NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2023
(Unaudited)
NOTE
1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
Nature
of Operations
Propanc
Biopharma, Inc. (the “Company,” “we,” “us” or “our”) is based in Camberwell,
Victoria Australia. Since its inception, substantially all of the operations of the Company have been focused on the development of
new cancer treatments targeting high-risk patients, particularly cancer survivors, who need a follow-up, non-toxic, long-term
therapy designed to prevent the cancer from returning and spreading. The Company anticipates establishing global markets for its
technologies. Our lead product candidate, which we refer to as PRP, is an enhanced pro-enzyme formulation designed to enhance the
anti-cancer effects of multiple enzymes acting synergistically. It is currently in the preclinical phase of development.
The
Company was originally formed in Melbourne, Victoria, Australia on October 15, 2007 as Propanc PTY LTD. On November 23, 2010,
Propanc Health Group Corporation was incorporated in the State of Delaware, and in January 2011, to reorganize the Company, all of
the outstanding shares of Propanc PTY LTD were acquired on a one-for-one basis by Propanc Health Group Corporation, with Propanc PTY
LTD becoming a wholly-owned subsidiary of the Company.
On
July 22, 2016, the Company formed another wholly-owned subsidiary, Propanc (UK) Limited under the laws of England and Wales for the purpose
of submitting an orphan drug application to the European Medicines Agency as a small and medium-sized enterprise. As of March 31, 2023,
there has been no activity within this entity.
Effective
April 20, 2017, the Company changed its name to “Propanc Biopharma, Inc.” to reflect the Company’s stage of operations
and development better.
In
July 2020, a world-first patent was granted in Australia for the cancer treatment method patent family. Presently, there are 59 granted,
allowed, or accepted patents and 17 patents filed, or under examination in key global jurisdictions relating to the use of proenzymes
against solid tumors, covering the lead product candidate PRP.
The
Company hopes to capture and protect additional patentable subject matter based on the Company’s field of technology relating to
pharmaceutical compositions of proenzymes for treating cancer by filing additional patent applications as it advances its lead product
candidate, PRP, through various stages of development.
Basis
of Presentation
The
Company’s interim unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q (this “Quarterly
Report”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“US
GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). In the
opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments and reclassifications and non-recurring
adjustments) necessary to present fairly our consolidated results of operations for the three and nine months ended March 31, 2023 and
2022 and cash flows for the three and nine months ended March 31, 2023 and 2022, and our consolidated financial position at March 31,
2023 have been made. The Company’s results of operations for the nine months ended March 31, 2023 are not necessarily indicative
of the operating results to be expected for the full fiscal year ending June 30, 2023.
Certain
information and disclosures normally included in the notes to the Company’s annual audited consolidated financial statements have
been condensed or omitted from the Company’s interim unaudited condensed consolidated financial statements included in this Quarterly
Report. Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s
audited consolidated financial statements and notes thereto for the fiscal year ended June 30, 2022. The June 30, 2022 balance sheet
is derived from those statements.
Principles
of Consolidation
The
unaudited condensed consolidated financial statements include the accounts of Propanc Biopharma, Inc., the parent entity, and its wholly-owned
subsidiary, Propanc PTY LTD. All intercompany balances and transactions have been eliminated in consolidation. Propanc (UK) Limited was
an inactive wholly-owned subsidiary through March 31, 2023.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2023
(Unaudited)
Use
of Estimates
The
preparation of financial statements in conformity with US
GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates. Significant estimates in the accompanying consolidated
financial statements include the estimates of useful lives for depreciation, valuation of the operating lease liability and related right-of-use
asset, valuation of derivatives, allowance for uncollectable receivables, valuation of equity based instruments issued for other than
cash, the valuation allowance on deferred tax assets and foreign currency translation due to certain average exchange rates applied in
lieu of spot rates on transaction dates.
Foreign
Currency Translation and Other Comprehensive Income (Loss)
The
Company’s wholly-owned subsidiary’s functional currency is the Australian dollar (AUD). For financial reporting
purposes, the Australian dollar has been translated into the Company’s reporting currency, which is the United States dollar
($) and/or (USD). Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and
expenses are translated at the average rate of exchange prevailing during the reporting period. Equity transactions are translated
at each historical transaction date spot rate. Translation adjustments arising from the use of different exchange rates from period
to period are included as a component of stockholders’ equity (deficit) as “Accumulated other comprehensive income
(loss).” Gains and losses resulting from foreign currency transactions are included in the statements of operations and
comprehensive income (loss) as a component of other comprehensive income (loss). There have been no significant fluctuations in the
exchange rate for the conversion of Australian dollars to USD after the balance sheet date.
Other
Comprehensive Income (Loss) for all periods presented includes only foreign currency translation gains (losses).
Assets
and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the
consolidated balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated
in a currency other than the functional currency included in the consolidated results of operations as incurred. Effective fiscal year
2021, the parent company determined that the intercompany loans will not be repaid in the foreseeable future and thus, per ASC 830-20-35-3,
gains and losses from measuring the intercompany balances are recorded within cumulative translation adjustment, a component of accumulated
other comprehensive income (loss). Prior to July 1, 2020, the Company recorded the foreign currency transaction gains and losses from
measuring the intercompany balances as a component of other income (expenses) titled foreign currency transaction gain (loss). As of
March 31, 2023 and 2022, the Company recognized a cumulative exchange gain (loss) of approximately $556,000 and $15,600, respectively,
on intercompany loans made by the parent to the subsidiary that have not been repaid as of March 31, 2023, which is included as component
of accumulated other comprehensive income on the accompanying unaudited condensed consolidated balance sheet.
As
of March 31, 2023 and June 30, 2022, the exchange rates used to translate amounts in Australian dollars into USD for the purposes of
preparing the consolidated financial statements were as follows:
SCHEDULE
OF TRANSLATION EXCHANGE RATES
| | |
March
31, 2023 | | |
June
30, 2022 | |
| Exchange rate on balance sheet dates | |
| | | |
| | |
| USD : AUD exchange rate | |
| 0.6697 | | |
| 0.6915 | |
| | |
| | | |
| | |
| Average exchange rate for the period | |
| | | |
| | |
| USD : AUD exchange rate | |
| 0.6794 | | |
| 0.7253 | |
The
change in Accumulated Other Comprehensive Income by component during the nine months ended March 31, 2023 was as follows:
SCHEDULE
OF ACCUMULATED OTHER COMPREHENSIVE INCOME LOSS
| | |
Foreign
Currency Items: | |
| Balance, June 30, 2022 | |
$ | 1,234,549 | |
| Unrealized foreign currency
translation gain | |
| 59,198 | |
| Ending balance, March 31, 2023 | |
$ | 1,293,747 | |
Fair
Value of Financial Instruments and Fair Value Measurements
The
Company measures its financial assets and liabilities in accordance with US GAAP. For certain financial instruments, including cash and
cash equivalents, receivables, accounts payable and accrued liabilities, the carrying amounts approximate fair value due to their short
maturities. Amounts recorded for notes payable, net of discount, and loans payable also approximate fair value because current interest
rates available for debt with similar terms and maturities are substantially the same.
The
Company follows accounting guidance for financial assets and liabilities. This standard defines fair value, provides guidance for measuring
fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all
other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related
to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income
approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement
cost).
PROPANC
BIOPHARMA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2023
(Unaudited)
The
guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad
levels. The following is a brief description of those three levels:
Level
1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level
2: Inputs, other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets
or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level
3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us,
which reflect those that a market participant would use.
Also
see Note 11 – Derivative Financial Instruments and Fair Value Measurements.
Cash
and Cash Equivalents
Cash
and cash equivalents include cash on hand and at banks, short-term deposits with an original maturity of three months or less with financial
institutions, and bank overdrafts. Bank overdrafts are reflected as a current liability on the balance sheets. There were no cash equivalents
as of March 31, 2023 or June 30, 2022.
Property
and Equipment
Property
and equipment are stated at cost, net of accumulated depreciation. Expenditures for maintenance and repairs are expensed as incurred;
additions, renewals, and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost
and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of
property and equipment is provided using the declining balance method. The depreciable amount is the cost less its residual value.
The
estimated useful lives are as follows:
SCHEDULE
OF PROPERTY AND EQUIPMENT ESTIMATED USEFUL LIVE
| Machinery
and equipment |
|
-
5 years |
| Furniture |
|
-
7 years |
Patents
Patents
are stated at cost and amortized on a straight-line basis over the estimated future periods if and once the patent has been granted
by a regulatory agency. However, the Company will expense any patent costs as long as it is in the startup stage. Accordingly, as
the Company’s products are not currently approved for market, all patent costs incurred from 2013 through March 31, 2023 were
expensed immediately. This practice of expensing patent costs immediately ends when a product receives market authorization from a
government regulatory agency.
Impairment
of Long-Lived Assets
In
accordance with ASC 360-10, “Long-lived assets,” which include property and equipment and intangible assets, are reviewed
for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability
of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted
future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future
cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the
assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily
determinable.
Employee
Benefit Liability
Liabilities
arising in respect of wages and salaries, accumulated annual leave, accumulated long service leave and any other employee benefits expected
to be settled within twelve months of the reporting date are measured based on the employee’s remuneration rates applicable at
the reporting date. All other employee benefit liabilities are measured at the present value of the estimated future cash outflow to
be made in respect of services provided by employees up to the reporting date. All employee liabilities are owed within the next twelve
months.
Australian
Goods and Services Tax (“GST”)
Revenues,
expenses and balance sheet items are recognized net of the amount of GST, except payable and receivable balances which are shown inclusive
of GST. The GST incurred is payable on revenues to, and recoverable on purchases from, the Australian Taxation Office.
Cash
flows are presented in the statements of cash flow on a gross basis, except for the GST component of investing and financing activities,
which are disclosed as operating cash flows.
As
of March 31, 2023, and June 30, 2022, the Company was owed $3,334 and $2,342, respectively, from the Australian Taxation Office. These
amounts were fully collected subsequent to the balance sheet reporting dates.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2023
(Unaudited)
Derivative
Instruments
ASC
Topic 815, Derivatives and Hedging (“ASC Topic 815”), establishes accounting and reporting standards for derivative
instruments and for hedging activities by requiring that all derivatives be recognized in the balance sheet and measured at fair value.
Gains or losses resulting from changes in the fair value of derivatives are recognized in earnings. On the date of conversion or payoff
of debt, the Company records the fair value of the conversion shares, removes the fair value of the related derivative liability, removes
any discounts and records a net gain or loss on debt extinguishment.
Convertible
Notes With Variable Conversion Options
The
Company has entered into convertible notes, some of which contain variable conversion options, whereby the outstanding principal and
accrued interest may be converted, by the holder, into shares of the Company’s common stock, par value $0.001 per share
(“common stock”) at a fixed discount to the price of the common stock at or around
the time of conversion. The Company treats these convertible notes as stock settled debt under ASC 480, “Distinguishing Liabilities
from Equity” and measures the fair value of the notes at the time of issuance, which is the result of the share price discount
at the time of conversion and records the put premium as interest expense.
Income
Taxes
The
Company is governed by Australia and United States income tax laws, which are administered by the Australian Taxation Office and the
United States Internal Revenue Service, respectively. The Company follows ASC 740 “Accounting for Income Taxes,” when
accounting for income taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred
income tax assets and liabilities are computed annually for temporary differences between the financial statements and tax bases of assets
and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or
minus the change during the period in deferred tax assets and liabilities.
The
Company follows ASC 740, Sections 25 through 60, “Accounting for Uncertainty in Income Taxes.” These sections provide
detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial
statements. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized
upon the adoption of ASC 740 and in subsequent periods.
Research
and Development Costs and Tax Credits
In
accordance with ASC 730-10, “Research and Development-Overall,” research and development costs are expensed when incurred.
Total research and development costs for the three months ended March 31, 2023 and 2022 were $66,020 and $50,395, respectively. Total
research and development costs for the nine months ended March 31, 2023 and 2022 were $242,223 and $147,702, respectively. Research and
development costs include allocations of salary among certain officers.
The
Company may apply for research and development tax concessions with the Australian Taxation Office on an annual basis. Although the amount
is possible to estimate at year end, the Australian Taxation Office may reject or materially alter the claim amount. Accordingly, the
Company does not recognize the benefit of the claim amount until cash receipt since collectability is not certain until such time. The
tax concession is a refundable credit. If the Company has net income, then the Company can receive the credit which reduces its income
tax liability. If the Company has net losses, then the Company may still receive a cash payment for the credit, however, the Company’s
net operating loss carryforwards are reduced by the gross equivalent loss that would produce the credit amount when the income tax rate
is applied to that gross amount. The concession is recognized as tax benefit, in operations, upon receipt.
During
each of the nine months ended March 31, 2023 and 2022, the Company applied for, and received from the Australian Taxation Office, a research
and development tax credit in the amount of $131,037 and $55,250, respectively, which is reflected as a tax benefit in the accompanying
unaudited condensed consolidated statements of operations and comprehensive income (loss).
Stock
Based Compensation
The
Company records stock-based compensation in accordance with ASC 718, “Stock Compensation”. ASC 718 requires the fair
value of all stock-based employee compensation awarded to employees to be recorded as an expense over the shorter of the service period
or the vesting period. The Company values employee and non-employee stock-based compensation at fair value using the Black-Scholes Option
Pricing Model.
The
Company adopted ASU 2018-07 and accounts for non-employee share-based awards in accordance with the measurement and recognition criteria
of ASC 718 and recognizes the fair value of such awards over the service period. The Company used the modified prospective method of
adoption.
Revenue
Recognition
The
Company applies ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 establishes a single comprehensive
model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue
recognition guidance. This standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers
in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also
requires certain additional disclosures. Subject to these criteria, the Company intends to recognize revenue relating to royalties on
product sales in the period in which the sale occurs and the royalty term has begun.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2023
(Unaudited)
Legal
Expenses
All
legal costs for litigation are charged to expense as incurred.
Leases
The
Company follows ASC Topic 842, Leases (Topic 842) and applies the package of practical expedients, which permit it not to reassess under
the new standard its prior conclusions about lease identification, lease classification and initial direct costs. In addition, the Company
elected not to apply ASC Topic 842 to arrangements with lease terms of 12 months or less. Operating lease right of use assets (“ROU”)
represents the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value
of future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company
uses an incremental borrowing rate based on the information available at the adoption date in determining the present value of future
payments. Lease expense for minimum lease payments is amortized on a straight-line basis over the lease term and is included in general
and administrative expenses.
Reclassifications
Certain
prior period amounts have been reclassified to conform to the current period presentation. The reclassified amounts have no impact on
the Company’s previously reported financial position or results of operations and relate to the presentation of accrued interest
separately on the consolidated balance sheet, of which $57,822 was previously included in convertible notes, net of discounts and including
premiums at June 30, 2022.
Basic
and Diluted Net Loss Per Share of Common Stock
Basic
net loss per share of common stock is computed by dividing the net loss by the weighted average number of common stock outstanding
during the period. Diluted net loss per common share is computed by dividing the net loss by the weighted average number of common
shares outstanding for the period and, if dilutive, potential common shares outstanding during the period. Potentially dilutive
securities consist of the incremental common shares issuable upon exercise of common stock equivalents such as stock options,
warrants, restricted stock units and convertible debt instruments. Potentially dilutive securities are excluded from the computation
if their effect is anti-dilutive. As a result, the basic and diluted per-share amounts for all periods presented are identical. Each
holder of the notes and warrants has agreed to a 4.99%
beneficial ownership conversion limitation (subject to certain noteholders’ abilities to increase such limitation to 9.99%
upon 60 days’ notice to the Company), and certain notes may not be converted during the certain specified time period from the
date of issuance. The Company’s CEO holds Series B
Preferred Stock that, when combined, confers upon him a majority vote, including regarding authorization of additional common shares and/or the
authorization of a reverse split the stock as considered necessary. Such securities are considered dilutive securities, which
were excluded from the computation since the effect is anti-dilutive.
SCHEDULE
OF ANTI-DILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS
| | |
March
31, 2023 | | |
March
31, 2022 | |
| | |
(Unaudited) | | |
(Unaudited) | |
| Stock Options | |
| 59 | | |
| 59 | |
| Warrants with no designations | |
| 3,305,975 | | |
| 109,361 | |
| Series A Warrants as if converted at alternate
cashless exercise prices | |
| 1,997,190,014 | | |
| - | |
| Series B Warrants | |
| 19,375 | | |
| - | |
| Series C Warrants as if converted at alternate
cashless exercise prices * | |
| 8,874,955,625 | | |
| - | |
| Unvested restricted stock units | |
| 59 | | |
| 59 | |
| Convertible Debt | |
| 529,536,021 | | |
| 71,349,657 | |
| Total | |
| 11,405,007,128 | | |
| 71,459,136 | |
| * | Only convertible ratably
upon exercise of Series B Warrants |
Recent
Accounting Pronouncements
We
have reviewed the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”)
accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods.
We have carefully considered the new pronouncements that alter previous generally accepted accounting principles and do not believe that
any new or modified principles will have a material impact on the Company’s reported financial position or operations in the near
term. The applicability of any standard is subject to the formal review of the Company’s financial management.
In
August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt – Debt with Conversion and Other
Options (Subtopic 470-20) and Derivatives and Hedging Contracts in Entity’s Own Equity (Subtopic 815-40), which eliminates the
beneficial conversion and cash conversion accounting models for convertible instruments, amends the accounting for certain contracts
in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions, and
modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS
calculation. The standard is effective for annual periods beginning after December 15, 2023 for smaller reporting companies, and
interim periods within those reporting periods. Early adoption is permitted, but no earlier than fiscal years beginning after
December 15, 2020, including interim periods within those reporting periods. The Company is currently assessing the impact the new
guidance will have on its condensed consolidated financial statements.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2023
(Unaudited)
NOTE
2 – GOING CONCERN
The
accompanying unaudited condensed consolidated financial statements have been prepared in conformity with US GAAP, which contemplate continuation
of the Company as a going concern. For the nine months ended March 31, 2023, the Company had no revenues, had a net loss of $1,912,522,
and had net cash used in operations of $927,278. Additionally, As of March 31, 2023, the Company had a working capital deficit, stockholders’
deficit and accumulated deficit of $2,963,642, $2,941,414, and $63,878,972, respectively. It is management’s opinion that these
conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of at least twelve months
from the issue date of this Quarterly Report.
The
unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effect on the recoverability
and classification of assets or the amounts and classifications of liabilities that may result from the outcome of this uncertainty.
Successful
completion of the Company’s development program and, ultimately, the attainment of profitable operations are dependent upon future
events, including obtaining adequate financing to fulfill its development activities, acceptance of the Company’s patent applications,
obtaining additional sources of suitable and adequate financing and ultimately achieving a level of sales adequate to support the Company’s
cost structure and business plan. The Company’s ability to continue as a going concern is also dependent on its ability to further
develop and execute on its business plan. However, there can be no assurances that any or all of these endeavors will be successful.
In
March 2020, the outbreak of COVID-19 (coronavirus) caused by a novel strain of the coronavirus was recognized as a pandemic by the World
Health Organization, and the outbreak has become increasingly widespread in the United States, Europe and Australia, including in each
of the areas in which the Company operates. The COVID-19 (coronavirus) outbreak has had a notable impact on general economic conditions,
including but not limited to the temporary closures of many businesses, “shelter-in-place” and other governmental regulations,
reduced business and consumer spending due to both job losses, reduced investing activity and M&A transactions, among many other
effects attributable to the COVID-19 (coronavirus). While to date the Company has not been required
to stop operating, management is evaluating its use of its office space, virtual meetings and the like.
NOTE
3 – PROPERTY AND EQUIPMENT
Property
and equipment consist of the following as of March 31, 2023 and June 30, 2022.
SCHEDULE
OF PROPERTY PLANT AND EQUIPMENT
| | |
March
31, 2023 | | |
June
30, 2022 | |
| | |
| (Unaudited) | | |
| | |
| Office equipment at cost | |
$ | 25,559 | | |
$ | 28,623 | |
| Less: Accumulated depreciation | |
| (24,925 | ) | |
| (26,600 | ) |
| | |
| | | |
| | |
| Total property, plant,
and equipment | |
$ | 634 | | |
$ | 2,023 | |
Depreciation
expense for the three months ended March 31, 2023 and 2022 were $450 and $490, respectively. Depreciation expense for the nine months
ended March 31, 2023 and 2022 were $1,345 and $1,503, respectively.
NOTE
4 – DUE TO FORMER DIRECTOR – RELATED PARTY
Due
to former director – related party represents unsecured advances made primarily by a former director for operating expenses on
behalf of the Company, such as intellectual property and formation expenses. The expenses were paid for on behalf of the Company and
are due upon demand. The Company is currently not being charged interest under these advances. The total amounts owed to the former
director at March 31, 2023 and June 30, 2022 were $29,777
and $30,746,
respectively. The Company plans to repay the advances as its cash resources allow (see Note 9).
NOTE
5 – LOANS
Loan
from Former Director – Related Party
Loans
from the Company’s former director at March 31, 2023 and June 30, 2022 were $49,558 and $51,171, respectively. The loans bear no
interest and are payable on demand. The Company did not repay any amount on this loan during the nine months ended March 31, 2023 and
2022, respectively (see Note 9).
PROPANC
BIOPHARMA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2023
(Unaudited)
Loan
Payable
Crown
Bridge Securities Purchase Agreement
Effective
October 3, 2019, the Company entered into a securities purchase agreement with Crown Bridge Partners, LLC (“Crown
Bridge”), pursuant to which Crown Bridge purchased a convertible promissory note from the Company (the “Crown Bridge
Note”), which had a remaining principal balance of $65,280
as of March 31, 2023 (see Note 6). The maturity date of the Crown Bridge Note was October
3, 2020 and is currently past due. The Crown Bridge Note bore interest at a default interest rate of 15%
per annum. In August 2022, the SEC filed a complaint against Crown Bridge due to its violation of Section 15(a)(1) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). Crown Bridge agreed to surrender all conversion rights in its
currently held convertible notes, including the Crown Bridge Note. Consequently, as of March 31, 2023, the Company reclassified the
remaining principal balance of $65,280
from a convertible note into a loan payable. Additionally, the Company recorded the remaining put premium of $43,520
into gain on extinguishment of debt during the nine months ended March 31, 2023. The total accrued interest from this loan amounted
to $33,281
as of March 31, 2023.
Loan
in default
The
Crown Bridge Note is currently past due and in default, consisting of $65,280 principal and $30,866 accrued interest, which includes
interest accruing at the default interest rate at 15%.
NOTE
6 – CONVERTIBLE NOTES
Convertible
Notes Payable
The
Company’s convertible notes outstanding at March 31, 2023 and June 30, 2022 were as follows:
SCHEDULE
OF NOTES PAYABLE CONVERTIBLE DEBT
| | |
March
31, 2023 | | |
June
30, 2022 | |
| | |
(Unaudited) | | |
| |
| Convertible notes and debenture | |
$ | 473,361 | | |
$ | 644,980 | |
| Unamortized discounts | |
| (103,932 | ) | |
| (31,669 | ) |
| Premium, net | |
| 150,289 | | |
| 313,127 | |
| Convertible notes,
net | |
$ | 519,718 | | |
$ | 926,438 | |
Coventry
Enterprises, LLC Securities Purchase Agreement
On
November 3, 2022, the Company entered into a Securities Purchase Agreement with Coventry Enterprises, LLC (“Coventry”),
pursuant to which the Company issued Coventry a promissory note from the Company in the aggregate principal amount of
$125,000,
such principal and the interest thereon convertible into shares of the Company’s common stock following an event of default (the “Coventry Note”).
The Coventry Note contains a $25,000
original issue discount. The Company used the net proceeds of $100,000
from the Coventry Note for general working capital purposes.
The
Coventry Note bears interest at a rate of 10%
per annum, with $12,500
in guaranteed interest. The principal amount and the guaranteed interest is due and payable in seven equal monthly payments of $19,643,
commencing on March 24, 2023 and continuing on the 24th day of each month thereafter until paid in full not later than October 24, 2023, or such earlier date as the Coventry Note is
required or permitted to be repaid and to pay such other interest to Coventry on the aggregate unconverted and then-outstanding
principal amount of the Coventry Note in accordance with the provisions thereof. Any or all of the principal amount and guaranteed
interest may be pre-paid at any time and from time to time, in each case without penalty or premium.
Additionally,
in the event that the Company files with the SEC a qualified offering statement on Form 1-A and such note has been outstanding for
four months since its issuance, Coventry has the right to convert all or portion of such note, including guaranteed interest, into
shares of common stock at the offering price used in connection with such offering.
At
any time following an event of default under the Coventry Note, it becomes convertible, in whole or in part, into shares of Common
Stock at the option of Coventry, at any time and from time to time thereafter (subject to the beneficial ownership limitations set
forth therein). The conversion price of the Coventry Note is ninety percent (90%) per share of the lowest per-share VWAP during the
twenty (20) trading-day period before the conversion (each, a “Calculated Conversion Price”). In the event that, within
30 calendar days either before or after any conversion, the conversion price of which is based upon a Calculated Conversion Price,
the Company consummates (in whole or in part) any financing (whether such financing is equity, equity-equivalent, or debt or any
combination thereof) or for any other reason issues any shares of common stock or any common stock equivalents at a price less than
the most recent Calculated Conversion Price (the “Alternative Conversion Price”), regardless of when that note or
instrument was originated, then, at the option of Coventry, (i) if the conversion has not yet occurred, then the Alternative
Conversion Price will be substituted for the Calculated Conversion Price and (ii) if the conversion has occurred, then, within two
trading days following Coventry’s written request, the Company is required to issue to Coventry that number of shares of
Common Stock equivalent to the difference between the number of shares of Common Stock that had been issued using the Calculated
Conversion Price and the number of shares of Common Stock that would have been issued using the Alternative Conversion Price.
Accordingly, the Coventry note is treated as stock settled debt under ASC 480 and the Company recorded a total of $13,889
put premium during the nine months ended March 31, 2023.
Upon
the occurrence and during the continuation of certain events of default, interest on the Coventry Note accrues at a default interest
rate equal to the lesser of (i) 18% per annum or (ii) the maximum rate permitted by law. Subject to the beneficial ownership
limitation in the Coventry Note, if any event of default occurs, then the outstanding principal amount guaranteed interest plus
accrued but unpaid default rate interest, liquidated damages and other amounts owing on the Coventry Note through the date of
acceleration becomes immediately due and payable at Coventry’s option, in cash or in shares of common stock at the mandatory
default amount, which is equal to 120% of all such amounts due on the Coventry Note. If the Company fails to deliver to Coventry
such shares, the Company is required to pay in cash an amount equal to the amount that the value of such shares exceeds the
principal amount and interest of the attempted conversion.
As
an additional inducement to Coventry entering into such agreement, the Company issued to Coventry 75,000,000
shares of common stock on the issuance date of the Coventry Note, which was valued using the relative fair value method at $37,500
and recognized as debt discount to be amortized over the term of such note.
The Company failed to make the first installment payment due in March 2023
which is considered an event of default. Additional money owed to Coventry due to default is considered de minimis as of March 31, 2023.
The
total principal amount outstanding under the Coventry Note was $125,000 and accrued interest of $5,103 as of March 31, 2023.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2023
(Unaudited)
Convertible
Note Issued with Consulting Agreement
August
10, 2017 Consulting Agreement
On
August 10, 2017, the Company entered into a consulting agreement, retroactive to May 16, 2017, with a certain consultant, pursuant
to which the consultant agreed to provide certain consulting and business advisory services in exchange for a $310,000
junior subordinated convertible note. The maturity date of the August 10, 2017 convertible note was August
10, 2019 and was past due (see Note 8). The note accrued interest at a rate of 10%
per annum and was convertible into shares of common stock at the lesser of $750
per share or 65%
of the three lowest trades in the ten
trading days prior to the conversion. The August 10, 2017 convertible note was fully earned upon signing the consulting agreement
and matured on August
10, 2019. The Company accrued $155,000
related to this expense at June 30, 2017 and recorded the remaining $155,000 related
to this expense in fiscal year 2018. Upon an event of default, principal and accrued interest immediately became due and payable
under the note. Additionally, upon an event of default, at the election of the holder, the note would accrue interest at a default
interest rate of 18%
per annum or the highest rate of interest permitted by law. The consulting agreement had a three-month term and expired on August
16, 2017. An aggregate total of $578,212
of the August 10, 2017 convertible note was bifurcated with the embedded conversion option recorded as a derivative liability at
fair value. During the year ended June 30, 2018, the consultant converted $140,000
of principal and $10,764
of interest. During the year ended June 30, 2019, the consultant converted an additional $161,000
of principal and $19,418
of interest leaving a principal balance owed of $9,000
at June 30, 2019. During the year ended June 30, 2020, the consultant converted an additional $500
of principal and $5,248
of interest, such that the remaining principal outstanding and accrued interest under the August 10, 2017 convertible note as of
June 30, 2020 was $8,500
and $22,168,
respectively.
On
March 15, 2021, the Company entered into a Settlement and Mutual Release Agreement (the “Settlement Agreement”) with the
consultant, whereby both parties agreed to settle all claims and liabilities under the August 10, 2017 convertible note for a total of
$100,000 in the form of a new convertible note. All other terms of the August 10, 2017 convertible note remained in full force and effect.
Both parties agreed that all future penalties under the new note were waived unless the Company failed to authorize and deliver the requested
shares of common stock upon conversion. The Company had the right to pay the balance of any remaining amounts dues under the new note
in cash at any time more than 60 days after March 15, 2021 (or May 30, 2021). Prior to the Settlement Agreement, the Company recorded
total liabilities $56,762 consisting of remaining principal amount of $8,500, accrued interest of $23,262 and accrued expenses of $25,000.
Accordingly, the Company recognized loss from settlement of debt of $43,238 during fiscal year 2021.
The
total principal and accrued interest outstanding under the August 10, 2017 convertible note was $79,000 and $10,185, respectively, as
of June 30, 2022 following conversion of $1,000 of principal and $8,000 accrued interest during the year ended June 30, 2022.
The
total principal and accrued interest outstanding under the August 10, 2017 Convertible Note was $0 as of March 31, 2023 following conversion
of $79,000 of principal and $9,543 accrued interest during the nine months ended March 31, 2023 (see Note 7).
Crown
Bridge Securities Purchase Agreements
Effective
October 3, 2019, the Company entered into a securities purchase agreement with Crown Bridge, pursuant to which Crown Bridge
purchased the Crown Bridge Note from the Company in the aggregate principal amount of $108,000,
such principal and the interest thereon convertible into shares of common stock at the option of Crown Bridge any time after
issuance of such note. Pursuant to the terms of such securities purchase agreement, Crown Bridge deducted $3,000
from the principal payment due under the Crown Bridge Note, at the time of closing, to be applied to its legal expenses, and there
was a $5,000
original issuance discount resulting in $100,000
net proceeds to the Company. The Company used the net proceeds from the Crown Bridge Note for general working capital purposes. The
maturity date of the Crown Bridge Note was October
3, 2020 and is currently past due. The Crown Bridge Note bore interest at a default interest rate
of 15%
per annum.
Additionally,
Crown Bridge had the option to convert all or any amount of the Crown Bridge Note at any time after issuance until the later of such
note’s maturity date or the date on which the default amount was paid if an event of default occurs, which would be between 110%
and 150%
of the then outstanding principal amount of the Crown Bridge Note plus any interest accrued, for
shares of the common stock at the then-applicable conversion price.
The
conversion price of the Crown Bridge Note was equal to 60% (representing a 40% discount) of the lowest closing bid price of the
common stock for the ten trading days immediately prior to the delivery of a notice of conversion under such note, including the day
upon which such notice was received. subject to 4.99% or 9.99% beneficial ownership limitations. The Crown Bridge Note was treated as stock settled debt under ASC 480 and
accordingly the Company recorded a $72,000
put premium.
The Crown Bridge Note contained certain events of default, upon which principal and accrued interest would become immediately
due and payable. In addition, upon an event of default, interest on the outstanding principal accrued at a default interest rate of 15%
per annum, or if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. Further,
certain events of default may trigger penalty and liquidated damage provisions.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2023
(Unaudited)
The
total principal amount outstanding under the Crown Bridge Note was $65,280 and accrued interest of $7,232 as of as of
June 30, 2020 following conversion of $42,720 of the principal balance during the year ended June 30, 2020. Accordingly, $28,480 of the
put premium was released in respect of the October 3, 2019 Crown Bridge Note during the year ended June 30, 2020 following partial conversion
of the principal balance.
There
were 15,000 unissued shares of Common Stock that were considered issuable for accounting purposes during the 1st quarter of
fiscal 2021 related to a conversion notice dated and received on September 16, 2020. In November 2020, the Company was notified by Crown
Bridge of the cancellation of this conversion notice as a result of the reverse stock split and, as such, the Company reversed the effects
of this transaction, thereby increasing the principal balance by $9,600 and put premium by $6,400 and a corresponding decrease in equity
of $16,000.
The
total principal amount outstanding under the Crown Bridge Note was $65,280 and accrued interest of $25,930 as of June
30, 2022.
In
August 2022, the SEC filed a complaint against Crown Bridge due to its violation of Section 15(a)(1) of the Exchange Act. Crown
Bridge agreed to surrender all conversion rights in its currently held convertible notes, including the Crown Bridge Note.
Consequently, as of March 31, 2023, the Company reclassified the remaining principal balance of $65,280
from a convertible note into a loan payable (see Note 5). Additionally, the Company recorded the remaining put premium of $43,520
into gain on extinguishment of debt during the nine months ended March 31, 2023. Therefore, the total principal amount outstanding
under such agreement with Crown Bridge was $0
after the reclassification of principal to loan payable as of March 31, 2023 (see Note 5).
1800
Diagonal Lending (formerly known as Sixth Street Lending LLC) Securities Purchase Agreements
October
21, 2021 Securities Purchase Agreement
Effective
October 21, 2021, the Company entered into a securities purchase agreement with Sixth Street Lending LLC (“Sixth
Street”), pursuant to which Sixth Street purchased a convertible promissory note (the “October 21, 2021 Sixth Street
Note”) from the Company in the aggregate principal amount of $63,750,
such principal and the interest thereon convertible into shares of common stock at the option of Sixth Street any time after the
six-month anniversary of the October 21, 2021 Sixth Street Note. The October 21, 2021 Sixth Street Note contained debt issue costs
of $3,750.
The Company used the net proceeds from the October 21, 2021 Sixth Street Note for general working capital purposes. The maturity
date of the October 21, 2021 Sixth Street Note was October
21, 2022. The October 21, 2021 Sixth Street Note bore interest at a rate of 8%
per annum, which interest was payable in shares of common stock; but
was not payable until the maturity date or upon acceleration
or by prepayment of such note.
November
26, 2021 Securities Purchase Agreement
Effective
November 26, 2021, the Company entered into a securities purchase agreement with Sixth Street, pursuant to which Sixth Street
purchased a convertible promissory note (the “November 26, 2021 Sixth Street Note”) from the Company in the aggregate
principal amount of $53,750,
such principal and the interest thereon convertible into shares of common stock at the option of Sixth Street any time after the
six-month anniversary of the November 26, 2021 Sixth Street Note. The November 26, 2021 Sixth Street Note contained debt issue costs
of $3,750.
The Company used the net proceeds from the November 26, 2021 Sixth Street Note for general working capital purposes. The maturity
date of the November 26, 2021 Sixth Street Note was November
26, 2022. The November 26, 2021 Sixth Street Note bore interest at a rate of 8%
per annum, which interest was payable in shares of common stock; but was not payable until the maturity date or upon acceleration or
by prepayment of such note.
January
4, 2022 Securities Purchase Agreement
Effective
January 4, 2022, the Company entered into a securities purchase agreement with Sixth Street, pursuant to which Sixth Street
purchased a convertible promissory note (the “January 4, 2022 Sixth Street Note”) from the Company in the aggregate
principal amount of $63,750,
such principal and the interest thereon convertible into shares of common stock at the option of Sixth Street any time after the
six-month anniversary of the January 4, 2022 Sixth Street Note. The January 4, 2022 Sixth Street Note contained debt issue costs of
$3,750.
The Company used the net proceeds from the January 4, 2022 Sixth Street Note for general working capital purposes. The maturity date
of the January 4, 2022 Sixth Street Note was January
4, 2023. The January 4, 2022 Sixth Street Note bore interest at a rate of 8%
per annum, which interest was payable in shares of common stock; but was not payable until the maturity date or upon acceleration or
by prepayment of such note (see conversions below).
March
7, 2022 Securities Purchase Agreement
Effective
March 7, 2022, the Company entered into a securities purchase agreement with Sixth Street, pursuant to which Sixth Street purchased
a convertible promissory note (the “March 7, 2022 Sixth Street Note”) from the Company in the aggregate principal amount
of $68,750,
such principal and the interest thereon convertible into shares of common stock at the option of Sixth Street any time after the
six-month anniversary of the March 7, 2022 Sixth Street Note. The March 7, 2022 Sixth Street Note contained debt issue costs of
$3,750.
The Company used the net proceeds from the March 7, 2022 Sixth Street Note for general working capital purposes. The maturity date
of the March 7, 2022 Sixth Street Note was March
7, 2023. The March 7, 2022 Sixth Street Note bore interest at a rate of 8%
per annum, which interest was payable in shares of common stock; but
was not payable until the maturity date or upon acceleration or
by prepayment of such note (see conversions below).
PROPANC
BIOPHARMA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2023
(Unaudited)
April
12, 2022 Securities Purchase Agreement
Effective
April 12, 2022, the Company entered into a securities purchase agreement with Sixth Street, pursuant to which Sixth Street purchased
a convertible promissory note (the “April 12, 2022 Sixth Street Note”) from the Company in the aggregate principal
amount of $68,750,
such principal and the interest thereon convertible into shares of common stock at the option of Sixth Street any time after the
six-month anniversary of the April 12, 2022 Sixth Street Note. The April 12, 2022 Sixth Street Note contained debt issue costs of
$3,750.
The Company used the net proceeds from the April 12, 2022 Sixth Street Note for general working capital purposes. The maturity date
of the April 12, 2022 Sixth Street Note was April
12, 2023. The April 12, 2022 Sixth Street Note bore interest at a rate of 8%
per annum, which interest was payable in shares of common stock; but was not
payable until the maturity date or upon acceleration or by
prepayment of such note.
May
12, 2022 Securities Purchase Agreement
Effective
May 12, 2022, the Company entered into a securities purchase agreement with 1800 Diagonal Lending LLC (“1800 Diagonal”),
pursuant to which 1800 Diagonal purchased a convertible promissory note (the “May 12, 2022 1800 Diagonal Note”) from the
Company in the aggregate principal amount of $63,750,
such principal and the interest thereon convertible into shares of common stock at the option of 1800 Diagonal any time after the
six-month anniversary of the May 12, 2022 1800 Diagonal Note. The May 12, 2022 1800 Diagonal Note contained debt issue costs of
$3,750.
The Company used the net proceeds from the May 12, 2022 1800 Diagonal Note for general working capital purposes. The maturity date
of the May 12, 2022 1800 Diagonal Note is May
12, 2023. The May 12, 2022 1800 Diagonal Note bore interest at a rate of 8%
per annum, which interest is payable in shares of the common stock; but is not payable until the maturity date or upon acceleration
or by prepayment of such note.
June
30, 2022 Securities Purchase Agreement
On
June 30, 2022, the Company entered into a securities purchase agreement with 1800 Diagonal, which closed on July 11, 2022, pursuant to
which 1800 Diagonal purchased a convertible promissory note (the “July 11, 2022 1800 Diagonal Note”) from the Company in
the aggregate principal amount of $105,000, such principal and the interest thereon convertible into shares of common
stock at the option of 1800 Diagonal any time after 180 days of the July 11, 2022 1800 Diagonal Note. The July 11, 2022 1800 Diagonal
Note contained debt issue cost of $3,750. The Company used the net proceeds from the July 11, 2022 1800 Diagonal Note for general working
capital purposes. The maturity date of the July 11, 2022 1800 Diagonal Note was June 30, 2023. The 1800 Diagonal Note bore interest at
a rate of 8% per annum, which interest was payable in shares of common stock; but
was not payable until the maturity date or upon acceleration or
by prepayment of such note.
The
following terms apply to all of the above 1800 Diagonal notes:
During
the first 60 to 180 days following the date of the above listed notes, the Company has the right to prepay the principal and accrued
but unpaid interest due under the above notes issued, together with any other amounts that the Company may owe the holder under the terms
of the note, at a premium ranging from 110% to 129% as defined in the relevant note. After this initial 180-day period, the Company does
not have a right to prepay such note.
The
conversion price for the above 1800 Diagonal notes is equal to 65%
(representing a 35% discount) of the market price of the common stock, which is based on the average of the lowest three trading
prices of the common stock for the ten trading days immediately prior to the delivery of a notice of conversion of such note.
Notwithstanding the foregoing, such conversions are subject to 9.99%
beneficial ownership limitations. All of the above 1800 Diagonal notes are treated as stock settled
debt under ASC 480 and accordingly the Company recorded a total of $262,500
put premium, of which $56,538
was recorded during the nine months ended March 31, 2023.
The
above 1800 Diagonal notes contain certain events of default, upon which principal and accrued interest will become immediately due and
payable. In addition, upon an event of default, interest on the outstanding principal accrues at a default interest rate of 22%
per annum, or if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. Further,
certain events of default may trigger penalty and liquidated damage provisions.
Such events of default include, among others, failure
to timely issue shares upon receipt of a notice of conversion, breach of covenants, representations or warranties, insolvency, bankruptcy
and liquidation (subject to cure periods), failure by the Company to pay the principal and interest due under such note, failure to reserve
at least five times the number of shares issuable upon full conversion of such note, failure to maintain the listing of the common stock
on at least one of the OTC markets or a national exchange, restatement of the Company’s financial statements at any time after 180
days after the issuance date of such note if such restatement would reasonably constitute a material adverse effect on 1800 Diagonal,
the Company’s failure to comply with Exchange Act reporting requirements or the Company ceases to be subject to such reporting requirements.
Failure
to deliver shares of common stock upon conversion of the above 1800 Diagonal notes within three business days of a notice of
conversion will result in the Company paying a penalty of $1,000
per day, subject to certain exceptions.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2023
(Unaudited)
Upon certain events of default, the above 1800 Diagonal notes will become immediately due and
payable and the Company must pay 1800 Diagonal 150% of the then-outstanding principal amount of the above 1800 Diagonal notes, plus any interest accrued upon such event of default or prior
events of default (the “Default Amount”). Further, upon any event of default relating to the failure to issue shares of common stock upon the conversion of such notes, such notes become immediately due and payable in an
amount equal to twice the Default Amount.
The
total principal amount outstanding under the above 1800 Diagonal notes was $265,000
and accrued interest of $6,081
as of June 30, 2022 following conversion of $117,500
of the principal balance and $4,700
accrued interest during the year ended June 30, 2022. Accordingly, $63,269
of the put premium was released to additional paid in capital in respect to the purchase agreements with 1800 Diagonal during the year ended June 30, 2022 following conversion of the principal balance.
The
total principal amount outstanding and accrued interest under the above 1800 Diagonal notes was $0 as of March 31, 2023 following conversion
of $370,000 of the principal balance and $14,800 accrued interest during the nine months ended March 31, 2023. Accordingly, $199,230
of the put premium was released to additional paid in capital in respect of such purchase agreements with 1800 Diagonal during the nine months
ended March 31, 2023 following conversion of the principal balance (see Note 7).
ONE44
Capital Securities Purchase Agreements
December
7, 2021 Securities Purchase Agreement
Effective
December 7, 2021, the Company entered into a securities purchase agreement with ONE44 Capital LLC (“ONE44”), pursuant to
which ONE44 purchased a convertible promissory note (the “December 7, 2021 ONE44 Note”) from the Company in the
aggregate principal amount of $170,000,
such principal and the interest thereon convertible into shares of common stock at the option of ONE44 any time after the six-month
anniversary of the December 7, 2021 ONE44 Note. The December 7, 2021 ONE44 Note contained an original discount and debt issue cost
for a total of $25,500.
The Company used the net proceeds from the December 7, 2021 ONE44 Note for general working capital purposes. The maturity date of
the December 7, 2021 ONE44 Note was December
7, 2022. The December 7, 2021 ONE44 Note bore interest at a rate of 10%
per annum, which interest was payable in shares of common stock; but was not
payable until the maturity date or upon acceleration or by
prepayment of such note.
March
29, 2022 Securities Purchase Agreement
Effective
March 29, 2022, the Company entered into a securities purchase agreement with ONE44, pursuant to which ONE44 purchased a convertible
promissory note (the “March 29, 2022 ONE44 Note”) from the Company in the aggregate principal amount of $120,000,
such principal and the interest thereon convertible into shares of common stock at the option of ONE44 any time after the six-month
anniversary of the March 29, 2022 ONE44 Note. The March 29, 2022 ONE44 Note contained an original discount and debt issue cost for a
total of $18,000.
The Company used the net proceeds from the March 29, 2022 ONE44 Note for general working capital purposes. The maturity date of the
March 29, 2022 ONE44 Note was March
29, 2023. The March 29, 2022 ONE44 Note bore interest at a rate of 10%
per annum, which interest was payable in shares of common stock; but was not
payable until the maturity date or upon acceleration or by
prepayment of such note.
August
15, 2022 Securities Purchase Agreement
On
August 15, 2022, the Company entered into a securities purchase agreement with ONE44, pursuant to which ONE44 purchased a
convertible redeemable note (the “August 15, 2022 ONE44 Note”) from the Company in the aggregate principal amount of
$110,000,
such principal and the interest thereon convertible into shares of the common stock at the option of ONE44 any time after the
six-month anniversary of the August 15, 2022 ONE44 Note. The transaction contemplated by such purchase agreement closed on August
16, 2022. The August 15, 2022 One44 Note contains an original issue discount amount of $10,000.
Pursuant to the terms of such purchase agreement, the Company paid $5,500 for ONE44’s legal fees. The Company used the net
proceeds from the August 15, 2022 ONE44 Note for general working capital purposes. The maturity date of the August 15, 2022 One44
Note is August
15, 2023. The August 15, 2022 ONE44 Note
bears interest at a rate of 10%
per annum, which is payable in shares of common stock, but is not payable until the maturity date or upon acceleration or by
prepayment of such note.
February
14, 2023 Securities Purchase Agreement
On
February 14, 2023, the Company entered into a securities purchase agreement with ONE44, pursuant to which ONE44 purchased a
convertible redeemable note (the “February 14, 2023 ONE44 Note”) from the Company in the aggregate principal amount of
$111,111,
such principal and the interest thereon convertible into shares of the common stock at the option of ONE44 any time after the
six-month anniversary of the February 14, 2023 ONE44 Note. The transaction contemplated by such purchase agreement closed on
February 14, 2023. The February 14, 2023 One44 Note contains an original issue discount amount of $11,111.
Pursuant to the terms of such purchase agreement, the Company paid $5,500 for ONE44’s legal fees. The Company intends
used the net proceeds from the February 14, 2023 ONE44 Note for general working capital purposes. The maturity date of the February
14, 2023 One44 Note is February
14, 2024. The February 14, 2023 ONE44 Note bears interest at a rate of 10%
per annum, which interest is payable in shares of common stock, but is not payable until the maturity date or upon acceleration or
by prepayment of such note.
The
following terms apply to all of the above ONE44 notes:
During
the first 60 to 180 days following the date of these notes, the Company has the right to prepay the principal and accrued but unpaid
interest due under the above notes issued to ONE44, together with any other amounts that the Company may owe ONE44 under the terms of
the note, at a premium ranging from 120% to 135% as defined in the relevant note. After this initial 180-day period, the Company does
not have a right to prepay such note.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2023
(Unaudited)
The
conversion price for the above ONE44 notes ranges from 60%
to 65%
(representing a 35% to 40% discount) of the market price of the common stock, which is based on the lowest closing bid prices of the
common stock for the ten trading days immediately prior to the delivery of a notice of conversion. Notwithstanding
the foregoing, such notes are subject to 4.99% beneficial ownership limitations. All of the above ONE44 notes are treated as stock settled
debt under ASC 480 and accordingly the Company recorded a total of $289,459
put premium of which $133,305
was recorded during the nine months ended March
31, 2023.
The
above ONE44 notes contain certain events of default, upon which principal and accrued interest will become immediately due and
payable. In addition, upon an event of default, interest on the outstanding principal shall accrue at a default interest rate of 24%
per annum, or if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law.
Further, certain events of default may trigger penalty and liquidated damage provisions. In the event that the Company fails to
deliver to ONE44 shares of common stock issuable upon conversion of principal or interest under a ONE44 note, it will incur a
penalty of $250
per day the shares are not issued beginning on the 4th day after the conversion notice was delivered to the Company. This
penalty increases to $500
per day beginning on the 10th day. In the event that the Company loses the bid price of its common stock on OTC, such
ONE44 note does not incur penalty and instead the outstanding principal amount increases by 20%.
The
total principal amount outstanding under the above ONE44 notes was $235,700 and accrued interest of $9,519 as of June 30, 2022, following
conversion of $54,300 of the principal balance and $2,873 accrued interest during the year ended June 30, 2022. Accordingly, $29,238
of the put premium was released to additional paid in capital in respect to the ONE44 notes during the year ended June 30, 2022 following
conversion of the principal balance.
The
total principal amount outstanding under the above ONE44 notes was $173,111
and accrued interest of $5,213
as of March 31, 2023, following conversion of $283,700
of the principal balance and $20,218
accrued interest during the nine months ended March 31, 2023. Accordingly, $152,761
of the put premium was released to additional paid in capital in respect to the purchase agreements with ONE44 during the nine months ended March 31, 2023 following conversion of the principal balance (see Note 7).
GS
Capital Partners Securities Purchase Agreements
August
12, 2022 Securities Purchase Agreement
On
August 12, 2022, the Company entered into a securities purchase agreement (the “GS Capital Purchase Agreement”) with GS Capital
Partners, LLC (“GS Capital”), pursuant to which GS Capital purchased a convertible redeemable note (the “GS Capital
Note”) from the Company in the aggregate principal amount of $93,000,
such principal and the interest thereon convertible into shares of common stock at the option of GS Capital. The transaction contemplated
by the GS Capital Purchase Agreement closed on August 16, 2022. The GS Capital Note contains a $5,000
original issue discount. Pursuant to the terms
of the GS Purchase Agreement, the Company paid $3,000 for GS Capital’s legal fees. The Company used the net proceeds ($85,000)
from the GS Capital Note for general working capital purposes.
The
maturity date of the GS Capital Note was April
12, 2023, but was extended to August 12, 2023 in April 2023. The GS Capital Note bears interest at a rate of 8%
per annum, which interest is payable in shares of common stock, but is not payable until the maturity date or upon acceleration or
by prepayment of such note. The
GS Capital Note is exchangeable for an equal aggregate principal amount of notes of different authorized denominations, as requested
by GS Capital by surrendering the same. GS Capital is entitled, at its option, at any time after cash payment, to convert all or any
amount of the principal face amount of the GS Capital Note then outstanding into shares of common stock at a price per share equal
to $0.0028 per share (the “Fixed Price”). However, in the event the common stock trades below $0.002 per share for
more than five consecutive trading days, then the Fixed Price becomes $0.0013 per share. In the event of default, such
conversion price equals 65%
of the lowest trading price of the common stock reported on the OTC Markets or other exchange for the ten prior trading days,
including the day upon which a notice of conversion is received by the Company. The GS Capital Note is subject to a 4.99%
beneficial ownership limitation.
Additionally,
such conversion price will be adjusted if the Company issues securities with more favorable conversion terms.
Currently, the effective conversion price of this note is 60% (representing a 40% discount) of the market price, which means the lowest
closing bid prices of the Common Stock for the ten trading days immediately prior to the delivery of a Notice of Conversion.
September
21, 2022 Securities Purchase Agreement
On
September 21, 2022, the Company entered into a securities purchase agreement with GS Capital, pursuant to which GS Capital purchased
a convertible redeemable note from the Company in the aggregate principal amount of $71,500,
such principal and the interest thereon convertible into shares of common stock at the option of GS Capital. The transaction contemplated
by such purchase agreement closed on September 26, 2022. Such note contains a $4,000
original issue discount. Pursuant to the terms
of such purchase agreement, the Company paid $2,500 for GS Capital’s legal fees. The Company used the net proceeds ($65,000)
from such note for general working capital purposes.
The
maturity date of such note is March
21, 2023 but was extended to March 21, 2024 in April 2023. Such note bears interest at a rate of 8%
per annum, which interest is payable in shares of common stock, but is not payable until the maturity date or upon acceleration or
by prepayment of such note. Such
note is exchangeable for an equal aggregate principal amount of notes of different authorized denominations, as requested by GS
Capital surrendering the same. GS Capital is entitled, at its option, at any time after cash payment, to convert all or any amount
of the principal face amount of the GS Capital Note then outstanding into shares of common stock at a price per share equal to
$0.002 (the “September Fixed Price”). However, in the event the common stock trades below $0.0014 per share for
more than five consecutive trading days, then the September Fixed Price becomes $0.0009 per share. In the event of default
under such note, such conversion price becomes 65%
of the lowest trading price of the common stock as reported on the OTC Markets or other exchange for the ten prior trading days,
including the day upon which a notice of conversion is received by the Company. Such note is subject to 4.99%
beneficial ownership limitations.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2023
(Unaudited)
Additionally,
the conversion price will be adjusted in favor of the note holder if the Company issues securities with more favorable conversion terms.
Currently, the effective conversion price of this note is 60% (representing a 40% discount) of the market price, which means the lowest
closing bid prices of the Common Stock for the ten trading days immediately prior to the delivery of a Notice of Conversion.
During
the first 60 to 180 days following the date of the above GS Capital notes, the Company has the right to prepay the principal and accrued
but unpaid interest due under the above notes issued to GS Capital, together with any other amounts that the Company may owe GS Capital
under the terms of the notes, at a premium ranging from 110% to 125% of the principal amount and interest of such note. After this initial 180-day period,
the Company does not have a right to prepay such notes.
Upon
the occurrence and during the continuation of certain events of default, interest accrues at a default interest rate of 24%
per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. In
the event that the Company fails to deliver to GS Capital shares of common stock issuable upon conversion of principal or interest
under the above GS Capital notes, the penalty becomes $250
per day for each day that the shares are not issued beginning on the 4th day after the conversion notice was delivered to
the Company. This penalty increases to $500
per day beginning on the 10th day. In the event that the Company loses the bid price of its common stock on OTC, such GS
Capital note does not incur penalty and instead the outstanding principal amount increases by 20%.
The
total principal outstanding and accrued interest under the above GS Capital notes were $121,500 and $4,885, respectively, as of March
31, 2023, following conversion of $43,000 of the principal balance and $2,945 accrued interest during the nine months ended March 31,
2023. An aggregate total of $121,500 of the above GS Capital notes were bifurcated with the embedded conversion option which were recorded
as derivative liabilities at fair value (see Note 11).
Red
Road Holdings Securities Purchase Agreement
On
October 6, 2022, the Company entered into a securities purchase agreement (the “Red Road Purchase Agreement”) with Red
Road Holdings Corporation, a Virginia corporation (“Red Road”), pursuant to which Red Road purchased a convertible
promissory note (the “Red Road Note”) from the Company in the aggregate principal amount of $53,750,
such principal and the interest thereon convertible into shares of common stock at the option of Red Road. The transaction
contemplated by the Red Road Purchase Agreement closed on October 12, 2022. The Company used the net proceeds ($50,000)
from the Red Road Note for general working capital purposes. The maturity date of the Note is October 6, 2023. The Red Road Note
bears interest at a rate of 8%
per annum, which interest is payable in shares of common stock, but is not payable until the maturity date or upon acceleration or
by prepayment of the Red Road Note, as described below. In addition, upon an event of default, interest on the outstanding principal
accrues at a default interest rate of 22%
per annum, or if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law.
Further, certain events of default may trigger penalty and liquidated damage provisions. Red Road has the option to convert all or
any amount of the principal face amount of the Red Road Note, beginning one hundred eighty (180) days following the date of the Red
Road Note and ending on the later of: (i) the maturity date of such note and (ii) the date of payment of the Default Amount (as
defined in the Red Road Note), each in respect of the remaining outstanding amount of the Red Road Note, to convert all or any part
of the outstanding and unpaid amount of the Note into common stock at the then-applicable conversion price. Pursuant to the terms of
the Red Road Purchase Agreement, the Company paid Red Road’s legal fees and due diligence expenses in the aggregate amount of
$3,750
which was recorded as a debt discount.
The
conversion price for the Red Road Note is equal to the Variable Conversion Price (subject to equitable adjustments for stock splits,
stock dividends or rights offerings by the Company relating to the Company’s securities or the securities of any subsidiary of
the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events), which is defined as
65% of the Market Price (representing a discount rate of 35%) which is defined as the average of the lowest
three (3) Trading Prices (as defined in the Red Road Note) for the common stock during the ten (10) trading days prior to the
conversion date. The Red Road Note is subject to 4.99%
beneficial ownership limitations and is treated as stock settled debt under ASC 480, and
accordingly the Company recorded a total of $28,942
put premium.
The
Red Road Note may be prepaid until 180 days from its issuance date, subject to the following: if prepaid within 60 days of the issuance
date, the prepayment premium is 110% of the face amount of such note plus any accrued interest, if prepaid after 60 days but less than
91 days from the issuance date, then the prepayment premium is 115% of the face amount plus any accrued interest of such note., if prepaid
after 90 days but less than 121 days from the issuance date, then the prepayment premium is 120% of the face amount plus any accrued
interest of such note, if prepaid after 120 days but less than 151 days from the issuance date, then the prepayment premium shall be
125% of the face amount plus any accrued interest of such note, and if prepaid after 150 days but less than 181 days from the issuance
date, then the prepayment premium shall be 129% of the face amount plus any accrued interest of such note.
In
the event that the Company fails to deliver to Red Road shares of common stock upon conversion of the Red Road Note within three
business days of a notice of conversion by Red Road, the Company incurs a penalty of $1,000
per day. Upon the occurrence and during the continuation of certain events of default, the Red Road Note will become
immediately due and payable and the Company will pay Red Road in full satisfaction of its obligations in the Note an amount equal to 150%
of the outstanding principal amount of the Red Road Note plus any interest accrued upon such event of default or prior events of default.
The
total principal amount outstanding under the above Red Road Note was $53,750 and accrued interest of $2,073 as of March 31, 2023.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2023
(Unaudited)
Amortization
of debt discounts
The
Company recorded $210,278 and $66,000 of debt discounts related to the above note issuances during the nine months ended March 31, 2023
and 2022, respectively. The Company recorded $232,674 and $380,961 of put premiums related to the above note issuances during the nine
months ended March 31, 2023 and 2022, respectively. The debt discounts are being amortized over the term of the debt and the put premiums
are expensed on issuance of the debt with the liability released to additional paid in capital on conversion of the principal.
Amortization
of all debt discounts for the three months ended March 31, 2023 and 2022 was $54,111 and $13,647, respectively. Amortization of all debt
discounts for the nine months ended March 31, 2023 and 2022 was $138,014 and $24,942, respectively.
The
Company reclassified $351,992 and $227,150 in put premiums to additional paid in capital following conversions during the nine months
ended March 31, 2023 and 2022, respectively.
NOTE
7 – STOCKHOLDERS’ DEFICIT
Increase
in Authorized Shares of Common Stock and Reverse Stock Split
On
May 18, 2022, the board of directors of the Company approved and authorized, and the holders of a majority-in-interest of the
Company’s voting capital stock approved by written consent for the Company to file a certificate of amendment to its
certificate of incorporation, as amended (the “Certificate of Incorporation”), which increased the Company’s
authorized capital stock. Such certificate of amendment increased the number of authorized shares of common stock from 1,000,000,000 to 3,000,000,000
shares. The number of authorized shares of
preferred stock remained at 1,500,005
shares, such that the total number of
authorized shares of capital stock increased to 3,001,500,005 shares.
Such certificate of amendment was filed and became effective on July 6, 2022.
On
September 21, 2022, the board of directors of the Company approved and authorized, and the holders of a majority-in-interest of the
Company’s voting capital stock approved by written consent for the Company to file a certificate of amendment to its
Certificate of Incorporation, which increased the Company’s authorized capital stock. The Certificate increased the number of
authorized shares of common stock from 3,000,000,000 to 10,000,000,000
shares. The number of authorized shares of
preferred stock remained at 1,500,005,
such that the total number of shares of authorized capital stock increased to 10,001,500,005 shares.
Such certificate of amendment was filed and became effective on November 4, 2022.
Preferred
Stock
The
total number of shares of preferred stock that the Company is authorized to issue is 1,500,005, $0.01 par value per share. These preferred
shares have no rights to dividends, profit sharing or liquidation preferences, subject to any such rights provided for such shares in any certificate
of designation filed by the Company with the State of Delaware.
Of
the total preferred shares authorized, 500,000
had been designated as Series A Preferred Stock (“Series A Preferred Stock”), pursuant to the Certificate of Designation
for the Series A Preferred Stock filed with the Secretary of State of the State of Delaware on December 9, 2014. James Nathanielsz,
the Company’s Chief Executive Officer and Chief Financial Officer and a director, beneficially owned all of the outstanding
shares of Series A Preferred Stock indirectly through North Horizon Pty Ltd., which entitled him, as a holder of Series A Preferred
Stock, to vote on all matters submitted or required to be submitted to a vote of the Company’s stockholders, except election
and removal of directors, and each share of Series A Preferred Stock entitled him to 0.001 votes per share of Series A Preferred
Stock or a total of 500 votes. North Horizon Pty Ltd. is a Nathanielsz Family Trust. Mr. Nathanielsz had voting and investment power over these
shares.
On
March 15, 2023, the Company filed a certificate with the Secretary of State of Delaware (the “Certificate of
Retirement”), effecting the retirement and cancellation of the Series A Preferred Stock to eliminate such Series A Preferred
Stock. No
shares of Series A Preferred Stock are currently outstanding as they were redeemed by the Company in March 2023. There were none
and 500,000
shares of Series A Preferred Stock issued and outstanding as of March 31, 2023 and June 30, 2022, respectively.
Pursuant
to a certificate of designation filed with the Secretary of State of the State of Delaware on June 16, 2015, five shares of
preferred stock have been designated as Series B Preferred Stock, par value $0.01 per share, of the Company (“Series B
Preferred Stock”). Each holder of shares of Series B Preferred Stock is entitled to voting power equivalent to the number of
votes equal to the total number of shares of common stock outstanding as of the record date for the determination of stockholders
entitled to vote at each meeting of stockholders of the Company and entitled to vote on all matters submitted or required to be
submitted to a vote of the stockholders of the Company. One
share of Series B Preferred Stock is issued and outstanding as of March 31, 2023 and June 30, 2022. Mr. Nathanielsz directly
beneficially owns such one share of Series B Preferred Stock.
No
additional shares of Series A Preferred Stock or Series B Preferred Stock were issued during the nine months ended March 31, 2023 and
fiscal year 2022.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2023
(Unaudited)
Common
Stock:
Shares
issued for Common Stock Purchase Agreement
Dutchess
Capital Growth Fund LP
On
November 30, 2021, the Company entered into a Common Stock Purchase Agreement (the “Dutchess Purchase Agreement”) with
Dutchess Capital Growth Fund LP, a Delaware limited partnership (“Dutchess”), providing for an equity financing facility
(the “Dutchess Equity Line”). The Dutchess Purchase Agreement provides that, upon the terms and subject to the
conditions in the Dutchess Purchase Agreement, Dutchess is committed to purchase up to Five Million Dollars ($5,000,000)
of shares of common stock over the 36-month
term of the Dutchess Purchase Agreement.
Under
the terms of the Dutchess Purchase Agreement, Dutchess will not be obligated to purchase shares of common stock unless and until
certain conditions are met, including but not limited to a Registration Statement on Form S-1 becoming effective, which registers
Dutchess’ resale of any common stock purchased by Dutchess under the Dutchess Equity Line. From time to time over the 36-month
term of the Dutchess Purchase Agreement, commencing on the trading day immediately following the date on which such registration
statement becomes effective, the Company, in its sole discretion, may provide Dutchess with a draw down notice (each, a
“Dutchess Draw Down Notice”), to purchase a specified number of shares of common stock (each, a “Dutchess Draw
Down Amount Requested”), subject to the limitations discussed below. The actual amount of proceeds the Company will receive
pursuant to each Dutchess Draw Down Notice (each, a “Dutchess Draw Down Amount”) is to be determined by multiplying the
Dutchess Draw Down Amount Requested by the applicable purchase price. The purchase price of each share of common stock equals 92%
of the lowest trading price of the common stock during the five (5) business days prior to the date on which Dutchess holds the
Dutchess Draw Down Amount in its brokerage account and is eligible to trade the shares.
The
maximum number of shares of common stock requested to be purchased pursuant to any single Dutchess Draw Down Notice cannot exceed
the lesser of (i) 300%
of the average daily share volume of the common stock in the five trading days immediately preceding the Dutchess Draw Down Notice
or (ii) $250,000.
On
July 13, 2022, the Company issued 14,336,712 shares of its common stock at an average price per share of approximately $0.002, as a result
of delivering one Dutchess Draw Down Notice to Dutchess. Consequently, the Company received gross aggregate proceeds of $24,711 from such Dutchess Draw
Down Notice. The Company received $23,758 of a previously recorded subscription receivable during the nine months ended March 31, 2023.
Coventry
Enterprises, LLC
On November 3, 2022, the Company entered into a Common Stock Purchase Agreement
(the “Coventry Purchase Agreement”) with Coventry providing for an equity financing facility (the “Coventry Equity Line”).
The Purchase Agreement provides that, upon the terms and subject to the conditions in the Purchase Agreement, Coventry is committed to
purchase up to Five Million Dollars ($5,000,000) of shares of common stock over
the 36 month term of the Purchase Agreement.
Under the terms of the Coventry Purchase Agreement, Coventry will not be
obligated to purchase shares of common stock unless and until certain conditions are met, including but not limited to a registration
statement on Form S-1 becoming effective which registers Coventry’s resale of any common stock purchased by Coventry under the Coventry
Equity Line. From time to time over the 36-month term of the Coventry Purchase Agreement, commencing on the trading day immediately following
the date on which such registration statement becomes effective, the Company, in its sole discretion, may provide Coventry with a draw
down notice (each, a “Coventry Draw Down Notice”), to purchase a specified number of shares of common stock (each, a “Coventry
Draw Down Amount Requested”), subject to the limitations discussed below. The actual amount of proceeds the Company will receive
pursuant to each Coventry Draw Down Notice (each, a “Coventry Draw Down Amount”) is to be determined by multiplying the Coventry
Draw Down Amount Requested by the applicable purchase price. The purchase price of each share of common stock equals 80% of the lowest
volume weighted average price of the Common Stock during the 10 business days immediately preceding the Coventry Drawdown Notice date.
The
maximum number of shares of common stock requested to be purchased pursuant to any single Coventry Draw Down Notice cannot exceed
the lesser of (i) 200%
of the average daily traded value of the common stock during the 10 business days immediately preceding the Coventry Draw Down
Notice, (ii) $250,000
or (iii) an amount that would cause Coventry’s beneficial ownership to exceed 9.99%
of the outstanding number of shares of common stock immediately after giving effect to the issuance of the Coventry Draw Down
Notice. During the nine months ended March 31, 2023, the Company has not received a Coventry Draw Down Notice.
Shares
issued for conversion of convertible debt
As
of June 30, 2022, there were 7,326,007 shares of common stock issuable from the conversion of debt during fiscal 2022. Such shares were
issued on July 12, 2022.
From
July 1, 2022 through September 14, 2022, the Company issued an aggregate of 264,492,661
shares of its common stock at an average contractual conversion price of $0.001
per share as a result of the conversion of principal of $327,200,
and accrued interest of $22,330
underlying certain outstanding convertible notes converted during such period. The total recorded to equity was $456,939.
From
October 17, 2022 through December 27, 2022, the Company issued an aggregate of 380,506,070
shares of its common stock at an average contractual conversion price of $0.001
per share as a result of the conversion of principal of $158,500,
and accrued interest of $7,191
underlying certain outstanding convertible notes converted during such period. The total recorded to equity was $165,691.
From
January 5, 2023 through March 30, 2023, the Company issued an aggregate of 1,375,598,285
shares of its common stock at an average contractual conversion price of $0.0002
per share as a result of the conversion of principal of $290,000,
and accrued interest of $17,985
underlying certain outstanding convertible notes converted during such period. The total recorded to equity was $435,198.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2023
(Unaudited)
The
Company reclassified $351,992 from put premium liabilities to additional paid in capital following conversions during the nine months
ended March 31, 2023.
During
the nine months ended March 31, 2023, principal amount of convertible notes of $122,000
and accrued interest of $12,488
containing bifurcated embedded conversion option derivatives were converted into common stock. Accordingly, the fair market value of
the shares issued upon conversion was $369,110,
resulting in a loss on extinguishment at the time of conversion of $234,622
and $223,288
of derivative liability fair value was recorded as a gain on extinguishment at the time of conversion, resulting in a net loss of
$11,334.
The
Company has 5,742,519,659 shares of its common stock reserved for future issuances based on lender reserve requirements pursuant to underlying
financing agreements at March 31, 2023.
Shares
issued for services and accrued expenses
As
of June 30, 2022, there was common stock issuable of 12,270,958 for services rendered during fiscal 2022. The common stock issuable of
12,270,958 were issued on July 1, 2022.
On
October 25, 2022, the Company issued 6,111,112 shares of common stock to a consultant for services rendered in October
2022. The Company valued these shares based on quoted trading prices on the date of grant at $0.0009 per share or $5,500 which was recorded
as stock-based consulting expense.
On
November 16, 2022, the Company issued 73,301,020 shares of common stock to a consultant for services rendered from
July 2022 to November 2022. Those shares were valued at approximately $0.00007 per share or $51,311, being the closing price of the stock
on the date of grant to such consultant. The Company recorded stock-based compensation of $51,311 during the nine months ended March
31, 2023.
Shares
issued upon exercise of warrants
Between
July 29, 2022 and December 6, 2022, the Company received gross proceeds of $200,000 from the exercise of 5,000 Series B Warrants and
issued 5,000 shares of its common stock.
Between
February 7, 2023 and March 9, 2023, the Company received gross proceeds of $175,000
from the exercise of 4,375
Series B Warrants for 4,375
shares of common stock, which were issued in
April 2023.
During
the nine months ended March 31, 2023, the Company issued 191,999,040
shares of common stock from the alternate cashless exercise of 960
Series A Warrants with an original exercise price of $200
and an alternate cashless exercise price of $0.001.
Cashless conversion is at the holder’s option and is available should the trading price of the common stock fall below $200
per share calculated based on the difference between the exercise price of the Series A Warrant and 70%
of the common stock market price. The Company recognized the value of the effect of a down round feature in such warrants when
triggered. Upon the occurrence of the triggering event that resulted in a reduction of the strike price, the Company measured the
value of the effect of the feature as the difference between the fair value of the warrants without the down round feature or before
the strike price reduction and the fair value of the warrants with a strike price corresponding to the reduced strike price upon the
down round feature being triggered. Accordingly, the Company recognized a deemed dividend of $0
and $408,557 during the
three and nine months ended March 31, 2023, respectively, and a corresponding increase in loss available to common stockholders upon
the alternate cashless exercise of these warrants.
Shares
issued in connection with a convertible note
On
November 3, 2022, the Company entered into a securities purchase agreement with Coventry, pursuant to which Coventry
purchased a promissory note from the Company in the aggregate principal amount of $125,000 (see Note 5). As an additional inducement
to the Coventry purchasing the note, the Company, as of the original issue date and for no additional consideration, issued to Coventry
an aggregate of 75,000,000 shares of the common stock, which were valued using the relative fair value method at $37,500
and recognized as debt discount to be amortized over the term of the Coventry Note.
Restricted
Stock Units
Pursuant
to employment agreements dated in May 2019, the Company granted an aggregate of 78 and 39 restricted stock units to the Company’s
Chief Executive Officer and Chief Scientific Officer, respectively. The total 117 restricted stock units are subject to vesting terms
as defined in such officers’ respective employment agreements. The 117 restricted stock units were valued at the fair value of $4,250 per unit or $497,240
based on the quoted trading price on the date of grant. There were $248,620 unrecognized restricted stock units expense as of March 31,
2023 and June 30, 2022. There are 59 unvested restricted stock units which are subject to various performance conditions which have not
yet been met and such restricted stock units have not yet vested as of March 31, 2023 and June 30, 2022 to which the $248,620 relates.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2023
(Unaudited)
Warrants:
The
following table summarizes common stock warrant activity for the nine months ended March 31, 2023:
SCHEDULE
OF WARRANT ACTIVITY
| | |
| | |
Weighted | |
| | |
Number of | | |
Average | |
| | |
Shares | | |
Price
Per Share | |
| Outstanding at June 30, 2022 | |
| 105,420 | | |
$ | 200.27 | |
| Granted | |
| 3,305,000 | | |
| 0.01 | |
| Exercised | |
| (10,335 | ) | |
| 54.86 | |
| Forfeited | |
| (1,000 | ) | |
| 2,000.00 | |
| Expired | |
| - | | |
| - | |
| Outstanding at March 31, 2023 | |
| 3,399,085 | * | |
$ | 5.51 | |
| | |
| | | |
| | |
| Exercisable at March 31, 2023 | |
| 3,379,711 | | |
$ | 5.55 | |
| Outstanding and Exercisable: | |
| | | |
| | |
| | |
| | | |
| | |
| Weighted average remaining contractual
term | |
| 2.38 | | |
| | |
| Aggregate intrinsic value | |
$ | - | | |
| | |
| * | The 3,399,085
total warrants
above which are exercisable into common stock consisted of the following: |
SCHEDULE
OF WARRANT OUTSTANDING AND EXERCISABLE
| | |
Number
of Warrants | | |
Exercisable | |
| Series A warrants | |
| 9,986 | | |
| 9,986 | |
| Series B warrants | |
| 19,375 | | |
| 19,375 | |
| Series C warrants | |
| 63,749 | | |
| 44,375 | |
| Warrants with no class
designation | |
| 3,305,975 | | |
| 3,305,975 | |
| Total | |
| 3,399,085 | | |
| 3,379,711 | |
On
August 16, 2022, the Company entered into an agreement with a certain consultant to provide services over a three-month period in exchange
for 1,000,000 warrants to purchase common stock at $0.01 per share with an expiry date of August 16, 2025. The fair
market value of the warrants was $2,408 on the date of grant as calculated under the Black Scholes Option Pricing model with the following
assumptions: stock price at valuation date of $0.0026 based on quoted trading price on date of grant, exercise price of $0.01, dividend
yield of zero, years to maturity of 3.00, a risk-free rate of 3.19%, and expected volatility 236%. The Company recorded $2,408 of stock-based
compensation expenses with respect to the grant of such warrants during the nine months ended March 31, 2023.
On
August 16, 2022, the Company and a third-party investor relations consultant agreed to settle an outstanding payable of $23,050
in exchange for 2,305,000
warrants to purchase common stock at $0.01
per share with an expiry date of August 16, 2025. The fair market value of the warrants was $5,551
on the date of grant as calculated under the Black Scholes Option Pricing model with the following assumptions: stock price at
valuation date of $0.0026
based on quoted trading price on date of grant, exercise price of $0.01,
dividend yield of zero,
years to maturity of 3.00,
a risk-free rate of 3.19%,
and expected volatility of 236%.
Accordingly, the Company recognized gain from settlement of debt of $17,499
during the nine months ended March 31, 2023 as reflected in the accompanying condensed consolidated statements of
operations.
On
March 8, 2023, the Company agreed with the holder of Series B Warrants (the “Holder”) pursuant to a letter agreement to
exercise up to $250,000
of Series B Warrants currently held as follows:
| 1. | Effective
upon the execution of such letter agreement, the Holder will exercise the existing 3,750 Series B Warrants
for an aggregate exercise price of $150,000, or 3,750 shares of common stock (the “Existing Warrants”) and; |
| 2. | Within
5 business days’ written notice to the Holder from the Company of receipt of approval by the Financial Industry Regulatory
Authority, Inc. (“FINRA”) of the Company’s next anticipated reverse stock split, an additional $100,000
of Series B Warrants for 2,500
shares of common stock. |
As
an inducement to exercise the Existing Warrants, the Company agreed to extend the termination date of the Existing Warrants and the
Series A Warrants held by the Holder to March 27, 2025, and to extend the termination date of the Series C Warrants held by the
Holder to the third anniversary of the last vesting date of such warrants, effective upon the exercise of the first $150,000
of Existing Warrants.
In
accordance with ASC 815-40-35-17(c), the effect of a modification or an exchange of an equity classified freestanding written call option
shall be measured as the difference between the fair value of the modified instrument and the fair value of that instrument immediately
before it is modified. The Company recognized the effect of the modifications of the warrants above that is directly attributable to
an actual equity offering as an equity issuance cost which amount is not material. The modified warrants are determined to be equity
classified, accordingly, the incremental fair value and equity issuance cost were both recognized in additional paid in capital and therefore,
there was no effect in equity and such value is de minimis.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2023
(Unaudited)
Options:
A
summary of the Company’s option activity during the nine months ended March 31, 2023 is presented below:
SCHEDULE
OF SHARE BASED COMPENSATION STOCK OPTIONS ACTIVITY
| | |
| | |
Weighted | |
| | |
Number of | | |
Average Exercise | |
| | |
Shares | | |
Price
Per Share | |
| Outstanding at June 30, 2022 | |
| 59 | | |
$ | 4,533 | |
| Granted | |
| - | | |
| - | |
| Exercised | |
| - | | |
| - | |
| Forfeited | |
| - | | |
| - | |
| Expired | |
| - | | |
| - | |
| Outstanding at March 31, 2023 | |
| 59 | | |
$ | 4,533 | |
| | |
| | | |
| | |
| Exercisable at March 31, 2023 | |
| 59 | | |
$ | 4,533 | |
| Outstanding and Exercisable: | |
| | | |
| | |
| | |
| | | |
| | |
| Weighted average remaining contractual
term | |
| 6.13 | | |
| | |
| Weighted average fair value of options
granted during the period | |
$ | - | | |
| | |
| Aggregate intrinsic value | |
$ | - | | |
| | |
In
May 2019, the Company’s board of directors approved and adopted the Company’s 2019 Equity Incentive Plan (the “2019
Plan”), which reserves a total of 234
shares of common stock for
issuance under the 2019 Plan. Incentive awards authorized under the 2019 Plan include, but are not limited to, incentive stock options,
non-qualified stock options, restricted stock awards and restricted stock units.
During
the nine months ended March 31, 2023 and 2022, the Company recognized stock-based compensation of $0 and $41,436, respectively, related
to vested stock options. There was $0 of unvested stock options expense as of March 31, 2023. No stock options were granted during the
nine months ended March 31, 2023.
NOTE
8 – COMMITMENTS AND CONTINGENCIES
Legal
Matters
From
time to time, the Company may be subject to litigation and claims arising in the ordinary course of business. The Company is not currently
a party to any material legal proceedings and the Company is not aware of any pending or threatened legal proceeding against the Company
that we believe could have a material adverse effect on our business, operating results, cash flows or financial condition.
IRS
Liability
As
part of its requirement for having a foreign operating subsidiary, the Company is required to file an informational
Form 5471 to the Internal Revenue Service (the “IRS”), which is a form that explains the nature of the relationship between
the foreign subsidiary and the parent company. From 2012 through the 2014, the Company did not file this form in a timely manner. As
a result of the non-timely filings, the Company incurred a penalty from the IRS in the amount of $10,000 per year, or $30,000 in total,
plus accrued interest, such penalty and interest having been accrued and is included in the accrued expenses and other payable figure
in the March 31, 2023 and June 30, 2022 consolidated balance sheets. The Company recorded the penalties for all three years during the
year ended June 30, 2018. The Company is current on all subsequent filings.
Operating
Agreements
In
November 2009, the Company entered into a commercialization agreement with the University of Bath (UK) (the “UK
University”), whereby the Company and the UK University co-owned the intellectual property relating to the Company’s
pro-enzyme formulations. In June 2012, the Company and the UK University entered into an assignment and amendment whereby the
Company assumed full ownership of the intellectual property, while agreeing to pay royalties of 2%
of net revenues to the UK University. Additionally, the Company agreed to pay 5%
of each and every license agreement subscribed for. The contract is cancellable at any time by either party. To date, no amounts are
owed under the agreement.
Collaboration
Agreement
On
September 13, 2018, the Company entered into a two-year collaboration agreement with the University of Jaén (the “University”)
to provide certain research services to the Company. In consideration of such services, the Company agreed to pay the University approximately
52,000 Euros ($59,508 USD) in year one and a maximum of 40,000 Euros ($45,775 USD) in year two. The Company paid 31,754 Euros ($36,117
USD) in 2019 and has accrued 28,493 Euros ($24,043 USD) as of June 30, 2021. Additionally, in exchange for full ownership of the intellectual
property, the Company agreed to pay royalties of 2% of net revenues to the University. On October 1, 2020, the Company entered into another
two-year collaboration agreement with the University to provide certain research services to the Company. In consideration of such services,
the Company agreed to pay the University approximately 30,000 Euros ($35,145 USD), which were paid in four installment payment of 5,000
Euros in November 2020, 5,000 Euros ($5,858) in March 2021, 10,000 Euros ($11,715) in December 2021 and 10,000 Euros ($11,715) in September
2022. Additionally, the University agreed to hire and train a doctoral student for this project and the Company agreed to pay the University
25,837 Euros ($30,268 USD). In exchange for full ownership of the intellectual property, the Company agreed to pay royalties of 2% of
net revenues to the University.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2023
(Unaudited)
On
July 27, 2022, the Company entered into a two-year research agreement with the University to provide certain research and experiment
services to the Company. In exchange for full ownership of the intellectual property, the Company agreed to pay royalties of 2% of net
revenues. In consideration of such services, the Company agreed to pay the University approximately 53,200 Euros ($53,806 USD) payable
as follows:
-
18,200 Euros ($18,407 USD) upon execution (paid in August 2022),
-
8,000 Euros ($8,091 USD) in September 2022 (unpaid),
-
7,000 Euros ($7,080 USD) in December 2022 (unpaid),
-
10,000 Euros ($10,114 USD) in March 2023 (unpaid), and
-
10,000 Euros ($10,114 USD) in July 2023.
The
commencement date for the experiments was on September 1, 2022, and the estimated length of time for completion is 24 months.
As
of March 31, 2023 and June 30, 2022, the Company has $40,465 and $14,364, respectively, balance due to the University for unreimbursed
lab fees, which are included in accrued expenses and other liabilities in the accompanying condensed consolidated balance sheets. As
of March 31, 2023 and June 30, 2022, there are no royalty fees owed to the University.
Consulting
Agreement
On
July 1, 2022, the Company and a consultant agreed to extend the term of a consulting agreement from July 1, 2022 to June 30, 2023 to
provide media-related services for a monthly fee of $50,000.
In addition, the Company agreed to pay a stock fee equal to 9.9%
of the outstanding common stock of the Company during the term of the agreement. The Company agreed to increase the
consultant’s diluted holdings back to 9.9%
and accrue the value of the common stock at each reporting period until June 30, 2023. All service fees are non-refundable. On
November 16, 2022, the Company issued 73,301,020
shares of common stock to this consultant for services rendered from July 2022 to November 2022 (see Note 7).
Accordingly, the Company recorded accrued expenses of $83,277
as of March 31, 2023 based on the amount of shares owed to maintain the 9.9%
ownership multiplied by the March 31, 2023 stock price, which are included in accrued expenses and other liabilities in the
accompanying condensed unaudited consolidated balance sheets along with $100,000
related to the monthly fees for a total balance owed of $183,277
as of March 31, 2023.
Operating
Leases
On
May 4, 2022, the Company entered in a three-year lease agreement with North Horizon Pty Ltd., a related party, (see Note 9) for a monthly
rent of $3,000 AUD or $2,176 USD (depending on exchange rate) per month plus taxes. On May 4, 2022, the Company recorded right-of-use
assets $66,201 and total lease liabilities of $66,201 based on an incremental borrowing rate of 8%.
ROU
is summarized below:
SCHEDULE
OF RIGHT OF USE ASSET
| | |
March
31, 2023 | | |
June
30, 2022 | |
| Office lease | |
$ | 66,201 | | |
$ | 66,201 | |
| Less: accumulated
amortization | |
| (21,677 | ) | |
| (3,678 | ) |
| Right-of-use asset,
net | |
$ | 44,524 | | |
$ | 62,523 | |
Operating
lease liabilities are summarized below:
SCHEDULE
OF OPERATING LEASE LIABILITY
| | |
March
31, 2023 | | |
June
30, 2022 | |
| Office lease | |
$ | 66,201 | | |
$ | 66,201 | |
| Reduction of lease liability | |
| (20,077 | ) | |
| (3,277 | ) |
| Less: office lease,
current portion | |
| (21,185 | ) | |
| (20,605 | ) |
| Long term portion
of lease liability | |
$ | 24,939 | | |
$ | 42,319 | |
Remaining
future minimum lease payments under the non-cancelable operating lease at March 31, 2023 are as follows:
SCHEDULE
OF FUTURE MINIMUM LEASE PAYMENTS
| | |
| | |
| Fiscal Year 2023 (remaining) | |
$ | 6,027 | |
| Fiscal Year 2024 | |
| 24,109 | |
| Fiscal Year 2025 | |
| 20,091 | |
| Imputed interest | |
| (4,103 | ) |
| Total operating lease
liability | |
$ | 46,124 | |
The
weighted average remaining lease term for the operating lease is 2.02
years as of March 31, 2023.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2023
(Unaudited)
NOTE
9 – RELATED PARTY TRANSACTIONS
Since
its inception, the Company has conducted transactions with its directors and entities related to such directors. These transactions have
included the following:
As
of March 31, 2023 and June 30, 2022, the Company owed its former director a total of $29,777 and $30,746, respectively, related to expenses
paid on behalf of the Company related to corporate startup costs and intellectual property (see Note 4).
As
of March 31, 2023 and June 30, 2022, the Company owed its former director a total of $49,558 and $51,171, respectively, for money loaned
to the Company throughout the years. The total loans balance owed at March 31, 2023 and June 30, 2022 is not interest bearing (see Note
5).
On
May 4, 2022, the Company entered into a three-year lease agreement with North Horizon Pty Ltd., a related party, of which Mr. Nathanielsz,
our CEO, CFO and a director, and his wife are owners and directors, for a monthly rent of $3,000 AUD or $2,176 USD (depending on exchange
rate) per month plus taxes (See Note 8). As of March 31, 2023 and June 30, 2022, total rent payable of $149,129 AUD ($99,872 USD) and
$122,129 AUD ($84,452 USD), respectively, was included in accrued expenses in the accompanying condensed consolidated balance sheet.
Rent expense under this lease was $22,244 and $19,680 for the nine months ended March 31, 2023 and 2022, respectively and reflected as
occupancy expenses in the accompanying condensed consolidated statements of operations and comprehensive income (loss).
Employment
and Services Agreements with Management
The
Company and Mr. Nathanielsz entered into an employment agreement as of February 25, 2015 (the “Nathanielsz Employment Agreement”)
setting forth the terms and conditions of Mr. Nathanielsz’s employment as the Company’s President and Chief Executive Officer.
The Nathanielsz Employment Agreement was scheduled to expire on February 25, 2019; however, the term of the Nathanielsz Employment Agreement
automatically renews for successive one-year periods unless either party provides 30 days’ prior written notice of his or its intent
not to renew. The Nathanielsz Employment Agreement continues in effect as of March 31, 2023, as amended on October 26, 2022 (see below).
The Nathanielsz Employment Agreement provides Mr. Nathanielsz with a base salary of $25,000 AUD per month ($300,000 AUD annually or $205,680
USD) and a monthly contribution to Mr. Nathanielsz’s pension equal to 9.5% of his monthly salary. Mr. Nathanielsz has the ability
to convert any accrued but unpaid salary into common stock at the end of each fiscal year at a conversion price to be determined by Mr.
Nathanielsz and the Company, which will in no event be lower than par value or higher than the closing bid price on the date of conversion.
Pursuant to the Nathanielsz Employment Agreement, Mr. Nathanielsz is entitled to an annual discretionary bonus in an amount up to 200%
of his annual base salary, which bonus shall be determined by the Company’s board of directors based upon the performance of the
Company. On March 16, 2018, the Company’s board of directors approved an increase of Mr. Nathanielsz’s annual base salary
from $300,000 AUD ($205,680 USD) to $400,000 AUD ($274,240 USD), effective February 2018. On August 1, 2022, the Company’s board
of directors approved an increase of Mr. Nathanielsz’s annual base salary from $400,000 AUD ($276,600 USD) to $600,000 AUD ($414,900
USD), effective July 1, 2022.
Mr.
Nathanielsz’s wife, Sylvia Nathanielsz, is and has been a non-executive, part-time employee of the Company since October 2015.
Effective February 1, 2018, Mrs. Nathanielsz receives an annual salary of $120,000 AUD ($80,904 USD) and is entitled to customary benefits.
Pursuant
to a February 25, 2016 board resolution, James Nathanielsz is paid $4,481 AUD ($3,205 USD), on a monthly basis for the purpose
of acquiring and maintaining an automobile. For the year ended June 30, 2022, a total of $7,689 AUD ($5,577 USD) in payments have been
made with respect to Mr. Nathanielsz’s car allowance which expired in August 2022. No payments were made during the nine months
ended March 31, 2023.
Pursuant
to the approval of the Company’s board of directors (the “Board”), on May 14, 2019, Mr. Nathanielsz was granted a $460,000
AUD ($315,376 USD) bonus for accomplishments achieved while serving as the Company’s Chief Executive Officer during the fiscal
year ended June 30, 2019 with $200,000 AUD ($137,120 USD) of such bonus payable by the Company to him throughout the Company’s
2019 fiscal year as its cash resources allow, with the remaining $260,000 AUD ($178,256 USD) of such bonus to be deferred by Mr. Nathanielsz
until a future date when the Company’s cash resources allow for such payment, as agreed to by him. A total of $90,000 AUD ($64,377
USD) in payments were made in the year ended June 30, 2019. On July 13, 2020, the Board approved a bonus of $240,000 AUD being equal
to 60% of Mr. Nathanielsz’s base salary which was accrued as of June 30, 2020. A total of $202,620 AUD ($136,606 USD) in payments
were made against the bonuses during the year ended June 30, 2020, which resulted to a remaining balance of $407,380 AUD ($280,726 USD)
bonus payable as of June 30, 2020. On August 12, 2021, the Board approved a bonus of $177,840 USD. A total of $221,890 AUD ($166,418
USD) in payments were made against the bonuses during the year ended June 30, 2021 resulting in a remaining balance of $422,610 AUD ($316,957
USD) bonus payable as of June 30, 2021 which was included in accrued expenses in the accompanying consolidated balance sheet. On August
12, 2021, pursuant to the Cancellation Agreement, Mr. Nathanielsz agreed to cancel $177,840 of the bonus payable in exchange for 5,928,000
shares of the Company’s Common Stock. On August 1, 2022, the Board approved a bonus of $140,000 AUD or $96,810 USD. A total of
$144,166 AUD ($99,691 USD) in payments were made in respect of the bonuses during the year ended June 30, 2022 resulting in a remaining
balance of $181,324 AUD ($125,386 USD) bonus payable as of June 30, 2022, which was included in accrued expenses in the accompanying
condensed consolidated balance sheet. A total of $48,387 AUD ($33,048 USD) in payments were made in respect of the bonuses during the
nine months ended March 31, 2023, resulting in a remaining balance of $133,000 AUD ($89,002 USD) bonus payable as of March 31, 2023 which
was included in accrued expenses in the accompanying condensed consolidated balance sheet.
Amended
and Restated Employment Agreement
On May 14, 2019 (the “Effective Date”), the Company entered into an Amended and
Restated Employment Agreement (the “Employment Agreement”) with Mr. Nathanielsz for a term of three years, subject to automatic one-year renewals, at an annual
salary of $400,000 AUD ($309,313 USD). Pursuant to the Employment Agreement, Mr. Nathanielsz was granted options to purchase 39 shares
of common stock (the “Nathanielsz Options”), with an exercise price per share of $4,675 (110% of the
closing market price of the common stock on May 14, 2019 (or $4,250), the date of approval of such grant by the Board),
(ii) 39 restricted stock units of the Company (the “Initial Nathanielsz RSUs”), and (iii) an additional 39 restricted stock
units of the Company (the “Additional Nathanielsz RSUs”). Such options and restricted stock units were granted pursuant to
the 2019 Plan approved by the Board on the Effective Date. The Nathanielsz Options have a term of 10 years from the date of grant. The
Nathanielsz Options and Additional Nathanielsz RSU’s are subject to vesting periods pursuant to the Employment Agreement. There are
39 vested options and 39 restricted stock units that are considered issuable as of March 31, 2023 and June 30, 2022.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2023
(Unaudited)
On
October 26, 2022, the Company entered into an Amended and Restated Employment Agreement (the “Amended Agreement”) with
Mr. Nathanielsz, effective as of July 1, 2022, (the “2022 Effective Date”). The Amended Agreement provides Mr.
Nathanielsz with a base salary of $600,000
AUD ($414,900
USD) per annum. The Company has also agreed to pay Mr. Nathanielsz an annual discretionary bonus in an amount up to 100%
of his annual base salary, reduced from 200%,
which bonus shall be determined by the Board and based upon the performance of the Company. The Amended Agreement has a term of
three (3) years from the 2022 Effective Date, with automatic one-year renewal periods unless either party elects not to
renew.
Amended
and Restated Employment Agreement
On May 14, 2019, the Company entered into an Amended and Restated Services Agreement (the
“Services Agreement”) with Dr. Kenyon, the Company’s Chief Scientific Officer and a director, for a term of three years,
subject to automatic one-year renewals, at an annual salary of $54,000 AUD ($41,580 USD). In connection with the execution of the Services
Agreement, Dr. Kenyon was designated as an executive officer of the Company and assumed a more active executive role with the Company.
Pursuant to the Services Agreement, Dr. Kenyon was granted options to purchase 20 shares of common stock (the “Kenyon
Options”), with an exercise price per share of $4,250 (100% of the closing market price of the common stock on
May 14, 2019, the date of approval of such grant by the Board), (ii) 20 restricted stock units of the Company (the “Initial Kenyon
RSUs”), and (iii) an additional 20 restricted stock units of the Company (the “Additional Kenyon RSUs”). Such options
and restricted stock units were granted pursuant to the 2019 Plan. The Kenyon Options have
a term of 10 years from the date of grant. The Kenyon Options and Additional Kenyon RSU’s are subject to vesting periods pursuant
to the Services Agreement. There are 20 vested options and 20 vested restricted stock unit that are considered issuable as of March 31,
2023 and June 30, 2022.
On
August 12, 2021, pursuant to a Cancellation Agreement, Mr. Kenyon agreed to cancel accrued salaries of $102,600 in exchange for 3,420,000
shares of common stock of the Company. As of March 31, 2023 and June 30, 2022, total accrued salaries of $82,500
AUD ($56,050 USD) and $54,000 AUD ($37,341 USD), respectively, were included in accrued expenses in the accompanying condensed consolidated
balance sheets.
Collaboration
Agreement
On
October 1, 2020, the Company entered into a two-year collaboration agreement with the University of Jaén to provide certain research
services to the Company. One of the Company’s Scientific Advisory Board is the lead joint researcher of University of Jaén.
Additionally, on July 27, 2022, the Company entered into a two-year research agreement with the University of Jaén to provide
certain research and experiment services to the Company (see Note 8). Further, the Company agreed to pay royalties of 1% of net revenues
each to two members of the Scientific Advisory Board.
Intercompany
Loans
All
intercompany loans were made by the parent to the Company’s subsidiary, Propanc PTY LTD, none of which has been repaid as of
March 31, 2023. Effective fiscal year 2021, the parent company determined that intercompany loans will not be repaid in the
foreseeable future and thus, per ASC 830-20-35-3, gains and losses from measuring the intercompany balances are recorded within
cumulative translation adjustment on the condensed consolidated balance sheet as accumulated other comprehensive income.
NOTE
10 – CONCENTRATIONS AND RISKS
Concentration
of Credit Risk
The
Company maintains its cash in banks and financial institutions in Australia. Bank deposits in Australian banks are uninsured. The Company
has not experienced any losses in such accounts through March 31, 2023.
The
Company primarily relied on funding from five convertible debt lenders and received net proceeds after deductions of $79,111 for original
issue discounts and debt issue costs during the nine months ended March 31, 2023 from each of the five lenders of $101,250, $189,000,
$150,000, $50,000 and $100,000, respectively, which represents approximately 17%, 32%, 25%, 8% and 18%, respectively, of total proceeds
received by the Company during the nine months ended March 31, 2023.
The
Company primarily relied on funding from three convertible debt lenders and received proceeds after deductions of $66,000 for original
issue discounts and debt issue costs during the nine months ended March 31, 2022 from the lenders of $641,500 (from each of the three
lenders of $160,000, $235,000 and $246,500, respectively) which represents approximately 23%, 33% and 35%, respectively of total proceeds
received by the Company during the nine months ended March 31, 2022.
Receivable
Concentration
As
of March 31, 2023 and June 30, 2022, the Company’s receivables were 100% related to reimbursements on GST taxes paid.
Patent
and Patent Concentration
The
Company has filed multiple patent applications relating to its lead product, PRP. The Company’s lead patent application has
been granted and remains in force in the United States, Belgium, Czech Republic, Denmark, France, Germany, Ireland, Italy,
Netherlands, Portugal, Spain, Sweden, Switzerland, Liechtenstein, Turkey, United Kingdom, Australia, China, Japan, Indonesia,
Israel, New Zealand, Singapore, Malaysia, South Africa, Republic of Korea, India and Brazil. In Canada and Mexico, the patent
applications have been accepted as of this March 31 quarter.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2023
(Unaudited)
In
2016 and early 2017, the Company filed other patent applications. Three applications were filed under the Patent Cooperation Treaty (the
“PCT”). The PCT assists applicants in seeking patent protection by filing one international patent application under the
PCT, applicants can simultaneously seek protection for an invention in over 150 countries. Once filed, the application is placed under
the control of the national or regional patent offices, as applicable, in what is called the national phase. One of the PCT applications
filed in November 2016, entered national phase in July 2018 and another PCT application entered national phase in August
2018. A third PCT application entered the national phase in October 2018.
In
July 2020, a world-first patent was granted in Australia for the cancer treatment method patent family. Presently, there are 59 granted,
allowed, or accepted patents and 17 patents filed, or under examination in key global jurisdictions relating to the use of proenzymes
against solid tumors, covering the lead product candidate PRP.
Further
patent applications are expected to be filed to capture and protect additional patentable subject matter based on the Company’s
field of technology relating to pharmaceutical compositions of proenzymes for treating cancer.
Foreign
Operations
As
of March 31, 2023 and June 30, 2022, the Company’s operations are based in Camberwell, Australia; however, the majority of research
and development is being conducted in the European Union.
On
July 22, 2016, the Company formed a wholly-owned subsidiary, Propanc (UK) Limited under the laws of England and Wales, for the purpose
of submitting an orphan drug application with the European Medicines Agency as a small and medium-sized enterprise. As of March 31, 2023
and June 30, 2022, there has been no activity within this entity.
NOTE
11 – DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Derivative
Financial Instruments:
The
Company applies the provisions of ASC 815-40, Contracts in Entity’s Own Equity, under which convertible instruments and
warrants, which contain terms that protect holders from declines in the stock price (reset provisions), may not be exempt from derivative
accounting treatment. As a result, warrants and embedded conversion options in convertible debt are recorded as a liability and are revalued
at fair value at each reporting date. If the fair value of the warrants exceeds the face value of the related debt, the excess is recorded
as change in fair value in operations on the issuance date. The Company had $121,500 (2 notes) and $79,000 (1 note) of convertible debt,
which were treated as derivative instruments outstanding at March 31, 2023 and June 30, 2022, respectively.
The
Company calculates the estimated fair values of the liabilities for derivative instruments using the Binomial Trees Method. The
closing price of the Company’s common stock at March 31, 2023, the last trading day of the period ended March 31, 2023, was
$0.0005 per share. The volatility, expected
remaining term and risk-free interest rates used to estimate the fair value of derivative liabilities at March 31, 2023 are
indicated in the table that follows. The expected term is equal to the remaining term of the warrants or convertible instruments and
the risk-free rate is based upon rates for treasury securities with the same term.
Convertible
Debt
SCHEDULE
OF FAIR VALUE MEASUREMENTS, RECURRING AND NONRECURRING, VALUATION TECHNIQUES
| | |
Initial
Valuations
(on new derivative
instruments entered into
during the nine
months ended
March 31, 2023) | |
March
31, 2023 | |
| Volatility | |
228.29 – 256.02% | |
| 267.38 | % |
| Expected Remaining Term (in years) | |
0.22 – 0.28 | |
| 0.01
- 0.03 | |
| Risk Free Interest Rate | |
3.13 – 4.42% | |
| 4.74 | % |
| Expected dividend yield | |
None | |
| None | |
PROPANC
BIOPHARMA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2023
(Unaudited)
Fair
Value Measurements:
The
Company measures and reports at fair value the liability for derivative instruments. The fair value liabilities for price adjustable
warrants and embedded conversion options have been recorded as determined utilizing the Binomial Trees model. The following tables summarize
the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2023 and June 30, 2022:
SCHEDULE
OF FAIR VALUE, ASSETS AND LIABILITIES MEASURED ON RECURRING BASIS
| | |
Balance
at
March 31, 2023 | | |
Quoted
Prices in
Active Markets
for Identical
Assets | | |
Significant Other Observable
Inputs | | |
Significant Unobservable
Inputs | |
| | |
| | | |
| (Level
1) | | |
| (Level
2) | | |
| (Level
3) | |
| Embedded
conversion option liabilities | |
$ | 132,501 | | |
$ | — | | |
$ | — | | |
$ | 132,501 | |
| Total | |
$ | 132,501 | | |
$ | — | | |
$ | — | | |
$ | 132,501 | |
| | |
Balance
at
June 30, 2022 | | |
Quoted
Prices in
Active Markets
for Identical
Assets | | |
Significant Other Observable
Inputs | | |
Significant Unobservable
Inputs | |
| | |
| | | |
| (Level
1) | | |
| (Level
2) | | |
| (Level
3) | |
| Embedded
conversion option liabilities | |
$ | 151,262 | | |
$ | — | | |
$ | — | | |
$ | 151,262 | |
| Total | |
$ | 151,262 | | |
$ | — | | |
$ | — | | |
$ | 151,262 | |
The
following is a roll forward for the nine months ended March 31, 2023 of the fair value liability of price adjustable derivative instruments:
SCHEDULE
OF DERIVATIVE LIABILITIES AT FAIR VALUE
| | |
Fair Value
of | |
| | |
Liability
for | |
| | |
Derivative | |
| | |
Instruments | |
| Balance at June 30, 2022 | |
$ | 151,262 | |
| Initial fair value of embedded conversion option
derivative liability recorded as debt discount | |
| 93,668 | |
| Reduction of derivative liability upon debt
conversion | |
| (223,288 | ) |
| Change in fair value
included in statements of operations | |
| 110,859 | |
| Balance at March 31,
2023 | |
$ | 132,501 | |
NOTE
12 – SUBSEQUENT EVENTS
Shares
issued for conversion of convertible debt
Between
April 2023 and May 2023, the Company issued an aggregate of 667,102,561
shares of its common stock at a contractual conversion price of $0.0002
per share, as a result of the conversion of principal of $112,750
and accrued interest of $6,433
underlying certain outstanding convertible notes converted during such period. The Company reclassified $48,865
from put premium liabilities to additional paid in capital following conversions.
Reverse
Stock Split
On
May 1, 2023, the Company effected a one-for-one
thousand (1:1,000) reverse stock split of
the Company’s issued and outstanding shares of common stock (the “Reverse Stock Split”). No fractional
shares of Common Stock will be issued in connection with the Reverse Stock Split, all of which were rounded up to the nearest whole
number. Proportional adjustments for the Reverse Stock Split will be made to the Company’s outstanding stock options,
warrants and equity incentive plans. The Company is awaiting the approval of FINRA for the OTC market effectiveness of the Reverse
Stock Split.
The
following is the unaudited pro-forma effect of the 1:1000 Reverse Stock Split on the basic and diluted net loss per share:
SCHEDULE
OF REVERSE STOCK SPLIT
| Historical
per share data – (Pre- Split basis) | |
Three
Months Ended
March 31, 2023
| | |
Three
Months Ended
March 31, 2022
| | |
Nine
Months Ended
March 31, 2023
| | |
Nine
Months Ended
March 31, 2022
| |
| | |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | |
| Net loss available to Common Stockholders | |
$ | 809,809 | | |
$ | 700,076 | | |
$ | 2,321,079 | | |
$ | 2,198,953 | |
| Basic and diluted weighted average shares
outstanding | |
| 1,924,073,522 | | |
| 66,353,881 | | |
| 1,115,848,071 | | |
| 47,561,123 | |
| Basic
and diluted net loss per share | |
$ | 0.00 | | |
$ | 0.01 | | |
$ | 0.00 | | |
$ | 0.05 | |
| Historical
per share data – (Post- Split basis) (Unaudited) | |
Three
Months Ended
March 31, 2023 | | |
Three
Months Ended
March 31, 2022 | | |
Nine
Months Ended
March 31, 2023 | | |
Nine
Months Ended
March 31, 2022 | |
| | |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | |
| Net loss available to Common Stockholders | |
$ | 809,809 | | |
$ | 700,076 | | |
$ | 2,321,079 | | |
$ | 2,198,953 | |
| Basic and diluted weighted average shares
outstanding | |
| 1,924,074 | | |
| 66,354 | | |
| 1,115,848 | | |
| 47,561 | |
| Basic
and diluted net loss per share | |
$ | 0.42 | | |
$ | 10.55 | | |
$ | 2.08 | | |
$ | 46.23 | |
PROPANC
BIOPHARMA, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2023
(Unaudited)
The
following is the unaudited pro-forma effect of the 1:1000 Reverse Stock Split on the condensed consolidated balance sheets:
SCHEDULE
OF PRO FORMA EFFECT OF REVERSE STOCK SPLIT
| | |
March
31, 2023 | | |
1:1000
adjustment | | |
Pro-Forma
Effect
March 31, 2023 | |
| | |
| | |
| | |
(Unaudited) | |
| Total Assets | |
$ | 143,742 | | |
$ | - | | |
$ | 143,742 | |
| Total Liabilities | |
| 3,085,156 | | |
| - | | |
| 3,085,156 | |
| | |
| | | |
| | | |
| | |
| Stockholders’ Deficit: | |
| | | |
| | | |
| | |
| Common Stock | |
| 2,621,298 | | |
| (2,618,677 | ) | |
| 2,621 | |
| Common Stock Issuable | |
| 4 | | |
| (4 | ) | |
| - | |
| Additional Paid In Capital | |
| 57,068,986 | | |
| 2,618,681 | | |
| 59,687,667 | |
| Subscription Receivable | |
| - | | |
| - | | |
| - | |
| Accumulated Other Comprehensive
Income | |
| 1,293,747 | | |
| - | | |
| 1,293,747 | |
| Accumulated Deficit | |
| (63,878,972 | ) | |
| - | | |
| (63,878,972 | ) |
| Treasury
Stock | |
| (46,477 | ) | |
| - | | |
| (46,477 | ) |
| Total Stockholders’
deficit | |
| (2,941,414 | ) | |
| - | | |
| (2,941,414 | ) |
| Total Liabilities and
Basic and Stockholders’ deficit | |
$ | 143,742 | | |
$ | - | | |
$ | 143,742 | |
| | |
June
30, 2022 | | |
1:1000
adjustment | | |
Pro-Forma
Effect June 30, 2022 | |
| | |
| | |
| | |
(Unaudited) | |
| Total Assets | |
$ | 81,651 | | |
$ | - | | |
$ | 81,651 | |
| Total Liabilities | |
| 3,105,300 | | |
| - | | |
| 3,105,300 | |
| | |
| | | |
| | | |
| | |
| Stockholders’ Deficit: | |
| | | |
| | | |
| | |
| Series A Preferred Stock | |
| 5,000 | | |
| - | | |
| 5,000 | |
| Common Stock | |
| 220,351 | | |
| (220,131 | ) | |
| 220 | |
| Common Stock Issuable | |
| 19,597 | | |
| (19,577 | ) | |
| 20 | |
| Additional Paid In Capital | |
| 57,124,982 | | |
| 239,708 | | |
| 57,364,690 | |
| Subscription Receivable | |
| (23,758 | ) | |
| - | | |
| (23,758 | ) |
| Accumulated Other Comprehensive
Income | |
| 1,234,549 | | |
| - | | |
| 1,234,549 | |
| Accumulated Deficit | |
| (61,557,893 | ) | |
| - | | |
| (61,557,893 | ) |
| Treasury
Stock | |
| (46,477 | ) | |
| - | | |
| (46,477 | ) |
| Total Stockholders’
deficit | |
| (3,023,649 | ) | |
| - | | |
| (3,023,649 | ) |
| Total Liabilities and
Basic and Stockholders’ deficit | |
$ | 81,651 | | |
$ | - | | |
$ | 81,651 | |
