued 535,000 shares of common stock to a related party for services.

 

NOTE 5 – LICENSE LIABILITY

 

The Company holds a license from a third party for certain patents and related material related to Pritumumab. The license allows the Company to develop, manufacture and sell its product worldwide using the patents under the licenses agreement. The license was entered into by Nascent Biologics, Inc. in March 2009 granting rights to the development and certain patents. The license was granted for total consideration of $2,000,000, to be paid in six installments of $300,000 plus a final payment of $200,000 on January 1, 2016. In addition, the license provides the licensor with a royalty of 2% on the sales of the developed product, up to $10,000,000 in sales, and thereafter, a royalty of 1% for all sales over $10,000,000. Prior to the acquisition by the Company, Nascent Biologics allowed 10 patents to expire based on their assessment of the patents and their value relating to the Company's development of its product. Nascent Biologics and the licensor amended the license agreement requiring payments of $333,000 per year from January 1, 2012 through January 1, 2015. Such payments were not made by Nascent Biologic or the Company after the acquisition of Nascent Biologic.

 

On September 21, 2015 the Company and the licensor amended their agreement where the licensor received a $30,000 cash payment and is receiving $1,000 per month for 28 months plus a $5,000 additional payment on the 28th month. In addition the licensor received 200,000 shares of the Company's common stock, plus will receive 1% of net sales of the Company's product up to $1,000,000 in royalties. The fair value of the stock issued was determined to be $150,000 and the transaction resulted in a remaining liability as of March 31, 2016 of $27,000 to be paid over 22 months and a gain on settlement of license agreement liability of $1,573,650.

 

As of March 31, 2016 and 2015, $27,000 and $1,792,650, respectively was accrued and unpaid under this license agreement.

 

 
49
 

 

NOTE 6 – COMMON STOCK

 

During the year ended March 31, 2015, the Company issued an aggregate of 2,735,000 common shares for cash proceeds of $1,295,000.

 

On July 15, 2014, the Company issued 22,829,400 common shares as part of a reverse merger valued at $19,000 which represents the net liabilities of Jin-En Group International Holding Company on the date of the share exchange (see Note 1).

 

On July 15, 2014 the Company cancelled 15,000,000 shares of common stock.

 

During the year ended March 31, 2016 the Company issued 695,000 shares of common stock and 195,000 warrants exercisable at $0.01 per share into 195,000 shares of common stock for $695,000 in cash.

 

On September 21, 2015 the Company issued 200,000 shares of its common stock with a value of $150,000 as part of the settlement of the license agreement liability (see Note 5). The license agreement liability settled totaled $1,723,650 and the fair value of the stock was determined to be $150,000 resulting in a gain of $1,573,650.

 

During the year ended March 31, 2016 the Company issued an aggregate of 3,037,965 shares of common stock with a value of $3,784,598 for services and compensation.

 

During the year ended March 31, 2016 120,000 warrants were exercised into 120,000 shares of common stock for $1,200 in cash.

 

NOTE 7 – CONVERTIBLE NOTES PAYABLE

 

On May 5, 2014 Jin-En issued a $60,000 unsecured convertible note bearing interest at 10% per annum. The note was convertible into common stock of the Company at $0.01 per share and matured on May 5, 2019. On September 15, 2015 the Company paid the debt holder in cash, $68,550 which included a principal payment of $60,000 and accrued interest of $8,550. As of March 31, 2016 the balance due on the convertible note was zero.

  

 
50
 

 

NOTE 8 – OPTIONS

 

The Company under its 2015 option plan issues options to various officers, directors and consultants. The options vest in equal annual installments over a five year period with the first 20% vested when the options were granted. All of the options are exercisable at a purchase price based on the last trading price of the Company's common stock on the date of grant and have a term of 10 years.

 

On January 27, 2015 the Company issued 355,000 options with exercise prices between $0.35 and $0.50 per share to four officers and directors and two consultants of the Company. A volatility of 250%, market price of common stock of $1.25 and a discount rate of 1.81% were used in calculating the fair value of the options using the Black-Scholes Option Pricing Model. The fair value of the options on the date of grant was determined to be $443,069. The fair value is being recognized as stock-based compensation over the vesting period of the options. The awards to nonemployees are revalued at each reporting date until completion of services.

 

On April 1, 2015 the Company granted a consultant to the Company 30,000 options that are exercisable at $0.35 per share. A volatility of 250%, market price of common stock of $1.05 and a discount rate of 1.87% were used in calculating the fair value of the options using the Black-Scholes Option Pricing Model. The fair value of the options was determined to be $31,456 on the date of grant. The fair value is being recognized as stock-based compensation over the vesting period of the options. This award to a nonemployee is revalued at each reporting date until completion of services.

 

On January 27, 2016, the Company granted a consultant to the Company 10,000 options that are exercisable at $0.50 per share. A volatility of 250%, market price of common stock of $0.14 and a discount rate of 1.87% were used in calculating the fair value of the options using the Black-Scholes Option Pricing Model. The fair value of the options was determined to be $1,392 on the date of grant. The fair value is being recognized as stock-based compensation over the vesting period of the options. This award to a nonemployee is revalued at each reporting date until completion of services.

 

During the years ended March 31, 2016 and 2015, the Company expensed an aggregate of $156,152 and $119,318, respectively related to its option awards. The unrecognized future balance to be expensed over the remaining vesting term of the options is $146,144 as of March 31, 2016.

 

The following sets forth the options granted and outstanding during the years ended March 31, 2016 and 2015:

 

 

 

Options 

 

 

Weighted

Average

Exercise

Price

 

 

Weighted

Average

Remaining

Contract

Life

 

 

Number of

Options

Exercisable

 

 

Intrinsic

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2014

 

 

--

 

 

$--

 

 

 

--

 

 

 

--

 

 

$--

 

Granted

 

 

355,000

 

 

 

0.49

 

 

 

--

 

 

 

--

 

 

 

--

 

Exercised

 

 

--

 

 

 

--

 

 

 

--

 

 

 

--

 

 

 

--

 

Outstanding at March 31, 2015

 

 

355,000

 

 

$0.47

 

 

 

9.84

 

 

 

71,000

 

 

$39,950

 

Granted

 

 

40,000

 

 

 

0.50

 

 

 

--

 

 

 

--

 

 

 

--

 

Exercised

 

 

--

 

 

 

--

 

 

 

--

 

 

 

--

 

 

 

--

 

Outstanding at March 31, 2016

 

 

395,000

 

 

$0.48

 

 

 

8.87

 

 

 

150,000

 

 

$900

 

 

 
51
 

 

NOTE 9 – WARRANTS

 

On September 30, 2015 the Company issued 145,000 warrants to 6 shareholders along with 145,000 common shares for aggregate cash proceeds of $145,000. On October 20, 2015 the Company issue 50,000 warrants along with 50,000 common shares to one individual for aggregate cash proceeds of $50,000. Each warrant is exercisable within two years of the issuance date into one share of the Company's common stock at $0.01 per share. As of March 31, 2016, 120,000 of the warrants have been exercised leaving 75,000 of this issuance outstanding plus 13,317 initially issued for a total of 88,317.

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

Weighted

 

 

Average

 

 

 

 

 

 

 

 

 

Average

 

 

Remaining

 

 

 

 

 

 

 

 

 

Exercise

 

 

Contract

 

 

Intrinsic

 

 

 

Warrants

 

 

Price

 

 

Life

 

 

Value

 

Outstanding at March 31, 2014

 

 

--

 

 

$--

 

 

 

--

 

 

$--

 

Granted

 

 

13,317

 

 

 

1.00

 

 

 

--

 

 

 

--

 

Exercised

 

 

--

 

 

 

--

 

 

 

--

 

 

 

--

 

Outstanding at March 31, 2015

 

 

13,317

 

 

$1.00

 

 

 

2.14

 

 

$666

 

Granted

 

 

195,000

 

 

 

0.01

 

 

 

--

 

 

 

--

 

Exercised

 

 

(120,000)

 

 

0.01

 

 

 

--

 

 

 

--

 

Outstanding at March 31, 2016

 

 

88,317

 

 

$0.16

 

 

 

1.48

 

 

$29,250

 

 

NOTE 10 – INCOME TAXES

 

At March 31, 2016 and 2015, the Company had federal net operating loss carry forwards of approximately $6,585,651 and $4,794,230, respectively, which expire in varying amounts beginning in 2028.

 

Components of net deferred tax assets, including a valuation allowance, are as follows at March 31, 2016 and 2015:

 

 

 

March 31, 2016

 

 

March 31, 2015

 

Deferred tax assets:

 

 

 

 

 

 

Net operating loss

 

$2,304,987

 

 

$1,677,981

 

Less: Valuation allowance

 

 

(2,304,987)

 

 

(1,677,981)

Net deferred tax assets

 

$--

 

 

$--

 

 

In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment. As a result, management determined it was more likely than not the deferred tax assets would not be realized as of March 31, 2016.

 

 
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NOTE 11 – MATERIALS HELD FOR RESEARCH AND DEVELOPMENT WITH ALTERNATIVE FUTURE ALTERNATIVE USE

 

During the year ended March 31, 2015, the Company, through contract manufacturing incurred costs related to the production of 424 grams of Pritumumab a human mono-clinical antibody. The product is being produced for use in research and development. In addition to the use in the brain cancer clinical trials, the Company has also determined the Pritumumab can be used in its current state in pancreatic, breast and lung cancer trials, none of which have commenced. Due to the existence of these alternative future uses, the Company has capitalized the cost of these materials not expected to be used in the brain cancer trials. Of the 424 grams being produced, 110 grams is expected to be used in the brain cancer trials which have already commenced. The cost of the 110 grams was expensed as research and development during the year ended March 31, 2015. The amount capitalized by the Company as of March 31, 2015 is $827,964 associated with 313 grams. These capitalize costs will be expensed as research and development as the materials are consumed. As of March 31, 2015, the production of the 424 grams was not yet complete. The Company will obtain ownership of the Pritumumab upon payment of all outstanding payables owed to the manufacturer. As of March 31, 2016, the Company had a payable balance of $1,455,519 owed to the manufacturer related to the production of the Pritumumab and other services provided.

 

NOTE 12 – LICENSE AGREEMENT

 

On January 12, 2016 the Company entered into a letter of intent with a company based in China to license the Company's product for production and sales in China. Under the terms of the agreement the Company received a refundable initial license payment of $600,000 with the second payment of $2,400,000 less taxes of 10% due after the completion of the license agreement. A payment of $5,000,000 less taxes of 10% will be received when the product is approved by the China FDA for clinical trial and a payment of $8,000,000 less taxes of 10% upon approval for commercial use within the license territory. In addition, a royalty of 9% of net sales less taxes of 10% will be paid to the Company. As of March 31, 2016, the $600,000 payment received was recognized as deferred revenue.

 

NOTE 13 – COMMITMENTS AND CONTINGENCIES

 

On June 30, 2016 the Company entered into a cell line sales agreement with the product manufacture. Under the terms of the agreement the company is obligated to make future payments based on the milestones of its achievements. These future payments may be as followed;

 

1.

$100,000 upon the initiation (first dose/first patient) of the first Phase I clinical trial (or equivalent) of a product;

2.

$225,000 upon the initiation (first dose/first patient) of the first Phase III clinical trial (or equivalent) of a product

3.

$225,000 payable upon the first BLA approval (or equivalent) of a product.

4.

Annual maintenance fee upon completion of phase I manufacturing or the transfer of the cell line from Catalent's control of $50,000;

5.

A contingent sales fee upon product sales of 1% of sales or $150,000 whichever is greater.

 

 
53
 

 

NOTE 14 – SUBSEQUENT EVENTS

 

On April 1, 2016 the Company issued 40,000 options to a consultant of the Company under the 2015 option program. The options are exercisable into the Company's common stock at $0.30 per share, have term of 10 years and vest in 5 equal annual installments with the first installment vesting on the date of grant.

 

On April 1, 2016 the Company entered into a consulting agreement under which the consultant was granted 30,000 options on April 1, 2016. In addition, the consultant will be entitled to additional option grants of 30,000 options on April 1, 2017 and 40,000 options on April 1, 2018. The options are exercisable into the Company's common stock at $0.30 per share, have term of 10 years and vest in 5 equal annual installments with the first installment vesting on the date of grant.

 

On May 23, 2016 the Company issued 150,000 shares of common stock with a fair value of $75,000 for settlement of $410,000 of accounts payable. The difference of the stock value and the accounts payable was treated as a reduction in development costs.

 

On June 13, 2016 the Company completed license agreement with a company in China. Under the terms of the license agreement the initial payment of $600,000 per the letter of intent became nonrefundable. On July 6, 2016 the Company received the second license payment of $2,400,000 less taxes of 10% ($2,160,000). (See Note 12- License Agreement)

 

On June 30, 2016 the Company reached an agreement for the settlement of outstanding accounts payable and cell line transfer with its manufacturer. Under the terms of the agreement the Company will pay the manufacture $1,500,000 for all outstanding accounts payable, plus receive a credit for $135,000 for completion of the product testing and manufacturing report, receive a credit for the cell line transfer fee of $225,000 and receive a credit for royalty on license sales of $150,000 of the $3,000,000 license sale. Under the agreement the Company will incur futures cost to the manufacture of 5% of the net future license payments received by the Company. On July 7, 2016 the Company paid the manufacture the $1,500,000. 

 

 

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