NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2022
(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”) was originally incorporated in Melbourne,
Victoria Australia on October 15, 2007 as Propanc PTY LTD, and continues to be 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.
On
November 23, 2010, the Company was incorporated in the state of Delaware as Propanc Health Group Corporation. In January 2011, to reorganize
the Company, we acquired all of the outstanding shares of Propanc PTY LTD on a one-for-one basis making it a wholly-owned subsidiary
of the Company.
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 to the European Medicines Agency as a small and medium-sized enterprise. As of December 31,
2022, 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 43 granted,
allowed, or accepted patents and 22 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.
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, in accordance with Section 228 of the Delaware General Corporation Law, for the Company
to file a Certificate of Amendment to its Certificate of Incorporation (the “May Certificate”) with the Secretary of State
of the State of Delaware, which increased the Company’s authorized capital stock. The May Certificate increased the number of authorized
shares of the Company’s Common Stock, par value $0.001 per share, from 1,000,000,000 to 3,000,000,000. The number of authorized
shares of preferred stock remains at 1,500,005, such that the total number of shares of all classes and series the Company was authorized
to issue became 3,001,500,005 shares. The Certificate 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, in accordance with Section 228 of the Delaware General Corporation Law, for the Company
to file a Certificate of Amendment to its Certificate of Incorporation (the “September Certificate”) with the Secretary of
State of the State of Delaware, which increased the Company’s authorized capital stock. The September Certificate increased the
number of authorized shares of the Company’s Common Stock, par value $0.001 per share, from 3,000,000,000 to 10,000,000,000. The
number of authorized shares of preferred stock remains at 1,500,005, such that the total number of shares of all classes and series the
Company is authorized to issue is 10,001,500,005 shares. The Certificate was filed and became effective on November 4, 2022.
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 six months ended December 31, 2022
and 2021 and cash flows for the three and six months ended December 31, 2022 and 2021, and our consolidated financial position at December
31, 2022 have been made. The Company’s results of operations for the six months ended December 31, 2022 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 December 31, 2022.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2022
(Unaudited)
Use
of Estimates
The
preparation of financial statements in conformity with the accounting principles generally accepted in the United States of America (“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
December 31, 2022 and 2021, the Company recognized a cumulative exchange gain (loss) of approximately $269,000 and $485,000, respectively,
on intercompany loans made by the parent to the subsidiary that have not been repaid as of December 31, 2022, which is included as component
of accumulated other comprehensive income on the accompanying unaudited condensed consolidated balance sheet.
As
of December 31, 2022 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
| | |
December
31, 2022 | | |
June
30, 2022 | |
| Exchange
rate on balance sheet dates | |
| | | |
| | |
| USD
: AUD exchange rate | |
| 0.6805 | | |
| 0.6915 | |
| | |
| | | |
| | |
| Average
exchange rate for the period | |
| | | |
| | |
| USD
: AUD exchange rate | |
| 0.6705 | | |
| 0.7253 | |
The
change in Accumulated Other Comprehensive Income by component during the six months ended December 31, 2022 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 | |
| 18,584 | |
| Ending balance, December 31, 2022 | |
$ | 1,253,133 | |
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 SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2022
(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 December 31, 2022 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 we are in the startup stage. Accordingly, as the Company’s
products are not currently approved for market, all patent costs incurred from 2013 through December 31, 2022 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 December 31, 2022, and June 30, 2022, the Company was owed $4,543 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 SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2022
(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. On July 1, 2019 the Company adopted ASU 2017-11 under which down-round
Features in Financial Instruments will no longer cause derivative treatment.
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 common shares 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 December 31, 2022 and 2021 were $74,878 and $50,753, respectively. Total
research and development costs for the six months ended December 31, 2022 and 2021 were $176,203 and $97,307, 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 six months ended December 31, 2022 and 2021, the Company applied for, and received from the Australian Taxation Office, a
research and development tax credit in the amount of $129,321 and $55,463, 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 SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2022
(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 Common Share
Basic
net loss per share is computed by dividing the net loss by the weighted average number of common shares 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 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 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
each note may not be converted during the first six-month period from the date of issuance. The
Company’s CEO holds Series A Preferred Stock and B Preferred Stock that, when combined, confers upon him a majority vote 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 PER SHARE
| | |
December
31, 2022 | | |
December
31, 2021 | |
| | |
(Unaudited) | | |
(Unaudited) | |
| Stock
Options | |
| 59 | | |
| 59 | |
| Stock
Warrants with no designations | |
| 3,305,975 | | |
| 111,910 | |
| Series
A Warrants as if converted at alternate cashless exercise prices | |
| 1,997,190,014 | | |
| - | |
| Series
B Warrants | |
| 23,750 | | |
| - | |
| Series
C Warrants as if converted at alternate cashless exercise prices * | |
| 7,999,960,000 | | |
| - | |
| Unvested
restricted stock | |
| 59 | | |
| 59 | |
| Convertible
Debt | |
| 930,128,205 | | |
| 28,520,974 | |
| Total | |
| 10,930,608,062 | | |
| 28,633,002 | |
| * | 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 our consolidated financial statements.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2022
(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 six months ended December 31, 2022, the Company had no revenues, had a net loss of $1,102,713,
and had net cash used in operations of $734,542. Additionally, As of December 31, 2022, the Company had a working capital deficit, stockholders’
deficit and accumulated deficit of $2,938,328, $2,915,417, and $63,069,163, 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), and there continue to be many unknowns. 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. The Company continues to monitor
the impact of the COVID-19 (coronavirus) outbreak closely. The extent to which the COVID-19 (coronavirus) outbreak will impact the Company’s
operations, ability to obtain financing or future financial results is uncertain.
NOTE
3 – PROPERTY AND EQUIPMENT
Property
and equipment consist of the following as of December 31, 2022 and June 30, 2022.
SCHEDULE OF PROPERTY PLANT AND EQUIPMENT
| | |
December
31, 2022 | | |
June
30, 2022 | |
| | |
(Unaudited) | | |
| |
| Office
equipment at cost | |
$ | 25,971 | | |
$ | 28,623 | |
| Less:
Accumulated depreciation | |
| (24,888 | ) | |
| (26,600 | ) |
| | |
| | | |
| | |
| Total
property, plant, and equipment | |
$ | 1,083 | | |
$ | 2,023 | |
Depreciation
expenses for the three months ended December 31, 2022 and 2021 were $422 and $504, respectively. Depreciation expenses for the six months
ended December 31, 2022 and 2021 were $895 and $1,013, 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 the former director
at December 31, 2022 and June 30, 2022 were $30,257 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 December 31, 2022 and June 30, 2022 were $50,357 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 six months ended December 31, 2022
and 2021, respectively (see Note 9).
Loan
Payable
Crown
Bridge Securities Purchase Agreements
Effective
October 3, 2019, the Company entered into a securities purchase agreement with Crown Bridge Partners, pursuant to which Crown Bridge
purchased a convertible promissory note from the Company with a remaining principal balance of $65,280 as of December 31, 2022 (see Note
6). The maturity date of the October 3, 2019 Crown Bridge was October 3, 2020 and is currently past due. The October 3, 2019 Crown Bridge
note currently bears interest at a default interest rate of 15% per annum. In August 2022, the Securities and Exchange Commission (the
“SEC”) filed a complaint against Crown Bridge due to its violation of Section 15(a)(1) of the Securities Exchange Act of
1934. Crown Bridge agreed to surrender all conversion rights in its currently held convertible notes, including the Company’s note.
Consequently, as of December 31, 2022, the Company reclassified the remaining principal balance of $65,280 from 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
six months ended December 31, 2022. The total accrued interest from this loan amounted to $30,866 as of December 31, 2022.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2022
(Unaudited)
Loan
in default
The
Crown Bridge loan 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 – NOTES PAYABLE AND CONVERTIBLE NOTES
Note
Payable
The
Company’s note payable outstanding at December 31, 2022 and June 30, 2022 were as follows:
SCHEDULE
OF NOTES PAYABLE CONVERTIBLE DEBT
| | |
December
31, 2022 | | |
June
30, 2022 | |
| | |
(Unaudited) | | |
| |
| Principal
amount | |
$ | 125,000 | | |
$ | - | |
| Unamortized
discounts | |
| (52,596 | ) | |
| - | |
| Note
payable, net | |
$ | 72,404 | | |
$ | - | |
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 Coventry purchased 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 contains
a $25,000 original issue discount. The Company intends to use 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, a $12,500 guaranteed interest. The principal amount and the guaranteed interest
is due and payable in seven equal monthly payments (each, a “Monthly Payment”) of $19,643, commencing on March 24, 2023 and
continuing on the 24th day of each month thereafter (each, a “Monthly Payment Date”) until paid in full not later than October
24, 2023 (the “Maturity Date”), 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, while the Coventry note has been outstanding for four months, there is a qualified Offering Statement on Form 1-A,
then Coventry may choose to convert any amount up to the entire balance of the Coventry Note, including guaranteed interest into shares
at the 1-A offering price.
At
any time following an event of default under 7(a)(i) of 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 in Section 5d thereof). 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 its 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, in respect of such conversion and at the option of Coventry, (i) if the conversion shall not then have yet occurred,
then the Alternative Conversion Price shall be substituted for the Calculated Conversion Price and (ii) if the conversion shall already
have occurred, then, within two Trading Days following the written request from Coventry therefor, the Company shall 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.
Upon
the occurrence and during the continuation of certain events of default, interest shall accrue at a default interest rate that shall
be equal to the lesser of i) 18% per annum or ii) the maximum rate permitted by law. Subject to the beneficial ownership limitation as
set forth in Section 5(d) of the Coventry note, if any event of default occurs, then the outstanding principal amount of the note, the
outstanding guaranteed interest amount of the note, plus accrued but unpaid default rate interest, liquidated damages and other amounts
owing in respect thereof through the date of acceleration, shall become, at Coventry’s election, immediately due and payable at
its option, in cash or in shares of Common Stock, at the mandatory default amount, which amount is equal to 120% of the outstanding principal
amount of the note and accrued and unpaid interest thereon, in addition to the payment of all other amounts, costs, expenses, and liquidated
damages due in respect of the note. In the event that the Company fails to deliver to Coventry shares of Common Stock issuable upon conversion
of principal or interest, the Company shall pay in cash an amount that is equivalent to the amount in excess of the sales value of the
shares of Common Stock that Coventry would have been entitled to receive from the conversion over the principal amount and interest of
the attempted conversion.
As
an additional inducement to Coventry purchasing the Coventry note, the Company, as of the Original Issue Date and for no additional consideration,
issued to Coventry 75,000,000 shares of the Company’s Common Stock, which was valued using the relative fair value method at $37,500
and recognized as debt discount to be amortized over the term of the note.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2022
(Unaudited)
The
total principal amount outstanding under the Coventry note was $125,000 and accrued interest of $2,020 as of December 31, 2022.
Convertible
Notes Payable
The
Company’s convertible notes outstanding at December 31, 2022 and June 30, 2022 were as follows:
SCHEDULE
OF CONVERTIBLE DEBT
| | |
December
31, 2022 | | |
June
30, 2022 | |
| | |
(Unaudited) | | |
| |
| Convertible
notes and debenture | |
$ | 527,250 | | |
$ | 644,980 | |
| Unamortized
discounts | |
| (88,837 | ) | |
| (31,669 | ) |
| Premium,
net | |
| 195,327 | | |
| 313,127 | |
| Convertible
notes, net | |
$ | 633,740 | | |
$ | 926,438 | |
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 the Company’s Common Stock at the lesser of $750
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 December 31, 2022 following
conversion of $79,000 of principal and $9,543 accrued interest during the six months ended December 31, 2022 (see Note 7).
Crown
Bridge Securities Purchase Agreements
Effective
October 3, 2019, the Company entered into a securities purchase agreement with Crown Bridge Partners, pursuant to which Crown Bridge
purchased a convertible promissory note (the “October 3, 2019 Crown Bridge Note”) from the Company in the aggregate principal
amount of $108,000, such principal and the interest thereon convertible into shares of the Company’s Common Stock at the option
of Crown Bridge any time from the of issuance of the of the October 3, 2019 Crown Bridge Note. The transactions contemplated by the Crown
Bridge Securities Purchase Agreement closed on October 3, 2019. Pursuant to the terms of the Crown Bridge Securities Purchase Agreement,
Crown Bridge deducted $3,000 from the principal payment due under the October 3, 2019 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 October 3, 2019 Crown Bridge Note for general working capital purposes. The maturity date of the
October 3, 2019 Crown Bridge was October 3, 2020 and is currently past due. The October 3, 2019 Crown Bridge Note currently bears interest
at a default interest rate of 15% per annum.
Additionally,
Crown Bridge had the option to convert all or any amount of the principal face amount of the October 3, 2019 Crown Bridge Note at any
time from the date of issuance and ending on the later of the maturity date or the date the Default Amount was paid if an event of default
occurs, which was an amount between 110% and 150% of an amount equal to the then outstanding principal amount of the October 3, 2019
Crown Bridge Note plus any interest accrued, for shares of the Company’s common stock at the then-applicable conversion price.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2022
(Unaudited)
The
conversion price for the October 3, 2019 Crown Bridge Note was equal to 60% (representing a 40% discount) of the lowest closing bid price
(“Lowest Trading Price”) of the Common Stock for the ten trading days immediately prior to the delivery of a Notice of Conversion,
including the day upon which a Notice of Conversion was received. Notwithstanding the foregoing, Crown Bridge was restricted from effecting
a conversion if such conversion, along with other shares of the Company’s common stock beneficially owned by Crown Bridge and its
affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock which may be increased up to 9.99% upon 60 days
prior written notice by the Crown Bridge to the Company. The note was treated as stock settled debt under ASC 480 and accordingly the
Company recorded a $72,000 put premium.
The
October 3, 2019 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.
The
total principal amount outstanding under the October 3, 2019 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 October 3, 2019 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 Securities Exchange Act of
1934. Crown Bridge agreed to surrender all conversion rights in its currently held convertible notes, including the Company’s note.
Consequently, as of December 31, 2022, the Company reclassified the remaining principal balance of $65,280 from 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 six months ended December 31, 2022. Therefore, the total principal amount outstanding under the above Crown Bridge financing
agreement was $0 after the reclass of principal to loan payable as of December 31, 2022.
1800
Diagonal Lending (formerly known as Sixth Street Lending) 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”) from the Company
in the aggregate principal amount of $63,750, such principal and the interest thereon convertible into shares of the Company’s
Common Stock at the option of Sixth Street any time after the six-month anniversary of the October 21, 2021 Sixth Street. The October
21, 2021 Sixth Street contained debt issue costs of $3,750. The Company used the net proceeds from the October 21, 2021 Sixth Street
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 may be paid by the Company to Sixth Street in shares of
the Company’s Common Stock; but shall not be payable until the October 21, 2021 Sixth Street Note becomes payable, whether at the
maturity date or upon acceleration or by prepayment.
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”) from the Company in the aggregate principal amount of
$53,750, such principal and the interest thereon convertible into shares of the Company’s Common Stock at the option of Sixth Street
any time after the six-month anniversary of the November 26, 2021 Sixth Street. The November 26, 2021 Sixth Street contained debt issue
costs of $3,750. The Company used the net proceeds from the November 26, 2021 Sixth Street 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 may be paid by the Company to Sixth Street in shares of the Company’s Common Stock; but
shall not be payable until the November 26, 2021 Sixth Street Note becomes payable, whether at the maturity date or upon acceleration
or by prepayment.
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”) from the Company in the aggregate principal amount of
$63,750, such principal and the interest thereon convertible into shares of the Company’s Common Stock at the option of Sixth Street
any time after the six-month anniversary of the January 4, 2022 Sixth Street. The January 4, 2022 Sixth Street contained debt issue costs
of $3,750. The Company used the net proceeds from the January 4, 2022 Sixth Street 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 may be paid by the Company to Sixth Street in shares of the Company’s Common Stock; but shall not be
payable until the January 4, 2022 Sixth Street Note becomes payable, whether at the maturity date or upon acceleration or by prepayment
(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”) from the Company in the aggregate principal amount of $68,750,
such principal and the interest thereon convertible into shares of the Company’s common stock at the option of Sixth Street any
time after the six-month anniversary of the March 7, 2022 Sixth Street. The March 7, 2022 Sixth Street contained debt issue costs of
$3,750. The Company used the net proceeds from the March 7, 2022 Sixth Street 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 may be paid by the Company to Sixth Street in shares of the Company’s Common Stock; but shall not be payable until
the March 7, 2022 Sixth Street Note becomes payable, whether at the maturity date or upon acceleration or by prepayment (see conversions
below).
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2022
(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”) from the Company in the aggregate principal amount of $68,750,
such principal and the interest thereon convertible into shares of the Company’s common stock at the option of Sixth Street any
time after the six-month anniversary of the April 12, 2022 Sixth Street. The April 12, 2022 Sixth Street contained debt issue costs of
$3,750. The Company used the net proceeds from the April 12, 2022 Sixth Street for general working capital purposes. The maturity date
of the April 12, 2022 Sixth Street Note is April 12, 2023. The April 12, 2022 Sixth Street Note bore interest at a rate of 8% per annum,
which interest may be paid by the Company to Sixth Street in shares of the Company’s Common Stock; but shall not be payable until
the April 12, 2022 Sixth Street Note becomes payable, whether at the maturity date or upon acceleration or by prepayment.
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 the Company’s
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 may be paid by the Company to 1800 Diagonal in shares of the
Company’s Common Stock; but shall not be payable until the May 12, 2022 1800 Diagonal Note becomes payable, whether at the maturity
date or upon acceleration or by prepayment.
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 the Company’s 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 contains debt issue cost of $3,750. The Company intends to use 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 is June 30, 2023. The 1800 Diagonal Note bears interest
at a rate of 8% per annum, which interest may be paid by the Company to 1800 Diagonal in shares of the Company’s Common Stock;
but shall not be payable until the July 11, 2022 1800 Diagonal Note becomes payable, whether at the maturity date or upon acceleration
or by prepayment.
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 shall be equal to 65% (representing a 35% discount) of the market price, which means
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. Notwithstanding the foregoing, 1800 Diagonal shall be restricted from effecting a conversion if such conversion, along
with other shares of the Company’s Common Stock beneficially owned by 1800 Diagonal and its affiliates, exceeds 9.99% of the outstanding
shares of the Company’s Common Stock. 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 six months ended December
31, 2022.
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 shall accrue 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.
Other
than as described above, the above 1800 Diagonal notes contain certain events of default, including failure to timely issue shares upon
receipt of a notice of conversion, as well as certain customary events of default, including, among others, breach of covenants, representations
or warranties, insolvency, bankruptcy, liquidation and failure by the Company to pay the principal and interest due under the Note. Additional
events of default shall include, among others: (i) failure to reserve at least five times the number of shares issuable upon full conversion
of the Note; (ii) bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for
relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Company or any subsidiary
of the Company; provided, that in the event such event is triggered without the Company’s consent, the Company shall have sixty
(60) days after such event is triggered to discharge such event, (iii) the Company’s failure to maintain the listing of the common
stock on at least one of the OTC markets (which specifically includes the quotation platforms maintained by the OTC Markets Group Inc.)
or an equivalent replacement exchange, any tier of the Nasdaq Stock Market, the New York Stock Exchange, or the NYSE American, (iv) The
restatement of any financial statements filed by the Company with the SEC at any time after 180 days after the issuance date for any
date or period until the relevant 1800 Diagonal note is no longer outstanding, if the result of such restatement would, by comparison
to the un-restated financial statement, have reasonably constituted a material adverse effect on the rights of 1800 Diagonal with respect
to the relevant 1800 Diagonal note or the Purchase Agreement, and (v) the Company’s failure to comply with its reporting requirements
of the Securities and Exchange Act of 1934 (the “Exchange Act”), and/or the Company ceases to be subject to the reporting
requirements of the Exchange Act.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2022
(Unaudited)
In
the event that the Company fails to deliver the shares of common stock issuable upon conversion of principal or interest under the above
1800 Diagonal notes within three business days of a notice of conversion by 1800 Diagonal, the Company shall incur a penalty of $1,000
per day; provided, however, that such fee shall not be due if the failure to deliver the shares is a result of a third
party, such as the transfer agent.
Upon
the occurrence and during the continuation of certain events of default, the above 1800 Diagonal notes will become immediately due and
payable and the Company will pay 1800 Diagonal in full satisfaction of its obligations in the amount equal to 150% of an amount equal
to 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 the occurrence and during the continuation of any event of default
specified in section 3.2 as defined in the 1800 Diagonal note agreements, which relates to the failure to issue shares of the Company’s
Common Stock upon the conversion of 1800 Diagonal notes, such above 1800 Diagonal notes shall become immediately due and payable in an
amount equal to the Default Amount multiplied by two.
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 1800 Diagonal financing agreements during the
year ended June 30, 2022 following conversion of the principal balance.
The
total principal amount outstanding under the above 1800 Diagonal notes was $105,000 and accrued interest of $3,981 as of December 31,
2022 following conversion of $265,000 of the principal balance and $10,600 accrued interest during the six months ended December 31,
2022. Accordingly, $142,692 of the put premium was released to additional paid in capital in respect to the 1800 Diagonal financing agreements
during the six months ended December 31, 2022 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”) from the Company in the aggregate principal
amount of $170,000, such principal and the interest thereon convertible into shares of the Company’s Common Stock at the option
of ONE44 any time after the six-month anniversary of the December 7, 2021 ONE44. The December 7, 2021 ONE44 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 for general working capital
purposes. The maturity date of the December 7, 2021 ONE44 was December 7, 2022. The December 7, 2021 ONE44 bore interest at a rate of
10% per annum, which interest may be paid by the Company to ONE44 in shares of the Company’s Common Stock; but shall not be payable
until the December 7, 2021 ONE44 Note becomes payable, whether at the maturity date or upon acceleration or by prepayment.
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”) from the Company in the aggregate principal amount of $120,000, such principal
and the interest thereon convertible into shares of the Company’s Common Stock at the option of ONE44 any time after the six-month
anniversary of the March 29, 2022 ONE44. The March 29, 2022 ONE44 contains an original discount and debt issue cost for a total of $18,000.
The Company intends to use the net proceeds from the March 29, 2022 ONE44 for general working capital purposes. The maturity date of
the March 29, 2022 ONE44 is March 29, 2023. The March 29, 2022 ONE44 bears interest at a rate of 10% per annum, which interest may be
paid by the Company to ONE44 in shares of the Company’s Common Stock; but shall not be payable until the March 29, 2022 ONE44 Note
becomes payable, whether at the maturity date or upon acceleration or by prepayment.
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 Company’s Common Stock at the option of ONE44 Capital any time after the
six-month anniversary of the August 15, 2022 ONE44 Note. The transaction contemplated by the ONE44 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 the August 15,
2022 ONE44 Purchase Agreement, the Company will pay ONE44 Capital’s legal fees of $5,500. The Company intends to use 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 interest may be paid by the Company to ONE44
Capital in shares of the Company’s Common Stock, but shall not be payable until the Maturity Date or upon acceleration or by prepayment.
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.
The
conversion price for the above ONE44 notes shall be equal to 65% (representing a 35% 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. Notwithstanding
the foregoing, ONE44 shall be restricted from effecting a conversion if such conversion, along with other shares of the Company’s
Common Stock beneficially owned by ONE44 and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s common stock.
All of the above ONE44 notes are treated as stock settled debt under ASC 480 and accordingly the Company recorded a total of $215,385
put premium of which $59,231 was recorded during the six months ended December 31, 2022.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2022
(Unaudited)
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 its Common Stock issuable upon conversion of principal or interest under a ONE44 note, the penalty shall be $250 per day the shares
are not issued beginning on the 4th day after the conversion notice was delivered to the Company. This penalty shall increase
to $500 per day beginning on the 10th day. In an event of breach of section 8m as defined in the ONE44 notes, such ONE44 note
shall incur penalty and will increase the outstanding principal amounts 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 $204,000 and accrued interest of $11,287 as of December 31, 2022,
following conversion of $141,700 of the principal balance and $9,378 accrued interest during the six months ended December 31, 2022.
Accordingly, $76,300 of the put premium was released to additional paid in capital in respect to the ONE44 financing agreements during
the six months ended December 31, 2022 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 the Company’s 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 GS Capital’s legal fees of $3,000. The Company intends to use the net proceeds ($85,000) from the GS Capital Note
for general working capital purposes.
The
maturity date of the GS Capital Note is April 12, 2023. The GS Capital Note bears interest at a rate of 8% per annum, which interest
may be paid by the Company to GS Capital in shares of the Company’s Common Stock, but shall not be payable until the GS Capital
Note becomes payable, whether at the Maturity Date or upon acceleration or by prepayment. 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 the Company’s Common Stock at a price for each share of Common Stock (“Conversion
Price”) of $0.0028 per share (the “Fixed Price”). However, in the event the Company’s common stock trades
below $0.002 per share for more than five consecutive trading days, then the Fixed Price shall be equal to $0.0013 per share. In the
event of default, the Conversion Price shall be equal to 65% of the lowest trading price of the Company’s Common Stock as reported
on the OTC Markets on which the Company’s shares are then quoted or any exchange upon which the Company’s Common Stock may
be traded in the future for the ten prior trading days, including the day upon which a Notice of Conversion is received by the Company.
GS Capital is restricted from effecting a conversion if such conversion, along with other shares of the Company’s Common Stock
beneficially owned by GS Capital, exceeds 4.99% of the outstanding shares of the Company’s Common Stock.
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 the Company’s Common Stock at the option of GS Capital. The transaction contemplated by the GS Capital
Purchase Agreement closed on September 26, 2022. The GS Capital Note contains a $4,000 original issue discount. Pursuant to the terms
of the GS Purchase Agreement, the Company paid GS Capital’s legal fees of $2,500. The Company intends to use the net proceeds ($65,000)
from the GS Capital Note for general working capital purposes.
The
maturity date of the GS Capital Note is March 21, 2023. The GS Capital Note bears interest at a rate of 8% per annum, which interest
may be paid by the Company to GS Capital in shares of the Company’s Common Stock, but shall not be payable until the GS Capital
Note becomes payable, whether at the Maturity Date or upon acceleration or by prepayment. The GS Capital 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 the Company’s Common Stock at a price for each share of Common Stock (“Conversion
Price”) of $0.002 per share (the “Fixed Price”). However, in the event the Company’s Common Stock trades
below $0.0014 per share for more than five consecutive trading days, then the Fixed Price shall be equal to $0.0009 per share. In the
event of default, the Conversion Price shall be equal to 65% of the lowest trading price of the Common Stock as reported on the OTC Markets
on which the Company’s shares are then quoted or any exchange upon which the Common Stock may be traded in the future for the ten
prior trading days, including the day upon which a Notice of Conversion is received by the Company. GS Capital is restricted from effecting
a conversion if such conversion, along with other shares of the Company’s Common Stock beneficially owned by GS Capital, exceeds
4.99% of the outstanding shares of the Company’s Common Stock.
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% as defined in the note agreement. After this initial 180-day period,
the Company does not have a right to prepay such notes.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2022
(Unaudited)
Upon
the occurrence and during the continuation of certain events of default, interest 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. 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 shall be $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 shall increase to $500 per day beginning on the 10th day.
In an event of breach of section 8m as defined in each GS Capital note, such GS Capital note shall incur penalty and will increase the
outstanding principal amounts by 20%.
The
total principal outstanding and accrued interest under the above GS Capital notes were $164,500 and $4,457, respectively, as of December
31, 2022. An aggregate total of $164,500 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 “Purchase Agreement”) with Red Road Holdings
Corporation, a Virginia corporation (“Red Road”), pursuant to which Red Road purchased a convertible promissory note (the
“Note”) from the Company in the aggregate principal amount of $53,750, such principal and the interest thereon convertible
into shares of the Company’s Common Stock at the option of Red Road. The transaction contemplated by the Purchase Agreement closed
on October 12, 2022. The Company intends to use the net proceeds ($50,000) from the Note for general working capital purposes. The maturity
date of the Note is October 6, 2023 (the “Maturity Date”). The Note bears interest at a rate of 8% per annum, which interest
may be paid by the Company to Red Road in shares of the Company’s Common Stock, but shall not be payable until the Note becomes
payable, whether at the Maturity Date or upon acceleration or by prepayment, as described below. In addition, upon an event of default,
interest on the outstanding principal shall accrue 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 Note, beginning on the date
which is one hundred eighty (180) days following the date of the Note and ending on the later of: (i) the Maturity Date and (ii) the
date of payment of the Default Amount (as defined below), each in respect of the remaining outstanding amount of the 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 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 Note shall be equal to the Variable Conversion Price (as defined therein) (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). The
“Variable Conversion Price” shall mean 65% multiplied by the Market Price (as defined therein) (representing a discount rate
of 35%). “Market Price” means the average of the lowest three (3) Trading Prices (as defined below) for the Company’s
Common Stock during the ten (10) trading days prior to the conversion date. Notwithstanding the foregoing, Red Road shall be restricted
from effecting a conversion if such conversion, along with other shares of the Company’s Common Stock beneficially owned by Red
Road and its affiliates, exceeds 4.99% of the outstanding shares of the Company’s Common Stock. The Note is treated as stock settled
debt under ASC 480 and accordingly the Company recorded a total of $28,942 put premium.
The
Note may be prepaid until 180 days from the Issuance date. If the Note is prepaid within 60 days of the issuance date, then the prepayment
premium shall be 110% of the face amount plus any accrued interest, if prepaid after 60 days from the issuance date, but less than 91
days from the issuance date, then the prepayment premium shall be 115% of the face amount plus any accrued interest, if prepaid after
90 days from the issuance date, but less than 121 days from the issuance date, then the prepayment premium shall be 120% of the face
amount plus any accrued interest, if prepaid after 120 days from the issuance date, but less than 151 days from the issuance date, then
the prepayment premium shall be 125% of the face amount plus any accrued interest, and if prepaid after 150 days from the issuance date,
but less than 181 days from the issuance date, then the prepayment premium shall be 129% of the face amount plus any accrued interest.
So long as the Note is outstanding, the Company covenants not to, without prior written consent from Red Road, sell, lease or otherwise
dispose of all or substantially all of its assets outside the ordinary course of business, which would render the Company a “shell
company” as such term is defined in Rule 144.
In
the event that the Company fails to deliver to Red Road shares of the Company’s Common Stock issuable upon conversion of principal
or interest under the Note within three business days of a notice of conversion by Red Road, the Company shall incur a penalty of $1,000
per day; provided, however, that such fee shall not be due if the failure to deliver the shares is a result of a third
party, such as the transfer agent. Upon the occurrence and during the continuation of certain events of default, the 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 an amount equal to the then outstanding principal amount of the 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 $1,013 as of December 31, 2022.
Amortization
of debt discounts
The
Company recorded $131,168 and $40,500 of debt discounts related to the above note issuances during the six months ended December 31,
2022 and 2021, respectively. The Company recorded $144,711 and $245,000 of put premiums related to the above note issuances during the
six months ended December 31, 2022 and 2021, 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 December 31, 2022 and 2021 was $52,629 and $5,221, respectively. Amortization of all
debt discounts for the six months ended December 31, 2022 and 2021 was $83,903 and $11,295, respectively.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2022
(Unaudited)
The Company reclassified $218,992 and $126,310 in put premiums to additional paid in capital following conversions during the six months
ended December 31, 2022 and 2021, 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, in accordance with Section 228 of the Delaware General Corporation Law, for the Company
to file a Certificate of Amendment to its Certificate of Incorporation with the Secretary of State of the State of Delaware, which increased
the Company’s authorized capital stock. The Certificate increased the number of authorized shares of the Company’s common
stock, par value $0.001 per share, from 1,000,000,000 to 3,000,000,000. The number of authorized shares of preferred stock remains at
1,500,005, such that the total number of shares of all classes and series the Company was authorized to issue became 3,001,500,005 shares.
The Certificate 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, in accordance with Section 228 of the Delaware General Corporation Law, for the Company
to file a Certificate of Amendment to its Certificate of Incorporation with the Secretary of State of the State of Delaware, which increased
the Company’s authorized capital stock. The Certificate increased the number of authorized shares of the Company’s common
stock, par value $0.001 per share, from 3,000,000,000 to 10,000,000,000. The number of authorized shares of preferred stock remains at
1,500,005, such that the total number of shares of all classes and series the Company is authorized to issue is 10,001,500,005 shares.
The Certificate 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.
Of
the total preferred shares authorized, 500,000 have been designated as Series A Preferred Stock (“Series A Preferred Stock”),
pursuant to the Certificate of Designation 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, beneficially owns all of the outstanding shares of Series A
Preferred Stock via North Horizon Pty Ltd., which entitles 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 entitles him to two votes per share of Series A Preferred Stock. North Horizon Pty Ltd. is a Nathanielsz Family
Trust. Mr. James Nathanielsz, the Chief Executive Officer, Chief Financial Officer and a director of our Company, has voting and investment
power over these shares. 500,000 shares of Series A Preferred Stock are issued and outstanding as of December 31, 2022 and June 30, 2022.
Of
the total preferred shares authorized, pursuant to the Certificate of Designation filed with the Secretary of State of the State of Delaware
on June 16, 2015, up to five shares have been designated as Series B Preferred Stock (“Series B Preferred Stock”). Each holder
of outstanding 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 December 31, 2022 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 six months ended December 31, 2022 and
fiscal year 2022.
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 “Purchase Agreement”) with Dutchess Capital
Growth Fund LP, a Delaware limited partnership (“Dutchess”), providing for an equity financing facility (the “Equity
Line”). The Purchase Agreement provides that, upon the terms and subject to the conditions in the Purchase Agreement, Dutchess
is committed to purchase up to Five Million Dollars ($5,000,000) of shares of the Company’s Common Stock, over the 36-month term
of the Purchase Agreement (the “Total Commitment”).
Under
the terms of the 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 (the “Registration Statement”) becoming effective,
which registers Dutchess’ resale of any Common Stock purchased by Dutchess under the Equity Line. From time to time over the 36-month
term of the Purchase Agreement, commencing on the trading day immediately following the date on which the Registration Statement becomes
effective, the Company, in its sole discretion, may provide Dutchess with a draw down notice (each, a “Draw Down Notice”),
to purchase a specified number of shares of Common Stock (each, a “Draw Down Amount Requested”), subject to the limitations
discussed below. The actual amount of proceeds the Company will receive pursuant to each Draw Down Notice (each, a “Draw Down Amount”)
is to be determined by multiplying the 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 Closing Date.
Closing Date shall mean the five business days after the Clearing Date. Clearing Date shall mean the first business day that the Selling
Shareholder holds the Draw Down Amount in its brokerage account and is eligible to trade the shares.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2022
(Unaudited)
The
maximum number of shares of Common Stock requested to be purchased pursuant to any single 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 Draw Down Notice or
(ii) an aggregate value of $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 draw down notice to Dutchess. Consequently, the Company received gross aggregate proceeds of $24,711 from such draw
down notice. The Company received $23,758 of a previously recorded subscription receivable during the six months ended December 31, 2022.
Coventry
Enterprises, LLC
On
November 3, 2022, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with Coventry Enterprises,
LLC, a Delaware limited company (“Coventry”), providing for an equity financing facility (the “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 the Company’s Common Stock (the “Common Stock”), over
the 36 month term of the Purchase Agreement (the “Total Commitment”).
Under
the terms of the 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 (the “Registration Statement”) becoming effective
which registers Coventry’s resale of any Common Stock purchased by Coventry under the Equity Line. From time to time over the 36-month
term of the Purchase Agreement, commencing on the trading day immediately following the date on which the Registration Statement becomes
effective, the Company, in its sole discretion, may provide Coventry with a draw down notice (each, a “Draw Down Notice”),
to purchase a specified number of shares of Common Stock (each, a “Draw Down Amount Requested”), subject to the limitations
discussed below. The actual amount of proceeds the Company will receive pursuant to each Draw Down Notice (each, a “Draw Down Amount”)
is to be determined by multiplying the 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 Drawdown Notice date.
The
maximum number of shares of Common Stock requested to be purchased pursuant to any single 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 Draw Down Notice
or (ii) an aggregate value of $250,000 or (iii) beneficial ownership limitation which is equivalent to 9.99% of the outstanding number
of shares of common stock immediately after giving effect to the issuance of the Draw Down Notice. During the six months ended December
31, 2022, the Company has not received a draw down notice from Coventry.
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 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 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.
The
Company reclassified $218,992 from put premium liabilities to additional paid in capital following conversions during the six months
ended December 31, 2022.
During
the six months ended December 31, 2022, converted notes – principal of $79,000 and accrued interest of $9,543 containing bifurcated
embedded conversion option derivatives. Accordingly, the fair market value of the shares issued upon conversion was $195,952 resulting
in a loss on extinguishment at the time of conversion of $107,409 and $106,799 of derivative fair value was recorded as a gain on extinguishment
at the time of conversion, resulting in a net loss of $610.
The
Company has 3,835,337,946 shares of its Common Stock reserved for future issuances based on lender reserve requirements pursuant
to underlying financing agreements at December 31, 2022.
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 the Company’s 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.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2022
(Unaudited)
On
November 16, 2022, the Company issued 73,301,020 shares of the Company’s 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 six months ended December
31, 2022.
Shares
issued for 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.
During
the six months ended December 31, 2022, the Company issued 191,999,040 shares of its Common Stock from the alternate cashless exercise
of 960 Series A warrants with an original exercise price of $200 and alternate cashless exercise price of $0.001. The Alternate Cashless
Exercise provision, for a cashless conversion at the holder’s option, is available should the trading price of the Company’s
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 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 $19,322 and $408,557 during the three and six months ended December 31, 2022,
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 note payable
On
November 3, 2022, the Company entered into a securities purchase agreement with Coventry Enterprises, LLC, 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 Company’s 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 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 the 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 December
31, 2022 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 December 31, 2022 and June 30, 2022 to which the $248,620
relates.
Warrants:
The
following table summarizes warrant activity for the six months ended December 31, 2022:
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 | |
| (5,960 | ) | |
| 65.77 | |
| Forfeited | |
| (1,000 | ) | |
| 2,000.00 | |
| Expired | |
| - | | |
| - | |
| Outstanding
at December 31, 2022 | |
| 3,403,460 | * | |
$ | 5.51 | |
| | |
| | | |
| | |
| Exercisable
at December 31, 2022 | |
| 3,379,711 | | |
$ | 5.55 | |
| Outstanding
and Exercisable: | |
| | | |
| | |
| | |
| | | |
| | |
| Weighted
average remaining contractual term | |
| 2.58 | | |
| | |
Aggregate
intrinsic value
| |
$ | - | | |
| | |
| * |
The
total warrants of 3,403,460 above consisted of the following: |
SCHEDULE OF WARRANT OUTSTANDING AND EXERCISABLE
| | |
Number
of Warrants | | |
Exercisable | |
| Series
A warrants | |
| 9,986 | | |
| 9,986 | |
| Series
B warrants | |
| 23,750 | | |
| 23,750 | |
| Series
C warrants | |
| 63,749 | | |
| 40,000 | |
| Warrants
with no class designation | |
| 3,305,975 | | |
| 3,305,975 | |
| Total | |
| 3,403,460 | | |
| 3,379,711 | |
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2022
(Unaudited)
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 the Company’s 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 six months ended December 31, 2022.
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 the Company’s 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 236%. Accordingly, the Company recognized
gain from settlement of debt of $17,499 during the six months ended December 31, 2022 as reflected in the accompanying condensed consolidated
statements of operations.
Options:
A
summary of the Company’s option activity during the six months ended December 31, 2022 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 December 31, 2022 | |
| 59 | | |
$ | 4,533 | |
| | |
| | | |
| | |
| Exercisable at December
31, 2022 | |
| 59 | | |
$ | 4,533 | |
| Outstanding
and Exercisable: | |
| | | |
| | |
| | |
| | | |
| | |
| Weighted
average remaining contractual term | |
| 6.37 | | |
| | |
| Weighted
average fair value of options granted during the period | |
$ | - | | |
| | |
| Aggregate
intrinsic value | |
$ | - | | |
| | |
On
the Effective Date, 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 the Company’s 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 six months ended December 31, 2022 and 2021, 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 December 31, 2022. No stock options were granted during
the six months ended December 31, 2022.
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’s parent U.S. entity 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 December 31, 2022 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.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2022
(Unaudited)
Operating
Agreements
In
November 2009, the Company entered into a commercialization agreement with the University of Bath (UK) (the “University”),
whereby the Company and the University co-owned the intellectual property relating to the Company’s pro-enzyme formulations. In
June 2012, the Company and the 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 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 shall hire and train a doctoral student for this project and as such the Company shall 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.
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, 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 December 31, 2022 and June 30, 2022, the Company has $14,135 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 December 31, 2022 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 shall pay a stock fee equal to 9.9%
of the outstanding common stock of the Company during the term of the agreement. The Company shall bring 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 the Company’s common stock to this consultant for services rendered from July 2022 to November 2022 (see Note 7).
Accordingly, the Company recorded accrued expenses of $17,479
as of December 31, 2022 based on the amount of shares owed multiplied by the December 31, 2022 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 $117,479 as of December 31, 2022.
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 USE OF ASSET
| | |
December
31, 2022 | | |
June
30, 2022 | |
| Office
lease | |
$ | 66,201 | | |
$ | 66,201 | |
| Less:
accumulated amortization | |
| (15,530 | ) | |
| (3,678 | ) |
| Right-of-use
asset, net | |
$ | 50,671 | | |
$ | 62,523 | |
Operating
Lease liabilities are summarized below:
SCHEDULE OF OPERATING LEASE LIABILITY
| | |
December
31, 2022 | | |
June
30, 2022 | |
| Office
lease | |
$ | 66,201 | | |
$ | 66,201 | |
| Reduction
of lease liability | |
| (14,214 | ) | |
| (3,277 | ) |
| Less:
office lease, current portion | |
| (21,102 | ) | |
| (20,605 | ) |
| Long
term portion of lease liability | |
$ | 30,885 | | |
$ | 42,319 | |
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2022
(Unaudited)
Remaining
future minimum lease payments under non-cancelable operating lease at December 31, 2022 are as follows:
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS
| | |
| | |
| Fiscal
Year 2023 (remaining) | |
$ | 12,249 | |
| Fiscal
Year 2024 | |
| 24,498 | |
| Fiscal
Year 2025 | |
| 20,415 | |
| Imputed
interest | |
| (5,175 | ) |
| Total
operating lease liability | |
$ | 51,987 | |
The
weighted average remaining lease term for the operating lease is 2.26 years.
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 December 31, 2022 and June 30, 2022, the Company owed its former director a total of $30,257 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 December 31, 2022 and June 30, 2022, the Company owed its former director a total of $50,357 and $51,171, respectively, for money
loaned to the Company throughout the years. The total loans balance owed at December 31, 2022 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 December 31, 2022 and June 30, 2022, total rent payable of $140,129 AUD ($95,358 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 $13,879 and $14,286 for the six months ended December 31, 2022 and 2021, 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 December 31, 2022 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 shall be 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 six months
ended December 31, 2022.
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 $41,387 AUD ($26,620 USD) in payments were made in respect of the bonuses during the
six months ended December 31, 2022, resulting in a remaining balance of $139,937 AUD ($95,227 USD) bonus payable as of December 31, 2022
which was included in accrued expenses in the accompanying condensed consolidated balance sheet.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2022
(Unaudited)
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 James Nathanielsz, the Company’s Chief Executive Officer,
Chairman, acting Chief Financial Officer and a director, 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 the Company’s Common Stock (the “Nathanielsz Options”), with an exercise price per share of $4,675 (110% of the
closing market price of the Company’s 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
Nathanielz Options and Additional Nathanielz 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 December 31, 2022 and June 30, 2022.
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 “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 Effective Date, with automatic one-year renewal
periods unless either party elects not to renew.
Amended
and Restated Services Agreement – On May 14, 2019, the Company also 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 the Company’s common stock (the “Kenyon
Options”), with an exercise price per share of $4,250 (100% of the closing market price of the Company’s 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 approved by the Board on the Effective Date. 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 December
31, 2022 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 the Company’s Common Stock of the Company. As of December 31, 2022 and June 30, 2022, total accrued salaries of $69,000
AUD ($46,265 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 subsidiary, Propanc PTY LTD, none of which has been repaid as of December 31, 2022.
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 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 December 31, 2022.
The
Company primarily relied on funding from five convertible debt lenders and received net proceeds after deductions of $62,500 for original
issue discounts and debt issue costs during the six months ended December 31, 2022 from each of the five lenders of $101,250, $94,500,
$150,000, $50,000 and $100,000 respectively, which represents approximately 20%, 19%, 30%, 10% and 21% respectively of total proceeds
received by the Company during the six months ended December 31, 2022.
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2022
(Unaudited)
The
Company primarily relied on funding from three convertible debt lenders and received proceeds after deductions of $40,500 for original
issue discounts and debt issue costs during the six months ended December 31, 2021 from the lenders of $414,500 (from each of the three
lenders of $160,000, $110,000 and $144,500, respectively, which represents approximately 39%, 26% and 35%, respectively of total proceeds
received by the Company during the six months ended December 31, 2021.
Receivable
Concentration
As
of December 31, 2022 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, Mexico, Republic of Korea, India and Brazil. In Canada, the patent application remains under examination.
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 is currently entering 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 43 granted,
allowed, or accepted patents and 22 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 December 31, 2022 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 December 31,
2022 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 $164,500 (2 notes) and $79,000 (1 note) of convertible debt,
which were treated as derivative instruments outstanding at December 31, 2022 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 December 31, 2022, the last trading day of the period ended December 31, 2022, was $0.0006.
The volatility, expected remaining term and risk-free interest rates used to estimate the fair value of derivative liabilities at December
31, 2022 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 six
months ended
December 31, 2022) | | |
December
31, 2022 | |
| Volatility | |
| 228.29
– 256.02 | % | |
| 256.02 | % |
| Expected
Remaining Term (in years) | |
| 0.22
– 0.28 | | |
| 0.22
- 0.28 | |
| Risk
Free Interest Rate | |
| 3.13
– 4.42 | % | |
| 4.42 | % |
| Expected
dividend yield | |
| None | | |
| None | |
PROPANC
BIOPHARMA, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2022
(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 December 31, 2022 and June 30,
2022:
SCHEDULE OF FAIR VALUE, ASSETS AND LIABILITIES MEASURED ON RECURRING BASIS
| | |
Balance
at
December 31, 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 | |
$ | 10,623 | | |
$ | — | | |
$ | — | | |
$ | 10,623 | |
| Total | |
$ | 10,623 | | |
$ | — | | |
$ | — | | |
$ | 10,623 | |
| | |
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 six months ended December 31, 2022 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 | |
| (106,799 | ) |
| Change
in fair value included in statements of operations | |
| (127,508 | ) |
| Balance
at December 31, 2022 | |
$ | 10,623 | |
NOTE
12 – SUBSEQUENT EVENTS
Shares
issued for conversion of convertible debt
Between
January 2023 and February 2023, the Company issued an aggregate of 518,209,044 shares of its common stock at a contractual conversion
price of $0.001, as a result of the conversion of principal of $136,000 and accrued interest of $3,756 underlying certain outstanding
convertible notes converted during such period. The Company reclassified $73,231 from put premium liabilities to additional paid in capital
following conversions.
